Adani Energy Solutions Limited (ADANIENSOL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Adani Transmission Limited Q4 FY '23 Earnings Call hosted by Nuvama Wealth Management. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Subhadip Mitra from Nuvama Wealth Management. Thank you, and over to you, sir.

Thanks. Good morning, friends. On behalf of Nuvama Wealth Management, welcoming you all to the fourth quarter FY '23 Results Call of Adani Transmission Limited. We are joined today by the senior management of the company, led by Mr. Anil Sardana, MD; Mr. Bimal Dayal, CEO of Transmission; Mr. Kandarp Patel, CEO of Distribution; Mr. Rohit Soni, CFO, ATL; Mr. Kunjan Mehta, CFO, AEML; and Mr. Vijil Jain, Lead, Investor Relations. I would now like to hand over the call to Mr. Sardana for his opening comments. Over to you, sir.

Thank you, Mr. Mitra, and very good morning to all our analyst friends. Let me convey my thanks to you all to have joined us early in the morning. The year that went by and the results that we declared yesterday, I will precede that by a bit of gratitude for the recognition that Adani Transmission received during the last quarter. Number one was the rank #1 bestowed on Adani electricity Mumbai by Government of India for the rankings that they did for various DISCOM and this is indeed very encouraging and very motivating for team to now sustain and ensure that we hold that position and stay within the top DISCOMs in the country. The number two, my gratitude goes to the ET Awards and the jury awarded emerging Company of the Year at to any transmission that amidst all that was being spoken and talked about was, again, very motivating and encouraging. And thanks to the honorable finance minister to have handed over the award to us. The third recognition is noteworthy that came in from Frost & Sullivan which gave us the unlike growth leadership award 2022, which was for something that we take tremendous pride in terms of sustainable business practices and ESG disclosures and tide path. So that is something that is really worthy of our commitment and therefore, for someone to recognize that part and orders on the ESG side is indeed very encouraging. The last part is, of course, in terms of the governance aspect, the Institute of Chartered Accountants are giving us reward for excellence in financial reporting for the year '21, '22 within the infrastructure sector. So I just thought, as a company, convey my gratitude to all the stakeholders, employees, for having stood by us and particularly in the times when a lot was being stated, but the company continued to move ahead and its parts of growth as also in terms of its performance. And I'm happy to report that the company gave yet another good performance during the quarter and make sure that in terms of all the operating parameters, which is availability, supply reliability, the distribution loss, I think we lost. Sure. Okay. Distribution loss and the 1 million units sold on all attributes we did exceedingly well. So that is how things stood by in terms of what we have been able to achieve. the other aspects in terms of ESG, as I said, that is something that the company has aspirations to be within the top 20, 25 companies globally. And therefore, we will continue our focus on various aspects, which will get us those ESG rankings and make us being rated amongst those companies. And to that extent, whether it is MSCI, whether it is S&P, sustainability score or FTSE, we will continue to pursue those objectives by virtue of our sustainability efforts on different counts and eventually keep our eye on the net zero target by 2050 in terms of limiting the global warming to 1.5 degrees. I will wrap up very quickly by saying that we have marked well on our targets to be 20,000 kilometers company with 40,000 MVA the operational terms when it comes to the transmission side. On the distribution side, we've done exceedingly well on some of the attributes linked to the customer, which is in terms of digital revenues in terms of video call center in terms of having moved to reliability indexes, which are comparable to the best in the world. And we are eagerly looking forward to working on 2 of the additional parallel or second licenses that we have applied in Navi Mumbai as well as in the Greater Noida area. In addition to the 2 licenses that we already hold, which is at Mumbai has also in the Mundra or Kacharia. I'm sure that you will have a number of questions, and I have my 2 colleagues, Dimmel and Kandarp, both supported by their subsequent -- the teammates and each one will be able to respond to various questions that you may have, and we look forward to a good participation. Thank you so much.

[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.

My first question is on the transmission pipeline buildup. I understand that the pipeline has gone close to around INR 500 billion or projects worth are under bidding and roughly another INR 500 billion is under some kind of a -- is waiting for a poor fine OP So how do you see that with the large opportunity? But last year, we hardly participated in or won any material bidding compared to earlier years, where your market share is much higher. How do you think about this pipeline?

So thank you, thank you very much for this...

Before -- Bimal, you go ahead, just Mohit, interesting to see the change. I didn't notice it before. I think you moved to ICICI Security. So welcome.

Thanks, Mohit, for this question. I will probably take a little step back and give you some parameters for this financial year as well and then really zoom into your question as well. I think one of the things which we ended up doing this quarter, this year has added almost 1,700-odd circuit kilometers to reach almost towards our goal of 19,779 circuit kilometers. We operationalized almost 4 key projects as well. And just as a competitive, we did 1,104 circuit kilometers previous year just as a growth, the comparison. The country's network grew by 3% in terms of lines, and we ended up achieving 8% growth. In terms of the transformation capacity as well the country grew at the rate of 7% and by virtue of few of these projects, we grew at a much faster pace of 26% transformation capacity. Now for the pipeline, I'll start with a very close input, which is the pipeline we have under construction. For the coming quarters, we are actually looking to commission at least 4 very key projects. And I think this will add almost 3,000 circuit kilometers to what we already have. Now the interesting part, this sector is sitting with so much of bidding, which is coming up as well. I think for us, we are actually looking at the TBCB pipeline of INR 66,000 crores. And our belief is this would take place in 12 to 18 months. And we believe that after this GIB clearance by the honorable Supreme Court. We envisage that the Rajasthan corridor bidding would start and I think this would start in a few weeks' time from now. And I think we would certainly participate in that pipeline build up as well. However, our underlying forecast on, let's say, our annual CapEx, we continue to give this guidance of INR 4,500 crores to INR 5,000 crores in transmission in the next 2 to 3 years. Hope that answers your question, Mohit.

Yes, sir, it does. It does. My second question is on the distribution licensee. Of course, on the new distribution upcoming license where you are trying to get the approval. What are sort of time lines do you think the regulator will take to a decision either way? I think we filed, I think, last year somewhere. I think it's already been 6 months, if I'm not wrong, yes.

Yes, this is Kandarp Patel. You must have noticed that we have applied for parallel license in Navi Mumbai as well as Western UP [ Jaiwa ] District. And we have also applied for additional area, which is also a second license for our Mundra distribution utility. Now all the applications have been filed with the regulatory emissions and it has reached to almost half of the process, which is required to be undertaken by the commission. So public notice were issued in all the 3 -- in 2 cases and public objections have also been received. Now commission has to again a public issue a public notice from their side and then invite our objection. And once they deal with that objection, they will be able to decide on that license application. As far as UP is concerned, now they should -- they will ask us, we hope that they will ask us to issue a public notice very soon because last part on our application, they had some queries and we have replied all those queries. So we expect that in another couple of months, the proceeds should get completed, at least in Mumbai and Mundra area and another 1 or 2 months for UP, yes.

[Operator Instructions] The next question is from the line of Harsh Shah from Jefferies.

So just to continue on the distribution but, sir, I would like to understand what's the status on the distribution reform right now. So can you just throw some light on that?

So, Harsh, the government of India is envisaging to amend Electricity Act and the bill is already under discussion. It has taken quite a long time, but what approach that we have taken that the existing air itself provides for provision for parallel license. So the path that we are pursuing doesn't require an amendment in the Electricity Act. But as and when the electricity actually amended and they allow to create multiple distribution companies in the same geography, we will welcome that and that will also help us grow faster.

The next question is from the line of Subhadip Mitra from Nuvama.

Yes, my question is, firstly, with regard to the larger TBCB pipeline that we are looking at, where you mentioned that we have a pipeline of maybe INR 66,000 crores over the next 12 months. Do you see a large component of HVDC projects also coming up in this space because these are very large ticket projects? And would you be also participating for some of these HVDC projects.

Yes. This is not 12 months. I think it is 12 to 18 months. And yes, there are HVDC projects as well coming up. And I think a lot of it has to do with the evacuation corridors of Rajasthan as well and some of the strengthening projects which are coming up, which includes the statcom as well. And of course, we will be participating as well. And I think -- we need to be mindful of the competitive intensity, which I think is growing in this segment. And one thing which we have committed to ourselves is that we will certainly be looking at profitable growth and winning the projects with the right kind of margins as well. But to answer your question straight, we will be participating. Okay.

Understood. Secondly, with regard to the intrastate CapEx opportunity, I mean we hear of numbers as large as maybe INR 200,000 crores as an opportunity there as well. Do you see any movement towards that?

Well, those are probably under discussion. I don't think much has come out. I think in our quarter 3 call, A very similar question came up. And I think we remain in this very similar status as well. Well, a lot of things is under planning, but not much has come out unless something really turns up I'm mindful of the fact that some of our competitors have certainly given almost an equal waited here to the interest or interstate projects or rather intrastate projects as well. And our guidance on that account also earlier has been that it is huge. We await the outcome here as well. So unless my colleagues want to add anything.

Understood. Last question from my side is with regard to the Mumbai HVDC project. What's the progress there? And when do you see that conversion?

Yes. So as far as Mumbai HVDC project is concerned, I'm sure you must be aware that litigation went up to Supreme Court. And we received the order from Supreme Court in our favor. After that, subsequent progress has been achieved on the ground, all the contracts has been awarded. The -- all the approval process environment and forest and CRZ is progressing very well. We are expecting all those approval by September this year. The laying of cable has already commenced in Mumbai, and we have already achieved about 15 kilometers of the progress there. Land at both end is also -- we have acquired, and it is in full posession of us. So substantial progress is going on, and we hope that we will be able to complete the entire project in the committed time line, which is March 25.

[Operator Instructions] The next question is from the line of Apoorva Bahadur from Goldman Sachs.

So a couple of questions. I think, firstly, on the smart metering front, if you can share some updates over there? How are we progressing? And then what has been the bottleneck at the system level over there, if you have faced any?

So Apoorva, we have already been awarded 2 smart metering contract, one from BEST and second from Assam. For BASP, we also closed our -- all the contracts and Assam, we are in the process of closing it. And there are many bidding process, which is going on just to name a few is in Chhattisgarh Maharashtra, UP, Himachal Prades, then Utrakand. So -- and now we are expecting a big tender from Tamilnadu aswell. Now as far as the ATL is concerned, what we have done is we have developed a strategic tie-up with all metal manufacturers as well as communication providers and software companies. So going forward, one of the biggest worry was mainly from a supply chain viewpoint. And we have taken a sufficient action on that part so that we don't face those challenges coming going forward.