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Adani Energy Solutions Ltd
Earnings Call Analysis
Q2-2025 Analysis
Adani Energy Solutions Ltd
In the second quarter of fiscal year 2025, Adani Energy Solutions Limited (AESL) reported robust growth across all its core business segments: transmission, distribution, and smart meters. The company revealed a significant revenue increase of 23%, reaching INR 4,200 crores, while EBITDA surged by 31%, reflecting strong operational performance and effective capitalization on growth opportunities.
During this quarter, AESL raised equity amounting to INR 8,300 crores, which will fuel the company's capital expenditure (CapEx) for growth in transmission and smart metering. The CapEx for the quarter was INR 3,000 crores, an increase of 2.5 times from the same quarter last year, bringing the total CapEx for the first half of fiscal year 2025 to INR 4,400 crores. The company expects to close the year with a total CapEx of about INR 10,000 crores, signifying substantial investments that are projected to contribute to a growth in EBITDA of at least 15%.
AESL secured four new transmission projects, amplifying its project under construction to INR 13,700 crores, which are expected to be commissioned over the next two years. These projects are estimated to contribute about INR 4,200 crores in EBITDA. Management highlighted an impending bidding opportunity of INR 85,000 crores in the next six months, which could enhance the company's market share and further drive revenue growth.
The company has ramped up its smart meter deployment significantly, from about 4,200 meters per day to a current rate of about 7,000 meters daily, with plans to further increase this to between 16,000 to 20,000 meters a day. Over the next six months, AESL aims to install around 30 to 35 lakh smart meters, totaling 40 to 42 lakh by year-end. Given that the smart meter segment generally yields margins between 75% to 85%, this initiative is expected to notably boost revenues in subsequent fiscal periods.
Despite extensive investments, AESL maintains financial prudence with a net debt to EBITDA ratio of 3.1x. The company also recorded an increase in profit after tax (PAT), which rose to INR 173 crores, indicative of strong operational management amidst capital expansion. Management emphasized a disciplined approach to financing new projects and securing long-term profitability, even amid rising expenditures.
AESL is diversifying its revenue base through the C&I (Commercial and Industrial) power solutions sector. Management noted ongoing discussions with major players like Google and Microsoft for long-term power purchase agreements. With initial projects yielding potential annualized EBITDA of around INR 150 crores, this venture represents a promising growth avenue and signals AESL's strategic positioning within the burgeoning energy management market.
Looking ahead, the management guides for a continued growth trajectory with projected EBITDA growth expected to exceed 20% in the coming years due to ongoing projects and successful execution of CapEx plans. With opportunities for expansion in key areas such as transmission and smart metering, the company is poised for accelerated growth as it capitalizes on India's energy demands.
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Ladies and gentlemen, good day, and welcome to the Adani Energy Solutions Limited Q2 FY '25 Earnings Conference Call. We have with us on the call today Mr. Kandarp Patel, CEO, AESL; Mr. Kunjal Mehta, CFO, AESL; Mr. Anupam Misra, Head Group Corporate Finance; and Mr. Vijil Jain, Head IR, AESL. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Kandarp Patel. Thank you, and over to you, sir.
Hello, good morning, and yes, this is to all investors and [ Ali's ] friends who has joined on the call. I hope all of you must have got an opportunity to go through the results that we have published and uploaded on our website. Having -- this was a very strong performance that we reported in quarter 2. And in fact, all the 3 existing business, which is transmission, distribution and smart meters are in a phase of massive growth. You must have seen those numbers. Another business that we were incubating so far, which was -- which is C&I power solution in business, I think from next quarter onwards, you will see contribution coming also from this vertical.
During quarter, AESL has raised the equity of 8,300 [indiscernible]. And in fact, that's very helpful to AESL for fueling this CapEx growth in transmission and smart metering. In the current quarter, besides the project under execution, which was INR 17,000 crores we have secured 4 new transmission projects. And with that, our project under construction has reached to [ INR 13,700 crores ] from INR 17,000 crores. Those projects are completed of the INR 31,000 crores equal contribute to EBITDA of about INR 4,200 crores, and the time line of these projects entire [ INR 13,700 crores ] CapEx would be around 2 years. So 24 months, you will see those assets getting commissioned in the current year, next year and some of them in the early part of next to next year.
In the current quarter, in fact, we did exceeding the [ gel ] as far as CapEx deployment is concerned, we deployed a CapEx of INR 3,000 crores in the last quarter. That was 2.5x of the CapEx that we deployed same quarter last year. And in is the case in total CapEx of first half of the current year, which is INR 4,400 crores. which was against INR 2,000, which is again 1.7x of the CapEx that we deployed in the same period last year. So as I said, in fact, in our business, it is important to understand that whenever we deploy CapEx, we do that extend lock-in profitability. So asset as it is long gestation, it might reflect at a particular time.
But as investors, if you have those numbers, then you have secured at this kind of profitability or revenue has already been locked in. So in fact, as the AML AESL, we closely monitor CapEx number on a quarter-to-quarter and a 2-month basis. This CapEx number will also get accelerated for a simple reason that first half was also having a monsoon. Now we will have a clear season for last 6 months, and we think that we'll be able to close this year with a CapEx of about INR 10,000 crores at the end. Now this will probably bring the growth in EBITDA that we projected, which will be in excess of 15 percentage. As far as operational update is concerned, we continue to do excellent work as far as operation is concerned, we maintained at [ a bit of ] 99.7 percentage. As a result, we also own 35 crores of incentive.
We added 140 circuit kilometers to our network, and now we have reached 23,000 circuit kilometers plus. As far as distribution is concerned, the growth in replacity sale was to the tune of 7 percentage. And continuously with our endeavor, we have been able to reduce distribution losses further. Now it has reached to 4.85%. And with all this effort on operation and project side, the financial numbers also accordingly showed the results. So revenue increased by 23 percentage reaching to 4,200 as well increased to -- by 31 percentage. It has reached withing 191 crores. Similarly, PAT also increased speed growth and reached to [ INR 173 crores ]. Similarly, cash profit has also shown very healthy growth and it has reached INR 1,026 crores.
While we do this CapEx, but we make sure that we operate this business with a financial prudence and discipline. And that's how we have also maintained that net debt to EBITDA at the 3.1x. Now as far as the outlook is concerned, transmission remains major area where we will continue to focus. And India is a massive opportunity as far as transmission is concerned, Besides, we already got our 4 projects, but still the bidding, which is going to happen in the next 6 to 7 month time is of the order of INR 85,000 crores. And we expect that we will maintain our market share. There could be opportunity to increase the market share as well, but we will make sure that we follow the proven investment decision. And even if we take the current market share, then we hope to get about to 15,000 crores to 20,000 crores [indiscernible] more in the next 6 months' time.
Distribution, the red currently is 8,400 and it will continue to grow as we continue to invest in distribution network in Mumbai. In fact, one of the projects which were supposed to commission in last to last quarter got delayed because of geographical surprise. But now that project is on track, and we expect that to commission in next quarter, that will add about INR 1,000 crores of [indiscernible] Mumbai asset-based. As far as margin meter is concerned, now we have started progressing very well. In fact, in last quarter, we deployed about close to about 4 lakh meters at the rate of about 4,200 meters per day.
In October so far, we are deploying about -- at the rate of about 7,000 meters per day. And now we expect to significantly step up the implementation plant because now we will have that clear season without any monsoon. And we expect to add about 30 to 35 lakh meters in next 6 months. So we'll close year by -- with the installation of about 40 to 42 lakh meters.
So these are the basic details, and I will hand over to all of our friends we will give further details during the question and answer.
[Operator Instructions] First question is from Mohit Kumar from ICICI Securities.
First question on the transmission. Can you just help us with the transition CapEx which will do for the next 3 years based on the current pipeline. Is it possible to talk about the expected EBITDA of the lock-in portfolio?
So Mohit, as I said, the project and the perception is -- of the order of INR 32,000 crores. which is already secured. And this time line of all these projects are about 2 years or 24 months. And we also expect to add another INR 15,000 crores at least to this city. So it will reach to about INR 45,000 crores of projects under implementation. And with that, we will have EBITDA in excess of INR 5,000 crores. In fact, with this INR 32,000 crore project under construction, it will contribute about INR 4,200 crores and another 15,000 projects will contribute about INR 1,600 crores to INR 1,700 crores of EBITDA. And this will happen over the '24 and the new project that we will get will be in [ 3 ] months from now. So that's the outer limit.
Understood, sir. And given the fact that there is a huge bidding opportunity in first half has been great, and I think you have won your fair share. But also, I believe the H2 seems to be -- likely to be again, again, a very massive opportunity. How do you think about the -- you can just explain us the [indiscernible] bidding opportunity and the pipeline you're looking for the next 18 to 24 months?
So Mohit, we have a clarity as far as the next 6 months is concerned. So those projects are already identified for bidding approved for bidding, and the process has reached to a certain level. So in next 6 months, we expect to see witness a bidding of about INR 85,000 crores CapEx of transmission project. In fact, this also includes 2 HVDC projects, which we were supposed to get bidded in last quarter, but it has spilled over and now it will wonder the bidding. And on a long-term horizon, 1 to 1.5 years, there will be another at least lakh crore of CapEx that will come under [indiscernible].
Understood. The [indiscernible] 2 HVDC, First one, I think already happen. And the second one is -- can it happen in the second half? Or do you think it will take maybe [indiscernible] of '26?
Yes. So certainly, it will happen in the second half. And another DC, which is the [indiscernible] DC, which got rebidded is likely to happen very soon.
Expecting apart from one call which already happened is picking other [indiscernible].
Correct. Correct. Correct. One of Rajasthan and one of [indiscernible].
Understood. And sir, on the second on this part meter as you spoke about 30, 35 last in the next 6 months your tankage [ 42 lakh ] in the -- by the end of year '25. How do you think about the '26 and '27 given the progress on all these areas? Is there something -- there's a number which you think you can guide us?
Again, sorry? Number for the next year?
For the next year, '26 numbers and '27 numbers, given your portfolio?
So Mohit, what we have got right now is about INR 2.6 crores meter. We will complete about 45 in the current year. But now all those issues that we had, in fact, when you start implementation, there are a lot of integration issues and there are a lot of coordination, which is required to be done with the distribution because you are getting into their operations. So there processes are also need to be aligned and our pace also need to align with the distribution companies processes. And every distribution company has a different process is for billing and meter installation and recollection.
So we have gone through that entire phase, entire integration is done. Everything is working stable. And now we only have to go and deploy meters on the ground. So in fact, in the current month, we had seen is ramping up to 10,000 meters a day from 4,000, which was there in the last quarter. With that kind of work that we have done on the ground, at least we'll be able to add about crore meters next year, and balance on in the subsequent year. And meanwhile, we will also add further meter as and when the opportunity comes in. So about INR 10 crores bidding opportunities yet to be -- come on the -- come for the bidding.
I think a couple of bits are out there, right, [indiscernible] one large one, which I think is supposed to but I think it [indiscernible] last year, specifically close. Am I right in that?
Yes, yes. So [indiscernible] we expect that it should get closed in a couple of months' time.
Understood. My last question on the C&I. Of course, we did touch on the topic, but the -- but we are -- think, what are your targets? What is the business model? What are the revenue order? Can you just please help us with some kind of [indiscernible]?
Yes. So Mohit, this is a very exciting thing, especially personally for me because I started my career with the power trading of. That's my first love intact and the C&I business. See, what we have done and what we have realized is that now with a growing economic activity in the country, there are many, many customers who has a very distinct requirement with conventional distribution company are not able to meet like -- if you take a case of data centers, we would want a certain level of reliability. At the same time, they would want a certain percentage of being penetration.
And they will also want power supply to commence an infrastructure to get ready in a particular time frame because then they will have to -- they will also have a similar back-to-back contract with other players. Now this offers you the opportunity because we have a presence in generation, renewables and recent transmission as well as distribution. And as a distribution of retail arm, we will be able to leverage our renewable capacity that we are creating in the group. And in case this concept, we started the in-house. So last year, we commenced this kind of activity for cement business, port business and [ Vivawest ]. In fact, today, we are managing power supplies for about 100 establishment of these 3 businesses across the country. And having tasted ourselves, now we have started getting into contract with a third party. In fact, currently, we already have a contract about 20 megawatts. We are into active discussion for contracts for about 250 megawatts.
So roughly, in fact by the year-end, we will be able to close or we will have a volume of about of [ 5,000 million ] units, and that will contribute on an annualized basis of about INR 150 crores of EBITDA going forward. And this, I'm talking without any major contracts with any data center player. There also, we are actively discussing with Google and Microsoft [indiscernible]. And we hope that we'll be able to finalize contracts with them very, very soon. This is going to be a very exciting business for -- you'll see a lot of action happening in this side in next and next quarter. And largely, you will see a lot of activity in next financial year.
The next question is from Brett Knoblauch from Cantor Fitzgerald.
Maybe first, on the smart metering deployment. How difficult is it to ramp up from? I know you guys said you guys were at 4,000 a day, now approaching 10,000 a day. What's the biggest bottleneck from you why you're not doing more on a daily basis? Is it labor? Is it inventory of the meters itself? Maybe just help explain that a bit.
See, today, so far, we were constrained by 2, 3 factors. Obviously, one, we have multiple geography. And so we have a contract with Assam, Mundra, Bihar, Maharashtra and Uttarakhand and BEST, a distribution company in Mumbai. So when you start deploying meters in any geography, first, you have to get those integrations done with a distribution company that takes some time. So what we did, we started with one by one distribution company. So first, we started with Asam, then we started what in Maharashtra, then Mundra, and now we have also started Uttarakhand.
So as we were starting a geography one by one, the total rate of deployment was less. And also there were issues around getting a good labor. Now having integrated with all the distribution company and having arranged all those contractors and skilled labor. In fact, we have undertook a massive training program, and we trained about 10,000 people as far as metering is concerned, and that is helping us now. So with this kind of deflation now, we feel that we'll be able to significantly ramp up the rate. We have already reached to 10,000 from 4,000, and we expect it to take it up to 16,000 to 20,000. So we'll operate between 16,000 to 20,000 meters a day from next quarter onwards.
That's super helpful. And then on the CapEx guidance, I think you said some much around INR 10,000 crores for the year which implies, I guess, just over 6,500 for the rest of the year. Could you just maybe break down how much of that is going to be between the 3 kind of segments of transmission, distribution and smart meter? And should we expect relative to the first half smart metering to have significant growth?
So out of the 10,000, the season would be around -- sorry, distribution would be around INR 1,600 crores to INR 1,700 crores. The smart metering would be around INR 3,000 crores, and the rate will be from a transmission side. But the biggest advantage as AESL to us is that eventually, AESL's profitability is largely defined by the CapEx. Now since we operate in 3 segments, even if there is some slippage in CapEx in some business vertical, we have an option and opportunity of pushing the CapEx in another vertical of the business. In fact, that makes an AESL distinct from all other players in the market.
And then maybe just one more. I think you guys talked about how EBITDA has grown at a CAGR of, call it, 9% over the last 4 years. It was 15% on a trailing 12-month basis as of the end of the second quarter. Can you just maybe big picture, talk about where you expect EBITDA growth to go from here? Should we expect, call it, that 15% rate to accelerate? Or maybe just provide some framework for us.
So certainly, it will be in excess of 15 percentage if you see the already project under execution and those projects including smart meters will get concluded in next couple of years. So that itself is INR 50,000 crores of CapEx. And therefore, the growth is going to correspond to that kind of CapEx, which, in my view, it will be in excess of 20 percentage.
The next question is from Dhruv Muchhal from HDFC Asset Management.
Sir, first question is on the C&I business. So under this business, can you target only the IST has connected customers or you can even approach the intra -- this company connected customers. I mean just trying to understand what's the [indiscernible] that you kept address?
So Drew, we can connect. We can target both. In fact, ISCS as well as interest rate consumers. You must have noticed that open access regulation, which has come from for this green energy the earlier restriction of [indiscernible] open access for the newer up to 1 megawatt has also been diluted for green energy. So therefore, in virtually all the customer in the country can become a target for you.
Got it. And what's the economic model here, you do a back-to-back with a generator, say, for example, any developer you have audit group and a similar contract with the customer. And you on the spread audit. So how does the model work, the economic model?
So what we do is we assume responsibility end-to-end and up to the delivery of power and also maintaining those connected assets so that the reliability is insured. So even last mile connectivity, if we need to invest, we invest and maintain that part. And from a sourcing side, we will have a bunch of assets that we will secure. And see, one of the biggest advantage that you can create is also from the diversity and aggregation of demand and supply. Now if you have a one side number of assets supplying power to you and on the other side, you have a number of customers, then you will also be able to create a lot of advantage because of diversity in demand and also in generation and also from aggregation side.
Got it. Got it. Perfect. That's helpful, sir. And sir, the second question is on the transmission, the outlook and bidding. So if I look at the overall landscape with seen, one of the larger players in the system has got a very reasonable order book now has been more aggressive in the -- I mean you got a larger share in the bits in the past. So do you think -- and one of the concerns in the transmission sector earlier was that the because of lack of bidding and also a number of players. But given the changing landscape, do you think IRRs would be better in future bids at some of the recent bids? Or there are still -- the impact is very high?
So Dhruv, you must have seen the IRRs have increased in the same time in the bidding. So the level of aggression certainly has reduced. And we expect that if not, it will further allow us to increase IRS, but at least, we don't see any condition where there will be a lot of aggressive bidding. Forcing you to reduce our IRR. I don't see that is happening because already 85,000 notified for bidding and another [ INR 100 crores ] will come in next year and in those time frames. So there is a huge pipeline available for all the players.
And sir, lastly, is that when we look at the execution time period which the system is allowing is about 24 months, I think now it's about 24 months, which still seems a bit tight given the overall execution cycle that we have seen historically. So when you bid for projects, do you consider that there could be a delay of 6, 9 months, you see some of your projects at some of our peers also that typically execution happens in 2.5 years or 3 years. So do you consider that when you're looking for bids or you're bidding for these IRRs? Or how is the favor that you think or 24 months you think is executable?
So we certainly make a detailed analysis before we take a call. And whenever we are sure, both in terms of supply and execution that we'll be able to complete in the time, then only we don't know it. And if there is a possibility of any delay, then we will certainly factor those kind of costs in our model. But see, Dhruv, most important for us is, and that is how we feel that we don't usually get into those kind of a situation because we do a lot of prepared [indiscernible] before we med and even before we go on the ground for execution.
The next question is from Bharat Shah ASK Investment Managers.
Yes. I lost out on the call in between. Plus, I couldn't fully comprehend your answer to the previous question. But on smart meter, I wanted to understand what is -- what are the constraints on the rollout? Because 4,000 or 10,000 still have very modest in very inconsequential kind of a rollout of 5 meters.
So Bharat, what I was replying to the earlier question is, that we had about 6 different geographies. We started to implement in different geographies one by one. And when you -- when we start deploying meter in particular geography, you have to integrate with the distribution system and you also have to integrate and demonstrate your entire smart meters and architech and platform to the distribution company. Once they approve, then you start deploying on the ground with full resources. Now as we were starting geography one by one. Therefore, the implementation rate was lower, and there were also issues around manpower. So both the issues now we have sorted, we have started implementing and integrated with all the 6 distribution companies. And now having sought out that contractor and manpower issues as well from 4,000 to 10,000 we have reached in a 1-month period, and we hope to take it to 15,000 plus, and we will continue to operate at that level.
But if you roll out 15,000 also a day, that will take you to mine it next to about 5 million for the next year. That -- it finds a very small number to my mind, unless I missed something. I thought you earlier mentioned that you expect to roll out about INR 1 crore meters next year. And if I heard it correctly, that's what I understood. So if you out 15,000 meters, then you...
S
I'm talking about the current geographies. If I add geography, then those numbers will get added.
Okay. So what exactly -- how many smart meters did we roll out last quarter? How much we expect in the [indiscernible]?
Yes. So last quarter, Bharat, we rolled out 3.6 lakh meter. We have reached a total of INR 6.73 lakh meters. And in the current year, the balance 6 months, we plan to add another 30 to 35 lakh meters.
So I think we'll reach about 48 meters by the end of the year.
Yes, 40 to 45. And why we are confident is because now that season is good. So in fact, we also faced quite a good amount of constraint because of extended monsoon. But now that the season is lower. So we expect that our deployment rate will continue, and it will improve significantly.
I can tell you awarded contract so far, how much do we expect to roll out next year? .
Next year, it would be around 70 lakh meter out of [indiscernible] contract.
And you expect to wait another 30 days from the new contracts that you may hope to be?
Correct. And this, again, I'm giving a conservative number about that. We will certainly try and boost those numbers at a higher level as well.
And are we facing any on-ground resistance of any kind, either from customers or others in terms of the rollout?
So there are resistance, not mainly from a customer, but all those motivated factors on the ground. And but that's a part of business. We have to deal with that and find your way in implementing it.
So that is -- and that's not the key reason why there is a delay?
No, no, no. It is -- it was -- it affected us to a certain extent to begin with. But now I don't see that the reason which is going to stop us.
Okay. And the economics of the smart meter that we had originally understood, roughly about 11,000-odd cost. Roughly about 1,000 comes from the government is an upfront subsidy. So basis about INR 9,000 to INR 10,000 is [indiscernible] over a period of 9 years roll out per month per meter is revenue, almost about 85% of which is the operating profit in the business. So that economics remains, right?
It remains unchanged. [indiscernible] just 1 area. The subsidy that comes from government is not INR 1,000, it is INR 900.
Okay. No, I said ballpark numbers, just rounding off and making broad numbers. Also, there were tax right mix in the current quarter. I could not fully figured it out. So net-net, there has been actually takes credit in the first half of the year. In the second half of the year, what is the expected tax liability we need to provide, we should out?
So this quarter itself, we had a onetime reversal of the MAT credit which AML distribution business was accounted. Other than that, there is no expected -- any expected reversals in the future years. We are expecting an effective tax of around 20 percentage, which will continue as the [indiscernible].
So the second half of the current year, this should come 20% is the effective tax rate, right?
Correct. Correct.
[indiscernible] for second half, I'm not talking of mixing with the first half. So the second half, currently, it will be 20%?
Correct.
And that is expected to stay the course going ahead?
Yes.
Okay. And last question on Microsoft and Google transactions, I thought one of the transactions already happened in using the bag. Something to get, if I read the announcements in the papers. Maybe I'm mistaken, if you can highlight on that.
You're right. Bharat, you're right. There was an announcement that was for Google contract where they had a long-term power purchase contract with [indiscernible] green for their part requirement of existing data center or the data center, which is under construction, [indiscernible]. What I'm talking is beyond that, that's only a power supply PPA between AGL and Microsoft -- sorry, Google. Now all those -- and that's only meeting a part requirements.
Essentially, these data center companies wanted someone to handle their entire power supply management because they don't have that kind of knowledge or expertise of managing this complex regulatory system as well as managing supply on the around-the-clock basis. So that is where we see an opportunity. And in fact, we are discussing with Google, Microsoft and many other players where they wanted us to design an energy solution for them, which will define the extent of green energy that we will supply the kind of reliability and time line. So those 2 transactions or these 2 are the registrant one.
Right. And broadly, is understood roughly for sticking together the entire solution that is arranging power design mix, ensuring [indiscernible] as reliable supply arrangement remaining by stitching together that solution with the various sources. You can hope to make about rupee and rupee half of fees per unit?
So [indiscernible], It will not only be speaking, but sometimes you might also have to invest like last mile connectivity, with one of the players that wanted a power solution. We are also investing for them in last mile connectivity and a small partial line needs to be created. So it will mostly speaking, but you might also require to invest somewhere to make sure that whatever the agreed delivery [indiscernible] that you have signed up. That is delivered. And as far as margins are concerned, it obviously would depend on a lot many factors, including assumption condition and risk profile of that particular contract. And that could range right from INR 1 to -- depending on the risk profile of the contract. If the -- all the solutioning or services to be provided like we do for our group companies where a carry on the risk, those margins are around 10%.
And these arrangements potentially can run into the hundreds of crores of units, but actually have tons of crores of units to be supplied in [indiscernible] potentially, isn't it?
Yes, correct. So what we are getting is about 7,000 to 10,000 million units in a couple of years.
700 to 2,000 crore units in a couple of years?
No. INR 7,000 to INR 10,000 -- [ INR 700 crores, INR 2,000 crores unit ].
Next question is from Ajay Sharma from Maybank.
I just want to check what's the IRR you are getting on the new transmission projects you just won?
[indiscernible].
Okay. And what's the increase in the regulated base for the distribution business, which we're targeting every year?
So we do CapEx of about INR 1,700 to cores 1,800 crores. and minus [indiscernible] INR 600 crore to INR 700 crore, so around INR 800 crores to INR 1,000 crores addition of every year.
What's the current regulated base?
It is [ INR 8,400 ] [indiscernible].
Okay. Okay. So about 12%, 13% -- 12% to 13% kind of growth every year?
Correct. See, and why we have been able to add a lot of CapEx in Mumbai distribution company, because there, you will not only add CapEx in distribution, but you also add CapEx in transmission. And we see a lot of CapEx coming from transmission side within Mumbai because as demand is increasing in Mumbai, there is an urgent need to augment a transmission capacity within Mumbai. In fact, one of the projects that I mentioned in the call earlier, which got delayed because of when geographical geological surprise, that project itself is about INR 1,000 crores.
Right, okay. And lastly, just a small housekeeping question. If I look at your balance sheet, right, if I look at the plant and equipment and right-of-use assets and capital work in progress, I mean, the difference between the September numbers and the March number is more like INR 1,500 crores. So I mean, where is your CapEx, you said is more like INR 4,000 crores. I mean why is there a difference actually? Did you get rid of some equipment or work?
[indiscernible] power plant.
Correct. So one is on account of INR 2,300 crores on account of [indiscernible] power plant. Plus there is certain recognition of the CapEx is also done under service concession accounting for the smart meter part. So combination of both debt. If you add that, you will get to INR 4,400-odd crores of CapEx incurred during the year. But most important reason is INR 2,300 crore of the asset which was [indiscernible] power.
So let me just outline that. The [indiscernible] power plant is a 500-megawatt coal-based humble power plant because [indiscernible] the Adani Electricity Mumbai Limited. For ESC considerations being decided that the Board of AML decided and ESL, in fact, run a process. And based on that, it has been carved out. So based on that, EMI today does not be in VML or AESL today does not own any coal-based generating power plant. So that is the -- and it's a book entry of INR 2,300 crores of book asset.
And the service concession was smart meter, is that part of other noncurrent assets [indiscernible]?
Under financial assets. So if you look at the cash flow, the cash flow will show a CapEx of 3,900 all and the balance forms part of the service concession accounting and other financial set.
The next question is from [ Sumit Kishore ] from Apollo.
Can you give us some information on the steady show cost quarter [indiscernible]? On the [indiscernible] not to be public? And what are the next year and what about [indiscernible]?
So [indiscernible] motors that have been sent by [indiscernible] to the shareholders as well as to AESL and AESL has made a disclosure to that effect. In due course, we will be responding to that. There is nothing additional to that, that we want to disclose at this stage. [indiscernible] also to clarify, it has nothing to do with the company per se. It is because it is the company, it is listed and hence, the [indiscernible] notice has been sent to it, but it is more pertaining to the shareholders rather than the company.
The next question is from [ Tarik Mauser ] from Investec.
I just wanted to confirm the current regulated equity for [indiscernible] distribution business? And also, how is it expected to grow?
See the transmission business has 2 parts to it. One is Section 62 assets and second is Section 63 assets. The Section 62 assets are the ones which have a regulated equity. The Section 63 assets is where we bid out the tariff number. And once we have completed the project, we received the tariff on a monthly basis based on the bid of schedule. So we would not have a regulated equity number for the transmission business overall. Whatever we do on the Section 62 side, that number is there and that I think the team can separately provide to you or maybe.
Yes. So [indiscernible], just to add to what you said, in AESL, where we have transmission business, there are a few initial projects, which was on a [indiscernible] where there is a regulated equity. So because we don't add any regulated RTM projects. So there could be a few RTM projects like currently, whatever is regulated equity in transmission, which is about INR 3,400 crores. And when we commissioned that HVDC transmission in Mumbai, about INR 2,000 crores of regulated equity will get added. As far as AMM is concerned, the regulated equity is about INR 5,000 crores. And as we do a CapEx of about INR 1,800 crores every year, INR 1,700 crores to INR 1,800 crores, we'll continue to add about INR 500 crores of regulated equity in [indiscernible].
Next question is from [ Sagar Parekh ] from [indiscernible].
On this smart meter project, you mentioned about [ 3,500,000 ] installation in H2. So assuming INR 900 you get. So does that mean like in terms of revenue, you will be all about INR 350 crores, INR 400 crores revenue for H2 from smart meters or the revenue accrues much later? How do we account for smart metering revenues and...
The INR 900 will accrue with a time lag of about 2 to 2.5 months. So once we deploy then we have to go and demonstrate and the 2 distribution companies that deployed meters are working. Once that is done, then billing starts and then that amount is paid. So roughly about -- there is a lag of about 2 to 2.5 months.
So next financial year is when we can see the entire like 40, 45 lakh meters, correct?
Correct. Correct. But part certainly will come into the current year as well.
And the remaining INR 9,000 crores or INR 10,000 I mean does it mean that from FY '26 onwards, only this INR 1,000 every year will come through or?
No, no, no. So the first year, one-time bill we will receive, plus 900.
Okay, okay. And how would the margin shape up in this business?
So smart meters generally have a margin of around 80% to 85%. In the initial years because of the initial ramp-up, the margins may come down to around 75%. But overall, the project would have an 85% margin.
Got it. And on your C&I business, did I hear it correctly? You said that your margins would range from [indiscernible] to INR 1, something like that?
Correct. So depending on the nature of the contract, if it's only a service contract, then would be a simple back to that contract, then it could be around that. But if it is a complex contract, a lot of the thing to be done and position is to be taken. And obviously, those margins will be in a higher rate. And you mentioned some INR 500 crore units you are expected by year-end with INR 150 crore EBITDA. So like INR 500 crore units would translate into broadly about INR 200 crores, INR 250 crores kind of revenue number because I'm assuming about 50 per se.
Currently, the majority of contract is on the [indiscernible] contract. Now we are start getting into the contract where we do stitching, a lot of stitching end-to-end solution and also taking a position in the contract.
If it's a service contract, then it would be broadly [ 10 ], right? So for INR 500 crore units that we were looking to close then it will be about INR 50 crore revenue?
So there are a mix of it. So a few contracts are those contracts as well, where we are taking a position.
And the entire revenue would be EBITDA or is there some like cost involved over year?
Very, very minuscule. So roughly the EBITDA would be 98-plus percent.
And how much are we looking to invest? You said that we would be investing in last mile connectivity also your -- in case if it's like a complex contract?
Yes. So I don't have the ready [indiscernible] number. It will depend on the contract to contract and where the consumers facilities are located. How far it is and how complex that particular facility in will be to connect. So depending on that location. So if you are doing [indiscernible].
[indiscernible] or return metrics that we look at when we bid for these projects, let's say, if we're investing INR 100, we get something back from that perspective, any sort of number?
Obviously, we will look for more than 15 percentage whenever we do CapEx.
Next question is from [ Brian Naga ] from Barclays.
I have 1 question. So on the [indiscernible] line. Can you give us any update as to the time lines and expected CapEx remaining on that?
Expected CapEx is about INR 6,600, INR 6,700, and the project is progressing very well. And we will be able to commission within timeline, which is August '25.
Okay. And I have just 1 question on [indiscernible]. So you mentioned, I think, last September, you will be able to liquidate about 15 billion of regulatory receivables. So is that going in line? Or do you expect to continue that beyond FY '25 or FY '26?
No, no, it is going online. In fact, we are liquidating more than what we have committed.
Okay. And just a small question. So for the annual CapEx guidance of AML, can you... [Technical Difficulty]
Yes, yes. So there was some disturbance in between. The annual CapEx of the AML would be around INR 1,700 crores to INR 1,800 crores.
And can you give a breakdown of what projects that would go in and all that? So it will be a mix of transmission and distribution and within distribution, there could be numerous -- a number of projects. Starting from your network augmentation, creating new substrate and putting up a smart meter, putting up a storage facilities. So usually, the process is that wherever we wanted to do CapEx, we have to go to MERC with a DPI. We go to MERC, justify why we are doing it, what is the advantage of that CapEx. Once [indiscernible] we do the CapEx.
Next question is from [ Angel ] from Prudence.
Okay. I would like to ask on the show cost moves again. As I understand there's 2 things there was a peer review facility that also, I believe, was in the first quarter earnings as well as far as this new one regarding shareholding. So is there any other color that you can provide on this especially also for the peer review certificate one. But like what steps have you taken or what sets you do together with the new show cost notice moving forward to resolve it? Is there any time line that you can give to provide for those 2 results? What typically are the stats that you take the results to the show cost notice?
The show cost notice was with respect to the peer review, which the statutory auditors in 2015, '16 had to provide which they have subsequently provided. And now there is a complete peer review available for our existing auditors, that matter, which was there regarding peer review of the show cost notice stands result.
Okay. Okay. So that's results. Then for the new one of the shareholding. So is there any on time line you guide for that to when will that be resolved? And what that [indiscernible] to actually solve that?
So that I think [ Anupam ] mentioned is that we are in the process of filing the new response to and we'll come out with the necessary disclosures in due course of time.
Okay. Okay. Understand. My first question is relating to, again, your transmission growth plans are quite large. And then the question is what kind of funding options do you have to actually fund this next leg of growth over the next the near to medium terms over the next couple of years? How do you weigh your various options across my onshore, offshore banks, dollar bonds, USDA better?
So yes, post this equity raise, we are currently fully funded. And for our debt financing, we continue to have various options, which, as you mentioned, it could be bank financing, it could be dollar bonds and it could be domestic bonds, which can be evaluated at that point in time. Currently, because of the QIC that we raised and the projects which are currently under construction, both are fully tied up as far as the debt funding is concerned.
Okay. So the trajectory risk wouldn't change your assumptions of like debt equity mix funding for a new project, right? Like you won't therefore fully more equity now that you have more equity?
That would be funded through a project of -- I mean, project debt of around 70 to 30, that would continue as it is.
Okay. Okay. I understand. And last thing is on the [indiscernible] bonds coming in August [ 2025 ]. I understand it's still quite some time away, but is there any thoughts on how to deal with that? And internally on like external rating agencies, is there any requirement by a certain time line to 6 months to 1 year here you have to kind of plan for that refinancing?
So the maturity is still some time away. And at the right time, we will approach the market to refinance that debt.
Okay. And lastly, the -- for AML, I do see our second quarter financials out yet. So can you remind [indiscernible] is the regulatory deferral account assets as of September '24?
So the regulatory deferral account, which was there of 1,600 is in the full course of complete liquidation. Currently, we have out of the 1,600 only around 900, which is left by the end of September. And by the end of March, as per the NRP order, that amount would get fully liquidated through the tariff itself.
And then so about INR 700 crores was done over the last 6 months. So that is cash?
Correct.
Additional cash flow? Okay. And what will the use of the [indiscernible] cash [ inform ]?
That would be used under the normal business use as per the waterfall of that facility.
Thank you very much. Due to paucity time, we'll have to take that as the last question. I would now like to hand the conference back to Mr. Kandarp Patel for closing comments.
We thank all the investors for the active participation during the call, and we look forward to any other questions that you may have. You can reach out to us or to Vijil for any other clarifications. Thanks for coming up and taking this call.
Thank you very much. On behalf of Adani Energy Solutions Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.