Inox Wind Ltd
NSE:INOXWIND
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
66.64
254.34
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Inox Wind Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Inox Wind Q3 FY '19 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Ankit Shah from Axis Capital. Thank you, and over to you.
Thank you, Molson. Good evening, everyone. On behalf of Axis Capital, I would like to welcome you all to the Q3 FY '19 earnings conference call of Inox Wind. We have with us Mr. Devansh Jain, Executive Director; and Mr. Jitendra Mohananey, our Chief Financial Officer for Inox Wind. We'll start with a brief presentation from the management post which, we'll open the floor for Q&A.I'll now hand over the call to management for their opening remarks. Over to you, sir.
Okay. Thank you very much. And good evening, everyone. I welcome all the participants of this earnings call. The Board of Directors of Inox Wind Limited has approved the quarter 3 FY '19 results of the meeting, which has just now concluded. I trust you would have had an opportunity to go through the results. Just to give you an overall prospective of the quarter gone by, Inox Wind has continued to be profitable in third consecutive quarter after a year-long gap on the back of ongoing SECI-1 execution.The company is back to normalized operations and is ramping up execution each quarter. The company has recently entered into technology agreement to launch our next-generation 3.3-megawatt wind turbine with 146-meter rotor diameter, which will probably the largest wind turbine rotor dia available in India. Newly launched 3.3-megawatt wind turbine sets new benchmarks in the -- in wind industry and will further reduce levelized cost of electricity and also provide superior returns to IPP.We're continuing a strong relationship with our agreement with Adani Green Energy. The company received a 501.6 megawatts LOI to supply erect and commission, newly launched 3.3 megawatts Wind Turbine Generators. With this, our order book stands at 1,207 (sic) [ 1,227 ] megawatts with an estimated value of over INR 7,200 crores to be executed over the next 18 months. In terms of financial results, we ended the quarter with the revenue of INR 391 crores as compared to INR 91 crores in the previous-year quarter. We returned to EBITDA profitability with a profit of INR 61 crores as compared to EBITDA loss of INR 18 crores in the previous-year quarter. We have our PAT of profit of INR 2 crores as compared to a PAT loss of INR 46 crores in the same quarter last year.This is the third quarter of profitability posted turbulent FY '18, which was affected due to transition to an auction regime and the wind sector.Coming to the operational highlights. We have continued operations across our manufacturing facilities of Gujarat, Himachal Pradesh and Madhya Pradesh. We delivered 74 megawatts during the quarter.On the balance sheet front, I would like to bring you -- bring to your notice Slide 7 and 8 of the presentation, which gives details of our focus on balance sheet improvement during the quarter and the past couple of quarters before that.Now during quarter 3, inventory stabilizes on the back of continued safety execution. We have moved to efficient working capital citing under the auctioning regime. The net debt remains at a highest -- healthy 0.41x versus 0.44x in quarter 3 FY '18. Please do not [ doubt ] the closing. Net receivable numbers are particularly higher, but it include significant part of sales made during the current financial year, where collections were delayed due to delay in central grid infrastructure being developed by the government.Post commissioning of central grid infrastructure, we expect increased realization from receivables.At the end of quarter 3 FY '19 in terms of working capital, inventories stood at: INR 756 crores; net receivables are at INR 1,446 crores; savings at INR 956 crores; and others are about INR 19 crores. This translates into net working capital of INR 1,227 crores.Despite the delays in government grid, net working capital frankly continues to move towards to be more efficient. Going ahead, we expect inventory levels to come down as the execution picks up the pace in the coming quarters. We also expect working capital levels to ease going forward and stabilize further on the back of better coordinated production inventory planning and execution of wind projects. On the debt equity front, as I explained, we ended the quarter at healthy net debt-to-equity ratio, 0.41x versus 0.44x in the same quarter of last year. So that this is a broad overview of our operations and financial performance, and how we see the sector going forward.I have along with me our Executive Director, Mr. Devansh Jain to take questions now.
[Operator Instructions] We have our first question from the line of Ketan Gandhi from Gandhi Securities.
So what is the gross debt and then advance received?
Net debt is changing [indiscernible].
We'll have net debt number. INR 835 crores, that's the net debt, and gross debt will be INR 990 crores.
Sir, I'd request you to come to the speaker phone for the audibility of the audience.
Net debt is INR 835 crores and gross debt is INR 990 crores.
Okay. And sir, about this new LOI with Adani, it is pertaining to which auction, sir, 54, 5 6 or 5 6 or [ 4 5 ]?
Well, it is spread over a couple of auctions. Adani is the one 4 5 and then also with the number 6. So it's probably going to be spread over these 2 or 3 auctions.
So we are not sure whether which are 4, 5 or 6?
It really doesn't matter from our perspective. I mean, Adani is doing the execution. We are only supplying turbines going forward. So it is supposed to be executed over those auctions.
Okay. And sir, as further in place of RLMM, I believe that now it is [ ITM ] under IWTCS. So when certification of this new technology will be?
Well, first and foremost RLMM still exist. IWTCS is nothing but a Indian wind turbine certification standard with a new standard, which IW -- which the government has introduced, but they're primarily following tight certification requirements, which will be required by the global big 3 or 4 [indiscernible] sold. RLMM very much still remains intact. For certification, you apply to under or under IWTCS you apply, and then get on to RLMM. So we should be putting up these new turbines over the course of this calendar year because we intend to start the delivery of these turbines maybe towards the end of this calendar year.
Sir, MSC has not yet around the [ dia papers ]. And I was on the con call of the MSC, they are saying, there is some milestone payment has to be reviewed from our side.
Correct. So we've entered into a technology agreement. There are certain milestones which need to be achieved while I'm not privy to when they announce and what regulations by them. We have a technology in place. As and when those milestones will come due, we will keep doing the needful. So that's where we are.
And sir, for this certification, normally, how much time it will it take, please?
For direct -- so there's an actual certification, which is to be conducted on the turbine and then there is some other people working on the design assessment, which goes on [ parallelly ]. I would tend to think from our actual operational certification, maybe about 2 months during the high wind season. And the paper certification is something which will carry on simultaneously. Please keep in mind this. You know that, well, while this may be a new turbine, which will launch in India, but the platform already exist globally and has been in operation for over 8 years.
Yes, sir. And only, my -- well, I mean, my -- I want to understand is 146 meter, do we have that kind of growth to keep from our factory to the ...
Well, honestly, this is not something which can move to every site. We're not going to have a 25-megawatt Maharashtra site or a 40-megawatt Karnataka site, where you'll be able to [ locate ] it. But if you look at it, a lot of the larger winds from which are developing are across Gujarat. Where from our existing window, wind factories, we'll be taking this bridge right there. Yes, still going to talk and we'll talk and so on and so forth, these turbines can go. But if you also look at it over the next 2 to 3 years, a lot of the development is happening in [indiscernible] Gujarat. SECI-1, -2, -3, -4, -5, so on and so forth, majority of it is in Gujarat. So these new bridge are, I believe, started to go there. And then possibly, thereafter, go to Rajasthan because these are probably the 2 large areas where these larger rotor diameters can presently be transported.
So you don't think any operational issues while transporting this from our factory to the Guj area?
Well, not to Guj and not to Rajasthan. Earlier, other sites, other stage, we are approved to carry out [ believe ] I think that's what [ carrying ] but different. 2, 3 years down the line, we need to see what happens with respect to [ trailer ] transportation and if these turbines can go -- will continue with a larger rotor diameter on the 2 megawatts turbines.
And I'm sorry, as far as I understand that we use the [ taxes ] to 44 megawatts. So we are around short of for by around 56-megawatt for as far as SECI-1 is concerned, right?
Correct.
And what is the deadline for that, sir?
Well, it's not about deadline. If you are aware, the Q1 deadline was October 5, 2018. The central grid is still not ready. So we -- I am not sure we can do anything until the central grid is ready. Far as the deadline for building the central grid was January 2018. Then it became June 2018, then it became August 2018. Then October, then December, then January, then end January, then beginning February. I believe they're now at the final stages, and I think that's what we also set out in our presentation. They're probably 10 to 15 days away, possibly 20, 25 days away from the central grid finally in commission.
So same views applies to 44. So it will be just plug and play, right?
Well, not plug and pay because to a great extent a lot of that is execution. While we bought a significant amount of turbines line already erected, but a lot of that execution kind of slowed down the last month connectivity, which is us doing our [ trial ] for the internal 23 KV line, et cetera, which we will keep processing that because a lot of our -- if you will also kind of got delayed because naturally, for the customers, a lot of them was in end payments and that delay was the point of them putting interest during construction if the [ common infra ] is not ready. So I think as soon as this is charged, I think whether it takes another for period or for period for us, I think we can ramp up commissioning very, very rapidly.
Okay. And so while this grid connection is ready, then it will be very smooth for SECI-2 execution, right?
Oh, absolutely, because it's the same substation and line which will be used for SECI-2.
So we can see a jump of execution [indiscernible].
Commissioning. You will see bouncing up of the commissioning naturally.
For SECI-2?
Yes. Well, even SECI-1.
;We have the next question from the line of Mohit Kumar from IDFC.
I have 2 questions. First, sir, can you just -- can you give us some sense on how do you see Q4 FY '19 and FY '20 in terms all the execution? And what is the deadline for all this SECI-1, SECI-2, SECI-3 and SECI-4 orders?
Okay. So Q4 FY '19, we expect to finish all the top line of SECI-1. I'm not jumping beyond that because at the end of the day, our supply more and more, we'll control our supply because if we keep supplying more and more 'till the grid is ready, it's not really helping because you don't have fast tracking of connections and so on and forth. As soon as the common infra is done and we're already in February, as I mentioned, we're probably around the 15, 20 days. Every week, we got a new deadline. But we -- it's part of that final frontier, 10 days, 15 days there and there. We are hopeful that it's in February, the common infra will be commissioned by the [indiscernible]. Post-which, we can then really ramp up our commission. So it's very hard to say over Q4 '19. What will happen? All I can say is that we expect to complete our SECI-1 [ supplies ]. And thereafter, as soon as the previous [ transmit ] is ready, we can ramp up our commissioning of the lines. Of course, FY '20 is a different ballgame, I -- well - it's well known, we won't give our FY guidance out, but we clearly have SECI-2, which will be implemented over the next financial year. The common infra, which we'll bridge now, which is being charged is the same for SECI-1 and SECI-2. So we don't need to develop another common infra. And then going forward into the next FY '20, we expect to roll out 3.3 megawatt of certain quantities, which will be to a great extent on the equipment supply.
So just to come back. So is SECI-2 and SECI-3, we'll order of around 500-megawatt? And again, SECI-1, they have 50-megawatt additional apart from the Inox in order. So can we -- so this 50-megawatt Adani [ gets ] excluded ideally by March 19 ...
Well, we'll be applying SECI-1, which should, I believe, be able to supply SECI-1 within this financial year.
In that 300-megawatt, right?
Certainly, so we've got about 2 44. We expect -- again, I can't give you what will [ 31st March ] look like. I can give you my P&L statement and forward-looking [indiscernible]
I understand. I'm just looking at why the deadline for the execution of SECI.
You know, Mohit, it's not about deadline. The deadline for SECI-1 was off the books. But the government, [ they know that ] does not exist. So what does the deadline do? The deadline is, obviously, no use.
But given they gave [ February the date ] the grid is going to ready by -- in the next few days, it means that SECI-2 and SECI-3 should be -- [ is it a stable ] ...
Well, SECI-3 is a little far off away from now because of the price, we may still have connectivity. We can use this existing grid and will be allowed. But other than that, even for SECI-3, there is some billing connectivity. And I think given some of the line challenges that Gujarat was facing, MNRE is already given a 2-month extension, and I believe they're probably going to give further extension given those data of other vendors of SECI-3.
The second question I have, you announced LOI. What is the big condition for becoming -- for converting this to firm order?
Well, sorry, because of confidential reasons, we will not be able to spell that out. But I think what it [ reads ] supposedly and what it kind of is outlined.
When do you expect you to convert to firm order?
I am unable to say that. All we can say that I think we continue to build on the strong relationship. We are [indiscernible]. We've done SECI-1 with them. We're doing SECI-2 with them. Of course, due to certain biddingin SECI-1 and -2 we kind of stayed away from SECI-3. But going forward, I think there are a very, very large LOI that is issued. We are working together fluidly on a lot of other developments together, and I think next couple of months, obviously, this will get converted into a contract and we'll start execution of this.
Is it possible to share the details in 12 months [ receivable ] this year at the end of Q3 FY '19?
Off the call, yes, we can share that with you.
The next question from the line of [ Kirpash ] [indiscernible] from [Mainstream] Broking.
Just want to understand, you come up with INR 390 crores which were delivered this month, in this quarter, in terms of commissioning in terms of supply or component.
Well, as far as supply or component, there is no commissioning.
Okay. For the supply, yes. Okay. And based on the land issues, this was happening the last 2 quarters in Gujarat. So what is the status right now? And how much [indiscernible] pending the deicisions?
Well, so while we have a significant chunk of language that already stated yes, of course everybody is impacted because the government has stopped a lot in land pending certain changes of automation and policy. But the good news is about [ lenses ] ago, the Gujarat government has come out with a new policy for land allotment. There is still some disclarity across the administrative levels. I think over February, that disclarity should be ironed out. And then a lot, which hopefully, should start beginning from end of the month. We have already for SECI-1, we have a bit of land rights. What we're also doing is we're partly moving towards private land just to keep building up offer to use that towards SECI-2. But I think this should get resolved over the next 30 to 45 days.
Okay. And just want to understand, the addition of the LOI, would you get it from Adani department of what? It will be the same or like it will be higher utilization?
Well, unfortunately, I'm not able to share that. But our rule for apple-to-apple scope, it will be about INR 6 crores to INR 6.5 crores per megawatt. Apple-to-apple scope, of course, if it's only a topline supply, some type of headwind, obviously that value reduces. But yes, on a turnkey basis, it's INR 6 crores to INR 6.5 crores.
Okay. So 501.6 megawatts is distributed among how many orders like SECI-1, -2, -3?
It's not SECI-1 and -2. SECI-1 and -2 is already done and over with. There are some -- They're going to be the future SECI orders, which will be SECI-4, -5, -6, so on and so forth. I mean, that is [ advantage over the SECI-1s ].
We have our next question from the line of [ Jaden Chua ] from [indiscernible] Advisors .
So I have 2 questions. The first question's related to the drop in revenues in Q3, is it because of this [indiscernible] compared to the Q2 revenues? Is that due to the [indiscernible]
Well, to be honest, I think all the 3 quarters have been more or less the same, INR 400-odd crores. So INR 10 crores, INR 12 crores, [ wherein ] there is not really anything there to talk about.
Okay. So nothing to worry about, okay. And second thing is the INR 7,200 crores for October period you talked about. Is that contingent upon this given this issue that you mentioned? Or is it -- most of it is attributable independent of [ tech ]?
Well, of course, you will need the grid to execute anything. I mean, for example, we want to do SECI-1 also. While we supply part of SECI-1, we should have honestly done far more. But because the grid is not ready, nobody is going to want you to supply turbines and keep the incurring interest during construction, that's foolish. So obviously, you need the grid to be ready to be able to take this power. Now from our perspective, SECI-1 and -2, which is our 500-odd megawatt, which we got ourselves. That entire thing will be connected as soon as this -- I mean, can be used to connect up to 500 megawatts as soon as the central grid gets connected. So to that extent, once this is ready, the pending SECI-1 execution and SECI-2 execution can be fairly, fairly, fairly structured and smooth and fast, as I may put it. Thereafter, obviously, more and more grid needs to be made ready. But I think, given the past 1.5 years of lag from the freeze in [ tariff ] regime, to now this auctioning regime, either the government is also now investing towards agreements. Construction is just is getting ready. I think the unfortunate grid for [ this process is ] sudden transition that, while there are auctions, nobody has started implementing a lot of these green corridors. So when they started implementing, you can all wait up 6 to 8 months of delay. Unfortunately, about a 1-year delay by the central grid. But hopefully, going forward, starting 6, 7 months, I don't think there should be further delays. Yes, I do know there is a certain amount of delay even for SECI-3 and SECI-4 grid but you know that could be possibly 6 months or so.
Okay. So essentially the 18 months of -- that you mentioned for the segregation on INR 7,200 crores, could move by around 6 months. Is that...
Possibly. Again, that's – it's a function of the SECI. You could fast track it or you could kind of -- you could do it earlier, you could do it a little later, depends on how hard the central grid will help.
We have the next question from the line of Viral Shah from ENAM Holdings.
So a couple of questions from my side. Firstly, on the SECI-1 and SECI-2, the 2 orders that we have on our books of 250-megawatt grid, have we been able to down sell any of these?
Of course. So -- we haven't been able to talk too much about that on the call for confidential reasons. But yes, barring 50 to 80 -- well, barring 50 to 100 megawatts, everything has been down sold.
Okay. Okay. Okay, great. The second question is on would it be possible to share the gross receivable number?
We can do that off-line.
Sure. And the third question will be, sir, out of this revenue, the INR 390-odd crores for the quarter and roughly INR 39 crores to INR 50-odd crores for the full year, how much of this will be coming from supplies to group companies, sir?
Applies to group companies. There's no supplies to group companies. No supplies.
No supplies.
[indiscernible] to the group companies, no. It's all SECI.
We have a follow-up question from Ketan Gandhi from Gandhi Securities.
Yes. Regarding the SECI-3 and -4, we have 200, 100. It has been down sold or still pending?
Well, we won multiple agreements of multiple discussions going on. I think beyond that is very hard to comment, but I think that's something we intend to use, given our new technology platform. And I think under the new technology platform, honestly, it's not really [ often times ] getting that out in the market.
Okay, great. And what is that advanced received from -- I mean --
What?
As of today, what is the advance received?
From, what?
From the customer?
Well, we would see the advancing about INR 200-odd crores. But again, it's how you classify it based on certain milestones developed, this will get con -- get it -- converted to receivables and get knocked off against receivables. Because of restructuring -- because of the structuring, which is tied around the SECI-1 and -2, some of this standard advances, but otherwise, actually, I really should -- it should not be an advantage.
We have the next question from the line of Kashyap Jhaveri from Emkay Global.
Am I audible?
Yes, yes.
Sir, I have just one question. I joined the call a little late, but I just wanted to understand in SECI-5 and 6, what was the total quantum that was explained, accepted in terms of the bids? [ Looking ] on this, you know [indiscernible].
Sorry, your voice is very unclear, can you please repeat?
Am I audible?
Yes.
I am asking, what were the bids accepted in SECI-5 and -6. I joined the call a little late. And what was the -- and what's your outlook on this auction regime going forward now?
So SECI-6 start of the bidding of to 2, 3 to 5 megawatt. Of course, 500 megawatts of capacity on our front. The bid submission, the bidding is yet to take place. So that's where we stand on SECI-6. With respect to SECI-1, I'm not 100%, I don't recall off my mind how much bidding was done. But that was also 1,200-megawatt bid. I think that was about 2,000 megawatts almost, bid. I think that was about 1,900-odd megawatts of bid, which was submitted for SECI-5. But we can check that and get back to you off-line for SECI-5. Going forward, I think the auction regime is here to stay clearly. I think end of the day now, it's really going to be a function of, as the grid starts catching the cost with the execution, you'll have more and more results. There's been a -- while there's enough bidding, which is being carried to almost 10.5 gigawatts to date, which has been carried out, you also need a lot of this to be executed on the ground. And for that, you needed these grids to catch up. So if you look at it today, about 70% or I would say, how much? About 60% only of SECI-1 has been commissioned. And SECI-2 is yet to be commissioned. So even the first 1,000 megawatts of SECI auctions have not been commissioned. So -- but we believe that every year, 5 to 6 gigawatt of commissioning can continuously keep happening. And I think, while the government will be talking about 7 to 10 gigawatts already year-on-year to be consummated, I think 5 to 6 [ gigawatt ] is what will -- should happen comfortably from the next financial year.
[Operator Instructions] We have our next question from the line of individual investor, Sourav Singh.
Again, congratulations on yet another profitable quarter. So Devansh, you have really managed the company well so far considering the top fence. I don't know how many people have been really following what's been happening in the industry, but clearly, the times are very tough. And considering all the delays and everything, you have been absolutely a dream manager so far.
Thank you. [indiscernible] I know people appreciate that, not just look at the top. I said [ respond ] and then given the other things that will beyond our control with respect to the auctioning regime and also the grid delays.
Absolutely. But on that top baseline, of course, I think, last time, also, I mentioned that if we work on communications of it and create a social media presence and things like that, maybe it will benefit the stock price. And I just -- I wanted to understand because now, going forward, I think times are going to be different. We are going to do much better, particularly next year, next financial year. So do we have risk management practices in place because what happens is when we get large orders, sometimes these can lead to receivables like we have seen some time in the past 2 or 3 years ago. So have we put -- have we learned something from those experiences? And what have been risk management in place so we don't have -- we again don't create that kind of situation, again, in the future?
You see, I think, to be honest, I think we're a very conservative group, and I think that's affecting the fact that our debt equity ratio is very low. In fact, none of our group companies carry debt. And that's probably the only reason why we survived through this massively turbulent period where 2 of our other Indian competitors have gone virtually bankrupt. Another one is, I don't know, really struggling. Having said that, I think where we stand at this point in time is, obviously, we've learn from our mistakes in March 17, but -- and that those mistakes were really the government coming in overnight, shutting the sector. What have we been able to do over these past 18 months to 2 years? We have really been consuming and re-utilizing all those inventory, which we could reallocate, and that's the reason why we also bid, won a couple of auctions. We are moving towards now, bringing in a new technology so that for the next 4, 5 years. We are really competitive and at the forefront of the technology curve and in terms of being the lowest-cost turbine producer supply in terms of cost of energy as well as capital cost. From a risk perspective, the only thing we could really have done at this point in time and what we intend to do going forward as well is we're kind of trying to move more towards equipment supply so that we don't need to do the grid infrastructure, we don't need to do equipment, land, et cetera, et cetera. But having said that, if eventually whoever is doing that, if the grid gets delayed, this will eventually going to delay the turbine supplies as well. So all that we are trying to do now is not carry too much inventory on our books, keep consuming whatever inventory we have left. Once we have firm orders, once we have a clear visibility, that's when we start loading up on inventories. I mean, it could be 30, 45 days really. But yes, we don't want to carry a significant amount inventories on our books anymore, number one. Number two, with respect to past receivables. See what happened in the past was people completely -- during the transition, everybody had to pay just walked out of the contracts, because the PTs were not being honored. Today, that fundamental fear and that fundamental risk is over because when you win a SECI option, your PT has been signed upfront. Another question of the grid is being delayed by 5 months or 6 months is a different story. So there is no risk that the -- will it be signed? Will the [indiscernible] now this power is too expensive I don't want to buy. The PT has been signed upfront. Only once the PT is signed as your time line of 18 months or 21 months, whatever it is, we kick off. So that fundamental risk and that fundamental problem is gone from the sector. Yet the central grid being delayed is something which remains, but I think now, people have a better grasp and track of that so people will rarely start execution of, let's say, a SECI-3 or a SECI-4. Once they know where the grid is, 3 months away or 5 months away or 6 months away from completion.
And are we working on the communications front, which will benefit the team [indiscernible]
Sourav, I did promise, I think, fundamentally, what had to be done is get the company back on track. And I -- with some amount of humility, at least, I can say now our operations are back in normal control by the team supported, began in the company. There is execution going on, on the ground. And we have, as I may possibly put it, cash flows are now stabilized the company. So I think a lot of our fundamental problems are behind us. It's now just a question of executing, bringing back results in the company. And I think in the days to come, as we become stronger, hopefully, with the March -- post-March, we should be able to increase our social media presence and communications.
Please continue to do the good job that you're doing, really. I mean, I really know how difficult it must be, really very good job.
Thank you. I really appreciate your kind words.
We have a next question from the line of Shivan Sarvaiya from JHP Securities.
So my question is on the interest cost, which is at a quite a limited level with respect -- respective of our debt coming down over the last 9 months, sir. So any color on that? How we expect that to go forward?
Just give me 1 minute, please.
Sure.
Okay. So can we take this off the call where we can share the details but broadly speaking, while yes, overall, debt number is lower. I think over this year, as I've explained to you last time, we have had a lot of onetime charges with the bank has charged us to get that banking facilities back in shape. So as you may be aware, we never had a -- I know from another fairly strong financial company, we're is still A-minus rating with a positive outlook, which is probably -- will only bring the company, which is even of that rating. But to have -- without bearing support banks coming and really supporting the wind industry, in the wind industry working for that. The banks really just have onetime charges, et cetera, et cetera. Hopefully, for the new financial year, we should be able to get that back in control. But having said that, I will say, almost INR 8 crores to INR 10 crores as a onetime charge in this.
Okay. Okay, sir. So if I may add a question was that going forward, so when you have a steady state execution post the completion of the central grid and stuff like that. So what is the steady-state margin that we can expect going forward, if say a 900-megawatt yearly execution is done?
Well, I think just broad park number, don't hold me to it, while insignificant you can't even ask what their number is [indiscernible] just for a second just to make sure.
Hello? Hello?
Yes, just give us a minute. Hello? Hello?
Yes, I can hear you.
I think even if you look at our 9 months results, our EBITDA margins are almost 14.7%. If you look at it historically during the good old days, we were maintaining about 15% to 16% EBITDA margin and about 10% or 9% to 10% PAT margin. I think if you look at it even today, we are at about 14-odd percent EBITDA margin. Of course, PAT margin is down to 1.2%, simply because of the acquisition cost being there and obviously the finance cost being loaded and that the entire operation is still a scaled down version. To be honest, I think going forward, also, we should probably get about 13%, 14%, broadly speaking EBITDA margin. Then I think our real aim is to get our PAT margins back up to 8%, 9% as we move forward. But obviously that assumes normalized volumes. And when you think of this from our last financial, we had virtually -- we had INR 300 crores of sales in the full financial year. We are now at about INR 1,300-odd crores. To extrapolate it, you'd probably pull out the full year number there. But I think we really need full year operations to get back our PAT margins, but EBITDA margins are frankly fairly healthy and will probably remain plus/minus 2% of where we stand.
Okay. Okay, sir. And sir, in the 9 months, so the volume is INR 244 crores, sir. This will be entirely for SECI-1, right?
Plus/minus 10, 20 megawatts, this may be for some pending orders...
Pending orders. Okay, sir. And from that, sir, how much is commissioned as of today?
No, nothing is commissioned because the central grid is not ready. If the central grid is not ready, we cannot connect our substation to it. If central grid is ready, we can plug and play and ramp up our commissioning.
Okay. So sir, we can assume, sir, that if the central grid is connected by February and SECI-1 will be done in Q4, and at least, SECI-2 should be done in Q1 of the next year?
Well, I hope so but I don't think it's going to happen that fast. Broadly speaking, I think if the central grid is commissioned, it will still take us 30, 40 days to hook up our substation to that. And therefore probably you'll see entire SECI-1 being commissioned by Q1, followed by SECI-2.
We have the next question from the line of [ Meha Punjabi ] from [ Minerva Advisors ].
I wanted some color on the OMS (sic) [ O&M ] business. You assessed that in the presentation that the margins are pretty high. Could you give us an idea of what kind of margins can one expect in this business? And since 2.4 gigawatts have already been installed by us, what is the revenue on a steady-state basis that comes from the O&M business for INOXWIND?
One minute, please. So broadly, the O&M revenues are about flat from the megawatt per annum. While we talk of the 2.4 gigawatt, which is our installed capacity, the majority of it is still in the warranty period and in the pre-O&M period. So at this point in time, we have O&M revenue speaking in for about -- we have about O&M revenues speaking for about 500-odd megawatts, which will translate to about [indiscernible]. And then that, before there is some accretion, let's say another INR 40 crores to INR 50 crores. But on a steady-state basis, 2.4 gigawatts would ideally give you -- yes, you can do the math, INR 200 crores, INR 190-odd crores.
Okay. And when does this warranty period end for...
The terms -- your warranty is valid -- specifically the warranty period is the pre-O&M period. So in some projects, it's 2 years; in some, it's 3; and in some, it's 4. We did average, I'd say at about 3 years.
Got it. And the margin profile under the business?
Well, this would be upwards of 25%. When you look at it from that perspective, right, it's an [indiscernible] routine job. We will obviously make at least 25%, if not more for doing the servicing piece of it.
So this should be your PAT margin of 25%, is it?
Yes, correct, upwards of 25%.
Upwards. Can you just help with the -- in understanding what goes behind the O&M piece? Like would you have employee cost?
We have employee cost, which will -- there's a portion there. You will have routine maintenance costs like grease, oil, consumables; and third, you'll have the insurance cost which we carry.
Okay. And I'm assuming the insurance would be the larger part of the cost structure.
Not really. Not really. The employee expenses will be the largest part of the cost structure.
We have the next question from the line of Ketan Gandhi from Gandhi Securities.
Sir, I heard you saying that, henceforth, I mean, for larger parameter and at 3.3 megawatts will be supplying only. Will not be doing...
Not necessarily. I didn't say that. I said our intent [indiscernible] in this financial year -- in the coming financial year, is to supply certain quantities of the 3 megawatts. [indiscernible] and only supply this. Because I think the LOI from Adani is only for supplies of turbine, supplies and erection and commissioning. Even if you look at the SECI-1 and 2 of Adani, 50 megawatts [ feed ] the common infra was developed by them. We are doing that common infra. So our intent really is to do about a couple of 100 megawatts of just supply. But yes, we have to do supply, the erection, commissioning, et cetera. We will have to do that as well.
I'm not getting it, sir. Please, can you please elaborate on that?
So okay, why don't you continue and complete your question?
No. I thought maybe we will just be supplying the equipment. And EPC will be done by the buying party. Is that right?
It depends. It depends what the buyer party wants to do, right. So like I mentioned to you, that the Adani LOI only talks about us supplying turbines. Assume it's not Adani, assume it's Tata, or assume it's somebody else. And if they say, no, I want you to do a turnkey job, we are happy to do the turnkey job also.
Okay. So basically, the agreement with Adani, LOI with Adani is only for the supply?
Correct.
EPC will be done by them.
Correct.
We have the next question from the line of an individual investor, [ Mayang Fifi ].
In an answer to one of the previous questions, we indicated that the intent is to get to 8% to 9% PAT level. The corresponding ballpark revenue would be what, INR 3,000 crores?
Approximately. Approximately.
And the next question is I'm referring to the annual report, Page 169, Contingent Liability.
Unfortunately, I don't have the annual report with me, but please go ahead with your question.
Sure. So it says that the claim of 4 customers for non-commissioning of wind turbines is pending and the amount is not ascertainable. So what is the status of these projects? And what was the reason for not...
Well, just to put it in perspective, this involves about 8 megawatts of projects. That's it. So it's not really anything significant, it's about 8 megawatts of turbine. And which have been done, but of course, there's some arbitration and legal proceedings going on. It's been going on for some time. Honestly, we've done everything contractually, which we have to do. So I don't think we expect anything to come out. But yes, given the accounting standards, we do need to provide for contingent liabilities.
And my last question was that was related to a client-specific contract. Is it better to take it off-line or should we...
You can take it off-line. I mean, as we communicated with you, we don't have an issue.In general -- is not on the call, it doesn't make an issue.
The client's name is [ Estevian ]. And they made one audit remark that you are aware, I believe.
Basically, it's the same investor center that [indiscernible]. Is this [ runup ] working on...
Yes, it is.
Yes, we are happy to take this call off-line. But again, just to put it in perspective and as driven as they do that, they still have a PT in place. They have now commissioned 38 megawatts of [indiscernible] projects out of the 50 megawatts. So the remaining 12 megawatts is [indiscernible] leads [ retire ] for PPA, which is their responsibility. As soon as they retire their PPA, we'll commission the project.
We have the next question from the line of an individual investor, Manish Kanakia.
Yes, I would like to know on your -- in your PPT Page 9, you're saying 3 to 5 megawatts -- gigawatts expected to be commissioned by the industry. Do you see that being provided downwards?
Well, as everyone expected to be about 2 to 3 gigawatts. Yes, that's probably a typo. We should have corrected that. Thank you for pointing that out.
All right. And just one more question, like, are there other states? Are you seeing other states like that Kerala and Rajasthan, coming up with their own bids?
Well, I don't think Kerala is -- we probably have the largest wind farm operating in Kerala, but Kerala is not coming up with any bid in the foreseeable future. [ Madhya Pradesh ] is not coming out with any bids in the foreseeable future. Maharashtra has come out with a hybrid [ we just ] recently put 800-odd megawatts, which is a wind-solar hybrid. We expect probably 1 or 2 more so we can come out with hybrid grids or pre-specific grids over the course of the next 6-odd months. But honestly, there's so much volume coming up in SECI that it really doesn't make a difference whether they take out a state pre-specific grid or not.
And do you feel that after the rates of like 2.85 or below, will it be workable to install this windmill anywhere other than Gujarat?
Well, to be honest, I think -- so there are 2 or 3 parts to it. One, over the past 2 grids we've seen, winds are stabilizing, so we add 3.4, 6 4 or 2 points, 6 5 to 2.4, 4 4 and 2.51. We've now seen tariffs stabilize at about 2.7. Having said that, as we move forward, if it's going to be just Gujarat or if it's just going to be the best sites of, let's say, Tamil Nadu, these tariffs probably can survive. But obviously if you're going to then move into states like Rajasthan, Madhya Pradesh, Maharashtra, so on and so forth, eventually, tariff will have to go up because I think it's speaking, let's say, for Gujarat site, it's 38% on our 3 technologies. Beyond certain volume, it's -- you can't be in Gujarat, that's risking. There's no more [ of attrition ] after SECI-4 and so on. Now if you go to Maharashtra and [ let's hit up the electric ] 34%. That's a clear 11% to 12% dip, which means you need 11% to 12% increase in tariffs. So let's say it's 2.7, you will clearly need INR 3, just broadband to do that. Now to some extent, as we take our better technology, for example, now we are moving to the 3 point streaming of technology, the cost of energy will further decrease. But obviously, you also want or the IPP -- or the manufacturers would want to make a little bit higher margin. And your IPP per day will see one, let's say, 13% or 14% on the other hand. Maybe somebody wants 13.5% or 14.5%. It's other than larger industries still significantly paying [indiscernible] license. I mean, that's what I know from the fact that the lowest cost and the leanest manufacturer. But others are not able to survive at these numbers. We probably have a little bit on the top line pricing moving up. And number three, with the banking -- with what's happening on the banking side, I think interest rates are forming up for long-term money. I mean, to really extend long-term money is not even available unless you're a really strong player. And that also you see a lot of the weaker players is a lot. But I think putting these 3 things together, 2.8-plus is something which should really, really, really lay out in the days to come. I mean, but honestly, nobody would say because if some IPP really decide, I want to win 500 megawatts, I don't care. It's better, obviously.
And what do you think is the capacity for Gujarat to actually take in 5, 6, 7...
I think at this point in time, they can do up to 4 gigawatts in this catch area, and I think that's for the next 2-odd years. Thereafter, it's hard to say about cuts. But of course, within Gujarat, you've got a lot of fight. Later on, in trust, it's not interesting. So interested, Gujarat can still put up a lot more power. But obviously, Gujarat just to call one center, like a year ago, which was at 2.43, which didn't make sense for anybody.
And the -- just 2 aspect, since you said that the central grid just got delayed. And the next 15 to 20 days, it could be up, yes, hopefully. Do you see SECI-4 or 5 getting postponed for implemented beyond FY '20?
Well, as you may notice, SECI-3 has already been given a 2-month extension. I believe from what I understand and what the other players are talking about, they probably expect another extension because the land issue is still not fully resolved. And even if they do, from what I understand, a lot of the people [ gridded ] [indiscernible]. It's only going to be ready only by March 20. So to that extent, in my view, you're probably only going to see SECI-3 by March 20, SECI-4 deadline, I think, in any case, is March or June. Am I right?
SECI-4 deadline is March.
It's March. So I don't recall off my mind, but I think it's March or June. So SECI-4, in any case, is not going to be really implemented within March 20.
So that means FY '20, we could still have only 4 or 5 gigawatts being implemented?
Yes, certainly. You'll have some of the grid state capacity is coming up and you'll have the backlog of SECI-1 or plan entire SECI-2 being commissioned. So with that extent, you'll have almost 1,400 megawatts of SECI-1 and 2 being commissioned plus/minus in FY '20, then you'll have almost 1.5 gigawatt of the to 1.5 to 2 gigawatts of state and after which kicking in, which will take it to about 3.5 gigawatts. And then you can add SECI-4 -- or SECI-3. SECI-3 is 2 gigawatts, so that would be about 5 to 5.5 gigs. I believe next year, we would see close to about 5 gigawatts of commissioning.
Okay. And then you can see stabilizing FY '21, '22...
It's a grid fix up then, obviously, you can bid more and you could do it. And obviously speaking, I think 5 to 7 gigawatts is a sweet spot for the industry year-on-year. Keeping in my mind, land, evacuation, grid, so on and so forth.
We have the next question from the line of [ Jace Gandhi ] from [ Marsh-Gandhi Securities ].
Sir, just for clarification. One is the central grid and transferred to [indiscernible] SECI-3 and 4 in subsequent order, right?
While we are really just existing, common infra have already have an entry already in place, except SECI-1 and 2 for 500 megawatts.
Okay. And does any -- how much...
Go ahead.
Another thing is how much revenue in the current quarter is booked from SECI-1 or SECI-2 orders?
Well, all of them is SECI-1. The entire thing is SECI-1.
As there are no further questions, I now hand the floor back to the management for closing comments.
Well, thank you. Thank you, everybody, for your time and thank you for being part of the call. We're happy to announce, this has been our third consecutive quarter of profitability on the back of our ongoing SECI execution. I think that ensuing the transition period has been prolonged. I think everybody is aware of that, which has not enabled us to move much more aggressively than what we would have probably like to do. But having said that, I think as one of our other investors did mention on the call, I think we've -- in all our humbleness, I think we've managed to steady the boat. The company is -- all the plants are operating fine now. We've got execution going on the ground. We've got -- we are now moving towards a new technology platform. A lot of valid issues, which is we been seeing for the past 1.5 years in terms of banking support and so on and so forth is now behind us.Going forward, we expect to completely ramp up execution and delivery as the common infra gets ready. We've also used this time to work with -- work on the next generation 3.3 megawatt turbines. And I think over the next couple of months, we should be launching the -- actually putting up the first couple of turbines on the ground, and I think that would set a new benchmark in the Indian wind industry in terms of lowering the cost of electricity.I think we're also very enthused by the fact that we've continued to build on a strong relationship with Adani Green. We've received an LOI for 500 and 1.6 megawatts on the new 3.3-megawatt turbines. They continue to work with us closely on this and they're really working as a partner with us during this turbulent period.I think our tariffs has started stabilizing over the past few months in the wind sector. And I think going forward, this should ease pressure in terms of turbine pricing, in terms of actual implementation on the ground. We service a lot of other fringe players who are building in the middle to flay time probably they're just struggling in terms of financial position and so forth.I think going forward, going into the next financial year, or talking of the next few months, I think we still have a lot of options which have are already been conducted. Of course, a lot of that implementation is yet to happen on the ground given some amount of delay or significant amount of delay. And evacuation in fact is being readied by the government. But having said that, I think going forward, we believe a period of robust sustainable growth is evident in front of us in terms of wind turbines sector. We are probably one of the very few wind turbine manufacturers, which has survived through this very, very turbulent period where a whole host of companies have collapsed. So I think we probably are just happy that we've gone through this very, very bad tough period. And I think quarter-on-quarter, we are stabilizing more and more, and clinging on our strengths. And I look forward to your continued support and hopefully, in the days to come, we should get back to our glory days.Thank you, and look forward to connecting with you with our March event.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.