Suzlon Energy Ltd
NSE:SUZLON
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Suzlon Energy Ltd
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Good day, and welcome to the Suzlon Energy Limited Q3 FY '23 Post Results Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. 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. I now hand the conference over to Mr. Anshuman Ashit from ICICI Securities. Thank you. Over to you, sir.
Good day, everyone. On behalf of ICICI Securities, I welcome you all to the Q3 FY '23 Post Results Conference Call of Suzlon Energy Limited. Today, we are pleased to host the management of the company represented by Mr. Ashwani Kumar, Group CEO; and Mr. Himanshu Mody, Group CFO. We will begin the call with the opening remarks from the management followed by the Q&A session. I would now like to hand over the call to Mr. Kumar and Mr. Mody for their opening remarks. Thank you, and over to you, sir.
Thank you, Anshuman. Greetings to everyone, and thank you for joining us for our Q3 earnings call. I hope you had an opportunity to review our results and investor presentation. I'll share with you an overview of the industry, and we'll walk you through our Q3 FY '23 and 9 months FY '23 performance. We will then take your questions. As you all know, the Indian government is committed to its 2030 target of 500 gigawatts of nonfossil fuel-based capacity.
The target for wind out of this is 140 gigawatts with current installed capacity of 42 gigawatts, it's clearly that over the next 7 to 8 years, we need the installation of more than 10 gigawatts per year. There was a crucial announcement last quarter by the government of India of inviting bids for 8 gigawatts per year annually from 2023 to 2030. This is, of course, will be in addition to the private sector initiatives in the commercial and industrial sector that we have seen a good tailwinds there. Government has also taken out policy related to ISTS waivers for being plants, discontinuation of e-reverse bidding. And all of these will boost the Indian power sector as we go forward.
There are 2 important parts of this 8 gigawatts per annum announcement by the government. One, it will ensure participation of all the 8 windy states in the development. Earlier, as was expected, what used to happen was that only rate the wind is the best, those states are being crowded and development cycle. Now the government has clearly outlined that not more than 2 gigawatts per year will be installed in any one state.
So clearly, the development of wind will be now across all the 8 windy states, which starts from Rajasthan in the North region to Tamil Nadu in the South. In addition to this, there is a draft repowering policy also government has come out, which has -- which shows a potential of 25.4 gigawatts.
Being the oldest player in the industries, we definitely have our plus point when it comes to repowering opportunities in India. On the business and performance front, Q3 has been a stable quarter for us, in line with our plan. In terms of going forward, we have major milestones within the company, too, when we installed the first machine of our S144-3.x megawatts at Tamil Nadu. 144 actually means the rotor diameter so 144 meters is a rotor diameter of the blades of this turbine.
Our RE performance reports that we are getting from the first machine is very, very encouraging. In terms of our priority because we cannot control the tariffs in which various bidders bid their things. Our priority is only to pursue quality orders with higher value and better margins, because for us, it's not only about the top line, but also about the bottom line going forward. We continue to, of course, build our order book. We continue to achieve on our order book as we go forward.
In addition to manufacturing, our OMS business that continues to perform as well it has always been, we have over 16 gigawatts of capacity around the world, out of which 13.8 gigawatts are in India. With good support from the government, including the higher allocation in union budget, a strong sector outlook and with consistent strengthening of our fundamentals, we think your company is now equipped to leverage tailwinds of the sector from the position of strength and that is demonstrated by our consistently improving performance.
I would like to invite Himanshu now, our CFO, to take you through our financial performance.
Thank you, Ashwani, and very good evening to you, ladies and gentlemen. I hope you had a chance to browse through our investor deck, which has been uploaded on our website. I would be using Slide #18 to 22 of our investor presentation that's on the website as a reference point for the discussion during this presentation.
Q3 of FY '23 has been a registered consistent improvement on all our key parameters. Our balance sheet is stronger as a result of significant debt reduction post the rights issue. It will be further spending with the receipt of INR 600 crores of balance call money on the rights, which is still pending for us to be called.
We are pleased to report that the consolidated net worth of the company has turned positive after a period of 9 long years. Our consolidated Q3 FY '23 PAT before exceptional items is INR 78 crores for the quarter. And this is the highest PAT in over 5 years that the company has been able to achieve purely based on the operational parameters. This is against a Q3 FY '22 PAT of INR 37 crores for the corresponding quarter last year, registering an increase of more than 100%.
We did a delivery volume in the 9 months FY '23 of 482 megawatts with a revenue of INR 4,257 crores as against 9 months in the previous financial year, where we did a delivery of 471 megawatts with a revenue of INR 4,078 crores, respectively. We continue to maintain a tight control on our costs as is reflected in our profit margins. As commodity prices and supply chain issues stabilize, the positive impact of the same will be more and more apparent in the coming quarters in our profit and loss statement.
With continuous focus on deleveraging of our balance sheet, and we have achieved substantial reduction in our net finance costs which for the quarter 3 FY '23 stands at INR 80 crores vis-a-vis INR 181 crores for the same quarter last year, which is a reduction of INR 101 crores, which is more than 56%. For the 9 months FY '23, our interest cost stands at INR 321 crores vis-a-vis interest cost of INR 540 crores for the same period last year, which is a reduction of more than 41% in the finance costs.
Hence, there is a marked improvement in our financial parameters, like net debt-to-EBIDTA stands at 2.6x on a trailing 12-month basis for December 22, whereas our net interest coverage ratio is at 1.9x for this year, which are very healthy parameters. I am happy with the way we are progressing on all our initiatives to further strengthen the fundamentals of our company on the P&L and balance sheet side, both whilst keeping a very, very strong focus on the bottom line.
On the overall economy, of course, as inflation is under control and the economy is showing great resilience going forward. And as Ashwani mentioned, with great sectoral tailwinds this will all go well to the sector and encouraged investor sentiment over the next several years. 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 Shubham Shukla from Voyager Capital.
Yes. So my question is like around the order book. It's in the capacity and megawatts. Can I get like monetary value of it, like how much is it going to be something?
As of now, we do not declare the order book in monetary terms because there is, of course, a turbine order book, which is -- which one can safely guess by multiple the megawatt by whatever is cost per megawatt and that is installed from our revenue. There is equivalent amount of order book, if I want to call it an order book is in our services business, where we have these contracts going forward, which are -- which will be remained with us over the next many years.
So because of the 2 different aspects of the business, we tend to not describe the order book in monetary terms. In terms of megawatts, I think it's already there on Slide -- one second -- on the Slide 15, it is 782 megawatts. But that's only, as I said, manufacturing all of that.
Okay. And about the debt, as we have seen the significant decrease in our debt levels, and that also we are seeing finance cost. So do you see any more reduction on like the net debt to be like in a couple of quarters or years, just a rough idea about this?
So whilst our scheduled repayments on the debt continue, Shubham, there is, as I mentioned, there is about another INR 300 crores from subsequent tranches on the right. So that has clearly been identified from the end use of the rights issue towards repayment of that debt. So in addition to the repayments that are scheduled, another INR 300-odd crores will go towards debt reduction.
So to that extent, it will be expeditious reduction on the debt year also in the coming few quarters.
But this is in for coming quarters, but like do you see like debt fee condition like maybe like 2, 3 years down the line like any plan sort of like to have it?
So a bit too early for me to bring you such a forward-looking guidance. But yes, we are maintaining the financial discipline of ensuring that the leverage keeps reducing on a significant basis. And hope to see us a day soon where the balance sheet would be that net debt positive.
We have the next question from the line of Sumit Kishore from Axis Capital.
My first question is in your third quarter and 9-month revenue, what is the Operations and Maintenance Services income and what is the margin contribution of that income.
So we'll give that to you, Sumit. You want just for the O&M for the Q3 or you're talking for the 9-month period?
Both.
Of course, it is a part of the segmental revenue that we have given on a -- will give you the numbers. So it is a total of -- for the December ended quarter, it is INR 476 crores in revenue and for the 9-month period is INR 1,386 crores.
Okay. And if you can give us a flavor of kind of margins for this business will be making at EBITDA level?
So at the EBITDA level, this business would be roughly about in the vicinity of 44% to 45%.
Okay. And I'm assuming you still be -- I mean there, this large portion will slow down to PBT.
That's right. I mean, on a stand-alone basis, but of course, on a consol basis, you'll have to adjust it for the interest outgo that we have towards the debt on the balance sheet.
Fair enough. My second question is development around India inviting 8 gigawatt wind projects annually is very good, but what is the traction that we are seeing after this announcement? Is there any visibility on when which state is going to start?
So from what we hear from the market is that and they have been after the announcement, there have been a series of meetings between the ministry and the nodal agency which is SECI. And I think so we should expect the first big announcement as part of this in the coming few weeks, if not maybe a couple of months.
Okay, so...
This is the first time, and this has been our industry request from the government that please announce policies until 2030 because we have a target of 2030. And this is the first policy which we have announced, which will last till 2013.
Right, right. So how exactly is the tariff is going to be discovered for the [indiscernible] if you could explain this?
So it will still be a bidding process, but it will be onetime big single stage bid rather than -- usually, what needs to happen was that anybody used to submit bids and suppose I have put INR 3, and now after everybody's bid are received, they would start being what is called a reverse option and give you a chance to improve your bids.
Now what was the -- what was that time happening was lot of people would reduce their bids just for the competition sake or whatever in their own judgment. And many of the projects did not happen because the big board awarded at unviable tariffs.
So basically, everybody welcomes the idea that everybody does their own calculation, submit their bid on which they believe that wind power can be supplied and the lowest person actually gets awarded the contract. The details of this how this whole scheme will work, as I said, these have been worked out by the Ministry and the nodal agency, which is SECI for Government of India, and they will come out soon with their first bids.
Sure. And this would get classified under central auction in your -- for the backlog because it's SECI?
Yes, yes, definitely. These are all central auctions, yes. And they will pull the power from multiple states and then sell it to a distribution company.
What is the additional promise that you have in state auctions and captive retail places, say one year forward basis?
So the states -- some of the states have been active in their auctions, mainly Maharashtra, Gujarat and Madhya Pradesh and Rajasthan. In addition, the corporate market, if you ask me the latest circular which everybody was waiting from CRC got released only on seventh of February. So we see now a big push in the corporate market which used to be only within state to interest rate transmission because the government's journey on the interest rate transmission for the corporate market is now clear up to June 25, there is no transmission charges. And there have been a lot of inquiries by the corporate from -- with us and with other equipment suppliers on setting up wind and solar and hybrid projects for supplying to their manufacturing works or their steel plants or their aluminium plants which are not in the windy states.
Okay. And I'm assuming that in terms of CapEx because you had significantly higher [indiscernible] there is no significant CapEx for the company in the next one year.
Yes, I don't think so there will be any major significant CapEx in the next few years.
What is the additional cash pending to be received on the rights?
Another INR 600 crores is what is pending.
And this will come over what time?
So that's something we are just in the midst of our budgeting process for next financial year, whilst I may not be able to give you a precise answer. But as part of the budgeting process, we will factor that in, and I'm sure the Board will decide on the same soon.
[Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital.
Congratulations on a good turnaround. My first question is the backlog. So of course, we are looking at the center option, which is going to happen maybe in the next 3 months down the line. But are there backlog from the bids which were closed in the fiscal, which are available for us to tie up? And can you quantify the quantum, which is still not tied up as of now?
So if you ask me, and that again is the best of our information, there's no published data on that. But from SECI VIII, IX, X, XI, XII, the XIII is just concluded. They would be, I would say, more than 3 gigawatts of bids which are not tied up with any equipment supplier. How much of these which will actually go ahead and how much will get tied up with us and other equipment supply, I don't want to guess.
Clearly, with our turnaround, we are a party, which more people will have their discussion with.
Understood. So we are in discussion with most of them and there could be some ways, like...
Whether they do the project or not on those tariffs is their call. I cannot...
There is a fair chance that is 3 gigawatt if they do the project, there is a potential for us out there. Is that the right fair assumption?
Yes.
The international megawatt in OMS services and the margins in the international OMS services, is this significantly different from the domestic?
Yes. So in the international O&M, we have about 1 gigawatt approximately under a mix of comprehensive maintenance and what we call a technical services agreement which is why, yes, you're right that the margins would be lower in the international because in India, we also enjoy the benefit of being a scaled-up operation.
So the margin, it's a little more than a breakeven operation I would say, single-digit percentage margins at the operating level in international OMS.
Understood. Thirdly, sir, on the hybrid opportunity, that's a very large opportunity. Are you thinking something to figure out how to get the business, that kind of business? I don't think we have got any hybrid wind equipment out as of now.
No, no. So let me just define it. The hybrid projects have wind element and a solar element. And then there is an integration of the two. So many of our already orders that we have talked about and we have received are the green portion of the hybrid projects. So what -- I think if you talk about order book that we disclosed then, yes. So let just give you one example of the order we disclosed last quarter, I mean in this quarter, which was that there on [ ISA builder ], now most of the 146 megawatts are part of hybrid projects.
Since we don't do solar EPC assets, we do the wind portion of hybrid projects and then we help the customer in integration the 2 sources and connecting to the grid.
The next question is from the line of Dhawal Doshi from Pinpoint Asset Management Company.
So a couple of questions. First, if you can update us on the status of the noncore asset sales that have been planned. Probably I'll continue to the second and close this.
So yes, there were a couple of assets that we've identified, as we mentioned in the last quarter. One of the 2 assets, I think we should be able to conclude fairly soon in the foreseeable future. So once we conclude on that, then we will take stock of how and when to progress with the divestment of the second noncore asset. So I think in the very near future, we should be able to report concrete progress on the divestment of the first asset.
That sounds encouraging. So I'm presuming this financial year would have one and the next would the other.
This financial year has about 6 weeks to go. So let's see.
Okay. Second question was with regards to the working capital. When do you think we will be in a position to ease out our overall limits with the banks or ease out the working capital situation and post which we can start bidding aggressively for projects? Right now, we are constrained by working capital in terms of the bidding. So when do you expect this situation to ease out?
So Dhawal, we are in very advanced dialogue with about 4 to 5 financial institutions, and I'm really happy with the significant progress that we've made with each one of them. We have an early sanction a small working capital limit on board as well. I will not be able to disclose the amount or the name of the institution as yet. But it's encouraging signs.
And I think by the exit of this quarter or early Q1 of next financial year, we should have had made significant progress for us to deliver on our next year's business plan.
So is it safe to assume that we could see a material jump in our order book position only once this sanctions from all the 4 banks that you're mentioning? Is that -- till that time the order book growth could -- will be constrained?
Not exactly because I think so our order book, as we have disclosed this quarter, we are going for quality orders and the orders that will happen. And so our order book growth will continue to be robust as and when people start awarding and finalizing their OEM suppliers. In terms of working capital, as Himanshu said, we are already on our way and working capital are not restricting our order book as of now.
The next question is from the line of Prashant Kothari from Pictet.
I Just had a few questions, sir. I'm a little confused about...
Sorry to interrupt. Sir, the line for you is not very clear. I request you to please speak into the handset. Mr. Kothari? [Technical Difficulty]
Ladies and gentlemen, the current participant in the queue has dropped from the queue. We will proceed with the next participant. We will take a question from the line of [ Abhijit Anand ] from Emkay Global.
So I want to understand the present competitive landscape, who are the top 5 players because we understand some of the earlier players who used to be in the last cycle to not do much on the domestic side. So have we seen some new players, some Chinese player or something of that sort. So if you can give a perspective on that side?
I think so the 3 largest players in the market today, according to my personal opinion is Siemens Gamesa, Suzlon and Envision. The other 2 international players are not that much focused on Indian market. The remaining are quite a small capacity and may not have the best of products for larger orders. So these 3, I would say, are the people who will gather the maximum market share in India this year and next year.
And in terms of capacity, how would that be among these players?
I think each to one of us will have enough manufacturing capacity to satisfy the market.
Okay. And Envision, if you can just -- how long has it been in the Indian market?
So Envision came out with the product I think a couple of years back and only those turbines have been installed. It's newer product. We've got some orders which are under delivery. Again, all of this is, I would say, the best of my knowledge. And those will be installed going forward.
The next question is from the line of Prashant Kothari from Pictet.
I'm sorry, my line dropped while I was asking the question, I'm not sure here with continue the question, was how much is the O&M fleet today because you said 16 gigawatt overall 12.8 in domestic but then you also said 1 gigawatt in international so I was bit confused.
Sorry, Prashant, your line is very bad. We couldn't really hear your question. I heard something about 1 gigawatt in international, that's about it.
Okay, sorry. Is it any better now?
Much better.
Okay. Okay. Sir, the question was on the O&M fleet, how much is it really? Because I heard 16 gigawatt overall and also heard 12.8 in domestic and 1 gigawatt in international, so much not adding up for me.
Yes. A part of the OMS fleet, the balance would be under -- it's either under warranty period or it may be a fleet that has turned out beyond its life cycle period.
I see. Okay. So you're only getting revenue from 12.8 plus 1, that's 13.8?
That's right.
Sorry, 13.8 plus 1. If you go to Slide 14, the Indian installed base is 13.8 gigawatts plus 1 overseas, plus some in TSA and Spares supply agreement, yes.
Okay. Okay. Understood. And what was our market share in the kind of orders placed in this year? If you have some one-part number to this.
It's very difficult to get the data. So we don't keep it. We usually go by the government of India numbers on the commission turbines at the end of the year. That's the only, I would say, a reasonable number to follow. And there's no database of public information on how much order book people have got.
And more importantly, even after they've got it, whether they are proceeding with these orders or not. So that's why we do not try to follow. We know which are the customers we are dealing with. Once we lose a customer also, we know usually, okay, this has been lost to this and the supplier. But I don't think I'll have a market share number, which is any -- in any seriousness I can claim to be right.
Okay. And in terms of actual installation trend, what is our market share in the last year?
42%.
42%, yes.
Okay. So it is typically better than our installed market share, which is quite encouraging. Okay. And maybe another question was, I mean, looking at your EBITDA in the O&M business, it seems that the manufacturing business is not yet making any EBITDA margins. I thought that our breakeven is roughly around 600 megawatts per year, was my understanding wrong or is there some change in the economics of the business?
No. So we have -- for this 9-month period, the WTG manufacturing business has yielded an operating profit, of course, so as the O&M business. So that continues to be encouraging. And on the WTG side also, we have a modest EBITDA for the 9-month period.
So you have contribution margins of 30%. That's kind of for the WTG business or for overall business?
No. So for the OMS business, we have margins which are in the 40% plus region. And the WTG, of course, we have a certain breakeven threshold which results into a single-digit operating margin currently. As and when we grow in the volumes, that adds to the WTG manufacturing margin.
Right. And so the WTG contribution margin would be about the order of what, how much?
For the current 9 months period, it will be about 16%.
Okay. Okay. Understood. And do you think that will change materially going forward? Or there is not nothing expected in the contribution margins because of competition or whatever?
So it should be similar as we move forward as well.
Okay. Understood. I think there is obviously this issue about a large consumer rate also in the green space whose agreement a bit of financial [indiscernible] possibly. Just wanted to understand your exposure to them and could that be because of any risk in terms of order cancellations or there be spreads in terms of working capital?
I think I will refrain myself to talk about, I would say, other companies on this call. Just to tell you that any such events, if they had a material impact on our current operations or going forward, we will disclose it to the demand.
Okay. Maybe talk differently, I mean how much is our customer concentration really.
No. I think our customer base is pretty well diversified in current order book. There's no customer concentration at all, actually, if you ask me in the current order book.
[Operator Instructions] The next question is from the line of Rohit Bahirwani from Vijit Global Securities Pvt Ltd.
As we all know, government will annually invite bids for 8 gigawatt wind projects during 2023 to '30. How much the company is expecting from this? And from then we can expect the orders to start coming.
I think so in terms of timeline, I think it's a very positive and announcement by the government in 2 aspects. One, it has given a clear roadmap for the next 7 years of 8 gigawatts per year. Number two, by reducing the step of e-reverse auction, the timeline for conducting the bid itself has been reduced.
We are now awaiting the next steps from the ministry and this nodal agency, which is SECI. Both of them should come out, as I said previously, in the next few weeks in the terms of processes.
And as and when the bids get awarded, usually, there are 2 processes in this. One is before submitting a bid, lot of people speak to us, and they become our potential customers, and they bid on the basis of our discussions with them. And two, post winning the bid, of course, they want to place the orders because they have only 24 months usually to set up the projects.
So we would expect, as and when this gets the full traction, which is going to happen over the next few months. We believe order book and the whole win sector will improve substantially.
So in this wind segment only, if we see the annual capacity, the company has a substantial part. And if I'm not wrong, 33% of the total national capacity, which in the company. So how much from this total 8 gigawatt plan of the government company is expecting?
Instead of giving futuristic numbers, let me just tell you that currently, out of the 41,000 megawatts in India, we have installed 14 gigawatts. So that is more than 33% of each installation, which has happened in India in the past. The similar has been our market share in the recent quarters. So I would not give any future guidance of what is the order book expectation, but I would say our performance has been healthy so far.
Okay. Okay. And what is the average time between receiving of orders and commissioning of the project, if you can give some information on that?
Yes. So in SECI big type of order, it is usually, I would say, the supply will happen around 15 months. and the final commissioning happened in 24 months, 18 to 24 months of the order because not all turbines are installed on a particular day. They do it one by one.
And in terms of smaller orders from corporate customers and people who use it for their own purposes, the supply is usually in 3 to 6 months' time and the installation in 9 to 12 months' time.
The next question is from the line of Faisal Hawa from H.G Hawa and Company.
So this has been like a -- 10, 11 years that we have spent prior to last year. So what are the 2 key lessons that we have derived from the 10 years and which hopefully, we will not repeat again those mistakes.
I think so, I mean, not only from this from my previous experience also. The simple, I think so it is always good to find -- follow the policy of financial prudence and plan according to how the market is going to behave and of course, keeping to also in terms of transparently and focusing on the corporate governance, do your business.
And I think so that financial discipline is something that, as you can see in the results have been brought about by reducing not only our financial costs, but our operating cost over the last many quarters. And so that's something, I think, which is good for any industry and any company. You will always have some events which will be unexpected, but as long as we have had robust discipline and transparency and governance, you will come through.
And sir, secondly, Mr. Tulsi Tanti was like very legendary entrepreneur and he is going to be missed like anything by the Suzlon. How has the organization now restructured? And what were the key roles that you are still playing and now is fulfilling those role, what is also Mr. Girish Tanti's contribution now to the company? And if you could just elaborate on where the [indiscernible] how we have actually coped up with it?
Yes. So I think what has always been the strength of Suzlon in terms of -- even when Tulsi bhai was around, and we do miss him, of course, on every day, is that it always had a good professional senior management team which was backed by the rich experience of Board and founder.
This time, for the first time, we are disclosing this in public domain and obviously, the Slide 16 of our investor presentation. So Vinod Tanti his younger brother has taken over, who's always been involved in the technology and service leadership of Suzlon has taken over as Chairman and Managing Director.
And Girish Tanti was earlier worked at Suzlon and then stripped out, has come back, and he's earlier led the various functions like IT, HR, CSR, and also establishing global business and corporate development. So that's what his experience is, which is being utilized by the company now. Of course, I, Himanshu, our Chief Technology Officer, [ Bernhard ] and Mr. Mangal who heads our OMS business are the professional faces who have been well experienced in infrastructure and power space and bring that experience for the company.
I think so the transition though personally, I would say, we all personnel loss has been fairly smooth in terms of operations. And if I can share one statistics that no one from senior management has put in the papers [indiscernible] unfortunate episode.
The next question is from the line of [ Prasad M ], an individual investor.
First of all, thank you for your honest way of executing the business. Really appreciate the conduct and thanks for your good numbers. My first question is I am looking at the slide, and then I see there is a lot of potential for the solar as well. Do you have any plans to get into solar energy?
I think there's no current plans to get into solar space. But as I said sometime back, that for hybrid projects, the integration part of it is something that...
Integration part, yes, that you mentioned solar, there is a plan because there is a lot of scope that being a big player in wind. I thought we can hit into solar. But my second question is that, sir, we have around nearly 800 megawatts of [indiscernible] right now. Why are we not executing aggressively in the existing order book? Is there any restriction for us or limitations in terms of manpower or other technology like that, we cannot execute in very aggressive like, let's say, you mentioned for big increase recently takes nearly 15 months.
So in terms of the execution of our orders, some of these orders are, as I said, being executed as and when the customer needs those turbines because many of the customers have their own sites which may not have acquired land or not completed the evacuation. And therefore, they do not want the turbines to be manufactured now in supply.
So some of the order book will get as and when their sites are ready, will be supplied at that time. Of the size that we have, depending on when the customer is ready to receive a turbines, we supply the turbine. So currently, company-wide, whether it is labor, manpower, resource sales or our manufacturing ability, I do not see any major impingement to fulfill this order book in a timely factor.
So what is our capacity to execute Max in 1 quarter...
Sir, we request you to kindly return to the question queue for further questions.
Let me just answer this. So as I said, we do have some of the sites which are getting ready from part of this order book, which will be supplied in the next 6 to 9 months' time.
The next question is from the line of [ Jatinder Agarwal ], an individual investor.
I have just one question. So we have our capacity utilization, which is somewhere in the range of 25% to 30%. Can you explain in 2 aspects? One, in terms of management or operations and the second in terms of the financial obligations that you may incur. This capacity utilization was to increase dramatically over the next 2 to 3 years.
So as we all are aware that the Indian wind market as our overall market did not do too well over the last few years, between '18, '19, '19, '20, 2021 and '22. So those quarters were not very good for Indian wind market. So our capacity utilization clearly began less. However, going forward, this capacity utilization, as we said, being the pioneer, we have the best of manpower, best of manufacturing facilities, best of OMS operating and management teams.
And therefore, we expect the capacity utilization as the Indian wind market grows to become higher. This will, of course, reflect in better performance of the company, both in terms of its revenue as well as other financial parameters.
No. What I mean to ask is what type of challenges do you see in terms of, sir, obviously, at 25%, the employee or the operational staff trend that you would have is very different from what you will hypothetically be doing at 75%. So that is one challenge that I can definitely see. Could you also explain this in terms of whether you need to upgrade your existing facilities in terms of CapEx in a quarter?
Yes. So thanks, Mr. Agarwal. I'll clarify that. So I think so our fixed manpower is fixed, and it can go up even if the volume increased substantially. What we need to add up is what we call the variable manpower. So I suppose I'm just giving an example, we are making x turbines per month. It has to make 2 x turbines per month then the labor force and the people we need at that level, what we call the variable manpower that will go up.
So that is -- and I think so an Indian ecosystem, getting those variable manpower, skilling them is something we have done it in the past, and we are confident of doing it in the future.
Okay. And sir, what about monetary cost in terms of redoing those factories or there...
As I explained in the previous question, we do not envisage any major CapEx over the next few quarters to do what we plan to do, which is to fulfill our existing order books and future order books.
No, not the existing order book, but that hypothetical assume if your capacity utilization...
Worth to say, yes. So I understand the volume was to substantially increase, let us say even, I'm just giving a number to let us say, 2x number, we do not have to do a substantial CapEx.
Perfect. And so for the next 3 years, you would say that at least in terms of maintenance CapEx that requirement is low, is it?
Yes. In terms of new CapEx, the requirement is low. In terms of maintenance CapEx, each manufacturing will have its own thing, which results funded through normal cost.
The next question is from the line of [indiscernible], an Individual Investor.
Hello?
Yes, sir, you are audible. Please go ahead.
Yes. My one question would be like, is there any possibility promoter planning to increase the [ pay ] in future?
As management, we would not like to comment on our shareholders' shareholding of our company. And so that's where I would leave the answer.
The next question is from the line of Sanjay Shah from Sarthak Metals Limited.
Sir, many, many congratulations, we are delighted to see the aggressively healthier getting off our very own companies loans. So my first question would be, we're all aware that this business requires a lot of free cash flow. So is it safe to assume that out of this policy push of 8 gigawatt of wind energy. Is it safe to assume that government would also like to distribute it among the top peers?
So the government will conduct bids and depending on the bidders winning the capacity and their preferred manufacturing suppliers. We would expect this 8 gigawatts to be distributed with the suppliers who are competitive and have the capacity and intention to take part in India's growth story.
Right, right. Is it possible that in the near-term future, we would be able to see a significant portion in the execution of the total megawatt? Like it's been a while since we've been noticing that it's been around 150 to 170 megawatts. Is it possible that Suzlon would be executing like higher number of megawatts in the coming future?
Yes, yes. We have a good order book and depending on our customers' requirement. Let's all keep our fingers crossed and hope for better execution.
The next question is from the line of [ Vinay Chaudhry ], an individual Investor.
Congratulations on the great number. So my first question is like where do we see with the recent noise from the R&D market on Adani, where do we see the orders from them, do we see any kind of flowing from them? And on the order flow, like you around 800 megawatts was the distribution of WTG last year. In Q4, we see Q4 as the major peak in our business. So what would be the Q4 and rough 24-megawatt distribution?
As you are aware, we are not providing any future guidance of what is going to be this quarter or next quarter or next year. But as I said, we are disclosing whatever we know, which is the current order book. And you are right that last -- Q4 of last year was an exceptional quarter with very high volumes, which is always very difficult to replicate.
Okay. Okay. And what about the orders, any update on the -- do we had in talking terms with the Adani group for orders?
So we have supplied turbines to Adani in the past. But as I explained to the previous question, that currently, our order book is well distributed and there is no concentration of orders from any single customer.
Okay. Okay. And just one more thing. Like with the -- with respect to the noncore assets, especially the [indiscernible]. So that is expected to be closed in next financial year. Is it the understanding correct?
So as we said, we are working on one of the 2 noncore assets and hope to conclude that soon. Of course, at the right time, the company would make the relevant announcements to the exchanges.
The next question is from the line of [ Mohan Kumar ], an individual investor.
Okay. You hear me now?
Yes, we can hear you.
Yes. Sorry. Sir actually, I have gone through that investor presentation yesterday. So I was observed one thing that, okay, the order book actually, it was reduced compared to the previous quarter. Correct me if I'm saying wrong. It's around some 15 megawatts, it is something that is reduced. Okay? And that is the one question. And mainly, I wanted to understand that, okay? Like why the order book has reduced like last time you guys said that there is a chance of strong order book is in pipeline. So by considering that was probably this quarter would have been order book have been increased. So may I know the reasons?
Sir, as you're aware that order book requires both sides to finalize, so one is the people who have won the bids, et cetera, they have to finalize their projects and then finalize with us. So they have been -- so depending on what has happened over the quarter, I think so we have done fairly well by keeping our order book almost at the same level.
And as I said, we are in decent discussions with many players who have won the bids as well as planning for their corporate capacities. So -- and so that is something which we'll keep sharing with you as and when we receive a large order or on a quarterly basis.
Sir, another question is like last time also we had that something strong order book not is in pipeline, okay? Currently, it is in advanced stage, okay? Even this quarter also, we have been hearing the sales statement. So I just wanted to understand that how much time would it really takes when you say advanced discussion to get it materialize in real order?
I think it's a fair question, Mohan. And I think so we would expect as the Indian wind market grows overall, the order book soon will look also healthy because the Indian wind market has been muted for last many quarters, the order has been steady rather than in a very growth aspects.
Okay. Another question on the trade receivables, like last quarter also, we are almost the same number. And even this quarter also, we have the same number trade receivables. So any blocking things for us to get it ratio, these things, sir?
No. So there is no red flag there. Of course, we share sales in terms of rupees crores has increased. So I mean if you look at the receivable, it may be similar, but the number of days outstanding is in that sense, reduced. So no red flags on any trade receivables.
The next question is from the line of Sunil Jain from Nirmal Bang.
Sir, my question relates to the recent auction of SECI in the May of around 1,200 megawatts and recent 600 megawatt. So ordering for these turbine has already happened or is it still on the way?
No. As I explained in the previous question, there have been outstanding orders to the best of our knowledge, right? So you are talking about SECI XII and XIII. But even in SECI IX, X, XI, there have been some bidders who have not yet placed orders. So some of the bidders would be in discussions with us. but not all orders from SECI IX, X, XI, XII and XIII have closed which is what I expect in my estimate of the orders which are yet to be awarded is more than 3 gigawatts, 3,000 megawatts.
Yes. But 8, 9, 10, there were some questions like whether that will happen or not. But this 12 and 13, [indiscernible] and at a good rate. So that should definitely happen.
I agree. I agree with your assessment, and we would expect some of -- the only thing I can share is we are in discussion with some of the winners on SECI XII and XIII.
So my question was not like -- it was more related to the timeline which generally [indiscernible] the need to prepare and then they placed the order. So that's why I was asking that.
Yes. So let me tell you the timeline. The way timeline works is after e-reverse auction is completed when the people have won the bid, get what is called the letter of award post which they accept the letter of award, the SECI goes and ties up with power sale to various states. They're saying, okay, these are the bids which have come for this tariff, would you mind purchasing this power.
Some of the discussion might have started before the bid, but the actual signing of what is called the power sale agreement, PSA, happens between SECI and the discounts of the various states post the award of the -- post the reverse auction being completed. That process can take 2 to 3 months and sometimes may extend to 9 months also.
Once that is signed, then they tie up with the power purchase agreement with the winning bidder. That's okay. We have signed this now. Your beneficiaries like Uttar Pradesh or some state and please come and sign the power purchase agreement. From the date of signing the power purchase agreement, the bidder is given 24 months to execute the project. That is the timeline. And he would want to finalize the order close to, I would say, because once he knows that, yes, power sales agreement has been signed by SECI and I can go ahead and I need to do this. So that's what he does.
So in SECI XII and XIII, as you rightly said, these have been recent awards. And I don't know the exact status of what is the shakeup of SECI signing those PSAs or PPA. But as I'm -- all I can say is that we are in advance and discussions with many of the bidders. But the final order will only be done once they are sure that they have signed a PPA with SECI.
Okay. And you are confident of maintaining your market share?
I'm confident of doing well.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
So we thank everyone on the call for participating, and thanks to ICICI Securities for organizing this call. And we look forward to future calls and our Investor Relations is available for any queries that you may have on the company or in your shareholdings.
Thank you so much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.