Inox Wind Ltd
NSE:INOXWIND
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Inox Wind Ltd
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Good evening, ladies and gentlemen. I'm Momita, moderator for the conference call. Welcome to Inox Wind Limited Q4 FY '21 Earnings Conference Call hosted by Axis Capital. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to Mr. Vebhav Saboo from Axis Capital. Thank you, and over to you, sir.
Hi, good evening, everyone. On behalf of Axis Capital, I'm pleased to welcome you all for the Inox Wind Limited full year earnings conference call. We have with us today , Sri Devansh Jain, the Executive Director; Sri Jitendra Mohananey, Group Financial Officer; and Sri Narayan Lodha, Chief Financial Officer. We will begin with the opening remarks from management on the operational and financial highlights as well as the key updates from the sector. This will be followed by a Q&A session. With this, I hand over the floor to Mr. Jitendra Sir. Over to you, sir. Thank you.
Okay. Thanks, Vebhav. Good evening, everyone. I welcome all the participants of this earnings call. The Board of Directors of Inox Wind Limited has approved the audited results for the quarter and year ended March 31, 2021 in the meeting, which was held today. I trust you would have had an opportunity to go through the results. I'll request Mr. Devansh Jain to provide you an outlook on the sector as well as operational highlights. Over to Mr. Devansh Jain. Thank you very much.
Thanks, [indiscernible]. Good evening, everybody. It's great to connect with all of you again. I hope the recently concluded second wave was not too troublesome for everybody, although a lot of people were impacted at our end. And I hope everybody is safe. I'll begin by taking you all through some of the operational highlights for the financial year. Mr. Mohananey will take you through details of Q4 specifically and also give an update about the 3-megawatt turbine holdco structure as well as strategic initiatives, which we expect to implement over the course of this financial year. So for the financial year FY '21, we recorded overall total sales of INR 847 crores as compared to INR 760 crores in FY '20, which was an increase of about 12%. What you may be seeing in terms of the published consolidated results as opposed to the stand-alone results, there is INR 136 crores of revenue, which has been eliminated, given that it's been supplied to an SPV, which we presently hold, which eventually, we intend to down sell to various investors just as we intended to do with our SECI-1 SPVs. The quarter gone by was an EBITDA positive quarter for us. So as you may recall, Q3 was EBITDA positive, Q4 has been EBITDA positive as a result of ramp-up in some of the new supplies, which are taking place as well as liquidation of some of the inventory in the system. We have exceptional provision of ECL, which we will -- which Mr. Mohananey will take you through in detail as we move forward. But that's given that we are now implementing an extremely conservative accounting policy so as to have adequate provisions on the balance sheet for any of the receivables of the FIT regime era. Over the year, we've commissioned about 80 megawatts for various customers, including Continuum, ReNew and various retail customers. Mind you, we also have various turbines, which was applied under equipment supply deals where commissioning was not in our scope as such. As a result of which the number might look a little low, but overall, it would have probably be -- been close to 140 megawatts. We have multi-year agreements with our customers. Over this year, we've added almost 300-plus megawatts to the paid O&M services, which is significant, which has taken our revenue earning fleet to 1,500 megawatts. I'm happy to say that the O&M fleet is now a solid annuity business for us, which keeps increasing as we move forward. And obviously, as the operational fleet increases as well as the fleet which is still in partly in the free period gets into the paying period, these revenues are expected to steadily keep increasing over the next 2 to 3 years. Coming to our 3.3 megawatt turbine, happy to update that our turbine foundation is complete. The supply chain is fully in place now for serial production. The first turbine should be operation in the ongoing wind season, and we expect to do commercial production immediately thereafter. We are in process of getting the most to parallelly do serial production, which should be in our facilities over the next couple of weeks. And while testing may be a routine matter, which will need to be done, given the fact that this is a platform which has been running globally for over a decade now, we are confident to move with serial production rapidly. As you may be aware, we have -- we had achieved financial closure for 100 megawatts of our SECI SPV for PFC. We don't intend to hold these SPVs long-term on our balance sheet. These will eventually be flipped, given the regulatory -- fulfilling the regulatory requirements. We have already started drawing upon one of the term sanctions from one of the SPVs. And over the next 3 to 4 months, we expect to completely liquidate all our capital blocked in a 50-megawatt uncommissioned SPV. To take you through our holdco structure, as you may be well aware, we started this initiative maybe 1.5 years ago with one of our other group companies, GFL, where we spun out the chemical business, which was the first tranche of the reorganization. The second tranche contemplated, demerging all the wind energy-related businesses in term of holdco and consequent to approval from NCLT in February. We now had Inox Wind Energy Limited, which became a listed entity as recently as the past 15 days, which is now the new holdco for Inox Wind. What that did is combine all the wind energy businesses in the group between Inox renewables, Inox Wind, GFL Limited into this holdco, so as to ensure there is value unlocking for the wind business and all the wind business-related capital assets are all clubbed into one entity. So we expect to have value unlocking in the wind business as the wind business picks up and ensure better focus and management for this business. Moving forward with respect to strategic initiatives, which we've spoken off to some extent in the past, which I would like to reiterate now, is given that we are now in advanced stages of the 3-megawatt turbine, actually getting commissioned, being installed, we have the foundation done. the tower is under manufacturing, various components are arriving, the supply chain is fully geared for serial production. We have molds, which will be eventually coming into India. We expect to be ideally suited and very competitively placed in the market for upcoming auctions. Another important point is we're seeing a major thrust in 2 segments of the market, which for the past 3 or 4 years had virtually shrunk or been completely eliminated. The first segment is the retail, capital and C&I segment, which was to us [indiscernible] accelerated depreciation segment. So you have a lot of demand coming in from captive consumers, C&I because the returns from wind has become extremely remunerated. So these guys payback periods virtually 4 years, 3 to 4 years, depending on which state you are in. There is -- besides that, of course, there is a lot of green pressure and RPO requirements in many states for various industries. This market is increasing, and we expect this to virtually reach 700 to 800-megawatt market size over the course of the next 12 months. The PSU segment, which was a steady state, 500 to 1,000 megawatt -- 500 to 750-megawatt market during the first FIT regime had virtually become negligible over the past 4 years. We are now seeing a lot of thrust from this segment, might be a few months before we start seeing a lot of orders from this front. But we've seen massive announcements by NTPC, various other PSUs like [indiscernible], et cetera. And gradually, these guys not only building in auction, but also taking out tenders on their own. So we expect over the next few months, both these segments to start playing an increasingly important role in the market, which would increasingly expand the market beyond the IPP segment. We are well positioned to cater to both these segments. The third key takeaway on the strategic side is given the way the market is developing, and some of the larger players are developing infrastructure on their own, which means we don't need to build and give turnkey projects to these guys, except for obviously, the retail segment and to some extent, some of the newer IPPs. We expect to have an increased proportion of equipment supply. That reduces significantly the risk associated with land, project development, transmission lines and so on and so forth, which is best left to experts like infrastructure guys like Adani and JSW guys who do the infrastructure themselves. Over the course of the next 12 months, we will be focusing further on retiring higher cost debts. We're already taking action on certain fronts, and we are looking at certain further refinancing to retire higher cost borrowings in the system. We are looking at reducing financial costs and charges across banks. We have achieved that with certain banks already. And given the way the business is looking up and the sector is becoming hot again, we are confident that over the next few months, we should be able to have significant savings on both these accounts. Another point which we are working on, which we've already started implementing is, we've already started leveraging IWISL, where the embedded value of the [indiscernible]. We've allocated equity on IWISL to the extent of almost INR 25 crores to INR 30 crores in the quarter gone by, and over the next 1, 2, 3 quarters, we will increasingly keep allocating equity. We have got Board approval in place, let me remind, for up to INR 100 crores, and we expect to utilize the full amount over the next 2 to 3 months -- over the next 2 to 3 quarters, I apologize. In terms of market opportunities, clearly, huge pressure globally with respect to ESG. You've obviously seen massive announcements coming in by Europe, massive announcing coming in from the U.S. China talking of 1,200 gigawatts by 2030. A lot of the European countries have advanced there goals from 2040 to 2030, some of them even to 2025. In India, we are looking at a massive growth on this side, which is 175 by 2022, moving up to 450 by 2030. Of course, you -- I'm sure everyone is aware of the recent announcement by Reliance of 100 gigawatts of solar by 2030. I'm sure wind would play a small part in that as well, but it just shows that we have massive announcements coming in from some of India's largest corporates, be it Adani or JSW or Reliance. And more and more investments coming in on the renewable side. We also have mega hybrid parks being developed in India, the first of which is coming up in Kutch. We are seeing a lot of traction on hybrid tenders. Of course, we've listed them in our presentation. Almost 3 to 4 gigawatts of tenders over the next 2 to 3 months on the wind side, wind-specific, hybrid as well as mixed tenders. So a lot of tenders continuously coming up. Tariffs are stabilized between 2.8 upwards. As I mentioned to the PSU side, NTPC as of last week has announced doubling of their renewable energy goals to 60 gigawatt by 2030. The government is also working on a green tariff so that companies can be more ESG compliant. They can kind of be green, given that there's a lot of investor interest on the green side. You have larger ESG funds who want to invest in companies who are net 0 and so on and so forth. We expect that to increasingly expand the market on the retail C&I and captive side. Given the COVID situation, the government was proactive and has extended the interstate transmission charges waiver for renewables up to 2025, which gives a longer viability and visibility for some of the projects up to SECI-9 and 10 to be implemented. So that is an overview of operations for the year gone by. Our strategic initiatives, about the new holdco as well as our 3-megawatt development. And with that, I'll hand over to Mr. Mohananey, who can take you through some of the key balance sheet actions as well as the Q4 numbers. Thank you.
Thank you very much. I'll take you through key balance sheet actions which we have taken during FY '21. During the year, company, we have raised around INR 400 crores by issuing nonconvertible debentures at 9.5%. The proceeds were utilized [indiscernible] to optimize working capital and retire high cost debt. On the front of raising equity, IWISL, our subsidiary, has already started allocating equity against multiple expression of interests received by the company to further strengthen the balance sheet and leverage the embedded value of the O&M business. Post transition from the FIT regime to the auction regime, we have put in place a very robust and conservative system for evaluation of debtors. For FY '21, the company has provided for expected credit loss amounting to INR 95 crores, which together with the previous ECL, stands at around INR 300 crores. Certain other initiatives are also in progress, which will lead a significant reduction in the financial cost. In terms of financial performance, I'll take you through certain information. The company continued to be EBITDA positive, excluding exceptional provision of ECL as a result of ramp-up in new supplies. The revenues and EBITDA compared to previous quarter is as under: the revenue of INR 375 crores in Q4 FY '21 against revenue of INR 204 crores in Q3 FY '21. Just to reiterate that revenue of INR 375 crores includes 300 -- sorry, INR 136 crores towards supply to a step down subsidiary, Nani Virani, which has got eliminated. EBITDA of INR 14 crores in Q4 FY '21 against the EBITDA of INR 13 crores in Q3 FY '21. The EBITDA of 14 crores is without exceptional ECL. So that -- this is a broad overview of our operational and financial performance and how we see the sector going forward. I will -- I have, along with our Executive Director, Mr. Devansh Jain and CFO, Narayan Lodha, to take questions now. So the question and -- session can be started now.
[Operator Instructions]. So the first question comes from Mr. Santosh Kumar, he's an individual investor. Please go ahead, sir. [Technical Difficulty]
Sir, basically, I would like to understand a little bit more about industry. Recently, the Adani has announced that they will be getting into wind manufacturing. And also yesterday Reliance has said that they'll be getting into the solar manufacturing. And we have also seen in the past that Government of India imposing custom duty and solar panels. So with all these things happening, where do we see, in terms of competition, for wind generation compared to wind -- compared to solar modules? That is first question. Second thing is, are we going to see any consolidation in wind turbine manufacturing because of entry of the -- lot of new players into the market, large players?
Thank you, Santosh I'll take that. First and foremost, with respect to there are 2 parts to it. First to the manufacturing part, second is IPP part. And then you spoke of the solar energy side. Well, I think on the manufacturing side, while we've heard of Adani incorporating an SPV, but we've also seen of course, Adani incorporating SPVs for various businesses, be it cement, copper and so on and so forth. I think it's a welcome move. The fact that we are seeing a massive thrust on the renewable energy side and on the wind energy side. Let's not forget for the past 4 years, the sector has virtually been mute, if not dead altogether. It gives a lot of confidence that a large player believes massive volumes are going to kick into the renewable energy side. Having said that, what we understand is it's an entity which has been incorporated. There's still a lot of groundwork to be done. And let me update that going from getting the supply chain to setting up the first turbine to getting the testing and so on and so forth is actually a 2- to 3-year task. Having said that, I think the market size is continuously increasing. And with certain [indiscernible], given that there's already been a significant amount of consolidation over the past 4 years with region out [indiscernible] out and a lot of other smaller players gone bankrupt. We are really down to 4 odd players in the Indian market, at best 5. And competition is welcome and the market size is increasing. So I think we welcome this move. With respect to solar tariffs and reliances announcement. Look, I mean, that's more on the solar manufacturing side, to be honest. And you also have Adani manufacturing solar times because the government of India wants to promote domestic manufacturing naturally and move away dependence from the Chinese. So you'll probably have 2, 3, 4 large players doing solar manufacturing, just like we have 3, 4, 5 large players on the wind side now. And probably the stronger players would probably end up being naturally Reliance and Adani out of it because on the manufacturing side, over the past decade, we've seen many, many solar manufacturing companies go bust. With respect to how we see consolidation, I suppose that would be more relevant on the IPP side. I think to a great extent, we've seen a large amount of consolidation. We are now really looking at 10 large players on the IPP side who have the ability to raise capital, who are financing availability, be it long-term financing in terms of debt or incremental equity. So the market is kind of consolidated to that extent. And yes, I did mention that 2 other segments are increasingly gaining traction in the Indian market, which is the retail side. And which will be the PSU side as we move forward. So I think the market is going to keep expanding. I address -- I suppose that addresses your question, Santosh.
Yes, sir. just one question. So basically, because of this custom duty imposed on solar modules, recently, we have seen there is a slight increase in solar tariffs. So is that [Foreign Language] basically wind will become more competitive compared to solar because of increase in tariffs? How we are going to see that?
Certainly, in the sense that if we are looking at solar being at about 2.25 [ blend ] and wind was at about 2.8, depending on which sites you're on similar to -- and again, holds true for solar as well. Looking at the BCD being implemented and other tariff measuring being implemented, solar is obviously bound to move up. It would probably be in par with wind tariffs. Let's not forget for the domestically bid out capacity of almost 5 gigawatts, which was won by Adani and others, domestically -- domestic tariff was 2.82. So if you look at it from that perspective, excluding BCD, we're already -- wind and solar are virtually at par. And again, a INR 0.10 or INR 0.20 gap here and there is not really going to make any difference because let's not forget renewables is where all the investments are going. Fossil fuel-based sources are virtually finished and dead now. And you need both sources of power to balance the grid as well as take -- fulfill requirements of night time, day time, rainy seasons, nonrainy seasons and so on and so forth.
The next question comes from Mr. Gokul Raj from Bavaria Group.
Devansh. The last call, you spoke about the eventual goal role being the merger of the holdco and the opco. So is it still the plan? And if so, what's the time line?
Gokul, well, that is the eventual plan. That's the final leg of the structuring of the businesses. And we are -- the Board of Directors is cognizant of that. There are various regulatory processes, which we need to follow. But I would tend to think over the next 1 year, that should be -- that should get concluded.
That's wonderful. You've been speaking about the monetization of the O&M business by raising equity. What's the valuation at which or roughly -- rough valuation around which it's happening?
It's happening at a valuation of about INR 1,000 crores.
Oh, okay. This is for the O&M business?
That's right. I mean, IWISL, which is the holdco of the O&M business as well as the infrastructure business. But primarily the valuation is of the O&M business.
Yes. And you're looking at, what? diluting 20% of it?
Well, at this point in time, Mr. Mohananey, please correct me, we have taken approvals from the Board of Directors for up to INR 100 crores?
Yes, we have taken approval for INR 100 crores. So we'll dilute to the extent of INR 100 crores.
And what's the debt outside of the ICD? What's the ICD number and what's the non-ICD debt?
Mr. Mohananey, do you have the details?
Presently, we don't...
Well, we have ICD -- yes, from an IWL perspective, it's about INR 350 crores is what I know because as we merge these 2 entities, this will collapse into IWL.
The INR 350 crores will collapse. And how much is the total assets that you're looking at [indiscernible] wind farms or things that you would actually set down sell. What's the number there? What's...
As we've always said, when we built the SECI-1 SPVs, there are certain regulatory guidelines, which need to be aided by within that. We did tie up to eventually sell the SECI-1 SPV. Similarly for the SECI-2 SPV, given that it's -- a lot of the assets were supplied a lot of our money, which we then liquidated from that, we will hold it and then eventually following the regulatory guidelines, flip it over to one of the IPPs or customers in the market.
Okay, but you're not looking at setting up your Inox platform or something?
No, no, no, we are simply focused on the [indiscernible] side. We are not -- we don't intend to become an IPP.
Yes, so last question would be, as you say, you have around [indiscernible] crores of revenues that you expect over the next 24 months or so, right? From the order book. What's the margin that's possible on this revenue?
No, it's going to be a mix of -- as I mentioned, we are moving towards the 3-megawatt turbine. That's where efficiency kicks in, that's what's the competitive product. The 2-megawatt is something which has been dragged on for a period of time until the market had not opened up. Of course, COVID came in, kind of disrupted that, delayed plans by another year. Because frankly, let me put it like this: if there's a new Mercedes model launched in the market, there will be very low demand for the old Mercedes model, or you'll be discounting the old Mercedes to a great extent. So we had to consume our stuck-up inventory, as well as stuck-up inventory in receivables, which we've virtually consumed in March and have tied up for consumption in Q1 and Q2. So we are now moving towards the 3 megawatt. Of course, in due course, we received various orders from retail customers and Continuum, which will ensure we keep supplying 2 megawatts to some extent. But as we bring the 3-megawatt online, we will move towards the 3 megawatts, which will enhance our EBITDA margin. So we expect and hope we can get back to our historical EBITDA margins. That would be our goal.
What would that number be when you say it's steady [indiscernible] that number?
That would be about [indiscernible].
[Operator Instructions] Our next question comes from Mr. Ketan Gandhi from Gandhi Securities.
Devansh, in terms of number of megawatts, what are we planning for this year and the next year in terms of EPC and equipment supply?
[Foreign Language], good to connect with you again. So we can't give forward-looking statements, but what we've always said is, broadly, we are looking at the business presently from a conservative perspective. Our -- we are looking at about -- in the coming financial year, we expect to hopefully do a top line of about -- that's our goal, maybe about INR 1,800 crores to INR 2,400 crores. And as we ramp up our 3 megawatts from H2, we would expect to, in the following financial year, take it to INR 3,000 crores and so on, upwards.
So in terms of percentage...
With respect to the portion of equipment supply and turnkey. Well, at this point in time, I could possibly say over the course of this financial year, it would probably be about 50/50. And as we move forward, it will -- equipment supply would probably move towards 65%. Mind you, we are not -- we are going to be a key part of the C&I, retail, captive segment and the PSU segment because the margins are better than IPPs there, lesser headaches, cash flows are better. And let's not forget from an Inoxian perspective, we have a massive land bank. And we have common infra built out in various places, which, frankly, if we were to do, say 200 megawatts a year of turnkey also, we have a good 4, 5 years over which we can consume our readymade build infrastructure.
Right, and sir, in terms of supply to our group company, when are we thinking to start that process?
Okay, Kethan, I think between that, I think we had -- we were to supply 2-megawatt and then given the delays in COVID, we eventually modified it to be a 3-megawatt supply. So over the course of this year, we will start supplies to our group company.
The next question comes from Mr. Utkarsh Sumai, he's an individual investor.
I had a question on your provisions, which you expensed in your P&L. I just wanted to know how much of those provisions are still remaining to be expensed in the [indiscernible].
Mr. Mohananey, please correct me. I believe we have INR 160 crores or INR 170 crores of provisions still on the balance sheet.
Yes, and as I explained that we have a robust system of evaluating debtors, which we do on a continuous basis. And based on the -- I mean this policy, we will be providing going forward. But as of now, whatever is -- was supposed to be provided, we have provided.
So how do you decide as to so how much to provide for in a particular quarter?
So Utkarsh, I think what we've done is a lot of it pertain to the feed-in tariff regime because under the auction regime, we are frankly pretty light, and there are no issues around that. There are certain -- if you look at our balance sheet last year and what will be out this year, there are certain provision percentages which we've added. So say, for example, 0 to 1 year, we still provide something; 1 to 2 years, we provide x percentage; 2 to 3 years, we provide x; and I believe 4 years or something beyond that, it's provided for -- to the extent of 100%. We have certain PSU accounts where we need to recover certain amounts, which is -- which takes a long period of time, which are in arbitration. But we expect to conclude that over the next 12 months. So we are following a percentage form, and we've kept it extremely conservative. We've looked at global OEMs, which provide for about 2%, 3%. We've actually, post this transition, get a far larger percentage. Particularly keeping in mind some of the feed-in tariff regime receivables. We thought it's more prudent to provide on the balance sheet.
Could you give us any guidance at to by the end of FY '22, what number could this come down to? Just approximate time? I just wanted to understand after...
There is no guidance. As we had mentioned earlier when we provided for FY '20, we said we provided a chunk. We said we have sticky receivables to the extent of INR 100-odd crores, depending on what we collect, what we don't collect. We will provide for everything by the end of the next financial year. And I think we've primarily taken care of -- I think we've virtually covered everything which we wanted to cover. I mean, there could be an occasional INR 10 crores, INR 20 crores, which may come in, depending on how things progress, but I think we've virtually provided for whatever we thought is prudent to provide, pertaining to the feed-in tariff regime.
And one more question, given our order book and all the projections that we have, do we expect to generate positive cash flow from operations in FY '22?
Of course. Certainly.
The next question comes from Mr. Viral Shah from ENAM Holdings.
Yes, can you provide me with the gross debt number as on 31st March? [Technical Difficulty]
Can you repeat the question?
Yes. Can you provide me with the gross debt number as on 31st March?
[indiscernible] can you take that?
If you'll see the balance sheet, which is there in the last slide, you will have the debt number there. And it would be around INR 900-odd crores. I don't have the numbers or the detail or the breakup of that, but it would be gross, that would be around INR 900 crores. And then we have some cash and cash equivalent. If you reduce, then you can arrive at the net debt number.
Sure, sure, okay. Also, just on the balance sheet, I wanted to know there are some other current assets of INR 782 crores, and there are other financial assets of around INR 460-odd crores. So what would these pertain to?
See the other current...
The current assets are advances, which we've received from various customers towards supply, including from our group company, those are the advances. With respect to the financial assets, Mr. Mohananey, can you elaborate?
Other financial assets consist of majorities O&M unbilled revenue. So when we booked the revenue of O&M on a straight-line basis, for certain period, the O&M business, I mean, the -- we don't bill to the first half because of the pre-O&M period. And those revenues, though, recognize our unbilled revenues, and that is there in the other financial assets. So that would be around INR 450-odd crores, which is there in other financial assets.
Sure, sir. And what would be the O&M revenues for FY '21, sir?
O&M revenues would be about INR 120 crores.
Or be about INR 140 crores.
Sorry. INR 140 crores, if I'm not mistaken, INR 120 crores or INR 140 crores.
Yes, INR 140 crores is the right number.
Okay. And just lastly, to a previous question, would all the supplies to our parent -- the group company happened in FY '22 itself? Or there would be start in FY '22 and then we'll complete in FY...
Hard to, Viral. I think we'll keep evaluating as we move forward. But for sure, some part would happen. But looking at the dynamics of how much we made our [indiscernible] produced over the course of the year, we also have agreements with some other customers who we need to supply, including a foreign M&P as well as 2 Indian large corporates. So we'll have to evaluate that as we keep moving forward. It's a dynamic situation.
Sure, and just on the 3 megawatt, what was the realization for [indiscernible] 3 megawatt turbine?
No, no. It's -- so let's put it like this, typically, erstwhile some rule was INR 6 crores 1 megawatt. It's now become a cost of energy game because you're no longer paying the feed-in tariffs. Effectively, as I mentioned, all OEMs are now producing turbines for profit. No one wants to make -- there's been enough consolidation. Depending on what the tariffs are looking at some of the field push, et cetera, which is happening on the commodity side, it's hard to say, but as I said, our endeavor is to be at about 15% EBIT. And I would tend to think that from a market perspective, some of it has -- we've been offering 2 other competitors who are offering the 3 megawatt in the market for the next financial year. The turnkey prices are about INR 21 crores, which is about INR 7 crores on [indiscernible], if that helps address your question.
[Operator Instructions] The next question comes from Mr. Ankit Gupta from Bamboo Capital.
Sir, how do you see the net capacity addition on the wind side on -- overall from the industry perspective over the next 2, 3 years? And how does FY '22 look like?
So, thank you. So we believe FY '22 will be ultra conservative in making these statements because there are a lot of placements by Tata, JSWs or Adanis out there. But from an OEM perspective, you've seen the past 4 years. So from a conservative perspective, we would expect FY '22 to be 3 gigawatts. And going forward, we would expect a ramp-up wherein the industry stabilizes between 3 to 5 gigawatts per annum over the next 2 to 3 years.
And sir, broadly, on the hybrid projects, which are coming up. You had this huge 13-gigawatt plant, again, inaugurated by the honorable Prime Minister a few months back. So from a hybrid perspective, over the long term, how do you see the mix between wind and solar for the new hybrid projects which come up [indiscernible]?
I think, as we know, whatever the fuel source, may be, 33% of that has to be the alternative fuel source. So let's say, 66% is wind and 33% needs to be solar and vice versa. But we would tend to think, as we move forward, we would possibly looking at -- possibly be looking at a larger proportion of wind in some of these hybrid tenders, given what you've seen in hybrid 1, 2, 3 and what we understand is going to happen in hybrid 4. Having said that, frankly, it's not such a big deal given -- while we may talk very conservatively of 3 to 5 gigawatts, the government's vision is 10 gigawatts per annum. With the plans announced by some of India's largest PSUs, power producers and statements being made by them, we would probably be upwards of 5 gigawatts. But -- and this excludes the retail and captive market, which is increasingly gaining traction and becoming significantly sized. So from that perspective, whether we do 33/66 or 50/50, frankly, it's not going to make that much of a difference. I think the market is increasingly expanding given the customs duty being implemented on solar and probably solar moving up to a higher tariff as well as hardening of panel prices globally and glass prices globally, I think wind gives a better return than solar.
The next question comes from Mr. Mayank Sethi. He's an individual investor.
Sir, during this year, February and March, promoters sold about 1.6% stake. So wanted to understand the reason for that. And is there any further dilution in -- stake is expected?
As you may recall, we have taken approval from the Board of Directors in Inox Wind itself to raise a few up to INR 100 crores, in IWL as well as taking approval to raise of INR 100 crores in IWISL. While we started implementation on the IWISL side, which is basically dilution of stake [indiscernible] the value of our O&M business. On the IWL side, when we took approval, the market cap was about INR 600-odd crores. We had spoken to a few investors, and there was, to some extent, some amount of pressure, which we have to fulfill. Otherwise, frankly, 1-odd percent stake is frankly irrelevant in the whole scheme of things. It's too minor, it's too small. Wind is well capitalized now as adequate liquidity, which is evident on the balance sheet. So frankly, at some point in time, yes, we may look at reinitiating the INR 100 crore fund raise to create further liquidity in the organization as well as maybe ramp up operation. But nothing in the near future.
Sir, in this 1,300-odd megawatt order book, can we provide execution schedule for that?
No, sorry, it's not possible to provide an execution schedule. I think it's something which will play out over the next 24 to 36 months. As I did mention on one of my calls, on one of my answers, broad numbers which we're looking or which our goals are trying to achieve, given forward-looking statements are banned, I can only say broad numbers, which the company has set to kind of achieve. So I think over the next 24 to 36 months, is a broad indication of what we expect to achieve, these numbers.
Understand. And since some of these orders are from SECI-3 and 4. So how is the connectivity going on for SECI-3 and 4?
So the connectivity is there. The grid is not built yet. And given the COVID situation, I think it further got delayed. But once the grid is in place, then we'll look at implementing SECI-3 and 4. Naturally, automatic extensions are happening for those projects given that the grid itself is not ready. I think it'll probably be another year or so before it's ready. And then we'll evaluate what product to put out there. But having said that, new orders keep coming, orders keep getting executed. So it's a rolling book. I mean, it's a huge number. 1,000-odd number is, frankly, a very, very large number to have in the order book. And given the growing market size, I don't think there's a shortage of order. I think there's a shortage of supplies in the market. Even in our case, we are frankly not really looking at taking orders on the 2-megawatt side because we are now transitioning towards the 3-megawatt product, which is cost effective, the most competitive product in the market. The newer technology gives adequate profitability to [indiscernible] outdated technology, frankly speaking. So that's what it is, Mayank.
And sir, recently, commodity prices, especially industrial metals, they have increased. So in our contracts, is there any price escalation clause? And if it is there, approximately what percentage of the contracts would have this clause?
Well, with respect to the 3 megawatts going forward, those will be prices which will be looked at. With respect to existing products, say, 200 to 300 megawatts, which is under implementation, we don't have the ability -- or we didn't have the ability to renegotiate or walk out of contracts. Of course, various OEMs have walked out of contracts, have renegotiated contracts. We don't believe that's prudent from a long-term perspective. But yes, where pricing is not established and broad benchmarks are in place for the newer technology, certainly, those prices will be reflective of the increased commodity scenario.
And under that situation, blended EBITDA margin, how much do we have [indiscernible],
Sorry?
Since about this -- under this scenario of commodity price rise, blended operating margins, how much do we expect? 13% to 15% or it will be less than...
No, I think we can't -- frankly, we can't give that. I think we've put in place what our larger goals are. And we endeavor to work towards a -- towards our historical EBIT margins with a newer product as we move forward, including our O&M business. So frankly, it's not possible to get [indiscernible] targets and goals and so on and so forth. So we're working towards getting back to our historical profit margins with our new technology, with our O&M business as we are moving forward.
I understand. Sir, how much inventory from previous regime would still be there in the system? And when do we expect them to be supplied?
Mr. Mohananey, can you take that? And I think we'll have to -- we have another call coming in, in the next 6 minutes, I think we'll have to quickly finish up in the next 5 minutes, given our other calls are starting up.
So we have almost virtually liquidated entire inventory barring 8 or 10 turbines, which we'll -- we intend to liquidate in near future. But otherwise, the rest of the inventory we have already liquidated and realized.
This is the last question. Any write-back on the provisions that we have made is expected, sir?
Frankly, we can't say that we've just provided for it. And I mean that's a prudent and conservative way of cleaning up the balance sheet or being ultra conservative. In the past, we've had various calls on sticky assets. We committed that we will do what it takes to recover. And I think we have been extremely prudent and conservative about that. Frankly, if we do recover, obviously, there will be a write-back. I don't think anybody can tell you today if there is going to be a write-back tomorrow. Mr. Mohananey, I think we'll have to wrap up in the next 3 minutes because I have other calls lined up at precisely [indiscernible].
Yes, noted. In fact, we need to close it. So it's fine. If there are no further -- I mean, questions, we can wind up the call.
So we'll take that as last question. I'll hand over the floor to the management.
Thank you. I think I would -- just to conclude the conversation and the conference call. I think, thank you, everybody, for being part of the investor call. It's great connecting with all of you and reporting back to you with respect to strategic initiatives as well as our performance in the quarter gone by. I would like to reiterate, we did mention a ramp-up in operations. Happy to say we have ramped up to a certain extent in Q4. We mentioned INR 200-odd crores to INR 300 crores to INR 350 crores, which is a jump of almost 70%. On the profit side, not too significant, given we had older price contracts. And we're still on the 2-megawatt product. But as we are moving forward with the upcoming 3 megawatts, which -- where the supply chain is now fully in place, we expect to aggressively ramp up production on that front. Our O&M business is doing extremely well. Revenues are steady state. Mind you over the past 2 or 3 years, we had various O&M issues given the liquidity issue in the sector, various problems in the sector. The business is completely stabilized, solid annuity business growing. And obviously, over the course of this year, we have taken care of a lot of balance sheet issues, be it provisioning, be it key financing, long-term borrowings, cutting costs, leveraging our equity. I think going forward, the sector is now on a ramp-up. We are seeing a lot of traction from IPPs. Regulatory hurdles are behind us, tariffs are stabilized to competitive levels. And hybrid has taken off in a big way. Besides that, the retail market and the PSU market are increasingly gaining traction in the Indian market. So overall, I think the industry is probably now -- is on -- well, I wouldn't say the threshold is now on track to continuously keep ramping up quarter-on-quarter. And hopefully, over the next 12 months, we should be -- into the next financial year, we should be a solid business as we were during the FIT regime. Thank you for your time, thank you for your interest. Please be safe during COVID times and look forward to connecting with you all post Q1. Thank you.
Thank you, sir.
Thank you, thank you a lot.
Ladies and gentlemen, with this, we conclude our conference call today. Thank you for your participation, and for using Door Sabha's conference call today. You may disconnect your line right now. Thank you, and have a good evening, everyone.