Suzlon Energy Ltd
NSE:SUZLON
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Suzlon Energy Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of Suzlon Energy Limited, hosted by ICICI Securities. During this call, the company management may make certain statements which reflect the outlook for the future or which could be constituted as forward-looking statements. These statements are based on management's current expectations and are associated with uncertainties and risks as fully detailed in the company's annual report, which may cause the actual results to differ. Hence, these statements must be reviewed in conjunction with the risks that the company faces. Thank you.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwani Sharma from ICICI Securities. Thank you, and over to you, sir.
Yes. Thank you, Michel. Good afternoon, everyone. On behalf of ICICI Securities, we welcome you to the Q1 earnings call of Suzlon Energy Limited. We have [indiscernible] because to mature company will be represented by Mr. Jayaram Chalasani, Group CEO; and Mr. Himanshu Mody, CFO. I hand over the call now to the management for the opening remarks, post which we'll open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Ashimi. Good afternoon to each one of you for joining our FY '24 Earnings Call [indiscernible] earning. I hope you had an opportunity to review our results and the investor presentation released or [indiscernible] We will now share with you an overview of the industry, and we will walk you through Q1 performance. We will then take your questions. With good policy initiatives from the government, the [indiscernible] has got messages -- the 330 target of 50 gigawatt of nonsocial field base capacity includes a healthy mix of wind and solar capacities into exchange of 100 gigawatts in solar 30 gigawatts was to have both solar and wind to coexist and not compete with each other. And this combination gives us the lowest cost of generation to meet the demand. This helps in the diversity of the edition purses and also the healthy form the perspective of great health.
The fact that wind is also available during the late evening and night when the power demand in India takes such balance the power generation profile and also support the grid. Initiatives like discontinuation of [indiscernible] was action win, new resin being on single state and all up close bit cases and expected to lead to better tariff discovery. There will also be a pulling of tariff for different spaces, which will reduce the average cost of present of color. The good part is that under the due bidding receive in capacity will come up in all 8 wind states, significantly opening up the availability of land and a vacation perspective. Tinari has also announced event projects bidding for of 50 gigawatt per annum, which includes 10 gigawatts of we from FY '24 to FY '28.
There is also a monthly bidding plan in place for FY '24, which will be conducted through renewable energy and payment garages, Exki, NHPC and GPC and tin win will plan is like gigawatt each basically NPTC, NHPC VM. That's totaling 10 gigawatts. [bred projects and the Acadian market further type of the demand pain, which will be lower than about what per annum plant. Initiatives like ISPs waiver extension for set of projects in 2025 and gradual phasing thereafter. -- will boost in the segment and led to huge demand of projects. wind repowering potential of 2 gigawatts and green hydros and mission targets, RPO, RGO obligations, green open access regulations, et cetera, with under boost sector. Our cumulative orders of 1,582 megawatt include order book as on June 30, 2023 of agreement was orders announced subsequently and subsequently 140 megawatts in 30 June 30 and 14-megawatt year after. This is also well diversified and healthy order book.
First priority going forward is to pursue quality orders with higher value and better margins. or focused demand and executing and building our order book. Our service business continues to do well with 2 gigawatt capacity under our service. I would also want you to know about the business impact of Simon of which hit us at sensors during June 2022. It also affected our OMS operations in a limited manner and some of the customers ability along the transmission lines and other extra network of [ Hermes. ] Escalation works are ongoing at the said wind farms, and these are expected to be completed soon. Net of expected insurance plans on a conservative basis, the company has provided an expenditure of [ INR 30 ] crores during quarter 1 towards estimation expenditure with strong fundamentals and strong sectoral tailwinds. Sean is now let to leverage the market opportunities arising from energy transition. I would now like to invite Himanshu to take you through our financial performance.
Thank you, JP, sir, and good evening, ladies and gentlemen. I would be using Slide #17 to 23 of our investor presentation, which has been uploaded on our website as the reference point for my discussion during this presentation. Q1 FY '24 has seen as registered consistent improvement in all our key parameters. Our balance sheet gets even more stronger. And the fundamentals have stranded with a focus on bottom line based on performance. We are pleased to report that we are ending the quarter with a strong consolidated net worth of INR 1,297 crores. Our gross debt for the quarter stands at INR 1,806 crores, which is a substantial reduction from over INR 13,000 crores in March 2020. Our net debt as of 30 June 2023 is INR 1,223 crores resulting in a net debt to net worth ratio of 0.9, which is less than 1, which is quite healthy.
Our consolidated PAT for Q1 FY '24 before exceptional items, stands at INR 93 crores. This is against Q1 PAT of the previous financial year FY '23 before exceptional items was [ negative ] 37 million. And our Q4 PAT of FY '23 was positive INR 68 crores. This is all before exceptional items. With continuous focus on deleveraging of the balance sheet in the last financial year, we have achieved a substantial reduction in debt finance costs, which for Q1 of FY '24 stands at INR 51 crores versus INR 148 crores in Q1 of the previous financial year, resulting in a substantial reduction of 66%. Being in the capital goods segment, it is important to look at the annual performance of the company rather than quarterly because in our case, quarterly performances very cyclically due to mix of orders that we are able to deliver for climatic conditions, allowing us write-off way for implementation of projects, installation and balance of plant activity.
As a result of which, typically, in the first half of any financial year, we're able to deliver about 30% to 35%, whereas S2 is the balance. The economy being on the strong footing and as the FCs are said, sectoral tailwinds being even more stronger for a renewed focus on renewable energy, it all augurs well for Suzlon at this time. With that, I'd like to conclude my presentation, and we can now open the floor for any Q&A that the callers may have. Thank you.
Thank you very much, sir. We will now begin the question-and-answer session.
[Operator Instructions]
We have the first question from the line of Abilene from Emkay Global Financial Services.
So first is on the stand-alone margin fact there has been strong is on the gross margin side, whether we see Q-o-Q or Yi. If you can just explain whether it is because of some good water product mix or how is it?
Hi, Himanshu here. So as I said in my opening remarks, I urge everyone to look at our overall annual performance larger and quarterly performance. Yes, you are right, there is an uptick in the Q1 margins at the contribution level. That is not necessarily representative of the margins that we made fee for the next few quarters.
So I would say that the margins that we saw in FY '23 for the full year should be the benchmark or basis of what you assume for FY '24. Of course, the endeavor at the management is to keep improving on those margins. And with improved supply chain, inventory levels and increased focus on working capital. We are confident that we'll be able to improve our margins from FY '23 onwards. But having said that, you should not assume the Q1 FY '24 as the benchmark.
Secondly, sir, this INR 200 crore impact because of the cycle largely factor of the OMS margin, I'm assuming, right?
That's correct. Yes.
Okay. So of -- so I think earlier you guys is to give a guidance of around 40% on the margin for as that season
Yes. I think if you add back the INR 20 crores that we should -- for this exceptional, then we would be at about a bit over 40% in operating margin.
And in terms of order pipeline, if you can see if you can throw some light in terms of 20 crores, obviously, ordering costs on has been good and some of the other players -- so for the rest of the year, how is the pipeline looking? I understand there is a large industry, but from a pipeline particular like 3 to 6 months. How are the inquiries
We are continue to see the traction in part of our lines both from the meeting side, which is like utility PP business and also we are looking at a large interest in terms of the CNS segment, including the retail segment. Obviously, there's a lot of interest, and the interest also is more on -- the interest is also significant because of 3 megawatts having come out. So the momentum continues. So I would say that much. And look at FY '25 as well as atypically moving some orders, which will be locked in even in us now the projects are like 24 to 30 months or between like later be is not the order some of the players.
These things will now even some part of becoming an FY '20 as we even those disputes are happening. So we are quite optimistic about the out of that name and the interest being shown from all sectors.
The next question is from the line of Amish Kanani from JM Financial Services PMS.
One, when you see the cost execution looks relatively low vis-a-vis book. So you can explain what are the challenges on the ground for execution? And/or I understand you said it first will be 30%, 35% of the overall. But the situation the way it is, why should we execute so low when not out will be so high. So if we can give us some sense on the execution side.
And second question, sir, is with the 3-megawatt order and also our orders being a mix of EPC versus [indiscernible] If you could give us some sense of whether our execution can be much faster in this year. And what are the kind of maybe directionally, if not exact numbers, what are the margin differences at the gross margin on the WPG side for the 3-megawatt versus non-train award and the [indiscernible] versus ones we can some that will be ready for long list I met.
On the execution side, I'm assuming when you call about execution, you're talking about supply, you're not talking about the commissioning inward, which is significant it's 25% of the market and David, I'm assuming you're talking about supply, not about the commissioning, right?
Yes, sir. 185 megawatts is what in we are seeing is our outstanding order [indiscernible]
Yes, 2 factors. The order book looks quite healthy. But if you see the presentation as well, besides 50% of it is for 3-megawatt orders, okay. The supply of which will start in quarter 4 of this year. And as far as the 2.1 megawatts are concerned, the supplies will depend upon when we do get for us. orders would have been issued, and there the dispatch reduces from quarter 2 and quarter 3 and quarter 4.
So the -- normally, when you have an order, the site has stability and they should be ready to access the cabins and we do this in other untangle is what the schedule happens. So most of this will come in Q4 gets carried up because of 3 megawatts also steam
Also, you must keep in mind, as I said, the metric conditions, especially during back end of Q1 and early Q2 create seal implementation models right-of-way as a result of which one is the sort of sales is more skewed towards [indiscernible] To your point on margins, as I mentioned earlier, you should assume FY '23 margin, the gross margin is something that we can definitely continue with whether we'd be able to better that or not, would be the only time will tell with more sort of inventory and working capital and supply chain in streamlined. But that is the base case that you should have.
And your comparison of 3 megawatts and 2.1 megawatts from the margins perspective. Obviously, 2-megawatt is an established product, where you post or in everything, 3-megawatt is coming now. The 3 megawatt, the [indiscernible] brand mainly the [ Biopharma ] before you take advantage of ductandthen maybe you can keep your pricing. So therefore, just wait and see how the marketplace and it depends upon both internal factors of cost-out, the initial rollout versus as we keep increasing the volumes and the BOP cost reduction for the
So was it non-EPC?
Yes, right today is like 2/3 EPC is 1/3 of non-EPC type [indiscernible] , but it's changing with some key new orders coming. I expect that it would remain as a 50-50 or 0 in terms of PPC. In fact, it is not just the PC and non-PC and we have categories like table Supervision alone, the something on distinct bases we are supply and installation.
In some places, we also play this foundation sensation in there are different types of contracts are coming in now. And EPC is a pure EPC where we take the total, but not the currency. We have a different contract for supply, POP, land, et cetera. And each compact doesn't talk to the one because we get that -- we don't have the contract and is coming on us.
The next question is from the line of Dave from Beriate.
My question is how much -- what execution are we targeting for FY '24?
Our guidance, it depends upon what is your estimate for the country. So competence has always been would be reaching around 30%, 25% to 30% of the head-count capacity edition. [indiscernible] did in quarter 1, if you see our numbers, but we are about 25% of the total [indiscernible] happened in the Q1. And we expect to maintain that 2% to 3% market share in terms of emission.
And given this current excessive range and this flooding situation a couple of cases. Is it causing any capital hindrance in our execution? And I mean, in just our overall operations of the company?
It is in terms of like there are our clients in that area or where we are supposed to do the talent of cement in all the work and we just do the supply in direction. We are done direction, but we're unable to commission because the [indiscernible] plants are not ready and other things are not ready. In some places where they're actually still balance the rate movement is getting impacted. There is some impact definitely is. But most of those projects are not most, the one of the projects are actually contracts. We have more of a seat on direction of solution. But commissioning is impacted definitely. Otherwise, we could have done more than what we did in [indiscernible]
[indiscernible] in FY '23, we executed 64 megawatts -- and now versus that we have a very healthy order book still. Q1 numbers are not very exciting compared to the last year. So that -- I just wanted to understand in terms of the profitability, what is it? Where are we -- I mean, why is it why are we lower than the last year in the top line and also the margins?
Yes. I answered the previous question. The overall order book is definitely one difference plant. And if you look at more on order book, 50% of that is 3-megawatt orders, which the way would start from -- so suddenly, you will see the more quality coming in because that's a 3-megawatt versus 2 megawatts before say the supply of 20 megawatts at that supply happens. Those orders are there, 50% of our order book is spoke by capacity, but the supply of that would come in at -- so the 1 will see the such coming there.
And second, as for the 2-megawatt is content, while orders are there, I just said some time back, it also depends upon when we receive the order and what is the dispatched here since we get some of the clients because many of these things are in their scope and some places, the direct substation of how we taking delays, so they want to readjust the time line. So before a month of that, not just the numbers, the capacity also -- you'll see it delay as well. You can't really look at the quarter and then say that this is what is going to [indiscernible] There are a number of factors.
So if I were to understand this 3-megawatt more clearly, so 50% of order book is [indiscernible] at and assume we do say maybe 800-megawatt of execution for the current year, for example, -- so 50% of that will happen in fourth quarter. That didn't mean that?
No. Out of the existing order book, 50% is for 3 megawatts. Okay? So we are not saying before 800 resumption. So I'm just quoting you a number, 800, if we take it 50% of that megawatt, no, we're not saying that. So these 2 are 2 different things. The play will commence in quarter 4. So therefore, the volumes will significantly increase in services because that's where it's coming in. till then we keep supplying 2 megawatts, but the ratio will not be 50-50 for this year. Order book is 55%, but the ratio of 2-megawatt and 3-megawatt 50, 50 this year. 1 megawatt will be more and 3 mega will be less.
So a lot of it 3-megawatt will be executed in Q4 this year than Q1, Q2 of next year.
Yes.
And then FY '23 have --
So just to add also to give you another factor it. So if you see FY '22, the total deliveries in FY '22 was 808 megawatts. And those were all 2-megawatt turbines. Now in Q1 of FY '22, we did 116 megawatts or pedigrees. I just leave those 2 great points to address our cost.
And so technically, the yield for the customer is higher and also for us, the profitability should be a little higher in megawatt turbine So then your profitability also should be much better in 25% compared to '24%?
Let's see when we come 5, obviously, we will have these earning calls with results. We'll keep this [indiscernible] .
Ladies and gentlemen, to ensure that the management is able to address questions from all participants in the conference. Please limit your questions to 2 questions. The next question is from the line of Deepak Kuka from Sapphire Capital.
First, I wanted to understand the first up, so what is the capacity addition at the industry level we are looking at maybe this year, any sort of best we have?
This is anybody's test so anything towards the north of 4 gigawatts the company of 4 gigawatts and then up to 5 gigawatts is
What is the estimate?
And let's say, in the quarter 1, if you look at it, quarter 1, we did about [ 1114 megawatts ]
[indiscernible] was the addition in the first quarter, right? And for the entire year, I could not make a number, sir.
It is between anywhere between 4 to 5 gigawatts, like 1,000 to 5,000 megawatts around about that.
On 25% to 30% is the market share that we are looking at. So ideally, from INR 1,000 to INR 1,200 is the range that we might et -- any kind sample calculations for your result,
We gave you both.
And sir, do we see any risk that the 3 megawatts, which is expected to start from fourth quarter, it might staining comes in FY '24?
No, we don't see anything because the -- this is already a big test certificate has come from the third party and already launched our LMM listing. Listing is also expected to come in this quarter. then we have plication the manufacturing point of it. I don't think we see the open in terms of fully working.
Just a clarification, you mentioned that FY '21 should be a gross margin from FY '24 -- so you're talking about the gross margins here or the EBITDA margins?
No, no. We're talking about the gross margins.
And sir, my final question is on your threshold margin. I mean, whenever we can order -- so what is the minimum test margins at the EBITDA level that we look at --
It varies a you can't really answer simply being the order to order out -- it depends upon a number of times a supply whatever risk we're taking it with a number of other factors and which time of our production cycle comes. So it's not possible to play that tooth margin if there are number of variables coming in.
Let me just clarify because we've said this on a few occasions in this call. So when I say [ FY 2 and 3 ] as a benchmark, that is for stand-alone contribution margins.
Not for the consolidated?
Yes.
The next question is from the line of Nikhil Avanza from ICICI Securities.
My first question is regarding can you just brief us about the idea planes that you have just announced because you have significantly reduced our debt in the last 3 years.
So what is the rationale interest -- so the thought process essentially is, of course, as you know, there's gross debt of about INR 1,800 crores -- and there are certain CapEx requirements plus to ease out the working capital -- of course, there are certain covenants that they are there from an end of the spectrum. So when a lender looks at growth of a company that will be very different from how an equity investor looks at -- long as the debt continues in the company at these levels we would be tied to those covenants.
Now the optionality between before the company management is very simple that we continue on a status quo basis, which is no need to do any fund raise, keep performing whatever working capital, we are able to generate keep delivering bases that we will still have a decent market share. But if we need to sort of have a good chance in getting market share, which is in excess of 30% as we go forward. I mean, not so much for FY '24, but FY '25, FY '26 onwards, then it probably makes sense for us to look at some kind of an issuance that we are thinking of which enables us to make the balance sheet at light or near debt-free. And also releases some cash for working capital and CapEx needs of the company over the next few quarters. So that is the intention of the management. Of course, the size and type of issuance will decide in the next few weeks and based on that as and when we make any progress or development, we will come back to you.
So the entire fund raising will be used to a production.
Well, it depends on the size of the issue. As you know, we've taken enabling approval from the board of funds of up to INR 2,000 crores, and that is currently intending shareholder approval -- so whether we do up to 2,000 means we could theoretically do full 2,000 or we could do less. That is something we will be deciding as I said, over the next few weeks and we'll come back to the markets accordingly.
So the on question regarding the C&I segment. So what is the kind of response eero the industry and the segments of the industry are really interested in the [indiscernible]
Right now, the between CN and retail particularly what are you part is our order book is 250, I think 50-50 percent is in that segment. The C&A segment is predominantly like one is smaller segment where 35, 35 megawatts. But there's a bigger segment of large industries where they have an active requirement, which today is happening on fossil few. They want to replace that with renewables. Just an example, giving 2 names like [indiscernible] out of sale or the sell like various big companies who are trying to do this.
And my assumption is that this would further in the next few years, start immediately, further go up because once the hydrogen picks up the last few years away anyway, if we all know. But on this initial C&A segment of replacing the existing capital capacity with renewable [indiscernible] fill, let's say, next couple of years, where you will see significant uptick in terms of demand [indiscernible] would tick up by then. So we achieve for its -- that again would be more of a state segment.
The next question is from the line of Vikram Sharma from Neesha Investment Advisers.
So first, we think we can megawatts [indiscernible]
Sir, may we request you to use your handset to [indiscernible]
So I was asking these 90 lakh per megawatt on contribution, and we have countries around 50%, 50% -- so I wanted to now break up of INR 500 crore fixed crores. And I also want to ask it will maintain if we do like 3 gigawatts if we see megacities will be patent or the company for Man.
So let me just try and understand the question because audio was a little pain. So in terms of contribution margin, as I've said, I'm not commenting on res lags, but 1 should assume mid-teens as a contribution margin, which is what we did in FY '23. And as I said, we'll endeavor to improve on that, but you should not take that as an assumption. far as fixed costs are concerned, yes, our fixed costs are approximately INR 500 crores on the manufacturing side. So -- we won't be able to give a split of that, but that is various corporate functions, our technology group, R&D team, manufacturing facilities all put together.
So we won't be able to provide a split on that. And for -- if we even once we get 3-megawatt turbine into serial production. We don't see a significant increase in the fixed costs other than what inflationary increases would normally be there.
And sir, second question, what will be our 3 megawatts of plus capacity in FY '25
Let's say, it's a case. Right now, that's not going to that because the cost requirement is the force stabilizes and then look at the FY '25 of -- so the right now, we are getting in different modes. It all depends upon what is the grade capacity. So that's way that's what I want to do it. [indiscernible] No, Betaland Boostek. -- voice more we are not able to understand what you're speaking this please SP-8 Yes.
So I was asking what is our revenue per megawatt on O&M portfolio side. And what is the expenses on that side.
So again, if you see the investor presentation, we have given details of the -- each business and certain KPIs, so Slide #20 on the investor presentation, you will get the detailed answers to your question, too.
We have the next question from the line of Rajesh Babaria from Martis Life Insurance.
You guys rightly mentioned that bers you just slightly mentioned that our fixed cost is around INR 500 crores or so, and it is expected to increase when the [indiscernible] portfolio. So can you please reiterate the same?
No, that's not what we said. I dedicate fixed cost will increase. We said impact the fixed cost will not increase if we add the 3-megawatt portfolio from -- the only increase will be on account of normal inflationary cost increases. That's it, of INR 500 crores would not see an increase.
Thank you. The next question is from the line of Willis Bala from Xylem Investments.
You have mentioned about the [indiscernible] being countered by these entities. But recently, NSCC mentioned that they would want to focus only on solar. So how do we see this? And what is the level of commitment have these 4 entities already given on these orders to be.
See, the -- directionally, the government said that we will lose 50 gigawatts per year bidding and another 10 gigawatt if proceed. That's one direction. Second thing is the core of our it's not the commented route today because Solar is ready. As I said that the last time, also we discussed, when you go to 2030, after the 3-year detailed study, if you want to meet trade demand, not talking about the capital demand, trade demand in 2030 lease cost option, they said is 300 gigawatts of solar and 100 gigawatts have been [indiscernible] okay?
Obviously, we all know that in India, we are extremely sensitive to the tariff. And if there is a lease cost option, whether you do it the pulp win at the miles. So the therefore, the wind, especially now if we see the last few months as an uptick on the wind because they win nested -- there is 2 [indiscernible]. One happens at the project level. Second half is the red level there is more question to -- in fact, if you see that SECI had issued the RFS for 2.5 gigawatts of wind and at that we showed are supposed to copies. So I think the -- it is not -- we always said it is not solar versus an its solar and wind and what the required for grid stability plus which is the least cost condition.
For the -- before, directionally, the government is also saying if at 45 gigawatts today, we need to go to 100 gigawatts of wind by 2030. So therefore, we will focus on that part of it. If somebody is coming up with you, so be it. But ultimately at the end of the day, this will meet the global study of 300 gigawatts of and watts or as sellers who went is not an issue, but I internationally, this is where we're going to go. And obviously, when it comes to the [indiscernible] segment, we -- it is like -- again, they will do a hybrid, depending upon the load profile of the capital load, and they will do the other translations.
And also, if you see the profile of wind in terms of the demand versus the profile of Solaris is different. [indiscernible] together is good. And if you look at more invite that win is a profile at the time of great demand --
So like all of the taper and given our conversations with the from 4 gigawatts of insulation , how do we see next couple of years timing now given that these 10 gig worth of orders only from government and then you name -- so do we see basically the installation doing from a the thing what happens is that the time 10 gigawatts of other and pectification of harder into a reality.
So use even earlier orders is always a lag, how much awarded, how much commission we all know the numbers should take these 10 gigawatts, if it takes CNA and at the end of it, all this put together the 6 megawatts is water of effectively the year. The government is talking about, let's say, even if you take this target at 2030, you need to do about 7 to 8 gigawatts a year that's 13 gigawatts today. So therefore, let's say, the range of 7 to 8 gigawatts is what is the requirement.
Then it depends upon the infrastructure, it depends upon the price availability and supply chain business reflected in not just the pubs because component supply trade making it globally what's going to happen. All these things will play a role, but the government is hoping that we will reach 7 to 8 gigawatts shortly.
So my last question is on the O&M segment of the budget. You mentioned like we had the cyclone impact of INR 2 crores, even adjusting that, I mean, on a year-on-year basis, the EBIT margins are -- so what is the sustainable margin to look at? You mentioned 30% that I think most like our competitor is doing a much better number than that. So I just wanted your view as to how to look at this in and the sustainable margins thereof.
So on margin, I would say that EBITDA margin would be a little over 40% is what one should assume given the sale of the capacity that we have, which is 14 gigawatts plus already installed. And of that, close to about 13 gigawatts of revenue generating, while it's about close to 1 gigawatt is under warranty [indiscernible] reps. So I would say that look at the margin profile as being 40%. I don't want to comment on competitor margins. That is your analysis from publicly available data. But from our perspective, that's what you said.
Yes, we also expect you to look at the margins of comparative operation. That would give you the real test studies.
A reminder on the participants. May we request you to limit your questions to 2. Should you have a follow-up question, please rejoin the queue. Thank you. We have the next question from the line of Dhaval from Gary Capital.
Sir, my question is with regards to the managing the operatory volatility. So we will we have a lot of bought-out parts for our turbine -- now from the time you. Sir, you have order book currently and interno ship out the final topinAnd the steel price goes up by 20% and so other raw material goes up by whatever percent how does that adjustment takes place with regards to passing on because that can eat up a lot of your [indiscernible]
Yes, the input cost for any component will depend upon 2 partners. One is the pay input price. That's the sale what we said. And second thing is the demand. We used to actually the steel is concerned in all our contracts. Now it's also. So on the steel price, it's patrol in our contract. That's we are hedged in that way the contract is. And that's how the commodity is concerned. And as for the component, other price is concerned, we placing our orders or relationships so you can manage. Therefore, we've been managing this for a year. So how do we have to do with tenders as far in the contract
Sir, the current participant has left the queue. We move on to the next question, which is from the line of Kishan Baralaba from MK Global.
Simple question. What is the capital into that you envisage for the next 2 years?
A simple answer. Yes, I wish there was a simple answer to that. So for next 2 years, I don't think we are in a position to project right now. But in this year, especially FY '24, our sustaining CapEx is about INR 100 crores, which we will certainly, of course, continue. In addition to the sustainable CapEx, we envisage an additional CapEx of a little over INR 200 crores to be incurred in and that's largely due, adding further mold capacity of our 3-megawatt per mine.
We have the next question from the line of Pradumna Shadri from JM Financial.
So I just wanted to understand on the O&M side, once we deliver a [indiscernible] turbine. So usually, when does the and revenue are coming from the same?
Like what's the time horizon that -- so from the commissioning date depending on the contract, there is typically 2 to 3 years of warranty period, which is free OMS that is bit into the sales price of the turbine. So most of our contracts for as 3 years. So typically from, let's say, 37th month onward from commissioning is when the billing for O&M would start.
So suppose something taking commission today, so we can assume that the revenue will start going in 2026.
Depending on which month. I suppose the July is on and then obviously a expense.
And usually, these contracts are for how long? -- that normally for life of the turbine. And then there are a review process. So it varies somewhere says, years is 3 years. on segment-wise retailed life. -- even in the corporate side, that's the idea. Usually, it's for the coll
We have the next question from the line of Peter Super Hawa from Asian company
We now have a promote is the lowest in the corporate one. How will the promoters ever have [indiscernible] and secondly is that if there is this huge explosion of orders that comes up from corporate India also going to energy again, short of CapEx because -- so will we again towards the [indiscernible] or you have something else in mind?
So the first one, seeing the game. Everyone knows what the selling of [indiscernible] not just [indiscernible] in the sector as well, okay? So how they've been up and down, the stakes gone for different vehicles because of the journey of the company and even today, the Chairman and regimen or from the Litmos and there are completely deep interest. And so it's the one we added.
I don't think it's just dependent upon what the state especially the environment and the commitment -- and when you see the order flow, obviously, also from the other industries, you know that what is the ones the commitment of the promoters. -- this -- another second issue. Yes. So you want to add?
Yes. So to further add on to that, one must not forget that close to INR 250 crores has been posted by the promoters in the company in the last 2 years by way of rights and the preferential allotment -- so I don't think if they are willing to commit this kind of capital. So I don't think 1 should be wanting the question the comment despite low stake. And -- that's one.
On your second point, there is such an exposure of orders, would we really come back to the capital markets. Difficult to predict the future. But I would say sitting here today, my best case assessment would be unlikely because there are other pockets of assets within the company which we would look at value-add or monetization, which, of course, we've not lost our focus on. That is something will take dissidence should such a capital raise be required in the future.
What kind of capital would these assets be able to raise? And do you feel that these assets would be a better price if there's an exclusion of orders?
Very difficult to say. I mean what kind of capital is definitely, I cannot answer your question. To your second point, logically, the answer is yes. I mean if there are some tailwinds. And then of course, the answer is yes. But the first one, very difficult.
We have the next question from the line of Rohit Bharani from Vijit Global Securities Private Limited.
Sir, can you please provide the value of orders at that you've built to complete in the next 2 quarters, that is before 21st March 24.
That 82 megawatts is the order to cast open order book, and we've already done the 35 megawatts in the part of 1 for the -- and then we also said that we go at 50% of the business for the next part mains for this year. I won't be able to give a guidance of how much we will do it, but we will be able to approximately what --
So you are seeing more than 50% over this quarter next year and less than 50% is [indiscernible] Am I right?
[indiscernible] -- next year for this year. Okay, obviously.
So my second question is, though the WTG revenues are down, volumes are down, where the realization seems to have improved, which is around per megawatt. So can we expect this to continue in future then? Is this realization sustainable infusion?
I think the realization, again, I can say what I said in the opening remarks that one should look at on an annual basis. The realization may have been stuck slightly -- but maybe other than small fluctuations, we should be able to get close to those realizations. And of course, it also depends on the order mix of [indiscernible] -- but all of that remaining same, realization should not waiver much
And my last question is, why has there been a decline in on if you compare both totally as well as on a Y-o-Y basis?
So again, when we said that there has been a onetime cost of about INR 20 crores in the O&M business. on account of the cyclone in Gurda. That is largely led to the headline in Q1.
The next question is from the line of Sumant from Rajiv Capital.
One of the questions has been previously answered. So I'll just ask you [indiscernible] question. We see that Offshore Wind Energy East coming to starting in India, how Suzlon taking his view on offshore wind energy. And the second is regarding the debt fund raising, when would you be taking accusers for talent any idea?
On the offshore side, there are talks about offshore and obviously, at some tangential as well, the -- we would be ready, as in a day, it's going to be ready for offshore. Having said that, offshore is still propositions for India in terms of tariffs because we are tighter, we are extremely sensitive to Paris. The offshore broad, like Europe and offshore in India are different because the incremental generation versus incremental cost as is different. Incremental generation from onshore to offshore is not very high, but the incremental cost is very high. So the tariffs are expected to be very high.
So therefore, while we might do some excellent in offshore, but it's still in our view that it's a way of sort. And having said that, we speak up, we would be ready with our [indiscernible]
Regarding my second regarding the debt front.
So -- I mean, firstly, to clarify, the resolution is not for debt foundries. That's number one. Secondly, the postal that it has already gone in this past about 2 weeks back to all the shareholders. So first week of August is when we expect to receive approval from all the shareholders of the cost.
The next question is from the line of Naval from Gariepy.
Sorry, my call got disconnected. So completing the question on this raw material thing, sir. So there's a sharp volatility of 15% to 20% kind of thing on the steel prices. So does that also hedge us in terms of our contracts for the past one?
I'll answer it, a format yes.
Sir, my second question is on this INR 20 crore hit on the O&M side. If you can quantify because it's a very large amount. And -- so where was this -- I mean, what is it in regarding the cyclone, what is that loss
What happens in [indiscernible] , we got -- we had the transmission line for last, which is actually supposed we managed the event agency, but the opens are down in that money before the insurance coverage is not there. And the second, what happens is number of companies, there will be small, small [indiscernible] like watering where you spend some money. The [ Cabana ] insurance, it comes the minimum detectable thing. So therefore, the client don't get insurance. Whenever there's an insurance, we get it is net of that is INR 20 crores.
And sir, one clarification I wanted on the fun -- so fundraising, the equity fundraising will happen in the entire the parent company or is something that happen the chances are happening in the O&M subsidiary also?
So the resolution right now that has been moved for personal valid approval by the equity shareholders is for equity issuance at the parent company in the list group.
And sir, the fully diluted number of shares will be -- as on today will be 17, right, the figure [indiscernible]
Yes, including for ESOPs. So about INR 30 crores shares have been approved by the shareholders on account of SOP -- so after that, adding that 167 is the right number, assuming that all the soft shares will get vested and granted, which, of course, will happen over a period of time.
Currently, other than ESOP, about INR 1,247 crores shares is the fully diluted capital, of which roughly about INR 5 crores shares still remain outstanding as partly paid and about INR 1,242 crores shares is fully paid up.
And sir, what are our plans for SE in terms of any CapEx would be required there? Like, I mean, kind of opportunity, what we are seeing or please there?
We expect significant opportunities for poach very select CapEx to be met on their own revenue. We don't need to raise any secret CapEx. In approach right now, we're working on is the look at country. We're looking at productivity improvement, a number of testing study in a -- so the yes. Because right now, the -- our iteration levels are very low, which is about 19%, 20% level. And so therefore, the very significant surplus capacity available both in [indiscernible] as well as countries. We don't need a CapEx but also there is possibility of some operations outsourcing.
Our focus is now on effort to see that Audi actually capture the market much more. We adjust about 2% of the total in market globally. We can submeter. We focus on FPPs now.
So that's 19%, 20% as of quarter 1 revenue quarter revenue is the utilization
Yes. That's normally that's been raised for quite some time. That's just a quarter one.
We have the next question from the line of Kean an individual investor.
My question is regarding the ITSC target, which are going to be incurred for the COD of 2025. So when you advise it, how to how Sun is gearing up for the view to 2 years...
Maybe it's not for us to gear up. It's if the IPP. So obviously, there will be pressure for commissioning by soon 25 to get 100% testing thereafter is also top close to 75, 50 and 25, depending upon when commissions. It is not completely been post 2023, with the -- especially the C segment, there is a lot of agency for meeting design person saying advantage is 100% waves.
Can you please speak clearly [indiscernible]
Yes, this 2025 June commissioning is for the 100% level and ISPs, the life for the project. And it is not one in after that. It tapers down to 75%, 50% and 25% as we move ahead. Like it becomes 25% are 50% margins and 75% -- having said that, because the sunset plus 100% is.
So there will be more pressure which is there will be more orders, more pressure for commissioning the projects before that, especially the CMA exit.
No, that is probably under stable and there's totally like an impact, but question -- do we have the cost on close game better order now we are resin. So like everything may not be commissioned up the order, we'll be reaching out to pick up. So referential like on 125 also we have discounts like BC, for example, GST like are we'll be able to a customer or not
This we have a contract of schedule. And as far as we are concerned, we have nothing good with guests charges. We will -- we need to deliver as per the contract schedule, and we don't take any liability with respect to ISPs. There could be different reasons they post that's delayed. So we don't take any is possibility to Sete.
On to the director like support if you're getting to order, for example, in the sector. So definitely, it will be come beyond that. However, you will commission on 25. The ICSC will be recovered from the client on --
So please understand our business model. is to supply turbines to customers who are availing these ISTs benefit. So when the customer is placing an order to us, as per our delivery and commissioning schedule, we have to deliver and commission the turbine by a certain date. In your example, if we get an order by September 24, and the orders is that we have to deliver and commission the turbine by, let's say, March 25, then we have to do that. There is no question if you agree to that schedule. And whether he is able to avail ISC's benefit or not his problem, not ours.
[indiscernible] it's not a cost to us.
No, it is not. So my suggestion would be you connect offline with our IR team, they'll explain this deal there will require some detailed explanation.
Number 2 sir, since the external balances are definitely like not very good in balance, for example, South Etienne only. That is our controlled in profit for jump. So what or what is we are taking to turn around our stent on the financial side for a point cost or like this acclimation like to find at the plan to bring the endowing profitability.
So we are working towards that. So we will, of course, keep coming back quarter-on-quarter and I would add that because yes, there are 3 different subsidiaries or rather active subsidiaries that are adding to the consolidated profitability and all businesses are very closely connected with each other. We urge you to look at the consolidated numbers. so far a stand-alone legal entity profitability is concerned. So hopefully, with time, we should get there, but very difficult for us to comment anything
With regard to console, if you situating we are almost in the like of areas almost in our statements you can say like gross profit is only like INR 5 crores only energies growth only -- into only from then on. So what I'll be doing to have the product thesis like generating profit from the panel and as efficiently thermalteen but like the ewe are not seeing much here.
So the question is that our core is the product turbine.a we are not making profit. even in the control also somebody coming INR 10 to INR 35 crores reunion from that owned only. So what we're doing right? I don't reduce don't be reduced this core that we start the because we are in low-fee we are doing like a profit a lot of even more or they are to liberal into 24 of adapters let in to something
I don't know something even in the like late salary-- [indiscernible] salary. So what I'm saying to something year 2-year if you reduce the cost share or core so cost or the other cost, at least the company can turn around and like is turnaround, definitely, its value will be higher. And then like we can definitely so.
Thank you. I think good sessions will look at demand.
Ladies and gentlemen, we take that as the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you.
I think thank you very much for attending the call and taking time out today. For any follow-up queries or questions, we are me or my IR team are available, you can reach out to us, and our presentation is available on the website, and we either will see you in person over the next few months or speak with you during the quarterly call results. Thank you very much.
Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines.