KPI Green Energy Limited (542323) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the KPI Green Energy Limited Q1 FY 2017 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [ Mr. Cyril Paul ] from EY. Thank you, and over to you, sir.

Thank you, [ Avrat. ] Good morning, everyone. On behalf of Ernst & Young, I welcome you to the Q1 FY '27 Earnings Conference Call of KPI Green Energy Limited. We are pleased to have with us senior management team from the company represented by Mr. Sohil Dabhoya, the Whole Time Director; Dr. Alok Das, Group CEO; Mr. Salim Suleman Yahoo, former Chief Financial Officer; and Mr. Vinod Jain, President, Investor Relations. We will have the opening remarks from the management, followed by a question-and-answer session. On that note, let me hand over the call to Mr. Vinod Jain. Over to you, Mr. Jain.

Thank you, Cyril. Good morning, everyone. Myself Vinod Jain, Head of Investor Relations at KPI Green Energy. On behalf of management team, I would like to extend a very warm welcome to all of our investors, analysts, stakeholders and other participants for today's Q1 FY '27 earnings call and for your continued interest and support. Leadership team has already been introduced by Mr. Cyril. I would like to briefly touch upon a few important leadership development during the quarter. We are delighted to welcome Professor Sunil Maheshwari, as Vice Chairman; and Mr. Rajesh Shrivastava, as whole-time Director. Both leaders having decades of experience of head of [indiscernible] JV, governance, business transformation, renewable energy, infrastructure and organization leadership further strengthens the depth and capability of our Board as we enter the next phase of growth. We are also pleased to welcome Mr. Kapil Kriplani, the incoming Group CFO. His extensive experience in finance, capital markets and strategic growth initiative will be a valuable addition as we continue to scale the business and strengthen our institutional platform. Please note that the company has published its results and has uploaded the investor presentation yesterday, is that all of you have had the opportunity to review them. Before we begin, I would like to remind everyone that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ from the growth anticipated. While these statements are based on management's current belief and assumptions investors are cautioned not to place undue reliance on them by making their investment decisions. With that, now I hand over the call to Mr. Salim Yahoo, our CFO, for his brief address, followed by the question and answer. Thank you, and over to Mr. Salim Yahoo.

Thank you, Vinod. Good morning, everyone, and a warm welcome to all of you. Those who are there on today's call. On behalf of KPI Energy Limited, I extend a warm welcome to all our investors, analysts, shareholders and participants joining us today for the earnings conference call for the quarter ended June 30, 2026. I hope all of you have had the opportunity to go through our unaudited financial results and the investor presentation uploaded on the stock exchange. KPI Green Energy Limited has made a strong start to the financial year FY '26-'27. The company has continued to deliver healthy growth in revenue and operating profit backed by consistent execution, a diversity and renewable portfolio across IPP and CPP segments and a clear focus on building long-term sustainable value. Our journey over the past 5 years reflect the strength and scalability of our business model. During this period, our compounded growth has been remarkable with a 92% CAGR in revenue; 104% CAGR in profit. This demonstrate that KPI Green Energy Limited remains well aligned with India's renewable energy requirement and continues to create sustainable value for shareholders. Speaking about the financial performance for quarter 1 FY '27, our total income stood at INR 710 crores as compared to INR 614 crore in quarter 1 of FY '26 registering growth of 16% Y-o-Y. On the similar line, EBITDA increased to INR 262 crores as compared to INR 217 crores in the corresponding quarter, reflecting a growth of 21% year-on-year. Our EBITDA margin has improved to 37% from 35%, reflecting the operating strength of our portfolio. Profit after tax for the quarter stood at INR 95 crores as compared to INR 111 crores in quarter in FY '26. I would like to pick some time and I'd like to explain this clearly. The year-on-year movement in PAT reflects higher depreciation and finance cost on rapidly growing asset base. As we commission new IPP capability, the associated depreciation interest are recognized upfront, while the full revenue and earning contribution of these assets materialize progressively over the year. Cash profit, which is a better measure of the underlying cash generation of the business actually grew at 6% year-on-year basis to INR 176 crores as compared to INR 163 crore in quarter 1 FY '26. We expect the full earning contribution of the new decommission assets to build through the remainder of FY '27. It is also worth noting that our quarter 1 FY '27 unit generation under the IPP portfolio has grown nearly 4x year-on-year, and the generation achieved in the single quarter already exceeds 65% of the entire FY '26 generation. This reflects the scale of our annuity base and the growing recurring revenue engine of the company. Speaking about the operational and portfolio highlights. On the operational front, KPI Green continues to scale its enabled portfolio across IPP and CPP segment as of June 30, 2026 our portfolio has reached approximately 6.94 gigawatts, up 71% year-on-year from 4.06 gigawatt a year ago. This comprises an installed capacity of 1.87 gigawatt and work in progress capacity of 5.07 gigawatts. Of the total portfolio of 2.57 gigawatt is under IPP and 4.37 megawatts is under the CPP segment. During the year gone by, we commissioned 0.85 gigawatt of capacity, while booking a further 2.88 gigawatt of fresh orders, taking overall capacity from 4.06 gigawatt to 6.94 gigawatt a single year. This reflects both our executive strength and continued strong demand for our double-engine IPP plus CPP business model. Our expanding IP portfolio is expected to generate more than 390 crore units annually at a full run rate, strengthening the company's recurring revenue base and improving the long-term visibility of earnings. With long tenure 25 years PPA, strong execution capabilities and integrated project development expertise, we are building a platform that combines growth with predictable cash flows. We have also continued to strengthen our key execution enablers. Our strategic land bank now stands at 8,657 acres. And our power evacuation capacity has reached 5.10 gigawatts, both of which secures our project pipeline and support faster lower-risk conversation of order into our operating capacity. During the quarter, we also successfully expanded our geographical footprint into Rajasthan, taking our total number of sites to 133. Speaking about the projects that we won, we continue to make strong progress across our key growth platform. In battery energy storage, our 565-megawatt/130-megawatt BESPA has been executed and financial closure is under process. In floating solar, we are actively executing 142-megawatt EPC order for Kadana Dam in Gujarat. In our 150-megawatt wind project in GNL, the PPA has been signed and financial close has been achieved, and the PPA signing of our 300-megawatt SJVN backed wind project is under process. We have also agreed both an interested trading license from the CERC and interstate trading license from the GERC and energy trading is being undertaken on a pilot basis, creating wider market access and better realization opportunities. Speaking about the international expansion, KPI is also expanding international footprint to strengthen its global market presence. In Botswana, we have signed an MOU with the government for 5 gigawatt of Energy with planning first 500-megawatt phase underway. In the UAE through a global alliance in the -- with the Fabtech Group and F Plus Healthcare Technologies, exhibition is underway for the solar power project integrated with battery storage system awarded to our subsidiary, Sundrops Energia Limited to power constrained data and containerized data center facilities. Our balance sheet and financing profile remains robust. We continue to build on the successful listing of India's first externally enhanced green bond, INR 670 crores, a 5- instrument carrying 8.50 coupon with quarterly amortization backed by 65% partial guarantee from GuarantCo which is AA+ rated by CRISIL and ICRA. This continues to reinforce the market confidence in KPI Green business model, governance standard and renewable build platform. Looking ahead, our focus remains on strengthening the IPP portfolio, expanding the CPP business and building capabilities in future growth segments such as best battery-storage system, green hydrogen, floating solar, offshore wind, pump storage and energy trading. Our strategy is to build an integrated renewable energy platform with strong execution capabilities predictable annuity revenue and long-term value creation for all the stakeholders. As India accelerated its renewable energy transition, KPI Green is well positioned to contribute meaningfully through scale, execution, innovation and disciplined financial management. We remain committed to timely execution, strong governance, sustainable growth and consistent value creation for all our stakeholders. With this, I would like to thank all our shareholders, lenders, customers, employees, partners and regulators for their continued trust and support. I now request the moderator to open the floor for question-and-answer session.

[Operator Instructions] The first question is from the line of [ Kartik Sharma ] from Anand Rathi Institutional Equities.

I hope I'm audible.

Yes, Mr. Sharma, may go ahead with the question.

Congratulations on the grade start for FY '27. I have a couple of questions. Given the expansion of our IPP segment, could you give us some color on how you see the debt and cash position evolving going forward?

IPP segment at present, we are at a very comfortable leverage. As you can see, we are at around -- a couple of figures over there. But going forward, also, if you see the way we are adding our profitability the way we have, we have already expensed out debt, which has to be taken for our bigger projects is around 250 and 370 megawatts. So going forward, I think the debt ended will be in the comfortable position of 3:1 max to max, which will be a long-term debt network.

Understood, sir. And also, if you could give us some color on how our pipeline is shaping up for FY '27 and '28? If you could give us some like quarterly, if you could give us some quarterly run rate.

See as I told you, our IPP segment has energized a substantial portion of our existing projects in hand. And the CPP also, I have an order book of approximately INR 5,000-plus crores. So going forward, there is enough order book in hand on the CPP side and IPP revenue also, as I told in my initial talk that the IPP segment will from here will show a better stronghold trajectory. The reason is that all the expenses have been expensed out. And now the revenue has started coming in since it was building a phase by panel, the revenue will slowly so it will start getting up stronger and stronger. So going forward, I think the coming up quarters, we'll have a far more better performance than what we have seen this quarter.

Understood. Sir, just about the order book that you just spoke about, is there -- with the data centers coming up are we targeting any -- is there any share of data centers in the order book, if you could give us some numbers?

[indiscernible] speaking. Basically, data center is the latest entrant and also opportunities horizon that in the [indiscernible] sectors. Generally [indiscernible] centers means our around-the-clock operations, so now it is every data center needs 2 things like the round-the-clock operations and all yes, a KPI. We are in touch with some of the data center people and some sort of inquiries going on. So I think it is a continuous process. As online needs to be materialized, we will obviously should be known to all the stakeholders.

Understood. Understood, sir. I have more questions, but I'll join the queue again. So that others can also get a chance.

The next question is from the line of Parth Kotak from Plus 91 Asset Management.

I have a couple of questions. One, on inventory, we saw a large buildup towards the end of the last financial year -- if you can update on the inventory position today? And do we expect inventory to come down probably when we announce the next quarter results?

Yes. So if you see the inventory is as of March, you have seen the inventory buildup has been there. It has come down to some extent in this quarter, and we expect it to go down further as we go on that. The reason for building the inventory was 2,3 factors. One was that since the geopolitical conditions we are getting worsened a lot of material we had to file because we had the availability of material, we don't want it to create a delay in our execution capability. So from that point we have added the inventory and stocked up the inventory. But as we go forward, it will slowly, slowly come down as we complete our projects and everything.

Okay. That's encouraging, sir. Sir, second question is on Botswana. We did mention in the opening remarks that 500 megawatts is under execution. One, when can we see some revenue contribution from this project and this will be IPP, right?

Yes. Both of them will be IPP. So Botswana project, the KPIs has a subsidiary in GIFT City now. Under the GIFT City, the Botswana company will be a subsidiary of GIFT City. And we have already acquired land over there, 1.5 acres of land has already been -- 5 acres of land has already been acquired

500 acres.

500 acres of land has already been acquired. So we are at a very advanced stage of signing the PPAs also. And so shortly, I think we'll see. But by execution point of view, I think this year will not be in revenue. But coming years, you'll see -- start seeing revenues in the Botswana project also.

That's great, sir. Sir, lastly, on Sundrops before I jump back in the queue. If you can give me what kind of PAT we've generated in Sundrops compared to last year, that would be helpful.

Sundrops this quarter, if I want to say I have already done INR 150 crore INR 155 crores with a PAT of INR 26-odd crores. So it has shown a very good profitability of 17-odd percent. Since Sundrops doesn't have any big IPP the way we had in KPI because of the KPI PAT was it bit down. But Sundrops has done, it has -- it has done an EBITDA of INR 42 crores. So all together, you can see that of Sundrops cash profit is also INR 30-odd crores. So going forward, Sundrops has a very good future, we are adding up a battery energy storage system over there. We are adding the battery energy manufacturing over there. And as you are aware, we are coming with the Sundrops IPO. So we have a strong order book. And Sundrop, I think this year, only on the IPP and the CPP side, if I look at, we will cross INR 1,500-odd crores of top line in this year in Sundrops.

The next question is from the line of Aman Soni from Seven Alpha Investors Private Limited.

I have 3 questions. First is on the growth part. While we have maintained our margins on a broader basis, our execution was very slow as compared to our guidance in this quarter, right? So what is the reason for that? Because this time, I'm not seeing any early monsoons or anything like that. So can you help us to understand for not showing 40%, 50% Y-o-Y kind of growth that we have been doing earlier? And secondly, how we should look at the revenue and the margin numbers for full year FY '27? So that's my question.

Yes. So your first question on the -- see, I don't think there was what you say, a slowdown in the execution. We have done execution, substantial execution. Now if you see the growth in the revenue is around 16% to 20%. I expect that we were expecting 20%, 30%, but it is also a lot of other factors. We have utility scale projects where the billing takes some time because there are institutions like Coal India Limited, Adani Group and we have Aditya Birla Group. So because of it, the billing. So this got postponed to the next quarter. So coming forward, if you see that the growth we have committed for the 30% to 40% year-on-year, that is something that which we will be able to maintain. And also on the margin, I've already said that the margin impact is a temporary impact because of the depreciation and interest. As the stabilization period gets over of these plants, the full revenue start coming in. So it will jump back to the levels that we had seen in the past.

To again, like when you are saying 30%, 40% growth, this is different from what your Chairman and Mr. Farukbhai yesterday mentioned in the YouTube interview. He was speaking about 40%, 50% CAGR. So just wanted to get some clarity.

I understand. I understand. See, 40%, 50% growth we have said earlier also, but you need to understand there are geopolitical conditions. So I'm just factoring that and being a little bit conservative. It's not that if we get 50% growth, we'll go to 60% also. It's not that we will curtail ourselves. But the way the geopolitical conditions are coming up, a lot of things are creating as a hurdle for the executions and everything. So from that point of view, we are -- I'm being a little bit conservative being a finance guy. But we -- if we get an opportunity if this condition settles down, we'll surely jump to what 50%, 60% of whatever the Chairman had earlier said. We will come back to that.

Can you help us to understand a bit more on like what kind of impact are you facing in the terms of the geopolitical situation? Is it bottleneck or...

If you understand geopolitical condition, the major impact is from the fuel. Now you understand that a lot of component goes into a solar plant. You have cables, you have steel, you have other ROW issues, you have logistics. All these factors have got impacted. And if you've seen, majority of the industries have been impacted because of the geopolitical condition. So we cannot say that we are very much against to it. We try to maintain it, though we are not as highly impacted as some who are directly involved into the fuel. But we have been impacted because the component that we use, majorly steel, MMS structure is a steel, evacuation towers is a steel, then we have cable. So these are major components which are impacting. So that's the reason we also have impacted to an extent. We have absorbed some portion of that and some portion we have passed on to the customers. So that has been a factor for us also.

Got it. Got it. And you mentioned about the stabilization period. How long we can expect this period to be? Because even if we are going to top line because of increased interest cost and the depreciation, we will not be able to see any benefit in the terms of the bottom line, right, during this period. So how long investors should look like this period going to be there?

See, if you look at the lenders' point of view, they give a stabilization period of 1 year, okay? Now if you see that in spite of stabilization period, in this quarter, we have done 65% of what we have done in the entire last year. So this clearly shows that my plants have almost in the phase of running in a full fledge. So I expect that in the upcoming quarters, you will see the full benefit of the plant. So automatically, it will then generate the same revenue, it will generate the same profitability that we expect.

And how we should look at interest cost and depreciation for rest of the year, for full year FY '27?

See, now the debt has already been taken and the IDC that we call, the interest during construction has been utilized since we have completed the project -- our portion of the project. So as we go forward, you will have the full interest cost, which will come in up for the projects. But at the same time, revenue will also get stronger. So it will be able to sustain both the things and then maintain the profitability.

Okay. Okay. And just last question, if I may. In the interview given by Mr. Faruk yesterday, he mentioned that in this financial year, your focus will be more on the governance side, right? So I wanted to understand more on this front because we have continuously highlighted our concerns in the past with respect to high pledge percentage and domestic institutions not being on the cap table. So can you throw some little light on this like where these issues stand in your governance framework right now? And what else you are looking to cater to?

esterday, what he mentioned was more on the -- what we say. It is not about any issues of governance. It is more about the change in the auditors. So we have changed our auditors. We have added people in the Board. And that is that for better guidance for -- because even video is in the top 5, and we have added BDO as our auditors. So we have to bring better practices, better processes. And for that purpose, we are adding experts in the industry, and we are -- so that is what we wanted to highlight on the governance point.

[Operator Instructions] The next question is from the line of [ Shrenik Mehta ] from Indo Alphs Wealth.

[indiscernible] This whole separation between IPP and CPP. The way we are increasing our weightage on the IPP.

Si, your voice is cracking. Can you repeat the question?

Okay. Am I audible now?

Yes, yes.

Okay. I just wanted to understand going forward, are you thinking about any changes in the proportion between IPP and CPP. The way we have increased our weightage for the IPP, it's definitely straining our balance sheet. We are continuously seeing additional equity being infused. The EPS growth for the first time has come in the negative. And the execution of IPP is still a lot in the pipeline. This is very capital intensive and very different from the original model of KPI, which was more of CPP. So looking at the strain that this is building up, are we looking at changing anything in terms of the proportion for the future between the CPP and IPP?

See, as we have earlier in our con calls also said that we will try to maintain IPP at a level of 20-odd percent of the total revenue mix. The reason is that this is a long-term revenue, and it's a very strong revenue. You can understand IPP gives me an EBITDA of 85% to 90%. So -- and it is a sustainable growth for next 25 years. So once I put an IPP, I don't have to worry about the profitability or the top line and all. As far as the IPP concerned, the staining, what I say, still I am at a very good comfortable leverage position. I'm still at below 3. I might go up to 3 because all the loans have already been taken of the upcoming project, and we are just executing those projects. So majority of the project, I mean, we have a deadline of September. We'll try to close all the project by September and the revenue of the portion of those projects have already started coming in. So from that, I think that EPS this quarter was down because of the PAT level because as you see, my EBITDA, my PBT has been -- EBITDA has been very strong as compared to the previous quarter also. So from that point of view, this is a temporary phenomenon, which will get to as we stabilize the projects, as I told you that this IP project once they stabilize, they will give me a strong profitability. And then EPS will also come back to its original level.

Yes. But we invest in the company to have a growing EPS.

Yes, Shrinik, but you need to understand every project has a life cycle, okay? Whenever any project, for example, any factory if you put it, it doesn't start with 100% utilization on the day 1. it takes over a period of time. And that is called is the life cycle of a project. So those project life cycle has its own phases. So we are going through that phase. But believe me, I mean, it is -- if it had been a cash profit less, I can understand. If it had been EBITDA less, I can understand there is a concern. But PAT can clearly seen that it's a depreciation with a noncash item majority. And it's only the interest cost, which will also get paid off as we start. And the major portion is that you have to focus on is that the generation has grown substantially. What I did in the full year, 65% of that I've already completed in this first quarter. I have 3 more quarters with such kind of -- so you can understand the amount of revenue generation that will happen in the IPP going forward is substantial. And you can see EPS will go from the past level to further stronger level as we go forward because of the IPP business.

So let me put this slightly differently. I totally understand your point and totally understand your perspective. but a typical IPP has a much lower ROE and our ambitions in KPI are much, much higher. So in order to invest for the IPP, if we have an ROE of 15%, 18%, we can't have a growth rate of 40%, 50% as has been stated by the company. So that difference will always be required to be financed by an external source, either through equity or debt. So this gap is what probably is a challenge for the company right now.

No, no. Shrink, you are losing out on one factor. You're only -- when you invest, you not only look at the returns on equity, but you also look at the appreciation of the shares, okay? If I give you an example, a simple example, if you look at Acme, Acme is a pure kind of -- you can say, IPP, majority IPP kind of. Look at the PE that Acme is getting. So once we go into that state, automatically, your appreciation is also -- market cap will grow substantially. And as you grow market cap substantially, I presume as an investor, even I would rather look at more on appreciation of the share price rather than the return on equity or the dividend I'm guiding. So that's the point we are looking at. We are looking at -- once we add more and more IPP, we'll get a better piece from the market and the appreciation of your share will be substantial. And that has been the history with the KPI. I mean when it started, it has already given 100x returns to the stakeholders. And we abide by that, we will give returns, and that's why we have focusing more on IPP that we get a better returns and ultimately EPS increases and the PE of the company also increases, which increases the market cap.

So we keep our fingers crossed.

Sorry to interrupt Mr. Mehta, may we request you return to the question queue for a follow-up question. The next question is from the line of Sahil Agarwal from AYM Investments.

So one thing I wanted to understand that the gross margins for the CPP segment of KPI Energy and KPI Agri both have fallen substantially. So like is this a onetime issue? Or like is this the new normal gross margin that we are going to see in the coming years or coming quarters?

See, gross margin, as I told you, one of the factor for the impact on the margin is the geopolitical issues. So the cost of little, a lot of balance of plant, logistics, everything has impacted this. And that's the region it has a little bit -- it might have tapered down.

So what can we expect going forward for the CPP segment only?

For the CPP, I mean, it will -- I mean, see, if the issues get resolved, I might jump back to my existing, but there's also a lot of other fact. If we have seen -- we were expecting that the issue getting resolved 6 months back only, but it is again, again resurfacing. So that impact -- geopolitical confirmation is something which we cannot judge right now because the way it went in the past year. So we are -- but as soon as the things improve, we will be able to jump back to our margins.

But the impact on margins of KPI Agri and the gross is still only 300 bps. But in KPI Energy, it has fallen from -- EBITDA margins have fallen from 22% to 12%. So how does -- how do we invest see to all of this because there was no hint from the management that there was a hint that margins may dip a little, but not from 22% to 12%. So that is a major concern.

If you see, KPI, along with its existing business has got IPP support. So there are some costs which is shared with the IPP and because of which the KPI margins, you can say, a little bit better compared. But EPC business, if you see overall, KPI Energy is purely, you can say, on the EP, EPC side. So from that point of view, it has a little bit more impact of the geopolitical conditions because KPI had some -- for example, I have a crane, which is there in this. So I'm utilizing the same crane for the EPC business. So automatically, the cost gets divided and everything. So it is the economies of scale, which also factor in. And -- but KPI Energy itself is an EPC-driven business. So that's why it had a more impact compared with.

So you are saying you will be able to get back to 20% in the coming quarters, right?

Yes, it depends upon the factors also, geopolitical conditions and everything, but we are keen on getting back to our old levels.

Mr. Agarwal, may we request you return to the question queue for a follow-up question. [Operator Instructions] The next question is from the line of [ Kush Shah ] from [ Vivok. ]

Congratulations for the good set of numbers. My question would be related to the earlier that you said about the incremental interest and depreciation cost that will be coming higher, but the revenue will be set off the interest and depreciation cost. So just want to understand for the bookkeeping that what would be the incremental interest and depreciation for the investment that you have made?

Whatever interest cost, the existing debt what we have taken -- now as I told you that my IDC interest during construction, which is part of the project, which is financed by the lender has got over. Now the entire interest will get booked as an expense, it doesn't get capitalized. From that point of view, that interest will -- but at the same time, revenue has started. So automatically, I have revenue to service that interest. Now the revenue goes into a phase-wise manner. So it will full fledge. -- like, for example, 40%, 20% revenue we have booked going forward, we'll increase 60%, 70%, 80%, 90%. And once it's fully energized or fully stabilized, then we can figure out that the revenue has been able to and give us a good profitability also.

Okay. But any number that you can give us specific for the FY '27 or the coming quarter? -- of interest in...

See, everything depends upon the generation, right? And you know that solar wind is a seasonal matter. So until unless I see the generation because next quarter also is what we say, lower compared to other quarters in the renewable energy because it has got rains and everything. So that also is a factor which will be...

The next question is from the line of Nikhil Kothari from [ Antara Capital. ]

So we are currently having an IPP capacity of 1 gigawatt, right? So what is the peak cash flows after interest that we expect?

See, I can tell you my IPP business gives me an EBITDA of 85% to 90%. Post EBITDA, there are not too much of cost. So it's depreciation and interest cost.

So what's the annual interest cost?