Refex Industries Limited (532884) Earnings Call Transcript & Summary

Okay. Understood, sir. And sir, in the ash handling business, our 98,000 target per day, if you can throw a roadmap like FY '28, FY '29 kind of when we are going to achieve that or broadly? And second, sir, on industry penetration, for example, how much industry is penetrated, how many plants or something on data-driven like it's underpenetrated still on ash or coal handling side.

Dinesh can take that.

I mean we'll be crossing 75,000 to 80,000 in the Q4 of this financial year. And currently, we are working in 42 thermal power plant. And penetration is, we are working in 30%, 35% of the thermal power plant in India today, and there is a lot of potential for the future opportunities.

If you can throw some light on that, on a lot of potential like because of compliance, everyone wants to do that, but how much they are handling by themselves or not pet or not handling it all?

If you can read the presentation, which is uploaded it is mentioned in that.

No, I got it, sir, but if you have some broader more data.

No, no.

Okay. Understood, sir. No problem. And sir, if you can throw some mobility part, we are looking for any strategic partner in future if we get more capital after demerger?

No, we are not. I mean that is still under demerger and it's under the legal process. So currently, we don't have any plans of getting any partners. I think once the demerger happens and this runs as an independent entity, as a requirement of the business comes in, we will look at it.

[Operator Instructions] The next question is from the line of Gaurav Ashok Bhansali from Urban Enterprise.

My question is what will our order book look like by Q4, the consolidated order book?

Very difficult to predict, Gaurav. As of now, INR 1,635 crores of Coal & Ash handling book is there. And out of INR 1,860 crores in the wind business, INR 525 crores is executed and that is the remaining INR 1,300 crores of order book is there. Q4, we'll have a good order book. I mean we are winning majority of tender now during last four months. Hopefully, we'll have a better order book on the Q4 of this.

The next question is from the line of Murtaza from Pinpoint Capital.

As the earlier participant has asked, you had mentioned that some of the wind orders are in advanced stages. So is it possible for you to quantify what kind of quantum either it's in the advanced stage or what sort of number is in the pipeline for the wind segment?

I think it's very difficult to quantify because the inquiry could be in gigawatts, but the actual conversions, you know how it works in India. It's not very easy to predict the actual conversion. But yes, as and when we get orders, I think we'll definitely announce it. We do look at substantial orders this year, definitely at least as maybe better than what we had last year.

Sir, once mobility demerger is completed, I just wanted to understand how are we planning to work with the capital allocation, and like would it be a bit more focused on the wind side of things? Or would it be a bit more focused towards ash handling? Just wanted to understand that a bit better.

See, capital allocation for both the businesses will happen based on the requirements. I think as the profitability and the revenue keeps growing, I think the capital allocation will be planned. Obviously, we will require from time to time, we will keep updating the shareholders and the investors on which direction we're going. Currently, the focus is more on the ash handling business. There's not much of capital requirement in the wind business. But as we do indigenization and a lot of growth and localization, so maybe if there are some capital requirement happens, it will be at the entity level, we will try and see if we can raise some working capital or terms on the bank. Otherwise, some capital allocation from holding company there.

Understood, sir. And sir, just wanted to understand that we have already delivered our first turbines to a particular project. So just wanted to understand what sort of feedback are we receiving from there? And how is it on ground? How is it working?

It is completely installed. I think it's 130-meter high turbine. The installation was done very well. It started operating and it is giving the desired results as projected by us to the customer and the customer is happy and there could be a potential negotiation for a next order from the same customer also.

The next question is from the line of Suhani Singh from ROTH Capital.

So I had a few questions. The Ash & Coal handling volumes were reported at approximately 68,000 to 70,000 tonnes per day. Could you provide an update on quarter 1 FY '26 exit run rate and volume outlook for the year?

Volume of as we have disclosed always, we are doing close to 65,000 to 70,000. Q2, it will slow down. Q3 and Q4, again, it will pick up. And there is capacity constraint is not there. I mean it is like multiplying the fleet and the people. And we are expecting a good growth in the coming quarters.

So sir, are you still confident of reaching the previously gained 90,000 to 95,000 tonnes per day run rate? And what time line should we...

Yes, in the Q4 of this financial year, we'll achieve that.

One more question, sir. Could you provide some guidance on the profitability trajectory of the wind business, especially where does this segment stand today in terms of profitability? Do you expect it to reach breakeven or turn profitable by FY '27?

Anil, you will take it up?

Yes. I think we just spoke about this at least two or three investors that this business will achieve about 5% to 6% margin by end of this year, and this will become profitable by end of this year.

The next question is from the line of Mahesh Sharma from Sharma LLB. The participant's line is not connected. We will move on to the next participant. Saurabh Jain from Think Capital.

So my question is what is projected revenue in wind business for FY '27? Any specified number regarding this?

I think we said that we have existing order books, which will complete this year, and that's the projection for now.

The next question is from the line of Murtaza from Pinpoint Capital. A follow-up question.

Just wanted to touch upon the pledge. So just wanted to understand, can you give an update on the current pledge level and what's the reduction trajectory going forward?

We have done a disclosure last month. There is a reduction of the pledge has happened. We'll be doing another disclosure in the next 15 days. There is a further reduction of the pledge has happened. And there is a continuous repayment continuous payment is happening on a milestone basis, release of the fare is happening, and we expect certain fare will get released in the next two weeks' time. it is going as per plan. There is no challenge in that. And there will be a regular basis of the release of the pledge.

The next question is from the line of Miten Shah, an individual investor.

So the first question would be like if I were to see the media release and the presentation, basically mostly on the stand-alone results. So I would just like to know why is that so? Because predominantly, not only into ash & coal, but even the wind energy also reflects. I can understand the mobility is going to get demerged. So if you can just elaborate on that, why highlight on the stand-alone as of now?

There is no specific thing. It is only mobility business is getting demerged. Wind business is getting stabilized. It is very new. It is the second quarter of operations. It is right represent because in the same quarter in the previous financial year, wind business was not there and the mobility business is getting demerged. So it is a right comparison of apple-to-apple and because of that there is no other specific reason. If you see previous year same quarter, I mean, year same quarter, it is only INR 327 crores. And if I do a comparison of a consolidated number of INR 900 crores, it will be a wrong comparison because wind business itself was not there in the previous year in the same quarter. That is the reason focusing is only so that it is apple-to-apple comparison.

So, going forward, as and when the wind sector delivers a decent contribution, then we will probably consider the numbers in the presentation as well. Correct?

Yes, it is more of giving a right comparison of apple to apple. Nothing else. I mean going forward, quarter-on-quarter, numbers will keep adding up. I mean like Q4 already wind is there. So when we present Q4 year, consolidated presentation will be the right way to present this.

Understood. Also second thing, I can see, I mean, really great traction in the Ash & Coal business as we started from 2018. I've been seeing it scaling since last five years. And rightly, you said in the previous con calls also the same kind of guidance that we have delivered. I can see huge opportunity in this, and we are also growing very healthily in this. But from my personal experience, whenever there is healthy margins and healthy TAM, we see the competition intensifying with others also. So how do you see the competitive intensity as of now and going forward?

Competition is going to help because it will create more awareness among the customer more awareness among the partners, vendor partners and it will help the business. I mean it is, we are only organized business player in this industry. If a few more come, it will help the business more than, it is rather a competitor, it will complement us. I mean always, now we are discovering the market. I mean somebody else also will work along with us to discover more market. It will help the, there is a huge gap of opportunities are there and opportunity is there for a few more players. It is not a challenge. It will be an opportunity.

Got it. Got it. Also, I mean, since we have seen we are almost entering the execution stage of wind turbine installation, the typical problems that we have seen in this sector is regarding land acquisition and also last mile connectivity of power connection. So can you elaborate on a few points for the ongoing projects? I mean how is it placed as of now regarding this.

So for us, it's very simple. We are only a product supplier. We don't do any part of EPC at all. So the customer buys the product from us. Our job is to deliver the turbine, tower and the blade to the wind site installation, everything is not in our scope at all. So currently, the market is mature where all the IPPs have their own process of getting land and connectivity. They have a separate installer to install it and they have a separate regulatory people who take care of the regulatory part of it. So all the wind turbine manufacturers have moved from the combined EPC business to just supply business.

So, you mean, they will be fully paid once we have supplied?

Yes. There could be a 5% which could be waiting for the installation and testing to be completed to ensure that the turbine. Otherwise, 95% of the money comes, yes. That is the performance.

Understood. And also recently, I heard regarding replacement of old blades by new ones like that. Any pipeline order book are we seeing regarding this particular.

We haven't got any orders for replacement still. It is still in discussion with various forums. But on ground, we have not seen any orders yet for our sector.

Got it. Got it. Also, if I may ask one more question, if you don't mind. So, since I've been more focusing into wind sector earlier. Unfortunately, we've seen a lot of birds getting killed because of the turbines as such. And recently, there is a development of converting one of the plates into black color or something like that. So, is it something that the company is also looking out for, I mean, or thinking of something to preserve our nature as such? Do we have any thought on that?

No, definitely, as again, we always believe that we should not harm anybody at all any living being. Honestly, there's no technology in the world which can actually avoid filling of the birds. We definitely try our best to see the high wind velocity when the blades are there, the kind of speed at which it goes. 99% of the birds nowadays don't come closer to the turbines. I think the recognition of turbines has happened in that locality. But the 1% chance, I don't think anybody can help. I mean our intent will not be our intent will be to see whatever we can do to save that; we will definitely try our best.

Got it. Got it. Got it. And also, last question, I mean, as of now, I'll come in the queue again. Recently, we saw a dip in the promoter stake as such. So do we see further increase in the same I know I mean, but if you can highlight on the same also.

Opportunity comes, we keep acquiring from the market. [Technical Difficulty]. We will see when there is an opportunity, we will keep acquiring from the market.

Got it. And what is the realization in Ash & Coal handling. Is it same 300 to 250 and 400 for Ash and Coal same.

It is a per kilometer per person. It varies from 450 to 1200. It is purely at distance [Technical Difficulty]

The next question is from the line of Chintan Mehta from Paluskar Family Office.

I wanted to know the 5.2 megawatt turbine in the sector, like how much market size it is and the specification of it? It's a larger turbine than normal 3 megawatts that I got it. But how much visibility which we have on this technology and this size?

I think the size of the market is not determined by the size of the wind turbine. I think the wind industry itself is growing and the government is having an ambition to achieve 100 gigawatts by 2030. So, the market will keep growing. I think the better technology and better size will always get a priority. Currently, the market is not determined by the size of the turbine.

Okay. And sir, just the last, just a clarification about the net margin. It's a PAT margin at wind level 6%, 7% this year ended you are looking for, correct?

Sorry, I missed that.

You mentioned, someone mentioned that at a net margin, wind business would be close to 6%, 7%. So net margin, we are talking about the PAT margin this year ended closing, correct?

5% to 6%, yes.

Yes. PAT level.

Yes.

The next question is from the line of Udit Sehgal from Pinpoint Capital.

Sir, there are some recent news articles regarding the railways being used for Coal & Ash handling. So how does that affect us positively or negatively?

This is going to affect positively only. This is railway transport is there for a long time. And we have started also into the, that is called RCR, Rail Cum Road. And it is going to help the complete industry. I mean railway came out with a discount in the tariff, tariff. And it is going to help to take it to newer area like Northeast, where the power plants are less and the requirement for cement companies are there. And it will help us to transport more from West Bengal, Jharkhand, Bihar to Northeast of India. And it will help positively to the industry. And it is new avenue. It will add to our new numbers. I mean, in addition to the road what we are doing, we'll be doing more in the railway also.

Excellent. And regarding the wind business, the whole industry seems to be in tailwinds, like I think FY '26 was the highest ever installation and FY '27, almost I think there's a target of 9 to 10 gigawatt. So do you feel like, I mean, there is a shortage of turbines is what we're hearing in the market. So do you feel the same tailwinds? Or is it business as usual?

The tailwind will be there because I think today, the renewable energy is shifting towards one source to multiple source. Everybody is looking at installing wind, solar and storage because government now needs round-the-clock power and not seasonal power. Seasonal power is actually causing a lot of grid stability. So I see that the next 5, 7, 10 years, whenever the, I mean it's not just I think for the next future, there will be a mixture of all three renewable energy, which will be installed. So I see there's a lot of tailwind in the sector.

And we see, sir, the turbine makers, they are generally making 18% to 20% EBITDA. So what is our plan for backward integration? How much time will it take? And when can we aspire to reach those kind of margins?

The localization process is in place. I think 12 months from now, we'll have about 85% of the components localized. So we can see a similar margin two years down the line when the localization and the plant capacity increases.

Excellent. And this localization, sir, we are getting done from like third parties or anything we are doing in-house as well?

Like I said, we are working with multiple OEMs across the country for developing our products. We own the technology license and design. Like an automobile company, we have more than 50, 60 vendors who develop various products for us. And the blades will be manufactured in-house, rest all will be developed in third-party locations.

So say, from FY '28, we can see the margins increasing once the localization starts.

Yes.

Ladies and gentlemen, due to time constraints, that was the last question. I now hand over to the management for closing remarks.

To conclude, we are pleased with the progress achieved during the first quarter of financial year '27. Our core business continues to execute well. Our order pipeline remains healthy, and our strategic growth platform continues to advance in line with our long-term vision. We remain focused on building sustainable business, creating long-term value for all stakeholders, strengthening Refex positions across key growth sectors. I'd like to thank all participants for this call for their continued interest and support towards the Refex. Should you require any further clarification or additional data points, please feel to reach out to our in-house Investor Relations, Mr. Gautam or the MUFG team. Thank you.

Thank you so much.

Thank you, everyone. On behalf of Refex Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.