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Good day, and welcome to Adani Enterprises Limited Q1 FY '23 Earnings Conference Call hosted by Elara Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Ankita Shah from Elara Securities. Thank you, and over to you, Ms. Shah.
Thanks, Nirav. Good morning, everyone, and welcome to this 1Q FY '23 Earnings Conference Call of Adani Enterprises Limited. We have with us today from the management team, Mr. Vinay Prakash, Director, Adani Enterprises and CEO, Natural Resources; Mr. Robbie Singh, CFO, Adani Enterprises; Mr. Saurabh Shah, Finance Controller and Mr. Manan Vakharia from Investor Relations team. And we will start with opening remarks and post which we will have a question-and-answer session. Thank you, and over to you, sir.
Thank you so much. Hi. Good morning, all. This is Robbie Singh, CFO of Adani Enterprise. I welcome you all to the earnings call to discuss quarter 1 financial year '23 results. AEL continues to create value for its shareholders as successful incubator for the past 2.5 decades. This integration model has created leaders in the respective sectors like Adani Ports, Adani Transmission, Adani Green Energy, Adani Total Gas and Adani Wilmar, and has delivered returns at a compound annual growth rate of 36% to shareholders. AEL holds a portfolio of businesses, both established and incubating, which are spread across different verticals in energy and utility, transport and logistics, direct-to-consumer and primary industries.
Within primary industry, it has established businesses of mining services and integrated resource management, along with the developing vertical of metals. As our established businesses continue to sustain long-term growth, we are making significant progress in our attractive incubation pipeline comprising of energy and utility, which is Adani New Industries, which is green hydrogen ecosystem and a full-service data center business, AdaniConneX. In the transport and logistics, we have Adani Airport Holdings and the Adani Road Transport Limited, businesses which will further accelerate value creation for Adani Enterprise shareholders.
We are happy to inform that AEL has completed primary equity transaction for INR 7,700 crores with Abu Dhabi based International Holding Company for 3.5% stake. This validates our strong capital management philosophy of-equity-funded growth and a conservative leverage targets.
Let me give you a quick update of our incubating businesses. In Adani New Industry portfolio, as all of you would know, we have announced investment of USD 50 billion over the next decade in developing green hydrogen and ecosystem. This will be housed under an Adani New Industries Limited. ANIL will have 3 business streams, manufacturing ecosystem to include module, cell, ingot, wafers and wind turbines, electrolyzers and associated ancillary equipment ecosystem. There will green hydrogen generation, it included the development of solar and wind power plants to produce green hydrogen, downstream products depending on the use cases for ammonia, urea, methanol, et cetera.
During the quarter, we announced our partnership with TotalEnergies to develop the world's largest green H2 hydrogen ecosystem. TotalEnergies will acquire 25% stake in ANIL while the transaction will follow customary approval processes, it takes the company one step ahead to produce the world's least expensive electron, which will drive our ability to produce the world's least expensive green hydrogen. Just following are some of the updates on this development. Existing capacity of 1.5 gigawatt Mundra is increasing to 3.5 and the additional 2 gigawatts will be completed by September this year. With this, the overall capacity will reach 3.5 gigawatts. Wind turbine erection for the first 5.2-megawatt wind turbine has been completed and testing and certification is underway. We expect completion in the next 6 months. We have identified 3 trial sites for the initial testing of electrolyzers, and we expect the testing to commence end of this year -- calendar year or early next year. From an operational point of view, module sales from our manufacturing ecosystem within ANIL stood at 260 megawatt. EBITDA from these sales was at INR 42 crores.
Adani Airport Holdings. In Adani Airport Holding percentage movement at the Airport increased by 35% and is now at 16.6 million, which is approximately 85% of the pre-COVID numbers. Construction at Navi Mumbai International Airport has started and approximately 26% of the work is completed.
In Adani Road Transport portfolio, we have signed concession agreement in May for Kagal-Satara road project of 65 kilometers in Maharashtra under a BOT basis. We also have provisional COD for Bilaspur road project. And construction activity is progressing well on other 8 road projects. The current road portfolio is now approximately INR 38,000 crores of both operating and under development projects.
A quick update of primary industry before I hand over to my colleague, Vinay. We achieved financial close for our first metals business, copper. This was led by SBI and it has been further down sold to various other banks. Financial performance of AEL for this quarter has increased -- in terms of revenue numbers has increased 223% and now is at INR 41,066 crores. Consolidated EBITDA increased by over 100% and is at INR 1,965 crores, with strong performance from both established and incubating businesses.
Now I invite my colleague, Vinay, to take you through the Mining Services and IRM business highlights. Vinay, over to you.
Thanks, Robbie. Good morning to all. In fact, as for the mining services business is concerned, Adani Enterprise Limited is the pioneer of MDO concept in India with an integrated business model that spans across developing mines as well as the entire upstream and downstream activities. It provides a full service range from taking various approvals, land acquisition, developing and acquiring infrastructure, mining, beneficiation and transportation to designated plants, which is some [indiscernible]. The company has also MDO for 9 coal blocks and 2 iron ore blocks with combined peak capacity of 120 million metric tons per annum. These projects are located in the state of Chhattisgarh, MP and Odisha. The mining collection volume increased by 72% to 8.1 million metric ton on year-on-year basis, and the further dispatch increased by 58% to 7.2 million metric ton on year-on-year basis. Revenue from mining business, mining services increased by 18% to INR 677 crores and EBITDA stood at INR 268 crores versus INR 307 crores on year-on-year basis on account of high operating costs. As Robbie talked about copper business, apart from financial [indiscernible] opportunities are progressing well, and it is as per schedule. Additionally, we have also received PLI scheme approval for copper to value-added scheme for our copper business. As far as the iron business is concerned, in terms of iron business, we have continued to develop business relationship and diversified customer across various end user industries. We retained #1 player position in India and having the endeavor to maintain the same position going forward. The volume in quarter 1 FY '23 increased by 52% to 26.7 million metric tons. The EBITDA has increased by 72% to INR 950 crores on account of higher volumes.
With this we open to Q&A.
[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital Advisors.
Congratulations on achieving a success in number of initiatives and especially raising money. Sir, my first question is on the mining operations. Given that you achieved 8.1 million tonnes. Sir, our profitability EBITDA isn't improving, it happened in Q4 also and in this quarter. So how do you expect this EBITDA ramp-up to happen? I understand that we are -- we opened around 55 million tonnes of capacity. When do you expect this peak capacity to be to achieved?
Yes. it. In fact,. As I told last time also, in [indiscernible] mining considering that we are getting a higher cost because of the diesel, explosives and [indiscernible], our EBITDA has gone down slightly, and we are working on various other technology initiatives to see as how we can recover it back. In fact, in this volume, the volume of Talabira and other mines have also included where we have a lower revenue because of having a lower [indiscernible] pressure. And considering that the cost -- the revenue -- the mining cost per tonne is lower, definitely the EBITDA burden is also lower in those mines.
As far as the increase of volumes are concerned, we are working on both the sides, trying to see if we can have alternate fuels to be used apart from going for the electric equipment and some technology changes, we are confident that we'll be pushed to increase the EBITDA level going further.
And sir, the new mines which are under development, which are next mines you are likely to open in the next 24 months?
So we have a few mines, which should get opened in the next 24 months. Like Parsa is ready to get opened subject to certain local approvals, we should open that mine soon. We have Suliyari mine, which is now going to go for its peak capacity. We have Talabira in mine, which did 7 million tonnes last year should do 12 million tonnes this year. And going forward, should reach to its peak capacity, which is 20 million tonnes. We have other commercial mines like Dhirauli and Bijahan, which should also come on board.
Understood, sir. And sir, is it possible to break up the IRM operations into Carmichael and your [indiscernible] business? Is it possible? Are you sharing that number, in case of sharing, please give the revenue and EBITDA number for Carmichael?
I think this IRM business is independent of Carmichael business, which Saurabh will like to comment here. But this IRM is excluding of Carmichael.
So this number of IRM is basically only the trading business, not the Carmichael commercial mine business.
Understood. But can you just share the revenue and EBITDA of Carmichael? Is it possible?
Yes. So just to give an idea that we have done 1 million metric tons of sales in Carmichael mine this quarter with the revenue and -- the EBITDA of about INR 85 crores is what we have.
Understood. On the New Industries businesses, have you received the LOA for the entire capacity in the sense you're participating in PLI scheme. So have you received LOA from the government? And when do you expect this integrated capacity to commission? And on the expansion of 1.5 to 3.5 gigawatt, are we looking given that the ramp-up is very fast? How do you see the traction on the market for our -- for the capacity?
Which question you're asking?
Okay. So let me break up and pick it up. First, on the LOA side, the government has -- I think we are participating in the PLI scheme, and we were one of the winners of that. So have you received the LOA from the government?
So that is continuing. And it's not -- see, I just want you to focus not on -- we are not doing this business for PLI schemes. I think we should keep the focus on the fact that Adani New Industries is setting up hydrogen -- green hydrogen ecosystem. Now the PLI schemes happened would be wonderful because that is part of the Atmanirbhar program of the government, and it will benefit us. But independent of that, it is a specific opportunity for India to finally have an energy source that is domestic. And therefore, it has its own economic merits. Having that, if you can kindly frame the questions in relation to that manner, it is not much better.
Understood, sir. My question is then, of course, we have -- we are doing the first ramp-up from 1.5 to 3.5 gigawatts. What is the next in the solar manufacturing business? And what duration you think you will do the third expansion.
No. So basically, the -- this is -- the ramp-up of the business is related to what are final targets to achieve the cheapest electron for production of green hydrogen. So we will have in Phase I, a capacity of 10 gigawatt, 10 gigawatts from all the way from polysilicon, ingot wafer and cell and module line. We will also have initial capacity of 2.5 gigawatts of wind turbines, which will also scale up to 10, and we will also have capacity for electrolyzers, similar.
And plus the glass, aluminum frames and backsheet. So this whole ecosystem is to provide input into the production of electron, cheapest electron so that we can convert that to the cheapest hydrogen. So the scale-up will be related to how we are developing, and we expect the first production of hydrogen to commence late calendar year 2025 or first half of calendar year -- for first quarter of calendar year 2026. So that's where the -- that's the ramp up schedules that we are working towards. The polysilicon itself will be full 10 gigawatt to start off because that's the minimum scale which is economic.
And so the timeline for the polysilicon, sir, any tentative timeline?
It's 30 months from that period from that period -- around that period.
[Operator Instructions] The next question is from the line of Apoorva Bahadur from Investec.
Sir, I wanted to know if we have finalized the electrolyzer technology partnership?
No, we are working on that. We are currently -- as I mentioned, we are currently in the process of starting the testing program for electrolyzers. And parallel to that, we are continuing to work on partnerships. But we have -- it's a dual track process, both partnerships and indigenous capacity.
So we are confident that our factory will be up and running and start producing electrolyzers so that we can start producing hydrogen by end '25?
Yes.
So the time lines are comfortable.
Yes.
Fair enough. Sir, also on the wind capacity side, can you guide by when this 2.5 gigawatt capacity be commercial? And also will we be selling the turbines to third parties in the commercial market? Or will it entirely be for captive consumption?
Mostly initially will be for captive consumption. So we have commissioned or erected the first 5.2-megawatt wind turbine. And we expect the -- it requires a certification process. We expect the certification process to complete in the next 6 months. And from there onwards, by that time, we will ramp up the production capacity, and we will be ready to produce 2.5 gigawatt.
Right, sir. And sir, last question from my side. And that is the power storage brand. I believe producing hydrogen using alkaline tech, which we will be going for initially, you require sort of a longer duration availability, or more reliable power. So what's our take on that, which technology or which method of storage will be backing. Will it become hydros or battery? And in either case, if you have already done some [indiscernible]?
No. We -- that is the configurations we are testing. So we are going through as to what and how the configuration of best operating configuration works to give the cheapest hydrogen given a power input profile. And so therefore, we are going to be testing the electrolyzer purely at a wind power site purely at the solar site and a hybrid wind and solar site. So we will complete that primarily to then come up with the best design configuration, under which the optimal hydrogen can be produced at an optimal cost. So that we are in the process of doing. So I -- once it is done, we'll continue to disclose it to the market as to how we are going. But at this stage in Phase 1 of the analysis, it does not rely on batteries or storage.
Okay. Sir, last question, if I may squeeze in one more. And this is -- I believe we intend to move hydrogen from Khavda to Mundra using a pipeline?
Correct.
Yes. So have we started the construction of it and what type of capital cost can we expect?
The pipeline is not a big cost. Pipeline is a very, very small cost of the overall project. But the right of way and all that analysis has been completed, and it's only about 200 kilometers. So it's not a very long pipeline. So we expect that to be ready and complete. It's not a gating item.
No specialized material needed to transport hydrogen because that's what we have read.
No, they're special, but they're all available.
[Operator Instructions] The next question is from the line of Sandip Bansal from ASK Investment Managers.
Robbie, I wanted to understand what would be the capital requirements across our various businesses over the next few years, especially on the equity side?
So from an equity point of view, we -- for the time being, we are fully funded, that we did already in advance, we did that equity issuance. We might do a small -- from time to time, we might look at appropriately funding various businesses. But the bulk, we completed that in May with IHC INR 7,700 crores. And overall, from a CapEx perspective, just pure CapEx perspective, we expect the CapEx commitments over the next 2 years to be in the order -- for AEL to be in the order of give or take about 88 -- INR 85,000 crores. And including revenue plus EPC margin plus internal cash flows and already funded equity. That is fully covered in our current plan. So we don't anticipate any new equity for the already identified projects.
Sure. So this INR 85,000 crores, if I understand correctly, is '24 -- FY '24 and '25 or FY '23 and '24?
No, it's '23 and '24. But of this INR 85,000 crores, approximately like about 7 -- close to INR 8,000 crores, which we have already spent on our manufacturing ecosystem. It's already spent. It will just be completed this year, part of it. So we don't need to -- from an outlay perspective, it is completing in FY '23. Just as to break up for you so that you see that Airports, so Airports will be about INR 11,000 crores this year. Roads to be around INR 8,900 crores. We will have in the copper about INR 2,900 crores; data center, a small amount, about INR 300-odd crores; and in our other materials business is around INR 4,400 crores. And that will be INR 37,000-odd crores, of which INR 9,000 crores as I mentioned, approximately INR 8,500 crores already spent previously -- in the previous years, completing this year. And the following year in 2024, we expect to have another INR 48,000-odd crores of CapEx.
Sure. On the Airport business side, if you can help us understand some of your plans because now it's been a few months since we've taken over the Bombay Airport as well. And Navi Mumbai construction has also started. So how should we think about the trajectory for revenues as well as EBITDA over the next few years?
The best way to explain the Airport business is that we look at airports as hyper-localized community economic assets, which is that primarily the airport is an economic center for its regional area in which it is, be it Jaypur, be it Ahmedabad, be it Lukhnow, Navi Mumbai or Mumbai. So it has -- number one, it has -- we have a plan, which is which we call the city side planning. And the city side planning is purely catering to its local community. So that's one. Second is the related to passenger activity and associated activities, which is related to aero and non-aero income at the airport. There are 3 income streams. The city economic area activity and the passenger aero and non-aero activity. So we expect to complete our first phase of our city side, which is non-passenger-related but city side developments by -- first phase of it will be completed by 2026. And fully completed by 2030 across our 8 Airport sites. We don't want to -- because it's so far out and those are the numbers not formally presented in terms of -- because of the period of which they're forecast. Overall, the way the structure would work is that the city side development should be -- should give us or local economic area should give us about 55% to 60% of our EBITDA and aero and non-aero should give us the other 40% of the EBITDA of the business.
So I would not -- till we formally start reporting on Adani Airport Holdings as a business unit, which we will shortly, I don't want to hazard an unverified say forecast for the Airport business per say. This year though, Airports achieved just, to give you a -- passenger movement of about 16.6 million this quarter and a cargo of about 2.3 lakh metric tons. And broadly, sorry, we achieved the EBITDA of about -- so about approximately about INR 540-odd crores of EBITDA that we achieved for the Airport business this quarter. But this is without any income coming yet from the city side economic developments, which will commence about 3 years from now.
Sure. And just one clarification. When you talk about city side development, does this include the real estate monetization at the Bombay airport as well or that is excluding that?
No, there is no -- like conceptually, we don't look at this real estate monetization. There is no monetization of real estate. It is actually how much the -- what you are building for the local community and how the local community spends within the airport. So it's not specifically like trying to monetize the land and try to do -- try to take -- undertake that kind of activity. It is more related to what is needed in the specific local community, do you build facilities for that community and then your earning income from that build capacity. So it will depend on city by city. There is more of a consumer-centric model and a model that is related to monetization of land, et cetera.
Next question is from the line of Mohit Kumar from Dam Capital Advisors.
Sir, a few clarification. Do you have access to all the 140-acre land in the Mumbai airport?
By access, you mean that do we have access? Yes, of course, we have access to all the land.
My question is, is it completely with us? Or is there something which is still to be transfer to us for the development you want to do on the land?
Majority of it is with us, yes.
So my second question is on the profitability of the solar business. I think this quarter, it was impacted adversely, I believe this is primarily because the movement in polysilicon prices. How do you see over the next couple of quarters and given the fact that they're going to ramp up? Do you think this -- the profitability, when will go back to the old deliver profitability?
No. See, the solar business is not a business that we look at in isolation. We look at it as an integrated part of the green hydrogen ecosystem. Okay. So there's no specific target that we want to achieve for the solar business. We want to achieve the target for green hydrogen per kg. So that is the metric that we are focused on.
Okay. Sir, but in the -- but are you saying that this 2.5 gigawatt entirely will be sold for the captive requirements?
Mostly, yes.
Okay. Understood, sir. There is one request that we wish to share our debt breakup earlier in our presentation, just start sharing if you can...
Sir, your voice is coming little garbled.
Is it audible now.
Yes.
So my request is to share the debt breakup which you used to do earlier, business-wise, sir, it used to be very helpful.
We still do it, it will be available in September results. It's available twice a year, September and March.
[Operator Instructions]
The next question is from the line of Nirav Shah from GeeCee Investments.
Just one question, most of them have been answered. On the MDO front, sir, we did -- you have given a guidance of around 40 million tonnes in this year and around 75-odd tonnes next year. So can you just update on that whether are we maintaining it or upping it?
So we are maintaining this 40 million tonnes for this year and for the next year, 65 million to 75 million tonnes depending upon the timing of various approvals.
Thank you. As there are no further questions, I hand the conference over to the management for closing comments.
Firstly, thank you so much for organizing. Thank you for the investors and the team to ask questions, also thanking Saurabh, Manan and team and my colleague, Vinay for this call. So we take the opportunity to see you again in October.
Thanks -- Thanks, Ankita from Elara to organize this, and thank you so much. We look forward to a similar type of organization in the next coming quarters.
Thank you, sir. Thank you for the opportunity.
Thank you very much on behalf of Elara Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.