Inox Wind Ltd Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Subhadip Mitra - Nuvama Institutional Equities - Analyst : Firstly, I think in your opening remarks, you did mention that we've seen close to 10 gigawatts of wind tendering. Can you please help us understand how much of this did you mention was hybrid and how much was in the loan? Unidentified Company Representative So around 15 gigawatts plus of hybrid FDRE and RTC tenders have been awarded over the course of FY24 and we believe that out of this 15 gigawatts, roughly around eight to nine gigawatts is the effective wind capacity, which needs to be set up for these projects. And in addition to that, there is around 2.3 gigawatts of plain vanilla wind projects which have been awarded. So roughly around 10 to 11 gigawatts is the effective wind capacity, which has been awarded over the course of FY24.

Question: Subhadip Mitra - Nuvama Institutional Equities - Analyst : And on the same line, we did mention that you are preparing yourselves for gigawatt-scale execution and are targeting, I think, two gigawatts of execution in the medium term. Would it be possible to show some time lines that are you looking at, let's say, one gigawatt in the next two years and two gigawatts over what period. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call Unidentified Company Representative Look, I think I'll just leave it at the point that we're scaling up, I think, in a very, very smooth manner, in a well organized manner. We've taken multiple actions over the course of the year as Kailash touched upon. If you look at some of the guidance figures, if you look at some of the investor reports out there, we talked of 800, 1200 megawatts ranging between those numbers this year, next year, et cetera, et cetera. I think we are, as a company, virtually in position for the gigawatt scale execution. Naturally, we are gearing up further to be able to have the capability to do two gigawatt scale. I would have all to say more than that, but I think our internal targets are higher than what's out there. I believe consistently we're meeting whatever expectations the market has from us. And I hope the whole team put together keeps doing that as we keep looking forward.

Question: Rohan Vora - Envision Capital - Analyst : Hello, Am I audible? Unidentified Company Representative Yes, you are.

Question: Rohan Vora - Envision Capital - Analyst : Okay. Is it better now? Unidentified Company Representative Slightly better. Yes. If you can speak a bit slowly, yes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call

Question: Rohan Vora - Envision Capital - Analyst : What will be our fixed cost per year -- below our contribution, just a ballpark number?

Question: Rohan Vora - Envision Capital - Analyst : Yes.

Question: Dhavan Shah - AlfAccurate Advisors - Analyst : So my question is on the execution side. I think we were of the estimate that this year would be around roughly 450 megawatts FY24, but we did roughly 129 megawatts in the last quarter. So again, the question is what led to lower execution for Q4. And on a project-wise I think in the third quarter presentation, you mentioned based on the different orders. So can you share the execution time line based on the different orders like CSC, NTPC, SECI and the other ones? How it would be executed in FY25? Unidentified Company Representative We have not given any official guidance. We have just -- if you see from that point of view, we have grown almost 6 times to 7 times from that perspective. In general guidance, we are -- we always are looking from -- execute from 600 to 800 megawatts. If you see for this year, next financial year, we have guided for 800 and the year after we've guided for 1,200. But also, you have to keep in mind, there could always be a volatility for a quarter or two, there would always be certain slippages. So that old quarter-on-a-quarter basis, what you have to look at is from an annual perspective. So for next year, when you look at it, we have guided for 800 and the year after 1,200. We already have an order book of 2.7, which gives us enough confidence for this kind of an execution and even beat that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call

Question: Dhavan Shah - AlfAccurate Advisors - Analyst : Okay. I think two months back, there was news that the SECI would again start like it was in FY17 or '16. So how do you see if that starts for the wind sector itself? Do you see the same kind of challenges what we faced during that time? Unidentified Company Representative No, we don't see any challenges. It was a nonevent and this was impact in internal loss which came out and was published by a media agency. But in fact, it was a nonevent, even after that, we won another order, a repeat order from Hero around 210 megawatts so it did not matter at all for us. If you look at it, the majority of the orders earlier were already on this path. So it is only the plain vanilla wind orders were where they were discussed on this note. And as we have said in the past, we have come out publicly, this is a nonevent. Our order book is very healthy, and we continue to win a lot of orders despite this. I think we've been on record across all news channels. The 90% of the sector operates on reverse auction, which is RTC hybrid and FDRE. So frankly speaking, 10% of the sector supposedly being on close bidding, whether it happens, doesn't happen makes absolutely no difference whatsoever. I think we've been on record, there have been multiple public statements made by me. And as we continue to see, we continue to win large orders. Current order book is sold out for the next 2.5 odd years. So frankly speaking, at least said multiple times, this is an absolute nonevent.

Question: Dhavan Shah - AlfAccurate Advisors - Analyst : But I didn't understand. Can you please explain again or in detail? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call Unidentified Company Representative Yes. So I think you must refer our Note 16a in financials. But broadly, these all are the noncash line items of INR14 crore, I again repeat noncash line items we have provided for the higher ECL on our debtors as we have completely transitioned from two megawatts to three megawatts now. Please record this Note of 16a in financials.

Question: Shweta Dikshit - Systematix Group - Analyst : On the execution side, I understand there could be some volatility in terms of execution number. First, if we look at the blended realization that has dropped significantly from the first quarter of this year, like we were executed only two megawatt turbines in the first and second quarter and our blended realization has dropped from INR5.2 crore per megawatt to INR4.1 crore per megawatt this quarter. So could you please explain this drop in realization. Unidentified Company Representative Yes. So if you remember, we have stated in our Q3 call also that we launched our three megawatt product commercially and started the supplies in the month of December. And it has taken a quarter for us to ramp up. The supplies are in full swing today. But yes, there may be quarterly variations, which is there. And because there was a ramp-up in this quarter, there were supplies of some of the components, some of the components will be supplied in Q1. So this is something which happens in a normal course of business. Shweta, if I may answer that because we're transitioning completely from two to three megawatts, obviously, there is -- it could not be perfectly timed. You can't have all the all the towers going on at the same point in time. Yes, we had that going to the extent of 90% accuracy in our two megawatt product but now on the three megawatt product over this and the next quarter, we make it uniform. So to that extent, what you're seeing in revenue realization is not gone down, but basically, there are certain bleeds in towers, which have not been built. And going forward, you may have a scenario where you may actually see higher realization because you'll have more bleeds in towers and less in the. But this will neutralize and make itself aligned over the next one to two quarters. But certainly, the realization in three megawatt is more, that is why we're getting to a very strong profitability scenario, otherwise we would have been struggling on the profitability front with the two megawatt product. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call

Question: Shweta Dikshit - Systematix Group - Analyst : Sir, if I heard it correctly, the net interest bearing debt as of end of FY24 was INR655 crore, if I'm not wrong? Unidentified Company Representative Yes, you're right. Given the breakup in our quarterly presentation also, if you would refer to the second last slide of the presentation, the breakup is given for your reference.

Question: Mohammed Nameer - Fairdeal Petrochemicals - Analyst : I had only one question, what is the reason behind issuing the bonus? Unidentified Company Representative Yes. So I think it was -- if I may compare because we were receiving a lot of feedbacks from the investors. And in terms of the price that has really run up in the last one year, we felt it is important that we consider investor feedback and we understand their intention behind the shares to be more liquid and to be now in a fair reach of most of the retail investors. And with that feedback and background, the company decided it is appropriate to look at the bonus as one of the key elements of rewarding the shareholders. And that is where the Board has decided to issue the bonus. And clearly, from INR150 to INR600 journey is something that was unprecedented, and it was one of the best performing stocks in this segment. And that's why the Board took a cumulative decision and also the people from the investors decided to go down that path.

Question: Pradyumna Choudhary - JM Financial - Analyst : Congratulations on a great set of numbers. So just wanted one clarity. We have around 2.5 gigawatt capacity, right? Unidentified Company Representative Yes, that's correct.

Question: Pradyumna Choudhary - JM Financial - Analyst : Understood. But where exactly would you say is the bottleneck? Like -- are we a bit concerned on the working capital side? Or is it just that we had a bit concern maybe in case of any future changes in terms of regulatory, which might come along, like exactly is this... Unidentified Company Representative I think the whole challenge lies on execution on the ground. It doesn't in working capital, it's a net -- will be a free cash flow company from this year -- significantly free cash flow company. Banking is not a challenge for us. Manufacturing turbines is the least of the challenge. So while you ask me, we are manufacturing capacity is 2.5 gigawatts. If we were making caustic soda, if we were making steel, yes, we would be running at a 100% utilization -- possibly 110% utilization. Unfortunately, in the wind sector, we have to -- whether we are doing turnkey or whether we're doing the equipment supply. At the end of the day, someone still needs to execute. And if you look at what's happening in India, the biggest constraint is who will execute with. There are only two wind players in the country today who survive who do turnkey. And everybody is flocking for turnkey solutions. So the challenge remains how do you do so much turnkey, multiple lines, ROWs, acquiring land, transmission infrastructure at the same time. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call If that gets resolved, which is not a piece of cake, -- to that extent, if people can resolve that and do that, certainly, we'll supply more turbines. I mean, if you look at it from one year ago to this year, and if you look at our order book, it's now transition from virtually 95%, 100% turnkey to virtually 70, 30 or maybe 60, 40 now with the Hero order. And our stated goal was to be roughly 50, 50. So as long as people can execute, we are more than happy to supply turbines to them.

Question: Pramod Bhutra - Reliance Industries - Analyst : Am I audible? Unidentified Company Representative Yes, you are. Please go ahead.

Question: Dhananjai Bagrodia - ASK - Analyst : You mentioned that you are the only player who hasn't taken a haircut and has managed to survive in a competitive industry like this. Could you just give us specific reasons why? Because we've always looked at this as more -- let's say, a competitive commoditized industry. What have you all done so differently? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call Unidentified Company Representative It's the management philosophy People operate at 3% margins, 4% margins historically. People operated with INR6,000 crore, INR8,000 crore debt. I frankly don't know. I can't answer about them, but all I can say is across the Inox GFL Group companies, we are profit leaders in whichever segment we operate it. We are very, very conscious of the capital we spend. A simple point in place, our entire CapEx on this 2.5 gigawatt of manufacturing capacity was close to INR600 crore to INR700 crore. Competitors would have spent INR2,000 crore to INR3,000 crore. So I'm not sure where it goes, what they do wrong. All I can say is we are very conscious about capital spend. We are very conscious about costs. And that's probably the only reason why we survived. While we had to pump in INR700 crore, INR800 crore from the promoter family to survive, we did have INR5,000 crore, INR8,000 crore, INR10,000 crore, INR15,000 crore of debt, had we had that we would have been in NCLT as well.

Question: Dhananjai Bagrodia - ASK - Analyst : Sure. And would you be -- would it be safe to say that these are at the margins which would be comfortable to you? And we see that, let's say, this bottoming out and there could be scope of margin improvement from here? Unidentified Company Representative So we guided for 14% to 15%, and I'll stick to that. Yes, there could be scope to improve further, there could be scope to go down 1%. But I think keeping all those thoughts in mind, currently, we are guiding for 14% to 15%. As we move along the way, if we are new products come in, et cetera, et cetera, we may have this.

Question: Dhananjai Bagrodia - ASK - Analyst : Okay. So fantastic, I think then at least the next 1.5 years, everything seems to be placed. And lastly, would there be any risk which we could then -- of course, see 1.5 years we are secured for. So any other risk which we might -- so I'm saying next 1.5 years we are secure in orders and margins and working capital also looks good. Is there any risks which could be there, which we've not mentioned? Unidentified Company Representative I think let's put it like this, we've got all the building blocks in place when you look at our presentation. We've got a strong balance sheet. We've got a lot of orders. We've reached the management team. We have our supply chain in place. So frankly speaking, after five years of hell, there has to be -- the sun has to (spoken in foreign language), now is our time. So let's the next decade be our time. There are normal business risks which are part and parcel of any business, quarter here and there, percentage here and there, receivables 30 days here and there, which is part and parcel of this business. Nothing out of the ordinary.

Question: Vishal Gupta - Emerge Capital - Analyst : Yes. All of my questions have been answered. Just to understand. Do we see any other exceptional items coming in FY25 like we have seen for the Q4? Unidentified Company Representative Yes. How will anybody know whether any exceptional item will come? How can you know that today? It's impossible to know that. I think on a -- I think what we've done as a company is kept operation straightforward. I think you could have exceptional gains, you could have exceptional -- I mean that's how we see it. I think we've been very conservative in terms of the balance sheet approach, in terms of provisions. And I think to that extent, it's impossible to predict exceptional items, but I don't see anything fundamentally changing from here on.

Question: Abhishek Dutt - Anand Rathi - Analyst : I just wanted to know, like in Note 16b, it mentions about the -- we have transmission capacity of 1.9 gigawatts in two states of Gujarat and Rajasthan. What exactly is this -- does this refer to like if you can explain? Unidentified Company Representative What this means is basically all the wind capacity we've set up to date. And if you look at that note, it says particularly currently Gujarat and Rajasthan, hybrid policies have come out, which enable us to use a common infrastructure to the extent of 50% more capacity. So on the existing infra, which has been fully utilized and spent out, we are now allowed to lose 50% more power and we are developing hybrid across multiple customers and multiple customers want us to give them the connectivity. So while we don't do solar if we can, we don't provide for that. Many of the customers are coming to look on to these transmission lines. And to that extent, we are almost one gigawatt worth of capacity, which has been created, which will be sold out. And that's the reason for the reinstatement in intangible asset.

Question: Abhishek Dutt - Anand Rathi - Analyst : No, I'm talking about the overall... Unidentified Company Representative The five gigawatt is the incremental capacity, the 1.9 is the already operational utilized capacity on which now we can add approximately 50% more, thanks to the hybrid policies in these two states. Will be an opportunity for future projects as well.

Question: Abhishek Dutt - Anand Rathi - Analyst : And this -- in the cash flow statement, it shows CapEx of around INR750 crore, including change... Unidentified Company Representative of common infrastructure which we have build on various sites, right? So basically, this we will rely from the customers. So as per the that need to be capitalized, but that is not an optical CapEx which the company incurs. So basically, that will be realized over a period of time. And on one side, you will see the fixed asset and on the other side, you will see the liability over a period of time. So the optical CapEx for production also running our operations are around INR50 crore to INR70 crore.

Question: Abhishek Dutt - Anand Rathi - Analyst : And this Hero purchase will also be -- is it an equipment contract? Or is it a C2C contract? Unidentified Company Representative No, it is mainly equipment supply, but along with some value-added services. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call

Question: Prit Nagersheth - Wealth Finvisor - Analyst : Yes, sir. So I want to understand we setup for the three megawatt execution. The question -- by asking this what I'm trying to understand this our level of readiness, the molds that need to be in place. Does it mean that from Q1 onwards, we should be able to have a more execution than what we've executed in Q4? Could someone shed some light on this. Unidentified Company Representative So obviously, the Q4 quarter was the one in which we ramped up the three megawatt production. Going ahead as we stated multiple times, 800-megawatt is the execution target for FY25. Now naturally, the ramp-up is going on. So Q1, Q2, Q3, Q4, you will be seeing gradually more execution. But FY25 is completely transitioned towards the thtee megawatt product. And out of the 800 megawatt, it will be majorly the 800-megawatt -- the three megawatt turbine which will be executed. So obviously, over Q4, you will see gradual ramp-up in our execution.

Question: Prit Nagersheth - Wealth Finvisor - Analyst : Right. So what I was trying to get to the answer is that are there some kind of stake sale, additional stake sale being planned or it's going to be fully seen. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 03, 2024 / 11:30AM, INWN.NS - Q4 2024 Inox Wind Ltd Earnings Call Unidentified Company Representative Impossible to answer at this point in time. All the options are open in front of us. I think the balance sheet is very, very strong. We've come down from about INR3,000-odd crore of interest-bearing debt in advances now to about INR600-odd crore. So frankly speaking, we're running to be net debt free in H1. And I think we're confident. We have multiple strategies in place. We have our O&M company in play. We have multiple options. We have multiple things being discussed at the Board level and also at the operating level. But all I can say is operationally itself our free cash flows in the manufacturing business will be much larger than the 600-odd which we carried on the books. I won't be able to share more than at this point in time.