Suzlon Energy Ltd
NSE:SUZLON
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Suzlon Energy Ltd
Earnings Call Analysis
Q2-2024 Analysis
Suzlon Energy Ltd
The company has begun commercial production and dispatch of turbines, with 5 to 7 turbines already being dispatched. Expectations are set for a gradual increase in this activity through Q3 and Q4, with a significant ramp-up anticipated next year. Investors can look forward to seeing a reasonable capacity going out this year, particularly in Q4.
The company's capital expenditure plan for the production molds required for turbines is proceeding according to its schedule. With three molds already operational or in transit, the remaining are expected to be in place by the end of the current quarter or early in Q4.
Despite the increasing demand which has created a supplier's market, the company intends to adhere to its previously stated margin guidance. The focus is on maintaining strong relationships with repeat customers rather than significantly increasing margins due to the favorable market conditions. However, there may be room for improved margins with some customers in the Commercial and Industrial segment, while the overall guidance for per megawatt remains unchanged.
The competitive landscape presents challenges with many suppliers opting for assembly in India rather than full-scale manufacturing. While this provides certain cost advantages due to subsidies and lower input costs for these suppliers, the company emphasizes the richness of its manufacturing components in India over mere assembly operations. This strategic focus on manufacturing depth could indicate a competitive edge in the quality of the end product.
In the field of Operations and Maintenance Services (OMS), the company faces no significant competition for its own supplied turbines. Nevertheless, there is pressure to maintain a high quality of service and to continue adding value-added services, as the market includes Independent Service Providers (ISPs) and large Independent Power Producers (IPPs) operating with different pricing structures and performance guarantees.
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Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Earnings Conference Call of Suzlon Energy Limited, hosted by ICICI Securities. During this call, the company management may make certain statements which reflect their outlook for the future or which could be construed as forward-looking statements. These statements are based on the 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. [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.
Good morning, everyone. On behalf of ICC Securities, we welcome you to the Q2 FY'24 Earnings Call of Suzlon Energy Limited. Today, we have with us the top management of the company being represented by Mr. J.P. Chalasani, Group CEO; and Mr. Himanshu Mody, CFO.
I now hand over the call to the management for their opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Ashwani, Chalasani here. Good evening, and thank you for joining us on Q2 FY'24 earnings call. I hope you had an opportunity to review our results and investor presentation. I will first start sharing with you an overview of the industry, and then we'll walk you through our Q2 performance. We will then take your questions.
With good policy initiatives from the government, the wind energy sector has got much needed impetus. There are policies to strengthen the sector in driving India's green transition like the concrete guidelines and policies of RPO obligations under Energy Conservation Act with specific RPO for wind turbines commissioned post 1 April, 2024. And the policy on implementation of pool tariff mechanism, which would, I think, go in a significant way of accelerating between growth.
The 2030 [indiscernible] target of 500 gigawatts of nonpersonal fuel base capacity improves a healthy mix of wind and solar capacities. The idea is to how both solar and wind to coexist and not compete with each other. We've helped in diversity of generation sources, and this also help me from the perspective of the grid health. The part that wind is available during the late evening and night, when the power demand in India peak, helps balance the power generation profile and also support the grid.
Initiatives like discontinuation of E-reverse biddings of wind will help in growth of wind sector. The good part is that under the new bidding resume, wind capacity will come up in all 8 windy states, significantly opening up the availability of land and the vacation infrastructure. The proceeds of a determination of uniform RE tariff is also announced, which, as I mentioned earlier, recently, which will help in reducing the average cost of procurement of our group pulling of tariffs. The leading renewable energy states of the country, like Gujarat, Maharashta, Rajasthan and Telangana have also introduced the proactive RE policies to further the state energy transition journeys. We expect even other wind states to follow the same.
We have an order book of 1,613 megawatts as of 30th September 2023. This is a well-diversified and a healthy order book. In addition to this, we also have a very strong order pipeline and recently, we announced an order from Juniper of 50.4 megawatts. Our priority going forward is to pursue quality orders with higher value and better margins. The process for [indiscernible] listing for 3-megawatt turbine has been completed from our side, and we expect this to be listed as earlier as next week. We have started the commercial supplies of 3-megawatt turbines. We also installed the first prototype of this turbine with 160 meters hub, which is a second proto actually, but the first one with 160 meters hub height in Gujarat, which will further reduce the LCoE.
Our focus for H2 remains substituting and building our order book. Our OMS business continues to do well with 14.3 gigawatts capacity in India. The growth of wind sector will also help SE forge as a major revenue comes from [indiscernible] wind components with a strong fundamentals and social and sectoral tailwinds. So the launch now well to leverage the market opportunity arising from the energy transition.
With this, now I will ask Himanshu to take you through the financial performance before we open up for questions. Thank you.
Thank you, JP, sir, and good evening to ladies and gentlemen. I would be using Slide#18 to 24 of our investor presentation as a reference point during this discussion. Our IR presentation has been uploaded on the website and also sent creator exchanges.
So for Q2 FY'24, we've done deliveries of 132 megawatts, totaling up to a total of 267 megawatts in the first half of this financial year. The company has also posted a very consistent and robust performance across all business segments with improved KPIs in the H1 of FY'24 on a year-on-year basis. Q2 FY'24 has seen us registered consistent improvement in all our key parameters. More importantly, our balance sheet has now become even more stronger and the fundamentals have strengthened due to the bottom line -- as a result of strong bottom line.
We're pleased to report that the company has ended 30th September 2023, with a strong consolidated net worth of INR 3,409 crores. Post the QIP, there is no residual debt in the company, except a very nominal debt of INR 120 crores in one of the subsidiaries of the company, which is SE Forge. This leads the company with a net debt of about close to INR 600 crores, meaning a gross cash balance of about INR 720 crores with the company. The company has been able to turn around this balance sheet significantly from March 2020, at which point, our debt was overall INR 13,000 crores to a net debt of INR 600 crores today.
Pursuant to the debt reduction -- net cash, sorry. Pursuant to debt reduction, we have achieved a substantial reduction of 61% in our finance cost in Q2 FY'24 of INR 36 crores. vis-a-vis Q2 FY'23 of INR 92 crores. The full benefit of debt reduction in terms of finance costs will be visible from the next quarter, which is Q3 FY'24 as the QIP this year got concluded in August through which we were able to reduce our debt.
Our consolidated PAT before exceptional items for Q2 stood at INR 136 crores and for H1 stood at INR 230 crores. This is, of course, against Q2 FY'23 PAT of INR 53 crores. So the economy and the industry is on a very strong footing and the sectoral tailwinds that we're facing are fairly strong, which puts us, Suzlon with the very strong balance sheet and performance parameters to well capture the market opportunity.
With that, I'd like to conclude my presentation, and we can open the floor for any Q&A that the callers may have. Thank you.
[Operator Instructions] The first question is from the line of Nikhil Abhyankar from ICICI Securities.
Congrats on a good set of numbers. So in H1, we have executed somewhere around 270-megawatt and -- but still we are below the FY -- H1 FY'23 level. So are we in a good position to give a guidance as per what our execution will be in FY'24?
I think our guidance always remain the same is that the H1 to H2, there is always a difference not just for us, for the wind sector as a whole. Normally, it's expected that it will be anywhere close to the double of what is in H1. Even if you look at -- as a country, we did about 1.5 gigawatts in the H1. And then now we're all talking about doing about 4.5 to 5 gigawatts. Obviously, that doubles the gigawatts mix, too, that's when we reach 4.5 gigawatts in India. Normally, that's the thumb rule. I'm not giving you guidance, but this is that normally works as us.
Okay. Sir. And in Q2, we reported an EBIT loss from the WTG segment? So what -- any specific reason for it?
Sorry, can you come again? Which segment?
WTG segment reported EBIT loss in Q2 of around INR 7 crores.
It is the segmental reporting is largely, of course, due to the depreciation, all of it sits in the WTG segment. As you know, O&M business and SE Forge would be light on the depreciation. So it's largely as a result of the depreciation, most of the INR 50 crores sits in the WTG side.
But in the last quarter, we had made a profit. So I was from that point of view I was asking.
If you look at the last quarter EBITDA for WTG segment would have been in the ballpark region. This quarter is about INR 30 crores. Q1 last -- in FY'24 would have been about INR 35 crores. So there is not marked a difference with similar volumes. EBITDA number is broadly the same for the WTG segment.
Okay. And sir, any views on the offshore tender that is expected in Q4? And how are we placed to participate in this opportunity?
Let me offshore various -- as you know, that we showed intention to come up with a tender, which came in. As you know that they're talking about 3 models of bidding. One is they say that they will bid about 500 megawatts in Tamil Nadu, 500 in Gujarat based on VGF, then the model B they're talking about is that they will last for the lease rights for the area based on the bidding. And then they will be given x amount of time to go and develop, but without any offtake guarantee. And the third model is that you can go and develop your own seabed and then they will do a bidding, and you have a right of first [indiscernible], almost like a swiss challenge.
Right now, they are talking about the Model B when it comes, let's see that we are getting prepared ourselves the -- for participation in the [indiscernible]. As you know that whenever the bidding comes, we don't participate ourselves directly. We actually have a pre-bid tie-up with somebody who is going to actually participate. So the same work we will do, because we are not the bidders for this, but we will be working with people, who are bidding for the project for a [indiscernible] supply on the projects, which we are working on.
The next question is from the line of from [indiscernible] Niveshaay Investment Advisors.
I just wanted to get the clarity on the industry -- the usual industry perspective, which we have, that is a 30-70 distribution between H1 and H2. So I just wanted to ask, are we in line with the performance in that particular metric?
This, again, leads to sort of the what you call the guidance. But as I said sometime back, the H1 and H2 is anywhere between 1/3 and 2/3 versus 60-40 or 70-30, whatever number you're taking it as, it will be in that line. And obviously, we are part of the sector and our performance also would be in a similar line.
Also for the 3-megawatt turbine, are the utilizations per megawatt or the EBITDA margins per megawatt slightly higher than the 2-megawatt cities? Or how are we placed there?
We don't give the model-wise guidance on what's happening because it's overall portfolio of what we sell, because it's -- we don't fix that. It depends upon who is the customer and whatever the contract we take, is it a [indiscernible] supply or is it [indiscernible] for EPC. So there are number of other factors. So therefore, it's not specific to saying that this is a model, this is what the EBITDA will have.
Realization, like I'm talking just about the supply and realization per megawatt remains the same? Or how is it different from the 2 megawatt series?
Yes, you can assume it will remain the same.
Okay. And one more thing -- sorry?
For the time being, because as we keep moving ahead, the cost for happens, then things will be different. But initially, as you can take the same.
Sure. And on the EPC non-EPC side, we -- in our order book, we currently have 47% to 53% kind of a mix. So what was the number before? And how are we looking to go ahead in the future?
See, this is also a sector issue. What's happening in the sector, if you look at it is that the EPC players are completely vanish from the scene, except us, okay? The largest people who talk about they just only supply the components, not even the full turbine. So there are supplies getting supplied, but the corresponding capacity to build the [indiscernible] to take you to the commissioning lacking today in the country. And in our view, that as we also look at in future, we see a significant risk for turbine supply line and the ground, but not getting commissioned. So because of this, we -- also the people earlier who worked with us and based on acumen supply are coming back to us and asking for EPC role.
So that's why we are seeing now the 43%, 47% what you see is an increase compared to what it was earlier. Earlier when I say is that last couple of years, I don't take it FY'17 and before that time, we used to do almost full PPC. Now the more and more payers are coming back and asking us to provide an EPC services. So we expect that segment to keep growing as we get more and more orders. But that's a concern for the sector as a whole, because today, you have more suppliers and less of the people who can do -- breach the gap between the supply to the commissioning.
[Operator Instructions] The next question is from the line of Raj Rishi from DCPL.
Can you hear me?
Yes, we can. Please go ahead.
I just want to find out what is the possibility of Suzlon maintaining its market share in a much bigger market, like whatever market share you have presently? Because others are also going to take part right. And supposedly a lot of countries have overcapacity also. So can you throw some light on this?
First of all, the lower capacity is part of the mix, okay? So what actual capacity, what is the manufacturing capacity, what is the assembling capacity is completely different. So I'm not getting to the details of that. As far as the market share for us is concerned, we define a different way, not in a market share. We say that if -- my capability, our capability to deliver is x, whatever is the market we should be in a position to deliver x . Take an example that I can deliver 2 gigawatts, don't hold me to the number, I am giving you an example. I can deliver 2 gigawatts. If the market is 5 gigawatt, my market share is different. And if the market is 7 gigawatts, my market share is different. Instead of looking at the market share, what we are concentrating is in what is our capability and we enhance our capability to deliver.
And with respect to whatever the market can be complete and then deliver to our full capacity. I think that's how we'll deal with that in the market share. Because if I do a 2 gigawatt if the market does only 4 gigawatts, then it looks like a 50% market share. But then if the market does 8 gigawatts, then it becomes a 25% market share. But I'm still doing 2 gigawatts. So therefore, I think market share varies from the point of the capacity overall, but we should be able to deliver to our full capacity. We should get orders and then we deliver that. That is what is more important for us.
Okay. And one of the global majors was Siemens Gamesa is having some issues. So is that expected to benefit Suzlon, because one competitor being slightly out of the picture or something?
See, I don't think the -- today is in the market, there is enough play for everybody to do that. As I said, the sometime back if our capacity, whatever is there today, we can actually get the orders. I don't see in the next -- at least for the next 2 to 3 years, guarantee for 2 years in FY'25, FY'26 and also presumably for FY'27. Whatever our capacity can go and get the orders, competition not initial. But what is important for us is to learn from what the issues they are facing and see that lens on them and then doesn't get repeated for us. That's what is more important than looking at somebody's got a problem to the force advantage to us. That's not the way we are looking at it. We're looking at it from an angle of what happened there and how do we ensure that it doesn't happen to us.
The next question is from the line of CA Kanwaljeet Singh from Balaji Infin Investment.
Congratulations on a good set of numbers. I have two questions. First, whether Suzlon is exploring any opportunities in solar power sector also as we are dealing with only wind power? Second, what is the -- what will be the future run rate of the models? Will current run rate continue? Or we will be going into an higher trajectory?
Come again, the second question about current run rate continues or?
Or we will go into a higher trajectory of orders?
Okay, on the solar, obviously, our spend is in build, because we manufacture wind turbines. In solar, we don't manufacture anything. Having said that, we will -- if there is a need be, we will get into solar. Where it is a hybrid project, somebody wants us to take the full responsibility for the entire project, we don't mind doing that. But otherwise, we'll stick to strength of wind, but not really solar specific projects, we will not take up, okay? So unless if there's somebody says that if you are doing wind, we also want you to do solar as part of hybrid, then we will look at that opportunity, not otherwise. On the -- sorry?
So are you currently bidding for such hybrid projects as such?
No, we are not bidders. As I said some time back, we are never bidders either in wind or in the solar. The bidders are IPPs or other people, and we only supply to those bidders, who're successful in the bidding. Some of them have a prebid tie up, some of them come after winning the bid. But we are never a bidder in any of the projects. We did once long, long back in solar and which we sold up on those projects. That's once upon a time, like in 2015, '16 type of time. Otherwise, we don't bid, we are not bidders.
And as far as the order book is concerned, it's growing, it's robust, and we expect the orders would keep growing. I don't want to put a number to what rate it will grow. But as I said in my opening comments, we are looking at the orders, which are quality orders and the quality counterparty, where we think the project would go ahead, not the taken orders than project gets back and then we get the decent -- good margins. That's our criteria. But there are enough -- there is enough potential in the market. Interest wise for [indiscernible], there is -- I can only tell you is that there's a huge interest in terms of placing orders in [indiscernible].
Okay. Sir, another question. We usually see you get large orders. So what value we should be assigning to a one order of a 3-megawatt turbine?
So our average realization is, give or take, INR 6 crores per megawatt, so whether it's a 2-megawatt turbine or 3-megawatt turbine, you should continue with the same economics -- unit economics.
Or the scope of [indiscernible] supply.
The next question is from the line of [ Jeevan ] from [ Siegel ].
I'm Jeevan from [indiscernible]. First of all, I would like to congratulate to your team for the excellent and for the last 3 to 4 years. And we have met the company as a debt-free company. And when you have -- my one question is, it is not a question, just from land investors angle I'm asking this, being your share like face value, it is having INR 2. For a very long time, it was local at like a [indiscernible] stock in the market. So it was around INR 4 to INR 10. So now you have come back above INR 30. And is there any possibility to make it as INR 10 paid up share and still we can boost up the market value of the stock?
So sir, we'll take that suggestion into consideration. I mean, there is right now no active plans to reverse split the stock. Obviously, we'll have to see what are the overall implications from legal, tax, companies like NCLT, various law enforcement agencies perspective. So whilst there is no current thought, but we'll, of course, consider the idea at the appropriate time, if we will.
The next question is from the line of Rahul Kothari from [ Grit Equities ].
I have a question. This is with regards to understanding our preference towards taking an order, whether it's more towards the turnkey projects or towards WTG equipment supply. And with regards to your estimate that you understood that 10 gigawatts of orders expected from PSUs, how are we looking to bid into it or supply our products and services to that segment?
See, equipment supply and EPC, we always tend to balance, because in EPC, at the end of the day, we need to look at what is our positive execution capability, how much can we deliver projects in terms of the land to the connectivity, including the evacuation system. Whereas the equipment supply is that we know that we have a definite capacity we can supply. So we always look at saying that how much we should take a equipment supply, how much is the EPC and also EPC depends upon which stage it is where we think the equation of land is easier versus cumbersome process.
So we keep -- we don't have a target per se, but we keep evaluating the sector saying that, okay, if you reach certain level of EPC, then we think that for this year, of the significantly enlarged our the project delivery capacity through this, then we will limit there and get on the equipment supply. So both will be there mix-wise. So it depends upon which state, which project and what capacity is and when.
And as far as the 10 gigawatts is concerned, then obviously, I just explained some time back, we don't bid but we support the bidders for those projects if someone wants to have a prebid tie up like [indiscernible] of prebid tie up or those winning the bid, they come to us saying that we won the bid, and we want to work with you for developing a project, then we'll work with them. So more bids get awarded to that much is the universe keeps increasing for us for the order intake.
Sir, just one more on the [indiscernible] front. With regards to -- because on the wind fundi is when there is a land marked with regards to the wind state and all identification term. Sir, as Suzlon culturing the large order coming in place in future and so execution would be a challenge. So do we have some -- or do we expose the land acquisitions earlier or will depend on the customer to the lands and [indiscernible]?
See, for us, our -- when we talk about we can do EPC, our spend is basically the win data, because we have the largest number of [indiscernible] and then the largest wind data available to us. So therefore, we clearly know in each state, each state when I say that all those 8 states, which side is good, which side is [ what sort of generation gas ]. That's the knowledge of what we bring in. So we can potentially when somebody wants to ask for EPC, which is that this is the site with win data, we will develop, because we may or may not have a land at that point of time, then we work with them entering the contract and we acquire along with them.
Moving ahead, the [indiscernible] we used to do earlier, but in between, we stopped because of various things that we don't acquire a land bank. But in case we are certain we have a very good site and which can get into a contract, let's say, in the next 8 to 12 months, not locking up the capital, then we would also look at investing in the land. But provided we are absolutely sure that we can convert that into a contract in a short period of time, but not creating a land banks, which are available for the next 5 years or 8 years sort of, no.
The next question is from the line of [ BA ] from Niveshaay Investment Advisors.
I just had this doubt that if we are not bidding directly and we are working with IPPs in the offshore projects, then how are we actually taking it forward? Because as I understand, we don't have capacity of -- which are required for offshore turbines. So I just wanted to get clarity on that.
No. No. The offshore tail is not required today because wherever whenever -- even somebody is winning the bid today, the wind turbine would be required, let's say, 3 to 4 years down the line. Offshore is completely different ball game. It's going to take a long time, the coming. While we do have the -- another technology under development, very stable. So in case we are going ahead with offshore, not a one-off project, but we think that the offshore in India is going to pick up. Then obviously, we will activate and get the first wind turbine out for the first project to come in. So therefore, the partners when they talk to us, they look at our time cycle versus the project time cycle, and that's how they go and bid based on our turbine. You don't need a turbine today for offshore.
The next question is from the line of Sriram Rajan, who is an individual investor.
I suppose I'm audible. Congratulations on great numbers. And just 2 questions. I was reading that Adani is already got a 5-megawatt turbine empaneled in [indiscernible]. Would that post the competition given that they can generate more power with lesser line?
It is not the question of more generation with less land at the end of the day for anybody you know that you're an individual investor, you would know that what matters is the cost per kilowatt hour, okay, which model gives you the lowest cost per kilowatt hour. For the larger turbines in India today, the cost per kilowatt hour is higher on its current side. It all depends upon the wind, the current wind availability, the sites that are available. Today, the 2-megawatt, 3-megawatt would give you a lower cost per kilowatt hour than a 5-megawatt turbine. So therefore, in our opinion, that is not a constraint at all. So what we need to look at is that will -- if that comes in the market, our products can give better cost per kilowatt hour than that. And we do feel that as we can -- our 3 megawatts and 2 megawatts can give lower cost per kilowatt hour, compared to 5-megawatt turbine in the current site.
That's good. I didn't know this. Okay. The other question was, let's assume we transition over a period of time from 2 to 3 megawatts completely, what would be the amount of gigawatts of turbines we can supply in a year, basically the capacity that we have?
See, our manufacturing capacity is anywhere between 3 to 4 gigawatts, because let's say that what is the capacity need, mostly our natural capacity is for 4 gigawatts. Our is obvious -- there are 3 components [indiscernible] tower and your blades. The tower is we do ourselves, let's take an outsource. So therefore, there is no capacity constraint in terms of tower as long as in advance, we book the fabrication capacity. So therefore, your capacity depends upon the blade manufacturing, one the blade manufacturing number of modes that you put in our plants.
So we assume that the capacity is we will be able to sell is x and then we put the most. But we see that FY'26, we can sell more then would quickly go ahead and put the [indiscernible] in some of our existing clients and increase of capacity. So capacity won't be a constraint if there are going to be in order. Orders on a consistent basis not that we do 1 year peak and then subsequently it comes down. If you look at the 2 to 3 years, this is going to be the capacity, then obviously, the manufacturing capacity would be ramped up quickly on the blade capacity and then to meet that.
Am I audible?
Yes.
My question is on the EPC front, you mentioned that the company is now expecting more complete EPC orders instead of just turbine supply. What is the main driver for that? And do you also see an improvement in O&M business as in recent years, we have seen more players going to specialized O&M service providers instead of the turbine suppliers?
On the EPC front, I clarified earlier is that more is coming in because of the demand in the market. It's not that we want to do more EPC, but there's demand in the market because as I said sometime back, there is no OEM left in the country other than us who does EPC, okay? Even the largest competition in the market are just supply components, they don't even supply the turbine, they just supply tower, they just supply the nacelle and even the blades, somebody wants, they can buy directly. But someone else has to bridge the gap between the turbine supply to our action commissioning, BOP and everything.
We do have limited capabilities in the country for who can do that sort of a service. So therefore, and some people went ahead experimented that, and there were some bad experiences, some good experiences. So people who have a bad experience want to get back into the EPC concept. That's the reason I said that there is more demand for EPC because we are the only people who cover EP&C services. So we don't give up anti-EPC, we provide EPC services.
And the O&M front -- on the O&M front, the -- today, a very single contract, what we signed for WTG supply. We've only signed if there is a OMS contract followed by supply of turbines. If there is no OMS contract, we don't sign the supply contract as well. So till now, that has been our principle. So every WTG we sell, we also have a OMS contract for that. So therefore, our OMS business would continue to grow to the extent we keep selling our WTGs, [indiscernible].
On the other front yes, there are some small ISPs sort of I mean and there are also some large equities looking at they are trying to do their own OMS. Our turbine and of our turbines have gone away until now. In fact, recently, we acquired 80 megawatts of Siemens Gamesa turbine for operations by us, given to us the work to power. In fact, we are getting multi-mics [indiscernible]. But having said that, we continue to improve our standard of service and more importantly, continue to develop value-added products so that benefits our customers in terms of improving energy output or improving the reliability and various aspects. But -- that's the reason that's how we want to retain our customers.
All right. Sorry, just one more question. What do you think could be the likely capacity addition in FY'24 and FY'25 overall sector level.
I think we gave our estimate earlier also, we gave it that we expect anywhere midpoint is 4.4 minimum and 5 max this year is what our expectation is. And even if you look at the H1 is 1.5, if you do develop that image too, let's say it's 4.5. So that's what is our guidance. We continue to believe that one. And in FY'25, our expectation is it could go up to 6 to 7 gigawatts.
The next question is from the line of Nikhil Abhyankar from ICICI Securities.
What is the quantum of order pipeline that we're looking at, say, till March end, March '24?
March end, we -- right today, we have more than 1.6 gigawatts of order. And there is a significant order book, obviously, because of the confidentiality with clients [indiscernible], we can't say how much it is, but there's a significant order price than we're negotiating today. And that's when we can put the order, then we come out and then basically announce. So I don't want to put a number to it, but there's strong order book, which we are negotiating today.
Understood. And also, sir, for -- there are around 4 RE bids also opened right now. And so are we also working with the IPPs to bid for these projects? And what kind of win proportion can we see in this thought process?
It's it all depends. Sometimes the wind proportion can be significantly higher, which despite this FDRE bids. The -- if I don't have a number right away with me for the current FDRE estimates. But what I remember the overall number is that in the 13 gigawatts of outstanding which today, which are open, the wind capacity is about 11 gigawatt. In some cases, the wind capacity is smooth than a the bid capacity, because for example that somebody wants to offer as part of an RCC power sort of thing and some people are saying that instead of getting into hybrid anything. I can actually, let's say, one 200-megawatt of PPA you have and go ahead instead of 650 megawatts of wind. On an annual basis, we meet the requirement of what is required the [indiscernible]. So therefore, wind capacity is going up. That's why I said that I don't have a bid-wise, but total overall bid wise in 13 gigawatts, the more than 11 gigawatts is wind.
Okay. And are we working with IPPs on FDRE bids as well?
Yes, we were obviously, the bidders remain the same, whichever the type of bid. The universe of bidders, the companies remain the same that whoever we have a relationship, we keep working on this, like earlier, we had a prebid tie up [indiscernible]. We had prebid tie up with [indiscernible]. We had prebid tie up with [indiscernible]. We had prebid tie up with [indiscernible], we name it we had. So sometimes they outplay bid around and stay acquired and then bid and come back to us. So there is no need for prebids, because the -- everybody knows the market, what are the prices and things like that. It was different when -- initially when the bids came up in the FY'18, the initial year of bidding, then obviously people, everybody had a prebid tie up. But now it's not necessary not even 50% of the bidders have a prebid tie up.
Okay, sir. And sir, final question on Siemens Gamesa. So are we looking to acquire any of the O&M projects that they are currently managing going ahead, whichever are coming for expiry?
We also see -- we do a multi-mic -- we are also working in a small way in the multi-mics. We are in the initial stages. We don't have significant capacity, little more than close to about 200 megawatts, of that 150-megawatt is what we acquired this year. I just said some time by 80 megawatts of Siemens Gamesa, which over to power had wanted us to do the [indiscernible] which we are doing it. Obviously, any of such opportunity comes in, we will definitely open to do a multi-make whether it's Siemens Gamesa or [indiscernible], we would be working. Today, we operate [indiscernible], we operate Inox, we operate Siemens Gamesa machines. Capacity will be small, but all these people will do it, and -- but that is one of our business models in [indiscernible], while we continue to do our own, but we'll also look at opportunities to expand into multi-mic.
The next question is from the line of Neil Ostwal from Bajaj Finserv Asset Management.
Can you give some color on the opportunity size of the C&I segment?
Today, if you look at our order book for the -- 2/3 is C&I, so including retail. So 1/3 is actually the bid capacity. So that's the rate that we're having today. So a significant portion is in there actually.
The next question is from the line of [ Pawan Gulati ] from [ Investor ].
Sir, congratulations on great set of numbers. A couple of questions on Slide 20. So basically, first one, it mentions in the installations in H1, that of [ megawatts ] and for Q1 the number was 0.3 gigawatt. So do you give the numbers in megawatts for both the quarters? That's one.
And the second question is that we have a capacity of greater than 3 gigawatt till our installations have been almost -- the run rate has been less than 1 gigawatt in a year, so what's our path forward to increased capacity utilization, sir?
So you're talking about supply?
So on Slide 20, I'll answer your question. So installations by Suzlon in the first half has been about 0.5 gigawatt, close to about 500 megawatts. And across the country, about 1.6 gigawatts of installations happened in the first half of this financial year. So approximately, again, if we take the market share dynamics just for the first half, this is installations where we are about 33%.
The other metrics for the H1, we've done 267 megawatts. That's in terms of deliveries. So in the H1, there has been deliveries of 267 megawatts of turbines, while installations have been 500 megawatts. I mean difficult for us to give you a market share numbers of the deliveries because we are not aware of what the competitors are doing, but -- we can report our numbers. But MNRE reports through the new wind capacity that have got added so. That's how we are coming to the 33%.
Also on the commissioning one, you'll notice that the whole of last year, we did about 524 megawatts also. That's what we actually reached H1, not today.
Got it, sir. But sir, my question was that really we have a higher capacity of 3 gigawatts a year, and we have the open orders as well, so basically, what will be our path to higher installations on a quarterly...
Yes, it's -- obviously, we can't give that guidance, but I can say is that order book is one thing, and the delivery schedule is different because each project is unique.
If there is an equipment supply, they will have their own schedule in terms of when they want the turbine, one is looking at the [ base ] site readiness. And even where we have an EPC, sort of -- I think it's where we are responsible for everything, still people, some of them have asked for rescheduling the supplies because the evacuation system is getting delayed. The substation from which their product gets evacuated is getting delayed. So this is now a dynamic situation.
So depending upon the need of the project and also the evacuation capacity is happening, the schedule keeps changing. So we may have an order and also orders may have been booked for this year, but the -- still that clients can come back and say that my evacuation is not happening or I'm getting delayed in terms of land acquisition, so therefore, please postpone.
So that's what keeps happening, that -- which is why we keep working with every client independently around each project. That's what would decide the -- how much we can supply. We can supply, but provided the projects are not ready to take that much capacity, then obviously, what do we do with that? They won't even pay us. They won't even take turbines and pay.
The next question is from the line of Amit Nigam from Invesco Mutual Funds.
I had two questions. When I look at the finance cost line of the P&L, sequentially, would the trajectory be a sharp drop or a more gradual drop? That's one.
And second is, when I look at your cash flows on a consol basis for the first 6 months, I see a significant deployment in the working capital lines. So does that give us some visibility to a better execution coming up in the second half?
So Amit, I'll answer both your questions. So on the first one, with regards to interest costs, yes, as I said in my opening comments, certainly, you will see a sharp drop in the finance cost in Q3. Up to now for the 6 months or H1, our finance cost has been about close to over INR 90 crores for the first 6 months. And that's largely been because of the debt that we had on the balance sheet, which has got repaid around the end of August.
So for a large part of the Q2 also until the QIP proceeds were realized and paid to the lenders, that interest cost line is figuring in the quarter 2. So Q3, we'll see a sharp decline in the interest cost for sure.
To answer your second question, working capital is, I would say, is an issue in the business. We are working as a company to further optimize that. And yes, you are right that if you see the cash flow, there is significant working capital deployment currently as we speak. So -- and once we have the 1.6 gigawatts in confirmed orders, certainly, we are very, very focused on executing those orders in the quickest and most profitable manner possible.
And so is it -- would it be prudent to conclude that March 31 in 2024, the balance sheet, especially on the working capital line items will be much lighter from where we are today?
May not be lighter from where we are today. Again, I would like to review working capital always as a percentage of overall sales either trailing or forecasted because wherever we end March '24, our net working capital at, that could be representative of the investments that we've made for deliveries to be done in March '25.
So I don't think in absolute rupees crore terms, it may be a lighter number. But in percentage terms for the business that the company would deliver going forward, it will certainly be lighter in that proportion.
So you're saying it'll be more efficient, right?
Yes, certainly.
The next question is from the line of Deepesh Agarwal from UTI Asset Management Company.
Sir, my first question is, is it fair to say entire order book of 1,613 megawatts will be executed by March '25?
Yes. Right now, the orders, what we have is -- that's right. The order book, what we have is for FY'24 and FY'25. The order in the pipeline, what we are now negotiating, we are discussing are -- of there, there are some which will go into FY'25 and FY'26. But the current order book, what is shown, 1.6 gigawatts, is for FY'24 and FY '25. I think this will be [ over ] beyond...
Okay. So for FY'25 incremental orders, anything which we get in the next 1 or 2 months can possibly go into FY'25, right?
Yes. Yes -- no. What is now happening is that orders that are coming in and sort the -- it depends upon the size, okay? If we get 50-megawatt or type of orders that will [ begin ] for FY'25. But let's say that if you get a large order for 200, 300 megawatts, then we could be FY'25 and FY'26, even if we get in the next 2 months.
Okay. So basically, if we take the formula which you gave earlier in the call, second half is typically [ too well ]. So assuming you do a 500, 550-megawatt in second half we have 1,100 available for execution in '25 plus any increment in order you get, which can be executed in '25, right?
Yes. Guidance-wise your numbers are right. But I can't fault with your arithmetics.
Sir, the other question is if I look at your order book, almost half of your order book is in Karnataka. Sir, what is the status of the transmission connectivity out there? I guess there were some substations which were to be installed, which are getting delayed out there. Anything which impacts us out there?
Yes, it does, Deepesh. Like some time back we were saying impact in the sense that there could be some people like especially for this year's supplies. Okay? So they can say slightly delayed because substation is getting delayed for the next year. So there are -- you're right, there are a couple of substations are delays those are expected to come, I think, end of this year and early next year.
So there will be some readjustment of delivery schedule that is what would be the impact on us. Otherwise, the connectivity and the capacity is not our responsibility, that's responsible to the client. So we would not have anything -- only to the extent that the -- if they know in advance, that's going to get delayed, then obviously, they would like to reschedule the supplies, move it by 2 months, move it by 1 month, move it by 3 months. That's sort of things can happen. That would be the impact on us.
There is another consideration, Karnataka is -- basically, the reason is that until now, as you know that the -- all the bidding was happening on the site [ stayed agnostic ] because we can put it anywhere. So everybody would go towards where the higher wind because that's the only way you can win the bid.
So initial -- all products came up in Gujarat then Tamil Nadu then, obviously, Gujarat had some constraints with respect to land, which they removed now. The only other option was the Karnataka, the option was available for MP, Rajasthan, AP, anywhere, but people didn't put up there because there, you will get lesser PLF compared to Karnataka. But now with the full tariff concept, those states are getting opened up. The constant delay in Karnataka, that is the reason.
So is if there is a delay in the transmission, it also defers our revenue, right?
Come again?
If there is a delay in transmission line being set up, it also defers our revenue, or we get -- our revenue is only the final commissioning that we took here?
Now contractually, it doesn't differ -- but then if they are repeat clients, we have a relationship with them and they know in advance, let's say, 10 months in advance that it's going to be delayed. They'll come and ask us saying that, "Can you please reschedule some of your supplies?" So we are oblige. If you oblige that, then there could be some difference.
Contractually, no. So we have agreed to a schedule when they need to take turbines that way. But then when you work on a relationship with the repeat clients, then obviously, you would tend to agree with them some revisions, if feasible. It's not necessarily that -- not always feasible to risk into the supply. But if we reschedule -- agreed mutually, a reschedule then there would be an impact on the top line. But then what will happen is that some of the sites could be there. So we will fill up that during that period of time. It's [ cushion ] because we're doing multiple contracts. So in some cases, we can advance because they would may be ready, but earlier we didn't agree to supply that time because we were to supply to this project. So now we can switch and supply to that product. That's how we plan when we have multiple contracts.
Sir, lastly, what is the status on the CapEx, which we were doing for the molds for the 3-megawatt turbine? Is it ready? And can we start shipping those turbines from 3Q or we'll have to wait for the 4Q for that?
We already started supplying commercially and about 5 or 7 turbines got dispatched already. And then we are now doing commercial production. This will gradually pick up in Q3 and Q4, but significantly ramp up will happen next year, obviously, but then you will see a reasonable capacity going out in this year, especially in Q4.
And the CapEx plan for molds is on track. So whatever number of molds we need, we already have 3 molds in operation and on transit, and the rest will be in play by end of this quarter or early Q4.
The next question is from the line of Dhruv Muchhal from HDFC Mutual Funds.
Sir, looking at the industry situation in terms of increasing demand and particularly -- and also your positioning in terms of the EPC service that you probably uniquely provide, very few players provide. Sir, is there a possibility or probably some discussions that you're already having, the scope for margins that you earn for your services plus the working capital cycle that we have in the business of improving versus what we -- we're thinking in the last 3 months or 6 months or the last 1 year. So some thoughts on that, sir, please.
Yes, on the improvement of working capital from the client side, we have done significantly already in the last couple of years. So we changed our payment terms. We said we would like to get payments on the component-supply basis, as a turbine-supply basis. We've done adequate work, but at the same time, there's always scope for improvement, asking them to open LCs and things like that. So that does exist in terms of the improvement of working capital cycles based on orders.
Okay. And sir, on margins?
Margins -- we gave a guidance on the margins. I think right now, we'll stick to that margin rather than saying that, okay demand feels -- for the repeat customers, we really don't want to go and say that because the demand is higher, it's now a supplier's market. We want to improve our margin significantly. That's not the way to work with the repeat customers. But some customers, the C&I segment and other things we [ may improve ] the margins. But our guidance remain the same is whatever we said earlier, the margin-wise, per megawatt. That won't -- we wouldn't like to change that guidance.
And sir, the second question is probably just to understand -- it could be too early. But we are seeing some intensity by Chinese equipment suppliers increasing. We are hearing about Europe trying to impose some restrictions on Chinese I'm not sure how relevant this is for India.
And I was looking at some data, the cost for them seems to be very low versus probably globally even for India -- versus India. So can that be a threat to the industry in India also to you? Or the dynamics are very different in India, and it has no implication.
Let me answer this from the industry perspective rather than looking at Suzlon, I don't want to get into the issue of what happened with Suzlon. The -- many of the suppliers as I said some time back, issue is that they are component suppliers rather than EPC suppliers, okay? When I say component, not even WTG, they're willing to supply just a nacelle, not even tower, not even the blade.
So -- and some people think that, that's the best way that I can reduce may cost. But ultimately, how much capacity do we have? Capability building in the country in terms of bridging the gap between supply versus commissioning is a major issue. So which is a concern, the government also is having now. And in fact, they started monitoring a number of turbines on the ground uncommissioned because -- which is going up now today in the country.
Yes, they do have the advantage of the price because many of them are actually assembling it here than the manufacturing even whatever manufacturing material -- the raw material completely imported from there. And they do advantage there in terms of subsidies, in terms of power cost so various things. So -- their input cost as well. So that's a known fact, but then the manufacturing component in India is much rich, more of an assembling here is happening.
So the challenge for them will always be -- that you mentioned the combining it with service. So that execution challenge will always be a problem.
For the bidders ultimately -- why I said that we're getting more demand for EPC is that how much of this -- how many of these clients really can think of partnering with someone else because nobody does on their own. You need a partner to build our projects. So do we have really a capability built up in the country for doing 7 gigawatts to 10 gigawatts, what we're talking about in terms of BoP is what -- is a question one has to ask. Supplies can happen. People can dump the turbines on the ground. But then know that as a country what we need is not the turbines dumped on the ground, but turbines commissioned, connect to the grid. So that as an industry, we're going to face that issue and which is now slowly is coming on the ground.
The next question is from the line of [ Rahul Kothari ] from [ GRIT ] Equities.
Sir, just picking up the earlier question forward. So these are imported and assembled parts, these kind of orders are also applicable like in the PSU tenders also or it's more towards the C&I, IPP, private IPP domain? That's one thing.
Does it -- second is on just to further understand on the competitive landscape from domestic and international front. So I understand they can win, there are domains, equipment suppliers and BoP and third is the OMS. So specifically on the OMS, for us, for our own supply, we don't see any competition, right? What we are looking for is the already OMS in place, which are where other players' products are supplied. So can you just elaborate on the front of the competition?
And thirdly, was just one more question to add in, that is regarding how do we look at the weightage of like 2 gigawatts -- 2-megawatt and 3-megawatt proportion in our revenue book going forward in FY'25, if we look into?
Yes. On the first one, the -- to my knowledge, there's no restriction on -- in PSUs because it's basically RLMM listed acumen is what people find. Unfortunately, in RLMM listing, it talks about either you manufacturer or you assemble. So you still get qualified for RLMM listing. So once you listed in the RLMM, I'm [indiscernible] that I don't think there are any restrictions for PSUs -- to my knowledge. I'm not completely authentic on that, but that's what I feel is the thing because they are listed in RLMM, and they are listed there because assembly is also allowed in RLMM. So therefore, that's the question number one.
And question number two, yes, you are right. There are two shows on the OMS. One is our own fleet. The other one is we multi-make, what we acquire from others. Even in our turbines, I don't think it's a [indiscernible] part to say that there is no worry because the people -- there are ISPs, which are there in the market, so they're setting up some sort of the, what you call, unsustainable benchmark in terms of pricing, in terms of performance parameters what they're guaranteeing plus some of the large IPPs think that they can operate.
So therefore, there is a pressure on us given our work fleet to ensure that our service remains high and then we keep adding value-added services, as I said -- mentioned earlier. So -- that's a [indiscernible] fact that we do recognize that even in our own turbine things, we need to be careful to protect ourselves. We've been able to do that, and we hope we'll continue to do that in the future.
And as far as the third question was, you said international? Sorry, you asked too many questions, so I forgot your third question.
The third question was regarding the proportion of revenues [indiscernible] coming from 2-megawatt and 3-megawatt turbines going forward in FY '25, '26. Are -- will it be more tilted towards 3-megawatts, sir, going forward?
See, right now, obviously, when you look at our order book, the significant portion is for 3-megawatts today than the 2 megawatt. But having said that, it depends upon which site -- some sites, 2 megawatts competes better than 3 megawatts. So we are agnostic and I think most of the people, the clients would be more for the cost per kilowatt, but as there's a psychological feeling that -- a psychological preference for 3-megawatt, being a larger turbine, maybe a number of [ footprints ] will be less and things like that. But we expect that FY'25, we will continue to have both maybe in the ratio of 2:1 or little different but that's around -- that is what we can think that 2-megawatt and 3-megawatt in FY'25 will be.
The next question is from the line of [ Sanuga ], who's an individual investor. As the...
Yes, let's go ahead, we can take the next question, if there are any. Otherwise, we can end the call.
Okay. So as the current questioner has left the queue, we would take that as our last question. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.