Inox Wind Ltd
NSE:INOXWIND
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Inox Wind Ltd
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[Audio Gap] operations and financial performance and how we see the sector going forward. I have along with me our Executive Director, Mr. Devansh Jain; and CFO, Narayan Lodha, to take the questions now. Thank you very much.
[Operator Instructions] The first question is from the line of [ Shivan Royal ], an individual investor.
Sir I want to ask that given that we have repeatedly seeing that around 600 megawatts of supplies can be done on plug-and-play business, I want to know what exactly are the things that we require so that the smooth commissioning can happen? Like what all other things are dependent? Why can't we do like commissioning smoothly? What other government support do we require in terms of infrastructure? Or can we do the SEC 1 and 2 suppliers completely in like 3 and -- 3 to 6 months?
Okay. So first thing is that as far as government support is concerned, yes, there were normal delays on the part of making the central grid power evacuation facility in place, which is now in place. So we don't expect any more government to support our facility to be provided at the site. Yes, we see -- we have 600 megawatts of power evacuation are in place. That means that we -- and out of that, we take [indiscernible] 250 megawatts. So 350 megawatts are available for us, where we have to just supply and rent the machine and commission them so that it becomes supplementally. So that can happen over within a period of, say, 3 to 6 months' time. We don't see any hindrance beyond this, and safety projects will be commissioned on continual basis.
[Operator Instructions] The next question is from the line of [ Pranjal Jain ] from Axis Capital Limited.
My question relates to the outstanding order book Of 300 megawatt that we have for our SECI-1 project. Just wanted some color in terms of land acquisition, has there been any delays on that front?
With respect to our SECI-1 order book of 300-odd megawatt, we've already commissioned 200 megawatts. We have another 100-odd megawatt left to commission, and we already have all the line for that in place.
And what is the scheduled COD for that pending 100?
Well, 50-odd megawatt for pending 100, 50-odd megawatt is to be commissioned that we will be for Adani Green Energy once they're committing, [ we will be ] commissioning it. Our scope is only supply there. So from what I understand is the substation and bridge should be ready in the next 2 to 3 months. With respect to our 50-odd megawatt, we are waiting for some extension approval, but I think that should be increased over the next 30 to 60 days, and then we'll be able to commission that 50 megawatt as well.
[Operator Instructions] The next question is from the line of [ Nitesh Amanco], an individual investor.
I would like to ask where do you see the markets going ahead for the next couple of years? Because government has set us such an ambitious target completing 22 gigawatts the next 2 years, but will it actually translate into order book? And do you see any -- anything going forward in this area?
Well, to be honest, I think the government has started a very ambitious target to income where they want to option of 10 gigawatts per annum. They've been saying this for the past 3 or 4 years. Of course, there's been a very, very painful transition period for the past 2 years, where majority of the manufacturers have shut down and they're probably down to just 2 or 3 foreign players in Inox Wind now. So we're very excited with the opportunity ahead for us to gain that market share and get back to normalized operating business cycle. But in terms of volumes, we honestly expect the sector to keep putting up about 4 to 5 gigawatts per annum. Given the fact that transmission lines and grid infrastructure is not in place to absorb 10/10 gigawatts per annum, maybe 2 or 3 years down the line if the Green Corridor [indiscernible] across the country that actually takes shape in the manner and speed and timelines within which it needs to be done, then sure, we can increase volumes. But within that, I think, 4 to 5 gigawatts is a realistic number, and I think that's something which we put out on Slide 14 of our presentation as well. Now let me also remind you, 4 to 5 gigawatts per annum is a very, very large market size. So of course, theoretically, everyone would want 10 gigawatts per annum because that's what the government has set up. But that 4 to 5 gigawatts would probably be the third largest wind market globally after China and the U.S.
Okay. I just have one last question. Assuming the sector assets executes 4 to 5 gigawatts, what do you think will be the -- our company's market share announcement amongst the 4 to 5 gigawatt, considering we have the capacity manufacturing in place?
Well, to be honest, I wouldn't be guided by that. I would simply look at during '15, '16, '16, '17, during the peak, when the market was at about 3-odd gigawatts. We were doing about 600 to 800 megawatts per annum in that 3 to 6 – 3- to 4-gigawatt market. So broadly, that should give you a broad indication of what our market share was and what we -- we're kind of fairly comfortable with that kind of market share. For us, more important is profitability. I think, from inception, we've always maintained, we're not driven by top line. We're not driven by being the largest. We've already seen the largest players in the market struggle, probably gone bankrupt at this point in time. So we are only driven by profitability, not by top line.
Okay. And in terms of the debt, I think there's not much debt on the book. The debt-to-equity ratio is quite less, but is it still manageable with this amount of commissioning?
Well, I think to the extent that we get to a normalized operation, which will be 400, 500, 600, 700, 800 megawatts, I think it's very, very, very lean, very healthy. Of course, if you have 0 operations, which is virtually what happened for the past 15 months, then even a 0.001 debt to equity will be hard to service. But at 0.4, I think our balance sheet is very strong, and I think we are very comfortable with this. Moreso, given the fact that we're seeing a very, very significant growth opportunity coming up in the next few quarters, I think we're fairly comfortable with this.
[Operator Instructions] The next question is from the line of [ Surendra Jain ] from Blue Banyan Advisors. The next question is from the line of Shivan Sarvaiya from JHP Securities Limited.
A couple of questions. First, the bookkeeping ones. Sir the other expenses have gone down materially Q-on-Q and year-on-year, so if you could give some color on that.
Basically in other expenses for a -- at least what we were doing is we have fixed income contract manufacturing of power. So those expenses have reduced. And now we are doing some manufacturing, so all those expenses are covering our direct cost.
So other expenses included fabrication charges, which were -- I mean, the fabrication was outsourced. Now we are doing within the -- our system. So that's why there is a reduction in other expenses.
And this will be continued...
That will be a mix of [indiscernible] outside fabrication. We will see how...
Where the project will be...
Where the project location and what are the logistic costs.
And apart from that, we have also reduced our transporters group cost from logistic cost, so that's how we reduce our overall cost of other costs.
Okay. Okay. And sir the finance costs, they don't seem to be reducing in spite of our data also reducing, but that has not been seen in the finance cost reduction. So sir some color on that?
Yes. So in the first quarter, there were some financial renewal from there, from the banks, so all the cost has been booked in this year. And there was some changes in the bank guarantee environment. So now as well our very guideline, whatever bank guarantee which we are issuing, so we had to have a 1 year extra claim period. So that's why the bank card has increased, so there is an increase of around INR 2.5 crores [indiscernible] from last quarter.
See, the banks are to keep mandatory the claim period for 1 year. Even if we request for, say, 3 months, 4 months, mandatory claim period is 1 year from the expiry of bank guarantee. So that charges and the tax ended it upfront, all the charges. And precisely because of that, there's a marginal increase in the financial cost. But if the bank guarantees comes well before the expiry of the claim period, we are expecting credit [ focus ].
I think additionally, what's also going to happen is I think as you may have gone to the presentation over the past 2 years, most virtually all the turbine manufacturers have gone bust. We're probably the only Indian wind turbine company to survive. In this period, while we got support from banks, a lot of them jacked up our charges. And that's kind of -- it's absolutely disproportionate to what we used to pay a year or 2 years ago. And I think with our cash flows now continuously increasing as it's reflected even in this quarter, and we have a hell of a lot of cash flows coming in over the next few months given that commissioning is now behind us. We are -- it's on top of our agenda to work out and hammer down our banking charges across all banks.
So where do you see this settling down over the coming years?
The bank costs?
Yes, sir. Sir if you could give me a breakup, I'll get a better idea of what that...
Well, I don't think we can share micro breakups, of course, but you can get it off the call with our finance team, they can show you broad headlines with you. But I think broadly, what the group is driven by is virtually all our group companies are net debt-free. And I think our aim really is to make Inox Wind net debt-free as well. And given the fact that the sector is now on the rebound, and I think we are well positioned, we are broadly aiming to be net debt free in next financial year.
Okay, sir. And so if you could give me some color on the execution that is going to be done during this year in terms of your order book?
So in terms of commissioning. Broadly, like, if you look at it, we've got 100-odd megawatt of supply program with Adani which is, depending on their commissioning, we're really just supplying turbines there. That's something which is going to play out, we don't know how exactly to play out. And we are also looking at a certain amount of equipment supply orders kicking in. Broadly, I would say, well, from an Inox Wind supply perspective, you're probably looking at about incremental 300 to 400-odd megawatt of supplies and commissioning over the rest of the year.
Okay. So don't you think that is a little less compared to the order book that we have?
Well, everything is -- to be honest, it's subjective, right? If you look at FY '17, our top line was 4,200. FY '18, it's up to 400. Did we plan for it? No, we didn't. We went from 400 to 1,500 in FY '19. The point is we have been absolutely ultra-cautious with respect to what we want to do on the ground, with respect to what we want to supply. Broadly speaking, a lot of great infrastructure is getting ready over the course of this financial year. When the sector shut down, we decided we're almost INR 2,000 crores of inventory, which has taken us almost 2 years to liquidate. So we are not going to be overambitious in terms of manufacturing inventories, sitting on it and then waiting for the grid to get ready. We don't mind waiting for 2, 3 months or losing 100-odd megawatt here and there. But broadly put, I think FY '21 is when we see a very, very exponential growth for ourselves given the fact that a lot of the grids are going to be finally ready. This year, we're going to be very, very conservative. We are focused on only getting our cash flows back in shape for all the turbine supply. For some of the turbines, which we're still sitting on, which we are now using in SECI-1 and 2 and collecting the net free cash flows for the sale.
And so my last question was on related party transaction disclosure that was given by the company. So sir, there were advances from group companies, Gujarat's chloro chem, of about INR 265 crores and [ ICD's ] payable of INR 195 crores. Sir if you could give me the nature of this transaction because...
Well, in ICD, was something which was given to the company because Gujarat chloro owns the company. So during this same called period, we needed some support from those guys. So that was an IPP, which was given to us about a year ago. And the remaining INR 260-odd crores, which was provided for them, is for a 50-odd megawatt project, 40 to 50-odd megawatt project, which we are implementing from them under the group Captive scheme.
Okay. So that is not there in this order book, right? This is not...
No, that's not in this order book. So that's already been supplied from existing inventory, allocated from the existing inventory.
[Operator Instructions] The next question is from the line of [ Mayan Sethi ], an individual investor.
My question is about the finance costs related to the previous question. What could be the normalized finance cost we can expect this year? Would it be greater than the last year, it's about INR 180 crores? Or will it be less than that?
So I mean, what does normalized finance cost mean? Do you mean in realistic terms actual bank charges which used to exist 2 years ago? Or do you mean something else?
Sir, after removing any onetime charges or any ForEx losses.
Well, normalized -- to that extent, the normalized finance cost are virtually the same as last year minus, obviously, as net debt keeps reducing. To that extent, the finance cost will go down. But like we mentioned, we have these absurd charges, which banks have levied on us for the past 1, 1.5 years. During the period of inventory, all the wind sector, Indian wind turbine companies shut down. As our cash flows are continuously keep increasing, that's something which we are working towards with banks to bring down.
So those are not onetime, but they are kind of exceptional in the sense that those are absurd charges that banks have levered on us for the past 1.5 years.
Perfect. For this quarter, the finance cost is about INR 49 crores. Out of this, how much is onetime charges?
We can't talk of onetime charges. It's not possible to give you onetime charges. Like I said, there are 2 types of charges. One is exceptional charges with banks have been charging us for the past 1.5 years. I mean, in that sense, if our overall cost is 160, should ideally be 120 CR. So that is exceptional to that extent. And that's something which we propose to bring down over the next couple of quarters as our cash balances keep increasing in the company, number one. Number two, with respect to one-off charges, we probably have a INR 4-odd crore one-off charge in this quarter, which will kind of get normalized as we keep moving forward.
That definitely helps. And then my next question is on Slide 10, where we gave us our working capital position. So I wanted to know, out of INR [ 933 ] crore inventory, how much is over 180 days and over 360 days?
We see -- one thing is that my inventory is not perishable. Okay. So whether it's 180 days or more than that, doesn't make much difference. Yes, if you want a breakup, I think we can have that offline. Right now, we don't have that number.
[ We have future investors on the meeting in there ] because it is not perishable. To be honest, for the past 2 years, effective shutdown.
[indiscernible]
And this is -- just keep in mind that this is the inventory of Inox. It's a consolidated number. So Inox Wind and Inox Wind Infrastructure Services where the inventory is also in terms of work in progress. So that is for the projects which are ongoing and are yet to be commissioned, those -- that inventory is also part of that. So in case you are keen, then we can share offline.
Perfectly sir. And on the same lines receivable of about INR [ 1,058 ] crores, how much would be over 360-day?
Well, we're not looking at it from a 365 days perspective because broadly, if you look at it when the sector shut down, we are over INR 2,000 crores of receivables and inventory startup. So at this point in time, what we're really left with is about 80-odd megawatt of turbine which will be about INR 400-odd crores of receivables, which would actually be over 1.5 years old. And this is something which is now being used up in the remaining SECI-1 and SECI-2 project to kind of get liquidated with immediate effect.
And sir the corresponding number on June '18, how much was that for the receivables, which were over 1 year old?
Well, I would say the entire receivable in June '18, barring INR 150-odd crores, would be over 1 year because that was 1 year since the sector shut down. And when the sector shut down, honestly, everything in the receivable was stuck up because none of those turbines were getting commissioned anyway.
I understand, sir. And what would be the normalized CapEx this year?
Well, we don't [ have any ] normalized CapEx. To be honest, we are bringing in the 3-megawatt product, so we're going to be putting in about 2 to 4 more. So CapEx on that front would be about INR 50-odd crores. That's about it. Otherwise, there is no other CapEx in the company. I mean, you have CWIP, which is a project, CapEx is, out of it, capitalized, but that has not been funded by us. That's being funded by the customers who are buying these turnkey projects.
Okay, sir. And FY '21, we are expecting to be a good year. All part number, how much -- how many megawatts could get executed in FY '21?
I can't talk like that, but all I'm simply saying is if you go back to '14, '15, '15, '16, '16, '17, we're really expecting '21 to be -- to back to normal operations here for us in the sense that we expect exponential growth from the present top line. So you can put a number to that yourself, I mean, we gave you broad indications of what our market share was at that point in time, and we expect the market to be 4 to 5 gigawatts quantitatively. So you put math to that, it's not rocket science for you to do the multiple.
So anything over INR 3,500 crores revenues? Or...
Again, we will not make forward-looking statements, right? But at the end of the day, I think broadly speaking, if you do that math, I will tend to think it would be better than that.
And, sir, what would be our market share for this -- at this point of time because...
Again, this seems not [indiscernible] market share perspective. We don't know -- we don't look at it from a market share perspective. To be honest, historically, our market share was 20%-odd. That's in the historical data in a typical 3,000-megawatt market or a 3,500 market, we were doing about 600 to 800 megawatts. So broadly, our market share was 20% to 25% in terms of supply. So broadly, if you do that, I mean, that's a good barometer in terms of what the past was. And I think that is something which we would kind hopefully expect to maintain or kind of at least be there. But like I said, we are only [indiscernible] by profitability, being the largest and being a loss-making or a bankrupt company is of no use. We've seen enough competitors who talk about being the largest in the market, but they're all bankrupt. We don't want to be the largest and be bankrupt.
I understand. Last question, what is the [indiscernible] revenue we expect?
I'll request to come back in the question queue for a follow-up question. The next question is from the line of [ Surendra Jain ] from Blue Banyan Advisors.
I just wanted to understand, with the [ blip ] coming on, I mean, coming on stream, if you will hand the order book, what is leading to a relatively low execution this year? And what makes the change for the exponential growth next year?
So if you look at our grid, we've got about 600 megawatt of power [indiscernible] ready. We've already done 250-odd supplies to [indiscernible] Respectively, we only upgrade in our capacity of 350-odd megawatt left. There is no other grid, number one. Number two, like I mentioned, we have been ultra-conservative with respect to planning and manufacturing implemented turbines. Please appreciate our position. For the past 2 years, we've been guiding with virtually over INR 2,000 crores of receivables in inventory which was blocked where we have no avenue. Every -- the grid, as you may have seen in our case, was delayed by over 15 months. We expect '21 to be an exponential growth year because a lot of customers' grids are going to be readied over the course of this financial year. We would rather wait and see that the grid gets readied and then start supplying turbines and manufacturing turbines. We no longer want to keep sitting on massive inventories and then suddenly get stuck that the grid, got delayed by 2 more months, 2 more months, 2 more months. So we're being very, very conservative with respect to what we want to do in this financial year. And like I said, our focus now is really getting a lot of liquid cash back in the system for all the projects which we've commissioned, for all the receivables which were blocked, for all the inventory which was blocked in our system. As you can see, our working capital has been going down and stabilized. It's gone down by about 18% this quarter. We are really looking at really making this a net debt-free company over the next 12 to 18 months. I mean, I may talk a little bit out of turn, but really for us, we don't want to have any debt in this company.
The next question is from the line of [ Shivan Guyan ], an individual investor.
Like you said, that we are aiming for 300 to 400 megawatts of supply in this year. So I just want to know, I just want to reconfirm you've already said this, that in this year, we are looking to complete SECI-1 and 2 along with commissioning and probably going to get all that cash for that also?
We can't get into specifics of whether we will do the full SECI-1, SECI-2 plus 300, plus 400 megawatts. But broadly, we've already put behind SECI-1 behind us. We're really looking at about 300 to 400 megawatts of -- we have, like we mentioned, [ 350 ] megawatts of grid available with us, and that's the only thing which we are planning. We're not planning anything dependent on other people's grid in this financial year until we see all those grid ready. For example, even the Adani grid of SECI-1 is still operating. So we don't want to bet on anybody's grid being readied until we actually see that grid ready. We've really faced a lot of it for this over the past 2 years, and we will remain ultra-cautious with respect to [ that idea ] as well as manufacturing and [indiscernible]
Okay. So just one thing. So whatever we will be commissioning, so we can take a lag of 30 to 45 days and we will be getting the cash for it?
It depends on the payment terms, whether we do all turnkey, whether we do a different supply, it's going to be a mix of things as we move forward. A normal working -- a normal receivable cycle is 90 to 120 days, and I think that's something which should be sustainable going forward fairly well.
[Operator Instructions] The next question is from the line of [ Vijay Kuma ], an individual investor.
Can you please explain the historical competency between solar and wind? And my second question is the 3.3 kilowatt generators, would it have any impact on our EBITDA or [ fixed ]?
So well, with respect to wind versus solar, I don't think it's any longer a question of wind versus solar. It's about renewables versus thermal. Wind and solar, [indiscernible] some between [ INR 2.5 to INR 3 ] broadly, so they're equally competitive. Wind is more preferable at night times, during rainy seasons. Solar is more preferable during the daytime when the sun exists. So they complement each other, so they have to co-exist. In terms of price and power to the grid, the EPP share of India today is [ INR 3.6 ] and wind and solar are between INR 2.5 to INR 3. So wind and solar are actually the cheapest source of power today in the country. We're really competing on the power side, and I think we're really seeing more and more renewables coming up. I don't think we're seeing any common investment barring a few investment by the public sector units, primarily also because the thermal private sector is virtually in [indiscernible] and you're only seeing greenfield acquisition until [indiscernible] are complete. So that's how we look at renewables versus thermal. With respect to the 3.3-megawatt turbine, not 3.3 kilowatt turbine, given the increased efficiency, of course, it translates into lower cost of electricity and much higher yields for IPPs. And that would naturally translate into higher EBITDA margin for us also going forward. So as we mentioned, we expect to get back to normalized profit levels as we ramp up our 3.3-megawatt production, which we expect over the next financial year.
[Operator Instructions] As there are no further questions, I will now hand the conference to the management for closing comments.
Thank you. We thank everybody for their interest in Inox Wind, and thank you for being a part of this investor call. Broadly put together, I think we're on the cusp of very, very significant growth going forward. I think the sectoral headwinds are behind us. The past 2 years of transition plane has led to many, many manufacturers shutting down. Some of them are in absolute financial distress. There is a real, real opportunity in the market to gain significant market share as well as increased supplies in the market. We've had a very tough time over the past 2 years as well. We are fortunate that we had group support and we could come out of it. We are now very, very enthused by the opportunities in front of us. Also, given the fact that our common infrastructure facility that are finally readied after a delay of almost 15 months, we are looking forward to a lot of liquidity, cash flows coming into the company over the next 2, 3, 4 months. Like I mentioned over the call, we have been very, very conservative and ultra-cautious with respect to our manufacturing and planning projections. We don't want to take any risks in this financial year with respect to grid readiness. Of course, we expect 2021 to be an absolutely significant bigger growth year for us. We are readying ourselves for that given our 3.3-megawatt turbine is being launched over the course of this financial year. And I think we're going to play this out very, very fairly cautiously over this financial year. But I think next financial year, we're really, really looking to grow exponentially. Broadly put, I think we are out of the 2 years of financial pain we've witnessed. And I think we're really looking forward to a smooth, organized way of running, running Inox Wind. And of course, an interesting part is majority of the supplies going forward, I want to be more and more equipment supply, not turnkey projects. And I think that puts us into a very, very lean, efficient manufacturing operation kind of play. So that's broadly what we think. We look forward to talking to you in [ Q2, ] and we look forward to getting back this company to grow all these. Thank you for your time, and thank you for your interest in our company.
Thank you very much[Audio Gap]