Sterling and Wilson Renewable Energy Limited (SWSOLAR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sterling and Wilson Renewable Energy Limited Q4 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Thomas Mathew, Head Investor Relations, for his opening remarks. Thank you, and over to you, sir.

Yes. Good morning, everyone, and welcome to our Q4 FY '24 earnings call. Along with me today, I have Mr. Amit Jain, our Global CEO; and Mr. Bahadur Dastoor, our CFO; and SGA, IR advisers. We will start the call with the key operational highlights for the year and quarter and outlook by Mr. Amit followed by the financial highlights by Mr. Bahadur, post which we'll open up for Q&A. Thank you, and over to you, Amit.

Thanks, Sandeep, and a warm welcome to all the participants on this call. I would like to give a quick update on our business operations and outlook on the solar industry. Beginning with our order book. We have been able to build on the order booking momentum in FY '24 and closed the year at approximately INR 6,023 crores of order inflows totaling approximately 3.3 gigawatt. New order inflows have jumped 37% in fiscal compared to a year ago when we booked orders of INR 4,387 crores. Our domestic order inflow continues to remain a key contributor, and it has grown approximately 10% to INR 4,854 crores compared to INR 4,387 crores last year. We won 2 international U.S. orders in FY '24 from Spain and Italy, respectively, and these mark our first international orders after a gap of nearly 3 years. These international orders are in line with our revised matrices, and we remain derisked from the module price exposure in these projects. Looking at Q4 in isolation, we have received 2 orders for INR 488 crores, including being declared L1 for a floating solar project in Jharkhand. This is our second floating solar project we have won this year. And the scope of work includes module and EPC work. Our second project in Q4 was from enfinity in Italy for a EUR 20 million project. This project is 45 megawatts. The scope of work include design, engineering, supply, excluding the PV module and transformer, construction, erection, testing and commissioning. While we had anticipated a strong Q4 for new order spend in line with our 9-month performance last quarter with 2 large domestic projects have got delayed, pushing them into FY '25 pipeline. So we are expecting orders from our repeat customers and some of the PSUs, which have now got pushed into April. Our unexecuted order book stands at INR 8,084 crores with approximately 85% constituting domestic orders. Our UOV continues to grow rapidly and coupled with its strong balance sheet, we are expecting to be able to capture a large share of the domestic solar EPC market. In terms of the outlook, our active order pipeline, which comprises projects with high visibility of being bid out in FY '25, looks pretty robust, and we look to maintain a strong win ratio in the projects that we bid. We are actively pursuing projects totaling 25 gigawatt in India and 5 gigawatts in other international geographies. The Nigeria MoU was announced in September '22 and we continue to work with various stakeholders in finalizing the EPC agreement for the project. Given the size and the complexity of the project, it has taken longer than expected, but considerable progress has been made in the last few weeks, and we remain confident for finalizing the same in the near future. The spillover of orders from Q4 FY '24 and the big pipeline for FY '25 give us a lot of confidence that the order booking for FY'25 will be higher than what we have achieved in FY '24. With the expected addition of orders from RIL and Nigeria in FY '25, we expect the order booking in the year to be very exciting. As stated in earlier calls, we reiterate that lumpiness in order inflow is to be expected with EPC company like ours and time lines for achieving project closure could vary depending on a host of factors, including finalization of contractual terms, financial closures, et cetera. Our O&M portfolio outlook continues to improve. And we have seen our portfolio grew to 7.6 gigawatts as of March 2024. The benefits of the large portfolio is expected to be improved in the coming quarters. Our EPC pipeline will continue to feed a large portfolio of O&M projects over the next 12 to 18 months. Moving to the industry outlook. India continues to remain a very vibrant market and they are on multiple large solar EPC projects beginning to take off with issues around land transmission, et cetera, getting addressed by the states and central government. Gujarat and Rajasthan continues to be in the forefront in the terms of new large solar projects, and we have a strong established base, which we hope to leverage on. Module prices continue to remain very low globally and the time remain right for more projects to come on stream aided by lower LCOEs, which should translate into more work for the EPC players like us. With a strong balance sheet, that has been achieved this year, we remain well positioned to tap the strong industry growth in both domestic and international markets. With this, I will ask Bahadur to take you through the consolidated financial highlights. Thank you very much.

Thank you, Amit.

Sorry to interrupt, sir, your audio is not very clear. Ladies and gentlemen, please stay connected while we reconnect the management line. [Technical Difficulty] Ladies and gentlemen, we have the management line reconnected. Sir, you can go ahead.

Okay. I trust I'm better audible now. Despite the challenges we faced in FY '24, we are happy to finally move back into profitability, which was achieved in Q4 FY '24. We closed FY '24 with a top line of INR 3,034 crores, which was 51% higher than the previous year. Gross margins came in at 10.3%, aided by our domestic EPC business which has been the key driver of performance in FY '24. With our sustained efforts on reducing overheads, we have rationalized overheads to INR 333 crores this fiscal, and we were able to navigate back into positive EBITDA territory in FY '24, closing the year at INR 54 crores. High interest expense in the first 9 months affected our bottom line, and we closed the year with a loss of INR 210.7 crores. Our Q4 results have begun to reflect the execution pace pickup of our unexecuted order book which as of today stands at INR 8,084 crores and is almost 65% higher than last year. With liquidity constraints easing post the QIP and the UOV largely comprising new projects with good margin profiles, we hope to maintain our profitability and growth going forward. In terms of Q4 performance, revenue from operations for the quarter ended March was INR 1,178 crores aided by a pickup in domestic EPC execution, and our gross margin came in at 10.5%. Our Q4 EBITDA came in at INR 59 crores and EBITDA margin of 5%, which is beginning to more reflect our steady state margin profile. While our PBT was INR 33.7 crores, our Q4 PAT was lower at INR 1.4 crores due to a noncash deferred tax charge in our books of almost INR 32 crores due to the unabsorbed losses now being absorbed in the stand-alone, which add a profitability of over INR 120 crores. Segment-wise, domestic EPC continues to operate at approximately 10.3% gross margin, while international EPC margin was 9.8% in Q4. O&M margins during the quarter was 15%. Coming to the balance sheet. Fixing our balance sheet in FY '24 has been a key achievement for us. Our net debt as of March 2024 was INR 116 crores, compared to nearly INR 2,000 crore net debt in the previous fiscal. We do not have any debt repayments till Q3 FY '25, which have not been taken care of by placing fixed deposits, and liquidity situation continues to improve. With this, we can now open the floor to questions and answers.

[Operator Instructions] The first question is from the line of Rahul Jain from JM Financial.

Sir, congratulations on the profitability in Q4. My first question is on the bid pipeline. So the bid pipeline has declined from 40 gigawatt quarter to 30 gigawatts currently. So what has been the reason for this decline, whether the orders has been tendered out? Or is it the actual reduction?

No. Actually, the bid pipeline has not reduced, but we are focusing on the -- which are the focus markets where which we will be concentrating on that has been indicated as a bid line for the company. So this 30 gigawatt, which we anticipate will definitely be floated out without any delay in this particular year and we will be pitching for this. So solar market is growing internationally, and there is no question of reduction of the bid pipeline.

Sure, sir. Sir, my second question is -- so now with the things in right place, what is your outlook on the international orders? I mean, which countries or regions can see ordering in the next 2 years? And how are we placed in these locations?

So right now, our increased focus is on Middle East, Africa and European markets. These markets are growing strongly, and we are going to focus on these particularly 3 markets in coming 2 years.

Sure, sir. On the Nigeria order, I mean, what is the -- when I see the Nigerian currency Naira has depreciated significantly since the time we have signed the MoU. Is this the reason why we are facing delays in closing the negotiations of design and EPC and finalization of orders? Or is it just -- there are several moving parts, as you said, on the finalization?

No, actually, that is -- the movement in Naira is not the reason because our contract was always backed in dollar. So it is a USD contract and nothing has to do with the movement of Naira and it has no impact on us. So there has been some other bureaucratic changes, as I indicated last call also because of the NDPHC got merged with the Ministry of Power and some of the other issues which we were sorting out with them. So which all we have -- I think we have finalized the contract negotiation with NDPHC. So there is no issues on that part. And in the last few weeks things have moved considerably, and we are very, very confident to finalize the Nigeria order very, very soon.

So can we expect it by Q2 itself?

I would not like to give a date but we are expecting it to conclude that very soon.

Sure. Sir, my last question will be, what are you guiding for in FY '24 in terms of order inflow? And will you stick to the guidance of 10%, 11% gross margin and fixed cost of around INR 250 crores, INR 300 crores for the year. Also now onwards, what will be the interest cost?

So I think part of the question will be answered by Bahadur and part I will address. So I think Bahadur you can start and then I will pitch in.

As far as the interest cost is concerned, right now, we are having approximately INR 400 crores of term debt, of which INR 25 crores has already been paid. Another INR 50 crores has been earmarked by fixed deposits. On the remaining INR 328 crores, the interest cost would range between INR 30 crores to INR 35 crores on an annualized basis. Unless out of free cash flows, we end up prepaying it. This would be more or less the range of interest for the year.

Sure. Sure, sir. And on the guidance on order inflow, gross margin and fixed cost as I asked?

Order -- as far as the gross margins are concerned, we'll be maintaining our historic gross margin, which we have been maintaining our international and domestic projects. And as far as the order book is concerned, we are expecting close to order book of INR 8,000 crores this year in FY '25, which we expect to close.

Order inflow you meant, right?

Yes, order inflow.

The next question is from the line of Shivani from Monarch Networth Capital.

My first question is on the order book of FY '24. What percentage is the legacy order? And what is the margin profile for those orders?

Can you a bit louder? I missed part of your question. Can you repeat again?

Yes, sure. I wanted to ask that the order book that we have of close to INR 8,000 crores, what is the margin profile filed for those orders?

Our margin profile would be consistent to the margins that we have declared. And as far as your question in terms of legacy orders, I trust you mean the old orders which were loss making. They have all been provided for, Shivani. So over there, the total quantum would be in the region of INR 70 crores to INR 80 crores in this INR 8,100 crores.

Sure. And my second question is on the other financial assets -- other current financial assets and other current assets. What amount is the indemnity amount that's comprised in such numbers?

The total indemnity receivables, which are there in various places, which are in trade receivables, other financial assets and other current assets are approximately INR 900 crores.

The next question is from the line of Kunal Shah from DAM Capital.

Sir, congratulations on a good set of numbers.

Sir may I request you to use your handset. You're not very audible, sir. The line for Mr. Kunal Shah has dropped. Maybe move to the next participant. The next question is from the line of Deepak Purswani from Swan Investments.

Congratulations for the good set of numbers. Sir, just wanted to understand in terms of the order inflow, you mentioned this year, we are looking at INR 8,000, and also, we mentioned about we are very excited about our order flow from the Reliance side as well. So just wanted to understand if you can throw some light in terms of contribution from the Reliance in this year. And also this INR 8,000 crores also includes some contribution from the Reliance also.

So actually, the INR 8,000 crores, which we are guiding is excluding Reliance and Nigeria order book. So this is pure play which we are getting from other third parties by bidding in domestic and international market. So INR 8,000 crores doesn't include Reliance and Nigeria at all.

Okay. If you can also give us some understanding in terms of the how should we look into the order inflow from the Reliance in this year?

Pardon? Can you repeat your question again? Your voice is breaking.

If you can throw some -- if you can also give some understanding in terms of the order into contribution, we are looking from the Reliance in this year. How should we look into it for the current year?

So as we have repeatedly stated on our like previous investor calls that discussions with Reliance is in progress and they have a huge rollout plan. But at this point of time, I would not like to guide on any numbers with respect to Reliance. We are expecting to conclude orders soon, and it is going to be a huge rollout.

Okay. And sir, in terms of the O&M revenues, this year, we did a revenue of INR 210 crores. I mean, going ahead, how should we look into this O&M revenue trajectory? Given there has been sharp improvement in the O&M portfolio or order book.

I'm really sorry, but I'm not able to hear you clearly.

Sorry to interrupt Mr. Purswani, may I request you to use your handset, sir, you are not audible, sir. Your line keeps breaking sir?

Is it better now?

Yes, sir, please go ahead.

Yes. In the terms of the O&M revenues, we did a revenues of INR 210 crores in this year. How should we look into this trajectory going ahead?

We are looking at close to INR 270 crores this year in O&M revenue.

Okay. And from a tax rate perspective, I think this year, we had some deferred tax expenses, tax asset. I mean, going ahead, what would be the effective tax rate we would be looking at out? Or this is just a onetime exercise?

See, we had made certain provisions on unabsorbed losses a couple of years ago. Those reversed because on a stand-alone basis, we had a profit of over INR 120 crores. This is a noncash adjustment on reversal of carryforward losses. We do not have much carryforward losses now because we have stopped providing for it from FY '23 and onwards. So this, as I mentioned, noncash. It will be significantly lower, if at all, in the next year. The tax rate continues to be 25 point odd percent, and we have carryforward losses would absorb a bulk of whatever will be our next year's profit on a stand-alone basis.

Okay. So put it all together, sir, what would be the effective tax rate as a whole?

The effective tax rate for the next year?

Yes.

I'm not in a position to give you any guidance because the calculation will depend on how much of deferred tax gets charged, and that is also on a stand-alone basis. But suffice to say, the actual current tax outflow will not be much due to absorption of carry-forward losses.

Okay. And sir, in terms of the finance charges, we mentioned on the debt of INR 300 crore, there would be an interest expenses to the extent of 30% to 35% -- INR 30 crores to INR 35 crores.

INR 35 crores. Yes.

And in terms of the BG charges and other charges, what would be the outflow we should build in?

No, BG and LC charges are already built into the project cost. Therefore, the project margins that we have guided is after that.

[Operator Instructions] The next question is from the line of Kunal Shah from Dam Capital.

Congratulations on a good set of numbers. So my first question, you did mention that a couple of the projects were pushed back, which were from Q4 to, let's say, Q1 this year now. Could you sort of quantify what would be the quantum of those? And are those just domestic or international projects both?

So projects are domestic and they're in excess of 3 gigawatts worth of projects we are talking about which got pushed out. So that's -- because they are with our repeat customers as well as some PSU projects, which we are hoping to conclude in March, but we're now expecting either the end April or first half of May, we should be moving ahead with those orders.

You mentioned 3 gigawatts, right?

Yes. That's a pretty big pipeline is there, which got pushed out, which we hope to get concluded very soon.

Okay. And this 3 gigawatts, again, would be broadly about BOS, end-to-end sort of how to read it, like -- or a mix of both?

Most of the orders which we are pursuing in domestic orders are like BOS.

Understood. Understood. And if you could just give some guidance with respect to the closing order book of this INR 8,000-odd crores. broadly, how much would be the revenue conversion in F '25 from the same?

Yes. So I will give you the revenue guideline in 2 parts. The first part is UOV, which is INR 8,000 crores. So we expect to convert out of that INR 6,000 or to INR 7,000 crores of revenue out of the unexecuted order book. And we expect to -- like we have given guidance of INR 8,000 crores, excluding Reliance and Nigeria, from which we'll be converting 25% to 30% into the revenue. So revenue breakup will be in 2 parts: One is unexecuted order book and then is the book and bill part.

This is very helpful. And also in terms of this commodity costs going up in the recent time. So one, is there any impact on the current ongoing orders? And two, will there be recalibration in terms of future bids, considering those?

So whenever we bid, we take current prices into account. So all our bids, when we bid out, we -- are based on the current prices. And as soon as we receive the orders, the orders are placed immediately. So when we book, so there is no impact, we take current market -- prevailing price into account. And as soon as we receive the order. So we are totally protected from those metal or product price fluctuations in the market. And I don't think it is going to impact us at all going forward or there will be any major recalibration of the prices.

Understood. Understood. And one last one from me. So you -- in the last call you had mentioned that there were some challenges in terms of the ability to tap non-fund-based limits during the early part of the year given the balance sheet positioning which obviously has improved now. But because of those constraints, have we caused -- is there any sort of time line delay to commission the order backlog, which was starting F '24 or everything seems to be on time?

So I will start off and then Amit can join as far as the commissioning aspect is concerned. We had expected a rating upgrade to happen during the quarter. Unfortunately, that has taken longer than expected. The rating upgrade is expected shortly, which will be a significant improvement over the previous one, is what we believe. However, that has taken the entire quarter, post which there will be discussions with banks for limit upgrades, and we are quite positive on that front. But this entire rating remaining in D for the quarter has caused constraints in terms of revenue, which could have been accomplished in Q4. As far as how it has affected the progress of projects, I'll just let Mr. Jain comment on that.

So as far as the project revenues, we were expecting to realize more revenues in Q4 which got impacted, but we expect that moving forward, that will be sorted out.

Understood. Understood. And sir, just one last one, if I can just push in you've spoken of this O&M business, particularly, but over the last 4 or 5 years, whatever be the conditions, the portfolio has been between the 6.5 to 7.5 sort of gigawatts, right? I mean, the O&M portfolio. So going ahead, how do we sort of see this scaling up in that sense? And also, do we start targeting the O&M bid as well from here on?

Yes. So I will answer both the parts. So as you see, our domestic order book is growing. So as far as the domestic order book is selling and a major contribution is coming from big PSU bids, which contains the provision for 3 years of compulsory O&M part. So when our Khavda portfolio, which is 4 gigawatts when it comes into action, it will straight away contribute huge chunk to our O&M portfolio. So you will see a significant growth in O&M portfolios because year-on-year, we will be delivering projects and adding into this portfolio. So if you presume that every year, and it's a cycle of 3 years, so the portfolio will be constant at least for the period of 3 years and every year, we are getting multiple gigawatts into that. So this O&M portfolio is going to grow significantly. So you will see a rapid addition to our portfolio. So in the next year, if we commission 4 gigawatt of Khavda portfolio, that means straightaway added into our portfolio. And next, this year, we are targeting, again, huge pipeline. So year-on-year, this will keep getting added and portfolio is going to grow significantly. As far as wind O&M is concerned, we are working on that part, and we are considering it very, very seriously how to enter O&M in wind segment. So that we are seriously planning to enter.

The next question is from the line of Faisal Hawa from H. G. Hawa and Company.

So sir, in the previous cycle, have you seen any kind of order increasing due to solar panel prices going down? And does the crude prices going up also have an effect on -- in solar panels or solar projects being sped up for bidding and project execution?

Can you repeat again, Mr. Hawa last part of your question?

So have you ever seen some connection between crude prices also going up and solar panel projects being sped up for bidding?

Yes. So actually, the first part where you saying about the module prices pull down. So definitely, this is a very, very positive change and LCOEs have come down. So whatever we are seeing that project rollout or the project closure getting expedited. And we see the market, but the numbers which we are putting in, they definitely are going to go up. So we are going to see far more project closure. As far as the crude prices is concerned, we said this journey -- the renewable journey has started and irrespective of crude prices, it will keep moving. However, from the energy security perspective, for more geographies is getting impacted by higher crude prices, we will see far more momentum in this direction. So energy security along with the green revolution of the renewable energies, both the factors together is going to drive the market towards the higher trajectory.

So sir, why is our guidance for order inflow is so tepid? It's only like INR 8,000 crores. I know that it is ex-Reliance and Nigeria, but it's still looking very tepid because fact remains that we are almost the only player or one of two players who can do 1 gigawatts projects in India. So any comments on that?

So we want to be like -- frankly speaking, we have been very conservative whenever we are giving guidance. And that is based on INR 8,000 crores we have guided. So whatever the current bids are there, but we are expecting to bid this number. So this is the guidance for the time being from our side.

Secondly, as there are now some players who are having the ambition to go above 1 gigawatt also. So are we seeing any kind of pressure on our personnel being poached or some attrition? Because we did some -- see some announcements during this quarter, sorry, the last quarter on one or two resignations at our end and also we are hiring some more people for the Kachchh projects.

Yes. So we have a very robust leadership pipeline and our execution and engineering staff continues to be very, very strong. So as far as manpower and organizational stability is concerned, we don't see any threat or any pressure on that side. So we have well-placed mechanisms in place with respect to the supplementing and developing manpower to carry out the volume of work and the growth path or the growth projections we have. So there is no concern at all on that front. We are fully geared up and our systems based on our projections, we keep adding and keep developing the organization accordingly. So we are pretty well-placed on that particular front.

So sir, just as a vision, and I will not hold you to that on any kind of figures. But what do you see if you could be a potential revenue that Sterling Wilson could be having 3 to 4 years down the line?

We can -- conservatively again, we can expect a growth of 15% to 20% on a CAGR basis every year. This again, so this is the guidance we have given for the revenue as well as the order book this year. And on that basis, we can expect. But we are growing to see the market expansion significantly in coming years.

So, this is what Amit is alluding to is without Nigeria and Reliance.

Yes. Okay. So 15%, 20% CAGR for next 3 to 4 years, provided we do not get any orders from Reliance and Nigeria.

Let's not put it so, negatively. We're just putting a positive statement of fact here.

No, yes. No, I understood. And secondly, sir, is there any progress on this battery storage and any R&D that we are doing or we have any kind of inputs from the Reliance side on how to execute these projects?

So actually, the company already has capabilities to execute EPC project for battery energy storage system. We have executed similar projects in Africa, and we were bidding for these projects in multiple geographies. And we expect this market to come up significantly in India, for which we have -- which has not been factored into our projections so far. We expect this market to grow significantly and we have in-house capabilities to address this market. So because we started working many years back on this particular BESS part, and we have technology agnostics, and we can address BESS projects, including any technology in any geographies, so we are fully geared up on that.

Sir, we will remain negative working capital for even this 15%, 20% growth over the next 3, 4 years? Or we may need more inclusion of funds through equity?

Business model will remain the same. The business model will remain same. We are going to be asset-light and negative working capital department.

And definitely, no equity additions?

Pardon? I think we missed that question from Faisal.

[Operator Instructions] The next question is from the line of Puneet from HSBC.

I joined a bit late. Is there any indicator from Reliance as to when the work will start flowing to you? And will you be the sole executor for those projects?

So I think I have already answered that question in the beginning of the call. The discussions are going on with the Reliance. And we remain the frontrunner for the execution of the portfolio. It's not -- and we expect the significant portion of the complete rollout to be done by Sterling Wilson. And work should start soon.

Okay. And would you also be executing wind for them?

Pardon?

Would you also be executing wind projects for them?

Yes. So all the options are under discussion. And as and when we finalize, we'll intimate you around that.

Okay. Understood. My second question is if you can talk about availability of modules given that ALMM is now in place. Is there any risk to execution or pace of execution given that there could potentially be shortage of capacity on the module side? Or are you well placed on this front?

A significant capacity addition is happening in India. And I don't see any challenge on that particular front with the respect to EPC rollouts, because whatever orders in hand, all the developments have secured modules. Even PSUs have secured models. So I don't have any concern and I don't see any impact coming on our execution portfolio.

The next question is from the line of Nikhil Abhyankar from ICICI Securities.

I got dropped from the call earlier. I'm not sure whether you've answered this question. So sir, what portion of our current 30 gigawatt of pipeline is hybrid projects?

Is what -- which project?

Hybrid projects.

Hybrid projects. So hybrid projects, right now I will not put a number to that, but we'll see that particular portfolio growing in the coming years.

So right now, there is no number, it is not included in the pipeline?

Right now, it's part of the pipeline, but I would say like I will not like to put a number because developers are also taking call on various factors, how much wind? How much battery? So based on the various configurations that number keeps changing. That's why we have not put a number to that.

Sure. And also, sir, we have -- so are we also looking to get into pure wind EPC because some of the OEMs are sticking to more of an equipment supply approach only. So is there an opportunity which you are seeing and which we can look at?

So we will do wind without land. And but of course, the OEM will be supplying the equipment, but we will not be taking responsibility for the land, which is rare. So we'll be going only and only where the land risk is not in our portfolio.

Okay. Land is not in the portfolio. So will we be bidding in the PSU bids, something like NTPC or someone?

So all the PSU bids, we take all from case-to-case basis. So how is our competitiveness and how well we are placed and whether all the risk metrics are getting complied to. And then accordingly, we decide for every bid. So this is decided on bid-to-bid.

Okay. And sir, just a clarity on the revenue guidance that you gave earlier. So you mentioned that out of the INR 8,000 crore order book that we have, around INR 60 crores to INR 70 crores will get executed there. Am I right?

No, no. Not INR 60 crores to INR 70 crores. INR 6,000 to INR 7,000 crores from the unexecuted order book will be executed this year. We are expecting to book INR 8,000 crores of order this year, out of which 20% to 30% -- 25% to 30% will be converted into revenue and all the numbers are excluding Reliance and Nigeria.

Okay. So without Reliance and Nigeria, around INR 90 billion to INR 95 billion of revenue guidance for next year.

Yes, so, whatever. I'm not putting a hard number to it, but I have given you the broad range.

[Operator Instructions] The next question is from the line of Aejas Lakhani from Unifi Capital.

Congratulations. Could you specifically speak about the receivables, the surety bonds that had got enforced by the contractor, the invocation of those bank guarantees of about INR 400 crores, the litigations that were going on and could you specifically state where we are in that journey?

All of those items are presently lying as current assets. The management has taken legal views or expert views to determine whether there is any provision required, and the decision was there is presently no provision that is required against each of those matters.

Okay. But could you tell me what is the update in the courts because you're fighting this battle in the courts. Has there been a hearing? When is it likely? When can we expect the fructification of this? By what time lines?

Amit, would you like to take this question since you're handling this front?

Yes. So as far as the time lines are concerned -- so we are expecting because legal process is always a lengthy process. So some of the cases are coming up for hearing in second and third quarter and some are coming in the Q4. So that's how it is panning out, but there are always development and there can be some delays with respect to that. But as Bahadur alluded to earlier, we have consulted or hired law firms, most reputed law firms, international law firms for all our cases. We have taken opinion of legal and technical experts and we are very, I think, favorably placed in all those litigations.

Okay. The next question is all your participant had asked about the need for maybe another fund raise in the next year, your thoughts on that? And if you could just provide some clarity that when Nigeria comes through because you stated that you're confident, how should we understand the order booking in that the conversion to revenue, the time lines associated, the cost, the scope of work, if you could just give some more understanding of that.

As far as the fund raise is concerned, we do not see any need for any fundraise. Working capital is negative. Operations are profitable. There is cash flow from operations if you see the cash flow that we have presented. So we do not see any need for a fundraise. As far as Nigeria, I think Mr. Amit has already answered the question. But in case, Amit, do you want to just follow up anything I leave it to you.

No. As Bahadur has alluded, we have already answered the question that we are working very closely with Nigerian authorities, the very positive developments have taken place in last few weeks, and we are expecting it to conclude very soon.

Okay. Could you quantify that over period because the time lines have moved. So over what period will we execute this? Will it be still spread out over 2 years. What would be the quantum that we may get in the first year, second year. Could you give color on that?

We will give color once the order is finalized. As of right now, it was a 2-year project. It continues to remain so.

The next question is from the line of Subhash from Value Investments.

My first question is about you mentioned that there would be an upgrade, right, on your rating upgrades. So after the rating...

May i request you to use your handset. There is a slight disturbance from your line.

Are you able to hear me now?

Yes, sir, please go ahead.

Okay. So you mentioned about the ratings upgrade happening soon, right? So I wanted to know after the ratings upgrade, I think there will be no need to pledge the shares, the promoter shares because in the last quarter to get some loans from the banks for the projects, I think there was some pledge.

Firstly, that is incorrect. There are no shares of the promoters that have been pledged to take any loans from the banks in the last quarter pertaining to this company. In fact, in the last quarter after the QIP, we have gone and reduced debt. The rating upgrade is expected shortly. And as soon as it is there, we will make the announcement to the stock exchanges.

Okay. And also on the segmental revenue, I see you have EPC business and also the O&M, operation and maintenance. So do you have any plans to build your IPP portfolio like individual power producing?

I will start off. We are not developers. So we are essentially in the space of EPC, whether it is EPC for solar, EPC for a hybrid project and O&M. We have no plans to be an IPP.

Got it. Sir, my last question would be on the conversion of revenue on your order book. So you mentioned that 25% to 30% of the INR 8,000 crores will be converted to revenue? Do you mean that is only for FY '25. I could not understand clearly. Could you please explain what is the conversion of revenue?

Let me correct you on that one. On the revenue conversion part, there are two parts. I will state again, one is the unexecuted order book value, which is like INR 8,000 crores is our UOV. Out of that INR 6,000, INR 7,000 crores will be converted into revenue. The fresh order inflows, which we are expecting to the tune of INR 8,000 crores. Out of that, we expect 25% to 30% will be converted to the revenue. So revenue conversion will be of these 2 parts. One is the order book, which is in hand and what will be booked during that year. So these 2 put together will constitute the revenue and this is excluding Reliance and Nigeria.

Okay. And if I could push just one more question. So about your margins, I see that your EBITDA margin is 5% and the net margin is a little bit lower. So compared to the smaller EPC players who show net margins of over 10%. Like do you have plans to improve the margin? I clearly understand this is a very good turnaround considering the losses that you have posted previously, but I would like to understand about the future margins.

So as we stated, we will continue to maintain our historic margins. And with the economies of scale and portfolio going up, definitely, there will be improvement on the margin. But I will not like to comment on other EPC players, but we have been in this market for long, and we have consistently delivered margins, which we will continue to do so in the domestic market revenues.

The next question is from the line of Darshil Pandya from Finterest Capital.

Sir, what have -- have you paid any debt in this quarter?

We have paid -- you're talking about debt repayment?

Yes.

Yes. So whatever was the debt repayment, which was scheduled, which was a commercial paper of INR 100 crores and a term debt of INR 25 crores has been paid on time.

You mean to INR 125 crores of debt has been paid?

Yes. But that was anyway earmarked with fixed deposits. So you'll see a change in the net debt situation.

And sir, any guidance for overheads for this year, what will be the overhead for this year?

No. We do not -- we will keep it consistent. We don't want to give any kind of guidance at this stage.

The next question is from the line of Rahil Shah from Crown Capital.

Just one question on the EBITDA margin. What can we expect going forward for FY '25?

May I request you to speak up, sir your audio is very low.

Just one question on the EBITDA margin. What can one expect going ahead for FY '25? And it would be really helpful if you could explain the improvement quarter-on-quarter as well. How does company see the margins shape up?

So as we have given the revenue guidance and the gross margin guidance. We are not presently in a position to give an EBITDA guidance because we wouldn't want to do so. You can fairly well calculate it. How it flows quarter-on-quarter will depend on the pace of execution of various projects across every quarter.

Okay. So please can you repeat the gross margin guidance? I joined the call late.

Yes, the gross margin, we said would be consistent with the gross margins which we have reported.

For the entire year?

Year-end quarter are fairly consistent.

The next question is from the line of Danesh Mistry from Investor First Advisors.

Congratulations for a good set of result. I just had one question was regarding our working capital. If you were to see the consol working capital there's been a great improvement. Just want to understand, there's been an increase in the trade payables a bit versus last year. So is this something that we can expect this on an ongoing basis? Or is it just project end date kind of balance sheet year kind of number?

Sure. Thank you. You will see that a lot of the revenues have happened in this quarter and -- especially in the month of March, leading to an increase in trade payables. Similarly, there is an increase in trade receivables plus unbilled, which lies in my other financial assets. If you see the two of them in combination, it is consistent with what is there even in the previous year. So the reason for -- whilst one is shown on the face and the other is shown in the schedule on the receivable side, the trade payable shows up straight on the face, which is why it looks inconsistent, but which is not the case.

The next question is from the line of Parth Agarwal from Bastion Research.

Congratulations on a good set of numbers. My one question is on -- so what has been your historical order book win ratio? If you can highlight that part.

So see, historic win ratio in the domestic market, what we have seen when that trend in last few quarters is market share is 30%, and our PSU strike rate is close to 50%. So we have been very, very successful and wherever the big PSUs tenders we have participated, more than 50% and overall market -- our addressable market share is 30%.

So when you're bidding for 30 gigawatts of project and assuming INR 1.5 crores per megawatt, it comes to around a size of INR 60,000 crores of order books that you're bidding for. So don't you think probably the order book win ratio should be close to rather than INR 8,000 crores should be upwards of INR 10,000 or INR 12,000 crores?

Could you repeat your question again?

So if you are bidding for 30 gigawatts of project this year, right? And with a win ratio of close to 30%...

Sorry to interrupt, sir. Your audio is not clear. May I request you to speak up, sir?

Is it better now?

Yes, sir, please go ahead.

Okay. I'm saying that with the 30 gigawatts of order book bid that you're going to do this year in FY '25. And with 30% of success ratio of win ratio that you have. So don't you think your -- probably your INR 8,000 crores of order inflows should be more than INR 12,000 crores, INR 15,000 odd-crores?

So see, the majority of the domestic market is BOS, in which like it is INR 1 crore per megawatt approximately with fixed tilt and INR 1.3 crores per megawatt with tracker. So this is the dominant market with some tenders coming out with modules. So with respect to that, we have estimated a number and given out to you. This number can like -- significantly improve as we go along the year. But we have kept the guidance to INR 8,000 crores at this point of time.

Okay. That's helpful. And just last question from my side. So pre-COVID, your gross margins used to be 14%, 15% level. And as you've guided that you're expecting around 10%, 11%, which you currently have clocked this quarter and this year. So any reason why you're expecting your gross margins to be lower than what historically it has been?

Our gross margins have always been historically in the 10% to 11% range. 14% has been when we have gone opportunistically into certain geographies where we have made high margins. However, if you go consistently year from year, it has always been in the range of 10% to 11% and not 14%. Before the next question comes up, since this is being asked repeatedly, I thought I'll just reiterate the whole thing. We do not have any equity fund planned for future. And just to put out the revenue expectation out of the UOV of INR 8,000 crores, we expect to close INR 6,000 crores to INR 7,000 crores. And out of the new order inflow of INR 8,000 crores, coincidentally, both are INR 8,000, the second INR 8,000 crores is without Reliance and without Nigeria. We expect to close between 25% to 30% of that. Hence, you can say out of the UOV and book and bill, the revenue right now that we are expecting is between INR 8,000 crores to INR 9,000 crores other than Reliance, other than Nigeria. I just thought I will summarize this because this is being asked repeatedly.

[Operator Instructions] Our next question is from the line of Dhyey from Niveshaay Investment Advisory.

I had this question on the EBITDA margin side. So what is the EBITDA margin that we earned in this quarter in the international markets?

We don't give EBITDA by region. The overall EBITDA is about INR 54 crores, which is what has been earned for the year and which is fairly similar to what we have got in the quarter as well.

Correct, sir. I also wanted to understand on the fixed cost. So let's say our revenue increases by a certain percentage, what are we expecting that number to be in terms of employee costs or other expenses. Will there be a multiplier to it?

Our employee costs and other costs are not related to the increase in revenue. And we are not expecting the overheads to go up significantly from what has already been given for the current financial year.

Correct, sir. I also had this doubt related to ALMMs. There were problems of unavailability of good quality modules when ALMM was initially introduced and that is why it was deferred. Do we expect to face any similar problems going ahead?

Could you repeat again, please?

So when the ALMM was introduced initially, there were some issues related to quality of the ALMM modules. So are we expecting any similar kind of situations in future?

No, I don't expect any such question. I already answered this question with respect to ALMM, because all the big industrial houses and fairly repeated manufacturers coming into market, and their modules are being published with latest technology. So I don't have any concern on availability or quality of the modules, and it will not impact project execution going forward. So there's no concerns on that front at all.

Our next question is from the line of Aryan Mehta from Mehta Investments.

Congratulations on the great quarter. Looking at the balance sheet, the other current liabilities have nearly doubled year-over-year. What is the reason for this?

Mr. Mehta, I'll just answer your question shortly. If you have any other questions you can ask in the interim.

No more questions.

So I'll take the next question, and I will give you an answer shortly.

This is the only question I have.

The next question is from the line of Raj Rishi from DCPL.

There was a report recently that suggested that the Indian EPC solar opportunity from now until 2032 is around INR 65,000 crores per annum. Do you agree with this kind of report, this kind of opportunity?

Opportunity, it can be like the valuations are arrived at considering various value. So what we project is the BOS value for the project for this market. But I don't know on what basis this number has been calculated, but we expect market to be significant in the range of 25 gigawatts going 15% to 20% annually. So from that basis, we can calculate the number. So I don't know whether that EPC has been calculated on the turnkey basis or the whole project cost. So that is very difficult to comment on that particular number.

So sir, like your assessment of your opportunity, the market addressability from your side would be what? From now until say, next 7, 8 years per annum in India?

So this year, what we have projected, we are projecting around INR 25 crores to INR 30 crores -- INR 25,000 crores to INR 30,000 crores and growing 15% to 25% CAGR depending upon how the whole system -- ecosystem is panning out.

This is the Indian opportunity for you?

This is an Indian opportunity we are talking about.

Which includes everything, Reliance and everything?

No, no. That's excluding Reliance and others. So Reliance whatever numbers we are talking about here, whether our own projections or the big pipeline is excluding the Reliance.

I will just answer Mr. Mehta's previous question. The increase in other current capabilities is essentially because of advances received for projects to the tune of almost INR 900 crores.

The next question is from the line of Ashish Soni from Family Office.

Sir, what are the few challenges you foresee in the execution in next couple of years?

Come again. Could you repeat your question?

Challenges, what do you see in terms of execution? Because everything I see is looking great in terms of tailwinds and everything, but what according to you, are the challenges you might face during execution?

Execution challenge like what we had foreseen that the talent market is going to be little bit on talent, so which we had already started addressing. So with respect to even the field workers as well as our staff, the training initiatives which needs to be taken. So we are carrying out the technical development of our people and the project execution people. So that part is already happening. But I don't see with respect to any other things, we are fully geared up to handle the pipeline, which is growing and I don't see any significant challenge on that particular part.

And one more question. Regarding geographies -- international geographies, any reason you're not focusing on U.S.?

U.S. and Australia, basically, what we are finding that these markets where we are strong and the portfolio has grown significantly. So we have chosen to address domestic market in a big way and markets in Middle East, Africa and Europe, where we can have far better contracts and much better margins. So that we have decided for the time being in the short term to took up in these markets.

Ladies and gentlemen, that was the last question for today. With that, we conclude today's conference call. On behalf of Sterling and Wilson Renewable Energy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.