Sarda Energy & Minerals Limited (504614) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sarda Energy & Minerals Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Parth Chauhan from AdFactors PR. Thank you, and over to you, sir.

Good evening, everyone, and thank you for joining us today to discuss the Q1 FY '27 business performance of Sarda Energy & Minerals Limited. We have with us Mr. Pankaj Sarda, Managing Director; Mr. Manish Sarda, Deputy Managing Director; Mr. Padam Kumar Jain, Director and Chief Financial Officer; and Mr. Nilay Joshi, Executive Director. Before we proceed with this call, I would like to mention that some of the statements made on this call may be forward-looking in nature and may involve risks and uncertainties that are difficult to predict. The company undertakes no obligation to update any forward-looking statement to reflect developments that occur after the statement is made. Documents related to the company's financial performance, including the investor presentation have been uploaded on the stock exchanges and company website. I now hand over the conference to Mr. Pankaj Sarda. Thank you, and over to you, sir.

Thank you, Parth. Good afternoon, and thank you all for joining us on the Q1 FY '27 earnings call. I hope you have had a chance to go through the financial results and investor presentation uploaded on the exchanges and our company website. Q1 FY '27 stands as testament to the series of decisions we have taken over the last few years to build a diversified integrated business model, one that has continued to help us navigate external challenges. Following a record FY '26, we have begun the new financial year with continued progress across our strategic priorities, strengthening our integrated business model through disciplined execution, strengthening expansion pipelines through disciplined capital allocation and improving efficiencies. Let me now walk you through the key highlights of the quarter. Despite a combination of planned maintenance shutdowns, unplanned outages and seasonal factors, Q1 FY '27 financial performance remained robust with the highest ever quarterly EBITDA and PAT. Q1 total income stood at INR 1,717 crores, EBITDA at INR 762 crores and PAT at INR 478 crores, a growth of 9.4% Y-o-Y. Net profit included a onetime net benefit worth INR 110 crores, mainly relating to the regulatory approval of final project cost for 113-megawatt Sikkim hydropower plant. Moving to the operational performance. Our energy business remained the key growth driver, contributing nearly 70% of consolidated EBITDA and providing stability to overall earnings. We have secured medium- and long-term power supply agreements for over 380 megawatts out of the total 710-megawatt salable power capacity, which meaningfully improves revenue visibility and earnings stability for our power business going forward. During the quarter, generation at the 600-megawatt thermal power plant continued to be steady during the quarter with an average PLF of 85.9%. Generation across our small hydropower plants was affected by delayed monsoon conditions during Q1. However, we are encouraged by the early trends in July and are hopeful of a better momentum in Q2. Separately, as previously announced in stock exchange intimation, our 113-megawatt Sikkim hydropower project was shut from 18th June to 5th July, following the collapse of a transmission tower caused by heavy rainfall and landslide. The plant has resumed operations fully and is functioning at normal level. On the metals front, while iron ore pellet production supported our operating performance, but the consolidated revenue for the steel and ferro alloys segments declined Q-o-Q as the production was impacted by several planned outages. Firstly, the planned replacement of 30-megawatt captive power plant unit at Raipur, along with improvements works across steel and ferro alloys facilities temporarily impacted production. This resulted in a temporary Y-o-Y decline in production of billets, wire rod, et cetera. However, the new 30-megawatt unit is ready for trial operations. We expect stable commercial operations to begin by the middle of this month. Secondly, at Vizag, the captive power plant underwent scheduled maintenance for 23 days, affecting ferro alloys production. Additionally, one of the ferro alloys units at Siltara was also under shutdown for 53 days for refurbishment. On the realization front, the steel prices remained largely range bound with a mild negative bias during the quarter, while ferro alloys prices saw a modest improvement, the price realization from sale of power was lower Y-o-Y. Moving on to the updates on our ongoing capacity expansion. Execution across our major expansion initiatives continues to progress as planned. The regulatory approval process for expanding our thermal power capacity at SKS from 600 megawatts to 1,200 megawatt is on track. The brownfield expansion remains one of the most capital-efficient growth opportunities available to us, backed by existing land, water, material handling system and evacuation infrastructure. Approval process for our 3 small hydro projects in Chhattisgarh, 74-megawatt aggregate is progressing as scheduled. Commissioning of our 50-megawatt captive solar project has been delayed due to right-of-way issues on the transmission line. We now expect commissioning before the end of the next quarter. For our recently acquired 66-megawatt hydropower project in Arunachal Pradesh, most key statutory approvals are in hand and critical land acquisition is complete. Work for approach road started. We remain confident of hitting our planned time lines on this project. On mining, development of the Shahpur West high-grade coal mine remains on schedule with commissioning targeted before the end of FY '27. The Bartunga Hill coal mine is expected to be opened by the end of next financial year, while regulatory approvals for the Gare Palma 4/5 and Sinduri coal blocks continue to progress as planned. Additionally, as part of our sustainability agenda, we are investing approximately INR 300 crores. The project includes a waste heat recovery power plant at Vizag with an aim to improve energy efficiency and resource utilization. As committed earlier, we continue to be very prudent about our balance sheet while undertaking all these expansions. All ongoing expansion projects continue to be funded through internal accruals. We are now net debt-free on both a stand-alone and consolidated basis with a strong balance sheet and healthy liquidity of more than INR 2,500 crores as of 30th June 2026, giving us significant flexibility to execute our long-term growth plans. Looking ahead, our focus remains on disciplined execution of the expansion pipeline, timely commissioning of ongoing projects, deepening the integration from mining to energy to metal and further strengthen the balance sheet. We are confident these initiatives will continue to enhance earnings visibility, improve operating efficiency and support sustainable value creation for all our stakeholders. With that, I'll hand over to Mr. Manish Sarda to walk you through the industry environment and outlook.

Good afternoon, everyone, and thank you for joining us.

Manish, over to you.

Good afternoon, everyone. Can you hear me?

Yes, sir.

Can you hear me?

Yes, sir, we can hear you loud and clear.

Energy sector demand..

Manish, you are not audible.

Not audible?

Sir, it is very much audible.

Okay. So let me go ahead then. India's power generation grew 9.4% year-on-year to around 5%.....

Talking about energy sector demand India's... Hello, are you there?

Yes, I'm there very much.

I can hear both of you.

Talking about energy sector demand.

I think they are unable to hear us.

Am I audible?

Yes, you are audible.

Manish sir, you may continue.

So India's power generation grew 9.4% year-on-year to around 523 billion units during the quarter. Thermal generation grew 7.5% and continue to account for close to 70% of the country's total generation, while renewable generation, including large hydro grew approximately 15%. Delayed monsoon conditions weighed on hydropower with small hydropower generation declining roughly 30% year-on-year and large hydropower generation declining 7% -- this was more than offset by a sharp 45% increase in solar generation. Average prices on the day ahead market held broadly stable at INR 3.85 per unit compared to INR 3.92 per unit in the corresponding period last year. However, prices in July have moved up from INR 4.19 to INR 5 per unit year-on-year. The government continues to prioritize energy security by promoting domestic energy resources and reducing dependence on imported coal and oil, reflecting global supply disruptions, higher logistics costs from geopolitical tensions and Indonesia's export restrictions, the Indian coal index for June 2026 was minus 21% higher than June 2025 and minus 11% higher than March 2026. Steel sector. India continued to outperform major global steel producers through the first half of calendar year 2026. Domestic crude steel production grew over 7.5%, even as China and several other major producers saw declines. The weak domestic Chinese real estate demand continued to push exports into global market at about 10 million tonnes per month. Amidst this, India's apparent steel consumption grew year-on-year, though momentum moderated sequentially. Imports have once again exceeded exports after 2 quarters, partly on the back of free trade agreements with partner countries. We welcome the government's antidumping investigations, which should help address unfair imports and support domestic producers. The ongoing conflict in West Asia has raised input costs and created supply chain disruptions. Elevated oil prices could inflationary pressure and affect demand in certain end-use sectors, including steel. While we remain in a wait-and-watch position, given India's predominantly domestic demand-driven economy, we expect to overall impact to remain manageable. Government initiatives under Viksit Bharat 2047, Make in India and Atmanirbhar Bharat continue to drive investment across manufacturing, logistics, electronics, semiconductors, data centers and industrial infrastructure, creating sustained long-term demand for reliable, competitively priced power as well as metal sector. How is SEML's positioning? Against the backdrop, -- we believe SEML is well placed to capture these structural opportunities through our integrated presence across mining, energy and metals. Our diversified and calibrated expansion pipeline is well aligned with India's long-term priorities of energy security, manufacturing-led growth and economic self-reliance. With plans to quadruple our mining capacity and double our energy generation capacity, we are entering the next phase of growth with a strong balance sheet, improving operating momentum and clearly defined road map. We remain confident that our integrated model, disciplined capital allocation and continued execution focus will drive sustainable growth and enduring value for all stakeholders. With that, we'd be happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of from [Sugandh Haria] from [GreenEdge Wealth].

See, my first question is on our IPP, the power sale, and power realization. If I just back calculate the numbers, in this quarter, we earned almost INR 8 a unit on our power sale. Now, I heard on the call that almost 370 MW of our capacity, we have some long-term PPAs or mid-term PPAs for that, and I’m sure the rates for PPAs would be between INR 5 to INR 6. Is it fair to say that going ahead, as more and more PPAs are signed by us, the revenue per unit of power will keep declining? Hello, am I audible?

Yes, you are audible. Just hold on. I think Raipur disconnected. Can you connect them, please?

Yes, sir. I’ll just connect them again. Hello, sir. Am I audible?

Hello. Can’t hear you.

Hello. Am I audible to you, sir? Sir, I think the Raipur team is unable to hear us.

So then you do one thing. You may be...

Are they on mobile or are they on landline?

No, no. See you connect on the mobile. I'll just give you the number. Wait.

[Operator Instructions] Ladies and gentlemen, we have the management connected. Sir, you may proceed.

This is [Sugandh Haria]. Should I ask my question?

Yes, please.

Yes. Sir, my question is on the power -- on our power business. See, when I back calculate, I get that we have earned around INR 8 a unit on an average for this quarter, which is quite a good realization. But I heard on the call that almost 378 megawatts of our power plant capacity is going to be on long-term PPAs. And the rates there may be in that INR 5 to INR 6 unit. So would our revenue from this power plant keep declining as we sign more and more long-term PPAs?

I think there is some understanding our current period income also includes the previous year adjustments. So the average realization calculated by you is not a correct one.

Okay.

Reverse calculation will not work because we have certain income for the previous period also.

Okay. Okay. Got it. Sir, but then going ahead, like we should generally assume for the full year, like INR 5 to INR 6 a unit on whatever electricity is generated and sold by us?

Yes, yes. It will be in between -- and over a period of time, it will go up. Over a period of time, as the inflation goes up and peak demand goes up, this will increase, particularly for the hydropower side.

Okay. Okay. Okay. Sir, and just I think this summer, it said that there was a lot of solar power in the daytime and which is why the daytime rates did not go up at all despite very high demand. So as Sarda Energy, how do you see this whole situation of excess solar capacity coming? And like will it hit us or that is precisely the reason why we are doing these long-term PPAs?

No. As the solar is increasing, at the same time, this BESS is also coming up. And there will be certain policy changes at the government level also when they may also give concessional power tariff during day hours to the industry or maybe charging stations and all those things, policy initiatives will also happen. So over a period of time, things will get balanced. But yes, definitely for the present time, during day hours, because of solar, power is excessive. And during the peak hours, the gas has gone up. So we are getting much higher prices during peak hours. And peak hour period has gone up from 5 hours to maybe 8 hours, 10 hours like that.

Got it. Got it. Got it. Okay. Okay. And in case of our hydropower, wherever our hydropower projects are, is there enough water like has it rained in the reservoirs which are there around our hydropower plants?

In case of our large hydropower plant of 113 megawatts, we have generated higher than the last year. We are at par even after closure of the unit for almost 13 days. So indirectly, we can say we have generated better than the previous year. But in case of smaller hydropower plants, there was a shortfall of water because there was a delay in the rainfall. Our generation was hardly 1% lesser than the previous year.

Yes. Sir, but next quarter, this -- like this quarter is the largest for our hydropower. So I was just checking if there has been anything.

Can you repeat your question?

Yes. My question is that, see, quarter 2 is the largest quarter for our hydropower generation. So I just wanted to ask if -- have the rains come and is the water adequate in the reservoirs from where this hydropower will be generated?

Yes, Rains are good. And July, we are getting far better rains in the smaller hydropower projects also.

Okay. Okay. Okay. Got it. And then my last question will be for this year, which is financial year '27, what will lead to, say, a growth in revenue or EBITDA? Because whatever projects we have on the coal mining side or in the power side, a lot of them are probably going to come later on. So is there any -- can we expect any growth in this current year?

One will definitely be the improvement in the power price realizations. Another is the improvement in the power capacity utilization in our IPP. These are 2 primary factors. And with the commissioning of our 30-megawatt power plant, there will be improvement in the generation.

Okay. And sir, you don't see any improvement on the metal side, like any.

Metal side, the production will go up with the commissioning of the 30-megawatt new power plant. Our total power generation will go up. That will definitely help in increased production of the steel side.

The next question is from the line of Manav Gogia from Yes Securities.

Sir, my first question is pertaining to the INR 110 crore impact on the net profit that we have witnessed this quarter. Just wanted to get a sense of if you could give me the number of what the actual impact was on the top line and on the EBITDA level?

In the top line, in the revenue, it was INR 162.64 crore was added in the revenue side.

Okay and...

There was an increase of about INR 18 crores on the other income in the form of interest. At EBITDA level, it I'll just give you the figures. Before tax, you can directly reduce -- add up 25% to the INR 110 crores. That is the EBITDA level effect.

Okay. Net of tax, right?

Net of tax.

Got it. Sir, just a follow-up. This INR 18 crores is the only number which is coming in to the other income because sequentially, we have seen a good jump in the other income from roughly INR 4 crores, INR 5 crores. So...

No, INR 18 crores is basically interest awarded along with the tariff. So that is added in the other income.

Okay. Got it. So that is quite helpful. Second question, sir, comes pertaining to the PPAs. So out of 380 megawatts of PPAs that you already have in place, how -- what megawatt capacity would it be pertaining to SKS, roughly 200 megawatts, if I'm not wrong?

No, 330 megawatts approximately.

Okay. 330 for SKS. And would you be able to give us a sense on what the tariff would be?

It is in between 5 and 6.

Okay, between 5 to 6. Okay. And the maximum capacity that we are looking for PPAs for SKS, is it going to be 400, 500, or are we going to keep something as probably open quantity over there as well for sale?

Maximum quantity is 540 megawatt.

Okay.

Now it's a call we have to take it to what extent we have to commit.