Orient Green Power Company Limited (GREENPOWER.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Results Conference Call of Orient Green Power Company Limited hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Ms. Chandni from Kirin Advisors.

Thank you. On behalf of Kirin Advisors, I welcome you all to the conference call of Orient Green Power Company Limited. From management team, the call would be addressed by Mr. Shivaraman, Managing Director and CEO; Ms. Kotteswari, Chief Financial Officer. Now I hand over the call to Mr. Shivaraman. Over to you, sir.

Thank you. Thank you all for joining our call. It's my pleasure to welcome you all to the OGPL Q1 FY '26 Earnings Call. I would like to thank all our investors, stakeholders and partners for their continued support and confidence in our company. The first quarter of FY '26 has been a landmark one for OGPL in recent past. A combination of internal and external factors has helped us deliver one of the best performance in recent years. The internal factors have been the completion of the component upgradation in a number of our wind turbines, which were down over the last couple of years. Almost all of them are currently online, and they have been able to contribute significantly to generation this quarter. We've also been able to manage our finances much better and bring our interest costs down significantly. The external factor has been the early onset of the wind season, which actually has returned to a normal pattern after 2 years of pretty poor wind. And this -- the wind has been sustained throughout Q1 and has also been fairly good even in Q2. So we have been able to achieve better revenues from our portfolio revenues going closer to the long-term average of generation. And obviously, this has improved our capacity utilization, our EBITDA and our revenues. Quickly running through our numbers. The total income was INR 93.17 crores for the quarter, which is about 38.6% growth year-on-year. EBITDA is INR 65.2 crores, 46.4% better than last year. And our EBITDA margin expanded by 378 basis points to about 70.75%. Net profit -- the PAT before discontinued operations was INR 28.85 crores, which is 446% year-on-year growth. And PAT margin is also 23% higher at 30.96%. This financial performance reflects the strength of our operating portfolio and also our benefits of our financial prudence. Our finance costs have declined by over 15% during the quarter because of timely debt repayments and improved credit ratings. Going forward, we have -- we are currently constructing our 7-megawatt AC solar project in Tamil Nadu. And final stages of awarding the contract for the 18-megawatt project totaling 25 megawatts. The delay in the 18 megawatt has been due to land due diligence issues, which, as you are all aware is always a problem in renewable space. But once -- now that we have almost frozen on the supplier, we should be in a position to quickly implement this project. We have already signed with customers to offer the power from this 25 megawatts of solar in combination with our wind so that we are able to give a diversified source of energy supply to our customers. I think with the favorable wind conditions continuing till date in Q2 and expect it to continue through the end of the quarter and with the commissioning of our solar project in the next few months, we will be in a position to deliver better results over the next few quarters. We are also looking at expansion, as we have earlier signaled that we would like to expand to about 1 gigawatt over the next couple of years. We are in serious discussions on quite a few inorganic acquisitions as well as implementing certain repowering projects on our existing assets. And we are confident that over the next couple of years, we will be in a position to significantly grow our portfolio. Thank you for joining us today, and we look forward to sharing more updates during the year and answering questions as they come up. Thank you.

[Operator Instructions] The first question comes from the line of Faisal Hawa from H.G Hawa and Company.

Sir, I have 3 questions. One is you talked about some acquisitions. So what route will we take to make these acquisitions, as our cash positions or bank balance position is not that healthy? And what are the kind of acquisitions we are looking at? Is it in wind and solar? And in which states are we situated in? Second question is, sir, if the better performance in the first quarter, how much of it would be due to the changes in our machinery and the old turbines, which were off getting started? And how much of it would be due to the better wind conditions? Third question is, sir, how much lower can our interest costs go to? And what are they at present? And we did get some significant other income because of banks giving us back the extra interest that they had charged. So what is the total amount of such other income that we could get from these banks? And sir, fourth question is that if the same wind conditions are continuing, do you feel that the second quarter also the profits could be like 2.5x to 3x like just like the first quarter?

Okay. So let me answer the questions that I can answer. As far as acquisitions are concerned, we are looking at across wind and solar. So -- and we are definitely looking at multiple states. There are a few projects in Tamil Nadu that we are evaluating, but there are quite a few projects which are outside of Tamil Nadu. So we are being quite agnostic and we were actually having a slight bias towards solar rather than wind because we need to balance our portfolio somewhat. Financing of these acquisitions, we will work out as we get closer. There are multiple options, but I think that's something that as we target kind of stabilizes, we will figure that out. As far as the increased performance due to -- whether it is due to the, should we say, increased generation or increased machines. So compared to Q1 of last year, we had about 12.46 crore units as against 9.5 crore units last year, which is about 3 crores units extra, out of which almost 1 crore unit is because of improved machine availability in our machines, that is the retrofitting of the machines. And the balance 2 crore units is because of better wind. So that's the kind of split between the two. As far as the Q2 is concerned, we are still halfway through the quarter. So till date things are looking good. But last year was particularly bad in Q1 because the wind was low last year, in fact, year before last year also Q1 wind was quite sad. So I don't think Q2 will see as big a jump in terms of the wind availability. But there are other benefits on reduced interest rates and things like that. So I think we will be able to achieve decent results in Q2. Obviously, we have to wait for the quarter to end. As far as interest costs are concerned, we are -- I think last year, we were at about 9.45%. Today, our interest cost is about 9.25%. So -- and we are pushing towards a net figure of over 8.75%, which we should be able to achieve in the coming -- hopefully, by the next year. That's the target that we have another 0.5% interest reduction is what we're looking for. I think that's pretty much...

And sir, what is the blended per unit realization that we are getting? And at the acquisitions we are looking at, what is the per unit realization because now the...

See, that's a little difficult to say. See, as far as acquisitions are concerned, there are 2 types. One is that we are looking at certain assets which are in long-term PPAs, which have lower realization, but then they have a 15-year, 20-year PPA. So that's a different kind of animal. And the -- our group captive assets have -- I mean, each -- I think we have an average net realization of around INR 5-plus from our group capital assets, which will be more or less similar if we acquire more such assets. So because the combination is different. Obviously, when we are acquiring assets, operating assets, if the tariff is lower, we will be paying a slightly lower price and where we acquire operating assets with higher tariffs, the price that we pay is higher. And -- but there are pluses. If when I have acquired assets with long-term PPAs, there's 15-year, 20-year stability of income. Whereas, with the group capital assets, the PPA durations are typically shorter.

[Operator Instructions] The next question comes from the line of [ Sanjay Agarwal ], an individual investor.

First of all, I would like to congratulate the team for a very good set of numbers for Q1. Am I audible?

Yes. Perfectly audible.

So the first question that I want to check, what are -- how we are doing the energy storage solution inside for the wind power, if you can throw some color on that? That's question number one. And question number 2, I heard you saying that the 7-megawatt solar capacity we have entered into the contract, so do we have any time line, like when we expect this to be commissioned? And is there a possibility we can start seeing the revenues coming probably in this financial year? And the third question is, sir, can you give us any revenue guidance for the '25-'26 and '26-'27 collectively on a consolidated basis.

I didn't catch your last question. What was that?

The revenue guidance on the consolidated basis.

Okay. So firstly, on energy storage, we are currently evaluating the feasibility of energy storage, both on the solar and the wind side. At current battery costs, it looks quite tight. It looks not really viable without some kind of a subsidiary, which is not available to IPPs unless you go to a government PPA. But we are seeing battery prices dropping continuously. So this is something that we are closely evaluating and I would think that we would be kind of getting into battery storage sooner rather than later. But the time line will depend on when the numbers start making sense from an IRR point of view. With regard to the 7-megawatt solar project, I think we are looking at about November or December of this year when the project will get commissioned. Revenue guidance, typically, we do not give going forward because two reasons. One is we are in the wind industry. So it depends a lot on how the Vayu Bhagavan helps us. And the second part, of course, is that since there are conversations happening, the baseline results may change. So we normally do not provide forward-looking guidance.

[Operator Instructions] The next question comes from the line of [ Sakshi Shinde ] from Orient Green Power Company.

My question is, what is the current average operational efficiency of wind turbines and has it improved as compared to the last year?

No, the turbine efficiency does not change year-on-year much because we already have the turbines, they're fixed so it is dependent. I mean, the only thing that we can do is ensure that they operate 24/7 during the wind season. So it's more or less the same. It's only depend what -- our generation difference is dependent mainly on wind and reducing breakdowns or downtime.

The next question comes from the line of [ Dhana Tolani ], an individual investor. Since there is no response, we will move to the next participant. The question comes from the line of Faisal Hawa from H.G Hawa and Company.

So what is our per unit generation that you are getting from the private players at this point of time? And how sustainable it is? Because overall, the renewable energy rates have fallen to almost INR 2.75 or INR 2.5 per unit. And do you feel that this can sustain? And any effect of the U.S. tariffs on us because most of our customers are also in the garmenting industry. And second question is, sir, what is the kind of priorities now this company holds for the Shriram Group? Because most of the other companies have been sold off or have been classified as not Shriram Group companies and promoter holding also remains extremely low. So will this company and its operations get a lot of priority? Because we have been talking of going to 1 GW from a very long time and even the annual report does not give any perfect road map for it. So is it a correct assumption that we will now go to 1 GW, say, in 1 year's time from today?

Okay. See, I'm not -- I don't think I can give you a time line on the gigawatt. So the only thing I can say is that we are working very hard on it. And all of us are kind of committed to doing it. There's a lot of work happening on the ground, but it's not at a stage where we can kind of communicate it formally to shareholders. As far as the sustainability of the tariffs that we have, we have decent PPAs, our exposure to the garment industry is not very large. We have a lot more exposure to auto component and other manufacturing and relatively small exposure to textile and garments. So we have not -- from that point of view, we don't see an issue with the U.S. tariffs. In terms of reduced cost, see, the drop in price is primarily -- a lot of it is on solar, not so much on the wind side. Wind has also dropped in price, but not that much. And if you see new capacity addition in Tamil Nadu has not been that dramatic in the wind side because of tightness in availability of suitable wind lands. So we don't see -- we do see some competition in terms of pricing, but it is not dramatic and it's not really putting a significant downward pressure. The other part is that a lot of our customers are still not achieved 100% renewables. The target is to achieve 100% renewables by 2030 or before. Many -- most of our guys are still at 40%, 50%. So there is quite a bit of headroom even within the existing customer base to expand our supply. And our constraint actually has been supply that we have not been able to generate enough power to supply the customers rather than not having enough customers to buy our power, which is why this solar makes sense and which is why we will look at hybrid and repowering some of our older turbines to increase generation within the existing portfolio. So we are quite comfortable on that front. We do have, should we say, support from our promoters to go forward. And we will find structures that work for growing the company. Thank you.

Sir, my question about the unclaimed so far interest which bank has overcharged us, how much is -- that's still recoverable and is in litigation with ombudsman? That question still remains unanswered.

That will be depending on the banks. We have launched a claim of around total -- in total INR 50 crores, out of which INR 9.3 crores Bank of Baroda has given. The balance, INR 40 crores depends on how banking ombudsman gives us the award.

And sir, suppose some of these acquisitions do not go through because of any technical reasons or some reasons on price factor. What is our plan B? Because we have raised two rights issues for expanding the capacity and on ground that capacity increase has really not taken place?

Yes. See, there has been a delay in the solar because we had signed up a PPA, I mean our agreement with EPC contractor for 25 megawatts. Unfortunately, when we went into the detail of the diligence of the land, we found that was a big hole in the land, so we were forced to reallocate our, should we say, this thing to two other contractors to keep moving because we could not take that risk. As far as the acquisitions are concerned, I think we have currently far more conversations than we can complete. So there are multiple options available. So the probability that all of them will go for is not -- is very, very low. So we have more options than we need. So I'm fairly confident that we will be able to get there. Organic growth will take more time because these projects take quite some time to develop in terms of land and in terms of evacuation, and especially Tamil Nadu wind land has become an absolute massive bottleneck because most of the places where the wind is viable have been already filled up. And the few other places that are available, there is a grid connectivity bottleneck. So I think the way to go in Tamil Nadu at least will be only inorganic and also repowering. We have a fairly substantial repowering portfolio. We were constrained by government regulation not being conducive, there were quite a few kind of holes in the government regulation for repowering. Most of those have been ironed out. There is still a little bit of work that needs to be done with the electricity authority and the regulator. We hope to get that done in the next month, 1.5 months, and then we will be able to start the repowering process on existing old assets. That will give us the advantage that you already have the grid, you have the land, you only need to knock down the old turbine and put in a new turbine, which will substantially improve generation with as lower cost as possible.

And sir, what are the per unit or per MW price that we are looking at if we acquire, say, solar? And -- or if we acquire wind, so what is the kind of capital that we'll need? Because any shareholder would need this figure to understand how much your equity will expand or how much your debt will expand in future?

Definitely once we finalize these deals, we will come -- obviously, we have to come to the shareholders for approval for doing all these things. So at that point, I think it is today too premature to talk about it because there is a wide range of assets that we're looking at. So as soon as we have clarity, we have a handshake with some of these things, we will come to the shareholders for approval. And obviously, we will be at that point sharing all the data that we have on it.

And sir, are we discounting any of our outstanding customer...

I'm sorry to interrupt, Mr. Faisal, could you please rejoin the queue for more questions? The next question comes from the line of [ Sakshi Singhania ] from [ Unity Finance ]. Since there is no response, we will move to the next participant. The question comes from the line of [ Dhana Tolani ], an individual investor.

Sir, I have a couple of questions with me and I'll just started the first one. I've seen good Y-o-Y growth in total income in Q1 FY '26. So what is the main key driver behind that?

Yes. So two drivers. One is the -- we had a few turbines which needed massive -- I mean major component upgradation that we managed to do over the last year. So those have been fully operational this year. We're generating about 1 crore extra units compared to last year. Second is that the wind season started a little early this year and has been quite sustained during Q1. So that added about 2 crores to our total -- 2 crore units to our generation. So we are totally about 3 crores extra units basically split between these two.

Also connecting to this question, like EBITDA grew also well, like EBITDA also there's margin expansion of around...

Our major cost in this business is O&M, which is more or less fixed and interest costs. So as we generate more power with the same assets, we will immediately have -- I mean, most of that falls to EBITDA.

Okay. How much of this from volume? And was it from cost efficiency or what was it from volume?

No. We -- see, there are -- in the profit side, some of it is from interest efficiency because we have had lower interest costs this quarter. But from the operations side, it is basically operational efficiency because we have very few levers in cost. We have some cost efficiency gains in O&M costs, but that is small compared to the overall cost of running the business. So in the wind business, you have to do mostly at operational efficiency rather than at cost efficiency.

Okay. So also, if we check the bottom line, it has increased tremendously. What is the main thing that's contributing to this factor? Because if you check the comparison between the EBITDA and the PAT, EBITDA increased by 46-around percent and PAT increased by around 400-plus percent Y-o-Y. What are the main -- like what made this huge increase?

Yes, because last year, the EBITDA was -- I mean, the interest cost is fixed. So last year, we had an EBITDA of around INR 45 crores against which we had a finance cost of about INR 18 crores and -- or INR 19 crores almost and depreciation of INR 20 crores. So effectively, we had only about INR 5.5 crores of PBT from INR 45 crore EBITDA. This year, if you look at it, we had an EBITDA of almost INR 66 crores, our finance cost was lower INR 19 crores came down to INR 16 crores and depreciation is more or less the same, INR 20 crores more or less the same. So basically, we had a saving of about INR 2 crores -- almost INR 3 crores in finance costs and higher EBITDA. So that entire difference tops to PBT.

The main reason behind the finance cost due to like the loan repayment or debt repayment or credit rating impact -- or what is the reason there?

See the interest rates have also come down marginally, 20 basis points to 30 basis points. However, the -- from the cost side, but major increases in the profit is due to the wind generation, out of which already sir has explained that the AP -- some of the machines which were down they were restored and due to which at least the bottom line has increased at least INR 7 crores to INR 8 crores, and the balance is due to high wind. The wind season onset is early, so because of that directly, the entire wind, which is additionally generated goes to the cash profit.

Okay. So it is at an industry level like the finance cost declined? Or do we have the like separate like or the -- like main benefit from finance cost?

No, I didn't understand the question.

So if you're asking about it at industrial level, see, because all the industry which has wind in Tamil Nadu, the same higher generation would have been there, provided they have maintained their assets, machine availability correctly. And with reference to interest...

If you see, year-on-year, actually, this year, Tamil Nadu only has outperformed. Andhra, the wind is more or less similar to last year. And Gujarat also the wind was similar more or less similar to last year. So it is only Tamil Nadu in our portfolio, which has actually outperformed this year compared to last year. Actually, last year actually Tamil Nadu underperformed. It would have been better last year, but it was worse than what we had hoped for.

So we can say we have a geographical benefit?

We had a bit of a geographical benefit this year.

[Operator Instructions] The next question comes from the line of Majid Ahamed from PinPointX Capital.

Sir, I have my first question that I have is for FY '25, can you just give me the number of units that have been sold versus the PLF? Can you give any...

PLF is little. See FY -- you're talking about full year FY '25?

Yes, sir.

So full year FY '25, we had a total of about 55 crore units which were generated -- 55.5 crores units.

Does that answer your question Majid?

[Technical Difficulty]

Majid, you're not quite audible.

Sir, second question I have is in terms of the receivables, I've seen around INR 19 crores to INR 20 crores of receivables. Your receivable aging is around 2 to 3 years. Would there be again, any impairment of ECL, expected credit loss or any receivable losses?

No, this is a INR 20 crore money which is lying in the AP government interest they have to pay us on the old outstanding dues, which we went to court and got settled, and we received INR 75 crores last 2 years back. So this INR 19 crores, again, we are pushing for -- while the court has ordered it to be paid to us, but due to their financial difficulty, they are delaying it. And as a practice because of the Ind AS applicability, we do provide the ECL as part of the accounts, which is a noncash expenditure. So that will be there. Except for that, there are no long-term receivables. My -- our receivables will be less than 30 days.

Less than 30 days. Okay. Got it, sir. And final question I have, sir, is there any debt repayment or -- will happen sir for this year FY '26, through strong cash flow generation?

Routine repayment is going on as per the, should I say...