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Torrent Power Ltd
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Good morning, ladies and gentlemen. Welcome to the Torrent Power Limited Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Lalit Malik, CFO, Torrent Power Limited. Thank you, and over to you, sir.
Thank you very much. Good morning to all of you, and thank you for joining earnings call of Torrent Power for quarter 2 FY '23. First, I'll take you through the performance of the quarter, after which, phone lines will be open for question-and-answer session.
We'll explain the performance of the company at PBT level first, and we'll take tax expense separately thereafter. Reported PBT for the quarter stood at INR 725 crores as compared to INR 485 crores in the corresponding quarter last year, with an increase of INR 240 crores, that's 49% on [ y-o-y ] reported basis.
There are no nonrecurring items in both the current quarter and corresponding quarter of the last year.
I will now take you through key highlights on improvements in the PBT by INR 240 crores for the current quarter.
The improvement in the operating profit is mainly coming from, one, improvement in profitability of gas-based power plants, mainly on account of 2 factors: First is net gain of INR 155 crores coming from sale of LNG. This, as discussed in the earlier call with elevated LNG prices, it makes commercial sense to sell LNG instead of converting it into electricity.
Second is gain of INR 40 crores on account of lower depreciation charge in detail on account of onetime impairment charges taken in quarter 4 for FY '22 and reduction in depreciation rate in full year. Therefore, in total, including above major factors, profitability of the gas-based power plants improved by INR 194 crores.
Moving on to performance of distribution business, pursuant to exploration of industrial demand, which was impacted last year due to COVID-19 pandemic, there was a marked improvement in overall contribution from the distribution business by INR 90 crores, major factors of which are evident.
One, gain on account of reduction in T&D losses of INR 51 crores, volume and rate gains from franchisee business of INR 14 crores and higher ROE and incentives in licensed distribution of INR 25 crores.
On the other hand, renewable business of the company witnessed a decrease in PBT, mainly on account of lower PLF in its wind project amounting to INR 32 crores. This was partly offset by profit booked on account of acquisitions calculated during last 2 quarters amounting to INR 9 crores.
Therefore, in total, profitability of renewable power plants reduced by INR 23 crores.
Next is with regard to finance costs, increase in finance cost of INR 34 crores, which is mainly due to increase in the average borrowing by approximately 2,000 crores.
Other miscellaneous gains of INR 14 crores mainly coming from increased contributions from coal-based plants and other miscellaneous gains.
Moving on after tax numbers. Consolidated profit after tax reported for the quarter is INR 485 crores as compared to PAT of INR 367 crores reported in corresponding quarter last year, which is higher by INR 118 crores, which is contributing to 32%.
This was all about the financial performance of the company during the quarter. Now moving on to operational performance of the company.
Distribution business witnessed a marked improvement in the overall demand and surpassed the pre-COVID level last quarter 2 FY '20. Demand during quarter 2 FY '23 has increased by 5% as compared to corresponding quarter of the last year and also as compared to Q2 FY '20, that's the pre-COVID level. The growth was driven by elimination of oil impact and consequence normalization of industrial and commercial activities.
This completes the overview of the quarterly financial and operating performance of the company.
Now we'll move on to give you a brief update on current projects which are [ evident ].
115 megawatts, 65 projects with SCOD of September 2022 is likely to get commissioned by end of December 2022. Request is submitted to [ SECI ] for SCOD extension till December 2022.
Next, SCOD of TPLD 300-megawatt solar project has been recently extended up to August and October 2023. Next is 300 megawatts SECI XII wind project was won by the company during quarter 1. LOA of the same has been received, and PPA will be signed in due course. Decisions have been initiated with few [ PTC ] contractors for implementation of the project.
That's all for this quarter. Now I would request coordinator to open lines for Q&A session. We wish everybody to stay safe and healthy. Thank you. Now we hand over to the operator.
[Operator Instructions] The first question is from the line of Swati Jhunjhunwala from Vt Capital.
So first -- my first question is the prices are -- power prices have been high in Q1 and Q2. So what is the outlook like going into Q3 and Q4?
[ Just to be for sure ] that the price of power for gas is higher as compared to the last year. So as you noticed, [ as delivered ] of Q2, we have not operated the plant significantly. We feel that is hardly 7% for [ in our solution ]. So we are waiting -- awaiting the price to stabilize. Once the prices stabilize, we will [ hook up the gas ] and then offer the [ decision plans ]. At the same time, into our fixed cost is continuing into [ various improvement ] projects. So the profitability is not going to be impacted. As far as [ the current outlook ] is concerned.
So pricing will continue to remain on the higher side in the short duration, although in the coming next year, perhaps the prices may look for downward trends unless there is some other unpleasant actions take place. Otherwise, currently, the prices are expected to remain at the [ elevated ] level in the short term.
Okay. And second question is, the Section 11 agreement at the government has come -- that the government has imposed right now, it is valid till December 30, if I'm not wrong. So after that, do we see any impact on our operations on account of PPAs not being signed or the power agreement is not happening?
No, it won't have an impact on us.
Okay. Next question is, what is the regulated equity as of September?
September -- I mean we don't look at September regulated equity, typically happens every year. So we generally look at on a year-on-year basis.
Okay. All right. So for the second half, what is the planned CapEx for the licensed distribution business?
Sorry, can you repeat it again?
The CapEx, the capital expenditure, what are we planning for the second half for the licensed distribution business?
Sure. So for the licensed distribution, we are expecting somewhere to the tune of INR 400-plus crores of CapEx in the second half since we have already completed almost INR 350 crores in the first half.
Okay. And could you give me the EBITDA breakup for the gas and the renewables and the licensed and franchise businesses?
We cannot give an EBITDA breakup. So Q2 -- in the Q2 numbers yes, [indiscernible] INR 351 crores..
51?
INR 351 crores. [ And as of today ], licensed systems is [ INR 397 crores ]. [ Franchise ] is [ INR 290 ] crores. And overall EBITDA is INR 1,261 crores.
INR 1,261 crores. Is that correct?
Yes, that's correct.
The next question is from the line of Nikhil Abhyankar from DAM Capital.
Congrats on a good set of numbers. So in the recent 2 or 3 big ticket projects [indiscernible].
Sorry to interrupt, sir. Your voice is breaking up.
[ My apologies for ] breaking up. Am I audible now?
Yes.
Yes. So in the recent past, the big ticket projects were announced and to land up in [ dollar asset ] and these projects are mostly power [ sustained ]. So what kind of power demand growth will you expect in the medium term?
You're talking about dollar asset?
Yes.
No, dollar asset right now, some industries are coming up. So as of now, there is not much of demand. It is mainly for the construction demand, which is there and that do not very high. So ramp-up will take some time in that area.
I was specifically talking about the Foxconn-Vedanta semiconductor deal and also lithium and battery plant for Tata Chemicals.
Yes. So I think Tata Chemicals plant, I think that is -- it is under construction or work has just started. So as of now, power demand is -- giving an outlook for power demand would be very difficult.
Okay. And sir, receivables have increased significantly to INR 29 billion since March. So any specific reason for this, sir?
Sorry, sorry, can you please repeat again?
Our receivables have increased to INR 29 billion.
So I can update about the receivables. The receivables has gone up because of the incoming new business coming in, like [ Daman and Diu ], which was not there as of March '23 -- March '22, which is stable in finance resale is a new receivable in our business.
Then the [ sale has ] as you noticed, we have significantly sold [ Reliance ] in the course of the quarter, about INR [ 3 crores ] on account of RLNG, which was not that on March '22. If you look at our distribution business normally have a higher receivable on September as compared to the March number. So about 50-50 gas of resale has gone up in distribution business in as of September which will come down over the -- during the H2.
And some new projects [ really taken off ] which was not there as of March '22. So all put together has increased the receivables as of March -- September '22 as compared with March '22.
The next question is from the line of Mohit Kumar from DAM Capital.
To the government, I believe that there were a couple of meetings held in the quarter for solving, resolving the gas issues. So have you heard anything from the government, do you think something is possible in the medium term? And does the ancillary market starting -- start will help our power plants to get the schedule?
Government, last one year, government has had a couple of meetings. So they are working with the solution to provide affordable gas to power project. But it's a work in progress, I would say at this moment.
Anything on the ancillary markets, sir? You have...
Sorry?
Anything on the ancillary markets you are hearing, which should help our power plants to have higher P&F?
Sorry, we lost you. You were saying ancillary markets?
Yes, yes, yes.
So can you just tell me what do you mean by ancillary markets?
You are supposed to start somewhere, I think [ CERC ] was supposed to come the regulation. So are we expecting -- have you heard anything on that? And can we expect a higher scheduling for our power plants once that is up and once that market is up?
No, nothing as of now.
Okay. And sir, second, and the next block also seen slightly has increased materially from March 31. So can you please explain how much has been permitted from the Daman and Diu and do you have the capacity?
We're losing you Mohit, sorry.
Am I audible now? What I'm saying is the fixed assets, fixed asset plus CWIP has seen a material increase from March '22.
Yes.
But can you please help us how much has been added from Daman and Diu and how much is from our CapEx?
Licensed distribution in H1 as I said is 183 crores. And franchise had 105 crores and [indiscernible] about [ 550 ] crores kind of thing. These are the breakup because of each fixed asset log and CWP has gone up.
So there is not much in Diu and Daman.
Not much in Diu and Daman.
The next question is from the line of Rahul Modi from ICICI Securities.
Sir, can you just elaborate a little on how the demand that you mentioned has been improving and is better versus the pre-COVID levels, especially in Agra and Bhiwandi? How is the demand trajectory been? And what is the sustainable growth from the current base that you expect over the next 3 to 5 years?
Yes. As we explained in the call, [indiscernible] reached brings across the pre-COVID level. And it is reach at an average level of 5%, 6% growth. That is what we can predict. And it all depends on the industry, how the industry will be or what will be going forward. But in a normal [ September we have ] 5%, 6% growth we can see in the demand in all our distribution area.
Okay. Sir, also, can you elaborate some on the bid on renewables that we had at solar for the 1.99 tariff? Any progress there? And there were some recent changes in the solar import duty structures, which some concessions we were getting. How is that impacting us?
Yes. As we explained earlier, we are awaiting the price to come down solar panels, which is around -- currently they're [ 27 cents ], we are hoping to compare -- once the prices are on a reasonable level, we can implement the project. As far as the duties are concerned, actually we see changing in law conditions. So it gets passed through. So it won't in fact impact the -- any of the solar projects.
The next question is from the line of [ Amit Minday ] from Morgan Stanley.
I had 2 questions. On your renewable EBITDA...
Sorry to interrupt Amit, can you speak a bit louder? We're not able to hear.
Can you hear me now?
Much better.
Okay. Great. So sir, I wanted to ask you on your renewable EBITDA. Renewable EBITDA per unit has gone up from nearly 3.8 per unit to near about 4.6 now. So what is driving this improvement in renewable EBITDA per unit? And what should be the sustainable number? That's one. And second, on this solar project that was for INR 1.99. I think we were looking at impairing this project, right? That's -- that project is not continuing. Am I correct on that?
No, we have already provided the amount look like last quarter, even over INR 10 crores apiece in the books of account. So no further [ booking ] requires something.
That project is [ not continuing ], right? We'll not be continuing with it at all.
Not yet current there, but we have a conservative we have provided we have made the provision of 10 crores.
As far as your questions on the renewable margin, so we don't actually figure out how we have tangible number. You added a new project during the H1. So that is what the impact you may have seen.
Great. It's that it has gone up steeply like it is up 20%, almost 3.8 -- 4.6 over 3.8. So I mean, what is changing? New additions, I can understand, but...
[ Amit ], there are new additions also in the capacity through acquisitions. So I hope you would have factored that. If you have done that, we can take it offline, and we can look at the numbers out as being calculated and then we can take it offline.
Last Q2, it was 787-megawatt project. This year, it is about [ 1,060-megawatt ] project. So capacity has gone up. In fact, with the correct capacity, I think you will get the answer.
The next question is from the line of Sumit Kishore from Axis Capital.
Could you give a 3-, 4-year strategic road map for the company across the regulated distribution franchise and renewable business? If you could outline the CapEx plans over a 3-, 4-year period for these businesses and how is the landscape evolving? We are sharing about the electricity amendment bill, which is going to come up in the winter session. And in renewables, we are looking at high module prices currently, which is sort of impacting the outlook there. I'd just like to hear your thoughts on the strategy for the company across business segments for the next 3 to 4 years.
As we explained during the last couple of quarters, as far as distribution is concerned, we have our CapEx run about INR 1,500 crores for the next 3 years' time, 3 years where we planning about [ INR 1,200 ] crores in our licensed distribution business, which will improve our ROE going forward. And about [ INR 250 ] recent disposition stand we'll try to ease the loss further.
In the case of renewables? Are there any opportunities that you're looking at? Similarly in licensed distribution and franchisee. Are there any other incremental growth opportunities in new areas that you're looking at or which are on the horizon?
[Technical Difficulty]
Ladies and gentlemen, we seem to have lost the audio from the line of phone for the management team. Please stay connected while we try to reestablish the connection.
Ladies and gentlemen, thank you for patiently holding. We now have the line for the management reconnected. Over to you, sir. Members of the management team please proceed.
Yes, sorry for the technical glitch, we can continue now.
Mr. Kishore?
This is Sumit. You were elaborating on your strategy on renewables and any growth opportunities across distribution?
Sumit, as we discussed earlier also and we have explained earlier in the call, also we are as was last year's restriction are concerned, we have a CapEx on INR 1,500 crores each year for next 2, 3 years' time. And our licensed distribution, we were thinking about INR 1,200 crores CapEx we are going to encourage here for next 2, 3 years and the franchisee about INR 250 crores to INR 300 crores CapEx. So this is -- the licensed distribution will give additional ROE, and it will give you additional ROE. And franchisee, we try to -- [ reuse ] the loss for that. We're going to plan for our distribution business.
As far as renewal is concerned, we have an ambition to go up to about 5 gigawatt of [ renewable ] capacity in the next 3, 4 years by [indiscernible]. And we are also looking for the new distribution areas to be added to our business, like what we -- like we have a [ further government ] deal. Government is coming up with a new and other various areas. So we plan to participate in that area also.
Sure. The plans are stable. Thank you so much.
[Operator Instructions] The next question is from the line of Chen George from Geojit Financial Services Limited.
Sir, my question is like how much exact quantity of gas as [indiscernible] in this quarter [indiscernible]
We're not able to hear you.
I asked like how much exact quantity of gas was sold in this quarter?
Mr. George, we are unable to hear you. Your audio is very soft.
Hello?
Yes, sir, please proceed.
Am I audible now?
Yes, sir. Much better.
So my question is like how much at quantity of gas was sold in this quarter? Because we note here seeing your number in financial terms amount, but can you help us with the quantity?
Yes, we have already shared those details about the quantity [ sold by that department ].
[Operator Instructions] The next question is from the line of [ Jitain Bhishi ] from Axis Capital.
My question is on the gas cargo which you had tied up for merchant purpose. So this is for this year's [ Q2 to Q3 ]. So in the upcoming third quarter also we can expect some best trading margin or we have already utilized the cargo?
So I think we have not fully utilized the cargo. There could be some spillover to the next quarter also from that cargo.
Say, the spillover in Q3, you're saying.
Yes.
And sir, on the volume number, if you can give us the actual growth in the quarter for the distribution licensed and franchising business and licensing [indiscernible] and number [ annualized number ] if possible.
On an average, it's around 5%.
The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.
Sir, in the stand-alone balance sheet, if I look at the other financial assets, there seems to be a decent increase that's even visible in the cash flow statement we changed for the first half. So I'm just wondering, is it because of the regulatory asset, the unbilled revenue? And if you can highlight something on that?
Yes. Part of it is because of regulatory assets.
Also due to the adding of the Daman and Diu also, which was not there in March.
Sir, I was looking at the stand-alone because I believe Daman and Diu will be...
A stand-alone number, yes, because it's in the regulatory event.
So are we -- I mean, is it because of some delays in the -- what we call FPPCA refuel surcharge? Or is that getting reflected very well?
Yes, it is because the deal in the recovery.
Sir, what would be at -- by end of September, what would be the regulatory asset as of now? I mean, which you typically report in annual report, which is a recoverable from.
A record set is built up in H1 and trade-reducing in H2. Better we will talk about the numbers on March '23. That will give a fair picture, meaner fit on the [indiscernible].
[Operator Instructions] As there are no further questions, I now hand the conference over to the management for the closing comments.
Thanks a lot for participation, and we wish everybody to stay safe and healthy. Thank you, and over to you.
Thank you so much.
Thank you. Ladies and gentlemen, on behalf Torrent Power Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.