Adani Enterprises Limited (512599) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '23 Earnings Call for Adani Enterprises Limited, hosted by DAM Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from DAM Capital. Thank you, and over to you, sir.

Thank you, [indiscernible]. On behalf of DAM Capital, I welcome you all to the Q3 FY '23 earnings call of Adani Enterprises. We have with us from the management team, Mr. Vinay Prakash, Director, Adani Enterprises and CEO of Natural Resources. We also have Mr. Robbie Singh, CFO, Adani Enterprises; Mr. Saurabh Shah, Finance Controller; and Mr. Manan Vakharia, Investor Relations. We will start with a brief opening remarks. After which, we'll follow it by Q&A. Thank you, and over to you, sir.

This is Robbie here. Thank you for joining the call. Just as a brief for the last 9 months, and then I'll touch on the quarter. For the last 9 months, I'm very pleased to inform you Adani Enterprise crossed INR 1 lakh crore in terms of total revenue. EBITDA for the first time crossed INR 6,000 crores and PAT also crossed INR 1,700 crores for the 9 months. On the key metrics, interest coverage has comfortably averaged for the last 4 years over 2.5x. Debt cover ratio is over 2 for the first time. Net debt-to-EBITDA now has fallen below 4x [indiscernible] net debt-to-EBITDA. Net debt-to-equity is now stable at less than 0.8 to 0.9 and net debt-to-assets are comfortable at 0.2%. For the quarter, Adani Enterprise has had a stellar quarter, this third quarter of 2023. For the first time, we've had a significant contribution from our newly incubating assets, which now stand at 33 -- approximately 33% -- was a little higher than 33% of our EBITDA. For the quarter, the revenue stood at INR 26,950 crores and the EBITDA at INR 1,968 crores. Of this EBITDA, INR 906 crore came from the new incubating businesses. These new incubating businesses include green hydrogen, Adani Airports, Roads and Data Center. Our traditional businesses of mining services and trading have consistently been a good performer for the last decade, and they continue to be excellent performers as of this quarter as well. The pleasing aspect of this quarter has been that the EBITDA increase at Airports driven by passenger increase of 40% and air traffic movement increase of over 20%. We're also pleased to inform you that our 2 gigawatt of cell and module line is operating in the Adani New Industry ecosystem, and our 5.2 megawatt onshore wind turbine is undergoing certification, which we expect it will complete in June. In relation to overall operating highlights, sales volume from our Adani New Industry ecosystem are up 64%; IRM trading and sales volumes are up high single digits; passenger movement at Airport up 40%; air traffic movement up 21% and we've completed close to 37 lakh road kilometers -- lane kilometers. In summary, these have been -- last 2 weeks have been interesting, but the key highlight, as always, has been stellar performance of Adani Enterprise and it's incubating businesses. With this, I will open for Q&A.

[Operator Instructions] The first question is from the line of Nikhil Abhyankar from DAM Capital.

Congrats on a good set of numbers. So sir, are we -- after the recent events, are we still going ahead with the CapEx plan for the renewable segment? And when do you expect the commissioning of 10 gigawatt of solar cell and module capacity?

So see, with the recent plan, there are a couple of changes, a couple of measures we will take just to respond to the market volatility. But overall, our plans for Airports, for the green hydrogen business, which is a core of our infrastructure. I will highlight to you another point what -- when I say this, see, if you see our -- now that we have -- all of our results are out, I can share with you. See, our core portfolio, which is the infra portfolio is about 81% of our EBITDA, which is -- and it has grown 46% in the last -- compared to the last 9 months of 2022 versus 2023. And that -- the core infra portfolio EBITDA is close to INR 33,000 crores now. As I mentioned earlier, our mining services and mining business is robust and stable and contributes about 9%. Cement is now contributing about 7%. So if you look at our core cash flow generating assets, they are exactly the same as before. So our investments in the core infrastructure sector, which includes Energy & Utilities, which is green hydrogen, and the -- our Transport & Logistics portfolio will continue as planned. However, given the current volatility, we will moderate the certain accelerations that we have budgeted in the CapEx profile. And we will now continue on the ordinary course of business based CapEx. So to that extent, yes, there is a change. But overall, our core infra and utility CapEx programs, we will continue to the extent of the -- as we've always done to the extent of the free cash flow available in those businesses.

Understood, sir. And just a second question. Sir, what are the contribution of [indiscernible] in terms of revenue and EBITDA from the Carmichael Mine?

Carmichael Mine this quarter contributed INR 427 crores, and that number will continue to rise on the EBITDA line.

On your EBITDA?

Yes, on the EBITDA line, EBITDA.

[Operator Instructions] The next question is from the line of Tanu Poddar from Mount Intra Finance Private Limited.

Okay. My question is regarding the Airport segment. So I wanted to understand the decline in the segment results. Because considering the high operating revenues in this particular segment, we would expect the EBIT to rise instead of fall. So I just wanted to understand why it has fallen and some details regarding the concession fees for the Mumbai Airport, regarding these two things.

I think EBIT more a realistic way to look at would be that the depreciation levels will continue to rise as we -- as our CapEx numbers rise. But overall, the EBITDA numbers are continuing to rise. So the depreciate -- noncash depreciation at the Airport business will rise for some time. Now in relation to the fee paid calculations for the quarter and for the year, we will share with you -- Saurabh and team will share with you post this call to the actual fees paid to AAI because I don't want to quote a rough number. I would like to just give you the exact numbers. So I will -- we will put that in [ writing ].

We have the next question from the line of Nirav Shah from GeeCee Investments.

A few questions and one clarification. You mentioned EBITDA from Carmichael Mine at INR 422 crores? I mean, this...

For the quarter, yes.

And that is part of -- it doesn't form part of any of the segments that we have reported, either ICM or MDO, it's -- [indiscernible] that?

It's part of the Natural Resources. So Saurabh, in terms of segmental reporting, we will bring [ out ] the Carmichael Mine from next year onwards as a segment? Yes?

Yes. Because right now, it does not fall above 10%, which is the criteria for segment [indiscernible].

Okay. Okay. Got it. Because if I add up those EBITDA reported from the segments, I mean, Coal Trading plus MDO, Solar and Airports, we are already getting INR 1,600 crores of number. I'll take it with Saurabh offline on this.

Sure.

Sir, just regarding the MDO volumes, I mean, we had given a target of 40 million tonnes and 50 million tonnes this year and next year. We largely stick around that same target?

Vinay, please?

Yes. In fact, I think this year, we are going to be around 30 million, and next year is going to be 40 million.

Okay. So we've scaled down by 10 million tonnes [indiscernible] plan.

Yes. So 1 or 2 products have got delayed because of which the volumes are lower, but we can always recoup it in the next 1 or 2 years' time.

Got it. And on the [ commercial mining front ], the first mine [indiscernible] starting in FY '24?

Yes, [indiscernible] FY '24.

And sir, last question is on the green hydrogen projects. I mean, we have read comments from the total management that as of now, they haven't signed. So any revised schedule in terms of commissioning of our hydrogen capacities, green hydrogen capacities, if you can?

No, I think the first stage of projects was related to the integrated manufacturing, they are continuing. And I think also, we should be careful in just looking at the media as a media statement. So it's -- the real full statement was that MoU was signed in May, engineering due diligence, technical due diligence, marketing due diligence. That work is continuing and that takes time on large projects like this. So [ Total ] is doing that work. And once that's completed, we will come back and revisit. But for the -- and then we'll look at it, but our MoU is still signed and was signed last year May. I think a lot of time in a higher volatility scenario, a lot of things get said, but I think you should not -- but our plan always has been that we are continuing with the Adani New Industry projects for the past 2 years. So that work is still continuing.

Got it. And just the last question is on the Airports. I mean -- so the revenue share started from only October onwards?

So just to answer that, the revenue share, which we have taken a provision of is from 1st October '22 this year in Mumbai International Airport. And before that, we have already -- as per the [ note ] which we have been giving that no provisions were taken because of COVID restrictions that were there in the earlier part of last year and the first half of the current year.

The next question is from the line of Anuj Suneja from ICICI Pru Life.

Yeah. My question has already been answered.

We have the next question from the line of Dhananjay Kumar Mishra from Sunidhi Securities.

You indicated that the pace of investment will be moderated going forward till the volatility is there. So any changes in our -- this new Mumbai greenfield project which we are expected to complete by March '25? So any changes over there? And what is the status of financial closures over there?

No, no. I think we -- I just want to clarify it. Ongoing projects, there is no change. So Navi Mumbai Airport will be completed on schedule, December 24 in 2024, and it will be ready for commercial [indiscernible] it is all set, everything is fully funded. There is nothing there for us to do new. It was just -- construction is continuing. And the best thing to do is that I would encourage those of you who are based in Bombay to actually -- it's a small drive. If you don't go, we can hire a bus and take investors there, and you can have a look -- analyst there, you can have a look at it for yourself. What -- when we say we will moderate the CapEx is that new commitments we will -- in fact -- we will not make new commitments till we settle this volatility period.

So even the Ganga Expressway is going as per schedule? There's no change over this?

Yes. Yes. Committed projects are continuing as scheduled. There's no change. We have great support from our banking community, great support from the investment community. So there is no change in that asset. We -- naturally when something like this happens, it's a very high level of volatility, and we have to handle it in a very mature, sensible manner. And so we have to look at it carefully. And so what we are moderating is that we let the volatility settle before we make any new commitments, and we will not make any new commitments till we are comfortable that the volatility is settled, and our investment community is not suffering the volatility and our supporters [indiscernible] and people who stand with us, institutions who stand with us, banks and investors that they don't have to deal with this on a daily basis.

Okay. And now the net debt-to-equity remains at under 1 -- 0.8, you said, right?

Correct, correct. That will not change for Adani Enterprise stand-alone basis because it actually will always oscillate around that level. Even at the group level despite all the growth of 46% in the last 9 months in the EBITDA from [ 22 ] to over INR 32,000-odd crore, INR 33,000 crores, net debt-to-EBITDA has remained at just under 3.2x.

Consol level, you are saying, AEL?

At a portfolio level. Yes.

Yes. Sorry, AEL consol level is just at 3.8 now.

3.8 [indiscernible]?

Yes, it's fallen below 4 for AEL...

What is the gross debt at consol level in AEL as of now?

Saurabh, can you give the precise number, please, on the exact number?

So as such, sir, in December, we don't give the balance sheet numbers. But right now, our gross debt-to-EBITDA is around 4.7x. We will be giving the full set of numbers in March quarter. At that time, we will come out with the exact numbers also.

Okay. And we have not considered [ debt ] of new Mumbai Airport in this.

Right. As of now.

So whatever disbursements have been taken are all included, sir.

[Operator Instructions] The next question is from the line of Bajrang Bafna from Sunidhi Securities.

Congratulations for a very good set of numbers for Adani Enterprises. And we genuinely stand by these difficult times, which we are facing due to some unforeseen circumstances. So sir, for the benefit of all of us, there is one thing that is in all of our minds that how we are going to fund the ongoing CapEx or the ongoing different projects that we are doing maybe for FY '23 and FY '24, which has already been announced. So if you could in a nut shell can define that this is what the investment requirement across different portfolios for the coming 12 months?

Sure. I think firstly, thank you for the support, and we are really encouraged by the support from our core investor and banking community. In relation to the total numbers, I think what we will -- because of this volatility, we don't want to give out each time we speak a number. Over the next 6 weeks, we'll come up with a formal plan, which we will -- which will be the part of the new -- March 31 results. All I can say to you today -- as we stand today is this, we will -- new commitments we ourselves will not make. Our existing projects are fully funded and continuing. So to say, Navi Mumbai Airport, Roads, Data Center, et cetera, they are continuing as scheduled.

The next question is from the line of Anshuman Ashit from ICICI Securities.

Congratulations on a good set of numbers. Sir, the first question is on our wind turbine manufacturing setup. So we had -- we were testing a prototype. So has that testing been concluded? And by when will we start the commercial production?

The testing will conclude between April and June, there are various steps of testing, various different tests have to be done, but we expect it to be finished by June, July this year. And then commercial operations will start -- production will start shortly thereafter.

Okay. And sir, the capacity target. So is the 3 gigawatt target being maintained for the wind turbine manufacturing?

Yes. Yes.

Okay. Sir, for 9 months, what has been the volume from our Carmichael Mines?

Carmichael Mine is -- Vinay, can you please give the run rate numbers?

I think roughly, it is around 5.5 million, 5.6 million tonnes. Saurabh can give you the right number. I think it's 5.5 million or 5.6 million tonnes.

Yes, yes. It is 5.5 million tonnes, sir, for 9 months. And for the current quarter, it is 2.5 million tonnes. Yes.

So 2.5 million tonnes already done in the 1.5 months in Q4?

No, no, no. We are talking [indiscernible] quarter.

Okay. And sir, what should be the normalized run rate which we can expect from this [indiscernible] in FY '24?

This mine is designed for 15 million tonnes.

Okay. And by when can we expect to reach the peak [indiscernible] capacity?

We're trying to get the [indiscernible] capacity by March or April.

Okay, understood. And sir, any targets on the IRM volume front, which you can give us for FY '24?

Actually, IRM targets are all decided by the market demand and supply price. So I think this year, if we are going to be plus 70 million tonnes, we foresee the same number to be the next year or slightly higher than that. But again, it depends on what is in the [ shortfall ] in India and the other countries where we supply coal.

Sir, how are you currently seeing the market? So is the demand/supply gap still there? And do you expect it to continue over CY '23?

Yes. So demand and supply gap is there. We do see it continuing for next year or so, but it all depends on how the power demand is coming up. If It goes down because of some reasons, it may affect the coal demand also. But as of now, we are very optimist and [ really ] positive in terms of the demand for the next year also.

Okay. Sir, one last question, sir. Have we done the financial closure for the Ganga Expressway project? Is that true?

All the sanctions have been completed. And then there are a couple of conditions precedent that we have to go through, which we will complete over the next 2 to 3 months.

Okay. And sir, we expect a lot of biddings and awards to happen on the Roads front in Q4. So will we be aggressive in [indiscernible] for them, and what will be your mix in terms of bidding for HAM projects and EPC projects.

No. See, as I mentioned earlier in my comment, for the new commitments on CapEx, we will first want this volatility period to settle before we actually make new commitments. So we -- I don't expect any significant bidding in the road projects till this volatility period settles.

[Operator Instructions] The next question is from the line of Nikhil Abhyankar from DAM Capital.

Sir, I just wanted to understand physical process regarding the copper plant and the Coal to PVC project that you have.

Copper plant, as I mentioned, it's an existing project. It's continuing. It's part of our natural resources team, which is Vinay's team. And they are continuing with the project. Construction is on schedule, and we will complete on schedule. In relation to the Coal to PVC, as I said, that is one of our new commitments, and we will reveal that commitment post this settlement of this volatility period. For the time being, we will not be making any commitments to new projects.

Okay. And sir, any plans regarding the data centers?

So data center is all scheduled projects, and they will continue as planned.

Sir, also, I just saw that there was a major [ debt ] in the [indiscernible] the coal trading, basically volumes. So given that the power demand is set to rise during the summer, sir, do you see there will be a major spike in this volume going ahead?

Vinay, can you please?...

I think you're right, the power demand goes up from March to June, July till you get the monsoon. And at that time, we definitely get a lot of requirements from [ Electricity ] Board for [indiscernible] coal. So we do see a spike in the demand. But as I said earlier also, it all depends upon the demand of power. If it continues or it happens the way it happened in '22, we are going to have the huge demand coming out of [indiscernible] also. But if it settles because of any reasons, then you may see the same demand, same numbers, which we are seeing in this quarter.

And so the EBITDA per tonne is coming out around [ 540 ]. So is this sustainable at higher volumes?

Yes. So what happens? If you really see the way we have been working in IRM, it is more of a service business where because of our being there in the complete supply chain, we command this dollar per tonne as a margin, which we have been maintaining for last so many years. It varies between [ 3 to 5 or 3 to 6 ]. We get this because of being there in the service function, being there in the complete supply chain. So we can maintain it even though it is going to be higher volume.

[indiscernible]. Okay.

Sir, sir, next question is regarding solar. Just one clarity, sir, what is the total capacity that is operational right now? Is it 3.5 gigawatt, 2 gigawatt?

3.5 by June.

3.5 by June. Okay. So we are almost [indiscernible] 80% capacity. And again, the realization over there is around [ $0.42 ] per kilowatt, which will be higher than what is the current trend. So is this also sustainable going forward, sir?

That will moderate to more market levels over a period of time.

And what will that mean market level, sir -- so market prices basically.

Market criteria.

[Operator Instructions].

So [indiscernible], if there are no further questions, we can close the call.

Sure, sir. I would now like to hand -- Sorry.

Is there anybody who has any question? Just check once again, if that be the case.

Sir, we have one participant who has just joined the queue. We will take the question from Nirav Shah from GeeCee Investments.

We can hear the last question. Yes.

Just one question on the [ MDO ] operations. I mean we mentioned that our volumes were impacted by [indiscernible]. So is it a onetime thing, which was during the quarter, or the run rate will recover from fourth quarter onwards?

So it was a onetime stoppages only [indiscernible] started and the way we are doing the volumes, I think we'll have a really good quarter for -- of FY '23. And we don't see this to happen in the future.

Okay. Any particular, I mean, what was the reason for the lower volumes? Was it [indiscernible] related or...?

It was changing from -- no, there is no [indiscernible] issues in any of our [ MDO contract ], and it can't happen also in the future. It was an issue of moving from your [indiscernible] permission where we were moving from Phase 1 to Phase 2. That is a transition issue.

[indiscernible], we can now close the call.

Yes. Sure, sir. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Probably on behalf of Vinay, CEO of our Natural Resources division and Metals division, Saurabh and Manan and team, I just want to thank everyone for participating. And we are on track for continuing performance in Adani Enterprise as we have indicated and our incubating businesses are performing as per schedule, which is a very pleasing result. Thank you so much for being on the call, and thank you for all your support. Buh-bye.

Thank you. On behalf of DAM Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines.