Torrent Power Ltd
NSE:TORNTPOWER
Torrent Power Ltd
NSE:TORNTPOWER
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Ladies and gentlemen, good day, and welcome to the Q3 FY '25 Earnings Conference Call of Torrent Power Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Saurabh Mashruwala, CFO and Executive Director. Thank you, and over to you, sir.
Thank you so much. Good evening to all of you, and thank you for joining Torrent Power earnings call for Q3 FY '25. First, I will take you through the performance of the quarter, after which phone lines will be open for Q&A session.
I'll explain the performance of the company at PBT level first, and then I will take you through the tax expenses separately. Reported PBT for the quarter stood at INR 630 crores as compared with INR 513 crores in the corresponding quarter of last year, an increase of about INR 117 crores, which is a growth of about 23% on a reported basis.
PBT for the current quarter includes nonrecurring credit of about INR 77 crores on account of sale of investment of cable businesses. Adjusted for the above nonrecurring item, adjusted PBT for the quarter stood at INR 553 crores as compared to INR 513 crores in the comparable quarter of last year, which is higher by INR 40 crores, a growth of about 8%.
Businesses that contributed to the performance are as follows: There are 4 factors which is impacting the performance. First, contribution from the thermal generation business increased by about INR 17 crores, mainly on account of higher contribution of the sale of merchant power and LNG by INR 37 crores. Cold weather conditions compared to the corresponding quarter last year impacted excess demand, which was higher by approximately 4% in the current quarter.
The second item, noncash adjustment on account of foreign exchange variation is about INR 33 crores. Second, contribution for distribution business improved by about INR 40 crores, mainly due to higher volumes, increase in ROE and capitalization of CapEx as well as solar and other O&M incentives.
Three, contribution from renewable generation increased by about INR 18 crores on account of lower PLF, mainly from the existing wind power projects due to lower wind speed and lower contribution from the capacity of 300-megawatt renewable plant commissioned during the quarter. Fourth, balance deterioration is on account of other income, finance costs and depreciation. This completes the explanation of the financial performance during the quarter.
Moving on to the project updates. First, 300-megawatt solar project got fully commissioned during the quarter. The aggregate commissioning generation capacity of the company stood at 4.7 gigawatt as on 31st December 2024, comprising of 2.7 gigawatt gas-based project, 1.7 gigawatt renewable capacity, and 362 megawatt coal-based capacity.
Pipeline project at the end of the quarter includes 3 gigawatt of renewable energy project, 2 gigawatt of pumped storage project, 2 transmission projects at Khavda as well as Solapur. Further details on the pipeline projects have been summarized in our latest investor presentation available on the website.
Moving on to the new ventures, company pilot project on green hydrogen blending with the CNG in U.P., one of the largest private sector blending project in India is commissioned and under trial runs.
That's all for the quarter. Now I request coordinator to open the line for Q&A session. We wish everybody to stay safe and healthy. Thank you. Handing over to the operator.
[Operator Instructions] Our first question comes from Gaurav Birmiwal from Axis Mutual Funds.
Can you just explain this other income increase? I'm sure you partly explained it in your opening remarks, but just for my benefit, from INR 53 crores last year to INR 170 crores this year, how do we explain this?
So the other income went up from about INR 53 crores to INR 172 crores mainly because of 2 reasons. One is, as we explained, the onetime gain of cable sale of investment of cable division of about INR 77 crores is one of the contributors to the increase in other income. And the balance is because of higher treasury income, which we have booked during the course of quarter.
Our next question comes from Swati Jhunjhunwala from JM Financial PMS.
Sir, if I look at your segmental performance, your generation revenues have gone down 10%, but the EBIT has gone up 50%. So what is the reason for both the fall in revenue as well as -- fall in revenue, I can understand could be because of lower PLF. But what was the reason for this higher EBIT that you have reported, if you could highlight?
Renewable generation or thermal generation you are talking about?
Sir, the thermal generation that is INR 1,400 crores in Q3 revenue.
INR 1,400 crores in Q3 as compared with the last quarter of INR 1,590 crores, that is what you are saying, right?
Right, right. That's right.
Yes. So generation basically is linked with my fuel prices. What fuel prices I have contracted; based on that, generation will come. But yes, in terms of annual, it is lower, but my -- see, generation, there are 2 contributors; one is the merchant sale as well as LNG sale, which has improved the performance of the thermal generation business for the current quarter as compared to the last comparable quarter.
Understood. But sir, merchant sale, wouldn't it be lower? I'm assuming given that DGEN this time was at a similar PLF of 4%, which is minimal. So wouldn't merchant sale anyway be lower during the quarter?
SUGEN, we can able to sell not from -- see, we are selling merchant power not only from the DGEN also, but from the SUGEN also, we are able to sell. So both have contributed the higher contribution EBITDA, I would say, as compared to the last quarter, both merchant sale as well as we are able to sell LNG also during the course of current quarter.
Understood. And can you highlight any reason why this EBIT is higher at INR 300 crores versus INR 228 crores in Q3 FY '24?
So that is what I'm saying. It's higher merchant sale as well as LNG sales, plus we also booked some foreign exchange gain also during the course of current quarter. These are the 3 reasons through which our thermal generation profit EBITDA is higher.
Understood. And sir, can you highlight the CapEx that you have done in 9 months in generation versus T&D versus renewable, if possible?
Yes. So 9 months CapEx -- can I give you the cumulative number of 9 months or for the quarter?
Sir, for 9 months, sir.
9 months, the license distribution, we are able to incur CapEx of about INR 915 crores. Franchisee is about INR 176 crores. Transmission CapEx, INR 138 crores. So about INR 1,200 crores CapEx -- INR 1,250 crores CapEx we have incurred in the license, franchisee, as well as transmission business for 9 months. It's a 9-month number.
And what would be that for renewables, sir? Any CapEx in renewables?
Renewable was about INR 1,300 crores for the 9-month number.
Understood. And sir, if you highlight any CapEx guidance for next year, what you're planning to do in license versus franchisee versus transmission?
Same CapEx guideline we mentioned for the next year also, about INR 2,000 crores total CapEx for license as well as franchisee, out of which about INR 250 crores for the franchisee and about INR 1,750 crores for the license distribution business. That is what we maintain the same guideline for the next year also.
Sure. And renewable and transmission, any guidance for that, sir?
Difficult for renewable and transmission, but as per the milestone of the project, CapEx will be incurred for the renewable as well as transmission project.
The next question comes from Anuj Upadhyay from Investec.
Sir, you mentioned, apart from the merchant, we also did LNG trading. How much income we earned through that?
We'll not be able to share the breakup, but these are the LNG sale, merchant as well as some ForEx gain. These are the 3 contributors for the improvement in the generation profit -- thermal generation profit.
Okay. So it wasn't a significant one?
Sorry?
It wasn't a significant one? I mean, total was around INR 17 crores through the merchant. And LNG and other, all put together would be how much, sir?
So see, last quarter, about INR 228 crores. This quarter, about INR 300 crores, about INR 75 crores increase is there, which is mainly coming from these 3 factors: merchant, LNG as well as some ForEx gains.
Okay. And any update on the Section 11 for gas base station, sir? Our assumption, how things are going to play out in the current fiscal or...
So government has started working on it. So they have started working on meeting the summer demand. So they will hopefully come out with the guidelines about the crunch period demand as well as Section 11. So it's too early to talk about it because we are in the month of February, starting February. They have started discussion with the various generators about the crunch period demand as well as Section 11. And both are based on the fuel cost available at that point of time. So we are hoping the same kind of a scheme will be available for the summer period also.
Okay. And any pipeline of the project commissioning for '26-'27 would be helpful, sir.
So Anuj, I think if you refer to our investor presentation, we have broadly given the commissioning timelines for all the projects for the renewable generation.
Okay. Fine. And lastly, on the PSP side, as was mentioned in the presentation that 8 gigawatts of what we have signed. So these are all firm projects where the LOA, everything has been done, or...
8 gigawatts is not signed. 2 gigawatts is signed. 8 gigawatts site is available with us, we have identified the project, but out of which 2 gigawatts PPA we have signed.
And PSP you're referring to?
Yes, PSP, we are referring.
Got it. LOA has been done over there?
LOA, we have received, and facility agreement also we have signed for the 2 gigawatts with MSEDCL.
Great, sir. And lastly, sir, for a small project, which is Airpower, which we intend to go ahead for a merchant basis. Just want to understand how the financial closure can happen on a merchant basis? Is it through the completely internal funding or we are also seeking some debt funding through external process?
No, no, we will try to do 70-30 debt-equity ratio funding. But it's a merchant project and you know, the merchant market is very good even for a renewable project also, because -- so we will do the mix of debt and equity for this merchant project.
Okay. But there is no consent or restriction as such from the banking -- from the financial institution to lend even if the project is on a merchant basis?
I don't think so. Anuj, I think if you look at the consolidated balance sheet, we have a very strong consolidated balance sheet. Bankers typically look at various ways of comfort which a corporate can provide to lend for a particular project. So there are various ways and means to fund this. We can borrow in Torrent Power level and use it for this project, or we can borrow in the subsidiary itself by giving some comfort from the parent. So basically, bankers will look at some sort of security. You are right that since it's a merchant power, PPA is not there, bankers will have some apprehensions, but which can be mitigated through these avenues.
So we'll provide the comfort from Torrent Power, and we'll -- either we borrow directly in Torrent Power or we'll provide some comfort and do the funding. It's not a big challenge, I would say. It's not a challenge, I would say. So it can be -- and project profile is good, merchant tariff is also good. So it should not be a problem in funding the project.
That's helpful, sir. And lastly, if you can throw us an update on the parallel licensing of the upcoming opportunity in U.P. Any view from your side would be helpful, sir.
So U.P. government has started the process. So obviously, we are the key players in U.P. when we see our presence in Agra. So we are very keen to participate in the process. So we are awaiting the formal process to be launched by the U.P. government. They have started the process.
The next question comes from Mohit Kumar from ICICI Securities.
The first question is on the -- is it possible to help us with the revenues, EBITDA and PAT for Torrent Green Energy Limited for the 9 months?
Torrent?
Green Energy. I think that's a new entity which has formed, right?
So Mohit, as of now, Torrent Green Energy does not have any operations. We are in the process of transferring businesses from Torrent Power to Torrent Green, which is yet to take effect. So as of now, there are no operations there.
When you look at the consolidated picture, consolidated picture numbers, segment-wise numbers we have given in terms of generation [indiscernible] and renewables also. But it won't change any -- numbers won't change on a consolidated basis, whether it is a part of Torrent Power or Torrent Green.
Understood, sir. The second question on the Bhiwandi franchisee. You have mentioned that the Bhiwandi franchisee agreement is extendable up to 5 years. Is there any such option available in Agra?
Agra, no such option, because it is up to 2030. Currently, it is available. So at appropriate time, we will initiate the discussion, because if you look at the latest development in U.P., the government is very keen to privatize the DISCOM. So considering those factors and having strong presence in Agra, we'll discuss around 2030 for the further extension.
Understood, sir. My last question on the PSP. Of course, you have won the PSP. I think it has been now 5, 6 months, you have signed the PPA. Have you started the construction? If not, when are you looking to start the construction or award the EPC contract?
In case of PSP project, generally 1.5 years is required for the approval, you do your DPR and all those things, you mobilize the sites and everything. So post 1.5 years, the construction activity will start. So currently, we are in the phase of getting approvals, getting DPR prepared and being waited by the Ministry of Environment and Forest. Those processes are going on right now.
What is the time line under the PPA, which will start supplying power?
It's a 4 years period. It's after 4 years from the signing of the PPA, we have to start supplying the power.
Next question comes from Satyadeep Jain from AMBIT Capital.
So just wanted to understand the use of proceeds from the QIP. If I look at the CapEx you've outlined for RE of about INR 19,000 crores. When we look at DISCOM CapEx also that you mentioned in transmission, the annual CapEx, given the equity contribution is typically 25%, 30%, you seem to have enough internal cash to be able to fund these projects. What is the intent use of funds for the QIP? That's the first question.
Sorry?
What's the intended use of funds from QIP?
As per the document which we have filed, PPT document we have filed and submitted, so INR 3,500 crores QIP, of which 25% is for general corporate purpose; 75% for the repayment of debt. So currently, we are prepaying the debt. And you know the internal accruals are there. Once we need the money for the funding of this upcoming project of RE and PSP, we'll raise a debt also at that point of time. So currently, we have used the QIP proceeds, 75% for the prepayment of the debt, and we have reduced the debt.
Just wanted to understand from a capital allocation perspective, Torrent is already, compared to a lot of other peers, under the balance sheet was already well managed and you look at equity contributions for future projects, if you put up more equity, it hurts the IRR. Are you looking at lower debt contribution in future projects in order to maybe have more safety cushion or the entire use you're saying is for 75% for prepaying the existing debt you had?
So if you look at our project under pipeline, we have about INR 19,000 crores project, RE project under pipeline, which CapEx will be incurred over the next 2 to 3 years. Plus we have a distribution CapEx every year, we generally spend about INR 2,000 crores, which is another INR 6,000 crores. There are small transmission projects. There is a pump storage project also we signed the PP also, about INR 12,000 crores, INR 13,000 crores CapEx is there. So our CapEx outgo in the next 4, 5 years, I would say, all together will be about INR 35,000 crores to INR 40,000 crores. So every year, generally, we generate about INR 2,000 crores free cash flows, which is available for funding the equity of 30% equity of the project. Apart from this QIP money plus internal accrual, we are able to fund these about INR 40,000 crores CapEx over the next 4, 5 years period. So that will get invested in those upcoming projects.
You raised cash now and the PSP will come as per your own -- because you need to go through DPR and all this. So the outlay for PSP will not most likely start in the next 1.5, 2 years. So you've already raised the QIP money. Are you going to deploy it somewhere for the next 1.5, 2 years before PSP kicks in, because your internal cash flows seem to be sufficient to meet your CapEx for the next 2 years at least.
So we have prepaid the debt from the QIP money. So we have reduced the debt. So once this project will start -- once we deploy the money in this renewal project and pump storage project, we start raising the money for the funding of this project. So currently, as of now, we have prepaid the debt from this QIP money.
The entire QIP, 75% of that you used to repay the existing debt on the balance sheet?
Yes.
Okay. And sir, just wanted to understand on the LP, the long-term take-or-pay contracts you have for LNG. I think last year, somewhere you were looking at maybe contracting more cargoes versus what you have. What is some of these take-or-pay contracts that you signed? Are they coming up for expiry sometime? And are you looking to -- I think last time we had mentioned you're looking to increase the quantum of those contracts. Is that still the thought process?
As of now, till 2027, every year, 3 cargoes we have contracted per year. And we are, in fact, in the -- we currently are evaluating tying up the further cargoes. So at appropriate time, we will do the tie-up. In fact, we have launched the tender in the month of August for the further tie-up of the cargoes. So we are in the process of doing it at this moment.
No thought of increasing the quantum of take-up, whatever number of cargoes you had, the same cargoes you will have in the future?
Satyadeep, I think what Saurabh bhai told was that we are looking at tying up additional cargoes, because if you remember, we did tie up cargoes for 3 years in the international market, which is getting over this year. So from next year, we don't have firm tie-up. We are looking at tying up for a longer period a higher number of cargoes. So we would definitely want to tie up cargoes as and when the opportunity is available to tie that up.
Okay. Fair enough. Just one quick question. On the Airpower merchant project, every quarter, this seems to be pushed out for the last several quarters. What is causing the delay? Is it something specific to this project that in terms of -- because it seems to be based on internal cash flows. So what is causing the delay in this?
So there is no delay, I would say, per se. We are on track in terms of implementing the project.
But if you look at the trajectory, every quarter, this gets pushed out by another quarter. There's nothing specific to this project.
No, I think we are working on -- so I think last time what we have said was it was likely by September '25. Now we are saying by December '25. So typically what happens in such kind of projects is that what we put out is the entire project commissioning date. It will happen progressively. And since this does not have a PPA, any wind mill or any solar module commission will start selling power. So this is pushed out by 1 quarter because of certain reasons in terms of certain connectivity and land-related issues, but that would be for a smaller part of it. When we put out these remarks, it is for the entire project. So it does not mean that we'll not do the project. Project will start getting commissioned, not from the entirety by September '25. Project will get commissioned.
The next question comes from the line of Nikhil Abhyankar from UTI MF.
As there is no response from the line of current participant, we'll move on to the next question.
The next question comes from the line of Bharani from Avendus Spark.
So I have a conceptual question wherein Agra already is in DVVNL, which also now is put up for privatization or at least that is what the government is working towards. Now if someone other than Torrent wins this DVVNL bid, how our offering in Agra will continue to be with us?
How can we have an impact, because we have a contract with DVVNL up to 2030. So by that time, there won't be an impact.
So I think, Bharani, we are a franchisee there. We are not a licensee there. What U.P. government is thinking about is giving the license out. So anybody who wins that will become a licensee. So instead of DVVNL, anybody who wins that will become the licensee. So that contract will get shifted.
The client will change for us, correct?
Correct. That's right. Because it's a bilateral contract. So it won't have impact up to 2030, till the contract is over.
So is there any, say, renewal clause in this contract for Agra?
We will discuss at that point of time, because as of now, 2030 is about 5 years away, I would say. So we'll discuss at that point near to the contract expiry date, Agra, like what we did in the case of Bhiwandi.
Okay. Okay. Fine. My second question is on this thermal generation segment EBITDA. So from merchant sales, what is the gain in this particular quarter?
So as we said earlier in the call, we will not be able to provide the breakup of the merchant and the LNG sales. But this INR 75 crores incremental contribution is coming from 3 segments, 3 items. One is the higher merchant sales contributions, higher LNG sale contributions, and some bit of ForEx gain also.
Okay. So like from merchant sales, like in the month of April, May, June, that is first quarter, we benefited due to Section 11. But now we will be selling in the open market, if I'm not wrong, correct?
Sorry, can please repeat again?
We'll be selling the merchant power in the open market?
Yes, yes. We are selling -- over exchange, I would say.
Yes, correct. So because the prices have come down, so we would be obviously targeting to sell only in the evening peak hours. Is that how it is, or...
Yes. We are targeting the peak hours, yes.
Evening peak hours. Understood. Okay. And what is this ForEx gain related to?
So basically, if you look at last year, euro rate was higher. This year, it was lower. So it's basically gain which we have booked on some of the long-term O&M contracts, I would say.
O&M contract. O&M contracts, some third-party vendor is doing on that year?
Yes, yes. So for our plants, there are O&M contracts which we have signed on a long-term basis. So on a quarterly basis, there is a provision which is made, but the payable is in euros. So if euro appreciates against rupee, there is an incremental outflow. And that's where it leads to a foreign currency loss on a provisional basis, on an accounting basis. That's not an actual cash outflow or inflow. And then if it depreciates, it becomes a gain. That's what it is.
Ladies and gentlemen, as there are no further questions, I now hand the conference over to the management for closing comments.
Thank you for the joining of Torrent Power investor call. I wish everybody to remain safe and healthy. Thank you so much.
Thank you. On behalf of Torrent Power Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.