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Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Earnings Conference Call of Torrent Power Limited. [Operator Instructions] Please note that this conference is being recorded. We have with us today Mr. Saurabh Mashruwala, CFO; Mr. Rishi Shah, GM, Finance; and Mr. Jayprakash Khanwani, AGM, Finance. I now hand the conference over to Mr. Saurabh Mashruwala. Over to you, sir.
Good evening to all of you, and thank you for joining the earnings call for Torrent Power for Q1 FY '24. First, I will take you the performance of the quarter, after which phone lines will be open for Q&A session. We'll explain the performance of the company at PBT level first and then take you through the expenses -- tax expenses separately. Reported PBT for the quarter stood at INR 711 crores as compared to INR 671 crores in the corresponding quarter last year, an increase of INR 40 crores, a growth of about 6% on a reported basis. To better understand the underlying performance of the company, we'll take you through the nonrecurring item for us during the corresponding quarter last year. There are no nonrecurring items during the course of the current quarter. So nonrecurring item in Q1 of last year includes 2 items. First, INR 16 crores profit we have booked on account of sale of [indiscernible]. And second, another nonrecurring item was provision of INR 10 crores, meet towards potential liability arising out of -- crossing the 100-megawatt aluminum solar project. So on a net basis, nonrecurring item, that it was about INR 6 crores in Q1 of FY '23. Adjusted for about -- just about this, PBT, for the quarter stood at INR 711 crores as compared to INR 665 crores in corresponding quarter of last year, is higher by 46%, above -- growth of about 7%. I will now take you through the key highlights of the quarter. PBT growth of INR 46 crores. The improvement in the operating profit is on account of 3 factors. First, the improvement in the overall contribution of thermal generation business by INR 60 crores, mainly on account of gain from sale of merchant power. Lower gas prices coupled with the better demand of the merchant power allowed us to sell power in the merchant market [indiscernible] tie-up with [indiscernible]. It is about 920-megawatt tenders won by the company in April '23, resulting in a net gain of INR 60 crores considering savings being booked in the corresponding quarter last year. The second reason is implementing overall contribution of distribution business, which improved by INR 18 crores. The distribution prices as well as franchisee distribution business showed improvement due to 2 factors. First, improvement in [indiscernible] increase in ROE and capitalization of CapEx as well as incentive contributes about INR 62 crores. These were partially offset by solar incentive of earlier years, accounted in Q1 of last year and/or contribution from distribution centers. This was mainly due to reduced volumes as well as bad debt provisions. The third reason is renewable business of the company witnessed reduction in profitability by INR 30 crores with a lower generation of wind power project due to [indiscernible] cyclones. Moving on to the after-tax numbers. Consolidated profit after tax reported for the quarter is INR 534 crores as compared to INR 503 crores reported in the corresponding quarter last year, which is higher by about INR 31 crores, growth of about 6% in line with the increase in the PBT numbers. Now moving you to the operational performance of the company. Thermal Generation business, an increase in PLF, mainly due to the increase in demand, both from the off-takers -- long-term off-takers as well as merchant power. PLF of renewable generation was down on account of lower wind generation mainly caused by the cyclone.
Distribution business, on the other hand, witnessed a flat growth in demand, mainly on account of release demand at Ahmedabad as well as Agra. Apart from this area, overall demand of the other areas improved by 4%. This completes the overview of financial as well as operating performance of the company. Moving on to -- moving on, we'll now brief you and again provide the update on the current projects, which are under pipeline. 150-megawatt [indiscernible] project was successfully commissioned on July 15, increasing our operating [indiscernible] capacity to about close to 1.2 gigawatts and reinforcing our commitment towards renewables. [indiscernible] 300 megawatt solar project is set to commission by end of this fiscal, while within MNRE approval to [indiscernible] March '23. 20 EPC contract for development of the project has been awarded to [indiscernible]. The [indiscernible] date of project is scheduled at March '25. We have been strategically focusing on the C&I segment in [ RE ], which has literally higher margins than competitively bid projects. We have recently entered into the agreement with Shapoorji Pallonji Group for supply of 132-megawatt solar project for desalination plant of Gujarat. [indiscernible] our ambition of catering to the specific energy need of C&I [indiscernible] taking over the total development capacity of 757 megawatts. That's all for this quarter. Now I request coordinators to open the Q&A session. We wish everybody to stay safe and healthy. Thank you. Handing over to the operators.
[Operator Instructions] We'll take our first question from the line of Sumit Kishore from Axis Capital.
My first question is, could you spell out what is the merchant sales volume in million units in Q1 FY '24? And what was the realization that lowered that? And if you could share what is the EBITDA contribution in Q1 due to merchant policy?
So EBITDA contribution, we have said on net to be about INR 60 crores profit after offsetting the LNG, which we made in the last quarter, simply compared with quarter of last year. So on net basis, we made about INR 60 crores profit from the merchant -- profit -- merchant sale. We have choice available to sale either -- generate the electricity and sale it. We have a choice of selling the gas. So this quarter, we choose to sale electricity rather than selling the LNG.
So INR 60 crores is the delta in profit from merchant sales after offsetting what was the difference in gains on sale of LNG, is that right to understand?
Absolutely.
So what -- so I'm just trying to sort of segregate the 2 numbers. Can you tell us what is the LNG sale gain in Q1 FY '24, in Q1 FY '23? And what is the absolute delta in merchant sales volume so that I can understand the contribution from merchant sales better?
So LNG gain was last year about INR 80 crores, Q1 of last year. Yes, so you just have to somewhat near it basically, the merchant gain is about INR 140 crores to the merchant gain for the current quarter.
Okay. Q1 FY '24 has seen hardly an LNG gain [indiscernible] LNG?
Yes, INR 80 crores last year, Q1 of last year. Sumit, basically, last year of Q1 had merchant LNG gain of INR 80 crores, and this year, Q1 has a merchant gain of INR 140 crores. So incrementally this year, this quarter, it is INR 60 crores higher.
Okay. Your BSE filing says that your LNG sales contribution in Q1 FY '24 is INR 721 million?
Yes, we look at that.
The BSE...
That is turnover, I would say.
Yes. Turnover, yes. So there is some turnover from sale of [indiscernible]. So that has not resulted in any gain you are saying in Q1 FY '24?
INR 140 crores merchant includes the sale of LNG, also about 10%, 20%.
But it's miniscule amount.
INR 10 crores gain is there. So merchant -- you can assume about INR 130 crores on merchant, INR 10 crores from the LNG for the current quarter and about INR 80 crores last year LNG gain. So the EBITDA will be about INR 60 crores.
Got it. My question is answered. It is good to see the addition of C&I customers in RE capacity, Shapoorji Pallonji that you mentioned. What are the IRR metrics and tariffs that you're getting from C&I customers? And what is your scope of growing this portfolio over the next 1 to 2 years?
Kind of mid-teen IRR kind of things we are targeting for this C&I customers.
Okay. And my last question is that in the distribution business, you mentioned that the net delta is INR 18 crores, but the delta for license distribution is INR 62 crores. Is there any -- is this entirely driven by contribution from additional capitalization? Or is there something else also because we generally see that in the license distribution business, the volume growth has just been about 0.76% year-on-year for all the regulated distribution circles combined. So is this purely driven by additional ROE on increase in regulated equity base?
So it's a combination basically, additional ROE from the CapEx as well as improvement at T&D losses. 2 factors, I would say.
[Operator Instructions] We have a next question from the line of Nikhil Abhyankar from ICICI Securities.
So sir, any update on the parallel licensing applications that we have to know?
In terms of parallel licensing, what you've applied, Maharashtra, we have responded all queries to the -- of the regulators. Now we are awaiting the date of hearing. So there is no further update beyond what I have given right now, but there are some queries to be raised, which we have answered them, and we are -- so we are awaiting the next date of hearing from the parallel licensing.
So what exactly would be the timeline? I think earlier we had mentioned somewhere around the end of this year, we would be getting some licensing?
We can't give any specific time line at this moment, but we are awaiting to hear from the regulators after responding to all their queries and all information they required.
Okay, sir. Sir, can you also give us what kind -- what will be the CapEx for C&I [indiscernible] for setting of 135-megawatt and the tariffs, sorry?
Yes. OpEx would be about -- apart from this, we have about 160 megawatts of C&I tie-up right now. The CapEx would be in the range of INR 700 crores, I would say. And I have -- we mentioned the IRR will be the mid-teen IRR kind of a thing we are expecting.
So sir, you cannot disclose the tariffs?
Sorry?
You won't be able to disclose the tariffs, sir?
No, no.
Okay. Sure. And sir, also, can you give us the EBITDA breakup?
So EBITDA breakup. In fact, we have started reporting -- segment reporting in our consolidated accounts. So I think segment wise EBITDA is available from the [indiscernible]. I can give you the number. Generation -- we have started reporting this -- segment reporting for Q1 onwards. So what EBITDA we've reported generation, we have reported [indiscernible] EBITDA. The transmission distribution about INR 691 crores, [indiscernible] is about INR 254 crores. And total EBITDA is -- we have reported is about INR 1,275 crores -- INR 1,275 crores.
Understood. And sir, earlier in the -- in your opening remarks, you mentioned increase in contribution from distribution business. So I did not get the exact quantum of it. So can you give it again?
About 62 -- net contribution about INR 18 crores and our license distribution is contributed by about INR 62 crores, which is offset by the lower volumes as well as from the franchisee as well as [indiscernible] volume as well as bad debt provision. And last, the similar quarter, we also got some solar incentive, which was not available this year, [indiscernible] incentive is not available. The tree impact, I would say, lower solar incentives, lower volumes, contribution [indiscernible] franchise distribution business as well as some bad debt -- small bad debt provisions.
[Operator Instructions] We have a question from the line of Dhruv Muchhal from HDFC Mutual Fund.
So sir, can you speak something about the C&I opportunity that you're targeting probably in the next 2, 3 years on what can you capture something on that, right, please?
We can't give any specific numbers what -- but we are actively exploring the C&I opportunity because we've started with the about -- more than 150 megawatts we have tied up. So -- and if you look at the overall scenario, as a country as a whole, total demand of the country about 49% is important with the 6 segments, C&I segment. And as of now, about 5%, I would say, is tied up, so there is huge potential we can see for the -- under this segment, I would say.
But there's no specific number or any target that you are looking at?
We can't have any specific targets, but we are working on the second very actively right now.
[Operator Instructions] We have a question from the line of Anuj Upadhyay from Investec.
Sir, could you highlight the EBITDA from Dadra and Nagar Haveli for the quarter?
We have given the consolidated EBITDA for distribution and transmission segment. We have reported -- started reporting segment wise reporting where about INR 691 crores of total EBITDA, which we have reported for entire transmission.
Right. Right. Can we...
Yes, we're not able to share the data of this covering all distribution franchise to license, everything.
Okay. Okay. And do we remain firm of our CapEx guidance, sir, for current and next year?
Yes. We have reported about INR 2,000 crores CapEx, about INR 1,750 crores for license distribution, about INR 250 crores [indiscernible] that guidance is continuing getting for current year as well as next year also.
We have our next question from the line of Jiten Rushi from Axis Capital.
Sir, most of my questions have been answered, sir.
We have our next question from the line of Subhadip Mitra from Nuvama.
I joined the call a little bit late, so apologies, this is like a repeat question. But I just wanted to get your sense of how do you see the overall bidding scenario panning out on the bidding space. Do you see -- are you seeing a pickup in the bidding that's happening over there? How do you see your own market share panning out over there?
In terms of bidding scenario, renewable bidding scenario, what our view is that [indiscernible] solar has been -- we have an intense competition. So we started looking at the hybrid kind of a model where we can supply the solar and we -- as a package, I would say. So that is what we are looking at right now. And we are actively looking considering the C&I segment also.
On the [indiscernible] side, are you also looking at...
I'm sorry, can you use your handset mode, please? You're not clearly audible.
I am using the handset, is this better?
It's not very clear.
Not very clear.
Is this better now?
Yes.
Yes.
So I just wanted to check that on the hybrid opportunity, how are you seeing kind of combining that with the farm title-related MOU et cetera, that you've signed? And over what period of time do you see that panning out?
[indiscernible] is a separate thing. We have MOU with the Maharashtra government about development of the 2 [indiscernible] projects. So we have about 2 sites. So we have started working with our MOU for approval. So it's a long run process because first we have to get the approval of MOU, they're on -- and we will start to work on this. It's basically 3 to 5 years project.
We have our next question from the line of Bharani Vijayakumar from Spark Capital.
I see that we have obtained the Board approval to transfer a few renewable assets to a company called Torrent Green Energy Private Limited. So can you highlight the future plans with this wholly-owned subsidiary and rationale behind this move?
So as you know, the green energy business is a growing business. So we see -- we are -- we want to create this platform for green energy. And these are -- we want to create this holding company, green energy holding company. So we are taking the first step of consolidating all renewable project under this vehicle, I would say. So -- and some of the units we are transferring [indiscernible] into this company.
Okay. Okay. Right now, only about 600 -- sorry, 316-megawatt looks like -- seem to have been transferred. So the remaining assets would also be transferred within this holdco?
Gradually, yes. So all the investment, we'll also get going to be transferring to this holdco.
I'm talking about the existing assets, which is -- on the subsidiaries.
Currently, there were -- 316 megawatts we are going to transfer. And there is a small piece of unit -- megawatt will be remained with Torrent Power.
Okay. So remaining ones would also be transferred to this one?
They are already SPVs of Torrent Power. Right now, what we are doing is we are transferring renewable projects, which are there in stand-alone balance sheet of Torrent Power. It is getting transferred to a new holdco. So that is one part of it. All of our remaining projects are already in SPVs.
Great. So these SPVs also come under this holdco? That's the question.
So not right now, but at some point of time. Once this exercise is over, [indiscernible] exercise is over after NCLT approval, we'll see at that point of time. Not that part of the scheme. I would say, not that part of the scheme.
Okay. And future project development would all come under this entity now?
Yes, yes.
Okay. Okay. And what would be our expectation of portfolio size, like we have about 5 gigawatt of portfolio size expectation by...
That is what our target is. We are working for to keep 5 gigawatt of capacity in next 3 to 5 years. So that is what our target is. So we are aiming to be near to 5 gigawatt.
Got it. Got. Final question on the pump storage hydro MOU that we're trying recently. So is this going to be sold through a PPA to the state DISCOM? Or are we planning to use this to bundle with upcoming renewal projects under our company to sell power as an RTC power?
It is -- when initial sales at this moment. So we're not able to give any firm answer on this yet, but we will work on this project going forward.
We have a next question from the line of Anuj Upadhyay from Investec.
Sir, we saw Q1, the PLF across that base station powering on an average of around 38%. Could you give some kind of an outlook how the balance part of the year looks like in terms of the utilization of the gas base station? And secondly, are we looking out for a tie-up for the balance requirement of shipping our cargoes. I remember [indiscernible] we have a long-term contract with Reliance and IOC for 25% and for another 30% we have made an arrangement. So any call on any further tie-up, sir, for the balance requirement? And lastly, can you just elaborate on how things are panning out across the SMK region in terms of [indiscernible]?
So in terms of gas tie-up, yes, if you look at the current prices are coming to the reasonable level, I would say about -- covering about $10 to $12, we expect further softening in the price. And after that, we will try to contact more cargoes also. So it depends on the gas tie-up, at what level future PLF will be operated is depending on the gas tie -- further tie-up of the gas. So about 50% we have tied up. So -- but again, it will depend on the price of the gas, which is going to be available. In terms of SMK, it may be bit lower than as compared with the Q1 of last year. Last year, it was about 58% team losses, which is about 32.5% at this moment in quarter -- Q1 -- Q1 FY '24.
In terms of future trajectory, sir, so how much loss [indiscernible]...
Last year, we reduced about 7% for a full year, I would say. So 6.5% to 7% reduction we are bringing. So we aim to at least 5%, 6% reduction going forward, at least for a couple of years, I would say.
We have a next question from the line of Mohit Kumar from ICICI Securities.
Sir, my 2 questions. First is on the -- I think we had tied up some capacity under bilateral market where the government was paying us a fixed amount and it's supposed to sell on a merchant. Could you say [indiscernible] anything in the quarter? And do you think that [indiscernible] next summer?
So yes, that is what we sold merchant power in Q1 and made profit of about INR 130 crores, I would say. And -- so we have used this window and supply the power in merchant market. We expect the -- it's a summer demand, I would say. To meet the summer demand, we power -- merchant power was sold. Going forward, depending on the summer demand and we expect further kind of -- from the government somewhere around September, October kind of a thing.
Did you sell the entire thing on the IEX? Is a kind understanding [indiscernible]?
No, it is not under IEX. So it's on a bilateral basis we sold.
Okay. Understood. And my second question is on the Ancillary market. Ancillary market has been operating now for a couple of months. Are you seeing any signs of traction? Are you able to schedule something in that market? And is that market the liquidity is increasing? Or do you think it is very low right now for our...
You're referring to?
Ancillary market. Ancillary market. Ancillary market launched by -- ancillary.
Okay. Okay. Okay.
So was there any offtake in the quarter, did you sell something that are you seeing -- is it pretty very low right now?
No, we are not there in that market as of now.
We have our next question from the line of Amit Bhinde from Morgan Stanley.
Most of my questions are answered. Just one thing, if you can tell us about how much was the EBITDA for the franchise business. Usually, you wish to give that split right now, to club T&D as one segment. So you can tell us about this?
So we have started giving segment-wise reporting. So we will provide the concerted EBITDA of transmission distribution business, it is about INR 691 crores. Sorry, we're not able to provide the breakup.
All right. And on your pump hydro storage as one of the participants is also asking earlier -- or I mean, would there be -- I mean, what is the outlook? Would it be a PPA signed? Or I mean, how are you looking at it, one? Second, how quickly do you think this would come up? You mentioned that 3 to 5 years, but then the demand in the industry seems to be high. So do you think that it can be fast pace? What would be the -- and what would be the cost that you're looking at? I mean you have mentioned indicated cost in the press release, but any deviations on that? Do you think that can be the case?
So basically, for getting the clearances in all, there is a process which is involved, and it typically takes 2 to 3 years for that to be finished off or to be taken care of. So we don't foresee that these projects will come up before that. As far as model is concerned, I think right now, there are 2 models in the industry, which are being worked upon. One is simply leaving out of the storage capacity. And the second one is supplying RTC Power by a back-end renewable capacity being put up. So as of now, we have not taken a decision on what sort of model we want to operate these facilities, which we are developing. Once we are in the further stage of developing it, then we'll take a decision on which way we want to go.
Right. But surely, this will not be like 16.5% regulated return on this one?
So I think these are all bidded projects. I mean, if you -- even if you look at leasing out of a storage capacity so bidding which is being done. And even if you want to supply RTC Power, again, it will be bid which you'll have to win. So it's not a kind of a regulated return kind of a project. But basically, if you have a right side, it will have a competitive advantage in the time of the bid...
Right, right. And roughly, what kind of tariff do you expect on this one?
Tariffs, again, it will be bid to bid, but the cost broad -- overview of the cost for developing these sites. I'm not including any renewable project, which if you want to sell RPC, it would be around INR 27,000 crores approximately for all the 3 sites, 5,200 megawatts put together. Now what kind of tariffs will have to be decided when the bid comes in? It's too early to talk about the tariff at this moment.
[Operator Instructions] we have a question from the line of Girish from MS.
Just wanted to understand smart metering and are you interested in doing it beyond your circles? And are you participating in projects? And what will be the model that if at all you take it up, what will be the model you will follow. In terms of EPC, you told yourself, et cetera? And also on renewable, you said 3 to 5 gigawatt and you've also spoken on C&I. But is there -- how much opportunity exists for -- from a discount perspective that you have already? How much more can you do on renewals yourselves? How much bids can come through from your circles? Just wanted to understand the overall opportunity from this part.
So as far as smart meters are concerned, Girish, these are -- I mean we are not looking at having that as a business model per se. So we may not want to sell smart meters per se. As far as our own DISCOMs are concerned, smart meters, yes, I think we are doing a small pilot project or as of now, we have not decided whether you want to roll out for -- all the DISCOMs which we have under our license under the company. So we will decide going forward. But basically, if I look at my T&D losses in all my DISCOMs, they are anyways at a lower level. So we are trying to figure out whether putting a smart meters will help economically or not.
We'll have to be figured out before rolling it out on our pan license leases. As far as -- so as far as the DISCOM capacity or our own DISCOM capacity is concerned, again, I think even if there are -- I mean, all the projects will have to be bidded out. So it is as good a bidding for, let's say, for -- especially for our own DISCOM. So just wanted to understand the rationale behind your question in terms of...
Understood. That it obviously will be a proper bid, but I wanted to understand that from a net zero perspective, do we have any specific targets that even in the licensees that we will have a certain amount of renewals? What is the current renewable procurement that the DISCOMs are doing? Is it like 20%, 30%? And can that number be scaled up significantly in the next 5 years?
So as of now, we are meeting our RPO obligations. As far as our license distributions are concerned, except new Dadra and Nagar Haveli because it's a recent acquisition which we have done. As far as net zero is concerned, as of now, we have not taken any targets per se for net zero. Going forward, we may look at increasing the share even beyond RPO obligation. As of now, it will be difficult to tell you any target per se on that.
We have our next question from the line of Rupesh Sankhe from Elara Capital.
I'm sorry, your voice is breaking. Mr. Sankhe? [Operator Instructions] As there are no further questions, I hand over the call to Mr. Saurabh Mashruwala for closing comments. Over to you.
Thank you so much for joining Torrent Power call -- earnings call. We wish everybody to stay safe and healthy. Thank you so much. Thank you.
On behalf of Torrent Power Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.