ACME Solar Holdings Limited (ACMESOLAR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to ACME Solar Holdings Limited Q1 and FY '27 earnings conference call hosted by MUFG Intime. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nikunj Seth. Thank you, and over to you, Nikunj.

Thank you, Danish. Hello, everyone. Welcome to Q1 FY '27 earnings conference call of ACME Solar Holdings Limited. From the management, we have with us Mr. Manoj Kumar Upadhyay, Chairman and Managing Director; Mr. Nikhil Dhingra, CEO; Mr. Arun Chopra, CFO; and Mr. Ankit Verma, Director and Head of Corporate Finance. Now I would like to hand over the call to the management for their opening remarks. Thank you, and over to you, sir.

Thanks, Nikunj. Good afternoon, everyone, and thank you for joining us today. I am Ankit Verma, Director, Corporate Finance, and it is my pleasure to present the highlights of our performance for the first quarter of FY '27. Before we get started, I'd like to thank all our shareholders for their continued trust and support. We're also pleased to have successfully completed our QIP, which reflects the confidence investors have in our long-term vision. This would give us the flexibility to prepone our CapEx for our under-construction projects and deliver better return economics. Let me now begin with our financial performance. This quarter marks another milestone for the company as we delivered the highest ever revenue and EBITDA in our history. Total revenue for the quarter stood at INR 954 crores, which is up 63% year-on-year, while EBITDA increased 56% to INR 831 crores. This strong performance was driven by higher CUF, revenue contribution from our BESS operations and renewable capacity additions. Our total EBITDA margin was around 87%. Looking at the businesses separately, our renewable energy portfolio delivered an EBITDA margin of around 88%, 89%, while the BESS business recorded a margin of approximately 82%. The difference is primarily because the cost of power purchased for charging the batteries is accounted for within the operating expenses. Therefore, the blended margin should be viewed in that context. Profit after tax stood at INR 235 crores, which is up 80% on a Y-o-Y basis, translating into PAT margin of around 25%. Our asset base expanded significantly to around INR 25,000 crores following the commissioning of new assets and batteries. During the quarter, we incurred capital expenditure of around INR 3,000 crores. And for the full year, we upgraded our CapEx to approximately INR 15,000 crores to INR 20,000 crores for this year. Moving to our battery energy storage system updates. In line with our strategy of early deployment, we commissioned approximately 2.3 gigawatt hour during the quarter till date, taking our cumulative commissioned BESS capacity to approximately 3.62 gigawatt hour. With this, we now account for around 40% share of India's cumulative commissioned BESS capacity till date, one of the highest in the country. Our BESS operations made a meaningful financial contribution this quarter as follows. Out of the total revenue of INR 954 crores in this quarter, INR 226 crores came from BESS from power sales, comprising approximately 85% revenue from short-term contracts and balance from merchant sales. BESS power sale is delivering healthy annual EBITDA to buy CapEx yield of more than 20%. We have demonstrated large-scale FDRE operations through battery operations in a bigger and more demanding way by charging, discharging the batteries in a 15-minute slot interval. We have secured short-term BESS contracts during the quarter, locking in more than INR 1,400 crores of revenue for partial FY '27 BESS commissioned capacity.

I'm sorry to interrupt you, but we are not able to hear you, sir. Sir, we are still not able to hear you. Ladies and gentlemen, the management line has been disconnected. Request you to please stay connected while we reconnect them. Thank you. Ladies and gentlemen, management line has been connected again. Over to you, team.

Thank you. I was coming to our BESS updates. I'll repeat again. Our BESS operations made a meaningful financial contribution this quarter. Out of the total revenue of INR 954 crores in this quarter, INR 226 crores came from BESS power sales, comprising approximately 85% revenue from short-term contracts and balance from merchant sales. BESS power sale is delivering a healthy annual EBITDA to CapEx yield of more than 20%. We have demonstrated large-scale FDRE through battery operations in a bigger and demanding way by charging, discharging the batteries in a 15-minute slot interval. We have secured short-term BESS contracts during the quarter, locking in more than INR 1,400 crores of revenue for partial FY '27 BESS commission capacity. Also we will keep on participating and tie up more such contracts for full BESS capacity in '27. Operational performance for batteries continues to remain better vis-a-vis our design expectation with a round-trip efficiency of approximately 89%, depth of discharge of around 93% and state of health being more than 99.9%. Also the plant availability for batteries is more than 99%. Coming to our other business updates, we signed 600 megawatt of FDRE and hybrid PPAs with SECI during the quarter, which takes our total PPA signed capacity to 3,880 megawatts out of total under-construction capacity of 5,080 megawatts. Balance projects of around 1,200 megawatts for which PPAs are yet to be signed are progressing well and expected to get signed soon. With this, our total portfolio now stands at 8,070 megawatts, which will entail around 20 gigawatt hour of battery storage. During the quarter, we also achieved the highest capacity utilization factor in the company's history at 30.9% compared with 28.5% in the corresponding quarter last year. Power generation increased by 23% year-on-year to 2020 million units. During the quarter, we secured financing of approximately INR 6,000 crores for our 700 megawatts of under-construction FDRE projects. And with this, debt has now been tied up for nearly 85% of our PPA-signed portfolio. Before I move to sector updates, let me briefly address the recent incident at our Acme Suryodaya BESS facility. As we had communicated earlier, certain media reports incorrectly suggested that the fire originated within the battery system. I would like to reiterate that the detailed technical root cause analysis has now been completed and the investigation confirmed that the incident was caused by an electrical short circuit in the AC cabling between the transformer and power conversion system, which resulted in a localized fire and equipment shutdown. Importantly, there was no damage to any battery systems or any other equipment at the site. We prevented it by already deployed safety measures across detection, suppression and containment. These include AI-enabled video analytics for early fire detection, arc-flash sensors within PCS panels, additional aerosol-based fire suppression systems inside PCS enclosures and enhanced fire barriers between electrical equipment along with improved cable protection. Also we have long-term warranty for BESS and other equipments from the suppliers. We have also built a best-in-class in-house 50 members EPS BESS team, which is responsible for overall integration, including installation, commissioning and operation of BESS. Now turning to key sector and regulatory updates. India's power sector witnessed a strong start to FY '27, supported by expanding economic activity, delayed monsoons and elevated cooling demand. Aggregate electricity demand during Q1 grew 8.8% year-on-year to 485 billion units. Peak power demand also reached a new all-time high of 271 gigawatt during the quarter, with this momentum continuing into July as well when delayed monsoons and persistent humidity again pushed peak demand close to 270 gigawatt. India's installed power generation capacity crossed 548 gigawatts as of 30th June 2026, with non-fossil fuel sources now accounting for approximately 54% of the total installed capacity. During the quarter alone, the country added nearly 13.9 gigawatts of renewable capacity, taking cumulative renewable capacity to 289 gigawatts. On the policy front, several developments are encouraging for the sector. MNRE extended the commissioning deadline for Open Access and Net Metering renewable projects to 31 December 2026, ensuring a smoother transition to cell-level List-II compliance. This also provides us greater flexibility to evaluate and commission merchant BESS projects co-located with solar generation. The Ministry of Power extended the graded ISTS waiver benefits for projects delayed due to transmission readiness for PPAs signed up to 30th June 2026. This reduces financial risk for developers and provides greater clarity for discoms while also benefiting our offtakers where GNA availability is delayed. Additionally, CTUIL has begun granting BESS connectivity through Right of First Refusal route which should accelerate BESS deployment while strengthening the grid reliability and enabling better participation during evening peak power demand. Looking ahead, our priorities remain centered on disciplined execution while continuing to build a healthy project pipeline. We are upgrading our BESS commissioning guidance from 10 gigawatt hour by calendar year 2027 to more than 10 gigawatt hour by fiscal year 2027, effectively bringing forward this milestone by nearly 3 quarters. For FY '27, we also expect to operate -- we also expect to commission 1.5 gigawatt of contracted renewable energy generation capacity, subject to timely availability of substation and transmission lines. We have already ordered more than 15 gigawatt hour of battery from leading global suppliers, including CATL and Hithium well within our budgeted cost. From the industry growth perspective, we expect to see large bids going forward, especially across the following categories: midterm contracts, long-term peak power, RTC FDRE, CFD related to peak power and straight bids. We will continue to actively pursue all such opportunities to capitalize on evolving market demand and merchant market dynamics. By 2030, we contemplate to increase our target beyond 10 gigawatt as guided earlier, basis the new growth opportunities that we are seeing in the market, and we will keep you updated on the same in coming quarters. With that, I conclude my remarks. Thank you for your continued support. We'll now be happy to take your questions.

[Operator Instructions] Our first question comes from the line of Subhadip Mitra from Nuvama Wealth Management.

Firstly, congratulations for a great set of numbers. And clearly, your strategy of early BESS commissioning with the short-term sales for peak power is working and reflecting in numbers. So congratulations on that. My questions are largely around the BESS piece because clearly, that's adding a lot of traction to the numbers. So in your estimate, what quantum of, let's say, open market or early commissioning of BESS is what you're estimating, let's say, in the current fiscal in FY '27 and for the next couple of years? And the second question is in the current short-term contract of the INR 1,400 crores locked-in revenue that you've talked about, what would be the ballpark range of realizations that you're looking for, for the BESS short-term contracts?

Right, right, Subhadip. So thanks for the query. So in terms of the -- this year is the 10-gigawatt hour by end of this March is what we will have on a daily basis in terms of the capacity being sold. Of course, as we scale up from 3.6 to 10, this will be a number which will keep on adding every month, and that is how we are contracting, planning for the capacity additions. And there is an upward bias to this number because the contracting we have done is higher than -- much higher than 10 gigawatt hour, so as and when the deliveries are made, there could be an upward revision to this number. In terms of the realizations from the contracted capacity, they range from, you can say, between 8 to 10 in terms of the realizations, depending on the month and depending on the volume of the contract. These are all bids conducted on the DEEP portal and the HP-TAM markets. So those are the range which are publicly available.

Understood. And as a follow-up, the 10-gigawatt hour by March '27 will naturally move upwards, I guess, over the next couple of years. Any ballpark range because I believe the overall number will be 20-gigawatt hour. So how much of that would be, let's say, open capacity for the next couple of years that you can look at?

So in terms of open capacity, we have only right now 600-megawatt hour, which is open, which also is planned to go into a PPA. So we aim to have 0 open capacity by end of this year. We don't want to operate any merchant outside of PPA. So it is -- the target is to have 0 outside PPA. This is all inside PPA, all the capacity we are operating. Only a 300-megawatt plant, which is 30 into 2 right now, which are scaling up to 300 into 4. That is something which we are yet to contract. Rest are all -- there is nothing open.

So I would like to add here that -- my name is Manoj. So I would like to add here. Every year, at least 10-gigawatt hour of battery will remain exposed to -- remain for the merchant market. And next year, it will go to the PPA. So to answer your question from 2 ways. One, we don't expose ourselves for merchant market for the battery for next 25 years. But our plan for next 5 years is at least 10 to 12-gigawatt hour batteries remain available for the short-term power market.

So yes, it's an important distinction, which I forgot to make. So the thing is we are doing early CapEx, as you rightly noted, right, in terms of the best installations. So first year, you can say, will be merchant and let's say, around -- so 1 year of merchant operations, but the CapEx is all allocated towards PPA, in terms of the final destination. So that's how it is working. There is no open -- from a long-term perspective, the BESS is not open other than the 300-megawatt plant, which is currently open, but we are aiming to put it in the next bid, which happens.

Our next question comes from the line of Aniket from SBI Mutual Fund.

Sir, when I look at the presentation, the G&A timeline for the SJVN FDRE is about June '27. So I just wanted to understand how do we look at the commissioning for that? Like, would you want to upfront the battery and wait for the solar commissioning to be pushed out of FY '27? Or just your views on that.

Yes, please. So Aniket, you're very right. We have already commissioned the battery for these 2 plants, if you look at Heergarh and one more substation.

Bikaner II.

Bikaner II. Those 2 are already commissioned BESS for the SJVN plant. So that is already commissioned, like you rightly noted. But the G&A connectivity is scheduled for the month, which you again noted in next year. So that's the only time we can commission the solar. So that's how it will work.

Understood. And the CapEx for that then will also get pushed out, like the modules and all you've not placed the orders for that?

So how we are going about is, yes, the CapEx is by and large done for the non-module part. We are done with, let's say, 80% of the transmission line and rest of the substations and the plant infrastructure. So the modules, we are looking at opportunistically, let's say, right now, the module prices are sub INR 12, right? They are in the range of INR 1,160 because of the changes in China regulation. Till -- from now until December is a good time to buy modules where you are buying Chinese cells. So we will be very opportunistic about the module and the other purchase, but we will want to minimize the interest during construction. So we'll balance these 2 objectives and buy modules, right? And we are also requesting that if there is any preponement on the GSS side that we are also working with, but we are viewing like that. In terms of the Fatehgarh II independently, which is not relevant to the PPA question you asked, but separately this Fatehgarh II is the bay is charged. So if we want to give the nighttime power, which we don't want to for this particular PPA. But for future PPAs or other PPAs we are doing there, the bay will be charged -- bay is currently charged. So it is capable of evacuating nighttime power, which is not relevant to the question you asked.

Got that. Understood. And just on the INR 1,400 crores of contracts that have been locked in, typically what's the tenure for this? And what are the aggregate units that we need to supply under this?

So see, the realizations, Aniket, we mentioned is around INR 8 to INR 10, in some cases higher also. So that's the -- you can calculate the amount of units because as the capacity is currently 3.6, it is going to 10. So the capacity will keep on adding up, and that's how the volume weighted megawatt hour will be arrived. So in terms of the contract nature, they range from -- until March, we had a couple of bids where we participated where the states are buying power for March today. Because of the El Nino effect, there is a lot of planning which states are doing in terms of the shortage they are perceiving across the monsoon months, we are also seeing strong demand. So typically, they are less than a year. All these are less than a year because that's where the short-term market is in terms of the contracts. But we are also seeing the midterm bids coming up from various states where they're looking at 5-year contracts. But that 5-year contract, we only have one project which we can offer from, like we mentioned, which is currently non-tied up. So we are only looking for bids under 1 year because keeping in mind our commitments and other things. So they are typically, you can say, maximum 1 year, but typical range is around 6 to 9 months ahead.

Understood, sir. And within this quarter, the battery that we have, how many cycles are we running in a day on an average?

One cycle a day.

One cycle a day. Okay. And just to confirm the 20-gigawatt hour battery, how much have we already contracted?

So we have contracted almost all of it. You can say around 90% of it, so already contracted. And in terms of the timing of battery procurement, that's an important point that we foresee that this year is a good time to purchase because there is a 6% export tax being imposed in China from January. So that's another thing. And of course, the merchant market-wise also earlier, the better. So given that we have contracted, by and large, all of it in terms of the contract. Wherever the PPA is not signed, that is -- we don't count it as something we need to order. So that is what is left. But wherever PPA is signed, there we have ordered the battery.

Our next question comes from the line of Mohit Kumar from ICICI Securities.

Congratulations on a very good quarter. My first question is, can you just help us with the depreciation and interest in the quarter, especially for the batteries, which were accounted in the P&L?

Right. Yes. In terms of the policy, it's a 20-year depreciation for the batteries. So in terms of the number, I'll just give you the numbers. Arun, can you spell out numbers? You can spell out the numbers.

Yes. So the interest portion in the battery part is around INR 32 crores and the depreciation part is around INR 27 crores.

Understood. My second question is on the -- of course, the CRC introduced a free exit option of merchant route conversion for lacking a signed PPA. I think you mentioned in the PPT that this is advantageous to us. Can you just help us how does it impact us in slightly more granular details?

Sure, sure. So as you would have noted that, Mohit, that bulk of our PPAs are signed. And the rest of the LOAs, which are still left are also on a good track to be signed. So we will gain from this freed-up connectivity where the PPAs are not signed and where the people have not -- where the people don't want to do, let's say, the alternatives which CERC is suggesting, let's say, putting up a merchant plant or putting up a C&I if their PPAs are not signed. So there is a -- we are expecting that quite a few -- quite a large number of connectivity may be freed up by this initiative, which is a good initiative by CERC. So that's how we are positive in terms of the future growth that we were seeking highest GHI connectivity always. So this will enable us to try and, let's say, if there are options for this connectivity, which is freed up, it will help us get that, which we could not have got if this initiative would not have taken place. And secondly, it will also help the CTU plan the future connectivity better, which is good for the grid in terms of the overall country that the connectivity is appropriately utilized and not stranded, and also good for batteries because the nighttime also will come around those -- because there is a Right of First Refusal attached to some of these connectivities, which will be freed up. So that will also free up a lot of non-ROFR connectivity or a ROFR connectivity, which is all linked to the solar connectivity. So very good development for us and the industry.

My last question is what is the expectation on bidding activity for the next 9 months in this fiscal for REs. We have seen that there is a slowdown in general in bidding, especially in the last quarter and FY '26.

Right. So in terms of the bidding, as you know, that we only have one area, which is now 6 months since that initiative. So SECI is consolidating all the bids. And now they've put in a rule that they will not come up with a bid until they have a prior -- more or less firm commitment on the requirement of power. So what we are seeing is the cycle time from bid to PPA will reduce because of that. So the quantum of bids, of course, have reduced from SECI because of that because they are realigning their whole sales and procurement system basis this guideline from the ministry. So what we have seen from them is a good amount of PSP, good amount of wind, good amount of 4-hour peak power bids, the full round-the-clock FDRE bid. So very large bids are expected. And we have...

CFD.

CFD is another contract for difference. So these are all -- which are very solid bids backed by demand from the counterparties. Bengal is coming up with a good amount of requirement post elections. Then there are a lot of other states which are coming up and, let's say, for the round-the-clock FDRE, there is a good demand. And these are all high crore per megawatt CapEx bids. So in terms of the CapEx and ROCE, these are very significant bids. And it is good for serious players because it needs connectivity at multiple places. It needs integration of various sources. So that is there. Then other than SECI, there are a lot of medium-term bids which are coming up from the states, like we said, like a 5-year peak power procurement. Even Gujarat and a lot of other states are coming up with their own FDRE in terms of the high creditworthy states. So that's, again, a good opportunity. And with the ISTS we were going -- there is, again, move towards BESS tenders and again, move towards putting up projects in high-resource states. Some states are going for that like Maharashtra is also coming up with those kind of bids. So the format of the bids have changed. There is no solar bid which will come, right? There is no -- of course, pure wind bids will continue coming. But the battery-related bids will be the focus. There is no bid in renewable, which will come other than PSP, which will not have battery. So you will see that the focus will be -- and also there is a rightsizing of battery bids, which will happen because of delay in the VGF-based projects, which was done by various states. So states will also size up how they realign post that bids in terms of the actual execution of those bids. So you will see that realignment currently going on because they were hoping for that execution, but that execution is not happening because of the competitive nature of those bids. So some realignment because of which the volume is currently low, but the structure being put in place and the demand drivers are very strong.

The megawatt-wise, I think I would like to also add, the megawatt-wise, there may be lesser megawatt, but each megawatt will be equivalent to 4 megawatt of solar because they are round-the-clock type of power, which we expect more and more to come in.

Our next question comes from the line of Sambhav Kela with HSBC Bank.

My first question is on the PPAs that you have signed this quarter. So on the 2 projects, are there any change in terms that have allowed you or enabled you to sign these PPAs, especially for the hybrid project? And also, if you could elaborate on the configuration of these 2 projects?

Right, right, right. For the hybrid project, what we have done is we have offered 1 hour of battery, right? That is the change to the standard configuration, right? And the second project, which we have signed is which one?

INR 6.28 per average.

Yes. This is no change. There is no change in that project configuration.

Okay. Okay. Got it. And secondly, if I look at your last quarter's PPT, there is one ACME Marigold LOA awarded project where you had mentioned that you have been invited to sign a PPA. So any progress there? What's the update?

Yes, yes, yes. Yes. So actually, this is being signed with the Northeast, one of the state in the Northeast. So they were taking time to -- because you know the railway status is currently as an open access party is being revised by Supreme Court, you must have gone through that proceeding. So because of which it is -- it took time. We are still very advanced stage, and we have given the bank guarantee for signing PPA. So it is expected to be signed very, very shortly. It took some time at their end, at the state end. The REMCL is very proactive on this, but the railway unit in the Northeast took some time. So this is still at a -- it's 100% going to be signed very soon.

Got it. Got it. And just lastly, if I -- just a clarification. On the projects that are -- that were targeted to be commissioned this year and where the GNA timeline is well into FY '28, what you're saying is that you will perhaps operate BESS on those projects, but you won't commission them early and operate them on TGNA, right? Is that understanding correct?

So see, the Ministry is also requesting everybody given the curtailment in Rajasthan and others. So every ministry also doesn't want people to commission because there was a representation by the industry that there is a lot of curtailment happening in the whole state. So nobody in the industry would like to commission on TGNA because the amount of curtailment which you get is not good for your shareholders or anybody, right? Even the lenders would not like it. So it is prudent to plan such that you only supply where your lines are complete -- all the elements of the line are ready, right? You right-size your plant. So we will -- wherever the solar GNA is available, right, we will try and prepone the plant as much as possible because it is always beneficial for us to early-commission the whole plant, so which we will continue to do. But wherever the solar GNA is not available, it does not make sense to buy modules and keep them stranded or not generate the whole PPA power because that is IRR decretive. So we will never do that.

So to clarify, I think your question also this one, we will make the plant ready in terms of transmission line, substation and even the entire balance of the plant. What we will do is we will operate the battery there at the plant. And whenever the daytime GNA gets operational, then we will start feeding solar.

Our next question comes from the line of Apoorva Bahadur with IIFL Capital.

You mentioned in your presentation and in the commentary as well that you have signed a locked BESS capacity, which will earn about INR 1,400 crores of revenue in this year. Can you share how much of the BESS capacity has been locked in and how much of the storage inventory is available for further monetization?

So Apoorva, you can -- we have mentioned INR 1,400 crores. So you can say that is around 70% to 80% of our capacity, which is locked in and 20% is still left. And this is assuming a 10-gigawatt hour kind of a number by March. If we go above, then we will need to contract that. But we are slightly -- we want to basically factor in any supply chain or such kind of issues. That's why we are guiding for 10-gigawatt hour.

Okay. And the EBITDA margins would be similar as 1Q, 82%? Or do you expect a change over there as well?

So see, the -- as you know, yes, the Q1 is a slightly better quarter. But since the commissioning happened in a staggered manner, right? So the interest and depreciation, so we will have to see. I'll have to come back to you on this one. But by and large, not very different from this, right? So the cost of power was also similar. So it should be similar. I think it would not be very different, maybe 2% to 5% here and there, but not very different.

Understood. That's quite helpful. Also in your presentation, I think you shared the capital cost for BESS, which has been capitalized around INR 93 lakhs per megawatt, if I'm not wrong. So yes, so that comes to around about $100 per kilowatt hour.

Yes.

How are you seeing this trend? I think initially, the first few batches which we ordered were at a slightly lower rate. And now what is the current price of delivered BESS into India?

Right, right, right, right. You are very right, Apoorva. So the initial BESS we ordered were at a lower prices. And then, of course, the lithium carbonate is a very volatile commodity. And of course, China has some -- has, again, a supply-demand economics through which things play out. So this INR 93 lakh could go up, right, could go up for the future BESS, but not again by a very high percentage, not more than maybe 5% to 10%.

Yes. Within our budgeted cost.

Within our budgeted cost. So because rest of the components, we are saving like the PCS is coming lower than the budgeted cost, and rest of the components are also coming in. And mind you, we are building at the substations where the line is already there, right? Line and substation is already there. So that also helps us save cost. The other thing is we are not factoring in the hedging gains we will have in this cost because we have already hedged more than $300 million of dollar from which we have a lot of hedging. So we are telling you the cost as we are spending it. And there will be -- so in terms of the -- because we have locked in a rate of around $89, $90, in some cases $92, $93 also depending on where the dollar was at that. But we keep on hedging as and when the opportunity comes because it's a very volatile world. So we keep looking for opportunities to hedge. So that -- there is, you can say, a positive bias in terms of reducing cost on the -- because of the dollar movement.

And this INR 93 lakhs, which you mentioned comprises given that it's a capitalized cost, IDC, EPC profit.

Everything, yes. Everything.

Yes. So INR 93 lakhs, including the transformer, everything.