Suzlon Energy Ltd
NSE:SUZLON
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Suzlon Energy Ltd
Earnings Call Analysis
Q2-2025 Analysis
Suzlon Energy Ltd
Suzlon Energy recently marked a significant milestone by securing the largest single order in the Indian wind industry from NTPC Green for 1.166 gigawatts. This order enhances Suzlon's already robust order book, which has now exceeded 5.1 gigawatts—a significant leap from approximately 2 gigawatts before. This unprecedented growth in orders showcases a regained confidence among stakeholders and positions Suzlon as a key player in India's renewable energy transition. This confidence is further bolstered by the acquisition of Renom, which expands Suzlon's service capabilities and fleet strength in the sector.
For the second quarter of FY 2025, Suzlon reported consolidated revenues of INR 2,093 crores, reflecting a robust year-on-year growth of 48% compared to INR 1,417 crores in Q2 FY '24. This growth is not just in revenue; the company's EBITDA also increased by 31%, reaching INR 294 crores, although the EBITDA margin experienced a slight dip to 14.1%. This drop was influenced by strategic investments in organizational development and technology, indicating Suzlon's commitment to strengthening its competitive edge. The company's profit after tax surged by 96% to INR 201 crores, signifying strong operational health.
Despite the impressive order book, Suzlon faced execution challenges, delivering only 256 megawatts during the quarter due to project readiness impacted by severe monsoons. However, management anticipates a robust ramp-up in the second half of the fiscal year, projecting wind installations reaching around 5 gigawatts for FY 2025, followed by an increase to 6-7 gigawatts in FY 2026. Looking further ahead, the company aims for annual installations between 9-10 gigawatts. The second half is expected to show significant growth, as many projects previously delayed are now set for commissioning.
Suzlon's leadership emphasized that recent increases in employee costs, which included provisions for employee stock option plans (ESOP), should be viewed as investments toward future profitability. These expenses, alongside costs allocated for enhanced technological capabilities and capacity expansion, signify a proactive approach to ensure sustainable growth. The company aims to ramp up its manufacturing capacity to 4.5 gigawatts by March 2025, ensuring all segments—tower, blade, and other assets—are adequately equipped to meet projected demands.
Suzlon remains strategically positioned with a clear focus on public sector undertakings (PSUs) and commercial & industrial (C&I) customers. Approximately 75% of its current order book is attributed to these sectors, reducing reliance on bid power purchase agreements (PPAs). The company's competitive edge is further heightened by its comprehensive offerings in the end-to-end wind energy value chain, supported by a strong supply chain and R&D capabilities. The management maintains that this integrated strategy is not easily replicable, enhancing Suzlon's long-term sustainability.
While focusing predominantly on wind energy, Suzlon's management has not ruled out future endeavors into solar and energy storage solutions. The company is currently in a phase of internal consolidation but is considering opportunities that align with its core business and enhance stakeholder value. Although there are no immediate plans to diversify into solar, management is open to hybrid projects if they arise.
Suzlon possesses a fortified financial position, evidenced by a consolidated net worth of INR 4,495 crores and a net cash position of INR 1,277 crores. This financial stability ensures that the company is well-positioned to capitalize on the multi-decade opportunity presented by India's energy transition. The management expresses confidence in continuing to achieve higher order book figures in the coming quarters, bolstered by the mix of current orders and ongoing discussions for future contracts.
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Ladies and gentlemen, good day, and welcome to the Suzlon Energy Limited Q2 FY '25 Earnings Conference Call. During this call, the company management may make certain statements that reflect their outlook for the future, 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 detailed in the annual report. Actual results may differ, so these statements should be reviewed in conjunction with the risks the company faces.
[Operator Instructions] Please note that this conference is being recorded. We will bring the opening remarks followed by a Q&A session. To be fair to others, we kindly request each participant to ask no more than 2 or 3 questions. From the management, we have with us Mr. J.P. Chalasani, Group CEO; and Mr. Himanshu Mody, Group CFO. Over to you, J.P. Chalasani, sir. Thank you.
Good evening. We appreciate you joining us for Q2 FY '25 earnings call. At the outset, let me apologize for delay by about 8, 9 minutes. That's because we had some issue with the connectivity. Extremely sorry about that. We never want to start a call late. We hope you have had a chance to review the results we published today.
Again, apologies, but I think you had limited time before you could actually see the results. We will henceforth next quarter onwards, I'll at least ensure that you have sufficient time before we have this interaction so that we can have a meaningful interaction.
We will now provide a brief overview of our Q2 FY '25 performance and our outlook for the full year. After that, we'll open the floor for questions. Let me begin with the key developments for the quarter gone by. We secured the largest ever single order in the Indian wind industry from NTPC Green for 1.166 megawatts. This project utilizes plug-and-play approach with the pipeline for land and power [indiscernible] within NTPC's scope. Our order book now exceeds 5 gigawatts, an unparalleled achievement in the industry. The entire order book consists of the firm orders as we disclose the orders only when they are backed by the financial commitments.
Suzlon acquired Renom, marking a pivotal entry into the multi-brand O&M sector and unlocking significant growth potential in this area. This strategic move capitalizes on Renom's strong ISP market position and Suzlon's expertise positioning us to substantially enhance fleet size and profitability. Additionally, we successfully monetized our corporate office, a noncore asset for INR 440 crores.
On the execution front, Suzlon has now established itself as a supplier of choice for PSUs, while also being a key partner for C&I customers. Our focus remains on pursuing quality orders with a higher value and better margins.
Suzlon continues its growth trajectory with deliveries of 256 megawatts in quarter 2, up from 132 megawatts last year. This represents a highest delivery for the second quarter in the last 7 years, accomplished despite severe monsoon disruptions in Gujarat and other parts of the country.
Robust order book of 4.7 gigawatts as effective September and over 5 gigawatts as we speak now -- sorry, 4.7 gigawatts for specific S144, make it as a testament of superior technology and customer confidence in Suzlon. This also reverberates with 29 years of proven track record with 32% market share on installed base.
The industry commissioned approximately 1,476 megawatts in first half of this financial year, which is below expectations on account of monsoon disruptions. However, we estimate that significant number of turbines are in the precommissioning phase and will be completed in H2 of FY '25. Our OMS business continues to do well with 15 gigawatt capacity in India with the machine availability ensured above 96%.
Our top priority remains timely execution of our robust order book, while upnholding the higher standards of quality and ESG. We believe India's renewable energy's journey is just starting with power demand to remain robust on account of rapid industrialization, urbanization, e-mobility, et cetera. And we are poised to lead this transformation and sustainable solutions for the future. Our expectation is that wind installations will be around 5 gigawatts for this financial year FY '25, 6 to 7 gigawatts for FY '26 and then increase to anywhere between 9 to 10 gigawatts yearly.
Our pioneering business model of end-to-end offerings for wind energy value chain, fully integrated supply chain, track record of project execution and best-in-class service cannot be easily replicated, which provides us with a strong competitive edge.
I would now like to invite Himanshu, to take you through the financial performance. Himanshu, over to you.
Thank you, J.P.C. sir, and good evening, ladies and gentlemen. I will be using Slide #17 to 25 of our investor presentation, which has now been uploaded on our website, www.suzlon.com as a reference point for my discussion during this presentation.
The largest single order of 1.1 gigawatt from NTPC is a testament to Suzlon's resurgence as a market leader in the PSU segment. With the largest ever order book of 5.1 gigawatts, we now have clear visibility of the orders that need to be tentatively executed over the next 18 to 24 months.
The acquisition of Renom has added to the -- significantly to our fleet strength of close to 2.9 gigawatts across wind, BOP and solar segments. On the P&L front, for Q2 FY '25, Suzlon continues its exponential growth trajectory with consolidated revenues showing robust growth of 48% on a year-on-year basis, reaching INR 2,093 crores in quarter 2 FY '25 compared to INR 1,417 crores in quarter 2 FY '24.
EBITDA has also grown by 31% to INR 294 crores in quarter 2 FY '25, up from INR 225 crores in quarter 2 FY '24. Our EBITDA margin remained strong at 14.1%. The small decrease in EBITDA margin as compared to Q2 FY '24 in percentage terms is largely because we are focused in incurring investments in organizational buildup, technological investments and a substantial ramp-up in capacity for future deliveries in the upcoming quarters. These decisive investments are set to significantly enhance our competitiveness, drive, efficiency and elevate profitability to new heights.
Rise in employee cost is also attributable to noncash provisions of about INR 32 crores on account of ESOPs that were granted to employees. PAT for Q2 FY '25 increased by 96% to INR 201 crores on a year-on-year basis. On a quarter-on-quarter comparison, manpower cost has increased by INR 46 crores mainly due to on account of the ESOP charge of INR 32 crores in this quarter, plus the annual increments, which -- for which we follow the July to June cycle every year.
The rise in other operating items from outsourced manpower, which is variable in nature, production ramp-up expenses, cost for transformation projects and certain onetime expenses for transactions and the director remuneration that was paid out in September accounts for all future growth trajectory.
The small increase in finance costs is largely attributable to processing fees paid to lenders for securing working capital against the NTPC project, a small increase due to increase in debt as a result of the Renom consolidation and lease rental expenses on the One Earth property as a result of its divestment.
We are pleased to report our balance sheet as of September '24, which demonstrates a position of strength with strong consolidated net worth at INR 4,495 crores and a net cash position of INR 1,277 crores as of September '24. Suzlon is now well positioned to seize the multi-decade opportunity in India's energy transition equipped with the largest ever order book and a strong pipeline of projects under discussion, a fortified financial position with the optimized cost structure, our best-in-class products backed by our in-house R&D team, a well-prepared and lubricated supply chain, renewed confidence from all stakeholders and a strong management bench strength, which is set to deliver the results.
The comprehensive approach positions us to capitalize us on emerging opportunities and drive sustainable growth.
With that, I'd like to conclude my presentation and open the floor to any questions that the callers may have. Thank you.
[Operator Instructions] Our first question comes from Ganesh.
Congratulations for the amazing results this quarter. I just have one specific question. I came across press -- money control discussion where the management said they wanted to get into the non-wind sectors as well, particularly solar. I just want to check what is the management's current thought process around this.
I have no idea about what exactly is the money control because we never spoke about getting into solar. And we've been on record on this saying that we would remain in our core business, and anything connected with that is what we'll keep doing it. At this stage, we have -- and -- but at the same time, we said that if there is any client who wants us to do the full project, which includes solar and wind component, we are willing to take up that job and do for the client because they want one single supplier. But till now, we have not got any such requests. There is no such contract of hybrid projects given to us. So therefore, we getting into solar at this stage doesn't exist.
The next question comes from Shweta Dikshit from Systematix Group.
My question is industry specific. As you have mentioned in the initial comments that we're looking at a 5-gigawatt of installation this year, that number was 3.3 gigawatts last year. Now if you look at the first half of this fiscal, capacity installation was only 2.2 -- 1.5 gigawatts, which was 2.2 gigawatts same period last year. What gives us confidence that in the second half, it will be sufficient to reach the 5 gigawatt number? And what in your opinion is the bottleneck here, which can stop us from achieving that number?
I think there is the reason why we still continue to feel that it would be closer to 5 gigawatts this financial year. While I completely agree that it is 1,476 in H1, which is less than H1 of last year. But there are significant amount of turbines supplied and like erected but not commissioned and now are on the ground. Even we did some analysis of end of quarter 1. I'm not talking about end of quarter 2 because end of quarter 2, we still need to get that data.
It then was 2.8 gigawatts of turbines are in different stages, whether they are at site [indiscernible]. Even if we take our own case, while we reported 201-megawatt as commissioned in H1, there is 170 megawatts, which is directed and ready for commissioning like last time also we said some capacity was [indiscernible] either because of the substation not being ready or [indiscernible]. Why we -- plus also let's understand that the reason for lower insulations in quarter 2 was significantly because of monsoon.
And this time, it was very heavy in Gujarat, we couldn't do anything -- not even in Gujarat, even Karnataka, different places, there have been significant impact. Considering that is past, considering that the turbines have been supplied and in many places it has been erected and then ready for commissioning for different reasons, we still believe that H2 would be significantly higher than the H1. And we are pretty confident that anywhere north of 4.5, if not 5, would definitely get commissioned this year.
The next question comes from Anupam Goswami from SUD Life.
Sir, my question is on what sort of capacity do we hold right now to execute annual orders? And going forward, what sort of a gross margin are we looking at? Even this quarter, the gross margin was a little dip. So this year and going forward, what sort of gross margin should we look at?
Anupam, so we're looking at the capacity. As you can see in our IR deck, currently, it's about 3.1 gigawatts, which we have now ramped up to about 4.5 gigawatts across all components of tower, blade and asset. So that's what our manufacturing capacity on a per annum basis would be. We are in the -- phase wise, we're looking at a ramp up to 4.5. And by the end of this financial year, we should have -- we would have completed that expansion exercise.
So far as margin expansion is concerned, one thing I've repeatedly said on all calls, when you look at consolidated margins, there certainly will be a dip because as the WTG business keeps growing in size, which is a lower-margin business as compared to the services business, the consol margin will definitely see a dip because of the larger increase of business in a smaller margin business.
However, for that reason, you need to look at the margin profiling of both WTG and OMS businesses separately, and we continue to maintain that the WTG gross margin will be in the mid- to late teens, whereas the OMS business gross margin will be about 65%.
Sir, won't our service business also increase as -- with the WTG business increases? So -- and what sort of percentage should we look at? mean, of all the installation of WTG, what sort of percentage will come in the service segment?
So every single WTG that we sell, we also have a services contract to back up. We don't sell any WTG without a services contract. That's number one. The services business revenue, however, kicks in only after completion of the third anniversary of commissioning of the turbine because first 3 years of the turbine are of free, which is covered under the warranty period, which is included in the sales price. So with the 3-year lag, the revenue for services of the commission turbine will kick in.
Except in contract like NTPC, where it kicks in like from day 1.
Sir, any ballpark like what sort of service revenue comes, let's say, for 1 megawatt or 10-megawatt WTG being sold?
I think you can do the math, Anupam. I mean, our services business broadly is about close to INR 1,900 crores in top line for a 15-gigawatt fleet. So I'll let you do the math there.
The next question comes from Deepesh Agarwal from UTI AMC.
My first question is if I look at the contribution in WTG segment, this quarter seems to be on a lower side versus last 7, 8 quarters. Was there any extra costs or the ESOP cost is resulting in this decline?
So Deepesh, ESOP cost will not be there in the contribution margin. Of course, ESOP cost will be there in the EBITDA. As we maintained that the WTG, if you're talking gross margin, gross margins will be in the late teens to early 20s. Of course, the slight percentage fluctuation here and there would be on account of commodity prices or some of the COGS items that we purchase. But -- I mean, there is no dramatic movement in the COG percentage for the WTG business from a contribution margin perspective.
Sure. And the 5.1 gigawatt order book which we have, doesn't have any long-term or long gestation kind of a contract, which effectively means ideally, everything should be getting executed in the next 18, 20 months, subject to any delays?
As I said in my opening comments, we don't announce any framework agreement at an order book. We just announce the projects which are likely to happen and where it's a confirmed schedule and then there is an advanced stage is what we announce.
And therefore, this entire 5.1 gigawatt, as Himanshu said in his opening comments should get completed in the next 18 to 24 months.
Understood. And sir, on similar lines, I think you were also looking at ramping up the production capacity in terms of debottlenecking at Daman and also restarting the Pondicherry plant. Where are we in that stage?
We are now -- Pondicherry we already started production there, As Himanshu mentioned for the previous question, that we will reach gradually from now onwards to 4.5 gigawatts before this year end in all segments, whether it is tower or blade or other assets. So we should -- before we start the next financial year, we would have a manufacturing capacity of 4.5 gigawatts, which should be gradually ramped up from now to the end of March. It's not that everything is going to happen at the end of March. Pondicherry has already started. It's in the ramping up stage now.
The next question comes from Pramod, an individual investor.
I would like to know, is there any plan to get into energy storage domain by acquiring any other company?
At this stage, if you ask me at this instance, no. But having said that, as we move ahead, we would explore different opportunities from time to time, which is closer to our business what we do. Like, as long as we remain within the RE business, if it's going to enhance our core business, obviously, we will look at it. But right now, there is no such proposal.
But I'm not saying out rightly no. So these all for the future. Right now, we are in the days of consolidating our core business quarter-on-quarter basis. And once we do that in the next couple of quarters, then obviously, we would look at other opportunities for growing around our core.
So did we add Renom revenue in this quarterly result or it's not added -- included?
Yes, we've added -- we've consolidated Renom on a line-by-line basis. Although for this quarter, it has been for about a 25-day period. I mean, as you know, the acquisition got consummated in the first week of September. So the line-by-line consolidation for a proportionate time period is only for about 25 days.
The next question comes from Amit Bhinde from Morgan Stanley.
Sir, I just wanted to understand the kind of one-offs that we have had because of the multiple transactions, the Renom acquisition and the One Earth sale that could be a part of the other expenses. And also, how much is the lease expense related cost in the other expense and the interest cost?
So I'll answer your second question first. So there will be when we divested One Earth in a sale and leaseback transaction, we confirmed that there will be an approximate INR 4 crores per month charge on account of the One Earth transaction in the P&L. Of course, that is on a gross basis. We also have rights to sublease the premises. So that subleasing efforts have already started, which would, of course, as and when we get third-party rental, the INR 4 crore expense will keep coming down. But as of now, the worst case you have to assume a INR 4 crore monthly P&L charge.
And there are no significant -- while there are some one-off cost items on acquisition of Renom and One Earth transactions, but those are not significant. The one-off items that we are incurring are largely related to a future capacity expansion, incurring some of our IT expenditure, like ramping up SAP, we're implementing S/4Hana, for which there are certain one-off costs which are for the long-term benefit of the organization, but no significant one-off costs on the Renom or One Earth transactions.
Right. Got that. Another question that I had was, as you mentioned in the previous question that the service contract for NTPC would start from the first day itself. So on that note, would the realization per megawatt for the WTG be lower? Because right now, when you have around INR 5.8 crores per megawatt on your WTG, that's including the 3-year free service period. So would NTPC have different terms and different pricing?
No.
So you're saying that despite this 3-year warranty period not being there, our per megawatt realization could be in the same range of 5.8 to 6.
Yes, yes. This is a competitive bidding, and they have different terms. Obviously, with the different pricing, PSU with the different pricing, still compared to what you normally do with others.
[Operator Instructions] The next question comes from Subhadip Mitra from Nuvama.
I'm sorry, I had got disconnected from the call. So I'm not sure if my question is a repeat. So what I wanted to understand is, firstly, given that you have such a strong order book and it is executing till over the next 18 to 24 months. Would I be right in assuming that you would roughly hit a run rate of 2, 2.5 gigawatts per annum kind of execution or will it scale up over a period of time, and it will be more bulky towards the latter half?
Subhadip, you are quite smart, okay. So you know that we said 5.1 gigawatts, and I also confirm that we will be doing it in 18 to 24 months. So you have answer in your question. And I agree to the assumptions what you're making without committing what are the assumptions you are making.
And just to add, I mean, of course, it's not that 5.1 stops there, there is an active order pipeline also that is in discussion.
There's a significant pipeline of orders, which we are discussing, which you'll keep seeing us announcing it. So therefore, we expect whatever the trend we started each of the quarters, we have been saying that at the end of the quarter, this is the highest ever order book we have, closing order book. And I'm pretty confident we'll continue to do that, at least for a few more quarters. At least for the next 2 quarters, we continue to say that this is the highest closing orders.
It's not that it's going to stop at 5.1, and we are pretty sure about that, looking at various opportunities, which we are at different stages of discussion. I don't want to put a number to that, but yes -- and I can confirm to you that the next time when we talk, I will again say that this is the highest closing order book we ever had.
Understood. Understood. No, that's very clear. My question is actually more -- I think the demand piece is amply clear to all of us who track the sector that we are looking at a very large wave of ordering that's come back and is likely to stay for some time. But in terms of the supply side, in terms of your own ramp-up of capacities. What's the progress there? Are you looking at significantly ramping up your annual execution capability? Any particular targets that you have over there?
Subhadip, with regards to the portion you missed. But anyway, before I come to the capacity let me tell you that even today, compared to what we have supplied, 217, 256 megawatts in quarter 1 and quarter 2, our capacity to supply is much, much, much more, okay?
Today, it is not the capacity of manufacturing, which is constraining us from supplying, it is the projects being reduced to offtake the suppliers for is what is the constraint, okay? That is what is defending. But moving ahead because it's an advanced action of that being taken through various clients, including us, for example, like NTPC itself, we said that they already awarded the land and the BOP contracts much in advance. So therefore, they sit in much better phase.
We expect this problem starting from Q3, Q4, especially next year, significantly reduced. Therefore, that's the time when we get tested for manufacturing capacity, today we're not tested. That is the reason which we said sometime back, we have already started ramp-up of capacity. And by progressively, by March '25, we would be at 4.5 gigawatts of capacity. And -- in all 3 segments, whether it's the place or the tower or an asset. that's the capacity we will reach.
Depending upon what order book we sit at March '25, we would then decide in the future and also looking at 2 to 3 years ahead, we would look at what other capacity expansion is required. Otherwise, 4.7 gigawatts is committed, and we will achieve that by end of this year.
Understood. And this a large component of this increase to 4.5 gigawatts. Would it also come from the Pondicherry facility getting reinstated?
Yes. There are -- as far as the national is concerned, one is Pondicherry. And secondly is that the additional securities what we're providing at Daman. Even Daman plant capacity itself is significantly going to go up. So the Pondicherry which I said sometime back we already started to ramp up and is in the progress now. And those two will add to our capacity plus blade's additional lines getting commission from now to then plus the cycle time getting improved for 3-megawatt blades.
So that's the fact will ramp up. And the tower, we met -- we have our own capacity, we met every single tower supplier together here in our office. I also said that when you are confident you are expanding your capacity for the trades and assets, we are committed to increase our capacity. They said, please tell us how much you want, we will supply the towers, it is not an issue.
Understood. Understood. And sir, lastly, on margins. Any particular reason why this particular quarter's margins are slightly on the weaker side? Or is it more of a timing issue and you expect things to get better?
No. So again, Subhadip, I don't know why you think it's on the lower side. Of course, if you're looking at consol, it will continue to be lower as the WTG business increases in the overall mix of the business between WTG and OMS. But other than that, really, there is not much of a swing in margin. It remains to be steady. If you look at the WTG business, it is close to about 22%, and the OMS business continues at about 67%.
The next question comes from Aadesh Mehta from Motilal Oswal Asset Management Company.
Sir, just wanted to understand whatever investments we have done in terms of costs where we are seeing some marginal decline in margins. Can you quantify how that can increase our competitive positioning or how that can move to higher growth, if you can spend some more time explaining that?
So Aadesh, if you look at the cost items, roughly, if you look at the operating cost, there has been an increase, as I said, on IT expenditure, which we've maintained that will be -- we will be incurring those costs. Of course, I'm leaving the ESOP side, because that's -- whilst it's a P&L charge, but it's a cost item nonetheless. And we will see that ESOP cost being incurred till FY '26. Of course, that is for the employee retention motivation whichever way we look at it.
And in addition to that, the administrative cost or employee cost, the way to look at it is that we're incurring those costs in Q2 for the future ramp-up of meeting higher capacity. So is the cost representative of the organization delivering 256 megawatts RR? The answer is no. With the same cost, the organization can and is gearing up to deliver a much higher RR in the future quarters.
So whilst it is difficult for me to quantify in rupees crores for you, but nonetheless, let me suffice it to say, that margins going forward -- and I'm talking margins at the EBITDA level for the WTG business or for the OMS business, will definitely not get compromised.
So when you look at the WTG business, EBITDA margins today, we are close to about 7%. That 7% EBITDA margin will only increase northwards on as we go and increase our volumes for deliveries. And the 40% OMS EBITDA margins will also maintain the same trajectory of growth for sure.
We're all clear that we are seeing also in the market today, the biggest challenge for renewable energy sector is the manpower, not getting the right kind of people. So therefore it is necessary for us when we're expanding significantly in terms of manufacturing, in terms of project sites and in terms of our OMS site. So it's necessary for us to get talent, train them, keep them in position. So that is what we're doing.
And also the -- this is nothing to do with your question, but I think we mentioned in our media release. Looking at our current consolidation of the core business what we have done in the last 2 to 3 quarters, now the order book being there, balance sheet having cleaned up, working capital has been paid up. The senior leadership completely in position and not just in position, now they are got into the group.
So therefore, we're almost getting into the core business being on auto mode. I said some time back when we talked about storage and all. Since I was mentioning it, we thought that this is the right time we start looking at what next for us to do, what is the strategy.
So first thing is we ourselves are strengthening our strategy in the senior whole strategic team, and we just hired the chief strategy officer. In addition to that, we also hired one of the leading global management consultant to work along with us and tell us that, okay, while your core business is consolidate going, is there anything for you to do to increase the stakeholder value in the future.
So therefore, that sector, which we started maybe it will take about anywhere between 4 to 6 months before we conclude saying that, okay there are opportunities adjacent to what we're doing is going to enhance the value of the core business as well as expand our business in the further areas. That's one thing which we are doing, and that's what is mentioned today by Mr. Girish Tanti in the media release also.
So that's another area which I thought we should tell you which we missed in our opening comments. That will address some of the points what other questions coming in, in terms of the storage, in terms of various other things. So we are also saying that when core business is getting stabilized, we also need to look at, are there any risk-free ways of enhancing our position to be there as a long-term player in the renewable energy sector.
Got it, sir. And I also wanted to understand that first half has been very peculiar for us in the sense that deliveries have been at least 2x the number of installations. So how long can those continue?
We -- as I said some time back, there is a significant gap in the industry between the supplies versus COD, okay? In fact, if you also analyze the actual commissioning what happened in the quarter 1, quarter 2 also received, to some extent analysis is not completely done. In the quarter 1, what got commissioned out of the 770 megawatts close to 600 megawatts was the turbines which got supplied in '21 and '22 -- year '21 and '22. So projects got set for different, different reasons. Now I think they're getting unlocked. Therefore, even today the significant amount of turbines supplied on the ground, are erected, ready for commissioning in [indiscernible].
And my assumption is that as we keep moving forward, some time back, suddenly this volumes got stuck because of temperature issue that [indiscernible] people are also facing in terms of connectivity. Various reasons why there is a significant gap between supply capacity in the country versus COD. I think that would keep changing. I'll see -- we feel that Q3 onwards, you'll see a difference in COD, gradually improving quarter-on-quarter for the sector.
The next question comes from Vikas Mukundan, an individual investor.
Nice numbers I see [indiscernible]. Quick question -- two quick questions. One, have you taken into account Renom revenues in this?
Sorry, can you be a little louder?
Can you hear me?
Yes. Now we can hear you.
I was asking, have you taken Renom numbers into this. Renom is now part of Suzlon. Is Renom numbers also consolidated in this?
Yes, for 25 days of the quarter, we have taken it.
Okay. And second question is, we had a sale of real estate. Is the process of that also taken into this?
No, no. That's not been taken into this. No.
And I see sir, even though the numbers have gone up from 170 in Q1 to 256 in Q2 in terms of installation commissioning, revenues have not bumped up much. Any reason?
So revenues are not bumped up because you have to see the RR also, which means the deliveries. What you are quoting is the commissioning numbers, but revenues are largely generated as a result of the deliveries that the company makes, which is 256 megawatts in this quarter as against close to 217 in Q1.
The next question comes from Manoj, who's an individual investor.
Sorry for that. I was on mute. I don't have any questions on the numbers because numbers are quite satisfactory to me. The one thing I just wanted to understand on the R&D part. Currently, we have S144 is a model which we are widely exporting. So is there any other turbine which is in R&D process, let's say, for 5-megawatt. One is that. Another question is regarding -- apart from India, are we doing any operations outside India? Just wanted to understand. We were doing it before, but not sure after COVID, how is that?
On the second question first on operations wise. Yes, we do have a service business outside India even today. You know that we had significant turbines supplies in India and internationally. So some part of that remains without service business. In fact, we are now aggressively working with whatever turbines we lost out in a year to get that. So the service business continues, and we will continue to grow in service business internationally, outside India.
On the turbine mix, I guess today is S144 is what is significantly being produced. But as I mentioned in the previous call that wind turbines business is still rollout 1 model. The next model is already on the drawing board. So therefore, the next model is on the drawing board. And at the right point of time, we will be in the market with the new model without any delays.
Okay. And just 1 last question on the order front.
The right kind of turbine, right size of the turbine, I don't want to mention about the capacity, right kind of turbine, right size of the turbine we would launch into the market when we feel that 3 megawatt is now got saturated.
One just last question on the order front. How much order that we can expect for this '25, which is in pipeline? Any -- could you give any tentative numbers from that?
I can only say, I'll repeat only what I said that every quarter, you will hear one statement from me saying that this is the highest -- ever highest the closing order book we will have. So this is 5.1 now what we're announcing, next time when we talk it will be more than that.
I don't want to put a number to it because if I want to throw a number, I can also throw a big number, which is actually on the table, but that doesn't make any sense for throwing a number so much after we are discussing. What I can tell you is that there are significant serious offers on the table which are in the final stage of discussion. And our order book, as I said that earlier also that once it's finalized, contract is signed and we received the required down payment then only we will announce to the market.
No framework, nothing. But yes, I don't want to put a number to it, but Manoj, but there are significant others which we are discussing at this stage with different clients. Yes, there are public sector tenders out there, even NTPC tender is out for the fixed one in Karnataka. So there are quite a few public sector tenders as well.
The next question comes from Sudhanshu Bansal from JM Financial Limited.
I have two questions. One is, how do you see the competitive intensity emerging as some of the Chinese players and Indian players, both are becoming aggressive in the Indian market?
Second is, with respect to like SE Forge, do we have any plan for growth in this particular business beyond our WTG business, sir?
The first one, Sudhanshu, obviously, we never wish away the competition. Competition is there, will be there, it will get intensified further. We all know that there are more and more players coming from outside. But you are the one who has been tracking the sector for ages. You know that even in FY '17, when we were doing a significant amount of turbine supply, also we had a tough competition but that time it was the European players and the American company. Now that got changed to the other companies.
So competition has always been there and would continue to be there. We are absolutely conscious about that. And we need to be -- we know that we need to be completely prepared and constantly keep sharpening our model, reducing our costs. But not -- again, repeat that we will not compromise on our margins when we take our orders.
So we will sharpen our costs. We will do different aspects of it. We will face the competition, but competition will be there. We are not wishing away the competition. We are watching it everyday, not just the current players. We know that there'll be more players coming in. We are not losing our sleep on that, but we are conscious and we have prepared for that competition.
And as far as the SE Forge is concerned, yes, now two things we are doing today. The -- while we continue to do whatever we have been doing in the wind sector, wind segment in fact of the domestically every single competition of ours is more or less a client for SE Forge.
What we are doing now is two things. One is we are doing geographical expansion, looking at more and more exports, there is significant opportunities. And the second portion -- second part of it is we getting into non-wind segment. We already received a few orders which will materialize into revenue maybe in the next 4 to 5 months. Because in SE Forge what happens is whenever the order comes to develop that model, it takes time before we start producing. So in fact our journey is towards that for non-wind. And there's a good amount of potential for that launches for non-wind and exports, both.
In the non-wind sector, which area? Auto -- like EV, auto or what?
Non-wind sector is in terms of bearings for different industries as well as Forge is concerned. In the Forge, we're looking at the defense sector, railway sector. And also maybe the indirectly a non-wind sort of a thing, they will these things in different places like a smaller gear box for them. So some of them might get into wind, some of them might get into non-wind sectors.
The next follow-up question comes from Amit Bhinde from Morgan Stanley.
I was just going through the industry slide in PPT. There, you have mentioned that C&I sector requires 78 gigawatt of renewable. I think earlier, almost 6 months ago, we were talking about 15, 20 gigawatts. So what in your assumption has changed so much that it went from 15, 20 expectation to 78. That's one.
And secondly, the next line says, 35 gigawatt plus wind pipeline of central state utilities, et cetera. So what is the safe time line that we should assume that once the ordering has happened and the IPPs have won the bid and the time line to place the order for any of the wind OEMs.
Yes. On the C&I segment, we mentioned the force there with the ICRA's report, which is what we picked up that number from, they had done the research and verified that. And as far as the bidding is concerned, yes know as we speak itself, but forget about what is awarded in waiting for the PPAs. There is about 23 gigawatts of 50% of it is [indiscernible] to happen and another 11.5 gigawatts or so where the bids are announced, but bids are yet to be submitted.
But having -- we -- having said that, the -- if you look at our mix of orders, which we have given in our presentation, that 75% of our order book is from C&I and public sectors. Only about 24% or so is from the bid PPAs. Our dependence on bid PPAs is much less compared to the market. It's predominantly C&I and the public sector. And also just to clarify that 78 gigawatts is for the entire renewables, not just for the wind.
The next question comes from Johnson -- sorry, the next question comes from Marcel, who's an individual investor.
Yes. My question is first regarding that although in this quarter, our turnover has gone up by almost about INR 80 crores something, but INR 65 crores is the increase in other expenses. So why it has increased so steeply. And what action are you going to take to control these costs so that like this kind of hike is not there in the other expenses in the coming quarters?
So Marcel ji, as we explained earlier, some of these costs are onetime in nature as in the -- I wouldn't say onetime, but incurring onetime for long-term benefit of the organization, like implementation of SAP S/4HANA module IT expenses, which is building a more robust organization for the future. And there is other expenses like ESOP, which is a P&L charge but a noncash cost, and that will continue till FY '26.
And having said that, even if the expenses are increasing, the margins for both the businesses, the WTG business and the OMS business that we will beat the past trends in terms of percentage margin on both the businesses.
Okay. Sir, second thing -- second question is like, although our order book has a significant increase from about 1.5 gigawatt to -- 2 gigawatt to about 5.1, that's a very good thing. But the execution has not taken the pace yet. In this quarter also, we have just executed there but only 256 megawatts.
So what's your like a plan or what's your road map that how many megawatts like we'll be able to deliver within the next 6 months? And what about the next year? So what is your plan for that like, how this 5.1 is going to execute? Number one. Number two, the NTPC order, when will we start to execute it? And like what will be it's quarterly spread, for example?
On the supplies, I answered some time back, 256 gigawatts is because of offtake by the projects, not the manufacturing capacity. We could have actually easily supplied double of the capacity in Q2, okay? Close to 600 megawatts is we could have supplied, but the projects are not ready to offtake and also Q2 being significantly impacted because of cyclone, so the transportation logistics. that the sites got eliminated, they were unable to unload, there were various other factors.
So therefore, order book is one. And second is the supply is the second factor. I also mentioned some time back this is likely to ease out now. Because the -- like NTPC I mentioned that their land is separate and their readiness is much better to take the supplies at various other places, these bottlenecks are getting removed.
So therefore, the -- as we keep moving quarter-to-quarter, the supplies would increase because projects will be able to offtake. As far as we are concerned, we can supply, as we said we would reach a capacity of 4.5 gigawatts to supply by March of this year. Supply is not a constraint. It's a question of projects off taking it.
No, sir. I'm not talking about the constraint, I'm just -- I mean that how much we will be able to deliver like this, because that -- only constraint is like because of the readiness of this project or the land or whatever required, that how much you are planning to deliver in the next 6 months?
Yes. See, our -- normally, our trend, which we wanted to reverse, but we couldn't significantly do it. Normally 1/3 is H1 and 2/3 is H2, and -- which we wanted to change this year, but I think we will change that next year, but this year seems to be going in the same trend, 1/3 and 2/3. So that's a simple calculation for you.
Okay. And then just regarding this NTPC order, when it's going to start deliver and like what is the last date for delivery? Last month or...
Yes. NTPC order is completely -- supplies -- there are different contracts. Supply contract is expected to be completed within I think 17 months from the NTPC, NTPC has already started. Actual supplies would commence probably by end of this quarter, but significantly mainly it starts from quarter 4 onwards. But some supplies likely to happen towards the end of Q3.
So sir, do we have any penalty clause? Because suppose now we are carrying 5.1 gigawatts, so there is definitely some fixed cost associated because you are hiring manpower, you are building your organization and so on. But of course, if the client is not ready, the lands are not ready, the project loans are not ready. So we are carrying some hidden fixed costs. So are you leaving some penalty or LD charges on the client also just because of your delay, like I'm getting this much of stock or like my inventory get built up, my working capital is built up. So how are you addressing this point?
Yes. I wish you [indiscernible] to accept this sort of term. But unfortunately, yes, we can -- not a penalty type of a thing, but we can have some different [indiscernible]. But at the end of the day, it doesn't go...
A claim. I mean to say claim, like you can put as a claim. I'm not saying penalty, like you can put a contractor claim.
Yes, logically, you're right, sir. But in practicality it doesn't happen that way. Let me not say that we will get that. We can put a claim, but -- at least, we are not operating in that manner.
But sir, you should be able to take some like browny points from this, at least like there must be some obligation on the client that, okay, the guys, you have delayed so much, but we are not charging anything, we are not raising any claims. So that at least in the next like time ordering or something we get the preference to get the repeat order, some select, like sort of realization must be there.
Today, sometime back when Sudhanshu was asking about competition when I said that, yes there is a competition, but our own specific advantage is this is of the long-term relationship with our clients. Most of our clients are repeat clients, most of our clients, and many of them are third time, fourth time clients. So I think we believe in this building long-term relationships. That's the reason, irrespective of competition, some of the clients would always remain with us.
Sir, there are many other participants waiting for their turn. I'm so sorry. If you want to ask a follow-up question, you can rejoin the queue. The next question comes from Dilip, who's an individual investor.
I have been seeing this Suzlon company for a very long time because of whatever the reason, last many years, I know about this company. It's very good to hear that it has come out everything and is doing very well. One thing which is bothering me that equity -- share capital equity has fallen up quite a lot from time to time just because of many reasons, that reasons are known to everybody.
So my question to the management would be, is there any thought process from the management side that if they would like to consolidate that equity capital, it is now from INR 2,713 crores. If that can be consolidated, then probably that EPS and other numbers would be looking much, much better or it can come back to its original [indiscernible] many years back.
[Foreign Language] So obviously, on a lighter note. But we have no impending such thoughts. Obviously, we keep deliberating time to time, such ideas and thoughts and discussions. But currently, there is no such plan. As part of the Board release today, you would have seen that we are looking at reorganizing the balance sheet.
There are quite a few legacy reserves and negative items that are there in the balance sheet. So, we are -- the Board has approved the cleanup of that. So all that will take about 6 to 7 months as a process. So our endeavor is to present a neat, lean, clean balance sheet to the investors going forward. What you suggested is, of course, certainly an idea that the management can pursue, but there are no current thoughts to do any of that.
Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you very much. And, of course, this doesn't stop here, the Q&A. Our IR team is always available for any further questions. No just that, at any point of time that there is need for -- to touch base with me or Himanshu, we are always available for any type of advices. And thank you so much for showing your interest and making it very, very interactive. Thank you, and happy, happy -- wish you a very, very happy Diwali to all of us, to you. God bless all of us. Thank you.
Thank you. Happy Diwali.
Thank you so much members of the management. On behalf of Suzlon Energy Limited, thank you for logging on into the Suzlon investor call. Thank you for joining us, and you may now disconnect your lines.