Adani Enterprises Limited (512599) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Pelsia, moderator for the conference call. Welcome to Adani Enterprises Limited Q2 FY '24 Earnings Conference Call. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.

Thank you, Pelsia. On behalf of ICICI Securities, we welcome you to Q2 FY '24 Earnings Call for Adani Enterprises Limited. We are pleased to host the senior management team of Adani Enterprises today. We have with us: Mr. Vinay Prakash, Director, Adani Enterprises and CEO, Natural Resources; Mr. Robbie Singh, CFO; Mr. Saurabh Shah, Finance Controller; and Mr. Manan Vakharia from Investor Relations. We will start the call with opening remarks, post which we'll move to Q&A. Thank you, and over to you, sir.

Mohit, Thank you very much. Welcome all to the earnings call for half year '24 results of AEL. AEL's incubation portfolio comprises of assets spread across energy utilities, transport and logistics and primary industries. In digital infrastructure, incubating assets include Adani Digital Lab and Adani business services. AEL's established business portfolio is supported by primary industry vertical comprising mining services, commercial mining and under advanced stage of completion, the copper smelter. Half year '24 results are powered by the emergence of core infra incubating businesses, which have contributed 48% of the overall EBITDA. This reflects the incubating business growth journey and successive milestones. The consolidated total income for the half year was at INR 48,876 crores. EBITDA increased by 43% to INR 5,874 crores. And in line with the increased EBITDA, consolidated profit before tax increased by 50% to INR 1,958 crores. Incubating businesses continue to record robust operational performances with total income rising over 100% to INR 10,608 crores. Consequently, EBITDA increased by over 100% to INR 2,824 crores and the consolidated profit before tax of the incubating businesses jumped over 22x. In Adani New Industries, our commitment of having 10 gigawatt of integrated manufacturing ecosystem is well underway. I'm pleased to inform you that than Adani New Industries has produced the first wafer produced in India. The 2 gigawatt of ingot/wafer plant is within schedule to be commissioned by the end of this financial year. Solar module manufacturing plant, MSEL, has received commercial operations certificate from SECI. India's largest capacity onshore wind turbine generator, 5.2 megawatt each machine, is now listed in revised list of models and manufacturers. With this listing, wind manufacturing division of ANIL has now started commercial operations. ANIL has also received WindGuard Certification, which has affirmed our production standards. This allows us to start series production for global markets. In Adani Airport Holdings, our portfolio is performing along expected lines. And the half yearly passenger movement grew 29% and is tracking 85 million passengers a year with a half yearly movement at 42.7 million. DigiYatra was introduced at five airports: Mumbai, Ahmedabad, Lucknow, Guwahati and Jaipur. In this quarter, we also added two new international airlines to our portfolio and nine new international routes were connected. Arrival and departure immigration block in Terminal 2 of Ahmedabad Airport is completed. Additionally, Mumbai Airport has completed its pre-embarkation security check Phase 2 expansion program. Further, domestic cargo terminal was operationalized at Jaipur Airport. And as an update, Navi Mumbai Airport is well on schedule to be completed at end of calendar year 2024. Road portfolio during this quarter, 4 of our 10 road projects have achieved over 50% completion and are right on schedule. ESG is a big part of AEL's journey. And our philosophy embeds this into the fundamental investment planning and the other significant CapEx that goes into our incubating businesses is reflective of this. In line with the ESG framework, our businesses have received recognition for environmental and social impact. For example, Mumbai Airport achieved Level 4 customer experience accreditation, which is third airport globally and first in India. Further, the Energy Engineers and Managers awarded Ahmedabad and Jaipur Airport with gold and silver, respectively, for facility and for commitment to energy efficiency and sustainability. Now I hand over to my colleague, Vinay, to run through mining services, resource management and commercial mining. Vinay, over to you.

Thanks, Robbie. Good afternoon to all. First, the mining services. AEL is a pioneer of MDO concept in India, which is mining developer and operator concept, with an integrated business model that expands across developing mine as well as the entire upstream and downstream activities. It provides a full service range right from seeking various approvals, land acquisition, R&R, developing required infrastructure, mining, beneficiation and transportation to designated consumption plant, which is TPS. The company is an MDO for eight coal blocks and one iron ore block. These projects are located in the states of Chhattisgarh, MP and Orissa. The company has serviced its contract and the quantities delivered during the quarter as per the schedule given by the customer. During the half year, the revenue from mining services was at INR 1,098 crores and EBITDA at INR 485 crores. For IRM business, integrated resources management business, we have continued to develop business relationship and diversified customer across various end user industries. We remain #1 player in India and endeavor to maintain this leadership position going forward. The volume in quarter 2 FY '24 stood at 18.8 million metric tonne. EBITDA for the half year was at INR 2,063 crores on account of improved realization on year-on-year basis. As far as the commercial mining is concerned, the Carmichael mine in Australia, the production has increased by 68% to 5.4 million metric tonne and the shipment increased by 70% to 5.1 million metric tonne. The company is having seven domestic commercial mine blocks. And these block projects are in the states of Maharashtra, Chhattisgarh, Madhya Pradesh, Jharkhand and Orissa. Thank you. And we open for questions.

[Operator Instructions] First question comes from Bharat Jain from ICICI Securities.

My first question is on solar. So sir, what is the capacity of solar manufacturing? And is the 4 gigawatt operating?

Yes. And the current capacity is approximately 4.5.

4.5. And then how much have we exported during the quarter?

Quarter-to-quarter, we can give you overall, the target export numbers, module sales. Export was approximately -- just one sec. The exports were, in terms of megawatt, we exported 792 megawatt worth of modules in this quarter.

Okay, sir. Sir, and what geographies are we exporting?

Mostly U.S.

Okay, mostly U.S., understood. Sir, and on wind, what is the plan for wind manufacturing capacity? Will it be majorly used for captive?

No, no, it would also be available for export as well. But initially, majority of our capacity, but -- and starting capacity will be 1.5 gigawatts.

Okay, sir. Sir, and are we planning to produce 2, 3 megawatt turbines?

That will depend. But initially, we'll focus on the 5 megawatt. But we'll have the capacity to produce 3 megawatts as well.

Okay, sir. Understood. And sir, can you give us the total CapEx on the three data centers?

Yes. So the data center business, CapEx incurred until date is approximately, we expect to have about $0.50 billion, about INR 4,390-odd crores and broadly in line with our earlier guidance given earlier in the year. The next year and year after that, also continuing along similar lines.

[Operator Instructions] Next question comes from Nirav from Geecee Holdings.

Sir, in the mining business, I'm seeing that you've removed Bailadila mine from the iron ore service contract. So is that officially -- while that mine had always had problems -- but so is it officially now off contract?

Yes. So Bailadila is officially out of our list now. They are not going ahead with that contract.

Got it. And on the solar module sales, I mean, on the margins front, we have done phenomenally well, and congratulations on that. You've done some 33% margins. But at the same time, our realizations are largely flattish on a per megawatt basis. So I'm assuming that we have benefited -- we would have benefited from the following module prices. So can you just shed some light on that?

Yes, yes. That's true. Although overall, the growth, it did benefit from the -- it benefited -- contractually, we expect the margins to be retained. But overall, because of sales, once they stabilize, the full production stabilize, only a certain basic percentage will be sold. It's not like we will -- that sales will continue to grow because the capacity initially will be 4.5 gigawatts.

Okay. And our export mix was almost 2/3 during the quarter. So when this mix changes again or normalizes, we still expect the margins to hold on to the current levels?

The export margins will hold. The non-export margins will be -- depending upon the underlying contract and the buyer, the other margins will be different from the export margins.

Got it. And sir, on the Australian operations, if you can just share the EBITDA numbers for this quarter and first half.

So Nirav, the EBITDA numbers for commercial mining are already there in the segment results. If you can just look at it, the PBIT numbers are already there. On EBITDA number, we can give you separately on the -- on a separate call on this, yes?

That is fine, that is fine. Perfect. And on the -- lastly, on the MDO guidance, I mean, if we can just shed any light because on what are we expecting to do this year?

Yes. So MDO, we should be closer to 35 million to 37 million tonnes this year.

[Operator Instructions] Next question comes from Prateek Kumar from Jefferies.

Congrats for good results and commissioning of new facilities and new energy ecosystem. My first question is on solar segment. So until the point we are not exporting -- so until the point we are not commissioning green hydrogen plants, so this quarterly run rate of solar modules can go to like how much? Like 1 gigawatt quarterly with the number which is 630 megawatts in this quarter, can it like sort of continue to move up with better exports or higher domestic sales as well?

That number will continue to move up in line with the utilization rate of the underlying plant. But I think the bigger thing there is that we don't want to convey an unrealistic assumption in the market that the sales -- longer term, the sales are a bigger objective here for longer term. It is objective that we have in the medium term is to build the integrated hydrogen ecosystem. And what this highlights though, Prateek, in the meantime, is that as green hydrogen ecosystem is modular as we are doing as a business case, each stage, it is cash flow positive. And therefore, this excess cash flow will continue to be deployed into the green hydrogen ecosystem and preventing -- it just shows you the overall strategy that we have adopted of each individual module of the green hydrogen ecosystem being profitable in its own right. So nothing is subsidizing anything. And I think that's a bigger message here that as we add green electron module of the green hydrogen, it will itself also be profitable. Then as we add the hydrogen electrolyzer chain, it itself will be profitable. As we then add the green hydrogen, green product chain, which is ammonia, methanol and urea, that itself will be profitable. And what this highlights is that the profitability of each module adding up to an extremely competitive hydrogen price, which will compete effectively with the import cost of LNG in India.

All right. And sir, when are we like now looking at commissioning like pilot plant, it's still like FY '27, right? That was the last message.

Yes, yes, FY '27, yes. We're on schedule. Pre-engineering work at the site, all of that is going on, site geotech studies, everything is going on.

Okay. And I mean, obviously, it is like next still 2 years away, 2, 2.5 years away. So from next quarter, we should also expect like sales from wind unit and the polysilicon unit?

Yes, absolutely, absolutely.

And what could be the margins in this segment?

No. We'll come that once we -- once the sales strategy of the turbines are established in terms of pure domestic and global, we'll update the numbers towards -- as part of our annual results.

Okay. And regarding some of the new projects which you are looking at like copper and coal to PVC, so what is the stage of these projects at this point, we're looking at financial closure for coal to PVC?

Financial closure of coal to PVC this financial year and then copper is on schedule to be completed in the first calendar quarter next year, so last quarter of this financial year as scheduled. And so there's no change in any of that.

Okay. And one question on your like segmental bookkeeping question, segmental, what is the road segment EBITDA for the quarter?

EBITDA, we'll give you. Segment results are there filed on the road. Road half year ended is INR 530 crores.

PBIT.

PBIT.

Right. Sure. So I'll take it offline. And what is the full year guidance for the coal trading volumes now? We've seen like some decline, obviously, in line with the market trends. But what is the full year guidance for the coal trading volumes FY '24?

Vinay?

Yes. It all depends on whatever requirement comes. But considering that we are running -- going at the 18 million to 20 million per quarter, should be somewhere between 70 million to 80 million. But again, considering we are a service industry, it all depends as how the demand and supply -- demand comes out of our customers.

And the MDO guidance which you gave was more like production guidance, right, not dispatch guidance?

So in MDO, whatever is the production, mostly it gets dispatched because our inventory on first day of financial year and the end of the financial year always remains plus/minus 0.1 million here and there. Because these all are long-term contracts signed by [indiscernible] for their own mine itself. So they lift everything which we mine.

We have a follow-up question from Bharat Jain from ICICI Securities.

Can you tell us about the status of the Navi Mumbai Airport?

It's almost just about 45% complete, on schedule to be completed last quarter, calendar quarter 2024 as advised in the Annual Result Meet, AGM, so exactly -- going exactly as per schedule.

Understood. And then what is the CapEx incurred on the six airports in H1?

Our total CapEx that year to -- total CapEx that we have incurred on the airports is approximately, say, about INR 5,350 crores for all the airports -- eight airports.

Okay. Sir, and what would be our target for H2?

Approximately, it is going on as per -- it's currently in the middle of the schedule. So it will be -- we don't want to give -- overall, our target about INR 11,000 crores CapEx.

[Operator Instructions] There are no further questions. Now I hand over the floor to management for closing comments.

I just want to thank ICICI Securities for the call and for the questions. If anything else, you can please reach out to Manan for any clarifications, anybody if you have. The presentation -- detailed presentation will be up on the website already. So that should be available. It will have a lot more detail as well. So once again, thank you, everyone. And if there's anything further, please reach out to Manan.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.