Torrent Power Ltd
NSE:TORNTPOWER
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
844.05
1 973.65
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Torrent Power Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Torrent Power Limited hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshavardhan Dole from IIFL Securities Limited. Thank you, and over to you, sir.
Thank you, Steven. Greetings, everyone. On behalf of IIFL Securities, I welcome you all for the 3Q FY '22 Earnings Call of Torrent Power. Firstly, I'd like to congratulate the management for a good performance and notably stepping up the dividend payout. Thank you very much, sir. Today, to discuss the results in detail and share the performance outlook, we have the senior management team of Torrent Power represented by Saurabh Mashruwala, VP Finance; Rishi Shah, GM Finance; and Jayprakash Khanwani, AGM Finance. I now hand over the call to Saurabh bhai for initial comments, post which the floor will be open for Q&A. Over to you, sir.
Thank you, Harsh. Yes, good morning to all of you, and thank you for joining the earnings call of Torrent Power for Q3 FY '22. First, I will take you through the performance for the quarter, after which all lines will be open for Q&A session. Let's go through the performance of the quarter at PBT level first, and we'll take ex expenses separately thereafter. Reported PBT for the quarter stood at INR 509 crores as compared to INR 399 crores in corresponding quarter last year, which is an increase of about INR 110 crores, about 28% on a reported basis. While there were no one-off items during the course of the current quarter, but as you would recollect, the reported PBT of corresponding quarter of last year was carrying 2 one-off items. First, there was a reversal of provision of doubtful debt in franchisee distribution business of about INR 31 crores due to better collection efficiency and increased maintenance activity during corresponding quarter last year. And the second, there was a net reversal of about INR 5 crores against the fuel cost. All put together, net nonoperating credit was about INR 36 crores for last year Q3 FY '21. Adjusted for this one-off, PBT for the quarter stood at INR 509 crores compared to INR 363 crores in the comparable quarter last year, which is higher by about INR 146 crores, about 40% increment increase. Now I'll take you through the key highlights on improvement in adjusted PBT of INR 546 crores for the current quarter. The improvement in the operating profit is mainly coming from -- there are really 3 reasons, so I'll just elaborate one -- the fourth reason. The improvement -- fourth reason is improvement in profitability of gas-based power plants on account of 4 factors. There are 4 factors contributing a gain of about INR 85 crores for gas-based power projects. First, gain from sale of LNG of INR 107 crores. Since LNG prices were higher, elevated during the quarter, it made commercial sense to sell LNG itself, converting into electricity.Second, higher profitability from the merchant power business was about INR 137 crores. We sold about 66 MUs and earned a contribution of 60, 70 paisa, which is around about INR 44 crores of merchant gain, as against 48 MUs sold last year similar quarter at INR 240 crores contribution, and we [ then grew ] INR 7 crores. A differential gain of about INR 37 crores we made during the course of this quarter. We either sell LNG or the merchant power, a little bit interchangeable. So we -- during the course of this quarter, we sold LNG also. We sold merchant electricity also. These 2 gains, 2 items were partially offset by reduction in contribution of about INR 9 crores on account of lower fuel savings due to lower PLF, which is partially offset by the lower O&M cost in -- for our gas-based power projects. Also, there was an increase in O&M expenses of about INR 50 crores. This was due to regular maintenance, which we generally carry out every 3 years. And the rest are in fixed cost recoveries. So in summary, due to above factors, gas-based power plant profitably has improved by about INR 85 crores on a net basis. The second point is moving to the performance of the distribution business. Due to restoration of industrial demand, which was impacted last year due to COVID-19, therefore, the reduction in T&D losses resulted in a gain of about INR 19 crores. Yes. Third item, there was a reduction in finance costs for the quarter of about INR 33 crores due to lower rate of interest and reduction in average cost of -- average debt level. The interest cost was lower by about 20 basis points during the course of the quarter as compared with the similar quarter last year. The debt level as on 31st of December '21 was lower at INR 7,528 crores as compared to INR 8,374 crores as on December '20, which is about lower by INR 850 crores. So we are able to reduce the debt by about INR 850 crores. On operational performance of the quarter, distribution business witnessed normalization in demand with increase of about 4% on a year-over-year basis due to opening of industry as well as commercial units after COVID-19 second wave. Rebound of Q3 '22 has witnessed about 2% increase over the 3-quarter period, and the year as a whole is expected to end with a demand reaching to the pre-COVID level of FY '20. Moving on to the PAT numbers. Corresponding PAT reported for the quarter is INR 369 crores as compared to INR 320 crores reported in corresponding quarter last year, which is higher by about INR 49 crores, about 15%. This completes the overview of the quarter financial as well as the operating performance of the company. Now I will move to the -- give you an update on the current projects in the pipeline. First, 115-megawatt SECI V project has received an extension of February -- from February '22 to September '22. So we got some additional time for the commissioning. EPC contract has already been awarded, and the project is likely to be commissioning during the course of FY '23. Second, SCOD of 100-megawatt GUVNL project extended to October '22 from July '22. So here also, we got some additional time to commission the project. Third, SCOD of 300-megawatt TPLD project is also extended from -- to December '22 to November '22. So the bidding process of 300-megawatt AP project, wherein we are L1, got canceled. So this project is not going to be kicked off. We expect the takeover of licensed distribution business of Union territory of Daman and Diu. As informed in the last call, with the stay imposed by the Bombay High Court and tender process has been executed by the Supreme Court, and accordingly, Union Cabinet on 24th of November has approved the formation of company to privatize the electricity distribution business of Daman and Diu and sale of equity shares of the newly formed company to the highest bidder, that is Torrent Power. The last one is acquisition transaction executed with [indiscernible] Reliance and BP, expected to be completed in the course of Q4. That's all on for the quarter. Now I would request coordinator to open the lines for Q&A session. We wish everybody to stay safe and healthy. Handing over to the operator. Thank you so much.
[Operator Instructions] The first question is from the line of [ Aniket Mittal ] from SBI Mutual Fund.
Just a few questions on the gas-based portfolio. So I think we had gas side up till December '21, but we've used that more on LNG trading and merchant curve rather than on the long-term PLF. So if you could just highlight your strategy going forward on this front? And how are we placed in terms of gas supplies for the coming fiscal year? And that would be helpful.
Yes. Thank you, [ Aniket ]. As far as gas is concerned, as you know, we have floated tenders. In fact, we have a new [indiscernible] IOC and Reliance, which is about, roughly speaking, about 25% to 30% of requirement of SUGEN and UNOSUGEN plant as of now. And for balance, we have to -- we are contracting long term -- short- to medium-term LNG from the international market. So we floated tenders for 5 years, in fact, from calendar year '22 to '27. And we got 34 cargo tenders we have floated. And we have contracted so far 3 cargoes each for '23 to '27. And -- so which will cover about -- another 25% the requirement from calendar '23 to '27. And this total of all put together, 50% of requirements we are covering. As far as current financials that are concerned, we are awaiting the -- since the gas price is elevated at this moment, though it has a little bit cooled down, we see it lowering about $38 last quarter. Now it is coming down to about $22 as of now. So we expect that post-winter, price will further come down. And that is what we -- also, we heard that Russia has also started supplying into more countries in Europe also, so -- which has impacted the current price of LNG in the international market. So post-winter, we expect that the price of gas will come down. And thereafter, we will contract the gas for the next fiscal, I would say. So that is what the current position of -- as far as gas is concerned.
Okay. And just to understand, once again, the impact of the lower PLFs on this quarter. I think you mentioned a number of INR 9 crores. So that INR 9 crore pertains to only the efficiency savings that we've lost. Is that understanding correct?
Yes. It is efficiency savings because fuel gain, we compromised because of lower PLF, et cetera. At the same time, because of a lower PLF, time and time, we tend to gain it in O&M cost also because my O&M cost will be also lower. So to that extent, some -- it will be compensated to -- in fuel loss by the reduction in O&M costs. So INR 9 crores net of fuel gain, which we have a lot. And it is partly compensated by the lower O&M cost.
So sir, what would be the component for the loss of efficiency, if you could just highlight that for the quarter?
As of now, I don't have the breakup. But the net impact is about INR 9 crores for the quarter.
Fair. And there's no sort of impact because of fuel availability or tie-up not being there on our fixed charges that we foresee?
No. Nothing at this moment.
And just one last question. Sort of heading into 4Q, if I look at the data for January, our SUGEN plant is operating at a PLF of 25%, and UNOSUGEN is largely shut. So would you say that this is a fair representation of our current supplies? Or sort of put it another way, till the time, let's say, gas prices remain elevated and we are unable to tie supplies, is it fair to assume that SUGEN would operate with a 25% PLF and UNOSUGEN would largely be shut?
Immediately, yes, because we have to source gas for the next fiscal, which we expected to buy, I think, in post-winter. Price will be minimal, I would say. So we will start tying the PLF for next fiscal.
So until that time, this would largely be the PLFs.
Yes. Yes.
The next question is from the line of Rahul Modi from ICICI Securities.
Congratulations for good numbers despite the challenging environment. So one of the questions which I had was in terms of the LNG that you have currently, you mentioned that you've tied up almost 50%. So what would be the average cost of LNG that you've already tied up till date for your gas-based projects?
The LNG tied up is always linked with the Brent price and, in particular, slopes. So it's not connected to the current LNG price, I would say. So it is always linked to the Brent price. It is a floating price, and we have opportunity to convert this floating part with the fixed price at appropriate time. So that is what we did earlier also. Last year, we converted all our cargoes into the fixed price. So it's -- currently, its floating price is linked to the Brent.
Okay. So any number you want to put on this for our understanding, how do you see? You can give us the slope where you expect it to go, but...
Slope will be around 11% to 11.5%, and our slope seasonally contracts.
Okay. And in terms of dollar, what could be the amount?
The Brent -- floating Brent, yes.
Okay. Okay. Sir, second question is, can you give us some updates on the solar projects that you're already doing. Now on a realistic basis, sir, what is your stand going forward? Because obviously, when we did that, the various prices -- now the module prices have gone up significantly. So any view on how viable the projects are now? And what's our strategy going forward?
We are -- as far as new projects are concerned, we are participating in the bidding. So -- because module price has gone up. So accordingly, we are bidding, considering the higher module prices. So that is what -- and we keep on participating. And we need...
Sir, on the tariffs that have already been discovered and you've won?
We are waiting to -- module price to come down because the issue hit everybody. So we are waiting and we -- government is well aware about this situation, and they've extended the SCOD date also. So we got some additional time to do the contract for the modules. We are waiting for the opportunity to contract the modules.
And sir, this 40% BCD which has been introduced now, will it be -- so how will it be passed on the tariff? Will our capacities be qualified for a pass-through?
Which one?
The custom duty which has been introduced in the module imports from the 1st of April, will that..
Indian law is generally passed through. Just to add here, see, when we bidded for these contracts, the module prices were completely different. And in the last 9 months to 12 months, they have shot off the roof. Now I think this is a major issue on the international module prices. So unless that comes down, meaning -- we will be looking at it very carefully. Unless it comes down, we will not be able to do this. So effectively, we are working on the module prices. As and when it comes down, we would want to do this project if it all means it lowers the module prices internationally.
Right. Right. So sir, one more question I had, sir, in these bids that we've done now everything incrementally, the government is talking about following an ALMM approach. So in these bids, are you forced to use domestic modules in any case? Or you can still import or this is not mandated?
It is open. It is open. We can use the domestic modules also. It depends on the price at what we are getting the modules.
[Operator Instructions] The next question is from the line of Apoorva Bahadur from Investec.
Sir, I wanted to understand on this gas availability side. Now that we have decided we have sold the available cargoes, what will be the availability for our gas power plants in Q4 and for the financial year FY '22? And also, what is the kind of underrecovery that you're seeing over there on a fixed cost basis?
As far as we explained in the beginning of the call to the question of [ Aniket ], yes, we have a fixed contract for gas for '22 -- calendar '22, '26, '27, about 50% we have already tied up. Currently, we have about 25%, 30% tied from the IOCL as well as the Reliance. So Q4, yes, we don't have tie-ups beyond this gas. But we are waiting to separate -- post-winter, we -- our view is that our gas price will come down because it started coming down, in fact. So post that, we will tie up for the next financial year.
Okay. Sir, what would be the expected hit on fixed cost recovery in Q4 then? And also, how much was the availability lower in Q3?
Fixed cost for SUGEN and UNOSUGEN is concerned, it is passed through. So there is no practically heat on the P&L as far as fixed costs are concerned.
Okay. So even without the gas, we were able to maintain the availability plant...
Yes. Even the -- without the gas -- gas is available. In fact, gas is not the issue. Gas, we can even source also. So we can -- the plant is available. We can access the availability of the plant.
Apoorva, the question is here about pricing and not availability of gas. So gas is amply available at a certain price. So fixed cost recovery is not an issue here.
And fixed cost is based on the plant availability.
Okay. Fair enough. I think -- in UNOSUGEN, it won't be a problem.
Yes. That is what we are saying. UNOSUGEN won't be a problem. The plant is available for the supply of power.
The next question is from the line of Sumit Kishore from Axis Capital.
My first question is regarding the segment-wise breakup of EBITDA numbers for the quarter and 9 months. Could you please share them?
I can give the quarterly numbers of EBITDA. Yes, for the current quarter, we had about INR 300 crores EBITDA; comparable quarter, INR 218 crores. And renewable is about INR 114 crores versus INR 129 crores. Distribution, about INR 352 crores versus INR 327 crores. Franchisee, about INR 206 crores versus INR 197 crores. And overall EBITDA, INR 988 crores versus INR 860 crores. This is before one-off. After one-off on a reported basis, about INR 1,000 crores EBITDA for the quarter versus INR 908 crores for the full year and for the comparable quarter of last year.
Okay. My next question is regarding your distribution franchisee business. We have seen a reduction in the level of T&D losses across the cycle. Would you say that there is further scope as far as reduction is concerned or you have reached the levels where you are comfortable?
See, if you look at the current level, for example, our -- for our distribution business, as far as T&D loss is concerned, there is always -- we are improving. In fact, we -- currently, on a YTD basis, for example, Bhiwandi is -- reporting about 12% in T&D losses. Agra is about same level. And SMK, being a new circle, is about 50%, [ sustainable ] level. So there is area of scope for further improvement in all these 3 areas.
So now to add on what Saurabh bhai told, if you look at our T&D losses in our distribution licensed businesses, they are in the range of 4% to 5%. So there is significant headroom available for us to reduce losses in these areas also to that levels. So the runway is very clear. For a period of time, this should be achievable.
So every year, we can show the improvement in the T&D losses. That is what we are working right now, in case of Bhiwandi and Agra as well as SMK also.
Sir, would you like to spell out some sort of a target, say, by FY '23, FY '24, this is how the trajectory of T&D losses in Bhiwandi and Agra also?
So I think we don't give any target, Sumit. But as a strategy or as a policy, we keep on reducing losses here. We don't give any targets or any estimates for the future. But if you look at my past history of last 5 years, we have been reducing the T&D losses 1.5% to 2%. But as we move along and keep on reducing this, the delta could come down. But there will be a reduction in trajectory. That is what we can take.
Fair enough. And also, finally, on this gain on sale of LNG of INR 107 crores, could you give us a sense of how much gas was sold? What was the procurement price? And what price did you sell at? And in case you would have generated electricity at that landed price of LNG, what would have been the tariff?
Yes. It will be difficult to give. But what we can say is that we have -- whenever the gas is available for our merchant business, we either sell gas or we sell -- we generate -- we make the power and sell the power. So based on the opportunity available, we take our decision, and we'll do either of them, either sell LNG also, either -- or sell power also or we can do both also. So depending upon the opportunities available, we take decision and then implement it.
Sure. So for the coming quarter, how much is the gas availability? I mean, could you please repeat for Q4? And how much -- I mean, would there again be surplus gas because the gas prices are quite elevated even now?
We -- for Q4, we can't give some guidance at this moment.
Sure. I just wanted to understand, in terms of your overall gas availability, how are you placed going into Q4?
As we discussed, we have gas available for about 25%, 30% for capacity. So that is what -- that we use to manage with those kind of quantities at -- for Q4 at this time.
And Sumit, just to add what Saurabh bhai said, Q4 typically is a quarter wherein demand is also lower. It starts picking up somewhere from March or March mid. So it all depends on how the demand is in our distribution licensed businesses, for which the PPAs have been tied up. So it's an interplay between both of them, how much is gas available and how much is the demand. So it's a very dynamic scenario wherein one eye is on the demand and the other eye is on the availability of gas.
The next question is from the line of Nitin Arora from Axis Fund.
Just -- it's more of a clarification. The gas availability which you are showing, you are saying there is no underrecovery because even if I'm showing the gas at $15 available at my gas plants, the regulator is allowing it. He is allowing to show the gas prices at 3x, 4x pricing, and there is no underrecovery of fixed costs at your P&L. Is that what you're trying to say?
Fixed costs, which is determined by the regulator, for example, SUGEN fixed cost is determined, also the INR 228 crores fixed cost is determined, that is what we are talking about. The recoveries primarily demonstrate the availability of the plant. Buying the power at INR 15 is -- we are not going to do that, but the fixed cost is available. We can supply power at INR 15 also if our distribution arm wants the power at that kind of a rate. But -- however, we have to demonstrate the availability of the plant. Based on the availability of the plant, fixed cost is passed for SUGEN as well as UNOSUGEN.
So why I'm asking this is because then in that case, the Gujarat regulator, which has kept the CapEx $7.5 of gas, becomes eventually invalid, right, because he is allowing you to show the availability at $15, then $7.5, it doesn't come into the picture in UNOSUGEN in that way. So that also should have been -- going forward, even if I show a dealer plant, I will still get fixed cost recovery [ as a ] result. Is that the right way to look at it, because he's allowing you to stay at 4x the pricing?
UNOSUGEN is a -- [ it is sectioned into ] 62 PPAs. So we have demonstrated availability. So based on the availability, the fixed cost is passed through.
The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
Just to harp on the question asked by Nitin earlier. So in case of UNOSUGEN, there was a cap that the regulator said that it has to be closer to the medium-term pricing and obviously, the gas prices if you worked backwards. But in case of SUGEN, it is very clear, it is -- you have to demonstrate gas, and you will get your fixed charges. The offtake is dependent on the market -- whether they discount prices or not. So in case of UNOSUGEN, what is that reverse work gas pricing that is coming? Until that, you can get paid on your fixed charges. But beyond that, fixed charges may not be available.
See, as far as UNOSUGEN is concerned, though the cash is there, we will make sure that we will not supply the power beyond this [ category ] now. So...
Sure. I understand. The second question is on the new opportunities in the distribution. We saw a couple of bids. If you could give us an update on these and any update on the distribution license that you have won. And which are the other opportunities that you are seeing on ground currently where there are talks going on or some tender activities are on?
Currently, the Daman and Diu is in pipeline. So that is what is going to be materialized in going forward. Plus Union territories, government is -- luxury plays a very small area, but it is on the horizon. Government invited the bid. So these are the opportunities available at this moment that we are looking at.
Sure. Any update on the Delhi side? There were news reports earlier that even that was on the block from the Reliance side.
No. That was not on the project at this moment.
Okay. Just last question from my side. On the renewable expansion that you have charted out on a 5-year basis and given the current situation, what's the kind of growth that we -- growth in the IRRs that we can see? Because we have seen, as you highlighted, module prices have moved up. There is a custom duty also which has been enforced in the Union budget. So what's the kind of tariff is required to make a low double-digit IRR in your view? And do you see that -- the opportunity that you can achieve your IRR target?
Yes. As far as renewable is concerned, we are working on both the fronts, organic growth as well inorganic growth also. We are also looking at various M&A -- acquisitions also as far as renewable is concerned so that we can at least get about 12%, 13% IRR returns from those projects. And plus, we are also bidding for the projects also so that we can at least get about 11%, 12% in equity IRR. So that is what currently we are working.
All right. Sir, just last question, if I may. Transmission was also an opportunity that you have started out for your long-term plans. Do you see that there could be some growth opportunities in the transmission as well, given the way biddings are underway? And is there an organic opportunity in that segment as well?
Also, we are working on it right now. In fact, we have bidded a couple of process and projects also. Unfortunately, we are not able to successfully get those projects at this moment. But see us -- we keep on bidding on transmission line segments also.
The next question is from the line of Dhruv from HDFC AMC.
Sir, just one question on your franchisee business. Sir, on a Y-o-Y basis, we have seen a decent reduction in your AT&C losses -- I mean, the number, AT&C percentage, almost 6% in Bhiwandi and about 2% in Agra. And sir, earlier, we used to understand, 1% reduction in both is about INR 40 crores of incremental EBITDA or PBT. Sir, but if I look at the EBITDA number that you have given for the franchisee, it's about INR 197 crores in moving to INR 206 crores. Sir, in that context, it looks extremely low. So -- and even your SMK, the loss has reduced. So what could be driving this gap in the franchisee business?
If you -- comparable number, if you can look at Q3 '21 versus Q3 '22, if you recollect last quarter, last year similar quarter, we got some of INR 31 crores of reversal of bad debt provision, which is not there in the case of current quarter. So that is why even though I have reduced -- I am able to reduce my T&D losses, my bottom line has not -- my absolute number bottom line has not improved because of the onetime gain we have booked last year similar quarter.
Okay. Okay. So even after adjusting for the INR 30 crores, it still seems low because at least you should have benefited almost INR 50-odd crores because of the loss reduction plus the SMK loss reduction. But -- got it, shortish...
In case of Bhiwandi and SMK, there were some negative rate variances where -- because sales price -- in Maharashtra, they have reduced the sales price. So there was some reduction in the sales price also, which also contributed to the lower -- maybe it can impact the profitability also.
Got it. Got it. Sir, is it possible to share the same math -- the benchmark that you used to give earlier, 1% reduction is how much now as the new -- I mean, the reset tariffs? 1% loss reduction in Bhiwandi and Agra will be how much? Obviously, if you can probably split that separately.
[ Dhruv ], they will not change significantly. If you look at the current numbers, INR 206 crores versus INR 197 crores, if I take out INR 31 crores from INR 197 crores, and then there's a delta of around INR 40 crores. And as per what we had shared earlier is 1% reduction tentatively gives us INR 40 crores for the full year. So given that mathematics, this also works out. So this rate reduction is not significant impact on the parameters of 1% reduction.
Got it. Because Bhiwandi, your losses reduced by about 6% and about 2% in Agra. No, I'll probably take this off-line. Sir, the second thing was on the gas, just to confirm, except for the 4Q, I mean, going ahead, you have 50% tied up of your PPA capacity. And of that 50%, 50% is from IOCL and Reliance, which is, I believe, largely on fixed pricing. And the remaining 50% is Brent-linked. Is that broadly right, sir?
Yes.
Got it. And the Brent-linked, you are trying to convert that also. Currently, it is floating blend. You are also trying to convert it to fixed Brent, as you had probably done earlier.
Yes. Exactly.
Got it. And sir, the third thing was we also have this Petronet offtake agreement, I mean, the conversion gas to -- LNG to gas conversion. If we don't use that, we probably will have to still take -- I mean, the take-or-pay arrangement. So does that cost hit you or you can get a pass-through of that?
So there are a couple of options available on that front. In fact, we can distribute also. We can work with that PLL also to distribute it, to distribute the cargo. And we have options to import the gas also and sell it in the market also, in domestic market also. That option is also available. Our option is we can complete the capacity also. There also, option is available. And the fourth, we can, yes, work with the [indiscernible] as pass-through also on this front.
So we should not be worried about this cost as such.
Yes. Not at this moment.
And sir, the last thing, on the solar bid, you mentioned that given the high pricing, if it remains, you will reconsider the project. I believe you have 2 under-construction projects. One is the GUVNL 100-megawatt and 300-megawatt, the -- the 300-megawatt project. So sir, just to understand, see, for instance, in an eventuality, if it is canceled, what would be -- I mean, is there any penalty that you'll have to pay? Or how do you get out of that contract?
As far as GUVNL is concerned, about -- INR 19 crores penalty would be that not material, I would say.
Okay. And for the Torrent one -- I mean, the 300-megawatt one?
Yes. We are hoping to implement the project.
The next question is from the line of Devam Modi from ARDEKO.
Yes. So just wanted to understand regarding -- what would be the fixed cost recovery number for both SUGEN and UNOSUGEN?
UNOSUGEN is about INR 228 crores per annum. And SUGEN, one second. I will tell you the SUGEN also. Can we come back to you on this off-line?
Sure. Sure. And this would be -- out of this fixed cost, because what you are saying, the number -- what will be the number that will be reflected above EBITDA and below EBITDA?
It is within the part of the EBITDA.
And that fixed cost recovery will be part of EBITDA only?
Yes. Yes.
Okay. Because from what we understand, there would be some depreciation and interest costs in the fixed cost. So that's why -- typically.
About INR 625 crores. We got the number, INR 625 crores, 25% for SUGEN project. It included depreciation as well, interest also.
Yes. So this entire number will flow -- I mean, this entire number will flow in the revenue. So it will come above EBITDA only is what you are saying.
Yes. Exactly.
And so it will equal to -- they will -- both plants altogether, roughly INR 210 crores per quarter would be the fixed cost recorded, which will happen above EBITDA?
Yes. Yes.
Sure. And on the renewable side, sir, what kind of -- I mean, over the next 3 to 5 years, what kind of size can we hope to grow to? And ultimately, is there some thought process with regards to monetizing it through like some investor or something like that because you are capping them at around, let's say, 11% to 13% IRR and you can invest them out like a lot of plants are talking of right now at like, say, around 8%, 9% IRR going ahead or things like that?
Our aim is to reach up to 5 gigawatts of renewable capacity by '24, '25. And if you look at the current project in operation as well as under pipeline as well as whatever SPV you're saying, we are close to about 1.5 gigawatt of capacity at this moment.
Including the...
All pipeline projects, yes, including the SPA which we have signed.
Like [ house ] and everything, okay. Sure. And you are mentioning something else?
5 gigawatt of the capacity by '24, '25.
Okay. And regarding the Daman deal, so now what is the exact status with regards to when do we see the takeoff? And what kind of project dynamics in terms of investment, time lines and IRRs we see over there?
We are waiting for the LOA from the government to come because the cabinet has already approved in November. So once LOA will be available -- we have started to work on it, in fact. So based on the receipt of the LOA, we will take over the Daman deal possibly come the end of November.
The legal roadblock which was there is no longer there. Is that the understanding?
As far as government is concerned, government is -- I think they are going to issue the LOA during the course of the month, current month. That is what our expectations are.
And what kind of numbers can we envisage or other with regards to the spend and what kind of revenues or EBITDA? What is the numbers that one can see over there?
It is about -- it is a complete industrial build. So that is what we can -- as of now, we can share. It's a completely industrial build. There is no residential connection there.
The next question is from the line of [ Aniket Mittal ] from SBI Mutual Fund.
I see most of my questions have been answered. But maybe on the CapEx side, if you could highlight what's been the CapEx for the 9 months so far and our targets for FY '22 and '23 and if you can break that across segments, please?
Yes. As far as CapEx are concerned, license distribution 9 months is about INR 730 crores. And the franchisee is about INR 227 crores, INR 225 crores. And then there is a -- Q4 CapEx is generally -- is always higher as compared with the 9-month number. So Q4 -- and about INR 1,000 crores, in fact, we have already spent. So about -- you can expect about another INR 400 crores CapEx in Q4. And as we -- given the guidance of about INR 1,500 crores CapEx every year we plan to incur for next 2 years, INR 1,250 crores for license distribution and INR 250 crores for franchise distribution area. That said, more or less, we are on track on the CapEx side.
Sure. And I mean, just one question, if you could highlight how are the -- I know you gave the numbers for T&D, but if you can highlight specifically on the collection efficiencies that you're seeing at both Agra and Bhiwandi. And the reason I ask is because I think there's some excess INR 130 crores worth of provision that you've done earlier, which I think we were looking to recoup in the next few quarters. If you just throw some light over there.
From INR 130 crores provision, we have got some collected also because we keep on reworking every quarter. At least in last year, we have reversal a lot, substantial -- a significant amount, I would say, and last Q3 and Q4. So still, something is pending, which we hope to collect during the course of next year.
What would be the pending amount?
Pending amount would be about -- SMK would be about -- SMK is the highest. Can I come back to you on this?
Sure. Sure. No worries. And just maybe one last question. This is more from a circle perspective that I want to understand. Now given the fact that our PLF for SUGEN rules dropped off. And if you look at the entire circle of Ahmedabad and Surat, I'm assuming now a majority of our demand, to meet that, you will be relying on the short-term market now. So what percentage of your overall demand is now, let's say, coming on the short-term market? And what prices are you buying over there, right? Just to get an understanding of your -- on how do you see your power purchase cost burn. Because eventually, your tariff is fixed, right, at this point in time. So if you can give some color on that?
Tariff is not fixed. Tariff is always a variable because I have opportunity to recover the additional power purchase cost through [indiscernible] mechanism. So...
Sure. Yes, I mean, I do understand. So that you'll recover probably later. But if you could give some color, I mean, the dependence on the short-term market, how much of overall demand are you now depending over there? What sort of bilateral contracts have you signed? What's the average cost that you're purchasing at?
We will -- in fact, we will give that number, what percent that we are buying from the short-term market in a couple of minutes. So we have to just see the numbers and then we have to let you know.
Next question is from the line of Anuj Upadhyay from HDFC Securities.
Sir, can you mention the price at which we are sourcing gas from Reliance and IOCL?
Reliance, it's Brent-linked by 8.5% slope. And IOCL also, it's Brent-linked based on the -- about 12% slope, I would say.
Okay. And just one follow-up on what previously has been asked on the availability of UNOSUGEN. So are we using the domestic gas to show the availability -- I mean, domestic gas prices to show the availability for UNOSUGEN because the imported one is -- quite expensive on that? So is that the domestic gas which has been shown to -- the price gap for the domestic gas being used to show the availability for UNOSUGEN? Just some clarification on that.
Both imported as a domestic gas as far as UNOSUGEN is concerned. We can buy imported gas also while showing the availability.
Okay. And how much the blended rate is concerned?
There is no such blended rate. Whatever is available domestically, for example, from Reliance, we can demonstrate, and balance will be imported one. Blended ratio is fixed by the regulator.
The next question is from the line of B. Vijay from Spark Capital.
Yes. Can you hear me, sir?
Yes.
Yes. So these 3 cargoes that we have booked for gas, when does the delivery start, sir?
'23 onwards, calendar year '23 onwards.
That is from April '23.
Yes. April '23.
Calendar year '23.
Calendar year '23. So January '23.
Calendar year is January '23 onwards.
Okay. So for this year, we have 25% Reliance and IOC, and we are open -- for the remaining 75%, we are open. We are yet to source gas.
Yes. Exactly.
Okay. Okay. And can you give the merchant sales in terms of number of units and the average price that it was sold at for this quarter, sir?
We sold about 66 MUs, and we earned quantum of some INR 60, 70 paisa for the quarter.
Okay. Okay. And finally, one question on the EBITDA number segment-wise. Can you give that for 9-months period?
9-months cumulative, I don't have right now. So we can give off-line that number.
Sure, sir. And our target to reach about 5-gigawatt overall in renewables over the next 3 to 4 years, that remains? Or in light of the increase in module prices, et cetera, are we thinking to kind of go slower?
That remains right now. That remains right now. But we are aiming to go up to -- reach up to 5 gigawatts by '24, '25. That is what our current aim is.
The next question is from the line of [ Swati ] from VT Capital.
Yes. Can you hear me?
Yes.
Yes. So first, regarding the renewable capacity of 5 gigawatt. So what is the CapEx guidance that you can give us, let's say, till FY '24, '25?
So Swati, it is very difficult to give a CapEx guidance. It depends on what kind of renewable you are doing, either solar or wind. So for '24, '25, right now, we have only one project which is under operation -- or which is under construction. Apart from that, we have 2 acquisitions lined up for which we have provided the details. Beyond that, giving you a guidance per se on new projects would be difficult as of now since we don't have any new projects in the pipeline.
The next question is from the line of Vishal Biraia from Max Life.
What will be the extent of equity dilution for this new INR 1,500 crores of CapEx that you plan?
Vishal, there is no equity dilution here. Sorry, I didn't understand your question.
It was pertaining to the 5 gigawatts of renewables that you plan to reach. So in addition to the CapEx that you will have to do for the existing businesses...
If you look at our current balance sheet and our current cash flows, for reaching 5 gigawatts, I mean, we don't require per se, as of now, an equity -- I mean, we are generating cash flows of around INR 3,500 crores, INR 3,600 crores of EBITDA every year, wherein there is enough headroom for us to deploy. And our existing balance sheet also is underleveraged. So I think there is no requirement of any equity dilution for reaching 5 gigawatts.
The next question is from the line of Harshavardhan Dole from IIFL Securities.
Rishi bhai and Saurabh bhai, I had 2 questions. One was we have seen a massive reduction in the interest outgo, which, as you explained, is a combination of reduction in debt as well as the benchmark rates falling down. Now is there any element that we can retain in the P&L, i.e., has benefited in the third quarter as well as on a 9-month basis? And how much have you passed on in form of lower tariffs? That was part number one. Part number two was basically pertaining to the broader strategy on capital allocation. It's good to see that the payouts have gone up to 33%. But again, relative to our CapEx plans as well as the leverage on the books, do you think there is any headroom to push it up further? Or this will be adequate level of dividend payout?
So Harsh, on the first question of interest pass-through, so whatever reduction has happened for the -- for 9 months of this year, there would be around 15% to 20% of pass-through which will happen. Balance would be retained in the P&L, purely because of the reduction which has happened in the debts which were there for other projects or repayments which have happened. As far as second question of CapEx allocation is concerned, our stated policy is 40% of dividend and that we are hopeful that we'll meet that on a year-on-year basis. And if you look at the 5-gigawatt target also, as I explained in the earlier question, that current balance sheet and current cash flows does not warrant us to have any reduction in dividend policy. Increase in dividend policy will depend on how management or how the things come out over a period of time. And so it's a dynamic scenario wherein if there are other opportunities available in, let's say, license distribution or franchise distribution or in transmission assets, then we would want to deploy capital in those areas. And if it is not there, then we will see at a future point in time on the dividend policy. But as of now, 40% remains. Going forward, we'll have to see what kind of projects are there in the hands or what is the visibility of the projects and then we can decide going forward.
Sure. That's really helpful. And more clarities to your ramp-up plans for Dadra and Nagar Haveli, you will make public once you take over or you would like to brief now?
So we would like to wait for the LOA to be available with us, and then we can discuss in details about that area or about that license.
Sure. Moderator, I think if there are no further questions, can we take that as the last one?
Sure, sir. That was the last question. I now hand the conference over to Mr. Harshavardhan Dole for his closing comments. Over to you, sir.
Thank you.Thanks, Rishi bhai and Saurabh bhai and Torrent Power management, for giving us an opportunity to host the call. Really appreciate, sir, your time. I'd also like to thank the participants for joining in and asking questions regarding the performance of the company. Rishi bhai, Saurabh bhai, any final comments?
Thank you so much, Harsh, for giving us opportunity to present our company to the various people. Thank you so much. I wish everybody stay safe and healthy. That is what we can say. Thank you so much.
Thank you. Thanks all of you.
Thank you. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.
Thank you.