Inox Wind Ltd
NSE:INOXWIND
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Inox Wind Ltd
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Ladies and gentlemen, good day, and welcome to Inox Wind Limited Q2 FY '22 Results Conference Call, hosted by Systematix Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amar Kedia from Systematix Institutional Equities. Thank you, and over to you, sir.
Thanks, everyone, and good evening, everyone. On behalf of Systematix Institutional Equity team, I welcome you all for the Q2 FY '22 post-results conference call of Inox Wind Limited. We have with us today the team from Inox Wind being represented by Mr. Devansh Jain, Executive Director; Mr. Narayan Lodha, Chief Financial Officer; Mr. Jitendra Mohananey, Group Financial Controller. I will now hand over the call to Mr. Jitendra Mohananey from Inox Wind for his opening remarks, and we will then open the floor for the Q&A. Over to you, sir.
Thank you, Amar. Good evening, everyone. I welcome all the participants of this earnings call. The Board of Directors of Inox Wind Limited has approved the financial results for the quarter ended 30th September, 2021 in the meeting, which was held today. I trust you would have had an opportunity to go through the results. To take you through the key highlights or key operational highlights, post-COVID second wave, which impacted our execution in Q1 due to nonavailability of oxygen, that execution was back on the track during the quarter, all be the seasonality factor, which was a monsoon season -- peak monsoon season. The execution is getting further accelerated during the current quarter. On the front of 3.3 megawatt turbine, I would like to inform you that the median performance of the same have arrived and the remaining are expected soon. The turbine should be launched in quarter 3 FY '22 and thereafter commercial ramp-up from quarter 4 FY '22 onwards should be there. Execution of Continuum project Nani Virani SECI-2 SPV and various retail orders is progressing well, and commissioning of the turbine is taking place progressively. Our consolidated order book stands at 1,276 megawatts. I'll take you through also key financial numbers and financial performance. Our EBITDA has continued to be positive. Now for the quarter and half year, the revenue and EBITDA compared to the corresponding quarter, revenue of INR 229 crores in Q2 compared to revenue of INR 171 crores in Q2 FY '21. Now this INR 229 crores in Q2 FY '22, the revenue of INR 229 crores includes INR 63 crores towards the supply to spread down subsidiary Nani Virani which has got eliminated and of consolidation. The EBITDA of INR 4.9 crores in Q2 FY '22 against the EBITDA loss of INR 33 crores in Q2 FY '21. So there is a significant positive swing in EBITDA. The revenue and EBITDA compared to the corresponding half year, revenue of INR 398 crores in H1 FY '22 against the revenue of INR 268 crores in H1 FY '21. Again, there is INR 390 crores of revenue includes INR 63 crores of -- towards supply of subsidiary, which has got eliminated in the process of consolidation. For the half year EBITDA of INR 7.6 crores in H1 FY '22 against the EBITDA loss of INR 29.8 crores in H1 FY '20. Now I'll request Mr. Devansh Jain to provide an outlook on the strategic initiatives which have been taken and the significant market opportunity. Over to Mr. Devansh Jain.
Thank you, JM. Good evening, everybody. I'm going to talk about the strategic initiatives and how we see the market opportunities spring up. We kind of revamped our presentation, which we've been taking out quarter-on-quarter. We've made it far more sharper, focused on a lot of actions which are taking place at our end. And if you could refer to Slide 6 of our strategic initiatives, we've broken this into 4 parts. One is the balance sheet actions we are working on through the product launch; three, the mix of product and EPC as we see going forward; and fourth, the monetization of our O&M. As we've mentioned, we have committed to significantly reducing the interest cost of the balance sheet, which is not just by retiring high cost debt but also ensuring infusion of capital by leveraging the IWISL equity amongst others to move the company to the very light balance sheet keeping in line the debt. As you all would have noticed in the recently conducted Board meeting, the Board has approved -- of course, it's pending ratification by the shareholders for which we have an AGM on the 29th of this month, post which the promoters have committed to infuse up to INR 200 crores in Inox Wind Limited. This is keeping in mind the permissible limit of up to 5%, which can be directly purchased by the promoters at any point in time. Over the last quarter, IWEL, the holding company of Inox Wind Limited, also diluted it by about 5% to raise about INR 100 crores, which has been infused into Inox Wind to further deleverage the balance sheet and also provide long-term working capital requirements keeping the upcoming ramp-up in operations from this quarter. We've also taken required approvals for issuing preference shares of about INR 1,300 crores and some other securities. This would lead to significant reduction of interest costs on the Inox Wind balance sheet as well as strengthen the balance sheet further. With respect to the product launch, we had mentioned that we would be -- we are working on the 3.3 megawatt turbine. And over the -- in the ensuing wind season, we would be launching this turbine. We're happy to say that we've made a fair amount of progress there. We've got majority of the key conferences now in India. We are awaiting the final 2 or 3 components to arrive. As soon as that arrive, we should have the prototype turbines up and post which, we should gradually move towards serial production starting from Q4 onwards. Just to remind you, we have still a very large 2-megawatt order book. So we have -- we still need to supply that. And along with that, we would start supplying that 3.3 megawatt turbines. And it's actually a mix of customers. There's a lot of trust from retail, C&I captive guys who are using the smaller turbines and a lot of the larger turbines are the ones which would be going to the PSUs as well as the IPPs. The third key area of strategic initiative for us has been that to mitigate EPC-related risks. We are already using majority of the sites where our common infrastructure already exists. And going forward, we are focusing on more and more equipment supply and very minimal EPC-related task so that we focus more on things which are well within the factory boundary bounty as opposed to be on the factory boundary. This would enable certainty of margins and reduce risks in terms of margins with the EPC business size. The fourth strategic initiative is the monetization of our O&M business, and we have taken certain significant steps. Over the quarter gone by and in the recently conducted Board meeting, we have taken approval to hive off the EPC business, which was cars under 100% subsidiary of Inox Wind called IWISL into another subsidiary of Inox Wind such that IWISL, subsidiary of Inox Wind, becomes a pure-play O&M company. As many of you would be aware, the O&M business there's extremely high EBITDA margins in the range of 40% to 50% upwards, and we believe there is tremendous scope for organic and inorganic growth. And we believe this complete business vertical altogether, which could significantly drive revenues and growth for the consolidated wind business going forward.The third piece or the third relevant part is significant market opportunities. Given the fact that India is already facing many parts of the world are facing this massive shortage of power. And thanks to COVID, there has been an increasing focus on renewable energy. I think this makes it all the more relevant. From an India perspective, of course, there has been massive announcements of -- our annual energy goal has been ramped up from 175 gigs by '22 to 450 gigs by 2030. More importantly, over the past couple of months, we have seen massive announcements. And to some extent, I think the sector seems to have been re-rated in the eyes of investors as well as in the eyes of banks and so on and so forth, where you've seen the likes of Reliance, NTPC, amongst others, announced extremely ambitious renewable energy plans for the next few years. In fact, the plans cumulatively announced by some of these guys is in excess of 200 gigawatts. I remind you, India's installed capacity at this point in time is close to about 120-odd -- 120 to 130 gigs. We are increasingly seeing a lot of traction in hybrid tenders. In fact, in the recently conducted hybrid tenders is one of the pure wind vendors, there has been significant overbidding. So we've seen almost 5x of the capacity bid volumes being 5x of the capacity which was available for tendering. A whole host of new IPPs, new pension fund back money, PSUs, besides the existing large IPT players, are increasingly bringing more and more and larger quantities, which will bode well for the sector in the months and quarters to come. I think that's a little bit about the sector and some of the key aspects which we are focusing on as a company. With that, I think we'll leave the floor open to questions and answers. Thank you.
[Operator Instructions] The first question is from the line of Uttar Sumaya Individual Investor.
Sir, given that you recently sought shareholders' approval to work for the special resolution, specifically item #2, where you intend to take a INR 1,000 crore loan, which is virtually interest free. I have a few pointers which I'd like some clarity on. Am I audible?
Yes. You are audible.
Yes. So in the past, you have indicated that your firm intends to merge IWEL with IWL within this financial year. Please provide clarity on that? Point number two, for the same, you initiated moving the company's registered office to Gujarat. And recently, you canceled that. And point number 3 is by doing this, you are virtually stripping away all the assets to the holding company IWEL as the loan given to IWL is interest free. Please clarify the intention of the management? And more importantly, please communicate and give us clarity as to will the merger take place between IWEL and IWL? And will it take place this year?
Thank you for question. First and foremost, there has never been any official communication with respect to IWEL and IWL merging. It's one of the options in front of the Board, and the Board will take appropriate decisions. The Boards of both the companies will take appropriate decisions at the right point in time. There is no statement that during this financial year, both the 2 entities will merge. So let's put facts straight up. Second, with respect to shifting of the registered office, due to various commercial considerations, we are not going ahead with that. And I think we provided abundant clarity on that in terms of the release, which was taken out by the company. Coming to the third point, in terms of stripping of assets of the holdco, I hope we do realize that the holdco owns 50.5% of Inox Wind. And at the end of the day, the holdco's valuation is majorly dependent on what the valuation of Inox Wind would be, number one. And number two, while we are converting a lot of the debt given by the holdco into preference shares, preference shares do provide interest at some point in time and dividends. So it's not as if the holdco is less asset is without is any assets whatsoever.
So why is that interest-free?
Well, it's a preference share. So when you issue preference share, you get dividends, right?
Yes...
While we respect your questions at the end of the day, it's for the Boards of both the 2 companies to decide what is in the long-term interest of both the organizations.
But this is not in the interest of the shareholders of IWEL because you're removing money from one company without any return given to the shareholders. So...
I'm sure your thoughts are welcome, and you may vote accordingly in the ensuing AGM which takes place.
Trying to understand your thought process as to why you are giving an interest free loan?
I think I made myself extremely clear, and I think the Board has taken appropriate decisions. We respect every individual's and every investor's views and they're free to vote as they.
And again, on the -- your initial decision on shifting the office to Gujarat, can you please tell us as to what was the thought process behind that?
of the company. That's why we had not. And due to COVID and other things, we have decided to continue the office to our. I don't really affect anything on the books and company. In the interest of the company, this decision has been taken.
[Operator Instructions] The next question is from the line of Mr. Abhishek Walu individual investor.
Congratulations, sir, on the great set of number. My question is regarding the monetization that you are trying to do. And my question is regarding IWISL. Sir, I have a couple of questions on the -- regarding IWISL. Sir, first question is, what kind of debt will the entity have on itself after the transaction is complete? And sir, any guidance on the kind of top line and profitability that it will have in the future? And third question is regarding the time line of the transaction. Sir, what when we can expect this transaction to complete? Sir, these are my questions.
Thank you for your questions. I think with respect to point number one, what we intend to do with respect to the pure-play O&M entity, we intend to keep debt of up to INR 200 crores prior to the capital raise. Post the capital raise, we expect to make that net debt free. That's the intent. Your second question was with respect to guidance. So at this point in time, we have a 2.2 gigawatt fleet under turnkey O&M contracts and about 800-odd under shared services. We -- as the INOX Wind fleet grows and we have a fairly large order book, naturally, this fleet will keep growing. Besides the fact that there are various OEM assets available, the OEMs of which are under distressed or in financial difficulties when customers are looking for a strong Board and player. Besides the fact that there are various small aggregators available in the market, we believe once we are able to raise a significant amount of capital and make this a pure play O&M entity, we would be ideally positioned to aggregate a lot of this capacity under the Plan Vanila O&M company, IWISL. So I won't give out any specific guidances, but we expect significant growth year-on-year. We'll talk more about transaction specifics as we move forward. In terms of time lines, we expect to -- we've broken it up into 2 or 3 slots ofcourse we started last year with converting some of the creditors into equity of IWISL as a result of which, from a 100% subsidiary, it's become a 98.4% subsidiary. And I think month-on-month, you should be hearing news and announcements on that front.
Okay. Sir, that was very helpful. Sir, I have one more question. Sir, do you intend to list this entity separately?
I'm sorry, I will not be able to answer that question given shady guidelines in forward-looking statements. But on a generic basis, we will do whatever it takes to generate value out of our O&M equity..
The next question is from the line of Abhijeet Bora from Sharekhan.
Sir, firstly, I'd like more clarity on this promoter using like almost INR 1,100 crores. So your press release, which you have released recently mentioned that it will be other than cash for INR 1,000 crores, what does that mean?
JM, can you take that question, please?
Yes, the security of our preference shares will be issued for a consideration other than cash for the reason is that the holding company, Inox Wind Energy Limited as -- I mean, Inox Wind Limited has borrowed from Inox Wind Energy Limited which is reflecting into corporate debt, ICD. So those IPPs will be converted into preference shares and interest thereon. So that is the transaction which we are going to have.
Okay. So that INR 1,000 crores will go away from like the debt. And what is the external debt which we are having apart from the intercorporate loan?
Net debt would be INR 900 crore approximately.
Both companies.
Yes. On the consumables, we would have about INR 900 crores of external borrowings.
Okay. Apart from this like INR 1,000 crores, which will be like converting or the intercorporate loan, right?
Yes.
Okay. And secondly, like, I would like to understand your strategy in terms of like how you would go ahead with the turnaround of your business both in terms of the margin and the execution part?
I'm not sure how to answer that question. But in terms of how we go about turning around the business, well, it's a function of the whole sector turning around. When the further shutdown in the transition from the feed-in tariff regime to the auction regime, it was basically like how cinema business shut down under COVID. What will you turn around when on the COVID whole business shutdown. Now that the whole sector is moving up and you're seeing tremendous options, policy clarity, PPA clarity, evacuation clarity, transmission lines under the Green Corridor already established, the sector has already turned around. It's now about ramping up volumes, number one, post-COVID. And number two, taking out the right products with the right profit margins, and that's exactly what we're doing.
Okay. So any guidance in terms of the like execution like for like '22, '23, what kind of executing in terms of the megawatt you would like to target to like get the benefit and the product mix, if you can just guide something on that part?
Well, unfortunately, we don't give out forward-looking guidances, but I think we've always maintained we should be about 15% to 20% of the market next year. I think that's a good enough estimate to put out there, number one. Number two, with respect to product mix, as we get the 3.3% up and running over the next quarter, after the prototypes, I think in the ensuing financial year or the next financial year, we should probably have a 50-50 mix of our 2-megawatt turbine and our 3-megawatt turbine.
From like next fiscal or like from FY '22?
FY '23.
Sorry?
FY '23.
Okay. And if I'm not wrong, like if the market size is 4 gigawatts, when you say 15% opportunity what you can do on an average 600-megawatt annually?
I think it's been much. So the market is 4 gigs, I think that's why we should be. If it's 10 gigs, it will be a different number and if it's 1 gigawatt, it will be a different number.
And finally, can I get the order executed in Q2 and H1 also the wind turbine sales volume?
JM, do you have that?
We'll -- whatever your questions, just e-mail us, we'll send you the please. Right now, please e-mail us at investor's e-mail ID, we'll provide you.
Okay, okay. And sorry, one last clarification that you mentioned that IWISL will be having INR 200 crores of debt and like having off, right? And you target to make it debt free or net debt free?
Well, our focus will always be in terms of net debt free. You'll always keep liquidity at some point in time, keeping -- we have significantly high growth ambitions. So frankly, whether it's debt free or net debt free, it really doesn't make much of a difference.
[Operator Instructions] The next question is from the line of Mandar Sherbet from S-Logic Investment Solutions.
Yes, my first question was about EPC business that you are hiving off and the strategy that you will be more looking at the equipment supply than the entire contract of equipment plus EPC. So will this strategy affect the O&M business because whoever does the EPC work might get O&M contract as well? Can I post the next question as well?
I mean, either you can go ahead with all your questions or we can answer your questions, and then you can keep moving for. Maybe you put out your questions and then we'll answer your question.
Okay. At least one more right now.
Go ahead.
About IWEL's recent AGM, there was a resolution about permission to drop the stake in IWL below 50%. So how much do we intend to sell from IWL's total stake that we have, 50.5% we have right now, but will it drop significantly?
Okay, Mandar, thank you for your questions. Point number one, with respect to the EPC business being hived off into a different vertical and us reducing our focus on EPC, let's put it like this. Why does majority of the O&M remain with OEMs, it's primarily because unless someone creates a 2 or 3-gigawatt fleet of a single turbine type, managing the supply chain and the spare part inventory is a mess. Now these margins are true for OEMs to the extent that they're managing large fleets. When someone is going to keep 200, 300 or 400 megawatts of a single turbine type. If he start keeping inventory of blades, gearboxes generators, control systems, drives, the cost of carrying that inventory will be obnoxious. Then two, how many gearboxes, how many generators, how many blades, how many drives should we carry? So frankly, the right way to look at it is we've seen this over the past 5 or 6 years now. While we control 2.2 gigawatts on a turnkey basis and 800 on shared services, all these guys are struggling and none of them want to control it. Because for these guys, who are, say, investing INR 3,000 crores, INR 4,000 crores, INR 5,000 crores, INR 8,000 crores maybe larger every year, making INR 5 crores, INR 10 crores on gross profit. It doesn't make any sense because the CapEx investments are much more. Their focus on managing the entire supply chain, the O&M piece is much more. I don't mean to say that 100% of O&M contracts will always be with OEMs. But majorly, all contracts O&M contracts will be with OEMs unless and until, of course, the OEM and itself within a financial soup or is on the part of closure.
Yes, got the point. Yes. About the next question, IWEL?
With respect to the IWEL stake below 50.5%, look, I can say this very confidently this is only an enabling resolution. From what I understand, I don't think there is any intention to take the stake below 50.1%. So effectively, this is just an enabling resolution, but I don't think there is any intention to raise any further capital by selling stake of INOX Wind Limited, which is owned by IWEL. As you may have noticed, the promoters themselves are in choosing another INR 100 crores because that capped at, say, 5%, number one. And number two, with the proposed fundraising plans which we have for vertical, I think the wind business is extremely comfortably placed going forward.
Yes. So actually, this AGM details are really heartening to know. As a shareholder, I'm very happy to read about all these details. Just one last question.
I'm glad you appreciate the larger and the longer-term vision of the boards of IWL and IWEL since some people seem to be looking at shorter-term views.
Yes, right. Just one last question about IWISL. Could you share the equity number right now, equity and issued equity right now?
Ladies and gentlemen, the line for the management has got disconnected. Request you all to please stay connected while we connect the management. [Operator Instructions] Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Thank you, and over to you, sir.
Hello? So we were on call with, I think, Mr. Mandar Sherbet, and he got disconnected.
I'm here. And my one last small question about IWISL, what is the equity base right now, which we are infusing some INR 600 crores in equity in IWISL, right? So before that issue, what is the equity size? Can I have a number?
Narayan, do you have the data with you? Can you answer that?
So present equity size is INR 120 crores. But definitely, we have been increasing more and more equity in IWISL also. So exact number, if you send us the e-mail, we'll send you the exact number.
Okay. I just was looking at the number of shares -- issued shares right now. Anyway, I'll e-mail you separately.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Yes. Sir, I was just going through the presentation. Now the order book of about 1,280 megawatts, which translate into INR 7,500 crores revenue, that execution you have mentioned over the next 24 months, is that right?
That's right.
So can you give us some indication in terms of how do you see the execution over the next 2 years, since over the next 2 years, you have given -- so FY '22 and FY '23, how do you see execution bifurcation?
Not really FY '22, it says over the next 24 months. So frankly, we're talking about, let's say, from 1st October perspective over the next 24 months, we would expect to do this kind of volumes, which -- I mean, if you kind of just split it into half hour, that would throw up about 600-megawatt a year. I think there's enough data publicly available on the presentation. And I think as COVID moves away as things are getting back to absolutely normalcy. Of course, there are some supply chain constraints globally and shipping constraints globally. But I think we are well geared and with some of the capital infusion and capital raise, which we are working towards, I think our aim and ambitions would be to get back to our historical top line, which used to exist in 2017 prior to the sector shutting down.
And by when is that we are targeting?
I mean that's something which we'll keep seeing quarter-on-quarter. I mean I don't think as the market is opening up, as the sectoral challenges are over, as -- it's a function of how the market keeps playing out. We are seeing tremendous momentum in the market at this point in time and all the regulatory issues are behind us. So frankly, I mean, we should be seeing a ramp-up quarter-on-quarter.
Ramp up quarter-on-quarter. Sir, you did talk about 600-megawatt annual execution, right? So that comes to maybe about 150-megawatt on a quarterly basis with some maybe plus/minus. So is that something that we want to achieve on a steady-state basis opposed the ramp-up that...
I did mention that's something which is there over the next 24 months. And yes, if you ask intent, I think that would be the intent. Of course, we have to keep in mind that there have been challenges over the past 1.5 years in terms of COVID shutdown. Now that we have the regulatory issues behind us, and we have transmission issues behind us, COVID is really derailed a lot of stuff. Thank God, COVID is beyond us and everyone good. But I would want to say, yes, that would be the intent. And I think a quarter here or there, we should gradually be moving towards those goals.
[Operator Instructions] The next question is from the line of Paras Nagda from Enam Holdings.
My question relates to this gross receivables. And I'm looking at the annual report, whereby it states that the 3- to 5-year window of the receivables were due for last 3 to 5 years is close to INR 400 crores out of the INR 1,350 crores as of March and where we only provide 15%. Devansh, could you give us some comfort on these dues? Because I understand these are from the days of the regime change which happened and there are certain news which have happened. So could we get some kind of clarity on these receivables? And secondly, can we have a slightly more aggressive write-off policy was my suggestion?
So Paras, I think first and foremost, as you will have noticed over the past 12 to 18 months, we've kept a very aggressive write-off policy. We've provided for almost close to INR 500 crore?
INR 300 crore.
INR 300 crore, INR 250 crore, almost provided for close to INR 500-odd crores of receivables and -- sorry, doubled it.
INR 350 crore.
Yes, INR 350 crore. INR 350 crores of receivables which have been written off from the P&L and have been cleaned up. In terms of this 3 to 5 years specifically, we have about INR 200-odd crores, which are in certain PSUs, which we are extremely confident of winning and recovering those dues. In fact, just recently, we've succeeded in getting our BGs back from one of the PSUs against whom we are to file certain legal cases. I think the challenge with PSUs are extremely slow, and legal cases with them going for some time. There's no enmity if I may say so, but we still need to recover our BGs and our cash. The other INR 200-odd crores were some of the old assets, which we were reselling and kind of clearing. This is something to a great extent, which would be completed within this financial year. And yes, we did mention whatever is left, I would say, we still have about INR 100-odd crores of sticky receivables if at all, we will provide for it within this financial year so that the entire balance sheet is as light or as clean as it can be. And I'm sure you would appreciate that we have been extremely aggressive in terms of providing and writing off past receivables over the past 18 months.
The next question is from the line of Gautam Bahal from Capital. .
First of all, congrats on the improving operational performance and strategic initiatives is quite exciting as a shareholder. I just had one sort of thorny issue really on the holdco merger issue, I understand that it's a Board decision where to merge the 2 companies. However, it's abundantly clear that the best case scenario for IWEL is a merger, right, especially post this preference share issue. So it would be good to get a directional feel of what the promoter mindset is on this issue, especially coming up for AGM. Given promoter of largest shareholders, certainly, it's in your interest to get this holdco discount taken away, right? So why not just commit to the merger? Why would you not do this is my question?
So Gautam, thank you for your thoughts and your comments. Okay, let me make it clear. First and foremost, the promoter or majority owners of Inox Wind Limited as well as Inox Wind Energy Limited. So naturally, a merger would be in the interest of the promoters as well, not just the minority shareholders. Having said that, there has been various opportunities which have cropped up. And some of those opportunities require a lot of agility and quick decision-making such as the one which we are evaluating and implementing for our O&M vertical. Two, the boards of both the companies have never publicly said that they will be merged. Again, they've also not publicly said that they will not be merged. What we're doing at this point in time is simply converting the advances and the ICDs to preference capital. Eventually, I would tend to think that they would be merged. But again, that's my personal opinion. I think going forward, once we're kind of done with the transaction on the O&M side, the Boards would evaluate that. And to the best of my knowledge or what I think would be right would be to eventually merge these 2 entities. But that's my personal belief. Officially, I cannot say anything more.
No, I totally take that on Board. I mean we saying direction in directional...
Logically, again, you mentioned it yourself, what's in the interest of the minority shareholders and what's in the interest of the promoters. So frankly, there is no conflict of interest to eventually consider a merger of the 2 entities.
So effectively that you have a lot of strategic initiatives going on right now, you want to finish that first.
Exactly.
You do the no-brainer decision, which is too much. I mean I'm not asking for commitment, but there's no reason not to do that, right?
Absolutely. Absolutely, Gautam. And I'm sure the Boards of both the 2 entities will be thinking on the same lines as well.
The next question is from the line of Abhijeet Bora from Sharekan.
Sir, only one more question that like what is the cost of debt and like how we target to reduce it as this balance sheet improvement measures, like how it will pan out?
I think maybe you can connect with our team, they'll take you through the exact details. But broadly, the cost of debt is about 11% at this point in time. More than that, I think how we're going to reduce it is naturally with the infusion, which is taking place, number one, with the INR 100 crore which was infused by IWEL, the INR 100 crore with the promoters are putting in, the INR 1,100 crore or INR 1,300 crore which is being converted into preference shares will eliminate interest. And fourthly, the proposed fund raise, which we are targeting for O&M vertical, is what would put together considerably eliminate the debt in the consolidated in business. for more specifics, I would request if you could get on a call with our finance team and our investor communication team, they would be more than happy to take you through the specifics.
Okay. And any time line for the funds raise for O&M business?
Look, we did mention our aim is to -- you will be hearing more from us on that month-on-month, but a broad aim would be to kind of do this over the next 6 to 8 months.
The next question is from the line of Nitin Dandhi from KISA Straight Capital.
Yes. Can you share some thoughts on sustainable margins considering the you are facing a lot of supply with respect to and other things. So do you think there is any threat on the margin which are -- and where do you think more or less like in gigawatt terms or operation terms, breakeven point?
So in terms of sustainable margin for the plain vanilla supply model, we should be at 12% to 16% EBIT margins, that would be sustainable. The O&M business, obviously, is a 40% to 50% plus margin business. And I think in terms of breakeven point, I think given what we're intending to do on the preference shares on the fund raise and the O&M monetization -- larger goal would be to virtually make this a debt-free entity over the next 6 to 9 months. And if we succeed in doing that, our breakeven would possibly be sub-50 megawatts.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you. Thank you, everybody, for being a part of the investor call for Inox Wind. As I would say, we are extremely excited about the various opportunities in front of us. We are significantly enthused by the rerating of the sector and the massive announcements by PSUs as well as some of India's largest corporates in terms of volume commitments which are in excess of what India has put up in the past 30 years. Our company is ideally placed to cater to that. And towards that, we are taking significant actions on the balance sheet, on the product launch as well as monetization of certain assets which we own. And I think we would be reporting back on many of these things month-on-month as we move forward. But things are looking extremely bright. COVID is behind us. We are ramping up our manufacturing as well as our execution on the ground. We are in discussion for significant orders across the board, not just for our 3.3-megawatt platform but also for our 2-megawatt platform. We have a significantly sized order book at this point in time. And I think we are ideally positioned in the Indian market to significantly take a large chunk of the PSU share, the retail captive C&I share as well as a significant part of the IPP piece. Thank you for your interest in our organization, and we look forward to connecting with you over the next couple of weeks and months as we update you about significant actions at our end besides, of course, the Q3 developments. Thank you. Be safe and wishing you all a happy Diwali in advance. Thank you.
Thank you. Ladies and gentlemen, on behalf of Systematix Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.