Tata Power Company Ltd
NSE:TATAPOWER
Earnings Call Analysis
Q3-2024 Analysis
Tata Power Company Ltd
Over the previous year, Tata Power has successfully commissioned around 353 megawatts of renewable energy capacity, indicating the company's commitment to expand its clean energy footprint. The company intends to carry on this momentum by adding another 250 to 300 megawatts by the end of the fiscal year. Looking further ahead, Tata Power has a substantial pipeline of renewable projects totaling 4.8 gigawatts awaiting completion in the coming years.
Taking a look at the company's financial health, Tata Projects, a division of Tata Power, has reported profits for the last two quarters. This trend is expected to continue, with the potential for exceeding past performance and bringing pleasant surprises in future results.
Starting from April 1st, Tata Power will benefit from the Approved List of Models and Manufacturers (ALM), mandating the use of Indian-made solar modules for certain projects. Despite fluctuating international prices, this move is expected to shield Tata Power’s margins. Additionally, a new opportunity has arisen to supply modules for one crore houses domestically, ensuring robust demand and protective pricing for the company.
Tata Power is strategically positioned in the transmission business, where approximately half of the market operates through Tariff-Based Competitive Bidding (TBCB), ensuring potential for good returns. With a market share around 10%, the company aims to leverage its portfolio to command favorable rates from suppliers, thus enhancing profitability.
The company is on track to set up approximately 2 gigawatts of solar capacity annually, of which around half will be utilized for Tata Power's own capital usage, with the remainder fulfilling external demands. This includes third-party EPC and international sales, further diversifying the company's revenue sources and contributing to long-term stability.
Tata Power is prudent with its investments, prioritizing projects that meet their threshold for returns, rather than chasing market share with low-margin projects. The company aims for returns that exceed regulatory business levels, ensuring its financial decisions are strategic and contribute to sustainable growth.
Over the past two years, power demand has seen an uptick, and this trend is expected to continue. The company has seen stability in coal prices over the last six months, anticipated to prevail in the same range, thus providing some predictability in operational costs.
With a robust bid pipeline and project commissioning, Tata Power expects to add 1.5 to 2 gigawatts in FY '25 and another 2 gigawatts in FY '26. The major commissioning activities are planned for the first half of the upcoming year, which should sequentially improve the company's financial metrics and operational capacity.
Currently, Tata Power's debt-to-equity ratio stands at approximately 1x. With deliberate planning, the company does not foresee this ratio exceeding the range of 1.5 to 2x in the near future, which indicates a moderate level of leverage and a commitment to maintaining a healthy balance sheet.
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Ladies and gentlemen, good day, and welcome to the Tata Power Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Praveer Sinha, MD and CEO of Tata Power. Thank you, and over to you, sir.
Thanks, [Dovin]. Good evening to everyone, and thanks for joining the Q3 FY '24 analyst call. I'm joined today by my colleagues, Sanjeev Churiwala, CFO; Mr. JV Patil, Financial Controller; Mr. Kasturi and Mr. Rajesh Lachhani from the Investor Relations and other team members from the finance team.
We have already shared the details with you, but just for the benefit of everyone, there are a couple of issues I thought I'll bring to everyone's notice for is that the power demand in the country has grown at a very fast pace. We have seen a nearly 10% demand surge in the last quarter. And during the last 9 months also, the growth has been nearly 9% to 10%. This higher demand is expected to continue in future quarters and future years also. Considering that there has been a huge surge in demand in all sectors, whether it is the commercial industry or the domestic residential sector. As also in villages where we see that the consumption has increased tremendously because of the governments of [indiscernible]. What we are expecting is that with the increased demand in power, Tata Power will continue to provide supply of power from all these existing assets. Coming to this quarter, this is the 17th successive quarter in which we have shown the pack or thereby demonstrating that solid business fundamentals are the of the company. And this is especially happening because majority of the profits have come from the core businesses, unlike previous years, when we used to get large point of profit from a noncore business, the own business. This is the quarter we have a PAT of INR 1,076 crores, which is nearly 2% higher than the last quarters. And similarly, our EBITDA has increased by 15% to INR 3,250 crores. On a 9-month basis, our EBITDA has jumped by nearly 34% to reach an all-time high of INR 9,342 crores. Similarly, our adjusted PAT before exceptional items has gone up by 4% for the 9 months to INR 3,000 crores. And this is on back of robust performance by all our core businesses, including generation, transmission, distribution renewable and also some of the new [indiscernible] we have won in [indiscernible] in the EV charging as also in [indiscernible]. While we made huge progress in our various businesses, our commitment to eligible continues to be there, and we will become net zero by 2025, which as a utility, we were the first one in the country to announce.
During the quarter, our renewable business commissioned 72 megawatts of renewable capacity and 343 megawatts of capacity in our utility scale projects in the last 9 months and with our green portfolio and seeing portfolio becoming nearly 5,600 megawatts. This, of course, includes our hydro, thereby accounting nearly 39% of our capacity in the teams generation production area. We have won number of projects during this quarter, namely the 13, 16 megawatts of RTC project. And this is the first RTC project that we have won from SJVN, which is a combination of solar, wind and battery storage. And with this, our project pipeline has become 4,752 megawatts. Over and above our existing 4,200 megawatts, we'll have nearly 9,000 megawatts of projects, minimal projects, which we will be setting down. With all this, we do expect that next quarter, we should be in a position to cross 10,000 megawatts of renegades and moved to nearly more than 50% of our debt capability coming from in those sources. Our solar EPC business has again reported a very good performance during this quarter, both in terms of revenue and EBITDA, as also our utility business, where nearly orders of 612 megawatts was INR 2,849 crores have been received in this quarter. Rooftop business continues to see excellent traction with nearly 146 megawatts installed and nearly 87 megawatts of orders won in Q3. During the last 9 months, we have installed 350 megawatts of new crossover. And why I'm emphasizing this is, considering that Government of India has recently announced that 1 crore houses will be provided with the rooftop solution. Once the details are out, and we know exactly what sort of capacity is being which are -- we expect a capacity addition of nearly 30 to 40 gigawatts of rooftop opportunity in the next to 3 years. And that's where I think Tata Power will play a very, very important growth going forward.
In all our renewable businesses, we have seen a huge amount of growth. And we do expect that this trend will continue in the future quarters also. In our manufacturing plant out of the 4 gigawatt of solar cell and solar model. The 3 gigawatt of solar modules have been commissioned and the manufacturing has started a and the 4 gigawatts module manufacturing will start in the next 2 to 3 weeks. Similarly, on our 4.3 gigawatt of cell line, the further cell is expected to be out in the month of it. And the plant should stabilize in the full capacity by June, July. We do expect that going forward, there will be a large number of pots including the use of solar project of the government in announced, which will use local basis solar volumes. And thereby, we will have a great opportunity going forward to meet the production that comes from this month. During this quarter, we have energized 412 public EV chargers. And with this, our total number of EV chargers, which are operating in so in much higher in operating as 5,300. And this is also on back of nearly 73,000 or home chargers and 690 of bus chargers, which are operating. We have recently tied up with Indian Oil Corporation to use their outlets to put nearly 500 of fast and ultra-fast EV chargers at different locations. Our T&D business has been doing consistently very good. We -- in the last quarter, we won 2 bids of -- worth INR 2,300 crores. This is the 344 circuit kilometers of Sikar-Bikaner transmission line and the 80 circuit kilometers Jalpura-Khurja line with a total investment of nearly INR 2,300. And all these projects will get completed in next 24 months. Our Odisha Discoms continues to perform very well. It has been a very challenging experience, but the teams over there have ensured that better quality service and reliabilities provided to the customer. And that has been demonstrated by not only good service to be consumed, but also in terms of financial performance. whereby in Q3, the PAT has gone up by nearly 75% to INR 63 crores. And on a 9-month basis, it has become INR 217 crores. We have also installed nearly 3.6 lakh smart meters in Odisha and replaced nearly 27 lakh meters in Odisha out of the 95 lakh consumers over there. This has helped us to improve our billing efficiency and collections. And the results will start being seen in the subsequent quarter. Our balance sheet remains very steady in spite of increasing capital. We [indiscernible] INR 3,600 crores in the last quarter. And in spite of all this, our end date debt has increased only by INR 2,000 crores, and that is a very healthy level of INR 38,600 crores. Our dividend ratios are very healthy. Net debt to underlying EBITDA is 2.86% because in the previous quarter, it was 2.7%. And our net debt to equity has been virtually at 1 level. We do expect that our increase in CapEx in future quarters will also help us to generate better EBITDA and profitability for the company. During the quarter, the company also received $50 million out of the pending receivables of $125 million from the investment done in Zambia. And we expect that the balance will also be collected in the next 12 to 14 months as for the arrangement are bit discount in Zambia. Acknowledging all these efforts, Crisil has upgraded Tata Power credit rating from A stable to A positive. And India Ratings has upgraded from A stable to A+ stable, which I think there is not an improvement in last 1 year. As Tata Power continues to move forward with a better performance in the resistant performance. we do expect that new investments, which is in our renewable business, transmission and distribution. As also the pump hydro project, which will start in later part of this year, we will start showing much better consistent early stages of comments for the company in the future Yes. I thank you all for all your support. And this -- especially required considering that Tata Power cross with market cap of INR 1,00,000 crores 3 days back and continues to improve to going forward. I believe that on our existing operations, we'll continue to do well in future, and we look forward for the continues. I will now ask now to open the floor for questions now.
[Operator Instructions] The first question is from the line of Sumit Kishore from Axis Capital.
My first question is, over the past 1 year, Tata Power has commissioned about 353 megawatts of RE capacity. What is the expected phaseout of commissioning of close to 4.75 gigawatt renewable project pipeline here on, how much is expected in FY '25, FY '26, effectively?
This is Sanjeev Churiwala, CFO, here. As you rightly said, when we look at our mandate commissioning. Normally, we do a big commissioning towards year-end. So the last quarter is supposed to be a big quarter for us where we would expect another 250 to 300 megawatts of commission happening. But looking at our current base, which is in the pipeline, while we are still working on our overall strategy. But looking on data commissioning in '25. We could commission anything between 1.5 gigawatts of 2 gigawatts basis closer to megawatt. And in subsequent years from the existing pipeline, another 2 gigawatt plus we'll get commissioned. As you would have seen, the numbers euros smaller. And because it was a saying that we'll do a minimum back given the very high sales and modest price to defer some of the projects. So as the module prices could bounce back to normalcy and nothing that strategy has worked. And as you are aware that the price of center volumes have come down. And to that extent, we have back-end profit in many of these protects that we're enticing now.
Sure. Sir, related question now with the sell-in module prices having collapsed and you are at the brink of commissioning your expanded cell and module capacity. So it makes sense to use this output for city scale projects in India at present without implementation of the LMM. And what are the margins that you could expect to make on the manufacturing side in FY '25 as you ramp up your manufacturing capacity?
So as you are aware, the ALM will kick in from 1st of April. So many of the projects where the given the concession till 31st March. If they have not got completed that we will have to only procure Indian make modules. So that's where our benefit is to the international prices have crashed, but I do expect that with this condition and also the new opportunity of 1 crore houses, which we'll have on the domestic weight module, we'll have a great opportunity, in fact, there is now a huge demand that we are seeing from various of the CPSUs and various of the other precure who want to set a project in the next financial year that we would like to tie up on a long-term basis for us. So we don't expect that we will have any challenge in subline more use from our factory and our margins to that extent will be quite protected.
Sir, would it be reasonable to expect margins closer to 15% in manufacturing of sell-plus module? Or is it early to talk about that?
Well, I would always expect more than that.
Okay. Finally, a question on your -- the line that we see on your cluster summary, cluster-wise summary. Has there been significant improvement in Tata projects in Q3 on a year-on-year basis or even quarter-on-quarter, which is driving some improvement in this quarter?
Yes. The Tata projects has made profit in last quarter. And this is the second quarter in which we have main profits. So in a few quarters, we have made profit and Tata Power -- Tata projects will surprise me going forward because all the projects where we had to make provisions for the under recovery of losses has been completed. And thereafter, it is only thing that will happen in other projects.
Sure. Has it been a significant increase in profit from Tata projects in this quarter? If you could give us the absolute numbers maybe, Sanjeev?
Yes. No, I think the way to look at it, a significant deduction in the losses. So if I look at the 9 months operations, what I had at the market last year as the topic I have, the defense is almost close to INR 200 crores to INR 220 crores. [indiscernible] Tata projects have come a long way the last 2 quarters, we are starting to see the profits coming in. And this is kind of current booking that is happening there, I think it's on a transformational power.
The next question is from the line of Puneet Gulati from HSBC.
Congratulations on good numbers. My question is with respect to the future commission for Tata Power renewables. Since ALML will come in place, what kind of module price do you expect post 31st March 2024? I'm sure you would have tied up for those already. If you can give some color on the module prices there?
I can't do prediction of module prices what will happen. But I can only tell you that there will be huge demand for domestic need for modules after the ALML 6 in from first April. So I think the commissioning of the plant has happened at the right time. And we will have a huge outside is because of the market demand that will take place.
Tata Power renewable [indiscernible] the consumer of these modules where you intend to commission 1.5 to 2 gigawatts has something been tied up for FY '25?
So Puneet, the other way to look at it is in our digital business, when you look at our large cage utility business, we already have 4.8 gigawatts of projects under pipeline. Significant net pipeline consists of all the big that we have on. So when we look at as the model prices subsided in the fed versus our past, we will definitely have margins over there. So we are not medianly concerned how the market will be a or the back couple of things will have to be kind of taken into consideration in the BCG of the sales and modules will continue. To that extent, the price parity will continue to happen in spite of the Chinese set module pricing dropping in, number one. Number two, as you are there, most of the sales and manufacturing facility have been full on the backing of the D&I incentives right? So that will also come then lot looking at our returns. So I think there is a very good position that we have commissioned a part of our modules. We already have a busy pipeline of projects coming in. We have the production from the [indiscernible] is there and as well as intending together. So I think at least we don't see a concern going forward. But you never know what happens after 1 year or 2 years, but definitely our pipeline is healthy as of now.
Understood. And if you can comment on what is the progress in pump storage, have you placed orders for equipment, et cetera?
The pump storage, as we had announced on the 28 November, we are completing the visibility and getting into the progress in the onstage to take easily 4 to 5 years to get commissioned. And hence, as a moving we're trying to tie up with various things. At the right time, when we have the proper approvals on the board, we will be coming back to a little bit more details.
Understood. Lastly, transmission projects also, you've once again started an initiative towards bidding for that. How is the competitive intensity there? If you can give some color? And what kind of IRRs are you aiming for there?
I think the way we look at the transmission business, 50% of the bits of the market presently is still TBCB. And then the overall private sector market share is close to about 10%. We have evenly on , and I think we continue to continue to work on other things coming in because then when we develop a portfolio of outdated position to kind of dictate better I think in the marketplace from the vendors and suppliers. And of course, we want to ensure that we are getting a good competitive returns on the pace and the counties in our bidding.
The next question is from the line of Subhadip Mitra from Nuvama.
My first question is with regards to the captive solar module manufacturing. Given that you're looking at setting up, let's say, roughly about 2 gigawatts of capacity every year, is it right to assume that you would be looking at roughly 50% of module sales for your capital usage and the balance shift would go to the external market be rooftops or otherwise?
So when we are talking about 2 gigawatt of our [indiscernible] -- of our utility scale, we also will be doing third-party EPCs and there will be some quantities that will go. Similarly, we are already doing something like 300-plus megawatt of which we expect to increase to 500. I also mentioned to you that now that the big opportunity has come off 1 crore houses to be provided with the crossover. So I think we have new opportunity more supply within the country and also maybe supply some it outside the country. So we'll have to see what sort of market opportunities are there and what sort of prices and returns we are. And we will take upon base on the market.
Understood. Secondly, on the transmission side, given that there is such a large automation opportunity opening up over there. Is there any targets you have in mind as to an x percentage market share or x quantum of projects that you would like to keep on winning every year in [indiscernible]?
We don't look at investments on those principles of market that we are more interested in what sort of the returns we can get from these projects. So we don't want to just for the sake of market share or just for many projects in [indiscernible] margin. So for us, if it is not meeting the threshold of returns, we will not take [ sub-storage ]. So opportunities are phenomenal, whether it is in transmission or renewal or it is on any other areas that we've seen. But for us, the guiding is will be what sort of return there and what sort of risk [indiscernible].
Understood, sir. And what is the ideal threshold for returns that you typically look at?
Very difficult to say, but you have seen how we have been in the regulatory business. Anything above that is the minimum that we would [indiscernible].
Understood. Sir, lastly, on -- I will refer to Slide #41 of your presentation, where you've given the 9-month breakup of the income EBITDA and PAT and cluster-wise. So firstly, this is very helpful for us to understand it in detail. Secondly, just wanted to understand the last line over there, which is the other study that includes data projects and other eliminations? What -- at least we are able to decide or is that out of the overall hit that has come from the coal front, maybe there's INR 1,000 crores, INR 1,200 crores kind of a winter coming over there. So while the renewals and the transition pieces have all contributed maybe INR 300 crores and offset that rate. There is a large benefit that is coming from that other speech, almost about INR 1,000-odd crores. And then maybe INR 225 crores of that is out of projects, as we mentioned. If you can throw some more light on this because that's a very large piece of discussion.
We are on slide 41. Are you referring to the line, which is other [indiscernible].
Yes, I'm referring to the fourth line from the bottom, others, including data project, Melco and [indiscernible]. So the YTD FY '24 number is negative INR 413 crores and the YTD FY '23 number is negative 1,426 crores, that's a INR 1,000 crore gap over this.
Yes. So let me explain this is specifically the dividends that we received from [indiscernible] associates and joint venture any -- yes. So the [indiscernible] will also include dividend from our coal mines, which we are not spilling out specifically out here. But what you can see is sort of a basis. So that exchange, it is lower by INR 1,000 crores , and that has been fully mitigated from the income from the 4 businesses, which is coming from our renewals, E&D, transition and our distribution businesses.
The next question is from the line of Sudhanshu Bansal from JM Financial.
Congratulations, sir, for a good set of numbers. So like how do you see the trajectory of coal prices and power demand for next 2 to 3 years? Secondly, color on the Mundra PPA will be very helpful for us.
So on the power demand, I think you have seen last 2 years, which has been a expected that with this sort of demand will continue subsequent yes also. As far as the Mundra is concerned, the plant is operating on the election the, and this is applicable of the 30th of June. We are in active discussions since the Section 11 is already in force. There has been a little bit of delay in finalizing because this will eventually be applicable post the Section 11 period over. So we do expect that something on similar bands will get finalized much before we theses Section 11 period gets over.
And sir, about the coal prices?
When the coal prices is very difficult. I don't think there is anyone who can fit into and the full pressure in tender. But what we have seen in last 6 months that the core prices have stabilized, and this is expected to be in the same range, provided there are no other new political changes that [indiscernible].
The next question is from the line of Apoorva Bahadur from Tata Power Company Limited.
This is [indiscernible]. Sir, wanted to understand this dividend from it, I think INR 416 crores wealth. Is it onetime and what sort of caused this payment?
Sure, I'll take this question. Just wanted to understand you on of which company...
I'm from Goldman Sachs.
[indiscernible]. Yes. No, basically, if you see this is a turnaround story of one of our associated company on venture in Zambia, where we have the horn, which has been underperforming for many, many years, and there were care disputes, which has now been seed. And because the tariffs could have been settled, the company is now making profits and have decided to declare a dividend of $100 million, and we have received the $50 million in particular quarter. But that profit, which is respect of that at INR 311 or is more than less than offset by the onetime gain also that we had because of Section 11 in the same quarter last year. So tenets about INR 30-odd crores. So it's not really impacting to the extent the bottom line.
Right. Sir, no, no, I wanted to understand that when is the recurring feature is INR 416 crores benefit or what's the annual pack of [indiscernible]...
So let's put it that way, that given that this is an accumulation of the profit which we are now distributing of course, we received a bigger number. But this company is capable of declaring a dividend early dividend of maybe $25 million, $50 million going forward. So yes, you think that there will be some recurring income coming through every year, but this company has done survived, right? So we can athletes see how the pain shapes up. to be able to give you a very confident answer maybe more for on the line, we have better comfort. But the good chart is this company where we were not kind of looking at any cash flow coming through has been devised and at least we're receiving a $2 million to the action, of course, the company didn't provide it [indiscernible].
Right. Sir, second question is on the [indiscernible] projects. Wanted to check at what stage are we in, in terms of the approvals, has the DPR been concurred and all the approvals in place?
So all the documents have been submitted, whether it is for DPR or for environment clearance and so on. And these are going through various motions of approvals in departments. So we do expect that by first quarter of the next financial year, we'll have major appeals. And hopefully, in the later part of this year, maybe by third quarter, of the next financial year, we will be in a position to start [indiscernible].
Sir, by FY '20 -- sorry, CY '25, around mid of '25, you expect to start work. And then it will take another 4, 5 years. So I believe I saw in the PCT sometime '27, '28 is what we are guiding for the condition?
We are trying to stick to some sort of similar time line.
So are we beginning work before we are giving all the approvals and stable work at all?
No, no. We'll start work only after we will also that I'm saying that maybe in the last quarter -- in the third quarter of possibly start working.
Okay. Okay. And for these firm storage projects, how much of the capacity tied up for group captive with the [indiscernible] group, any color on that?
Those are still being discussed, and we'll see the data.
Sure, sir, last question on this module manufacturing. If you could share the cost factor, what's the final cost of traction for these volumes? Or how much closer are we to the sales prices to the duties and with the detail as well?
And I mentioned to you that these models are all in different putting all together compared to what prices we see in other countries because this is the [indiscernible] and any volume that comes from outside the in the custom [indiscernible]. Also, they are not approved in the midst of model manufacturers. So this has to basically share to the local requirement in the country and we to do the pricing based on that.
Sir, what would be our cost?
Details are being worked out there. And once we are ready with that, we'll possibly in next quarter, we will do the some [indiscernible].
The next question is from the line of Satyadeep Jain from Ambit Capital.
Just one question on the pump storage, give you are close to starting construction in the next few quarters? And let's say, if you don't sign up the capacity before you start obstruction, as you look at financing, I understood previously banks were somewhat unwilling to lend to anti capacity. Is that for pump storage, if you do start construction before tying up raising finance? Is there any challenge on that? I just wanted to understand how do banks tend on these projects?
So what we are seeing is that there is a huge amount of bids which are coming up. In fact in the next few weeks and months, we are expecting nearly 7 gigawatt of bids, which are coming, which are the [indiscernible] bids. So we are seeing huge demand. There's also a huge demand from industrial and commercial users. They are looking at 24/7 power. And this will be a packaged power of solar, wind and pump storage, so [indiscernible] 24/7 [indiscernible] wind power. So we do not explain that we will have any challenge in timing of it .
So just wanted to understand, you'll typically tie up this entire 2.8 gigawatt before you start construction, right?
Not necessary. We will take a call on that. So let's see how the market it was some point, it will name but 100%.
The next question is from the line of Aniket Mittal from SBI Mutual Fund.
Yes, sir. Sir, firstly, on the PPR side, when I look at the 9-month numbers, excluding other income, the EBITDA margins at about. So clearly, has been on a downward trajectory despite capacity additions that we've been doing. So just wanted to understand over the years, what's the reason for the decline in EBITDA margins over here and over the next 3 years is the commission capacity? How should we look at the EBITDA margin for TPREL?
The margin is dependent on the project concept. And as we have seen now that the volume prices have come down and large-scale project income in the last quarter as well as in the consequent 2 quarters, you will see a few improvement in EBITDA.
So for the coming, let's say, 2 years if we commission the remaining capacity, what sort of EBITDA margin should we look at for [indiscernible]?
I won't be able to give you guidance at this thing. But definitely, it will be much better than what we were doing into 1 year.
No. I think if you look at this business and also eat the industry, the EBITDA margin would be in the range of 75%, given that it has a mix of both solar and wind. And this particular quarter, normally third part of the wind is always in terms of generation. But yes, what we feel is once we go live with our sales and volumes and is also projects in the pipeline, which will keep on improving in the coming quarters. deliberately as of [indiscernible] date, as I said in the earlier discussions, as we only have commissioned 353 megawatt. And of course, to the extent the fixed cost portion is not happen that much. But in the coming quarters, we will have further commissioning happening. And the biggest commission will happen in the first 2 quarters of the next year. So we will see sequentially the improvement coming in.
Okay. And in terms of commissioning, I think you mentioned 1.5 to 2 gigawatts for FY '25, how much would come in FY '26?
Given the current bid pipeline and the COD commissioning definitely, as of now, we would expect another 2 gigawatts coming and if we are able to bring something more in the coming quarters. This can go up to 3 gigawatts. But yes, definitely, 2 gigwatts is for sure that we will be commissioning in [indiscernible] also.
Okay. And on a medium- to long-term basis, what's the optimal capital structure that you're looking for in terms of, let's say, the debt-to-equity or debt-to-EBITDA?
It's a very complete answer because, again, you can think about the way you're looking at [indiscernible] level, are you looking at a specific platform level because as a platform in [indiscernible].
At a consolidated level, .
Yes. [indiscernible] presently debt-to-equity is about 1x, right? And then with all our plannings, we don't think that will go anything beyond 1.5 and 2x invent the near future, right? But at the entity level, where we plan the bid, the issues will be different. But finally, what we do intend to ensure that we win all our noncore has increased selling from time to time, equity ratio on that has to happen -- we keep our intent to study definitely below 2.
Okay, fair. And lastly, in the 4.8 gigawatt of under-construction projects, how much of it is wind?
[indiscernible] if you know that. That number is there [indiscernible]. It's Slide 9.
If you can go to Slide #9, you'll have the breakup of that.
Slide #9. Okay. Fair. Fair. Sir, this slide actually includes hybrid as well right, which would also have a wind component in -- so if I were to take the wind component in the hybrid as well, I just want to understand how many wind capacity of wind that you have under construction right now, including with the component in hybrid.
So we'll be able to share that with you, we will give you that.
But I think it's better to look at it when we are bidding for solar separately and for going separately, but we for the hybrid and also for the -- it's a big combination that we need to do for solar, wind and battery right. So we have to look at it in that sense and as a combined sense because the installed capacity and the retail developer. So my earnest to all of you would be not to break out that but a little bit of more complicated.
The next question is from the line of Anuj Upadhyay from Investec.
Sir, first question relates to your stand-alone business. So the decline in profitability, is it purely because of lower dividend income or there's some other factors as well because our sensors, the Mundra under recovery, it has gone significantly due to Section 11. But in spite of that, the profit is down [indiscernible].
Yes. So basically the profit that we get for our old mine has only come down and that is what is contributing to a lower standalone. But perhaps it's always looking at the conservative picture.
Okay. And your margins across the EPC continue to remain quite volatile [indiscernible] back to close to 5% kind of a margin. Last quarter, probably, you has given a guidance at a low margin order basis more or less been the egyptian has been completed. So now we will be executing projects where margins are at a are somewhere in the range of 7% to 9%. So any comment on that, sir?
You're Talking about the EPC margin?
Yes, EPC one.
Yes. So the EPC margin, our targeted margin is close to 5%. But as you're right, the market has been very volatile, especially because of the commodity prices, FX, sales, modules, is now stabilizing, and we think with the current base pipeline, we can still targeting that 50% kind of EPC margins.
So the supply driven to our sale order backlog, I mean, order book [indiscernible], we are targeting close to 5% to 6% EPC margin?
You're talking about that margin of 5% of the EPC business, that's correct. But of course, that is what we're targeting it, it will be a little higher or more effective on how things move. But when we do a particular bidding, we had to target increasing margin of 5%.
Okay. And any possibilities or where Mundra can participate in the on market? Currently, whatever selling has been happening, I believe -- but any possibility that we can participate in the merchant market provide as we are mentioning in the scenario by the country to say the [indiscernible]?
I think Mundra today is operating full capacity and all the producers are taking because it's a very efficient plant. And it's -- they don't buy from Mundra then they will have to buy a so the market at about a 5 year price. So none of the preparers are any to need the opportunity to schedule power from this one. So I don't think we have an opportunity to sell outside the sectors. But in case they don't take the power and then, of course, we have the [indiscernible]. open market.
Okay. And lastly, can you just mention the offtake price on Mundra like what is the generation cost and what price we're selling from consumer?
It's there in the schedule, the Gujarat SMBC releases the -- on a deal basis, the merit order, I can check in [indiscernible].
Yes. And also, I think it's basically a cost-plus market for us. extent what testing order so that all the figures can take out [indiscernible]. Beyond that, I think the cost doesn't matter because it's still at a section level for us.
No, fine. Just wanted to get a sense if on we get an opportunity to the open market and that could be our cost and the spread on the [indiscernible].
In [indiscernible], we can provide you separately but it is not actually serve a glutton market. So depending upon the coal prices and everything, if you will just move up and down. So this is kind of an [indiscernible] formula.
The next question is from the line of Puneet Gulati from HSBC.
My question is on your EV charging business. there was a -- are you aware of the Tata Motors is also eating into EV charging business? And how does that fit into the collaboration with Tata Motors?
So I've not heard about that, that we cater to full Tata Motor requirements that will reduce for the 4-wheeler or it is for [indiscernible]. So I don't know of any other opportunity that Tata Motor is working on channel all the present requirements, whether it is for home charging and public charging, bus charging, fleet charging [indiscernible].
Okay. That's very [indiscernible]. And secondly, if you can comment a bit on the profitability even on a Y-on-Y basis were weak for the renewables business despite adding significant capacity. How should we think of it? Is it a function of part utilization higher depreciation? How should we think of that?
So what happens as Sanjeev mentioned that it's very difficult to do money quarter-to-quarter basis because there are certain series in the year in certain quarters when you have better deviation and you have better solar generation. Similarly, we have which you have better piece and better in generation. So I think you need to do it on a 12-month basis rather than we trying to do on a quarter-to-quarter.
Okay. So what was [indiscernible] the wind part?
Beg your pardon?
So if you can comment on what was retail this time in terms of solar or wind, where was the P&F lower?
What happens is for us, what is important metrics is the availability of the plant and all the availability that [indiscernible] solar or wind are very, very high in benchmark in the country. our ability of the are solar at so have been discussed also in 98% level. Secondly, we have shared what is the ELS for the solar and it's on Slide 49, we can [indiscernible].
Right. So with the other income part, INR 45 crore versus INR 106 crore, I go that was generally operational income, but what exactly is that if you can throw some light?
It will be a combination of some operating income some interest income on investments, a combination of that. But if you really see for the quarter, the number is quite small, INR 450-odd crore.
Correct. Versus INR 106 crore previous quarters.
Yes. Yes.
The next question is from the line of Mitul Bhuva from unlistedindia.com.
Coming to Slide #4. If I see Mundra coal and shipping, the profits are down from INR 924 crores to INR 89 crores. just to understand, like because of the lower coal prices, the profits are down, right?
Yes, that's correct.
And so Mundra is just a cost pass-through which means that we are not benefited by the lower coal prices?
No. So we -- whatever coal we are precuring, that plus cost plus the market that is cost dropping in coal prices to that extent doesn't benefit. It is kind of small on a molding business. Yes, on [indiscernible] business, we're right then what matters to us is a contribution that comes from old mines recertification that will significantly drop as we see overall and lower profits from [indiscernible] generation coal and hydro.
Okay. Sir, I was asking this because we have invested more than INR 25,000 crores in the Mundra and coal business. And if the profits are to remain at this level, then you won't generate sufficient cash profits to repay our debt, right? That's the concern actually.
See, you need to look at it is that from a loss-making today we are not. So to that extent, I think we need to look at the totality rather than in looking at it in terms of do you want to sort of return...
But in the future, can we expect like good profits from stand-alone Mundra also? Or the cost pass-through will be very minimal only?
In today's scenario, when we have Section 11, it's the cost neutral. So whatever is the actual cost of generation getting paid to you. In future, based on what sort of we enter with them, we will have to see what sort of returns we [indiscernible].
And to your question if I add to the when you look at the cash contribution coming from the coal mines. But on top of that, we also get the dividends, right, because the conservation can make it off but when I look at the cash flow, a significant cash flow comes from the [indiscernible] perspective.
Okay. Okay. My second question was that your management has guided that the revenue will double in the next 3 years to around INR 1,00,000 crores. Can you just give a brief on like where the revenues are going to rise actually? Because in the last 3 years, the revenue has risen only in the Odisha discoms mainly. So can you give a brief on where the revenues will rise in the next 2 years?
Well, I think the presentation that we had made in the analyst meeting. If you see that, it will give you a good idea that is where we are putting the CapEx and where being close [indiscernible]. So I think it is a direct correlation to that.
I think part of the question we tried to answer in our removing pipeline itself, we're talking about 2 gigawatt of commissioning happening next year and move happening in. So currently, we are at 4%. And then that for itself, we are talking about 9 in the next 3 years' time. right? So I think that will continue in a big profit. [indiscernible] I think the new manufacturing also, we spoke about the commission [indiscernible] modules that will also start contributing towards profit.The opportunity in [indiscernible] did for us. We also look at that. So I think it is a [indiscernible] strategy in terms of looking at where we want to reach our aspiration fears on the line and the taking on that.
Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Dr. Praveer Sinha for closing comments. Over to you, sir.
Thank you. Thank you to everyone for joining in the call. And in case you have any further queries, you can connect with our Investor Relations team, and we'll be more than happy to share with you. These presentations have been made quite detailed. But if there is any further improvement that you would like in the presentation or in more details, please connect with us. And I'm sure, with your support, we have been able to get a market cap of more than INR 1,00,000 crores, and we are now looking for next milestones. And I'm sure you will support us in this direction.
Thank you, everyone, and take care and good bye.
Thank you. On behalf of the Tata Power Company Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.