Inox Wind Ltd
NSE:INOXWIND
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Inox Wind Ltd
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Ladies and gentlemen, good day and welcome to the Inox Wind Limited Q4 FY '20 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. Vaibhav Saboo from Axis Capital Limited. Thank you, and over to you, Mr. Saboo.
Yes. Thank you, Neerav. And on behalf of Axis Capital, I would like to welcome the management of Inox Wind on the call. The management team will be represented by Mr. Devansh Jain, Executive Director; Mr. Jitendra, Group Financial Controller; and Mr. Narayan Lodha, Chief Financial Officer. I would now request Mr. Devansh Jain for the opening remarks and Mr. Jitendra for the operational highlights. After that, we'll open the floor for Q&A. Over to you, sir. Thank you.
Thank you, Vaibhav. Good afternoon, everybody. To begin with, we are very excited about the revival of the wind sector post a painful transition period, which lasted almost 2.5 to 3 years and are now well geared to thrive in the future. I would like to focus on 5 key operational highlights for the year gone by, and 2 or 3 key sectoral themes and how we see that playing out going forward.Of the 5 key operational highlights, firstly, during FY '20, we are focused on commissioning our SECI-1 projects and collecting significant receivables against them. As most of you may be well aware, the central grid for our projects was significantly delayed, as a result of which we could not commission our grid infra and the SECI projects. Over the course of the year, we have commissioned about 250 megawatts of SECI projects. We have also now built one of the largest grid infrastructures on the central grid, which is about 750 megawatts. And this will be used on a plug-and-play basis going forward. This will be of a significant advantage for us as we are moving forward. Secondly, over the quarter gone by, we have received our single largest order ever, a 250-megawatt order from Continuum Wind, a Morgan Stanley-backed company. We have already achieved financial closure for this project from Power Finance Corporation of India, and we have already commenced execution of this project beginning Q1 of the new financial year. Continuum Wind is a repeat customer. And in the past, we have executed 170-megawatt project for them. The third key operational development of the year. We have strategically also tied up a new manufacturing facility at Bhuj Gujarat on lease for manufacturing nacelles and hubs. This, we believe, will lead to significant cost savings for us across our logistics supply chain costs, ease operational supply chain hurdles as well as lead to significant working capital savings for us. This plant is ideally located right next to most of our project sites in Gujarat. We have begun -- we are expected to begin production here in Q1, and we have now commenced production there. The fourth key operational highlights which we're focused on, we have done a lot of work around our 3.3-megawatt turbine, which is soon to be launched, and we will begin serial supplies for this within FY '21. This is probably the largest wind turbine in India, and will be amongst the most competitive turbines globally. I'm sure all of you are aware that we have already received multiple LOIs for this turbine, and there is a lot of interest for this product in the market. The fifth key operational thing which we're focused on is we have also done a lot of work towards creating a larger O&M platform and are actively working towards leveraging our existing 2.7, 2.8 gigawatt platform towards creating significant value for all our stakeholders and the company. We would shortly be making more updates around this as we move forward. With respect to the key sectoral developments, there are 2 primary developments which I would like to brief everybody now. Firstly, MNRE has finally decided to remove the upper tariff cap in the reverse options. We believe this will lead to significantly higher participation and interest in the sector and future auctions. This will enable the determination of a true tariff, wherein all the players in the value chain, be it the IPPs, the OEMs or the discoms, will make sustainable returns and power will be available at competitive prices. I think second significant macro development we see is the upcoming amendments to the Electricity Act. We believe this proposes to significantly increase the penalties for noncompliance of RPOs, and this is expected to give a significant flip to demand for renewable energy across India, and particularly in those states which are non-windy states, beyond Tamil Nadu and Gujarat. Again, we are extremely excited about the future prospects of the sector and are looking forward to reattaining the strong position we used to enjoy during the FIT regime. With this, I would like to request Jitendra to take you through the financial and other highlights for the sector before we open up the call to questions. Thank you.
Thank you very much, sir. Thanks for the operational highlights and market opportunity. I'll take all the participants through COVID-19 impact on us, financial performance and our O&M business. To start with COVID-19 impact, I'd like to inform that company has adhered to all the requisite norms as stipulated by the government. The supplies during quarter 4 FY '20 were muted due to COVID-19 impact. The operations across all the manufacturing plants and project sites were subdued during the quarter on account of nonavailability of manpower and supply chain constraints and were subsequently temporarily suspended with effect from 26 March, 2020. The manufacturing operations resumed with effect from 27th April, 2020 to a very limited extent due to restrictions imposed on account of social distancing, manpower availability and supply chain constraint. Post unlock 1.0, the company has started ramping up operations given availability of required manpower and access to supplies. We have utilized the lockdown period to further optimize our costs and readied ourselves for the upcoming 3.3 megawatt wind turbine generator. We are now well poised to ramp up and grow significantly in the future. On the front of financial performance, I'll first cover Q4 FY '20. During the quarter, we commenced execution of new orders along with fresh supplies of wind turbine generators. Revenue and EBITDA compared to corresponding quarter in the last financial year, that is FY '19: revenue of INR 189 crores against revenue of INR 180 crores, which is higher; EBITDA profit of INR 11 crores against the EBITDA loss of INR 25 crores without exceptional provision; EBITDA loss of INR 177 crores against EBITDA loss of INR 24 crores with exceptional provision. As a onetime measure and provision, the company has provided for expected credit loss, we call it ECL also, to the tune of INR 187 crores on the consolidated receivables pertaining to FIT regime. This is an exceptional item and has no cash impact on the company. There is overall continuous improvement in the working capital cycle, INR 152 crores in Q4 FY '20 as compared to INR 635 crores in Q3 FY '20. Constant reduction in the net debt quarter-on-quarter, INR 300 -- sorry, INR 634 crores in Q4 FY '20 as compared to INR 648 crores Q3 FY '14 -- FY '20. Net debt-to-equity ratio continued to remain robust at 0.38x versus 0.34x in Q3 FY '20. I'll cover financial year '20 during full year. During the year, we commissioned 262 megawatts and resumed fresh supplies of WTGs. Lower revenue and EBITDA for FY '20 is primarily due to the fact that post central grid availability, which was significantly delayed, we utilized our resources to complete projects under SECI-1, for which substantial supplies had taken place in FY '19. We focused on commissioning these projects and collecting receivables. We are now poised to ramp up new supplies and execution.Revenue and EBITDA compared to FY '19: Revenue of INR 760 crores against revenue of INR 1,437 crores; EBITDA of INR 82 crores against EBITDA of INR 173 crores without exceptional provision; EBITDA loss of INR 106 crores against EBITDA of INR 173 crores with exceptional provision. EBITDA was impacted due to a onetime provision of INR 187 crores towards expected credit losses in the receivables. Overall, continuous improvement in working capital cycle, INR 152 crores in FY '20 as compared to INR 1,213 crores in FY '19. Constant reduction in net debt year-on-year INR 634 crores INR in FY '20 as compared to INR 916 crores in FY '19. Net debt-to-equity ratio stands at healthy 0.38x versus 0.47x in FY '19. Just to cover O&M. The O&M business is a strong annuity model. Inox has multiyear O&M agreements for its fleet across customers and from the current financial year, a significant part of wind turbine generators will be beyond free O&M warranty period. Moreover, with the increase in the fleet size, on the back of a strong auction order inflow, we expect this revenue stream to pick up strongly in the coming years. O&M revenues are noncyclical in nature and have steady cash flow generation and higher margins. Our O&M business gives us a real significant opportunity for monetization and has the potential for significant organic and inorganic growth, and we are fully focused on releveraging this. So that is the broad overview of operations and the financial performance and how we see the sector going forward. We can now start question-and-answer session, and we are -- we'll be happy to answer the queries.
[Operator Instructions] First question is from the line of Mohit Kumar from IDFC Securities.
Sir, my question is regarding the SECI-2 and SECI-3 and also SECI-4. Is there any extensions provided by SECI for implementing these projects? And when do you expect all these 3, SECI-2, SECI-3, SECI-4, to contribute to our top line? And secondly, on it, sir, we have 500-megawatt LOI from Adani, it is for which particular project? And is this on? Or is there some risk to the -- expected to this volume?
Thank you, Mohit, for your question. First and foremost, for SECI-3 and 4, we have already received extensions from SECI. Let me remind that for SECI-3 and 4, the central grid infrastructure still needs to be readied, not just for us, but across the sector, multiple winners of SECI-3 and 4. With respect to SECI-2, we've already -- given the COVID situation, there is already a certain extension provided. We've asked for a certain longer extension given the grid itself was delayed by over 18 months by the central grid, and we expect to receive that. So I think they have a long period of time before those projects sort of expire and we can implement those projects. With respect to your question when we expect these to contribute to our top line, I think, look, we are focused on utilizing our common infra, which is now ready for 750 megawatts as well as implementing various other projects, which are higher-margin projects. So at this point in time, we have the Continuum project under implementation. We also have some ReNew orders and some more Adani orders under implementation. It's hard for me to specifically give you forward-looking statements in terms of what volumes we will be doing year-on-year. But I think it would not be incorrect to say that I think we expect substantial growth to take place over this year. I think FY '19, we did a top line of about INR 1,500-odd crores, which dropped to about INR 700-odd crores in this financial year, simply because the grid was not ready and we wanted to utilize our time commissioning the grid and collecting up our receivables. But I think we see significant growth going forward. With respect to the Adani LOI, which we spoke about, I think it's in public knowledge that that LOI has been issued to us for the 3.3 megawatt turbine. I think it's a well-known fact we have a very strong relationship with Adani Green Energy. We have done multiple projects for them in the SECI-1, even SECI-2. I think as soon as we are introducing a 3.3 megawatt turbine in the market, we expect to see a lot of traction on that front. And I think Adani has a huge goal of setting up almost 25 gigawatts of renewables by 2025. Presently, they're only at about 3 gigs. So I think there is a huge runway. I think this would probably just be the tip of the iceberg as we move forward.
And the last thing sir, a lot of hybrid tenders are being set up. Have you received any order for any of the hybrid? And are we approaching them?
Look, the hybrid tenders have been announced in 2019. Let's not forget, the grid for SECI-3 and 4 is still being created. So hybrid is a long way off for people grid to be readied. So I don't think people are even close to remotely ordering projects for SECI at -- for hybrid at this point.
Next question is from the line of Ketan Gandhi from Gandhi Securities.
Can you throw some light on SECI-2 down-selling of the project?
Look, we've got interest from multiple investors for all our SECI projects. For confidentiality reasons, it's not possible for us to disclose who the buyers are. Even for SECI-1, I'm sure you'll recall, we have not officially disclosed any of the buyers of the SECI-1 projects. But I think now that we have the grid infrastructure ready, for us, it's virtually a plug-and-play business. And I think there are a whole host of IPPs and pension ones sitting out there who want derisked commissioned projects. So we don't see any challenge in terms of building those out and flipping those over.
No. So as of today, it is not signed? SECI-2?
Unfortunately, I cannot disclose those things at this point in time.
Okay. And sir, we have -- in the press release or the presentation, you have mentioned that around 300 megawatts of O&M has been canceled. I mean, any particular reason?
So it's not been canceled. So over the past 2 years, when the sector had been facing a lot of issues, a lot of the IPPs decided to take some of the O&M into their own hand. Having said that, all the common infrastructure O&M remains with us. So of the 2.8 gigawatt already installed by Inox Wind, we continue to do full service for 2.2 gigawatts. And for the remaining 600-odd megawatts, we continue to provide entire common infrastructure facilities.
And sir, this Continuum order, which is part of our project only? Or there is a separate totally new, I mean, those -- bid won by them only?
No, those are the bids won by Continuum. They are only utilizing our common infrastructure on a plug-and-play basis, but the tender has been won by Continuum.
Okay. So we will be supplying the turbine and doing the EPC also?
Correct. Correct.
[Operator Instructions] Next question is from the line of [ Raj Shah ], an individual investor.
In FY '21, are you planning to close on a profitable note? The next year? Hello, am I audible?
Yes. Yes, of course, we run the business for profits only, and we expect that we will be closing FY '20 with a reasonable profit.
Sorry, actually, you were not audible. Can you just repeat it again?
I'm saying that, yes, of course, we run the business for profit. And FY '21, yes, we are expecting reasonable profit in our [indiscernible].
Reasonable profit. Okay. Because, see, in FY '20 Q1, Devansh Jain has indicated that in the next year, there will be exponential growth. So I want to know, is there any growth happening in this year?
Yes, we have disclosed you the order book. And the value of the order book, we are sitting right now on an order value of around over INR 8,000 crores.
But see -- yes, yes, yes. I know. The order book is very big and good. But about the execution part, so will you be executing a significant quantum of the order book in this year?
Raj, to step in, first and foremost, while we may have spoken of certain things in Q1, please appreciate the central grid was delayed by over 18 months. So things which are beyond our control are not in our capability. Again, it's -- now there is a COVID impact and all factories were shut down for virtually 3 months. You know, naturally, nobody can foresee this and predict this. It's a very general and normal point that anybody runs a company and operations to make profits. And certainly, we have enough orders as well as enough visibility now that the transition period is over for us to get to profitable growth.
Okay. Good to hear it. And just another point, I was not doubting on the execution part, but I was just curious about it. The other question I wanted to ask, the ECL provision as you have bid. So as a layman, can you just help me understand with that? What is the exceptional item of the INR 187 crores?
Yes, sir. I'll just explain you. This is called the ECL or expected credit losses. There is a common [ prevalence ] called provision for bad and doubtful debts. We are -- hopefully, with receivables, which pertain to FIT regime, we have gone through each and every contract. And we have -- based on our own judgment and assessment, we have provided for around INR 187-odd crores as doubtful receivables, but that doesn't mean that they are bad debts. We will put all the efforts to have receivables as part of that in our book. This is the first time we are saying because this is a very significant amount seeing our past track record. And that's how it has been categorized as exceptional item.
All right. All right. And any other amount which you expect to go as far as first the ECL way in Q1 FY '21, just approximately?
Okay. I won't be able to give you the approximate. What we do is that we review our receivables quarterly basis. And as I expect that significant amount has already been provided, it's a substantial amount, we don't see any more amount with -- of this magnitude coming in under normal provisions which are required under this management team.
Okay. Fair enough, fair enough. And just another -- the last thing, I don't know whether I should be asking it or not, but let me ask it. So my -- it is to Mr. Devansh Ji. Are you ending any other company or just doing all the things on the Inox Wind only, right? The focus part is only on the Inox Wind or the other group companies also?
I think I didn't understand the relation of that question. I think Inox Group is a fairly large group. And honestly, all of -- everyone remains involved in the larger operations of the group. So it's not as if someone looks after only one company.
Next question is from the line of [indiscernible].
So my first question is regarding the receivables of INR 1,300 crores that you mentioned in the balance sheet. Sir, I want to understand how much of this pertains to the FIT regime and how much pertains to our auction base supply? You got my question, right?
Sorry. The majority of receivables pertain to the auction regime, and we don't have -- we don't disclose this data, we [indiscernible]
I'm really sorry, I'm really sorry. I'm not able to hear you properly.
Am I clear now?
Yes, it's better now.
So majority of receivables are -- pertain to auction regime only. There would be a small quantum of SECI receivables. As of now, I don't have a breakup of those receivables. You can shoot the query or you can e-mail us and we'll be happy to respond to you.
All right. Fair enough. So regarding the last SPV of 61, correct me if I'm wrong, but we have received the extension on November 25, 2019, and in the previous earnings call, you have mentioned that you will be targeting to finish the commissioning by February 2020. But you have not done that. So can you please explain what's the situation there? And why we are not able to meet our targets?
So we virtually built out that SPV. But unfortunately, due to the COVID impact, we could not carry out commissioning. We've gone to CRC for a further extension. And as you may be aware, CRC itself was shutdown. So we believe we have a hearing coming up sometime in July or August, wherein the commissioning time lines will be reinstated to us, and then we'll be able to commission that project. But yes, that's a virtually INR 300 crores asset sitting on our balance sheet, which we will be building out and flipping sooner than later.
Sorry to dig this a bit further. But in this petition that you're filing with CRC, there is no mention of COVID-19, right? You mentioned that the grid was not ready, so that's the reason why I am asking you the question. Are there any further risk that...
We have asked for a 132-day extension if you've gone through the petition which we filed in CRC, because we believe we are not supposed to be paying any LDs on that last SPV. We've not paid any LDs for the last -- we've not paid any LDs for the last 4 SPVs so that -- and clearly, we need to get a favorable order on that front, and we are confident of getting a favorable order on that.
All right. Fair enough. And what is your plan on the execution of MSEDCL's 50 megawatts project? Can you update us on the -- any required extension approvals? Or whether we found any buyer for this project?
As I mentioned in the previous call -- previous answers, we already have extensions for SECI-3 and 4 and also for SECI-2. The grid itself is not readied by the central grid for SECI-3 and 4. So we are on...
MSEDCL, the Maharashtra project?
Even for the Maharashtra project, due to certain technical reasons, we've already been given certain extensions but we've asked for longer extensions.
Got it. And one more thing, in our order book, as you mentioned on the earnings presentation, ReNew Power 38 megawatts is missing. So is that some critical error? Or is there something wrong with that order?
Where is the error? Can you -- can you repeat it?
Yes, in the earnings presentation, we mentioned the order book on Slide #8. On that, we do not see the ReNew Power 38 megawatts order that we were including in the previous presentations.
I'll get back to you on this. I'm not able to...
Already supplied. I think we don't have the specific details here, but I think we've already supplied majority of the turbine. So what has already come into our receivables, naturally, it's not part of our order book. Again, we can get back specifically. I believe we've already supplied about 20 megawatts to them.
But I think in that case, you need to update the supplied figure of 304 megawatts. I think that is missing.
Well, I think if you look at the details of the other, that would be net of what is already supplied. Clearly, we don't give details of every 2-megawatt, 4-megawatt, 6-megawatt and the others, right?
Yes. Got it. But that order is still on, right? ReNew Power, 38 megawatts? That's no problem with that order?
The answer is for it, we've received payments for it. The project is already under implementation.
Great. Fantastic. So one last question. So our trade payables are at pretty high levels for almost 4 quarters now. Any problem there? Do we have enough utility to continue our operations in this new fashion?
Yes. Trade payables are in line with our business activities, there are payables which are -- we don't see any problem in that, and they are all in the normal course of business. There could be payables on account of material supply, imports as well as service provider.
Yes. But -- where the concern for me as an industry is that our receivables have gone down drastically, very fantastic, but the payables trend is a bit alarming. That's why I'm asking this question. If everything is under control, then it's great.
Okay. So everything is under control and we monitor cash flows very closely, whether it's from -- I mean, inflows from receivable or the outflows to the payables. So there's no, as such, any problem with that.
Next question is from the line of Venkat Raman from Orient Securities.
In the investor deck, you have shown receivables of INR 110 crores. But in the consolidated balance sheet, the receivables figure is INR 1,322 crores on a top line of INR 760 crores. Can you please explain? Hello?
Venkat Raman, are you there?
Yes, I have already asked the question. Should I repeat?
Yes, sir, please.
See, the receivables as per the investor presentation is at INR 110 crores, and as per the consolidated balance sheet, is at INR 1,322 crores on a top line sales of INR 760 crores. Can you please make some -- I am not able to make any sense about it. So can you please elaborate? Is that clear?
Your voice is not clear. Can you be a bit louder? And -- yes.
Is it clear now?
Yes.
Okay. The receivables as per the investor presentation is at INR 110 crores. As per the consolidated balance sheet, is at INR 1,322 crores. And the total top line sales for the year on a consolidated basis is INR 760 crores.
Hello?
Hello?
So I think you are not audible, and we don't have so much of data. So for the detailed data, please mail us your query, we'll reply separately on this.
Okay. And another thing is -- another point was regarding the notes, there is a point on litigation. What is it regarding?
Pardon, your voice is not audible. Can you speak it louder or something?
Yes. What is the -- in the notes in accounts, that is on -- mentioned about litigation. I want to know what is it regarding.
Can you -- can anyone repeat what he is asking? Hello?
Hello.
Yes, yes. Am I audible now?
I'm able to hear you.
Jitendra Mohananey, at this side, am I audible?
Yes, yes, sir.
Okay. Tell me what is the question?
One was regarding the litigation that is there in the notes on accounts. What is it regarding?
Okay. These litigations are the part of contingent liability and they are normal litigations, which normally happens when you run the business. So there's no significant litigation and those litigations, which are there in the -- are subjudice, they don't have a significant -- or they are not going to have significant impact on the financials of the company.
Are they related to any liquidity damages or penalties from the customer side?
No, not at all. They are all commercial litigations, primarily from material suppliers or service providers. But there is no litigation, per se, from any of our customers.
Okay. Now the question on receivables was that in the investor deck, it is at INR 110 crores. After the consolidated balance sheet, it is at INR 1,322 crores. And the sales figure for the full year is at INR 760 crores.
Yes. So I'll explain you. The receivable of INR 100-odd crores, which we are showing in the presentation, are net of advances. So we have taken advances from customers, and these are net of advances. The INR 1,300-odd crores receivables are gross of -- I mean, they are the gross receivables. So this is all. And the second question is about the turnover versus receivables. So it's very normal in our business because our contracts are very long-term contracts. And the execution supply and execution time takes -- sometimes when the wind farms are under development, it takes around more than 1 year to complete a project. So immediately matching the receivables and the turnover for a particular year may not be the -- I mean...
I think one of the fundamental problems now going forward in SECI is, we're doing a lot of SPVs. And many of the SPVs have been down-sold by us. So a lot of the receivables that we have are coming in terms of advances. So technically, you need to knock them off. But given the whole SPV culture, we cannot knock them off. They continue as advances and receivables continue independently. Once we flip over the SPV, the advances and the receivables will knock off each other.
Okay. Okay, understood. Now other thing is regarding O&M, if I buy it -- when you sell a new machine, it is usually the free period for O&M as the warranty period is, what, 2 years or 5 years?
2 to 3 years.
For 3 years.
2 to 3 years.
And after that, we're going to start kicking in.
2 to 3 years, depending on the contract.
On the contract. Okay. All right.
Next question is from the line of Deepak Poddar from Sapphire Capital Partners.
Sir, my first question pertains to your interest cost. Like in spite of our lower debt, our interest cost is higher. So can you please explain that?
Fundamentally, I think there are 2 issues which have been going on until the sector was shut. There are a lot of banks asking us absurd rates to continue our facilities, which not only included onetime charges, but also the interest costs which we were paying. That was significantly high. As you may have noticed over the past 2 years, a lot of the bank debt, a lot of the outstanding debt has come down drastically. We're now down to about INR 600-odd crores of net debt in the company. So given our ongoing efforts to monetize our SPV, which is sitting with us partly our O&M business as well as now with the sector revived and our collections ramping up over the Continuum, Adani, other orders, I think we are targeting to reduce this bank debt to a great extent so that a lot of our onetime charges and so on and so forth go down. Just to give [indiscernible]…
How much?
For doing the FIT regime, typically, our bank charges, or a normal LC, we were around 0.3%. Today, we are paying almost 2%, 2.5%. So it's almost a 10x increase in terms of what we are seeing. That's primarily happened because over the past 3 years, virtually all the Indian wind turbine manufacturers have gone bust. So barring us and probably 2 or 3 foreign manufacturers who had very strong balance sheets guided by their MNC parents, no one else survived in the sector. So that is 1 key reason. The second reason why we've also seen a jump up in our finance cost is because we received the advances from various customers. Some of them are interest-bearing advances. Because we needed to secure the liquidity position of the company, we had to take advances where we were paying interest on some of the -- to some of these customers. As a result of which, we have a higher interest cost over this quarter. But I think with the actions and the efforts which are now lined up going forward, we should see a drastic reduction in this quarter-on-quarter.
Okay. So out of this INR 96 crores, which is like some INR 45 crores last quarter, so how much would be the interest-bearing advances cost and how much would be onetime charge of interest cost?
I don't think I have the specific details in front of us, but we can get back, so if you could shoot us your contact, we'll get back to you with the specifics.
Okay. And you mentioned that you are looking for substantial reduction. So what...
We already had a substantial reduction in a shutdown period of almost 3 years. We are probably the only domestic OEM who has survived without a single rupee of haircut across our banks. The only other OEM we are aware of who survived has probably taken an INR 8,500 crores of rate cuts from the banks. And we are now down to about INR 600 crores of net debt. I did mention, we're also sitting on a INR 300 crores asset, which is our SECI-1 SPV. So I think going forward, we are really looking at hopefully bringing this down to 0 in the next couple of months.
Next couple of months, net debt to 0, that's what you're mentioning, right?
All our [indiscernible] lease. Yes.
Okay. Okay. And in the last call, you did mention that FY '21 will be the first year of kind of a normalized performance after a gap of 3 years, right?
That's right.
So would you want to elaborate more like what sort of execution you want to do? What sort of profitability you might be targeting?
I think it's -- we can't make forward-looking statements being a listed company. But one thing is for certain, I think the transition period pain is over. In FY '20, we finally have a grid which was ready. So we commissioned our projects and collected a lot of our stuck-up receivables. I think what I mean by normalized here is now is the period when we are beginning new supplies of turbines. We have virtually cleaned up a lot of the old inventory lying in our system, reallocated it, used it up. We have a limited amount of inventory such as SPV -- one of the SPVs sitting in our system. As soon as we get the approval to commission, we will commission and flip that over.
Fine. And also, sir, normalized a 500-, 600-megawatt kind of execution, is that a fair...
Again, to be honest, I think Q1 has been a washout for everybody due to COVID. So while it would have been honestly, a fully -- on a normalized operational year, had it not been for COVID, I believe it will still be a normalized year for us. We are very excited. We have a lot of orders. But to some extent, there would be an impact of COVID in Q1, which would impact volumes. And Q2 being peak monsoon in Kutch, where majority of the projects are, I think there would be some impact of that. But I think, all in all, we would still see a very significant growth in terms of top line and profitability over the course of this financial year.
Fair enough. Understood. And my last query is on your gross receivables. So gross receivables are still high at about INR 1,300 crores, right? And so we were not able to knock off advance again. Is that the reason we are not seeing that number going down? So some elaboration on that would be helpful.
Partly, I think Jitendra did explain that. We've got certain SPVs which need to be knocked off from advances and from receivables. Case in point is one of the SPVs that's already built was to be commissioned, which was commissioned thereafter. We're still sitting on one of the SPVs. And then actually, we have advances in ordinary course of business. We will supply them. They get knocked off at different points in time. So I wouldn't read too much into it. I think it's more an issue of now the whole business being done under various SPVs as opposed to plain vanilla FIT regime, where you simply supply, then got money. There was no concept of advances and knocking it off against receivables. But I think post the ECL provision, which we've carried out in this quarter towards our FIT regime, I think we are on a fairly healthy track in terms of collecting those receivables as well.
Next question is from the line of [ Anak Rajim ] from Jain & Associates.
Hello?
Sir, sorry to interrupt you. Sir, you are not audible. May I request you speak a little louder?
I need to ask about the same page that was explained about the finance cost. So in the finance cost, we have seen the increase. But we mentioned in the previous call that in FY '21, we can have a number of about INR 120 crores for the full year, but that doesn't seem to be the thing with what the numbers are coming from quarterly. And eventually, the interest rate what we are paying and the EBITDA margins we have, how can we survive going forward?
As I -- as we explained to you that we are aiming at a reduction in the finance cost, and we are quite working quite aggressively on that. We are talking to banks and putting everything in place. So we do expect that going forward, finance costs will be going down. An absolute number, right now, we are not in a position to give you any number that this will be the finance cost in FY '20. But yes, we are aiming on that and we are addressing the issue.
So are we aiming for any kind of restructuring, which, due to the COVID, RBI and all will be open to? Are we thinking of any such thing?
No, I don't think we need any restructuring. I think over the past 2 years with the sector being shut down, we have successfully brought down our net debt drastically. We've not taken a single rupee of haircut from any bank. And I think we are financially strong enough to sustain operations going forward. As I mentioned, we are sitting on a virtually INR 300 crores asset in one of our SPVs. We have now operations continuing across multiple supplies of Continuum, Adani and so on and so forth. We also have a significant opportunity sitting in our O&M business. So I think, as I did mention in one of the calls, we are working towards making this INR 600 crores also close to 0 over the next couple of months.
Next question is from the line of Ketan Gandhi from Gandhi Securities and Investments.
Sir, in terms of 3.3 megawatt turbine, where are we standing? I mean in terms of registration and approval and all that?
So we've ordered out now all the key components of the 3.3 megawatt turbine. We expect to begin receiving key components from July and August. I think over the next 2 to 3 months, we should have our prototype up, and then we would simultaneously roll out commercial production. Again, this is a platform, which has been running globally for now almost 8 to 10 years. So while we would be launching it for the first time in India with one of the largest rotor diameters, the 3-megawatt turbine platform itself has been operating globally across multiple countries on the AMSC platform for the past many years.
So we are 6 months or 1 year away from actually putting the turbine on the ground?
As I mentioned, we are a few months away from putting up the prototype. And we will be doing commercial production for the 3.3 megawatt turbine over the course of this financial year as well.
So most probably last quarter?
Let's not get into specifics. But yes, we are -- we have -- we also have many of the 2-megawatt orders which are still being implemented, including Continuum, Adani and so on and so forth. But yes, we already have enough LOI for the 3.2-megawatt turbine. We ourselves are in a hurry to bring it. But it was important for us to utilize all our stuck-up inventories of the 2-megawatt turbine. It was important for the grid infrastructure to be ready. And ever since that happened, we are on war footing, trying to bring the 3-megawatt turbine. As I mentioned, some of the components are already ready and which would start coming into India from July end to August beginning. And over the next 2 to 3 months, we expect to put up the first prototype and simultaneously begin commercial production.
Fair enough. Sir, you -- in presentation, you mentioned about a good opportunity in O&M monetization. I mean, can you throw some light on that? Can you -- or I mean...
There are various assets which any company owns. We are sitting on, as I mentioned, for one, we have an SPV sitting in our system, which is worth almost INR 300 crores. As soon as we commission it, we believe we will be able to optimize and get that INR 300 crores from the -- we have down-sold many of our projects as all of you are well aware. So once we commission that, we are sitting on that as a INR 300 crores asset within our balance sheet, number one. We also believe we are sitting on a fairly attractive O&M platform, which is almost 2.8 gigawatt. Yes, 2.2 is full-service and about 600 is common infrastructure services. As all of you may be well aware, the O&M business is a high-profit margin business with sure-short cash flows, which are annuity-based contracts. We are looking at multiple options. We're looking at organic growth, inorganic growth. We're looking at dilution of minority stakes in our O&M business, and we are working aggressively towards that. I think we will have more details on that in the next few months.
So in quarter or 2, we can have some sort of monetization of O&M?
It's very hard to give you specifics. As I did mention, we are working aggressively towards something on that front. And in the next few months, we should be making some announcement on that front.
Sir, you said we are sitting on 50 megawatts of 1 SPV on our book. Has that been down-sold or still it is pending?
No. For confidentiality reasons and SECI reasons, we cannot disclose what is down-sold, not down-sold. But yes, as I mentioned, we have multiple customers available, be it corporates, be it pension funds, be it our existing customers who are interested to take over build-out on key projects, be it SECI-1 or SECI-2 and so on and so forth. So that is not a challenge for us now to build and flip SPVs.
Okay. So for me to understand, sir, how does it happen? I mean, SECI -- I mean any SPV which has to be down-sold, how it happens? It happens prior to the commissioning or post commissioning?
So technically, you could do it prior or you could do it post commissioning. But under certain regulations, you need to hold on to it for 1 year before it is actually down-sold to an end-end customer. So there is structuring, which has to be done, just like it's done in solar projects, so that's the reason you also see advances and receivables, which need to be knocked off. But you kind of build it and then you flip it. And at the end of 1 year, the eventual owner becomes the owner of the asset.
Yes, fair enough. As happened in case of Torrent and Adani, I mean...
Correct. Correct.
Okay. And last question is we have mentioned that we have got orders from Adani, Continuum and ReNew. So Adani order which we have got, is it part of the -- their bidding or part of our bidding?
What is left over is part of their bidding. We've built ours and flipped them over -- flipped those over to them. What is pending is part of their grid infrastructure, which is presently under construction.
Thank you very much. Ladies and gentlemen, due to time constraint, that was the last question for today. I will now hand the conference over to the management for closing comments.
Thank you, Vaibhav. I would like to thank all the participants of the call for taking out the time to attend this call. It is -- it has been a fairly challenging year, the year gone by. We had certain things which we have wished to achieve, some of them which we could, some of them which we couldn't. I did briefly elaborate on all the key operational highlights at the beginning of this conference call. But more important, excited about the future prospects of the sector. Actually, to be honest, about the revival of the wind sector. The past 2.5, 3 years has been a period where virtually the sector was dead. Over this period, naturally, virtually all the OEMs, original OEMs in India have gone bust. Thanks to our group support, we have survived. We are now looking very strong and are raring to go. We have received some of the largest order. In fact, the largest order in our entire history was received in the last quarter. We are very excited about our 3.3-megawatt upcoming project. I think we are enthused that in spite of the COVID impact, we continue to execute. Our O&M business is doing fine. We have received multiple orders. We have seen a lot of traction in the market for further orders for Inox Wind, including some of our past customers as well as some of the new customers who we are in touch with. And of course, I would like to mention, Q1 will have an impact, given the fact that virtually the entire country was shut down due to COVID. But going forward, beyond Q1, I think we should be back to normalized operations, and we look forward to reporting back to you in the next couple of months. Thank you for your time, and thank you.
Thank you very much. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.