#Q1WithBQ | #TataPower's June quarter net profit jumps 22% year-on-year, even as revenue misses street estimates.
MD & CEO Praveer Sinha shares FY24 growth outlook. #BQLive
MD & CEO Praveer Sinha shares FY24 growth outlook. #BQLive
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00:00 The company in focus in this segment is Tata Spark. We have Dr. Praveen Sinha, MD&C of the
00:08 company joining us. Mr. Sinha, thank you very much for joining us. You got a good set of EBITDA growth
00:14 this year and the margins also expanded significantly. Can you take us through what
00:19 was the reason for this expansion? Thank you very much. You are right that this is the 15th
00:29 consecutive quarter of growth impact and what is important is that the quality of numbers have
00:37 improved drastically and that gets reflected that EBITDA has grown up by nearly 43% to 3,000 crores.
00:46 First time actually in a quarter we are having a bit of 3,000 crores. What is important is that
00:54 our existing businesses have done very well. Our Mundra plant operated during the quarter
01:01 under section 11. Apart from this, our renewable businesses have done very well.
01:06 There has been a substantial increase in the renewable part as also in the EBITDA in the
01:13 quarter and that has got translated in the overall EBITDA growth of the company. Similarly, our T&D
01:23 especially our distribution in Odisha and the transmission business, the EBITDA impact has
01:29 improved. So I think right across each of our businesses the EBITDA has improved and so also
01:36 the path. What is good to see is that now it is the core business which is doing very well. Unlike
01:44 last year where in the first quarter and through the year we had a huge profit that was coming from
01:51 our coal business where the coal prices had gone up. This year notwithstanding the fact that the
01:58 coal prices are very low, we still have shown a very healthy EBITDA and PAT number and I think
02:05 going forward you will see that this will get further consolidated and
02:10 there would be further improvement in EBITDA and PAT in the future quarters.
02:16 What we also saw is the addition of nearly 5.8 gigawatts in Q1,
02:21 77% coming through renewable energy. What kind of addition do you see by the end of the fiscal?
02:28 So we are definitely expecting that many of the projects which are in the pipeline
02:35 will get executed in this year whether it is our own utility scale or group captive or even the
02:42 third party EPC and those will help us to show a much healthier EBITDA and PAT numbers.
02:50 The exact numbers of course are in the range of about 2 gigawatts but what I can tell you is that
03:00 out of the 4 gigawatts which is the order book pending with us, substantial quantum will get
03:07 executed in this financial year. Sir, if I look at your solar utility EPC book,
03:13 it is 17,643 crores, it has grown quarter on quarter but do you see a bit of slow sluggish
03:21 growth coming into this segment? I think we are touching a very small
03:27 segment of the market, there is a huge potential and opportunity and it of course requires a little
03:34 bit of advocacy and education with the consumers, telling them not only that it makes a good
03:43 environment initiatives by them but also it is economics and the cost of power comes down
03:50 and I think the benefit that they accrue is much higher on overall basis. So I think
03:59 we find that there may be some sluggishness during the monsoon period but on an overall basis, I do
04:09 see that there is a huge amount of interest and how we convert that interest into order than
04:15 actual execution, I think we need to continue working with the consumers on that.
04:20 What's the update on the solar cell and module plant coming up?
04:27 It's going on very well, we are on track and we expect that within this year,
04:32 both the module and the cell unit will get fully operational and we will be able to produce it and
04:38 use it for our projects in the country as also wherever we have opportunity, we will sell some
04:45 of the modules inside the country and maybe export also. If I look at the trends for wafers and cells
04:54 which has a pricing of that, it's almost come back to FY20 levels. Do you see that having any impact
05:03 or giving an impetus to the adoption of solar going forward?
05:09 So the prices have actually come down and it's good for the industry because that much more
05:18 projects can come up which were stalled for last two years because of the higher prices of modules
05:23 etc. So it's a very good development. Secondly, as far as we are concerned when we are
05:30 manufacturing in India, we get a certain advantage to protect the Indian industry through the customs
05:37 duty which is nearly 40% in case of modules. So I think inherently we are being supported by
05:47 providing a certain safeguard to Indian manufacturers and that will help us in
05:53 ensuring that we are able to produce and have a much better margin than we supply in the country.
05:59 Your cell plant may be coming up in by September, that's what I saw in your presentation and module
06:05 by first quarter of the next calendar year. What kind of revenue addition that would add to you
06:14 going forward? It's actually the opposite, the module will come in September.
06:21 The cell will come in the first quarter of next calendar year. So it's going on, it's on track and
06:32 we are working towards that timeline and we expect that the modules will start coming out.
06:40 What kind of revenue potential that will be for Tata Power? Right now, since it's only for a
06:46 certain period and this is a staggered plant, all these staggered commissioning that will happen.
06:54 So it's not that all four GigaWatt will get commissioned in the month of October, it will be
06:59 the first 500 and every two weeks another 500 will get added. So it's only over a staggered period
07:07 that maybe by December or January, the four Gigawatt of module will be ready and thereafter
07:14 the of course we said. So it's still work in progress and we'll be able to share more details
07:21 once the actual timelines are formed. So the benefit would accrue in FY25, is that the right
07:31 way to say? Yeah, absolutely. The first full year of operation will be by FY25. Okay, I saw your
07:41 net debt also going up and the gross debt also going up. It seems that the working
07:47 capital requirement has increased for you. What is the reason for that? Well, what has happened is
07:56 that typically in the first quarter, many of the payments get delayed from many of the customers
08:03 because of extreme heat conditions, consumption increases and they are not in a position to pay
08:09 immediately. So those all get paid in the month of July and August. Secondly, we have done
08:16 investments in many of our projects as we have a very ambitious target to add nearly 2.5 GigaWatt
08:23 in this year. So many of the activities relating to the projects are now going and the results of
08:31 that will start coming when these projects are implemented and they start generating power. So I
08:37 think what you would see is that because of the 12,000 crore of CapEx that we have planned,
08:44 there would be an increase in debt but so also there will be an increase in our EBITDA to cater
08:51 to the higher debt that we get. Do you expect your total gross debt or net debt to come down
08:58 by the end of the financial year or will it be on an elevated level compared to last year?
09:02 It will be because we are doing nearly 12,000 crores of CapEx. So it will be little more but
09:11 the metrics will be very good, our debt equity or our debt EBITDA numbers will be very, very safe.
09:19 Will you be needing capital, equity capital at some time to fund this entire expansion plan
09:27 or is it going to be entirely internal accrual going forward? It is internal accrual and in
09:33 any case last year we had equity infusion from our partners who had come into the new platform. So
09:41 that money is already lying with us and we'll be using that for our growth this year and next year.
09:49 Give me a sense of how you plan to expand the entire portfolio because you are looking at once
09:59 the entire renewable energy portfolio comes into play, you will have nearly 51 percent coming from
10:04 renewable energy. How do you plan to gradually replace the entire thermal part with renewable
10:14 energy because to play beyond that once you clean, so will there be a next set of expansion
10:20 plan that will come in? How will it play out? So as we have shared earlier, we will be adding
10:27 about 2 to 2.5 gigawatt of renewable capacity every year which will be a mix of solar, wind
10:34 and now pump hydro will also come and the objective is that these will be new capacity
10:41 additions. Of course, the existing assets, old assets will continue to work till their useful
10:48 life or till the time their DPAs are there and so it's transitioning that will take place where
10:55 capacity additions is a every year aspect while the decommissioning of some of the units will
11:02 happen over the next 15 to 20 years. Give me a sense of how distribution is also doing. TND was
11:11 another segment which did very well for you in this quarter. How is it doing and my question is
11:18 that you know the government is pushing for smart metering and prepaid metering in many cities like
11:24 Mumbai and other cities. Where are you on that? So our transmission and distribution are doing
11:33 very well. Our transmission every year we do a capex of nearly 600 to 700 crores in Mumbai
11:40 for upgrading the network and also a replacement of many of the old
11:46 equipments which are there so that the reliability enhances in Mumbai. We also do
11:53 capex for our distribution business in Delhi, Mumbai and Odisha and that's why you have seen
12:01 that our performance in all these places have further improved especially in Odisha now that
12:08 we have stabilized our operation. Secondly, we have already implemented 650,000 smart meters in
12:17 Delhi, Odisha and Mumbai put together and we will over a period of time cover all our customers
12:24 with smart meters in the cities and maybe in few pockets of the rural areas. We also have
12:35 got recently an order of 1700 crores from Shakti's for setting up of the smart meters over there.
12:42 We have again been very careful and calibrated in terms of which areas or which cities, which states
12:52 we will go and work on smart meters. So I think our T&D business is poised for very good growth.
12:59 We had taken last year two assets which were under stressed conditions, the transmission assets in
13:06 UP and UP and Rajasthan and Haryana. Work is going on in both of the projects and hopefully next 12
13:15 to 18 months they will get commissioned. So I think we have a very good game plan on our
13:22 transmission and distribution business which we will implement over a period of time. Sir,
13:28 give me a sense of how the working capital requirement for a power company like you
13:32 change with the prepaid metering and the smart metering coming into place. Does it
13:39 eliminate to a large extent the need of working capital because payments will now be prepaid
13:45 instead of being delayed by a few months? Yeah, absolutely and you would see our debtors,
13:53 number of days of debtors which was last year in the first quarter 58 days has come down to 47 days
14:00 this quarter and it will further get improved in the subsequent quarters. So what we do is
14:07 whatever we build we are getting paid in most of the places we have 100% collection efficiency
14:13 and we expect that we will be able to do that much better with our smart meters. So I think
14:22 this is only supporting our program of ensuring that whatever we build we collect 100% and
14:30 to that extent our working capital is controlled. Finally, sir, section 11 which has helped Mundra
14:38 operate at a higher efficiency, till when do you expect that to be there and do you expect
14:44 an extension coming in as well? So it's there till the 30th September. Last year we saw the
14:50 extension so maybe it might get extended this year also. So let's see how the requirement of
14:59 power is there in the coming months and based on that the government... What is your projection
15:05 for requirements, sir? Well, projections this year went a little off because of the weather changes.
15:16 We were expecting 230 gigawatt in summer months and it didn't cross 220. So very difficult to
15:24 predict what sort of weather conditions would be there but typically in October is very hot and
15:31 also very humid so we do expect that there would be a good demand of power. Mr. Sinha, it was a
15:40 pleasure talking to you today. Thank you very much for joining us on BQ Prime. Thank you, thank you very much.
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