Adani Energy Solutions Ltd

NSE:ADANIENSOL

Earnings Call Analysis

Strong Performance and Strategic Shifts

Adani Energy Solutions Limited (AESL) reported over 20% growth in all financial metrics, particularly EBITDA. The firm is entering a high-growth phase driven by transmission, distribution, and smart metering projects. Strategic transactions include carving out the Dahanu power plant for INR 815 crores to reduce debt, with plans to increase renewable energy integration to 60% by 2027, although ahead of schedule. Revenue from operations rose by 46%, and adjusted EBITDA grew by 28% despite the onetime impairment of INR 1500 crores. AESL's future strategy includes substantial CapEx and maintaining over 90% EBITDA margins in transmission, projecting steady growth across all verticals.

Introduction: Entering a High-Growth Period

Adani Energy Solutions Limited (AESL) has reported remarkable growth in the first quarter of FY '25, with all financial parameters exceeding 20%. This is indicative of AESL entering a high-growth period. The leadership highlighted a solid pipeline in transmission, distribution, and smart metering, expecting these numbers to sustain and reflect on a quarter-to-quarter basis.

Strong Financial Performance and Profitability

The revenue for AESL increased by 46%, and the adjusted EBITDA showed a 28% growth. Despite carving out the Dahanu power plant, which impacted the regulatory asset base, the company managed to maintain strong profitability. The sale proceeds from Dahanu, approximately INR 815 crores, will primarily be used to reduce AESL's debt【4:12†source】【4:16†source】.

Operational Efficiency and Strategic Asset Management

AESL's operational efficiency remains robust with transmission availability at 99.7% and distribution efficiency exceeding 99.9%. The company has effectively managed its assets, leading to a significant reduction in distribution losses. Additionally, the sales have seen a substantial increase due to the growing demand in AESL’s operational geographies【4:12†source】.

Focus on Renewable Energy and Smart Metering

AESL is significantly aligned towards the renewable energy transition. The company is integrating approximately 38% renewable power in its portfolio, aiming to reach 60% by 2027. Another key focus area is smart metering, with an existing strong pipeline of around 23 million meters. This segment is expected to boost profitability due to high margins and strong demand across various states including Telangana, Tamil Nadu, Karnataka, and Madhya Pradesh【4:10†source】【4:14†source】.

Challenges and Competitor Landscape

The company acknowledged facing challenges in equipment sourcing, especially for high-voltage transformers. However, AESL has mitigated these issues through strategic pre-planning and long-term agreements with suppliers. Additionally, the competitive landscape, particularly in the transmission segment, may see reduced intensity, potentially improving margins 【4:12†source】.

Capital Expenditure Plans

AESL has outlined an ambitious CapEx plan for the coming years. For FY 2025 and FY 2026, the company plans to invest around INR 7,000 crores and INR 5,000 crores respectively in transmission projects. The distribution business will see an annual CapEx of around INR 1,500 to INR 1,700 crores. In the smart metering segment, the company has earmarked INR 5,800 per meter for the installation of around 50 to 60 lakh meters this year, with a goal to ramp up to 1 crore meters next year【4:10†source】【4:12†source】.

Future Outlook: Sustained Growth Across Verticals

The leadership emphasized AESL’s potential for sustained growth across all its verticals. With ongoing and newly won projects, the company expects to maintain a consolidated growth rate of over 20%. The smart metering segment is predicted to be a significant growth driver, pulling up the overall growth rate. The planned CapEx and projects under construction provide a clear roadmap for achieving these targets【4:6†source】【4:16†source】.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Adani Energy Solutions Limited Q1 FY '25 Investor Update Call. [Operator Instructions] Please note that this conference is being recorded. Today, we have with us on the call Mr. Kandarp Patel, CEO; Mr. Kunjal Mehta, CFO; and Mr. Anupam Misra, Head Group Corporate Finance. I now hand the conference over to Mr. Kandarp Patel. Thank you, and over to you, sir.

[Kandarp Patel, executive]

Thank you. Good afternoon to all analysts and investor friends. Welcome all of you to this call. We have already uploaded the press release as well as presentation on our website. I hope you must have got an opportunity to have a look at those documents. Before we get into a detailed discussion on operational and financial parameters, just to highlight that in this quarter, you must have seen that the growth at AESL now has been in excess of 20 percentage in all financial parameters and especially EBITDA. Now therefore, AESL is now entering into high-growth period. And you will see almost similar numbers on a quarter-to-quarter basis as we progress. And these numbers are based on the solid pipeline of projects that we already have in our hand in transmission, distribution as well as smart metering. The another purpose that we are trying to achieve and we are making sure is that we become the leading energy transition company. Now all the transmission projects that we are developing is for evacuation of renewable powers and mostly in the Khavda region, where AGEL is setting up the world's largest renewable power plant at a single location of 30-gigawatt. Similarly, in distribution segment on the line of commitment that we made, we have already integrated about 38 percentage of renewable power in our total portfolio for our distribution power purchase. And we will keep on pushing that number and meet that commitment of 60 percentage by 2027. In fact, we plan to achieve that much ahead of it. The third intervention or third business vertical, which is now going to give us a significant push in terms of profitability and revenue, which is smart metering segment. The aim of smart metering is to make the grid efficient and also to make sure that a higher amount of renewable is integrated in the grid by virtue of time of detail. So in all the verticals, we are trying to make sure that we facilitate in energy transition in the country. In fact, that is another reason why we made a commitment that we will at appropriate time will carve out Dahanu power plant. Now the Board has decided to carve out Dahanu power plant, and soon, this power plant will get shifted out of AEML. After that, AESL and AEML both will become a pure transmission and distribution utility managing energy transition. The value at which it is getting carved out is about INR 815 crores, which is equivalent to the regulatory asset base of Dahanu. So the asset base of AEML will reduce temporarily to that much extent. And the proceeds that we will receive will be reducing -- will be used for reducing our indebtedness. But by the end of the current financial year, again, we will build up that rev in distribution and transmission in AEML. And before we close this financial year, we'll be able to achieve, in fact, incrementally higher rev than what we are having prior to carving out of Dahanu. Now when we carve out the Dahanu, we also make sure that all the electricity demand is met in terms of PPA approved by MERC. So the power supply will continue to -- AEML will continue to get that power supply from Dahanu power plant, even in new avatar because there regulatory nature of the power plant doesn't change and the supply will continue as long as MERC approves that or extend the PPA for Dahanu. Now as -- because of carving out of Dahanu, there is exceptional item impairment amount of INR 1,500-odd crores that you must have seen in the financial statement. If we remove that onetime item, all the numbers -- financial numbers, like revenue from operation has increased by about 46 percentage, the EBITDA adjusted of that onetime item has increased by about 28 percentage, even the operational EBITDA has increased to the similar number. On operational part, we continue to do better as we have done in many, many years since last. Our ability remains in the range of 99.7% for transmission; in terms of distribution, it is in excess of 99.9 percentage. We continue to reduce our distribution losses in AEML. And we have also seen a significant increase in sales, not only in AEML, but also at MUL because of strong demand growth in our geographies. So in a nutshell, one of the best performing financial quarter, we have got into that growth zone and also backed by strong operating parameters. Now we hand over to investors, and we will answer those questions.

[Operator]

[Operator Instructions] First question is from the line of Mohit Kumar from ICICI Securities.

[Mohit Kumar, analyst]

And my two questions on my side, sir. First is, can you explain or can you just throw some color on the smart meter? Have you received go-to-live for most of our -- the pipeline? And the related question is that how we see the trending activity as of now, which are the large states which are still pending to award the smart meter order?

[Kandarp Patel, executive]

Mohit, as far as smart meter is concerned, we already have a pipeline of 20 -- around 23 million meters already concession awarded to us. We have already started implementing in BESP, in Assam and in Bihar. Now in next couple of weeks, we will start implementing in Uttarakhand as well as in Maharashtra and Andhra Pradesh. So we have already implemented close to about 3 lakh meters in BESP Assam and Bihar. And we also implemented about 5 lakh in AEML. So now that implementation is progressing well and it is getting momentum. As far as bidding pipeline is concerned, about 12 crore meters are yet to be auctioned. Probably that will -- now the state whose bidding is pending will -- you will see actions on those parts and those states are Telangana, Tamil Nadu, Karnataka, part of Madhya Pradesh. So these are the 4 major states which are yet to issue a bid for smart meter. Then even in West Bengal, they have yet not covered the full one. In Gujarat as well, there is some meters which are pending. So we see a robust growth coming from smart metering segment.

[Mohit Kumar, analyst]

Sir, is it possible to give some guideline on the how do see this smart metering installation for next 3 years, you have '25, '26, '27 based on the current order book?

[Kandarp Patel, executive]

So Mohit, we are targeting about 50 lakh to 65 lakh smart meters in the current year. And from next year onwards, we will reach to about 1 crore smart meter implementation. So we will try and finish the existing one in next 2 to 2.5 years. And then we will continue to implement as we get new order book.

[Operator]

[Operator Instructions] Next question is from the line of Rabindranath Nayak from Sunidhi Securities.

[Rabindranath Nayak, analyst]

Sir, my question is regarding this transmission line -- transmission business, the EBIT margin [indiscernible] 46%, 45%. So once upon a time, it was 60% to 70%. So how do you see this margin going ahead because majority of the new businesses of the transmission line would be completed in the [indiscernible] model? So how do you see the margin going ahead from this in the upcoming projects? And about this GTD business, you have sold this asset, Dahanu power plant at INR 800 crores translation for a book value of around INR 2,200 crores. So what is the regulatory impact from this tariff? And also in terms of ROE, how is it going to impact the business of the company? And when this PPA with Dahanu will [indiscernible] from the distribution business?

[Operator]

Sorry to interrupt, Mr. Rabindra, your voice is breaking, and there is some background noise from your end.

[Rabindranath Nayak, analyst]

Is it now okay?

[Operator]

This is little better. Please repeat your question.

[Rabindranath Nayak, analyst]

Regarding the transmission line sort of [indiscernible] again, I'm repeating. The margin in the EBIT margin for the transmission business is continuously declining. What is the reason for that? And how do we see the margin going ahead? And for the regulatory impact on tariffs and also for this sale of Dahanu power plant, what is the -- how do we see the tariff going ahead? What is the impact on the profitability of the company going ahead in the GTD business? And regarding this PPA with Dahanu, when it is going to finish?

[Kandarp Patel, executive]

So I think Rabindra, as far as transmission segment margin is concerned, you must have seen that we continue to maintain that 90% -- 91 to 92 percentage of EBITDA margin on our revenue. And we will continue to have that number. The outlook is because there is a lot of opportunity coming up in the market space. And because of that, we think that the intensity of competition will reduce significantly, and that will give us also to improve that margin better. As far as Dahanu is concerned, though the book value of Dahanu is INR 2,200 crores, but the regulatory asset base on which MERC approves the tariff is around INR 800 crores. So there will not be any impact on the tariff whatever is the impact is that impairment in the financial statement, and that's also a book loss. It is not an actual loss. So your cash profit and EBITDA doesn't change, neither tariff changes under the PPA nor the EBITDA and cash profit changes under the financials.

[Rabindranath Nayak, analyst]

Okay. And about, sir, PPA with DISCOM right now with -- from Dahanu, when it is going to finish?

[Kandarp Patel, executive]

So the existing PPA has a tenure till April 2025. But we understand that PPA will get extended at least for a couple of years. And the reason is because Dahanu is very, very important for supply of power within Mumbai. And till the time, sufficient capacity is -- transmission capacity is created to import power into Mumbai, that PPA will continue. Our transmission project, HVDC transmission project, which is meant to bring 1,000 megawatt into Mumbai is expected to commission around September 2025. And they will also take some time to make sure that we are comfortable with the performance -- line performance. There is another line which we have set up, which is Kharghar-Vikhroli. But that line is not in a position to utilize full capacity because the transmission line, which was to get connected to Kharghar is yet to start. So we think that once the transmission system is stabilized, it is proven that Mumbai can import power in excess of 2,000, then they will -- till that point, they will continue to extend Dahanu PPA.

[Rabindranath Nayak, analyst]

Okay. And sir, regarding you clarified this transmission business. I'm just asking the EBITDA margin. I was just looking at the EBIT margin, which has come down from 67% to 70% to around 53% in FY '24 and 46% in this current quarter. So if you add the depreciation, then the things are -- the margins are coming down. How should we look at the capital, whether the tariff you are bidding at a lower price due to that, the margin is coming down -- EBIT margin is coming down? How should we look at in the future projects?

[Kandarp Patel, executive]

So there are two reasons. One is, obviously, in past, that competition was intense and those margins were not very high. The second thing is that there are also a lot of regulatory issues pending before various forums. Now we believe that those claims will get approved And the moment it approves, that will get -- start getting reflected into profitability. We have not booked all the claim in our account as a revenue. And once we get the clarity, you will have a better number in terms of profitability.

[Rabindranath Nayak, analyst]

So from when we can see that better profitability to come? Any ballpark time line you can provide?

[Kandarp Patel, executive]

So one of the case, which was for delay and shifting of tariff, that matter was pending since a long time. For one of the assets, we got an order of [indiscernible] a couple of months back. There are some issues regarding 2, 3 parameters, which we are challenging after. Now we expect that on the similar line for the balance, other assets as well, we will receive the orders on those lines. Like of the major one, which is pending is in -- for our UP asset. And we expect that those orders will be available in next 6 months' time.

[Rabindranath Nayak, analyst]

Okay. And sir, regarding smart meter space, can you please explain this quarter, the profit is high, but the sales is low, because there is a disparity in the -- between the performance of last quarter -- the fourth quarter and the first quarter. Can you please explain what has happened in this quarter and what was there in the last quarter?

[Kandarp Patel, executive]

Yes. So -- you are right, is in terms of the increase in net profits during this quarter. Because what had happened is that in the last quarter since the meters had not been installed, the margin on that meters was not recognized under the accounting standards. Now since those meters have been installed, the profits on that CapEx which has been incurred has been recognized under the accounting standard. So around INR 8 crores of that is an additional margin which got recognized for the meters which got installed during the current quarter.

[Operator]

Next question is from the line of Nikhil Nigania from Bernstein.

[Nikhil Nigania, analyst]

My question first is the transmission business. When we listen to competitors, especially the biggest one power grid, they talk about equity IRRs of about 11%, 12% in the business -- in TBCB projects. I just wanted to get a sense -- I mean they borrow cheaper than anyone else. Are you seeing similar returns in that business? And as you were highlighting earlier, do you see it improving substantially? Or do you see it being broadly in this range?

[Kandarp Patel, executive]

Yes, Nikhil, certainly we are looking at a much better return. In fact, our internal target is always around 15 percentage. And certainly, power grid has a certain advantage as compared to us. But at the same time, we also have a separate advantage in terms of project implementation. And when you are implementing in a place like Khavda, obviously, we have a much, much better competitive as compared to any other player because we will be able to make sure that projects are implemented in time and commission in time without affecting any penalties or any defaults. So -- and as there is a good pipeline, we expect that the competition intensity will certainly reduce.

[Nikhil Nigania, analyst]

Understood. Just on the related point on execution then, are you facing challenges in sourcing equipment, especially high-voltage transformers, which is seen as a problem everywhere in the world?

[Kandarp Patel, executive]

Nikhil, you're spot on. Everyone is facing that problem. But what we are doing is because we have a clarity as to what kind of projects that we wanted to do and what is our time line. So usually, we plan our project much before of even the contractual time line. So as a practice, we do strategic buying. And then we get into a long-term arrangement with those equipment suppliers who are allowed to supply equipment in India and qualified under the TBCB. So you have to fulfill those guidelines where you don't procure from a company who are importing from somebody who is neighboring to us or importing in India, but having ownership neighboring -- in a country neighboring to us. So we tie with them in advance, and we make sure that those equipments are delivered in time, and we make that commitment right upfront. So normally, we don't go to them once we win the grid. We go to them prior to that and commit that quantum.

[Nikhil Nigania, analyst]

Understood. Understood. And then just on the pipeline, if you could just quantify that -- sorry if I missed it earlier, what kind of tender pipeline you expect in the 12 to 18 months?

[Kandarp Patel, executive]

So it is -- Nikhil already those bids -- in fact, the projects which have already been declared to be under TBCB, which will happen in 1 year time is around INR 90,000 crores to INR 1 lakh crores. And these are mainly from those central projects. We are not considering any projects that some state might come up. And we see that a lot of traction on [indiscernible] side as well, though everyone is talking about those state projects since long. But we sincerely see that traction coming from state side as well.

[Operator]

Next question is from the line of Bharat Shah from ASK Investment Managers Limited.

[Bharat Shah, analyst]

I was quite happy to listen to that opening commentary, where you mentioned that there has been all round growth in all parameters in the current rate. And in your opinion, Adani Energy Solutions has now entered a high-growth phase. I met with Kunjal Mehta a few days back -- a few weeks back. And jokingly, I was saying, Adani Energy seems to be slow-moving train among all the Adani Group businesses. So I'm happy as well as intrigued by that statement is to hitting the entered high-growth phase. So would you describe what is the new formed energy in Adani Energy Solutions and what will be the key drivers, vertical-by-vertical, transmission, distribution, smart meters? And I think, District Cooling is still some time away. So will be happy to hear your perspective as to what is going to drive on a more sustained basis, the superior growth?

[Kandarp Patel, executive]

Thanks, Bharat, for this question. In fact, Kunjal has decided to prove you wrong. So see, if you understand Indian energy market, there are three things that is happening. One is obviously energy transition. And you see energy demand for the projects or CapEx coming for energy transition world over in most of the economics. But the very unique in India is that the additional factor, which is growing energy demand. Now you see a growth of about 8.5 to 9 percentage every year in terms of energy demand, which brings a lot of demand for projects and CapEx. And the third one is obviously a modernization of grids, where this smart meter and other projects comes in. Now if you see all the 3 segments, the kind of -- size of opportunity that is available in India and if you see the competitive canvas in all the 3 segments, we feel that we are much better placed as compared to many other companies to capture these opportunities. And one of the important advantage to AESL is that we have a diversity in terms of business model. So we have a transmission, distribution, smart metering and now those District Cooling coming up. So even if some segment is not moving very fast, we will have an opportunity to focus on other segments, which is moving fast. So that kind of diversity advantage is available with hardly anyone other than us.

[Bharat Shah, analyst]

But these are genetic factors. I mean, these are evolving over a period of time. Basically, energy demand is growing at a rapid pace, probably one of the fastest in the world energy transition. Therefore, modernization and new energy generation, all these are known factors. What is certainly making you say that Adani Energy Solutions has entered a high-growth phase. That was a bit intriguing to me. So just wanted to understand in more detail as to what you meant by that.

[Kandarp Patel, executive]

Yes. Bharat, let me be specific. When I say we entered into high growth phase is because see, we already have about INR 17,000 crores of transmission projects already under implementation. And we have those smart meters project of about 22.6 million meters. And we continue to do CapEx in excess of INR 1,500 crores in AEML. Now if you add all these three opportunities, which is already in hand. And you compare with the past numbers, you will realize that we will continue to do 20 percentage every year. Now this is the first part that we already have that kind of concession available in hand, project under implementation. And the second phase, which I was trying to convey is that all the three elements in which we operate, you must have seen that the size of opportunity, which is left out is, humongous. So obviously, even if we continue to maintain our existing market share, we'll continue to grow in excess of 20 percentage.

[Bharat Shah, analyst]

Do you mean it at an aggregate level for -- or each of the three businesses will grow at that rate?

[Kandarp Patel, executive]

So when we are talking of 22 -- 20 percentage, we are talking at AESL level.

[Bharat Shah, analyst]

Okay. Because distribution, I can't see why it will grow at 20%. And even transmission is unlikely to grow at 20%.

[Kandarp Patel, executive]

Yes, yes, we are saying at -- we are saying 20 percentage at AESL level combined together of all verticals.

[Bharat Shah, analyst]

Smart meters growth will pull up the growth rate is what you mean?

[Unknown Executive]

Correct.

[Kandarp Patel, executive]

Correct.

[Bharat Shah, analyst]

And on each of those three verticals, can you kind of highlight likely growth rate over the next 3 to 5 years? And separately for District Cooling, what is in offing? Is there any near-term really prospect? Or it's a more medium- to long-term kind of inspiration?

[Anupam Misra, executive]

Am I audible?

[Bharat Shah, analyst]

No. Just now heard it.

[Anupam Misra, executive]

So this is Anupam this side. I was just trying to speak on this. I think I will try to articulate this question in a different way now. Earlier, if you saw before 2018, Adani Transmission, what was the earlier name of AESL, was purely a transmission company. So the canvas that AESL operated was on transmission. And we had -- the first 4 projects we had at an EBITDA of INR 2,000 crores. Then after that, we've added about 25 more projects, which have gotten us to an EBITDA in transmission for about INR 4,000 crores, okay? Now that's the part of what we have today. Going forward, based on the projects that we have in hand, which are under construction today, one of them is a very large project, close to INR 1,200 crores EBITDA. And overall, once all of them are operational, INR 2,200 crores. So transmission stand-alone will grow by 50% based on the existing projects in hand. This is just locked in. All we need to do is ensure that we execute these projects to plan, which we have done over and over again over the past, say, 8 to 10 years, not only in AESL, but in other group companies as well. That's the hallmark and strength of the group. Going on to the...

[Bharat Shah, analyst]

What time it is? INR 4,000 crores to INR 6,200 crores in...

[Anupam Misra, executive]

This will be -- September '26 will be the last project operation build. So on a run rate basis, you will see this on -- in September '26 quarter end. But on an annual revenue basis, we'll see this in FY '27 basis? So that is...

[Bharat Shah, analyst]

So every year, it will go up by 50-odd percent, so about 15% comparted?

[Anupam Misra, executive]

Yes. Now this is not counting for the new projects, which we will go on to win once the bids are going to come in, right? So that's going to be on top of that. The second business is distribution, where the business model is fairly straightforward as you actually have an existing regulated asset base on which you add the regulated CapEx that would do year-on-year. And on that regulated CapEx, you earn a return on equity as well as a return on debt. So there is a RAB-based approach. That in itself will continue to grow with a steady growth rate of 10% to 15% year-on-year based on the RAB growth. And that is something that you will see every year. We will do our CapEx. And based on that CapEx, we'll get the return. And again, repeated year-after-year, 2018 is when we introduced this business model into AESL. The third one, that is smart meters is where a bulk of the growth is coming. Today, I mean, if you look at FY '24 smart meter had negligible contribution to EBITDA. Over the next 3 years, there is the 23 million meters, which are going to be implemented. So that EBITDA will come in over a course of next 3 years. And then that will be a steady revenue stream that will come. Now basically, that's where the bulk of the growth comes from, because it's 0 going to 23. But more importantly, here, there are more projects to be awarded till now out of 120 million meters, we secured 24 million -- 23 million meters, that's a 20% market share, assuming we maintain that or slightly improve that which looks like the case, we will end up with a lot more -- more than double of what is currently there in hand. So that's how we drive the growth on this. And Bharat bhai, I think what we can do is potentially, we can get in touch with you independently to explain this in more detail. But yes, this is what I thought we could articulate.

[Bharat Shah, analyst]

Yes, sure. And then, of course, we'll meet separately again. But one just last point on smart meters. Over 3 years when we implement about 2.3 crores smart meters, what kind of profits would be generated in this 3-year period of installation? And what is the kind of revenue we can visualize after the installation is done?

[Kandarp Patel, executive]

So basically, the 23 million meters, which we have currently won, we have won at an average tariff of close to around INR 12,000 per meter. These contracts are for a period of 10 years, where out of 10 years, 2 -- 2.5 years have been given for the deployment of the meters and the balance, 7.5 years or 90 months, is towards the revenue earning period. So the 12,000 is on -- over that period of 90 months. And the margins on this business are pretty high in the range of around 85%. So that's how this entire economics works for this smart meters thing. The average CapEx cost in terms of the initial CapEx was that the company has to put is in the range of around INR 5,800 per meter, which the company has to incur. So that lands to an IRR of at least 25% or minimum 25% on the smart meters business.

[Bharat Shah, analyst]

And on an average, if we visualize in terms of smart meter per se, how will the outflow of that INR 5,800 would occur in -- I suppose, most of it is in the initial phase. And how much of the revenue would accrue in the -- in that 10-year period and at what time frame? So that some kind of idea of IRR can be understood.

[Kandarp Patel, executive]

So the INR 5,800 crores has to be incurred upfront and the INR 12,000 will be earned over the next 90 months.

[Anupam Misra, executive]

So just to simplify, Bharat, when you install the meter, you first get that INR 900, which the distribution company gets from Central government as a grant. So every meter installed and commissioned, you'll get INR 900 in the first year and rest about INR 11,000 that you receive it in 10 years. So roughly around INR 1,100 per meter per annum that you will receive. So all the meters that are installed, let us say, first, we -- in first year, we have installed 60 lakh meters, so we receive INR 900 for those 60 lakh meters and INR 1,100 for that annual -- annuity payment.

[Bharat Shah, analyst]

Got it. So IRR would work out to what on a 1 meter basis?

[Kandarp Patel, executive]

More than 25%. If you look at equity returns. On project returns, it will be excess of 18%.

[Operator]

Next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.

[Dhruv Muchhal, analyst]

Sir, the regulatory asset base that you mentioned for Dahanu, INR 800 crores, INR 850 crores, that is the regulated equity or the overall capital base?

[Kandarp Patel, executive]

It's a combined of regulatory date and equity, both.

[Dhruv Muchhal, analyst]

Okay. Sir, I'm just trying to understand how is the book value, INR 2,200 crores, in the regulatory asset -- I mean, the overall asset is INR 800 crores. So is that the disallowed CapEx? Or what is that?

[Kandarp Patel, executive]

So what has happened is that when this asset was acquired 5 years back, the acquisition cost was allocated to various assets at that point in time. And Dahanu -- I mean, Dahanu asset -- as the generating asset has been allocated a higher value than the regulated value and that's why you have the book value having been higher than the regulated value. But just to confirm, Dhruv, there is no regulatory disallowance as far as RAB is concerned at Dahanu.

[Dhruv Muchhal, analyst]

Okay. So when the equation that happened, you had increase in -- effectively allocation related to an increase in the book value of the Dahanu asset and which now gets written off.

[Kandarp Patel, executive]

Correct.

[Anupam Misra, executive]

So Dhruv, if I can explain this. When the transaction happened, the entire distribution business was carved out of our Infra and was sold to SPV. That transferred happened at a fair valuation, which was about INR 12,000, INR 12,500, which is a book value of the asset. And the regulated asset base at that time was about INR 5,000 crores, INR 5,500 crores. So that is the reason why you have a disparity in book value and regulated asset base. They're not just the allowance of CapEx of any form.

[Dhruv Muchhal, analyst]

So the asset gets transferred now at the book value -- I mean at the regulated asset value?

[Kandarp Patel, executive]

Yes.

[Dhruv Muchhal, analyst]

Onetime regulated asset value. Got it.

[Anupam Misra, executive]

And you have to think of it this way, you have to think of it it's a thermal power asset with 1-year of PPA left. It's got 25-year life, already extended. In addition to that, there is potentially a view that if IRR can take, then the PPA can be extended for 2 more years. So that's -- all of those factors that will be taken into consideration when you work out the value of the asset.

[Dhruv Muchhal, analyst]

Got it. Got it. Makes sense. And this will have some small implication on your regulatory asset base, but you say that, that can be offsetted based on your CapEx plans in the regulatory value?

[Kandarp Patel, executive]

Yes, Dhruv. So we will -- the RAB immediately will reduce by about INR 800 crores by the end of the year because we continue to add that CapEx, it will reach back to the same level. In fact, we will -- there will be some additional RAB as well. And see the most important point to note here is that, now in the entire RAB of AEML, there will not be any thermal asset. It is pure transmission and distribution assets only.

[Anupam Misra, executive]

And see this also, Dhruv, drives reduction in cost of capital for AEML as well as AESL because a larger pool of capital, which is ESG part of capital, can then start playing into this because of the negative factor that is there, there is a thermal asset sitting there has now been dropped out.

[Dhruv Muchhal, analyst]

Yes. Yes, makes sense. And -- sorry, last question is just on the transmission segment. I just wanted to reverify. So assuming the under construction projects, they will require about -- so you have to complete them over the next 2 years, they will require about INR 8,000 crores, INR 7,000-odd crores CapEx every year for the next 2, 3 years. So that's the number. Do you see any upside to that number based on the bidding that you have? Or all bidding that we do now, the related CapEx to that happens from probably FY '27 onwards?

[Anupam Misra, executive]

So if I can take an attempt in answering that question, out of the INR 17,000 crores of CapEx that we have for the projects under construction, about INR 4,000 crores is already spent. So the balance, INR 13,000 crores will be spent this year and the next year, so FY '25 and FY '26. So that's INR 6,500 crores broadly a year. The projects that we win this year, we normally enter into starting expanding CapEx -- year 0 is the winning year and then year 1, 2, 3 -- 1, 2 depending on the kind of the project and the design of the project, we spend it. So you should actually start seeing that also in '26, '27. You see if you can add to that, I mean unless there is anything you wanted to add to that.

[Operator]

Next question is from the line of Nidhi Shah from ICICI Securities.

[Nidhi Shah, analyst]

So the -- firstly, on CapEx that you mentioned, could you give me a segment-wise breakdown of the CapEx for '25 and '26? That will be my first question. And the second is that the transmission bidding pipeline. What do you think is the pipeline within that? And how much will we be able garner it? Those are my two questions.

[Kunjal Mehta, executive]

Sure. So for the projects, which are already under construction in transmission business, the CapEx which is planned for FY 2025 is INR 7,000 crores and for FY 2026 is INR 5,000 crores, which will ensure the completion of all the 9 projects that we have in hand. Of the pipeline, which is there, which Kandarp bhai mentioned earlier of around INR 1 lakh crores coming up for bidding each year, we will continue to have the existing market share of around 20 percentage. So that's in terms of the planned CapEx in transmission business. In case of the existing distribution business, in case of AEML and Mundra Utility, we would -- we have a planned CapEx of around INR 1,500 to INR 1,700 in each of the year for that. On smart meters, the -- we have currently won 23 million meters. As I told you, we have a CapEx outlay of around INR 5,800 per meter. And our plan is to install close to 50 to 60 lakh meters this year and which will increase to 1 crore or more than 1 crore in the next year. So that's on the existing businesses that we have won and the CapEx for the future businesses or the additional business would depend upon the projects that we win.

[Nidhi Shah, analyst]

And just a follow-up on the transmission. Has the competitive intensity there declined? Or has -- or given that the pipeline is not strong and in the new tenders, especially that are upcoming, what do you think in your experience is going to be the competitive intensity?

[Kandarp Patel, executive]

So Nidhi, certainly the intensity in competition has reduced, but not significantly so far. But we expect that with the kind of pipeline that is already announced and in the various stages of bidding, we certainly feel that intensity will reduce significantly because we are talking of about INR 1 lakh crores to INR 90,000 crores CapEx of a project in a year. So we feel that intensity will reduce significantly.

[Operator]

Next question is from the line of Abhiram Iyer from Deutsche Bank.

[Abhiram Iyer, analyst]

Congratulations on a good set of results. Sorry if this question has been answered earlier in the call. But could I just ask what would be the use of proceeds on your disposal of the Dahanu power plant?

[Kandarp Patel, executive]

So Dahanu power plant proceeds would be based on the covenants and the waterfall, which is as per that one covenant which we have and would largely be used to reduce our debt, which is there in the company. So because the cash flows of AEML are more than sufficient to take care of the CapEx requirement, this additional cash flow in terms of Dahanu will be used to repay the existing debt of the company.

[Abhiram Iyer, analyst]

So of AEML debt or are you envisaging some flow to AESL debt as well?

[Kandarp Patel, executive]

AEML debt.

[Abhiram Iyer, analyst]

AEML debt. Understood. Understood. And second question on AEML. So if I look at the revenue increase on a year-on-year basis, it's about 23%. Adjusted EBITDA is around 15%. Could you please just clarify on why the margins have fallen for this quarter?

[Kandarp Patel, executive]

No. So margins have not fallen. If you understand the business model -- regulatory asset-based business model, it is essentially EBITDA, which will remain constant or will increase. The revenue has increased because of two reasons. Obviously, there is an increase in tariff because of levy of FAC and a higher number of -- higher amount of sale. But you must have seen when -- during the COVID period when my sale reduces significantly, but EBITDA remained constant and margin -- percentage margin improved significantly, but that is not material in the distribution business because it is regulatory asset-based driven model here.

[Abhiram Iyer, analyst]

Understood. So basically, if I compare EBITDA plus the change in your regulatory balance, it should more or less be in similar line -- in a similar ratio with respect to the same quarter previous year?

[Kandarp Patel, executive]

Correct.

[Abhiram Iyer, analyst]

Understood. And one last question. Could you just please give what would be the current debt and cash balance at AEML as of June?

[Kunjal Mehta, executive]

At AEML or at AESL?

[Kandarp Patel, executive]

AEML. AEML.

[Kunjal Mehta, executive]

AEML has 2 outstanding dollar bonds of -- one is of $880 million, which initially was $1,000 million, now it is $880 million. And there is a $300 million of SLB bond, which takes to around $1.1 billion of dollar bond. And then there is a $282 million of quasi debt from the parent -- from the shareholder company.

[Abhiram Iyer, analyst]

Understood. So once the transaction for Dahanu is complete, that debt will reduce by around -- the net debt will basically reduce by around $100 million?

[Kunjal Mehta, executive]

Correct.

[Operator]

Next question is from the line of Puneet Gulati from HSBC.

[Puneet Gulati, analyst]

My first question is on transmission. In first quarter, how much of bidding has happened and what is the share of Adani?

[Kandarp Patel, executive]

So in first quarter, there are 4 projects which got bidded, and we have got one. The process is going on for allocation. So they will have to take a decision and then go to equity commission for adoption of tariff. We expect that should happen next week. So our pipeline -- means our share remains almost same about 20 percentage. But this project, we got at much better higher...

[Puneet Gulati, analyst]

But in terms of value, whether you want to talk in terms of transmission income or the CapEx, that was out for bidding in what we wanted...

[Kandarp Patel, executive]

No, the project we have won is about INR 4,000 crores CapEx.

[Puneet Gulati, analyst]

0 Okay. And is the market share similar in terms of number, I think? 20% should I assume almost similar number? INR 20,000 crores of CapEx for bid out?

[Kandarp Patel, executive]

Sorry?

[Puneet Gulati, analyst]

Should I assume the INR 20,000 crores CapEx of bid out? And you could have same 20% market share there?

[Kandarp Patel, executive]

So the bid out was about -- of INR 30,000-odd crores. There was 1 HVDC project in Rajasthan. And this was [indiscernible] project for Khavda. There are 2 HVDC projects coming up for Khavda in the next couple of months.

[Puneet Gulati, analyst]

Okay. And how is the pipeline looking for the second -- this current quarter?

[Kandarp Patel, executive]

So in current quarter as well, we feel that at least 1 HVDC project will get bid out and another 3 to 4 projects. So roughly around INR 30,000 crores, INR 35,000 crores worth of bidding opportunity.

[Puneet Gulati, analyst]

Another INR 35,000 crores. That's helpful. And secondly, if you can talk a bit about your experience on the smart metering side. Some bit of installation has happened. How has the collection behavior been and in terms of payment by government, et cetera?

[Kandarp Patel, executive]

So Puneet, what we did is that, first, we focused on standardization of our solution. So all those smart meter, HES, MDM communication, cloud. And then everything integrated seamlessly with the distribution billing system. So we have completed that aspect. In fact, if you not have done that aspect very well, then you will face a lot of problem not only during implementation but also during operation. So we learned that part when we were implementing AEM -- smart metering at AEML. So we have concluded that part with all the distribution companies where we have got order. We have started implementing in BESP, Assam and Bihar. We are facing some resistance in BESP. But in Assam and Bihar, in fact, there is no resistance. We have reached -- combined there, Assam and Bihar, we have reached to about 6,000 meter installation a day. Now from -- in a couple of weeks, we will start implementing in 3 distribution companies of Assam, one in Uttarakhand and at two places in Maharashtra. So combined together, we wanted to reach to about INR 20,000 crores to INR 25,000 crores -- 20,000 to 25,000 meter installation a day. And I think that we will be able to demonstrate by end of this quarter.

[Operator]

We will take our last follow-up question from the line of Bharat Shah from ASK Investment Managers.

[Bharat Shah, analyst]

Anilji or Kandarp bhai, basically once the smart meter is installed your job is done and all the benefits of avoiding energy, leakages and remote monitoring and all other value-added benefits would accrue to the DISCOMs. How do we derive? Because we will have a lot of data through those meters. And how do we levitate this data in terms of intelligent analytics to benefit and convert into revenue over a period of time? Or would that belong entirely to DISCOM and we have no role to play?

[Anupam Misra, executive]

So Bharat bhai, that data certainly belong to DISCOM. We are the only custodian. And we can have a very limited use. But what probably advantage is we can derive from the smart metering is that you can certainly understand the consumer's consumption better and payment behavior. And eventually, if you wanted to expand your distribution business in those areas, obviously, this kind of insight will be very, very healthy. And you can actually plan your investment and operation quite efficiently, if you decide to take distribution assets there or you wanted to apply for a second license.

[Bharat Shah, analyst]

And after the meter is installed, after 10 years what happens? How do we rejuvenate this revenue stream?

[Anupam Misra, executive]

So as per contract, I have to hand over entire infra to the existing distribution company. But see what happens that those meter life is also for 10 years. And now they will -- once this contract is over, they will have to appoint another meter [indiscernible] contractor to deploy a new set of meter. And here, we see we're having a great competitive advantage when they decide to replace this meter through another tendering process because we will have presence there, we would have understood the entire geography and we would have operated in their geography for next -- last 10 years. So the knowledge of that particular geography and working with the distribution company will become a major competitive advantage when they decide to replace this existing meter -- smart meter with a new meter through bidding process.

[Bharat Shah, analyst]

And the life of this typical meter would be what?

[Anupam Misra, executive]

Sorry, Bharat bhai, I couldn't get your point.

[Bharat Shah, analyst]

What is the physical life of smart meter?

[Anupam Misra, executive]

10 years.

[Bharat Shah, analyst]

After 10 years, it becomes kind of useless?

[Anupam Misra, executive]

Correct.

[Operator]

As there are no further questions from the participants, I would now like to hand the conference over to Mr. Kandarp Patel for the closing comments.

[Kandarp Patel, executive]

Thank you all. Thank you for the questions and look forward to continuous engagement with all investors. In case you have any clarifications, Vijil is available for any of the additional clarifications that you have.

[Anupam Misra, executive]

Thank you, everyone.

[Kunjal Mehta, executive]

Thank you.

[Operator]

On behalf of Adani Green Energies Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.