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Torrent Power Ltd
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Ladies and gentlemen, good day, and welcome to Torrent Power Limited Q2 and H1 FY '21 Earnings Conference Call hosted by IIFL Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshavardhan Dole from IIFL Capital Limited. Thank you, and over to you, sir.
Thank you, moderator. Greetings, everyone. On behalf of IIFL Securities, I welcome you all for the second quarter earnings call of Torrent Power. To discuss the performance detail and share the outlook for subsequent quarters, we have the senior management team of Torrent Power. Today, we have Mr. Saurabh Mashruwala, VP, Finance; Rishi Shah, GM Finance; and Jayprakash, Manager, Finance. Without much of a delay, I'd like to hand over the call to the management for their opening remarks, subsequent to which we can have the Q&A links opened up. Over to you, sir.
Thank you, Harsh. Good morning to all of you. Thank you for joining earnings call for Torrent Power for the Q2 FY '21. We'll take you through the performance of the quarter. After which, phone lines will be open for Q&A session. Consolidated PAT reported for the quarter is INR 204 crores as compared to INR 750 crores reported in corresponding quarter last year, which is lower by INR 546 crores. That is roughly 73%. The PAT has reduced considerably. However, if you could -- if you would recollect, large part of this is attributable to one-off recognition of INR 281 crores of deferred tax asset comparable last year -- comparable quarter last year, due to reduction in MAT rate from 21.55% to 17.47%. Adjusting for this change, PAT of the current -- PAT of the reported quarter is -- reported degrowth of 57%. Now moving on to the PBT number, reported PBT for the quarter is INR 230 crores as compared to INR 533 crores reported in the corresponding quarter last year, which is lower by about INR 300 crores, that is 57%. I will now explain you the recurring items -- nonrecurring items for -- to clear -- to get a clear picture of the underlying performance. There are nonrecurring item in both the quarter, current year as well as comparable last year quarter also. I will now touch upon the nonrecurring item of the current year quarter. The nonrecurring item in the current year quarter includes 3 items. First, is the provision of INR 100 crores towards doubtful debt, mainly in the franchisee distribution due to lower collection efficiency. We expect meaningful recovery against this provision during the course of next 12 months. Secondly, there is an under-recovery of fuel cost of INR 42 crores in UNOSUGEN project which will be reversed in Q3. The third item is a gain, an income of INR 21 crores arising from CERC’s Tariff Order for our SUGEN project passed during the current quarter. So all put together, net nonrecurring charge we booked in Q2 is INR 121 crores. So we have booked a charge of INR 121 crores in current quarter.Now I talk about the nonrecurring income -- nonrecurring item for the last quarter. The income of INR 200 crores was accrued in the licensed distribution segment on receipt of favorable order from APTEL, with respect to carrying cost claims pertaining to the earlier year. So we have -- last year last quarter, we have income of INR 200 crores one-off income of INR 200 crores. Secondly, against this provision of INR 161 crores was made against -- for our SECI III wind power project. Both put together net nonrecurring income in the corresponding Q2 was INR 39 crores. Adjusted for these 2 one-offs, PBT for the quarter is INR 351 crores as compared to adjusted PBT of INR 494 crores in corresponding quarter last year, which is lower by INR 143 crores. That is roughly 29% instead of 57% on a reported numbers basis. Though current quarter indicate a degrowth on adjusted basis, it is pertinent to note that sequentially, adjusted PBT for the current quarter is higher by 79% than the adjusted PBT of Q1. Thus, there is a marked improvement in the performance on quarter-to-quarter basis reflecting improving condition of the economy. Now I will touch upon the reasons for lower PBT for the quarter which is mainly attributable to the COVID impact. The first reason is demand and customer collection in our franchisee distribution business of Agra, Bhiwandi and SMK that impacted. Demand was lower by almost 18% as compared to the corresponding quarter of '19/'20, which resulted in a lower contribution as well as higher T&D losses. However, the demand has shown a marked recovery of 29 -- 28% growth over the Q1 of the last -- this year, current year.The second reason is lower wind PLF of 28.7% in current quarter as compared to 39.1% in the corresponding quarter last year. That is lower by 10.4% in absolute terms. Most of the pan-India wind sites experienced 20% to 40% lower wind speeds than normal in this monsoon season. Third reason is a lower profitability in our merchant power business. The fourth reason is a positive gain. We have benefited from the lower interest cost by INR 37 crores, which is mainly due to the reduced average debt levels as well as lower rate of interest. With this, I complete the overview of the quarterly performance. I would now request the participants to raise questions on the performance and we can go with the Q&A session. Thank you so much.
[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.
Sir, my first question is how the demand is faring in September and October, especially in Surat and Bhiwandi? And also if you can comment on the overall demand for the Torrent distribution area?
Yes. See Surat and Bhiwandi are more of an industrial hub. So I talk about the demand in September, for example, so demand in September for Surat was down by about 18%, and in October it bounced back with positive 6% growth. So demand was negative in September for Surat. And in October we have witnessed -- we have experienced about 6% positive demand as compared with the comparable last quarter last year. And in case of Bhiwandi, demand again was down by 18% in September and in October we have witnessed about -- in that 18% negative demand was going down to minus 2%. So 2% reduction in demand with comparable quarter last year. And overall -- on a overall basis in Q2, our licensed distribution has witnessed a degrowth of about 15% and franchisee distribution witnessed a degrowth of about 18%. So overall demand was down by almost 16% in Q2 as compared with the comparable quarter last year.
Mohit, just to add on this. If you look at Q1 of this -- for this year, it has -- there is substantial recovery in the demand. As we had said in Q1 that Q1 could be the worst quarter and going forward we see improvement coming upon a quarter-on-quarter basis. So Q2 is more or less in line with what we had expected. On a sequential basis, it is improving. So Q1 demand was down by 37%, so which is -- versus 16% in Q2 here. Q2 as on September 30.
Understood, sir.
There is a marked improvement in thedemand during the course of the quarter..
Good to hear that, sir. My second question is, is it possible to give us the breakup of EBITDA and PBT business-wise for the quarter and also a comparable number for the last year same quarter?
I can give the EBITDA-wise breakup.
Sure.
First, then we will give the PBT breakup also. For gas-based project this quarter, EBITDA is about INR 175 crores as compared with INR 221 crores comparable last year -- last quarter -- comparable quarter of last year. And the renewables about INR 180 crores is the EBITDA for the current quarter and comparable quarter of last year was INR 226 crores. For the licensed distribution business it’s about INR 352 crores EBITDA for the current quarter with the comparable quarter of last year is INR 332 crores. So that is an improvement of about INR 20 crores in license distribution business. Franchisee distribution business, EBITDA is INR 153 crores as compared with the last year EBITDA of INR [ 247 ] crores. And total EBITDA, this is before one-off I'd say. So total EBITDA is INR 855 crores so before one-off for the current quarter and comparable quarter of last year is INR 1,041 crores and one-off item is -- there was a charge of INR 121 crores in the current quarter while there is an income of INR 39 crores in the comparable last year quarter. So EBITDA reported is INR 749 crores and the -- for the current quarter and the comparable quarter of last year is INR 1,104 crores. Coming back to the PBIT numbers. Before one-offs impact I'm talking about. The gas-based power project is INR 64 crores current quarter. The last year is INR 87 crores so reduction by INR 23 crores mainly because of the merchant volume -- merchant contribution. Renewable is INR 111 crores current year as compared with the last year is INR 164 crores. This is mainly because of the lower wind speed in the country for our projects. License distribution is INR 247 crores PBIT for the current year and the last year is INR 233 crores Franchisee distribution is INR 129 crores PBIT and last year comparable number is INR 225 crores.The finance cost is net of treasury is about INR 188 crores for the current quarter and comparable last year quarter is INR 224 crores which is about 37% reduction.
INR 37 crores.
INR 37 crores reduction. So these are the number for the business segment wise
The next question is from the line of Abhishek Puri from Axis Capital.
Sir, 2 things. First could you tell us why Surat T&D losses have normalized, but the Ahmedabad T&D losses have not normalized. Ahmedabad was more of residential low drive.
Surat current year -- current quarter T&D loss is about 3.37% -- 3.84% as against year. 3.84% for the H1, because you wanted to see the YTD basis, so at YTD basis, 3.84% was the T&D loss up to in September as compared with, 3.37% of the comparable last year H1. So there is a marginal increase. There is not much increase I'd say, about 0.5% increase in the T&D losses which is the Surat.
All right. But why is Ahmedabad not normalizing, Ahmedabad is still quite high 2.66% of last quarter versus this year it is at 9.34%.
If you look at the mix of the customer, so more of a recent consumption in residential segment is higher as compared with the commercial and industrial segment. This is the reason why the T&D losses is a bit higher in Ahmedabad and Surat in the current first half.
Okay. Similarly for Bhiwandi, when do we expect the losses to start normalizing? Because we are running at almost 900 basis points higher than last year.
Yes. So I think Q4, we can see that we will be near to the last year level. That is what we can see.
Abhishek just to add on what Saurabh Bhai told, in license distribution business, we expect that for the year we would still be below the normative level, as far as license distribution is concerned. As far as franchise distribution is concerned there would be some elevation in terms of T&D losses are concerned. For -- by Q4, we are expecting we should be normalizing compared to Q4 of last year, but for the full year, there still be a slight elevation in T&D losses are concerned.
Got that. And secondly, in terms of merchant power volumes and realization, you said the merchant realizations are lower and lower contribution as well. If you can give us some numbers that will be helpful.
See the merchant contribution -- in the current quarter of Q2, we have sold about 480 MUs on a contribution of INR 0.24. And last year, it was 395 MU. So there was a growth of 22% of merchant's volume. There is a reduction in the margin. So last year, we earned about INR 0.72 for unit contribution as compared with current quarter is INR 0.24.
And lastly, if I may ask in terms of the gas contracts that you have, since Henry Hub prices have moved up, you have a lot of gas, which is linked to the crude prices. So if you can give us some idea of how many cargos are tied up and what prices because they are largely fixed price, right?
Yes, they are a fixed price contract, yes. This position has not changed materially, I would say, as compared with the Q1. For current year, we have fully booked, I would say. Till March, we are fully booked. The next year -- for the next year we have about 7 cargos we have contracted so far
And the price range will be similar as previous period of about $3 to $4?
Yes, around that only. About $4 kind of a thing.
The next question is from the line of Nitin Arora from Axis Mutual Fund.
So my first question is more -- it's good to see the provisioning what we talked about in the last quarter. So it's good to see we are providing for that. But generally, this provision, I just wanted to understand from a going-forward perspective, what kind of a schemes are you giving to your end customer? It's more of EMI schemes, which you see visibility that can come back at this in, let's say, next 2, 3 quarters or 4 quarters once you're providing this more to understand that is it the last provisioning you see? Or do you see further provisioning that can come going forward? That's why -- sorry, yes, please, go ahead, sir.
Yes. So these provision is -- see these are the provisions, it is not a bad debts. So in respect to that we will make an effort to recover the -- most of the amount in the course of next 12 months' time. So all -- without -- because of the lockdown, and lots of restrictions by the state government, we are not able to conduct the vigilance activity for the -- in the franchisee distribution area. So now that the activity has started so we expect that we will get the results and we will recover the most of the amount, at least with the amount, Id' say, during the course of next 12 months' time.
Nitin, just to add on what Saurabh Bhai told, it is more about recoverability from -- for the units which are sold now. So what happens is typically, people who have purchased power will take some time to pay. So it would be a time lag wherein we have to manage wherein they will be able to pay. Now what happens is that as far as accounting norms are concerned, if it goes beyond certain levels, you have to provide for it. But that essentially, it doesn't mean that it's a bad debt. So effectively, out of this, I think a major part of it would get recovered over a period of 12 months. So it is just a provisioning we have done.
I understand, Rishi. the question was more because if you ask -- if you recollect, I only asked this question in previous quarter that why we are not providing when everything is shut down. It's good to see that we have provided. My question was more -- because now you understand the customer profile in all the distribution franchisees very well because things have bounced back. Now going forward, the question was more that does it cover enough room in terms of provisioning that going forward, even if, let's say, a 10 percentage increase more goes bust or more goes down in terms of their payment, this provision is more or less sorted and would not -- the company would not compel to provide for more provision. The question was more from a direction from a provisioning perspective even now you can understand the customer psyche well.
Yes, we don't expect that the further provision on a net which is required.
Got it. That's very helpful. My second question is, sir, with respect to -- we saw government intervening a lot in a lot of the state distribution here not to charge the consumer and wait for the consumer to pay back. Any sort of pressure you are seeing from the government side from the local state government not to pressurize the consumer, the end consumer or the MSMEs, which you have a lot of in your, let's say Bhiwandi, any sort of pressure from them? Just...
It was there in the Q1 and some part of Q2, but not now.
Not now. Got it. And sir, just lastly, if you can comment on your wind generation part. So I understand the pattern itself was very disturbing in the wind side in Gujarat, but any comment going forward would be helpful. That's my last question.
The wind -- drop in wind deposit was something abnormal and it has happened in a very long -- after a long period of time. So we feel that this should not continue for more months, I would say. So it will be normalized, I think, in couple of months. It is normalized. It's a one-off event. It's a one-off event. So now we think wind speed is normalizing.
The next question is from the line of Naresh Vaswani from Sameeksha Capital.
Sir, the government came out with the draft bidding document for privatization of distribution in power companies. So how did you read in that in terms of opportunity for our company? And generally when you bid for these utilities, what criteria you look in terms of returns? Like how much CapEx you need to invest in this for turning it profitable? How many years it takes to turn around? Any light on that would be helpful.
It would depend on the case to case basis, like for example, we can see these -- instead of Bhiwandi -- to give an example of Bhiwandi and Agra, their CapEx would be -- we generally invest upfront CapEx so that you can get the -- you can start getting the results as quickly as possible. Bhiwandi, we have invested -- in first couple of years, we invested almost INR 400 crores CapEx so that has started -- it has impacted our -- reduction in T&D losses also. So -- and this kind of -- in distribution CapEx would be not like a generation kind of a project, it will be in a phased manner, I would say. So every year, you also incur depending upon the circle, depending on the area where you are, you have to incur the CapEx and you have to plan the CapEx accordingly. It's not a bunch -- CapEx will not be bunched up I would say.
Right. So in how many years will you generally see that T&D losses come down to the level where it becomes profitable for us?
Yes. I know it was very -- Bhiwandi, it was very quick. Agra, about -- within 4, 5 years, we have started showing the -- getting the results in terms of Bhiwandi and in terms of T&D losses. It has reached to a reasonable level, I would say.
Okay. And in Agra, how much did we spend in those 4 years in CapEx?
See so far in Agra -- we are there in Agra from since 2010. 10 years is there. We have almost invested about INR 1,000 crores in Agra.
Okay. And in terms of this draft, how would you read into that in terms for the opportunity for us, sir?
Sorry, can you repeat the question?
I'm saying the government came out with a draft bidding document for the distribution privatization so how did you read into that?
I think we are right now evaluating those drafts. So it is too early to comment as of now on those.
The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
I have a couple of questions. So first, on the wind side, the generation which was there in the first half, not the second quarter just was it below the P75 level?
No. So Bhavin, it was below P90 levels, not P75 levels. And this is more coming out of the wind resource not being there for the entire country. So if you look at 4 major states, all of them have reported lower wind speeds.
Sure. So it was below P90, but not below P75. So it was within that band, which was the long period average. Is that correct assessment?
Yes.
Sure. Sir, second question is, so we had a CapEx expectation of INR 4,500 crores over the 3 years on the distribution side. This year, we had highlighted it will be lower. So what was the CapEx in the first half? And what is the expectation for the current year? If you could break that into the license and the franchisee, that will be great.
In the first half we incurred CapEx of INR 350 crores for all distribution put together. And as we said in the last conference call, our guidance is about -- total CapEx is about INR 800 crores to INR 900 crores for the year. And [indiscernible] would be about -- license out of INR 350 crores, [indiscernible] for the license distribution business and about INR 80 crores for the -- remaining is the franchise distribution business for the first half. And as far as the guidance is concerned about between INR 600 crores to INR 700 crores is for license distribution business for the full year. Now between INR 200 crores to INR 300 crores for the franchisee distribution business for the full year.
Sure. My last question is, even in the license this year the volume is below what we had originally anticipated or it was there in the tariff order, which was given by the regulator. So is there any under recovery from the original expectation? Because there was -- the previous year was also trued up and that was expected to be recovered this year?
So we don't expect that -- on overall basis, the early basis, we don't expect any under recovery for the year. So we were expecting some recovery of past dues when we started this year, but that may not happen this year. But we don't expect any significant amount of under recovery or over recovery this year for the full year.
The next question is from the line of Aniket Mittal from Motilal Oswal Asset Management.
Sir, just to get a better hang on this provisioning that we've done. Could you sort of quantify what has been the collection efficiency at Agra and Bhiwandi? Because I think if I remember in 1Q, our collection efficiency was somewhere around 70% to 80%. How has that moved in 2Q?
Collection efficiency, I will talk about our first half collection efficiency. In the first half Bhiwandi is about 96%, Agra is about 90% kind of a thing . And these are the 2, Bhiwandi and Agra. On a quarterly basis Aniket, I think, we have improved significantly from Q1 of this year wherein collection efficiency has improved at 99%, 100% in Bhiwandi and 95%, 96% in Agra. So I think we are seeing a good traction on that front as far as collection efficiency is concerned on a quarter on quarter basis
Okay. Sir just I am trying to understand what is the provision for. Because I take our 1Q collection numbers were lower, which is something that we were expecting, and hence we have done a provision in 4Q for that, right, if I am not mistaken that is how we did the provisioning, right?
We have a rule-based policy about the provision. So since -- if you notice I think, Q4 also, we made provision of INR 48 crores, so which has helped us in Q1. So Q1, because of the rule-based provision, there was no need to make any additional provision. And in Q2, because of our lower collection efficiency, we have to make a provision. We are just considering our normal provisioning policy.
Okay. But in 2Q, our overall collection efficiency has been on 100 percentage. Is that not the case?
H1 it is 96% for Bhiwandi and 80 -- about 90% for Agra.
Okay. Got it. And sir just I think in your opening remarks you mentioned some under recoveries on UNOSUGEN, could you just throw some light on it, what is that related to?
Yes. See these were accounting thing, like, for example, we have a SUGEN project, UNOSUGEN project. And we are also power -- selling power in merchant market also. So we have our -- we purchase the cargo based on -- for our -- for each project individually. The storage facility which we have is a common facility. So consumption will happen for all the projects together, I would say. So because of the consumption is -- we are booking the consumption based on the -- on a FIFO basis and -- but the billing to the consumer will happen at the contracted cargo rate only. So difference of this is the under recovery for the UNOSUGEN project.
Okay. Okay. But that is something we expect to recover in the coming quarter?
Yes, we will -- we are going to recover in the next quarter, Q3.
And then sir, another question if I may. Sir I think the MYT Regulations for both your Ahmedabad and Surat licenses are expected just from the next MYT perspective, let's say, from a 5-year perspective which is from FY '22 to FY '27, what is the amount of CapEx that we envisage for both Ahmedabad and Surat?
We have -- next 3 year's guidance we have given INR 1,500 crores for the license distribution area.
So would that largely continue?
Yes, that will continue.
Sir, just that point actually to understand if I look at the last year’s MYT regulation and the average CapEx that we have done in the distribution license, it comes to around INR 800 crores. And now we are guiding for around INR 1,500 crores. So what is leading to the sharp jump versus the -- and ifI look at last year's numbers as well, the approved CapEx what we projected is somewhere around INR 800 crores to INR 1,000 crores. So what is leading to the sharp jump from around INR 800 crores to INR 1,500 crores?
Aniket when we say a INR 1,500 crores it is our license and franchise put together. So if you look at license business, it is INR 1,000, INR 1,200 crores and the franchise business would be around INR 300 crores additional. So when we say INR 1,500 crores it would be both put together.
When you've seen the INR 1,200 crores numbers so that it looks a bit higher. Like I said, our average has been somewhere around INR 800 crores,
It also including our additional CapEx in my Dahej and Dholera SIR also and incremental CapEx in Ahmedabad and Surat. Now typically what we are planning to do in terms of Ahmedabad and Surat that -- those plans have got delayed because of COVID and then onset of monsoon. So I think in next couple of years we should be able to recoup this CapEx.
Okay. So out of the INR 1,500 crores numbers, how much is Dholera?
So Dholera what we are saying is that we'll have a CapEx guidance of around INR 500 crores over the next 5 years. But that will depend on how it will pan out in Dholera. But right now, what we are doing is we are supplying construction power there. So we are building some small capacities there to import power. So it will not be a larger CapEx as of now, but going forward, if things improve, we'll have to incur higher amount of CapEx.
Sure. Sir, just one last question on the MYT itself, now even typically what's happening within the Surat business is we sort of enjoy a good amount of savings and on the T&D because our T&D loss seems to be lower than both the -- after all T&D is by the commission. So do we expect this normative T&D number to get reduce in the upcoming MYT, is there a possibility, sir?
These are already are [ fresh ] numbers so let's hope that the regulator will not touch normative numbers in MYT.
So with respect to Torrent you say?
Yes.
The next question is from the line of Dhruv M from HDFC Asset Management.
Sir, the INR 100 crores provisioning would it be fair to assume it is largely Bhiwandi? Because you see in Agra has recovered significantly so it is Bhiwandi that is driving it?
It is all for all 3 locations Bhiwandi, Agra and the SMK.
But the bigger portion will be Bhiwandi?
Agra is recovering, but not -- in terms of volume, but not in terms of collection, collection efficiency, right? As I said, collection efficiency for the first half is 90%.
Okay. Sir, because -- so sir, is it possible to share what would be the quarterly revenue that you probably generate from Bhiwandi for the annual revenue some approximation?
Bhiwandi is about INR 400 crores for the current quarter.
Okay. And sir, so INR 400 crores sir now you have reported a AT&C loss of 23%. So that would be in that of which -- so that number INR 400 crores is net of this AT&C loss, right? This should be after this 70%. Okay. Okay. So had this 18% has not been there you would have been probably INR 500 crores. And this INR 400 crores for the INR 100 crores of earning probably see 70% is Bhiwandi. For this INR 400 crores, 70% is what you have made the provision for?
No, no. So...
The under recoveries were I mean we build that you had issued from the previous quarter which were not required.
Dhruv, these INR 100 crores is not only in Bhiwandi, it is more or less evenly spread out across all the 3 franchise distribution areas.
Okay. Okay. Yes. So that I understand. So probably I am assuming about INR 60-odd-crores will be Bhiwandi given that is a bigger segment
No, no as I said it is evenly spread out between all the 3 areas more or less on a 1/3rd basis. Bhiwandi is lower than the 2 area, Agra and SMK. It more or less corresponds to the collection efficiencies which we have said. So I think Agra and SMK is a higher number compared to Bhiwandi.
Okay. Okay. And sir, what would be the cumulative provision that would we have done over the last 3 quarters? I think INR 40 crores, INR 50 crores you did in 4Q. In 1Q you did…
Yes, INR 48 crores in Q4 and the INR 100 crores in this Q2. There was very small provision of INR 5 crores in the Q1 not much.
Okay. And sir in one of the previous calls you mentioned that you don't expect net incremental provision. But I was wondering can some part of this reverse can boost your profit? I mean you see that it would be the provisions but there will be offset also
That is what we said in the beginning. Just that this is the provision which we have made. We expected the -- this company will make an effort to recover the maximum amount to the extent possible in next 12 months time. So I think a major part of this provisioning should get reversed over a period of 12 months. So it is just a provisioning which we have done because of certain accounting rules we need to follow. But if you look at on a -- it will not end up in a bad debt kind of a situation.
Okay. Got it. That I understand sir. But of say, for example, INR 50 crores is -- say INR 40 crores is your provisioning for Bhiwandi, on a revenue of INR 400 crores. This is also after the AT&C loss that means some part of the losses are already covered in that number on the INR 400 crores number. So, almost 10% of what we are billing is not recovered. So I was just wondering is this the last amount of provisioning that we are doing something similar to the previous question? Or there would be some more? Hello?
Yes, yes. So we don't expect there is a further provisioning
Okay. Okay. And sir secondly, now you have a decent sense of how the demand is panning out in Bhiwandi and probably Surat. Particularly focusing on Bhiwandi, do you see any permanent demand reduction? Any terms and strategy, is that what you are seeing? Some demand which will probably never come back any sense on that?
See, it is too early to say. But if you can just see the October number of Bhiwandi, almost we are back to the last year level with a very, very miniscule 2% drop in the comparable number of last year in terms of demand. So demand is coming back in Bhiwandi also.
So no permanent connection that you have seen nothing of that sort permanent connection that what we are seeing?
Not for the year I would say at this moment.
And sir last question, what I remember was for the SUGEN listed LNG, our long-term tie up within December 2020 to link to crude, are they be renewed and for what duration? Or is it keeping doors open?
We are covered up to November, December next year.
Okay. And this is still will be link to crude and you will be -- you would have hedged those, right?
Yes, yes.
Okay. Okay. And sir, so I mean, given that the LNG can be very volatile, so do you have to go to the regulator to get an approval of the cost that, yes, this is a fair cost, and you can probably go ahead with it or how does it work?
No, we don't have to get the pre-approval of the regulator. But we are -- on a regular basis we are updating them and say what is the -- what all the contracts we have undertaken, we have contracted.
Okay. Okay. And sir, this new contract that you have signed will be similar to the last -- in terms of pricing will be similar to the last contract? I think last was about $6, $7. This would again be similar? Or…
See it will be as a current rate I would say it is about $4 kind of a thing..
Oh, that is further lower. Okay. Got it.
The next question is from the line of Maan Vardhan Baid from Laurel Investment Advisory
There was an update about the Delhi distribution business and us participating in that. Any further color on that?
No comment.
No comment. We don't have any comments on this.
The next question is from the line of Aniket Mittal from Motilal Oswal Asset Management.
Sir, the distribution franchise EBITDA number that you reported of INR 153 crore. Out of this, what would be the EBITDA loss for SMK?
Aniket, it would be difficult for us to give you a segment-wise number.
Okay. Just to get a sense of what sort of -- what's the trajectory happening at SMK as of now because I think on a year-on-year basis, that would have impacted you negatively as well, right?
Yes. So if you -- I can only say that if you remove a one-off adjustment, SMK was more or less breaking even.
Okay. So it was breaking even.
For this quarter.
Okay. So there are certain provisions that we have done in SMK as well right, is it?
Yes, yes, yes.
Okay. And what has been the collection at SMK? Is it sort of stock on business? If you could give -- throw some light over there?
Collection efficiency you mean?
Yes, yes, yes.
Collection efficiency for SMK is about 80%.
80%. Okay. And the overall T&D loss as well still be around 50-odd percent?
Overall T&D loss is about 39%.
Okay. T&D 39%, okay. And how do we see the trajectory for this going, let's say, for the next couple of years and especially this year? Would this still remain high, somewhere at around 40-odd percent?
Our objective is try and reduce the -- if you can see the experience of Bhiwandi and Agra, we -- it is -- we have next 5 years, I think, in Agra, we could able to achieve about 20% kind of a loss level. So similar thing we can expect in case of SMK also.
Okay. Okay. And sir, one more question if I may. So when this MYT regulation, let's say, comes in and when it gets approved by the commission we have a large amount of regulatory assets also sitting on a big side of around INR 1,000 crores. So how we would recover that? That gets recovered when, let's say, the MYT comes in or it would be on a more phase manner?
It will be a kind of a phase manner only.
So Aniket, if you look at last 3, 4 years, our regulatory assets more or less remains stable at these levels. So typically, it's a cycle wherein every year, we'll recover the past debt and then in that year, we might end up at a gap or a surplus. So on an overall basis, it would be on a phased manner. But then our -- if you look at the level for last 3, 4 years, it has more or less remained in the same range. So at least we are not adding upon any regulatory assets per se.
Okay. Sure. Understood.
And in this INR 1,000 crores, there are a couple of orders which are also pending true up in this year. So it also gets added there.
Sure. Just trying to understand so let's say, when the MYT sort of order comes for the next 5 years, does that trued up by sort of quarter could be even a...
MYT doesn't cover that. It has to be a true up so every November we file up for -- file for true up order and then in March the regulator gives you a true up order, it is covered under that and MYT doesn't cover those areas.
The next question is from the line of Vishal Biraia from Aviva Insurance.
Yes, sorry for that. Sir, one question on the collection efficiency as to when you mentioned that our Bhiwandi collection efficiency is 96%. So this is only for the bills that were generated and the collection that was done only for those bills or for those that section of customers? Or is there a scenario where you've not billed to certain section of customers so that is you did from the calculation of collection efficiency?
That would happen. It is a collection efficiency of whatever we have billed based on that collection efficiency is decided. But every -- that would not happened that we have not billed to the customer.
So what proportion of customers would not have billed itself? I mean, what is that approach?
See, like, for example, if meter rating has not happened, we will bill the -- we billed the consumer based on the assessed value.
Agreed sir.
Yes, the billing will happen on an every frequency, like monthly frequency or the once in a 2 months, it is going to happen.
Okay. So just for the sake of better understanding, say, there are 100 customers, all 100 have been billed?
Yes.
And out of those 100, this is the collection efficiency, that 96% of the amount that was billed has been collected. So there is no section of customers that have -- that was not billed?
Yes.
The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
Just one question. So on a slightly longer-term basis, say, 3 to 5 years, what could we expect as T&D losses in the franchisees, say, Bhiwandi, Agra and SMK? And we understand Bhiwandi is more or less similar lines as Surat, where we are low single digit. So could we expect it that Bhiwandi could reach similar levels as Surat?
So I think, Bhavin, that's the [indiscernible] So I'll say that if you look at Surat and Ahmedabad, we are in the range of 3% to 5% kind of AT&C losses. And on a normative basis, Bhiwandi and Agra, it is in around 12% to 15% range. Now there is significant headroom, which is available for us to reduce AT&C losses going forward. Now it will also depend on the license getting renewed or not, so we will try to reduce the losses as much as possible. And as far as headroom is concerned, there is significant headroom available for us to reduce the losses. As far as SMK is concerned as Saurabh Bhai earlier said that it will take some time for us to reduce the losses. Looking at our experience in Bhiwandi and Agra, so I think it should be faster, but it will take at least like 3 to 4 years for us to break even at that in SMK and then further reduce the losses there in SMK.
The next question is from the line of Anuj Upadhyay from Emkay Global.
Sir, can I make sure how the consumer mix has changed in Bhiwandi and Agra? In Q1, it has dropped to 73% in Bhiwandi, I guess. And for Agra, it was down to 23%. Are they back to the [ 90-40 odd ] level or still some part to cover?
The consumer mix say, for example, Bhiwandi, commercial and industrial was about -- for the last year it was 91%. If you look at the Q2 breakup, it is around 86%. So it's a change in favor of -- against the commercial and industrial [ 35% ], by about 5%. And for Agra, it was 43% industrial and commercial for the full year, and at Q2, it is about 32%.
Just for Q2, right, sir?
Yes.
Okay. Okay. And if we say for the first half, sir?
That would be about 30%.
For Agra. And Bhiwandi, sir?
Bhiwandi, about say about 81% kind of a thing. 81%.
81%. And SMK is largely residential, sir, right?
SMK is largely residential, yes.
How much would that be say we can just...
SMK would be about 90%, I would say.
Okay. 10% is CNI over there.
Yes.
Hello?
Yes. [indiscernible] is residential.
The next question is from the line of Dhruv M from HDFC Asset Management.
Sir, one clarification. In the earlier question, you mentioned that there are no significant permanent connection cuts. Despite that we have taken provisions of about INR 100 crores. That means you are supplying to customers -- you are still supplying. I mean the customers and it will be gone and you are still showing it to them that is why you have the confidence able to recover this amount?
See, there are rules about disconnection. And so that disconnection rule we are following. Except for some part of the H1 government has directed us not to disconnect the connections.
Okay. So I mean the customers are not out. The customers are still there with you, and they will be continuing that power. So that is why you believe that you will be able to recover this amount, is it?
Yes, yes.
The next question is from the line of Devam Modi from ARDEKO.
Sir, firstly, just wanted to know, what is the total invested block in the renewable piece of secondary wind part of 649 megawatts?
Sir, we will give that off-line. Right now, we don't have that number handy.
Just wanted to get an idea, we understand because second -- there is a part which came up 176odd megawatts in FY 2020, and there must be an earlier piece which was obviously already there. So what are the kind of normal condition PLF we are looking at from the whole portfolio and if you could split it between FY 2020 commissioning in the earlier piece.
That is 120 -- 170 megawatt that you are talking about it is not in Torrent Power, it is in subsidiary of Torrent Power. So I will give those data off-line separately because we don't have right now on a handy basis.
Sure. And on the gas-based plants, we have obviously seen a great improvement in region volumes in H1 compared to previous year. So now we understand that the spreads are down, but what will be the visibility in terms of volumes for H2 and going ahead over there? And what kind of spreads would you guide? I mean, what should we look at for looking at the spread over?
So there we typically don't give any guidance per se. But if you look at from the electricity demand perspective typically H1 is one of the best half year, I mean, best half year. And H2 is generally a subdued half year. So for next half year, we would not see such kind of volumes per se. But on a incremental basis, if you look at last 2 years we have been able to increase volumes coming out of DGEN partly because of better exchange prices and partly because of lower gas prices. And we also -- we expect that our gas prices to remain subdued or at these levels going forward also because of International LNG supplies being available in plenty. And if the demand picks up on exchange, we will be able to sell more power from DGEN.
So also on the gas front we have been hearing before for some time that there was some policy which was coming to support the gas-based plants, so has anything come or is anything expected on that front which should help DGEN?
No, I think government has shelved that plan now as far as gas-based power plants are concerned.
Sorry, I did not get the answer.
I'm saying government has shelved those plans of subsidizing gas-based power plants. So we don't expect anything to come there.
So, in the medium to long-term till demand picks up, because this plant does not have a PPA, this will always be subject to some under recoveries which will be there till demand picks up substantially?
Yes, so on a medium term basis, yes, but on a long-term basis if demand picks up, I think average PLF of all the power plants in the country should go up. And that -- there we could have an opportunity to tie up a long-term PPA. But that is sometime away as of now. So on a short-term or a medium term basis it would be a peaking power supplies, or in supplies in exchange or on a short-term basis short-term contracts of 1, 2 months kind of a structure.
And we have been hearing a lot about this privatization of distribution franchises from the government. So, over there anything which is probably in the work apart from obviously Delhi you said, you don't want to mention anything but apart from that any other circles is coming up for bidding or probably some action is going on from the next, let's say 1 year perspective?
So I think the central government is planning to privatize duty -- I mean, those 7 or 8 areas. There, I think the government is drawing up the plan. So once that is successful, other states will also start picking up from there. But as of now, there are no firm areas of own franchise or license, I think, opportunities which are available, which I can say that, yes, this is there in the market.
So sorry, I mean, you mentioned that Central Government is looking at 7 to 8 areas, so this will mainly be Union Territories and things like that?
Yes, yes, yes.
Okay. So there is some bidding work which is going on over there in terms of some curtailing...
No, no. It is right now in a drawing plan. Draft guidelines are out or draft, the parameters are out, which everybody is looking into. And that is for 2 areas. So bidding stage has not yet come.
Okay. So this would be at least a year away in terms of action, in terms of the bidding activity?
I think a year is too long a time. I think we expect by, let's say, March or Q1 of next year should be the time wherein you can expect something.
And finally, just if you can confirm the gross debt and the total cash and cash equivalents as of September.
The gross debt was about INR 8,600 crore and treasury balance is about INR 1,000 crores.
This is all the cash and cash equivalents which should be there?
Yes.
Ladies and gentlemen, due to time constraint, we take the last question from the line of Mohit Kumar from DAM Capital.
Sir, couple of clarifications, are you participating in this Odisha distribution licensing?
No.
Okay. And secondly sir, Mumbai, Shil, Kalwa for [indiscernible] just started. We must have a tough quarter. But how do you expect this to behave over the next 2, 3 years? And have you started working on the long-term ratios? Or are you -- or is it still a challenge at this point in time?
Shil, Mumbra and Kalwa is a 90% residential area. So like, for example, you would have observed Bhiwandi and Agra we got a good success. So it's a very small area as compared to Bhiwandi and Agra. So we expect that the next 4 years time, we will invest in the network augmentation. So we'll get the -- we would see the success in reducing the T&D losses and as well as AT&C losses also in SMK.
Thank you. I now hand the conference over to Mr. Harshavardhan Dole for closing comments.
So if deemed fit, I'd like to squeeze in a couple of questions from my side. One is, in general, we are getting a feedback that the renewable competitive intensity were likely to ebb out. Firstly, your thoughts on that? And if so, in terms of capital allocation, do we intend to bid more aggressively and look forward to put up renewable capacity? That was the first question. The second question was basically pertaining to a revival of gas-based power plant. Any further progress on that side?
Renewable capacity, we are selectively looking into it. And selectively we'll bid for the new capacity. And unless us, we have certain parameters, which we have discussed earlier also. Unless we meet those parameters, we will not be planning to bid -- to win any project. But if it is coming under those parameters, we'll definitely like to look at it. So if the intensity -- competitive intensity goes down, then we'll definitely want to look at it, if it is hitting our parameters as we have discussed earlier also. Right? And as far as gas-based power plants are concerned, I think government is no longer going ahead with the plan, which they were having, like in '15, '16, wherein they had given some subsidized gas, which they have shelved as of now. So as far as DGEN is concerned, as we discussed, it would -- right now, it is more of a short-term, medium-term perspective, when it will run for a peaking power or for sale in exchange and some short-term contracts with Discoms.
Well, I think we are completely run out of time. And on behalf of IIFL, I would like to thank the management for giving us the opportunity to host the call. And I would also like to thank all the participants for logging into the call. Thank you very much.
Thank you so much. Thank you.
Thank you. Ladies and gentlemen, on behalf of IIFL Capital Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.