Inox Green Energy Services Limited (INOXGREEN.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Inox Wind and Inox Green Energy Services Limited Q2 and H1 FY '26 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.

Thank you. Good evening. On behalf of ICICI Securities, I welcome you all to the Q2 FY '26 Earnings Call of Inox Wind and Inox Green Energy Services. For today's call, we have with us Mr. Devansh Jain, Executive Director, Inox GFL Group; Mr. Akhil Jindal, Group CFO, Inox GFL Group; Mr. Sanjeev Agarwal, CEO, Inox Wind; Mr. S.K. Mathusudhana, CEO, Inox Green; and other senior members of the management. I would now hand over the call to the management for their initial remarks, after which we'll open the floor for the Q&A session. Thank you, and over to you, sir.

Thank you so much, Mohit. Good evening, everyone, and thank you for joining the Q2 FY '25 (sic) [ FY '26 ] Earnings Conference Call of Inox Wind Limited and Inox Green Energy Services Limited. I will first brief you on the financial and operational achievements of Inox Wind for the quarter under review as well as other key developments and future road map before handing it over to Mathu for his briefing on the development at Inox Green. We are pleased to inform you that we have been able to deliver the best ever Q2 in Inox Wind history despite the quarters being substantially impacted due to monsoons. With over 200 megawatts executed in Q2 and around 350 megawatts in H1, we are on the track to achieve our guidance for the full year, with H2 generally being 70% of the annual execution. I will briefly take you through some of the key results of Inox Wind's financial performance for Q2 FY '26. On a consolidated basis, Inox Wind has reported a revenue of INR 1,162 crores, an increase of 56% Y-o-Y. EBITDA of INR 271 crores, an increase of 48% Y-o-Y. PAT of INR 121 crores, an increase of 43% Y-o-Y. Cash profit of INR 220 crores, an increase of 66% Y-o-Y. Execution for the quarter stood at 202 megawatts, taking the total execution in the first half of FY '26 to around 350 megawatts. On the order book front, we have a large and very diversified order book, which currently stands at over 3.2 gigawatts. We are building new customer relationships and continue to fortify our existing relationship. Further, we are also discussing with multiple customers, including the group IPP to enter into framework agreements and partnerships, which would provide long-term recurring annual orders. Cumulatively, these arrangements -- agreements will secure upward of 1 gigawatt of annual recurring orders for Inox Wind going ahead. Consequently, we are confident to close FY '26 with a very strong net order book, which will provide execution visibility for the subsequent 18 to 24 months. Our manufacturing facility, including the recently commissioned nacelle and hub unit at Kalyangadh, Gujarat are operating at high utilization levels and EPC activities on multiple sites are on full swing post the monsoons. Further, we are expanding our manufacturing presence in South India by setting up a new blade and tower manufacturing facility, giving us quicker access to large sites across Karnataka, Andhra Pradesh and Tamil Nadu. With my colleague, Mathu, we will brief you on in greater details. We are elated with the achievements and prospect of our subsidiary, Inox Green, where Inox Wind holds 56% currently. Inox Green has 12.5 gigawatt renewable portfolio directly or through investments made for multi-gigawatt portfolio acquisitions. The group IPP with ambitious plan of setting up multi-gigawatt renewable energy capacity annually provides a strong portfolio addition visibility -- additional visibility. Further, with the organic and inorganic growth prospect of the company, we believe Inox Green is on track to become the largest renewable O&M player in India. Another positive development is the scheme of demerger of the substation business from Inox Green and its subsequent merger into Inox Renewable, receiving approval from shareholders and creditors. This will add value for both Inox Green -- sorry, Inox Wind with subsequent listing of Inox Renewable Solutions as an EPC arm of Inox Wind and Inox Green with elimination of depreciation on demergers of the assets block. With a global shift towards greener power, India has also set ambitious plan for the complete transition to renewable energy. Hybrid projects are gaining pace to achieve this transition. Wind along with solar plays an important role in this hybrid projects. Wind complementary to solar in Indian conditions make it as an important source of power for grid stabilization as well as higher grid utilization. Also, price arbitrage compared to merchant power, especially during the peak hours, makes wind an important source. The recently announced reduction in GST for wind component from 12% to 5% is another positive development in the increasing list of favorable policies being in place for Indian wind sector, including ALMM for wind and wind turbine components, amendment to CERC connectivity and GNA regulations for ISTS, allowing hybridization of existing solar and wind transmission projects among others. With all building blocks in place, I believe Inox Wind is well set to embark on next leg of growth. I would now hand over to S.K. Mathusudhana, CEO of Inox Green for his remarks. Mathu?

Thanks, Sanjeev. Good evening, everyone. I will firstly brief you on our financial achievements of Inox Green during the quarter before moving to other aspects. During Q2 FY '26, Inox Green reported best ever financial performance. Total income of INR 129.5 crores, up by 101 percentage year-on-year. EBITDA of INR 52.2 crores, up by 52 percentage year-on-year. Profit before tax of INR 40.9 crores, up by 323 percentage year-on-year. Profit after tax of INR 28.1 crores, up by 363 percentage year-on-year. Cash PAT of INR 50.9 crores, up by 121 percentage year-on-year. During the quarter, the machine availability of the entire portfolio averaged 96.3%. Inox Green's portfolio stands at 12.5 gigawatts, including the investments which we have made to acquire 6.5 gigawatts of operational wind O&M assets of 2 companies. With the financials expected to consolidate into Inox Green's books in FY '27 post statutory approvals. We expect our profitability to grow manifold in FY '27 over FY '26. The scheme of demerger of the substation business from Inox Green and its subsequent merger into Inox Renewable Solutions has received approvals from shareholders and creditors. Once this scheme receives final approval from NCLT, gross block of around INR 1,000 crores will be eliminated from Inox Green's balance sheet and subsequently, the annual depreciation of INR 50 crores to INR 55 crores will be eliminated, thereby increasing the profitability. It will also lead to significant improvement in the ROE and ROCE of Inox Green. Inox Green has rapid growth plans on both organic and inorganic fronts. We will continue to be beneficiaries of our parent company, Inox Wind's rapid execution growth Additionally, large-scale plans of our group IPP company and solar module vertical will also benefit us going ahead. I believe Inox Green is well on track to become India's largest renewable O&M company in the very near future. I will now hand over to our Executive Director, Mr. Devansh Jain, for his remarks, after which we will open up the floor for the Q&A. Thank you.

Hi. Good evening, everybody. While Sanjeev and Mathu have taken you through the brief financial and operational performance of their respective companies, let me just touch upon some of the strategic initiatives that we have undertaken across the renewables vertical of the Inox GFL Group. At the outset, I am pleased with what we have been able to achieve so far, building one of the most integrated groups in the energy transition space. Today, we are present across the value chain in renewables, right from manufacturing of wind turbines and solar modules, project development, EPC and commissioning to O&M services and now renewable power generation. At the same time, our group companies are also large consumers of energy. Our IPP venture, I believe, is the most strategic fit in the group as it enhances the value of all our existing businesses. While Inox Wind stands to gain through recurring turnkey orders over the next several years, Inox Green also gains through the constant addition of capacities to its O&M portfolio. At Inox Wind, all our strategic decisions related to backward and forward integration has started to yield results. Additionally, at Inox Wind, we are strategically pivoting ourselves to enter into long-term framework agreements with multiple IPPs, which will lead to a large recurring annual order inflow visibility. Further, Inox Wind has acquired multi-gigawatt O&M portfolios through investments, which takes our current O&M portfolio to 12.5 gigawatts and sets us on course to make Inox Green the largest renewables O&M company in India. This has been done in one of the shortest times globally ever. There has been a substantial progress in the substation demerger scheme, which has now received approval from shareholders and creditors. I believe that the demerger and subsequent listing of Inox Renewable Solutions will unlock substantial value for both Inox Wind and Inox Green. I thank all our shareholders and creditors for their continued and unwavering support for all of our group companies. Thank you, and now we can open the floor for Q&A.

[Operator Instructions] The first question is from the line of [ Akhilesh Rawat ] from Ridhanta Vision Private Limited.

Yes. First of all, I want to congratulate management on good sets of numbers. So I have 2 questions. So my first question is like you have raised the financial '26 EBITDA margin guidance to 18%, 19%. Could you break down how much uplift comes from backward operations like nacelles, transformers and cranes and how much come from royalty position on the 3-megawatt platform?

Thank you for your question. So broadly, we don't give specific breakups of the benefits coming in from all the activities that we are doing. But we've said it multiple times that the royalty, which has gone off now for the 3-megawatt turbines is broadly around INR 6 lakh per megawatt. I'm sure you can make out from the numbers that we've already given several times. But on the 18% to 19% EBITDA margin guidance that we had increased in the last quarter, we continue to stick on that.

Okay. Okay. And my second question is like you mentioned focusing on completing incomplete sets in quarter 1 con call and maintaining like 120 days net working capital. So could you quantify the megawatt or rupee value of these incomplete sets that are still on the books and expected cash conversion time line, especially of turnkey projects where revenue is recognized early, but cash comes only at commissioning?

I mean different projects have different payment cycles, but effectively, we've guided for 120 net working capital cycle. And I think we're well on track to broadly achieve that over the course of this financial year. So I'm not sure what specific data you want.

So like what is the rupee value of incomplete sets stuck in receivable inventory today? And like how much of that is expected to convert in Q3 versus Q4?

Again, there is nothing stuck. That just guiding. There's nothing got stuck. We've guided for 120 days of net working capital, and that's what the company will achieve over the course of ongoing quarters.

I think, you also have an advantage of seeing our balance sheet. So all the numbers that you're asking are a part of our Clause 41 disclosure. You can have a look at the inventory and the debtors and the creditors. So working capital cycle is something that is easily available from that Clause 41.

[Operator Instructions] The next question is from the line of Mahesh Patil from ICICI Securities.

Congrats on a very good set of results. Sir, a couple of questions. One on the execution. So we have achieved around 348 megawatts in H1, which is close to 29% of our full year target of 1.2 gigawatt. So -- and you have still maintained the 1,200 megawatt target. So just wanted to understand from -- so how do you see execution in H2? I mean since we have achieved only 29% and H2 target is very steep. So...

No, I think we've publicly guided multiple times that H1 and H2 will broadly be 30% to 35%. And yes, we've achieved about 30% in H1. As Sanjeev mentioned, obviously, this is the most affected quarter in terms of monsoons, and I think we are broadly very well on track to achieve that. We also mentioned our new nacelle manufacturing facility in Kalyangadh has gone live. Cranes are deployed across sites. Transformer manufacturing has been ramped up. We are extremely confident of achieving that. Having said that, I think, we are very well on track even with respect to the financial numbers we've guided for. If you look at the financial numbers over H1, I think, we're extremely -- I mean, frankly, we're ahead of track of what we've guided. So we are confident of achieving the overall target for the financial year.

Okay. And sir, speaking of financials, I think we have guided for 18% to 19% margins. But in H1, we are a bit more than 22%. So we are likely to overachieve our...

We upgraded our margins last quarter to 18% to 19%, and we stick to it. We're not changing guidance at this point in time. Over the past, I would say, 6 quarters, we've upgraded guidance to almost 4x. I don't think it's fair to keep coming back to us and asking us for margin upgrade every quarter. I think we're doing better than what we have guided, and I hope shareholders are happy with that.

Okay. And sir, what about the pipeline? We have 380 megawatts of orders in H1. So if you can guide us in terms of inquiry pipeline and what we can expect in H2?

So look, we have said in our guidance that we are working on multiple projects. We've also worked on a strategy where there are tenders which is EPC, there are tenders which are semi turnkey and there are tenders where we do only equipment supply. I would say at this point in time, we have in excess of 3 gigawatts of tender pipeline among multiple sectors, which I just explained. And we are extremely confident that we would achieve our guidance. Probably next quarter when we meet, we will talk more about some time, even possibility of overachieving it.

Just to add, sir, I'm asking about the inflow, sir, order inflow. How do you see the pipeline?

Yes. I'm only talking about order inflow that we have in excess of 3 gigawatt of tenders that we are working on today. This is a mix of complete EPC, semi-turnkey and equipment supply.

Got it, sir. And sir, last...

Just to add to what Sanjeev sir has said, he has mentioned in his opening remarks as well that we are strategically now working on signing framework orders with multiple parties. which will, in turn, give us an order visibility, an annual recurring order visibility of at least 1 gigawatt across multiple parties. So that is also something which will come over the next few months.

Sure, sir. So I think in the presentation, you have mentioned that 500 to 700 megawatt each year is expected from our group IPP, right? And then maybe 500 megawatt more from other parties?

From multiple other third-party companies.

The next question is from the line of Ketan Jain from Avendus Spark.

Congratulations, sir. My question is just a follow-up to the question of the previous participant. I just wanted to understand, recently, there's a media article saying that almost 40 gigawatt of projects without PPAs are expected to cancel and go for rebidding. How do you expect this to impact the sector? Do you expect -- what's your outlook on the ordering activity in wind, especially even in 7 months, the ordering activity has been down. Do you expect this to impact the sector in the near term?

A couple of things. First and foremost, with respect to Inox Wind, we don't have any orders in our system, which are impacted by these so-called potential PPA cancellations, right? Second, with respect to -- there's been a lot of murmur, talk about this for the past 15 months. And many of these tenders are stand-alone tenders of wind, solar. And what's happening, the name of the game has now changed to FDRE, RTC hybrid from a grid stability perspective, from more absorption of power in the grid. Also, batteries become fairly competitive. So people want to add FDRE with more wind. Honestly, this entire cancellation drive increases the opportunity for the wind sector because you're going to see more and more hybrid RTC, FDRE tenders, which will lead to more wind component bids as we move forward. I think the other way to look at it is, I mean, we are really moving to a scenario where rather than just taking out tenders, and then keeping PPAs pending forever, which really leads to no execution because without PPA signing, no FC happens, financial closure. And nobody places orders and moves forward. You're now moving to a regime where the government is saying, look, let's actually add the power, which the grid needs, which is from hybrid RTC, FDRE, as I mentioned. So I think it's a bold move. It's a proactive move. And I think putting aside the so-called optical negative input, I think it's a very positive move for the sector to move towards actual genuine bids, which will keep coming up as we move forward. The other thing to look at it is if you look at the past 7 months of data, what the wind sector has added in the past 7 months in India is close to about 350 to 3,700 megawatts of commissioning. So if you just extrapolate that to 12 months and mind you, Q2 is always a monsoon quarter, we are broadly looking at a scenario we are north of 6 gigawatts in this financial year. And across key industry players, we've guided for this year being 5 to 6 gigawatts, next year being 7 to 8 gigawatts. I think the industry is going to surpass this as we move forward.

I can just add -- this is Sanjeev here. I can just add just to tell you that in Inox, we have an extreme robust risk management process. Any tenders that come to us, all these nitty-gritties are weighed in before we decide to make a bid. So as just Devan said, we have no job in execution, no project in execution, which may impact because of this news, which is floating around. Neither we have tendered today, the 3 megawatt -- excess of 3 gigawatts that we are tendering will fall into this category. So thanks to this risk management process internally in the organization, which has always helped us to be one step ahead of what others do or to take care of the market needs.

The next question is from the line of [ Madhu Desai ] from [ MD Advisors ].

Devan sir, my question is already answered in previous questions. So I just wanted to wish everyone all the best for the coming quarters and take care of your health, sir.

The next question is from the line of Ketan Gandhi from Gandhi Securities.

Is it possible for you to quantify the number of equipment supply and EPC for the balance in execution in the H2?

No, Ketan, we will not quantify because we've got different orders at some point in time, some of the equipment supply sites are ready, sometimes they are not ready. So it's not possible to quantify. But broadly, I would say for the course of this financial year, we should be somewhere between 50-50 to 60-40 in terms of turnkey equipment supply.

The next question is from the line of Nitin Kaushik from Afin Capital Private Limited.

Sir, my first question was regarding Inox Green. So what O&M portfolio growth are you expecting in FY '26?

So we've given ample details in our presentation that we've already reached around 12.5 gigawatts of O&M portfolio across wind and solar, part of it coming in from the investments that Inox Green has recently made to acquire certain portfolios accumulating to around 6.5 gigawatts. And we've also said in our last call that we have a target to achieve 17 gigawatts of O&M portfolio within the next 2 years. That was from the last quarter. And we are very confident of, in fact, overachieving that number. So probably that should answer your question.

Got it, sir. Sir, the second question was regarding the realization of wind turbine segment. So sir, I wanted to ask what are the current realization of this segment? And also what drives these realizations?