Solex Energy Limited (SOLEX) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Solex Energy Limited Q1 FY '27 Post Results Earnings Conference Call hosted by Adfactors PR. [Operator Instructions] Please note that this conference is being recorded I now hand the conference over to Mr. Rushabh Shah from Adfactors PR. Thank you, and over to you, Mr. Shah

Thank you. A very good morning to everyone, and warm welcome to Q1 FY '27 earnings call of Solex Energy Limited. From the senior management, we have with us Dr. Chetan Shah, Chairman and Managing Director; Mr. Vipul Shah, Non-Executive Director; and Mr. Hemal Kachiwala, Chief Financial Officer Before we begin the earnings call, I would like to mention that some of the statements made during the call may be forward-looking in nature, and hence, it may involve risks and uncertainties, including those related to future financials and operating performance of the company Please bear with us if there is any call drop during the course of the conference call. We would ensure that it is reconnected at the earliest I now hand over the call to Dr. Chetan Shah, Chairman and Managing Director, for his opening remarks. Thank you, and over to you, sir

Thank you very much, and hello to everyone. A very good day to all of you. On behalf of Solex Energy Limited, I welcome all our investors, analysts, and stakeholders on this call to discuss our Q1 FY '27 results. Let me begin with 2 developments that I'm happy to share with you. First, we have completed our listing on BSE Limited. Solex Energy is now listed on both the NSE and BSE. Kindly note, this was a listing of existing shares on the BSE main board. No fresh capital was raised. This is a milestone we are proud of. It reflects the confidence that investors and stakeholders have placed in our vision, our governance, and our long-term growth strategy. As of today, Solex Energy is supported by a growing community of over 11,000 shareholders. And with our presence on both exchanges, we look forward to further broadening our investor base, improving liquidity and strengthening our shareholder profile. Second, the company continues to strengthen its order inflow following a INR 628-plus crore order received in July '26. In August '26, secured INR 42.47 crore new work order from a domestic private limited company in the power sector for the supply of N-type TOPCon 620 watt peak glass-to-glass solar PV modules, with execution scheduled to commence in October 2026. In addition, the company has received LOI for further INR 175 crore order with a MSA currently at the signing stage. Together, these orders represent an executable order pipeline of INR 845.84 crore targeted for the execution by the December 31, 2026. Before I take you through the quarterly performance, let me place Q1 in the right context because I believe context is important for how one reads these numbers. As we consistently said in our previous interaction, our business is closely linked to utility scale solar project execution in India, and it is inherently H2 weighted. The first half of the fiscal year is seasonally softer, and the second half is when the bulk of module dispatches, EPC completion and the revenue conversion happens. Q2 FY '27 has unfolded along the same seasonal shape. There are 4 factors worth highlighting. First, ALCM, which is known as ALMM II, production flow, higher operating expenses, shifting of delivery schedules. Consequently, customer offtake of modules slows down in Q1 and Q2 and the pipeline flows into H2. This is a structural feature of our industry, not a one-off. If you look at Solex's own trajectory over the last several years, the pattern of the softer H1 and much stronger H2 has been consistent. Second, ALMM. As you are aware, up to the middle of May, there was a broad expectation across the industry that the ALMM List-II, that is ALCM timeline on cells would be extended. On 25 May, it was clarified that there would be no extension. In the weeks that followed, a number of upcoming projects were placed on hold and the market as a whole moved into a wait-and-watch mode, while developers assessed the implication of their project time lines and their financing. This slowed down the fresh decision making and led to some customer driven rescheduling of module deliveries during the quarter. I want to be very clear on 2 points here. These are the timing shifts and not cancellations. And we do not currently see any orders at risk. And whether ALMM is extended at any stage or not, there is no impact on our order book, because we are prepared for both scenarios. For ALCM compliant orders, we have supply arrangement in place with domestic cell manufacturers. And for our other orders, we are fully secured on the imported cell supply chain. Third, the cost base. With softer volume in seasonally weak quarter, our fixed cost and the full quarter impact of depreciation and interest on our 4 gigawatt capacity are absorbed over a smaller revenue base. Let me know -- let me now turn to operations and order visibility, where I would like to focus most of your attention. Our 4 gigawatt module manufacturing capacity at Tadkeshwar, Gujarat continues to operate as planned. The ramp-up of Line 3 and Line 4, which were commissioned in November '25 and reached full utilization by March '26 is now well behind us. For financial year '27, we are working with an average utilization assumption of around 55% across the year. Our order book visibility currently stands at approximately INR 3,400 crores. This is the -- this is spread across the 3 stages. Confirmed purchase orders where deliveries are underway, signed MSAs where formal POs are awaited, and MSAs at the advanced stage of discussion. As I mentioned earlier, this visibility is not contingent on an ALMM outcome or that is ALT -- ALMM II outcome. Alongside this, we continue to see healthy inquiry pipeline from both existing IPP relationships and the new customers. And we keep adding new orders even as we execute the existing book. Our customer profile, which includes several of the largest IPPs in the country is a source of strength and not a concentration risk. These are the most quality conscious buyers in the industry. They conduct their own predispatch inspection and repeat business from their cohort has been the foundation of the Solex order book. We remain aligned with the FY '27 revenue guidance and PAT margin in the range of 5% to 6%. Let me now touch on the strategic priorities that we are executing in parallel with new term delivery. Technology and manufacturing differentiation remain at the core of what Solex stands for. And we were the first Indian manufacturer to launch G12R TOPCon module. Our facility is fully automated and MES driven with complete unit level traceability. And our in-house testing laboratory allows us to certify product against the most rigorous international climate conditions. Our R&D partnership with ISC Konstanz, Germany continues to progress on the next generation back contact and TOPCon plus cell roadmap. And our engineering collaboration with TT Vision, Malaysia is helping us on automation and process optimization. These are what allows us to serve the IPP and C&I segment, and they are the reason our customers come back to us. On cell manufacturing, our working group is intact. The 2.2 gigawatt N-type TOPCon plus cell line, which is the first phase of our planned 5 gigawatt cell capacity, is on track for commissioning by end of calendar year 2027. On land, we are in closing stage of the identified parcel with connectivity approvals expected shortly. On funding, the debt component of the approximately 700 crore is at an advanced stage of discussion with our lenders and the equity component of 350 crores structured as a combination of NCDs and CCDs is progressing through the due diligence stage. We are also onboarding an experienced TOPCon cell manufacturer on a KPI linked basis for line design, commissioning, operations which significantly de-risks the ramp up phase. I want to be clear on one thing. Cell manufacturing is not an incremental capacity for Solex. It is the platform on which the next phase of our margin trajectory is being built. Once operational and stab -- stabilizer -- operational and stabilized, backward integration into a cell is expected to support a meaningful uplift in profitability over the current range. Investors should see Q1 as the near-term operating cycle and cell manufacturing as a medium-term earning inflection. On BESS, that is battery energy storage system, we continue to progress on our evaluation with a technology partners identified for the containerized BESS manufacturing setup. As shared previously, BESS will be housed in a separate subsidiary. We will come back with more specifics as the plan firms up over the coming quarters. All of this sits within our long-term visibility Vision 2023. Under which we intend -- we intend to build 10 gigawatt of module capacity, 10 gigawatt of solar cell capacity, 10 gigawatts of BESS infrastructure and 2 gigawatt of wafer and ingot capacity while exploring further integration across the solar value chain. This is closely aligned with the Government of India's Aatmanirbhar Bharat and Viksit Bharat initiative. And the INR 4,000 crores MOU we have signed with the government of Gujarat is the first concrete step in that direction. To close, our operating priorities for the reminder -- remainder of FY '27 are straightforward, ramping utilization across all 4 module lines, converting the advanced stage order book into the confirmed POs, closing out land, funding, and technology approvals on the cell project. Building the export footprint, and preparing the balance sheet for the next CapEx cycle. Solex has always taken a calibrated approach to growth. We announced capacity when technology, customer relationship and funding are in place and we deliver on what we announced Q1 FY '27 sits at the start of the H1, H2 curve we have consistently spoken about. And we remain confident in the shape of FY '27 and in the medium-term opportunity in front of us. With that, I now hand over to our CFO, Mr. Hemal Kachiwala, to take you through the financial performance in detail. Thank you.

Thank you, Chetan. Good day to all. Let me briefly walk you through the financial performance for Q1 FY '27. For Q1 FY '27, total revenue stood at INR 265.6 crores as compared to INR 261 crores in Q1 FY '26, a growth of 1.8% year-on-year. EBITDA for the quarter stood at INR 33.8 crores as against INR 42.7 crores in Q1 FY '26. Translating into an EBITDA margin of 12.7% for the quarter as compared to 16.4% in Q1 FY '26. Below the EBITDA line, there are 2 further items to note. Depreciation and amortization for the quarter was INR 10.2 crore as against INR 4.3 crore in Q1 FY '26, reflecting the full quarter impact of Line 3 and Line 4, which were commissioned only in November '25. Finance cost for the quarter was INR 12.5 crores as against INR 5.4 crores in quarter 1 FY '26, reflecting the higher working capital deployment during the quarter. And the fact that a larger share of our working capital requirement was met through fund based limits rather than non-fund based facilities. Together, these two item account for significant part of year-on-year movement at a profitability level. Profit before tax for the quarter stood at INR 11.1 crores and PAT stood at INR 3 crores in Q1 FY '27 with a PAT margin of 3.1%. Earnings per share for the quarter was INR 7.39 crores. To summarize, the year-on-year movement at the profit level reflects seasonally softer volumes and the full quarter impact of depreciation and interest on our expanded capacity. And not any change in the underlying business. Our order book, our customer relationship and the balance sheet position remain intact. With an H2 weighted execution calendar ahead, we remain confident of delivering on our FY '27 guidance. With that, we now open the floor for the questions. Thank you.

[Operator Instructions] First question is from Rishi. Kindly announce your name, your company name and proceed with your question.

Hope I'm loud and clear. My first question is, in November, you referred a total CapEx plan of INR 1,500 crores, if I'm not wrong. Of INR 1,100 crores in cell line, INR 200 crores in module and INR 100 crores in working capital. And this was funded by INR 1,000 crores in debt and INR 500 crores in QIP. But in May, the reference has changed from INR 1,500 crores to INR 2,050 crores from INR 700 crores via debt and INR 355 crores from equity. Sir, I just want to know what made this change and which figure should investor community use for their reference in FY '27 modeling?

So Rishi, this ...

vision was there when we were planning for adding an additional 2.5 gigawatts of module line. So looking to the current market dynamics, we have planned not to go with the additional module capacity because we foresee that a lot of module capacity will be available in the market as and when Solex requires. So that's almost INR 200-odd crores has been reduced because of no urgent CapEx plan for the module line, plus while working with the vendors and our team, the project cost is around INR 1,050 crores. So at present, INR 1,050 crores, out of which INR 700 crores from the principal lenders and INR 350 crores will be will be our margin. So at present you can consider INR 1,050 crores for the 2.2 gigawatts of cell line. That is the immediate expansion plan as of now.

Understood, sir. Understood. And sir, one last question that inventory grew significantly in FY '26. So from 1,795 million to INR 2,905 million approx. So alongside the finished goods pile up you have discussed, is there any risk of inventory obsolescence or write-down given by the pace of module technology change?

It is like we said, it's a seasonal impact, but the technology is not an impact because we have the latest generation of modules manufactured by us, mainly the G12R. So this is a, you know, the seasonal impact and all the inventory. So last year also if you say -- see the same pattern was continued. And similarly in the current quarter the current half year the same thing is going on. So maybe with the, you know, once the monsoons are over and the field are ready for installation and everything, this all inventory pile up and everything. And again, this is the reason you see the first half and the second half you know the huge difference. So almost if you see the Solex trajectory, the difference is 1:3, you know, that is the huge gap and the way Solex is performing.

The next question is from the line of Mandira. Kindly announce your company name and proceed with your question.

This is Mandira from Investec. Couple of questions from my side. So with India's BESS order pipeline at around 50 GW is expected to award over the next 24 months. So which is likely to double the addressable solar market size. So what gives Solex the credible right to win despite having no manufacturing track record?

Yes. So I think BESS is something which is a quite exciting journey in India. And basically, currently, there is a dependency on import of the technology in BESS. In India, also those who are setting up the BESS manufacturing currently, they are much more dependent on the import of the full whole technology. And so basically, Solex has already announced the BESS expansion, manufacturing expansion in fact you know. So it's total 10 gigawatt which we'll do in 2 phases, 5 plus 5. So we have already started evaluating technology and then you know on the multiple front for BESS. And we would like to catch up this BESS journey also, Indian BESS journey and not only Indian but the overseas BESS journey also in days to come. So at present, there are very few manufacturing setup for the BESS in India and which are just on a trial basis. Those projects which are already awarded, in fact, they have their own time line to finish their and commission their projects. So we'll be able to catch up this journey once we reach to that stage of going for the -- I mean, adding the BESS to the existing plant or the new plant, upcoming plant.

So Mandira to add on what Chetan mentioned, like if you see the Solex journey, we closely work with topnotch Tier 1 manufacturers -- solar manufacturers in China. So same approach was there in the model line. As Chetan mentioned, we are -- we are technological tying-up with one of the most reputed cell manufacturers in China. So same thing will follow for BESS also. So we are in the advanced stage of discussing with our so, what technological partner we have to onboard and how the entire setup is to be done. So as and when things are there, so we are not going -- we are not going to just jump in the BESS seeing the opportunity and everything. But whenever we do, it will be in a very deliberate manner.

Got it, sir. That's great. So secondly, how does your cost structure and the product quality when it is compared with the Chinese competitor in the targeted export market? And particularly given that India's highest level module is there in ASPs?

Are you referring to solar modules or you are referring to BESS?

Solar modules.

Okay. So basically, Chinese are -- otherwise, they have their own business strategy and they are very aggressive in the overseas market. And so basically, Solex is finding place where there is some preference for the Indian module manufacturer. So we go very strategically in a marketplace where there is a preference for Indian module. Indian modules are not that bad in terms of pricing. We are competitive, but yes, Chinese strategically, they place prices in such market where it is very difficult to compete with them. But yes, I mean, as I said, we focus on a market where there is a preference for Indian modules. Otherwise, in terms of scale of economy in India and overseas in terms of quality, I think the Indian modules are at par with the Chinese sometimes they are, the Indian modules are better proven in terms of quality and reliability. It is just a strategic placement of pricing and the clients which are available for the overseas market for the Chinese manufacturers, which is now the Chinese government is removing. So the real competition will -- and the real situation from the Chinese price will come in front in a few quarters now. And so our focus is majorly as far as overseas market is concerned, it's Middle East, Africa, Europe, and we are trying to establish on U.S. market as well. But currently, we have majorly focused on Europe, Middle East and Africa, other than India.

Mandira but in our projection, the export revenue is on a very low side for FY '27. So we are making our presence felt and we have identified a full-fledged team to represent Solex in the European market. So as and when the right opportunity is there, Solex will be ready to grab that opportunity.

Got it sir. All the best for the coming quarter.

The next question is from the line of Manan Shah. Kindly announce your company name and proceed with your question.

Yes, Manan here from Moneybee. Sir, historically, we have seen that Q1 is not as weak as we have performed this quarter. So what resulted in such a weak performance in Q1 despite having so much capacity available?

So as we mentioned, like Q1, the entire Line 3 and 4 was operating. So all the interest, depreciation and these expenses were there. Comparatively, the revenue was not that extent. Secondly, there were some EPC government revenue, which was booked in the FY first quarter of '26, which are not here because we -- Solex has stopped doing, we are taking very government projects very you know on a niche basis or very selectively.

No, I meant on the module side, generally, April, May and June, this time monsoon was also delayed. So I would have assumed that execution would have been stronger versus what we've reported in general.

So because of ALMM, announcement of ALMM II, so you know, the order...

But our orders were mostly not -- were outside of ALMM, right?

No, no. So there were mix of ALMM and you know people slowed down. So what people have done -- they've seen the 1st June was a very tight schedule for people to implement. Suppose if my solar farm is ready and I don't get connectivity from the grid, because of any reasons on the part of grid, then the whole projects will be problem. In fact, if you see when the government announced and then they have given a limited window for people those who have stuck, so I think there was some 4000, 5000 applications were received, whereby the projects were stuck because of, 9,500 applications were received where the projects were almost on the ready stage or the modules, majority of modules and everything were delivered. So this was the industry did not have clarity. Secondly, people were not clear whether they have to buy the ALMM compliant modules or the noncompliant. So what people thought is better to wait and watch. So now with the clarity that government has given selective extension, people have got clarity and the orders are getting converted and in fact, so a lot of orders, you know, they will hold the delivery, what Chetan mentioned that deliveries were on hold. So they are, the orders are not canceled, but they are extended. So I think you'll see in the second half, we'll be able to cover this numbers.

So I'll add to -- I'll explain the situation, like the order situation. There are orders which are already grandfathered projects. Like so the ALCM impact -- I mean, the ALCM mandate doesn't impact on those orders. So what you're rightly mentioning on them. Those orders are the H2 orders, deliveries and I mean, to be converted in revenue because the post monsoon only they execute the projects. These are the utility scale projects. Another set of orders are the captive projects where there was a lot of confusion because of the ALCM. And then due to that, there was a deferment of delivery schedule and timing and everything. Because the mandate came with the immediate effect without having any time line and then the government extended up to the 9,500 applications for the commissioning and granting them extension. So with that background, government, in fact, they've extended this till the -- till the month of December for the commissioning. So meanwhile, the announcement came in mid of July. So that was a full-fledged monsoon season everywhere. So those who are granted extension, they are now waiting for the monsoon to get over and execute their projects. So basically -- and this situation is with everybody. So I mean, the situation will be improved once the monsoon gets over and then there will be a lot of pressure in execution of projects and delivery of our module for both the segments. The grandfather projects and the captive and those who are granted extension for such a ...

Okay. Okay. And out of your order book or pipeline that you say of INR 3,000, INR 3,500, how much of this can get impacted by this ALMM II?

Majority of the grandfather projects and almost about you can say 20% of orders will be -- which are having the vulnerability from this segment. But now because of the extension that problem is also solved now.

Okay. And you also mentioned in your commentary that you have tied up with some cell manufacturer, if at all, this ALMM gets implemented. So can you highlight with whom have you tied up? And what sort of arrangement it is that ensures guarantee of cell availability to you?

Yes. So we are already working with 3 cell manufacturers in India and we are buying domestic manufactured cells from them for the DCR supply, which is at a very smaller volume right now. And we have signed MOU with a couple of upcoming cell lines, they are likely to, I mean one of them, they have -- because I'm unable to announce the names because of the NDA which are signed with them. And so we have to work with multiple cell manufacturers. One of them, they have already started partially, they are operational and they are on the ramp-up phase. Once they complete the ramp-up phase, they have already committed 1 gigawatt of cell supply per annum to us. And there are 2 other manufacturers, they are already on the verge of starting their production line. So I think once we are done with -- we will -- whatever I'm trying to say is that quarter 4, last quarter of this financial year, we'll have a clear visibility for the domestically available cells because right now, we are totally tied up with the grandfather projects. And so we have a limited space available for the -- to take on the DCR mandated projects right now. So next year, we will have a sufficient supply where there will be a majority of these projects will have a DCR mandate, and we will have a sufficient supply from those who we -- with whom we have signed the I mean, the MOUs and with the quantity of almost about 2.5 gigawatts of cells. And these are all like the G12R cells. Currently, G12R cells are not available. And those who with whom we signed contract, they are producing only G12 cells. They are converting their production line to G12R. Once the conversion happens, then we'll have a supply.

Manan also the FY '27 majority of revenue is coming from the non-DCR, so non-- ALMM listed. So at Solex we will require mainly DCR cells from April onwards, April '27. And we believe till that time our requirement will be there, there will be a lot of capacity available in the market because a lot of lines are in the installation phase and the ramp-up phase. So till the time Solex requires DCR modules, a lot of cell availability will be there in the market.

Okay. And also in your commentary, you mentioned that you have confirmed POs of around INR 800-odd crores to INR 900-odd crores. So is this the execution that can be expected till December? And how do you see the balance order book getting converted into POs?

These are to be executed by the December this year.

Right. But from your inquiry pipeline, is there a possibility of further orders getting converted into POs till December? Or this is the execution that you're expecting will pan out till December?

These are the orders we have already closed it and that's the reason we have mentioned here. There are many orders in the second because you know I write -- I mean, if you remember earlier I mentioned the different phases of orders. And so there are MSAs already signed and then we are waiting for the time line and backed by the firm POs. So these are the orders which we'll announce once we keep closing one by one.

Okay. And any update on our cell line project because we have been talking about doing closing the land deal for the past many quarters and also the funding arrangement. And still there is no -- any conclusion on either of them?

So there are 2 answers. One is that land we have already procured and we have applied for the electricity connection. In Gujarat, it is -- it has its own time because of the availability of -- there is a huge requirement for the electricity. We applied for 30 megawatts of connection and then we are waiting for the government to give us in writing. In principle approval is already -- verbal approval is already done. We are waiting for the written approval. Once we have a written approval, then we will have all like other documentation in process. And so that is one part. Second part is the changing in strategy because first of all -- I mean, initially, we were -- we were of our planning was to raise equity through the QIP and pref round. But then the market situation is not something which is favorable for this round, and then we have changed to the structured debt. And so for raising this through this route, the due diligence and everything is completed and the matter is at the final stage of evaluation with the investors and the funding agency. So these are the 2 major factors where we have -- we are taking a little bit more time than what it was expected. But I think we are on track and our preparation and homework is such that we will ensure that whatever the time we have consumed on this phase, we will overcome in terms of for the execution because almost everything is designed, the agencies, everything is aligned. We will announce everything once the financial closure is done and then we get a confirmation from the electricity connection. These are the 2 major points that we want to close before we openly come in the market again with our announcements and the time schedule and then to whom we are working and everything. Thank you Manan.

Okay. I just have one last question, if you may permit. Yes. So initially, we used to talk that we would be manufacturing for the world and not only for the Solex brand. So are there such opportunities still available in the market or those opportunities have dried up because our utilizations are fairly low. And is there a shift in strategy now that now we will only manufacture the Solex brand or...

Yes. So it's a good question. In fact, the facility which we have designed and then we are operating, which is as per the global standard. And in previous year, we have already manufactured for the world leading -- I mean, the world #1 brand. So we are already in a discussion and on the agreement stage with the other brands also, and we'll manufacture for them. These are all will be the Solex branded modules for their clients. So basically, in India, those foreign brands they cannot sell in India because they don't have any manufacturing facility of their own. And so they cannot sell with their own brands. So they have adopted Solex brand. And likewise, the other companies are also in discussion and they are like waiting for the confirmation and on the time lines and everything from their client and from our side as well. So this journey is on, and it's a very -- because we have already done for 2 companies, which are the globally top 5 companies. And then this past track record, the other companies are also quite open for us. As far as the OEM contract manufacturing is concerned about the global brands, we now basically, we are focusing on that segment as well. Up till now because our capacity -- previous year, our capacity was limited, the capacity got expanded in December. And then it was backed by the orders. Now we do have some visibility for taking the contract manufacturing orders also from the global brands. So we will look into those segments also. Because currently, up till December, we don't have any visibility to take such tasks because we have -- it's all backed by the existing orders. And quarter 4, we will evaluate whether if we are able to close capacity available capacity with the domestic orders and we'll focus on the contract manufacturing in the next financial year. But yes, for the Indian projects from the global brands, we are already discussing. We are likely to close something for Q4 for the Indian projects from them.

The next question is from the line of Bhavya Agarwal from Share India Securities.