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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to Adani Enterprises Limited Q1 FY '24 Earnings Conference Call hosted by Investec Capital Services.
[Operator Instructions] Please note that this conference has been recorded.
I now hand the conference over to Mr. Aditya Bhartia from Investec Capital Services. Thank you, and over to you, sir.
Thank you, Lisa. We are pleased to host the senior management team of Adani Enterprises today. We have with us Mr. Vinay Prakash, Director, Adani Enterprises and CEO of Natural Resources; Mr. Robbie Singh, CFO; Mr. Saurabh Shah, Finance Controller; and Mr. Manan Vakharia, Investor Relations.
We will start the call with opening remarks from Mr. Robbie Singh, post which we'll move to Q&A. Thank you, and over to you, sir.
Thank you so much. I welcome you all to the earnings call to discuss first quarter financial year '24 results. As you know, AEL's business portfolio comprises both established and incubating assets spread across energy, utility, transport and direct-to-consumer and primary industries.
In services, AEL includes ADANI DIGITAL LABs and shared services center, ABEX. For the sustained long-term value, AEL has made significant progress in our attractive incubation pipeline. This first quarter of financial year '24 is powered by the emergence of green hydrogen business, Adani New Industries Limited, that now contributes over 10% of EBITDA.
Our performance for the quarter reflects our strong operational momentum on the back of ANIL Ecosystem and the Incubating business performance. The consolidated total income was at INR 25,810 crores. Consolidated EBITDA increased by 47% year-on-year to INR 2,896 crores. And in line with the increased EBITDA, consolidated PAT increased by 44% to INR 674 crores.
In our commitment of having 1-gigawatt of data center platform in India, I am pleased to inform you that AdaniConneX has secured the largest data center project financing deal in India with USD 213 million construction facility.
Now for update of some of our Incubating businesses. In Adani New Industries, our green hydrogen ecosystem, during the quarter, the Integrated Manufacturing division received the provisional certificate for 5.2-megawatt prototype 1 wind turbine. The production of this is expected during this quarter. Further, during this quarter, ingot/wafer facility, preliminary work has commenced, and we will update at the half year results.
Airport portfolio is performing as expected. The percentage number grew 27% and is now tracking at 85 million a year with this quarter's number being close to 21.3 million. In the Road portfolio, construction's in full swing in our 10 HAM and BOT projects. 3 out of these 10 projects have more than 50% completed construction and rest of the projects are as scheduled.
In the journey of AEL, our ESG philosophies are embedded into the fundamental plan with a significant amount of CapEx going into our green hydrogen business and other businesses of similar nature.
There are certain awards that highlight the consistent endeavor, and those include Adani New Industries Limited, the green hydrogen ecosystem, we won the Aegis Graham Bell Award in the category for Innovation and Manufacturing. Adani Road Transport team won an Energy Conservation Award Gold Category in the Road Construction.
Now I'll hand over to my colleague, Vinay Prakash, who will take you through the Mining Services and the IRM business highlights.
Vinay, over to you.
Thanks, Robbie. Greetings to all. As far as the Adani Enterprises is concerned, it's the pioneer on MDO, which is Mine Development Operator concept in India, with an integrated business model that spans across the developing mines as well as the entire upstream/downstream activities. It provides a well service range right from seeking various approvals, land acquisitions, R&R, developing required infrastructure, mining, beneficiation on site and the transportation to the designated consumption point, which is TPS.
The company's MDO for 8 coal blocks and 2 iron ore blocks. The projects are located in the state of Chhattisgarh, MP and Orissa. The company has serviced its contract and the quantity delivered during the quarter were as per the schedule. During the quarter, the revenue for mining stood at INR 608 crores and EBITDA at INR 242 crores.
In terms of the other business, Integrated Resource Management business, we have continued to develop business relationship with a diversified customer across various end-user industries. We remain #1 player in India and endeavor to maintain dealership position going forward. The volume in quarter 1 FY '24 stood at 17.8 million metric tonnes and EBITDA for the quarter 1 has increased to INR 1,000 crores on account of improved [indiscernible] basis.
Coming on commercial mining. The company is now having 7 commercial blocks. The blocks are located in the state of Maharashtra, Chhattisgarh, Madhya Pradesh, Jharkhand and Orissa. We already got the commission of the Committee for the early coal block in [indiscernible] and whereas we have got the vesting order for northwest of Madheri, [ Gondbahera ] and [ Gundurell ] in the coal block by MOC in June '23.
Thank you.
We open to Q&A.
[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.
My first question is on the Mumbai Airport. I believe that GMR has got a favorable order from DDSat on the existing contract. And I think that this particular order should be applicable to Mumbai Airport. Is my understanding right?
The order generally as a rule from a regulator applies only to the specific order that is sought by the asset owner. However, from a precedence point of view, you are correct that in the filing of [ mile ] also, the similar considerations will apply.
Understood, sir. But it will take time to get resolved, yes. What is time expectation when you think this new thing can get reinterpreted and be a part of our higher tariff?
No, that is -- I think the important thing to realize there is that it's a regulatory process. We don't want to specifically comment on time because a lot of these relatively complex consideration that the regulators have to do their work. But you -- I will just highlight you the nature of the regulatory process.
The time value of money is always accounted for in the regulatory order. So if there is a delay or if it takes some time to value it, that will be captured in the final order. So there's no economic value loss, and that is one of the key aspects of the regulatory business.
Understood, sir. My second question is whether [indiscernible] Mumbai Airport, the airport EBITDA Q-o-Q. So is this while the dealer went on Arrow? Or do you -- has it seen the spending per pass increasing very fast in the quarter Q-o-Q?
Largely, the EBITDA growth and EBITDA is driven by the 2 aspects. One, the spending by the passengers and non-passengers at the airport; and secondly, the increasing in the actual gross spend rate of each of the passenger and non-passenger. There's 2 aspects contributing to the growth in EBITDA.
Okay, sir. My third question is on Carmichael. Is it possible to share today presently EBITDA for the quarter? And the related question is that in the segmental which you've disclosed, commercial mining is one line item. I believe this primarily corresponds to Carmichael. Is that -- is my understanding correct?
Yes.
Yes, your understanding is correct.
Okay. My last question is, sir, on the solar PV. We have done a very, very good job in the sense the numbers are very good for the quarter. And I believe there is porting a very large amount to the third countries. Can you please specify which other countries where we're exporting our models right now, some ballpark?
Primarily, U.S. and Europe overall.
[Operator Instructions] The next question is from the line of Aditya Bhartia from Investec Capital.
Sir, could you share some details on the progress on creating green hydrogen ecosystem? I understand that we have the 4-gigawatt solar module capacity. But just want to understand how we're looking at the time lines for expansion of this facility as well as backward integration. Also, has there been any progress on technology sharing for electrolyzers?
No. All of that is probably as -- like I said in my opening comment. The backward integration is continuing. So Wafer & Ingot plant is under development, and we'll formally update as to where it is in our half yearly result. Windtech facility, as I said, has already achieved provisional certificate. So it is up and running and is moving to commercial production.
Similarly, all the ancillaries, be it glass, be it aluminum frame, back sheet, EVA, all of that are now in very advanced stages and in a lot of the cases, ancillary system is operating. We expect the -- there's no change in the time line as we had indicated last year. But I think from a formally full detailed time line on green hydrogen, the best time to update will be May next year.
But certainly, on the Ingot & Wafer and further improvement, we'll provide that update in the second half -- with the second half results.
The other element of it, which is -- which you refer to being the electrolyzers, there, yes, we -- all the agreements in relation to the 3 technologies are in place, and we will be -- and we expect sometimes towards the end of this quarter or early in the third quarter to start the development and construction work on that, so to have our own integrated facility for electrolyzer manufacturing.
Then the land for this, for the solar and wind plants, have been identified and site work -- site evaluation, site work, geotech and all of that is going on. And we'll be in a position to update over the next 6, 9 months. So from -- in the ancillary and product system also, the work is underway. Site evaluation versus the green methanol, green ammonia, fertilizer -- green fertilizers. Everything is, in that sense, at full speed in that vertical. We will provide a comprehensive update with final year result and an update on the Ingot & Wafer and other facilities on the integrated manufacturing in the half year results.
Perfect, sir. That would be [ give influence ]. Sir, on the data centric business, just wanted to understand what would be the proportion of overall capacity that has been formed up with the orders already? And if we look at this segment, what would be our competitive -- what do you consider as our biggest competitive advantage versus our peers?
See, we don't specifically look at -- sometimes it gets, I would say, I guess, too much on what's the competitive advantage or what's not. India is going to be a very significant data market. And it will have a lot more than just 1 or 2 players, okay? We would like to be one of the leading players and the full service data center, okay? And the various aspect go with that, center edge, data centers, et cetera. So in each aspect, we would like to be a significant player.
So currently, we have an order book other than the operating and near operating order book of over 110 megawatts and of hyperscalers. And we expect that to rise dramatically over the next couple of years. We will be well on the way to completing 1-gigawatt by -- before the end of this decade.
Understood, sir. And lastly, sir, what are our CapEx plans, especially for green hydrogen, airports and data center segments for the next 3 years?
See, overall, there is a longer term, the CapEx plans don't alter for the asset, like green hydrogen full 3 million tonne facility, approximately $50 billion, as we've outlined earlier in previous year. So that plan continues afoot as it is, which would be -- so this year, we would touch about -- just about between $300 million to $400 million, and then it rapidly starts rising from next year and the year after.
On the Airport side, we will have about this year just about USD 1.1 billion. All of these are, just to clarify, we are assuming INR 80 to $1 rate, but adjust for that. But -- so about USD 1.1 billion this year would be the CapEx on Airport. It will broadly remain in that range for the next years and then there would be a decline once we complete the first phase of our development plan in Airports.
The next question is from the line of Nikhil Abhyankar from ICICI Securities.
Congrats on a good set of numbers. So sir, what's the guidance for commercial mining this year? And what exactly is the -- the reason for asking the question is what -- our production has fallen like 10% Y-o-Y. So that's -- what is the reason?
Vinay, please, over to you.
Sorry. So I got the first -- [indiscernible] I'm not getting a -- able to get the proper voice also. As for your first question is about the commercial mine, we are really hopeful of starting the open cut in Dhirauli mine, which is the commercial mine, in this financial year. We have already got the EC permission. We are hopeful to get both FC Phase 2. And as soon as we get Phase 2, we should be in position to do the box cut in Dhirauli mine. Our other mines, Bijahan or [ Bonkari ] or GP, they'll will take some time because out of 7, 4 are actually underground mines. So they'll take some time to go for the preparation, you have to prepare for sharp incline, and then you need to put machines to take out coal. So that will be take time until 2025, 2026. But in this financial year, we are going to start -- we should start 1 mine as far as the mine operation is concerned. Coal will come only in the next years.
Okay. And sir, what is the guidance for this year, the volume guidance?
For the coal mining volume?
Yes.
Sorry -- you're talking about the coal mining volume?
Yes, sir, coal mining -- commercial mining volume, yes, sir.
So commercial mining, I don't think we'll get the volume this year in India.
Okay. Sir -- and we are also developing Talabira mine. So what is the -- how much do we expect per year out of it, volumes? And when will it...
Talabira mine is having a PRP of 22 million tonnes per annum. For this financial year, as per our contextual obligation, we are -- we have to do 10 million tonnes. But we -- on the request of NLC, who is our customer, we have indicated that all win-win will be 13 million tonnes this year, 1-3.
13. Okay, sir. And sir, you have given the production for Carmichael mine. So what is the offtake over there? And also the EBIT has been negative. So what should we -- what will be the trend over there?
So as far as this year -- so whatever we are mining, we are able to sell it in different countries, that businesses of Adani Group. We have been in this business of [ ICM ] for last 23, 24 years. So we have a good setup in many countries, and that's how, in the first year, second year itself, we are in position to see that all the volume which is going out of our mine are getting loaded into the ships. So that -- there, we are not seeing any problem. We are being better than what we did last year. As you have seen that quarter 1 '23, we did 1.3, doubled in this year by doing 2.6.
Okay. And sir, a final question, the margins on our solar manufacturing has been very high. Our realizations are also very high when the module prices globally are coming down. So what exactly will be the trend going forward? And also, our utilization levels, if I'm not wrong, are somewhere around 60%. So can we see better utilization going ahead as well?
Yes, the last question first, the utilization levels will rise because this was as technology change was taking place across the line to TOPCON, that's why as we -- the lines were stabilizing. So the utilization rate will rise. Margins will stabilize around the number, but margins will not rise, but are expected to stabilize or a very slight decline, but we expect that. And our reason for the margins -- high margin is that technology plus the trade flows mean that there is a demand for product from India and that is what is pushing the margins higher due to the competitive pressures in relation to Southeast Asia, their cost requirements, their sales cost, et cetera. So it's an overall global supply-based scenario. We expect that to continue for some time. But over the longer term, we expect the volumes to be high, margins to be slightly tighter than where they are today.
The next question is from the line of Prateek Kumar from Jefferies.
My first question is on your CapEx as you highlighted CapEx segment-wise. So what is the overall CapEx for FY '24 for our company? And I mean, given we have like completed a large M&A in our group company cement business, and this is probably the first large obviously M&A. So after the Hindenburg Report, are you looking for accelerating CapEx in Adani Enterprises as well which was suggested to have sort of mild slowdown in past quarter?
No, no, I think that was probably more media than anything else. We had always said as -- around 28th, 29th of January, I'd said that in the core businesses, the CapEx will continue. There's absolutely no reason for any of that to happen. That whole frenzy of half-baked articles and stories were related to people's perceptions rather than what we have actually said.
So what you are seeing is basically the core CapEx, be it Adani Green, be it Adani Transmission, be it Adani Ports, be it Adani Total Gas, be it Airports, be it within AEL at Airports, be it Adani Green Hydrogen Ecosystem, be it data center, everything is continuing as normal. So it was only the perception outside that something is going to be more -- slowdown in the core or slowdown -- that was never the case, we never said that.
And what you are seeing here is naturally when the opportunity came along, it was a key opportunity for our portfolio company, Ambuja, to acquire a great asset available for which is synergistic to its portfolio, synergistic from a logistics point of view, massively positive in terms of earnings. They did that.
If any asset like this comes available to us in a core portfolio, we'll acquire it. And therefore, the growth also did not steep. Our total CapEx, as we had indicated even last year, this year was around $3.7 billion across Adani Enterprises and will continue that way.
And on the utility portfolio with the utility portfolios that we have and transport and logistics portfolio we have and the core asset portfolio we have, which is in the primary industry, they will not -- they are driven by the fundamentals of the users and consumers in India plus the demand in India, which is not changing.
So a report of which we have said and our Chairman said in the yearly report, that was malicious, half-baked, half-truths, half based -- misquoting of our own disclosures. That would not change the business. It just causes market volatility, and that's all it was. And I think we should not get too excited by market volatility because that's -- our investment horizon is 30-plus years.
So this is the volatility part, and it's our obligation to ensure the volatility is manageable. But beyond that, it has no implication on our core business portfolio.
Great to hear, sir. So the $3.5 billion, $4 billion kind of CapEx for this year. Also, is there an update on commissioning of copper project and financing [indiscernible] of coal to PVC project?
No, corporate project is on schedule, first calendar first -- calendar quarter next year. We pretty much -- it's just right on schedule. So there is no change, no update. And if there's any update, we'll naturally bring it to the market. Coal to PVC, we are just working through on the various reports, preparation, pre-site works, et cetera, which are ongoing.
But at the moment, we don't have an update beyond the fact that all the prep work is going on. And if there is an update, we will highlight to the market. Otherwise, we'll certainly be updating as to where we are post the half year results.
Third question on Airports. So the time line for Navi Mumbai Airport was like December '24. Due to heavy monsoon, was there any impact on construction process like at the last month? Or is there any change in time lines? I know it's like -- still like 15-month end, so it should not -- hardly would have mattered.
No. We've committed to complete. We'll complete as committed.
And lastly, so last quarter, we talked about this TotalEnergies investment into green hydrogen project. So that seems like off table now, right, irrespective of that equity investment from that group?
No, it was -- like I said, we signed an MOU with them last year. That MOU is still there. They have to complete their DD, which they have to complete. The project is not dependent on that equity. As you know, we are going ahead with the project as it is and at the same pace. So that never was the case. It is -- if our partner requests us to look at a project that we are doing, we always welcome our partners to participate.
The basic philosophy of the group is that investors should invest in majority of our portfolio. So Total is a very respected partner. We have a great relationship with them. They invest in -- we invest in 2 public companies, they invest in 1 private company with us and another private company with us in terms of marketing. So we have 4 investments with them. And if they express an interest in the fifth investment, we will naturally say sure, no problems.
But that doesn't mean that, that investment is a joint investment decision. Investment decision is still Adani Enterprise's. And Adani Enterprise is continuing with that investment. And we are -- we will -- we do not anticipate or we do not think there'll be anything that we report in relation to the change of schedule on that.
And one more question and just a clarification. We have given 1 more segmental commercial mining and mining services this quarter. So this commercial mining which will start in India, so that will be clubbed with Carmichael mining in commercial mining segment?
Yes, commercial mining will be in the -- that we'll have to -- because we have very highly profitable, very solid, long-standing mining services business, where we are a service provider to various state-owned enterprises and so possibly will serve in the future to other non-state enterprises as well. So it's a specific business, and we want to make sure that it is understood that way.
And commercial mining is -- all our commercial mining activities, be it India or overseas, will fall under the commercial mining, which fall under our Natural Resources division, of which my colleague, Vinay is the CEO.
The next question is from the line of Gaurav Singhal from Aspex Management Limited.
Two questions for me. So one is, can you help give a breakup of the $3.7 billion CapEx plan for this year across the different segments?
Sure. Approximately about $300 million for green hydrogen; $1.1 billion for Airports; approximately $1.7 billion for the road network; just under $100 million for water; just under $200 million for the data center; and then small completion costs for the copper project, just under $200 million.
Got it. And then secondly, in terms of financing the CapEx, as the group, I think, had -- the Board had passed a resolution to allow the group to realizing about INR 12,500 crores in equity. Is that part of the financing? Or will that not be for this CapEx?
No, that doesn't relate to the current project. Current projects are fully funded. As you've seen in the last 3 years, we, as a portfolio, have raised over $9.2 billion of equity from long-only investors. That is a continuing program for actually from the past 3.5 odd years. The same program -- under the same program last year also, we sought something similar. This year also, we are seeking the same enabling resolution because our ongoing normal equity program of about $2.5 billion to $3 billion across the portfolio will continue this year also.
And -- but those are -- those -- that is meant for the next 3 years projects. The current projects are fully funded. So there's nothing required for the current projects.
Got it. And just one last thing. So based on the -- I guess the total debt is right now about INR 38,000 or INR 40,000 crores or thereabouts based on the debt-to-equity ratio that has been disclosed. So can you share like a split roughly of how much of that would be just Indian banks and non-Indian banks? And also, is this composition expected to change a lot over the next 3, 4 years?
So normally, the balance sheet is not provided in this quarter result. So all I will say is that other than what disclosed at the annual AGM results, we don't expect any significant variation from what's been highlighted in those results and neither does the mix change dramatically for our assets. We -- overall, at a portfolio level also, we are very stable debt structure. But more certainly in the half year, the update will be provided on this.
[Operator Instructions] The next question is from the line of Dhananjay Mishra from Sunidhi Securities.
Congratulation on good operating profit. Sir, just wanted to -- I mean, all my questions are answered already. In Road segment, because quite a few projects, we have achieved 50%, 60% in terms of construction. So how many projects we are expecting to be operational this year or next year?
And secondly, in terms of new project biddings -- pipelines, how we have placed into certain new projects in Road sector?
So we expect 3 projects to complete this year. And on the bidding and all, we don't specifically ever flag our interest to an extent that it meets our guidelines for rate of return guidelines for HAM and BOT projects, then naturally we are interested. But beyond that, I can't really say anything. But out of our 10 projects that we have on stream today, plus the BOT assets and 1 TOT project, 3 of the HAM projects will be commencing -- will be completed within this financial year.
And all other -- except for Ganga Expressway will be completed in FY '25?
Not all others, but most certainly majority, yes.
[Operator Instructions] The next question is from the line of Prateek Kumar from Jefferies.
Just one question on your guidance. You -- historically, you sometimes give figures for expected volumes in IRM and mining services for the full year. What would be the number for FY '24, which you would expect?
So as far as IRM is concerned, it all depends on the demand and supply of -- for coal in India. If I see the current market and current situation in India, I think it should definitely [ cost ] 70 million tonnes in IRM, but I give it -- it all depends on the real demand of coal in India as far as the coal is concerned. As far as the mining services question, we are targeting to go somewhere closer to 35 million tonnes in India.
And the solar modules -- so this 614 -- so we should expect like what would be the number for Solar Module segment in terms of megawatt?
We expect the run rate to continue on broadly in the -- from a quarter-to-quarter, it is not expected to change, but you can expect the run rate at the same level.
Okay. So there was like -- particularly, there's an adjustment on the base number which we had from earlier presentations for Solar Module segment, what is that related to?
Unless, you can specifically point out, we don't quite understand your question.
Yes, so module segment, so we have done like the 614 number this quarter. Last year, same quarter, it has been reported at 328 from the presentation. We had this December as around 260 from prior year's presentation. So there's been some restatement of that number. So what is that related to?
Actually, that is quarter 1, 2023, not December. It's a quarter-on-quarter comparison. There's no restatement that has occurred. This Q1, because the numbers are split into domestic and export and -- the domestic number in quarter 1, '23 was 309 and export volumes were approximately 19. This quarter first, the domestic is 227 and export volumes are 387. There is no restatement of anything at all. It is just mix of sales have changed, and that is what reflected in the presentation on Page 18.
[Operator Instructions]
If there are no further questions, we can close the call.
Sure, sir. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Aditya Bhartia for his closing comments.
We would like to thank the management team of Adani Enterprises for giving us the opportunity to host the call. We would also like to thank all the participants for logging in.
Sir, do you have any closing remarks?
Yes. No, we just want to thank the investors for their questions, and thank you for the words regarding the results. And we expect to speak to you at the half year results. Thank you.
And thank you Investec for taking -- ensuring that this call happens. Thank you.
Thank you.
Thank you, everyone.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Investec Capital Services, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.