Refex Industries Limited (REFEX.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Refex Industries Limited Q2 FY '26 Earnings Conference Call. [Operator Instructions] This conference is being recorded. We have with us today from the management team, Mr. Anil Jain, Chairman and Managing Director; Mr. Dinesh Kumar Agarwal, Whole Time Director and CFO. We will begin the call with opening remarks from the management team. And post that, we will open the floor for questions. With that, I hand over the call to Mr. Anil Jain.

Good morning, everyone, and thank you for joining us on yet another earnings call. Q2 FY '26 marked a period of steady improvement across our coal and ash handling business despite the early and intense monsoon-led disruptions in Q1 and continued rainfall in Q2, which was largely anticipated as part of a seasonal cycle. With activity levels picking up across sites and cost discipline continuing, our total income from continuing operations, largely driven by ash and coal handling, grew subsequently by about 15% to INR 431 crores, while EBITDA nearly doubled to INR 74 crores from last quarter. The net profit stood at INR 52 crores. These numbers reflect the underlying resilience of Refex's business model. With the monsoon period now largely behind us, except in a few states still experiencing prolonged rainfall, we are seeing a steady pickup in site activity and volumes across our coal and ash handling operations. More specifically, the improved site access and normalized plan schedules are driving this recovery. As we move through Q3, our focus remains on disciplined execution and operational efficiency. Our mobility vertical continues to strengthen its foundation with teams on the ground engaging closely with the corporate clients charter ready to deploy fleet expansion and improve utilization across B2B and B2B2C platforms. On this note, I would like to briefly mention that the demerger of Refex Green Mobility Limited from Refex Industries Limited is in process through a composite scheme comprising two steps. That is, first, the merger of RGML into RIL, followed by a demerger of Mobility undertaking from RIL into a separate listed entity called Refex Mobility Limited, in line with our strategy to unlock focused value creation for all our stakeholders. Post demerger, the mobility vertical will pursue its growth plan independently with strategic and financial flexibility. Our wind vertical continues to progress steadily as we are fulfilling the initial customer orders while exploring new opportunities as well. We remain in the building phase of our external -- of our internal technology and manufacturing capabilities being the foundation for scalable growth in the years ahead. As shared earlier, we have taken a conscious call to wind down our power trading operations, focusing instead on core business with higher strategic and financial alignment. Looking ahead, with multiple new ash handling projects commencing, we anticipate continued momentum in the coming quarters. Refex's strong order book, diversified portfolio and operational discipline continue to position us for consistent long-term value creation. Thank you, and I would like to open the floor for questions and answer them, please.

[Operator Instructions] We take the first question from [ Miten Shah ], an individual investor.

Am I audible?

Yes, sir.

So my first question would be like we see a different listed company called as Refex Renewables also. So I would like to ask whether it falls into the consolidated statement of Refex Industries or is it a separate sister concern company from the same promoter management?

It's a very separate listed entity. It has nothing to do with Refex Industries.

Okay. And this time, the presentation did not include refrigeration business at all. Is it that we have totally wiped it off? Or is it on the process of completion of wiping it off?

If you see the notes to the account, this has been clearly disclosed that -- it has been clearly disclosed. In the segmental result, there is a separate revenue and profit has been disclosed.

Okay. So it will be totally closed from here onwards, am I right?

It is in the process of liquidation. Not yet.

Sure, sure. Thirdly, with respect to Venwind basically, I mean, how are we structured like? Is it like we are in the league of same players like Suzlon and Inox Wind wherein we manufacture wind turbines? And if yes, how are we competing with them since these are established players in the market?

Yes. This is a wind turbine manufacturing business which we have. We are manufacturing 5.3 megawatt of wind turbine, which is different from what others are manufacturing. Definitely, we have an edge over the others in the machine which we are making. It is a better and higher size capacity machine and generating better technology from the other machines.

Okay. That is in terms of technology. How about in terms of pricing, how do we stand against them?

We are competitive in the market. We already got two orders that shows that our price is competitive and are orders from marquee customers. So definitely, we are competitive in the market.

And what would be the approx ballpark margins that we could probably achieve from here?

Yes, we are still working on those. Maybe once the revenues start coming in, we'll be able to...

But then what are the margins that we presently enjoy on the ash handling business?

That is already it has been given. It is anywhere in the range from 7% to 10%.

[Operator Instructions] Our next question is from [ Krishna Chaudhary ], an individual investor.

Am I audible?

Yes, sir.

Sir, I would like to know regarding the order book status that currently we have. We have been regularly disclosing the new order wins to the exchanges. But if we can have some brief numbers regarding the coal and ash handling business, what all order book do we have right now?

We have very good order book as of now. It is close to INR 1,200 crores we have completely in the coal and ash handling services business. And I mean, next 6 months, business will be really well.

Okay, sir. And regarding the Venwind, as you mentioned, we have two ongoing projects right now, right? Any other, sir, we are in the pipeline that we can expect to win in the coming months?

As and when new order comes, we'll keep disclosing to the market as we are disclosing already whatever the orders are coming in, we'll keep disclosing it.

Okay. And one more thing I wanted to ask, sir. In the balance sheet, we have mentioned some contract assets. So what is that basically if you can provide...

Whenever a service or a work gets completed, but due to certain compliances, if the billing has not happened, it comes as a contract asset.

Okay. So can we assume, sir, that the amount of the contract asset, the work has been done in that particular quarter or the 6 months and it would be billed afterwards, like the revenue would be recognized in the coming months for that?

Revenue is already recognized. It is only the -- since it is a contract asset, revenue is already recognized. It is only the closure of some certification and the approvals, billing will happen.

Okay. And sir, we also increased our authorized capital a few months back, and we more than doubled it, if I'm right. So can you just know what is the rationale behind that? Are we planning some fundraising in the coming months or why such a big increase in the authorized capital?

This is already it is as per the disclosure, I mean, as per the disclosure and the compliance requirement, at various point of time, authorized capital gets increased. There is no immediate plan to raise any fund. Company is sufficiently capitalized and there's sufficient bank balances.

Our next question is from [ Sumit Jain ] from [ Ketak Family Office ].

I had a couple of questions. One was regarding Venwind. We have a couple of orders that we've won. But as I can see in the P&L, we've still not recognized any revenue. So is it that we've front-loaded the expenses and revenue is going to be -- is going to come in the -- like we'll be booking revenues in the second half? Or at what point do we start booking revenues in the Venwind vertical?

Yes. Most of the revenues will start getting booked from the third and fourth quarter onwards. Maximum revenue will be in the fourth quarter. We'll have some small revenues also might come up. These are again all in production, the equipments are. As soon as the production happens, we'll start delivering to the customers.

Okay. So basically, the 179 megawatt and the other order that we won, INR 474 crores, is that to be executed and completely booked in this year or like there would be spillover in subsequent years as well?

Majority will be done in this year. There could be potentially some spillover in the next year.

Okay. Second question was regarding the Refex Mobility vertical that now we are wanting to hive off to a different listed entity. What valuation is that going to be? Like, let's say, if I own 100% of Refex, what valuation have we ascertained to this particular vertical because now that it would be demerged from the company, like have we reached that number? And at what point do we see that company getting listed completely as a separate unit? Like is there a time line to it?

As per the Companies Act and the process of merger and demerger process, there is no valuation requirement to be done since the company holds -- it is 100% subsidiary and there is mirror shareholding will happen. All the shareholder of Refex Industries Limited will get the same shareholding as per the scheme, which has been disclosed. There, there is no valuation requirement to be done. And we have already done a filing with BSE and NSE, and we are awaiting the approval of BSE and NSE. After that, the NCLT filing has to be done. We expect this will take 6 to 7 months process as per the normal whatever it happens, the various compliance process will -- I mean it will take another 6 to 7 months' time.

Okay. So the key takeaway here is the valuation is going to be ascertained by market forces once that lists -- like the company gets listed. And the second point is for the next 6, 7 months, the losses that, that particular entity is now having, that is still going to be bankrolled and it is going to be on the books of Refex Industries, right?

No. If you have read the result of this year, there is -- it has been already been disclosed that it is a discontinuing operations.

Okay. But like for the next 6, 7 months, like for the next 2 quarters, until and unless we don't get the approval from NCLT and BSE and NSE, that still is going to be on the P&L, right?

That has to be done as per the accounting standard. And that is how -- yes.

And last thing was on the ash handling front, whole ash handling front. We were wanting to ramp up our capacity to 90,000 metric tons by the end of this year. So the order book and the kind of demand that we are seeing, are we on track to do that? Or like we're seeing some slowdown? Or what is the situation on the ground at this point?

No, we are on track unless there is a rain happens. Rains subsided all over India as of now, and we are on the track.

Our next question is from [ Jasmine Surana ] from VT Capital.

I wanted to understand the margin surge in the ash and coal handling business this quarter.

This quarter margin is really good. It is between 10% to 12%. And that is majorly because of product mix. A few of the plants where we are working have a very good margin. And there the rains were not there. Because of that margin is -- it is upward of 12%, whereas it will be between 8% to 10%. Like any other quarter, it will continue to have an 8% to 10% of margin.

So I'm to understand that the margin surge is just a one-off and it's a result of lesser rains in some plants and better product mix?

It is because of better product mix. Margin is always it will be between 8% to 10% to 11%.

[Operator Instructions] Next question is a follow-up from Miten Shah, individual investor.

So as far as this order for Venwind is concerned, is it only for the supply of these wind turbines? Or does it also include the operation and maintenance, say, for the next 10, 15 or 20 years, which is normally with other players because those are basically recurring revenues, which gets increased over a period of time?

It is only for the supply. For the O&M, there will be a separate contract. Anyway, we have to do O&M also. But whatever the disclosure is done, it is only for the supply.

Got it. Got it. Okay. And are there any investment which has been forecasted for this year or for next year? If yes, then how much would that be?

No, we are not currently looking to raise any capital.

Sorry, I cannot hear you. Not looking to, okay, okay. And if I see present capacity is like almost we're doing 70,000 metric tons per day of ash handling. What are we targeting, say, in the nearby future, say, 2 to 3 years down the line from the present capacity?

3 years down the line, we think we should at least grow by about 60% to 65% on daily handling.

Sorry, your voice is a little bit feeble. Can you speak a little bit louder?

We're looking between 60% to 65% growth in the daily handling capacity.

That's substantial. Okay. But is it possible for us to include the market share in the presentation going forward? Although we have the numbers I believe, but I believe it is hardly -- roughly around 1% of the total TAM, which I realized from last time's con call. So that will give us an indication of our progress. Could that be possible?

We'll try and incorporate that.

We'll take our next question from Tanya Kothari of AUM Capital Market.

Firstly, congratulations to the management team for a strong margin recovery this quarter and for the steady operational performance despite extended monsoon. So I just wanted to understand the company's stance on the power trading vertical. We have seen its contribution fall sharply from around 20% of revenue in FY '24 to just 0.1% this half yearly. So given the CERC's recent July directive on implementing market coupling, which aims to create a single uniform price across power exchanges, how does the management view this regulatory shift and could a uniform clearing price and centralized coupling mechanism make the trading business more viable? Or does Refex intend to permanently exit this segment? So can you throw some light on this, sir, vertical?

Yes. So just to give a little more color to what you said, we were into pure trading of power only. We were not into market coupling or on exchange. So we have decided to wind this up completely because the margins in power trading were extremely low, and this was not in alignment with what we were doing, where our majority of focus was. So we won't be looking back into power trading business anymore.

Okay. Sir, since ash and coal handling business derives around more than 96% and how do you see the contribution evolving once the green mobility and wind verticals which matures, how do you see the EBITDA margins contributed by these verticals going in the next half or next couple of years, sir?

Like we said that we are demerging the mobility business. So hopefully, in the next few months, it will be a separate listed entity, and the results will not get consolidated after that. And as far as wind is concerned, yes, it is -- it will contribute -- continue to contribute on the revenues consistently. And the EBITDA margins, we don't see a big difference between both the businesses. But yes, as we mature in the business, we'll be able to give more color to those numbers.

Our next question is from [ Maitri Shah ] from Sapphire Capital. There seems to be no response from this connection. We will therefore move to our next question that's from Sumit Jain from Ketak Family Office.