Suzlon Energy Limited (SUZLON) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Suzlon Energy Limited Q3 FY '25 Earnings Conference Call. During this call, the company management may make certain statements that reflect their outlook for the future, which could be constructed as forward-looking statements. These statements are based on management's current expectations and are associated with certain uncertainties and risks as detailed in the annual report. Actual results may differ. So these statements should be reviewed in conjunction with the risk of the company faces. [Operator Instructions] Please note that this conference is being recorded. We will begin with opening remarks followed by Q&A session. [Operator Instructions] From the management, we have with us Mr. J.P. Chalasani, Group CEO; and Mr. Himanshu Mody, Group CFO. Over to you, J.P. Chalasani, sir. Thank you.

Thank you. Good evening, everyone, and thank you for joining our earnings conference call for quarter 3 FY '25. We are happy to share that our good performance has continued for quarter 3 FY '25 driven by strong growth momentum and the success of key strategic initiatives. I will now highlight the key points. And following that, we will open the floor for any questions you may have. As promised in our last investor call, we are pleased that for the current quarter also, our order book is at an all-time high of over 5.5 gigawatts, maintaining our leadership across the customer segments. For the very first time in history, we will also enter the new financial year with an orders in hand for the entire year. Our focus continues to be on securing high-quality orders for period beyond FY '26 that offer greater value and better margins. On the manufacturing front, we are extremely happy to announce a significant ramp-up in capacity to over 4.5 gigawatts with revamped Pondicherry and Nacelle facilities. Additionally, we have added new blade lines in Madhya Pradesh and Rajasthan, which will increase our production to meet demand for the future. The order book for S144 now exceeds 5 gigawatts, a testament to superior technology and strong customer confidence in Suzlon. This achievement reflects our 29 years of proven track record and a 31% market share in the installed base in India. We take pride in stating that the S144 is truly made in India, made for India product with over 85% of its components sourced domestically. On the execution front, Suzlon has achieved a record quarterly delivery of 447 megawatts, marking an outstanding 163% year-on-year growth, up from 170 megawatts same quarter last year. With 977 megawatts delivered in the 9 months of FY '25, we have already surpassed the entire FY '24 total of 710 megawatts, setting a new benchmark for our performance. The industry commissioned approximately 2,277 megawatts in first 9 months of FY '25, falling short of expectations, primarily due to transmission delays and land-related challenges. However, we see a sizable number of turbines are currently in the pre-commissioning stage to get commissioned in a phased manner. Talking about Suzlon, we have commissioned 241 megawatts in the first 9 months and with an additional 218 megawatts, which are pre-commissioned, bringing the total to 450 megawatts. With around 80% of our order book being non-EPC orders, where land availability is in customer scope. However, even for non-EPC orders, we have prioritized orders with partial land availability upfront. Notably, NTPC, Jindal Renewables and the latest Torrent Power orders come with substantial land availability at the start, which will provide better commissioning visibility for FY '26. Our OMS business continues to do well with 15 gigawatt capacity in India with machine availability ensured beyond 96%. Renom continues to strive for customer fleet acquisition with AUM assets under management crossing 3 gigawatts. We believe India's renewable energy journey is just beginning with the wind sector poised for multi-decade growth, supported by a wind installation target of 400 gigawatts for Vikshit Bharat 2047. With our ramp-up strategy on track and operational preparedness at optimal levels, we are well positioned to sustain momentum, creating long-term value for our stakeholders and play a pivotal role in advancing India's renewable energy. It gives me a great pleasure to mention that our efforts on the ESG front is being deeply appreciated and recognized by the external world. Suzlon is now a member of United Nations Global Compact and has aligned to the decarbonization goal of net zero by 2050. I would now like to invite Himanshu to take you through our financial performance.

Thank you, J.P., sir, and good evening to all of you, ladies and gentlemen. As always, I will be using Slide #18 to 26 of our investor presentation as a reference point of my discussion during this discussion. The investor presentation has now been uploaded on our website. With an unprecedented order book of 5.5 gigawatts, we are thrilled to have clear and promising revenue visibility. The time line for executing this order book is approximately 24 months, setting us up for an exciting and transformative period over the next 2 fiscal years. In Q3 FY '25, Suzlon continues its exponential growth trajectory, delivering 447 megawatts with all financial parameters showing a strong surge Y-o-Y and Q-on-Q. In the 9 months of FY '25, we have already surpassed all our targets or deliverables that we did for the full year in FY '24. On a consolidated basis, Suzlon delivered record performance in Q3 with a revenue of INR 2,969 crores, which is 91% higher as Y-o-Y for the same period. For the WTG segment, our contribution margin has improved to 22.7% for the 9-month period FY '25 from 19.4% during the same corresponding period for the prior financial year. Our EBITDA for the quarter 3 is at about INR 500 crores, which is 102% increase Y-o-Y and a 70% jump Q-on-Q with an improvement in EBITDA margin to 16.8% from 15.9% last year despite organizational buildup, technological advancements and a substantial ramp-up in capacity. This, we've been able to achieve largely because of the scale and the leverage that we now have with our suppliers due to the scale that -- of our order book. Quarterly PAT of INR 388 crores is 91% higher on a year-on-year basis and 93% higher on a quarter-to-quarter basis, which gives us confidence that Suzlon has shifted into high gear on the operational growth following a successful financial turnaround on the balance sheet front nearly a year ago. We are also pleased to report that our balance sheet has further fortified as of December 2024 with a net worth of INR 4,914 crores and a net cash position of INR 1,107 crores. Our pioneering business model of offering end-to-end wind energy value chain, fully integrated supply chain, track record of project execution and best-in-class service cannot be easily replicated, which provides us a very, very strong competitive edge. With that, I'd like to conclude my presentation and open the floor to any queries that the callers may have. Thank you.

[Operator Instructions] The first question is from the line of Sumit Kishore from Axis Capital. As there is no response, we'll move to the next question, which is from the line of Mohit Kumar from ICICI Securities.

Congratulations on a very, very good quarter and superb last 24 months, sir. My question is, sir, on the order inflow inquiry. Of course, it has increased 20 -- 18 months...

I'm sorry to interrupt, sir, but you are not audible.

Am I audible now?

Yes.

Yes. Yes.

So the question is, how has been the order inflow inquiry as of now? Are we seeing inquiries -- are we seeing inquiry as strong as it has been there in the last 18 months?

Yes. I think it is not last 18 months. What I would say is actually it is increasing from quarter-to-quarter, the order inquiries, as we keep seeing it. So therefore, we see a good traction in terms of order inquiries. And there are -- obviously, you know that there are 3 types of order things. One is C&I segment, which is our strongest point where we have about 58% mark in our order book share. Then PSUs is picking up now. You know that we have won already NTPC one order. Second, the bid is put in already. We're expecting results to come out in the next 30 to 45 days, and other PSUs. And third is a bid. So the bid project. So we actually -- and also, we are now seeing a traction in the way people are talking about, fine, it is not immediately to be done, can we do a project development and then we want to do a project, let's say, in FY '27, starting at end of FY '26. So we're getting interesting proposals. And so we're also getting into discussions where people are saying can we have a little longer-term pipeline type of discussions rather than just having one-off projects. So I think from that angle, the traction what we're seeing on the order book is very, very encouraging.

My second question on the C&I side, sir, given the fact that the transmission charges are supposed to go up by June '25 and there was an expectation that C&I will pick up in the Q4 FY '25 and Q1 FY '26. Are you seeing that momentum?

Yes, it continues. See, let's understand that, first of all, the -- 2 factors play a role. One is the tariff arbitrage compared to what they have today versus what happens with the renewables. Secondly, on the transmission front, it is not completely going away in June '25. We are moving from 100% waivers to 75%, okay? For one more year, you have 75%. Then it goes to 50%, then it goes to 75%. So therefore, even -- while it is less than what it would have been up to June '25, but there's still the transmission charges waiver to the extent of 75% for the next 1 year. So therefore, the people would have preferred to complete as much as possible before June '25. But then the -- it's -- wherever projects are there, still the traction is happening on that.

Understood. Sir, my last question is on the financial side. I think on the O&M services, your revenues are increasing Q-o-Q, right -- Q-o-Q and Y-o-Y, but your EBIT is almost similar at INR 2 billion. So can you please explain that? And how should we build up the -- for the future?

So Mohit, it is essentially, there is -- if you look at any period, there are certain one-off items that hit the P&L, whether it is relating to insurance services or the insurance claims on the VAP and VAS services that causes this fluctuation. But clearly, going forward, as we've always maintained that the O&M margins at an EBITDA level will be about 40%, and we continue to maintain that guidance going forward. There may be aberrations quarter-to-quarter due to, as I said, insurance claim income and the VAP sales.

The next question is from the line of Sumit Kishore from Axis Capital.

My compliments on a fairly strong set of numbers in Q3. My first question is, what are the emerging trends of wind, solar sizing in FDRE projects with evolving battery economics?

It's actually very difficult to predict, as I think partly yourself answered. The changing pricing scenario of storage would keep changing the combination of wind, solar, how much do you want to have it. Having said that, the -- what type of an FDRE we are talking is important because are we talking about the load following FDRE? The FDRE definition is completely different. If you see -- go ahead and see the bid itself, there are 7 or 8 types of FDREs...

Let us say for load following FDRE?

Load following FDRE. See, earlier, it used to be like the -- it used to be about 200% of the capacity is supposed to be wind. Now people are still talking about 140% to 160%. So therefore, the -- it also depends upon the load profile -- specific load profile, okay? If you're talking about, let's say, a load profile of a Delhi DISCOM [indiscernible] came up because the peak is much higher, so then you will have more of wind capacity there. And if you're talking about semi-urban type of an FDRE, then you will have a different combination. It's difficult to explain, but it is changing with respect to the storage spacing, but still the installed capacity required of wind will be more than 100% in any FDRE load following scenario. Whether it would be 150% or it should be 160% or 170%, we really don't know, depending upon the load profile of that particular retail distribution segment.

Got it. The second question is, could you quantify the nonrecurring items, which may be part of third quarter as part of employee expenses. Also whether the depreciation and interest costs that we see in Q3 are the recurring numbers that we should expect with the higher WTG capacity, especially on depreciation?

So depreciation, Sumit, will be a recurring item because with the increased CapEx, as J.P. sir mentioned with Pondicherry for the additional Nacelle facility getting mobilized and our additional molds for the S144 getting commissioned, the increased CapEx is, of course, hitting the P&L from a depreciation perspective. So you should certainly assume that the depreciation of about INR 60 crores to INR 65 crores a quarter would continue as a normal standard.

One-off expenses in employee?

Yes. So one-off expenses in employee, of course, would largely pertain to ESOP charge. Now the ESOP charges for Q4 would be the similar as you've seen for Q3. As we step into the next financial year, difficult to say. But as of now, it looks like that the ESOP charge on account of employee expenses as a one-off would reduce for the full year in FY '26 as compared to FY '25.

What has been the number for Q3 on ESOP expenses?

ESOP expenses, Q3, would be about INR 32 crores. And for the 9 months, that expense, of course, you can just simply -- multiply it by 3, about INR 83 crores is the 9-month expense on ESOP. Our estimate is INR 116 crores would be the charge for ESOP for the full year FY '25. And that INR 116 crores would certainly be lower. I can't say by what amount for FY '26, but it would certainly be lower.

Okay. And just one last question, if you could comment on what strategic steps are you taking for diversifying from your main growth engine of WTG in India right now?

See, right now, as you see, there is a huge amount of traction within India. What we are now trying to look at is that how do we actually diversify our business within the WTG, as a growth, is like as what we have been talking earlier. We are increasing our activity of advanced development, okay? So we're getting into those contracts. As we speak today, we do have a contract which we don't announce as part of WTG contracts for about 1,100 megawatts for advanced development of projects. And then further more we are entering into. So therefore, what we are trying to do is diversify -- I don't know whether you call it as diversification, you call it as a different action, is that what do we need to do that in is growth engine would further grow. So -- because one of the reasons we are seeing is that the commissioning not happening at the required level, that has the pushback and how much can you supply. So we are trying to see that pushback can it be removed or not. That's one area which we are significantly concentrating. We started this year. That will grow a big way in the next year as well so that we will not have an issue of a pushback coming on our supply. That's one area we thing. Second area, obviously, we are concentrating is in terms of multi-brand acquisition in case of Renom. So these 2 are going to be the major things. But then we are looking at any probability of exports in case you hit here, but that we're in the process of studying. We don't -- we're not going to say that there is going to be the action right now planned for the next year. But then we are looking at it. So saying that, okay, fine, if in India, this is what is maximum it can take, then -- because we have a capacity, is it possible to do it to, let's say, Europe. We don't know what's going to happen in U.S. I know you raised questions, but I have no answer for that, the Europe and other places, because there are -- a lot of European manufacturers are significantly exporting from here to Europe. India is the base. Our manufacturing costs are much lower than them. So obviously, if they can do it, we can also do it. But that is more of an incremental capacity over and above what we can sell in India is what we are doing. Otherwise, Himanshu, if you want to add anything? But we don't have any other significant versions at this stage.

Yes. No, I agree. And just to further add to my earlier answer, Sumit, and also to Mohit's question in the first question. From the depreciation perspective, this quarter is the first quarter where we are fully consolidated Renom as well because in Q2, we consolidated that only for about 25 days. In -- Q3 is the first quarter where the entire consolidation has happened. And about INR 8 crores delta in depreciation that you see is on account of Renom. And also to earlier Sumit's question, when you see the OMS segmental EBIT because Renom, as a margin business, is lesser than the Suzlon O&M business. So as Renom keeps growing, although it's very small still, so it doesn't make too much of a difference. But as we see the segmental revenue along with Renom, you might see a percentage shrink, but very minimal.

The next question is from the line of Puneet Gulati from HSBC.

Congrats on a great order book. So how should one think about this 5 gigawatt order book? Over what period would you expect to deploy this?

These are -- some part of it obviously for current -- we were executing in quarter 4 of this year. And the large portion is for FY '26 and some of them is FY '27. Let's be clear that the -- these days that you have an order book, when you take the order book, you have a contractual schedule saying that this is what is the delivery. But we all know that there are changes happening with respect to the project schedules because maybe the substation got shifted or something else is happening. So we are -- there is a constant discussion between us and the clients to the extent of keep modifying the schedule. But the simple answer to your question is that most of this order book is for FY '26 and FY '27...

Possible to give some sense of...

How big residual quarter 4.

Is it possible to get a breakup between quarter 4 and then maybe FY '26...

Yes. I can give you a contractual breakup. That's not going to help because it doesn't give you any number of saying that what it is really going to be because the contractual number is different in reality what's going to happen is different. So as we keep approaching quarter-to-quarter, we will know what next quarter we are going to deliver. So...

And in this environment of...

As I told in my opening comments, first time in the history of Suzlon, we are starting the next financial year with a full order book in position.

Right. No, that's very interesting. And in that context, how are you pricing your product where there is uncertainty of timing of installation in FY '26, '27. Is there a flexibility in pricing that you're keeping? Or is it a fixed price contract?

Two things we do. One is that the steel [indiscernible] as a pass-through because that's a major component for us. And second, what we say is that our price is valid for X amount of months for the project to get executed. If the supplies for reasons not attributable to Suzlon, if they get delayed contractually, then obviously, we need to sit back and -- we can't really drop them, we can -- need to sit back and discuss the pricing. These are the 2 safeguards what we have.

So third one that we've also done for our large A-class components with our suppliers. We've entered into long-term framework agreements. So we know that at least the key critical components, also, we do have, in a way, price freeze and beyond a certain volume, we, in fact, have a volume discount.

Okay. And -- Okay, sorry. So there is a volume discount once you really reach at a number and before that it's fixed, right? And in that, have they given any advance? Is there a risk that these contracts might get canceled, if the price discussions don't fructify or are very firm in nature and there is huge advance...

No. We've not given any advance to our suppliers because of the framework agreements. These are mere framework agreements. But we've kept a fairly large margin of safety in terms of what we can deliver over the next 12 to 24 months vis-a-vis our order.

This is on the supply chain side.

Received advance from the -- from your customers?

Yes. Yes. We don't announce any contract unless there is -- the contract is backed in advance. We don't...

Right. And last one. And are these all for S144? Or is there a plan for an upgrade built into these orders as well?

No, no. All these are for 144 at this stage. So -- and of course, there's a small quantum of 8% out of our outstanding order book. 92% is 144 and 8% is for S120. And there is no other model other than these 2 we are offering in the market today.

Understood. And what's in the pipeline? Any thoughts, if you can throw on?

Yes, pipeline always -- you always work because the product development cycle is long. So obviously, we are working on the next version of the turbine. But depending upon what is -- when is the market ready, what happens to 144, we will launch the turbine. That will be larger than 144 obviously.

The next question is from the line of Vikram Datwani from Nuvama Institutional Equities.

Congratulations on a good set of numbers. Two questions from my side. So first is we've seen order inflow already at 3.5 to 4 gigawatt in this year. The order book is at roughly 5.5 to 6 gigawatt. So at any point, do you think we will get choosy with our order inflow? Or can we maintain this order inflow run rate because you already have visibility for the next 2, 2.5 years. So do you foresee this kind of inflow going forward? Or will we get a little choosy in orders in the next couple of years?

The moment I say choosy, it looks like we've become arrogant. So obviously, we are not that way. The customers have a choice and we have. When we discussed about these projects is that what we look at seriousness of the project is looking at their financial closure, if it is the -- PPA is there or not because all projects what we acquired from the bid, the 21%, 22%, all of them have a PPA. And then if it is a non-EPC, it's [indiscernible] equipment supply, their position of land and the substation is what we look at it. Because generally, if you look at it, most players who are in the market today, the large IPPs what we enter into, all of them are good people, okay? And as long as we have our own pricing, of which we want to offer, if that matches and then we have adequate safeguards in terms of if there are delays, then we just go ahead. I don't think -- I will not use the word that we are choosy at this stage. Obviously -- but of course the -- there is a flash of delivery coming in and being asked for when we can't do it, then there -- it is not choosy, but we will tell them we can't do this. This is what in the delivery schedule. We can adjust to the delivery schedule is fine. Otherwise, they have an option to go somewhere else. Those things can happen...

So I was majorly talking about from the capacity standpoint like you rightly eluded to at the end...

That is exactly what I'm saying. So therefore, if the delivery schedule is already -- we are overloaded during that particular period, then we offer a different delivery schedule to them. We don't say no, we offer a different delivery schedule. And there are some discussions. Sometimes we agree to a different delivery schedule or sometimes it doesn't meet so they say that sorry, this time it doesn't meet, then I'll go somewhere else. But that is, again, not the word of choosy, but not able to meet the requirement of the client.

Yes, I meant it from a capacity point of view. Got it sir. My second question is on...

Did happen that way.

Okay, sir. My second question is on margin sustainability. So we've had quarters where you've not booked EPC revenues -- EPC expenses because installations have been weak. So on a yearly basis, do you have any sustainable margin guidance or any target mix between product delivery and EPC delivery?

So on margin, if we look at the contribution margin for the WTG segment, in the 9 months of this year, we've done about 22.7% for the division -- for the segment as a whole. Now clearly, the commissioning, for reasons we've discussed, has been a little lower. But having said that, as and when the EPC work and the commissioning completes, that margin may slightly come down. So whilst earlier, we've always maintained a margin of late teens, I think it's safe to say that close to 20% or little over 20% on a consolidated steady-state basis would be the contribution margin. So that is pretty much, I would say, upping the guidance from a contribution margin perspective by a few percentage points.

Got it. And any reasonable percentage breakup between product versus EPC that you are targeting?

So we don't -- we've not yet started giving segmental split of product versus EPC. We just as you know, reporting WTG as a segment, we are not doing the split as of.

The next question is from the line of Amit Bhinde from Morgan Stanley.

Congratulations, sir, on a great set of numbers. So my first question is with regards to the realization, it comes to around INR 52 million per megawatt for this quarter. Now in this, I understand that EPC portion was not there, but then is there any pricing pressure that you're experiencing with a few other OEMs getting very active in the market?

No, there is no pricing pressure whatsoever. In fact, when J.P. sir mentioned earlier, we don't want to be arrogant in saying no to certain orders. So clearly, the kind of traction that you see with our order book pretty much there for the next 2 years. There is no reason for us to come under pricing pressure and neither is we are seeing that from the competition perspective. So this is merely due to slower execution on the EPC front that you're seeing the INR 52 million, which, as always, we mentioned, will be close to about INR 6 crores you take steady-state basis, it's about INR 58 million to be precise. I think it's a notch lower largely because of the slower EPC execution.

Right, right. So INR 58 million is a good number to work around with, right? And on the contribution margin that you said in the previous question, 20% or a little over it, is that a sustainable guidance? Or is it only for FY '25?

So as I mentioned that as we move forward, around, I would say, 20% would be 1 large component, of course, is steel. So depending on where the utility prices move, whilst that's a large pass-through item. But consistently, our endeavor will be to deliver a margin of close to 20%, which we've always maintained late teens. So about 20% is what we can consistently deliver.

The margin has become -- or went from late teens to 20%.

Yes. That's the only change in guidance.

Got that. And on the previous question, you mentioned that there's around 1,100 megawatts of advanced development projects that you are offering. So in this, how would the realization...

Not offering, we're executing.

Yes. So you're executing. So how would the realization differ versus the INR 58 million for average...

No, that is -- yes, let me -- I think I explained in the previous quarter's call also, in the development, what happens is that the government wants to do an EPC project with us because the land is an issue. So what they do is that they only give an NTP for the land. And first of all, we are not waiting even for the NTP, we have started developing the projects where we start acquiring the land up to a certain extent, then we keep offering in the market since this project is there if you want the development. Then they come in and give an NTP for land and they start paying for the land from then on. And at appropriate time, the NTP for EPC l be given. And we don't announce those EPCs because they have not been given. So once the EPC NTP is given, advance is given for that portion, land we -- already is advanced. So we announce to the market...

So this 1,100...

I mean, they are then to be converted into EPC contracts. But at what stage when it gets converted, we announce to the market.

Right. So right now, is this, 1,100 a part of your 5.5?

No, no, no. I said that this will get -- as and when gets converted into EPC contract with that one, is when we will announce. Right now, it is not part of 5.5.

Any indicative time line in 6 months or 1 year that this can get converted?

It's reasonable to expect that next 3 to 4 quarters, this get converted into EPC contracts. There'll be EPC.

All right. And one more question on your delivery timelines. As you mentioned that there is a contractual delivery timeline in each of the projects. So how is the timeline differing in C&I versus the PSUs. So PSUs, is it 18, 24 months? Or how is it in C&I, especially in PSU?

No. You're asking C&I versus PSU or?

Yes. So is it like the C&I would have a lower contractual delivery time line? Is that the right way to look at it?

No, no. C&I normally tends not to revise significantly the contractor schedule because it is meant for their own consumption normally. But there also, we see that they get stuck with respect to the land or evacuation, but to a lesser extent. PSU, we have to see because we're just doing execution of NTPC right now. But on the bid-related projects, obviously, we see a big shift.

Right. Broadly, would it be like 12 to 18 months for C&I or lower?

It means like 12 to 18 months shift you're talking about the contract schedule?

Sir, delivery timelines from ordering -- from ordering to delivery timelines.

Yes, yes. It's reasonable -- that's a reasonable number, 12 to 18 months, depending upon the size of the project.

Right. And for CapEx, do you have any guidance revised because now that you are adding new blade lines, et cetera? So I recollect that you were guiding around INR 400 crores of CapEx per year. Is there any revision to that?

So Amit, no revision. And we request that this will be your last question. We can, of course, connect offline, if you want. But to quickly answer your question, that no revision and guidance to the same.

The next question is from the line of Aadesh Mehta from Motilal Oswal AMC.

So just wanted to understand this margin guidance -- this aspiration of around 20%. This is on the EBITDA numbers or at the contribution level?

Aadesh, it's on the contribution level for WTG. I wish it was EBITDA, but I don't -- definitely not. So it is on the contribution margin for WTG segment.

And other thing which I wanted to understand is that, so far, wind installations have broadly lagged our deliveries, right? If you see the country level data. So how long do you think this can continue that even as installations are lagging, we will continue delivering our products to our clients.

See, obviously, if there is a continuous delay in the land or the evacuation, there would be -- that's what I said sometime back in another question, that there could be potentially a pushback on supplies side, in fact there could be delays and clients can say that "please slow down the supplies." That's probably can happen. Otherwise, given our numbers, what we're looking at today would have been still higher, okay? So what we deliver in Q3. But that is what you need to overcome. That is where I said that we have now been working with -- one is on the development side. Second thing, what is we're looking ahead is that if you look at next year, it is not going to change in a quarter or 2 quarters, but it will definitely change in FY '26 significantly. These are plans coming from development. Second also is that some of the clients, what we have now contracted how land in position. For example, we just did the Torrent power contract of 482 megawatt, which is meant for the captive -- for the distribution business. We already have 50% of land along with the right of way. So as I said that we are developing ourselves like NTPC has -- whatever we are not executing, they're already getting the land in advance position. Torrent for Karnataka, which got delayed, EPC project, we are doing EPC. So therefore, we acquired the land almost for about 150 megawatts there, already out of 300 megawatts. So these things will result into a better project execution, quicker project execution moving ahead. But are we -- do we see a significant change in Q4? No. Are we seeing -- going to see some gain in Q1 next year? No. I think gradually from starting from Q2 next year onwards, you will see an improvement, pushbacks coming down. FY '26 will be definitely better than FY '25 because of these reasons. And FY '27 onwards, I don't think -- at least as to the one, we will see any issues with respect to the land. Evacuation, we still -- of course, it's beyond our control. But on the land delaying the projects will not happen, significantly coming down FY '26, we can guarantee and FY '27, it would practically be not there.

And sir, do we see this being a hiccup over the next 6 to 12 months because the execution run rate is very strong from our side, do you think given the progress report you are seeing at your client level, you can continue delivering this number of equipments?

Yes. See, what happens is that the -- we have multiple clients, okay? If it is only 1 project, 2 projects continuing the supply, then there is a saturation point we reach quickly. Because we have multiple projects and multiple clients, so while I do agree that there will be some pushback, which is what we talked about contracts are still getting revised. But then we don't see it to that extent, impacting our supplies significantly in the next few quarters. And by then, we would be ready with even the land -- not only we, sector as a whole realize, this as an issue, land and ROW. So most people are actually investing in land much in advance. Like I said, the 3 clients, which we are working with right now for this 1,100 megawatts, they're spending on land much in advance with us. So I think things would change. Today, I completely agree that that's not just the land, including the evacuation is an issue today. We are nowhere near our ambition of reaching about 8 gigawatts a year run rate. But I think the things would change -- expected to change in FY '26 and FY '27.

[Operator Instructions] The next question is from the line of Dheeraj Kripalani from Avendus Capital.

So my question is on the industry level. If you look at the wind capacity additions in India, so till FY '25, only 2 gigawatt has been added. So my question is that I just want to know your view at what capacity additions in India, you will see in the next, let's say, 3 years? And what are the challenges, of course, in the capacity additions?

Yes. As I said -- okay, we'll talk about Suzlon, we're not talking about the industry. But I also said some time back that not just we and the other industry players also working towards reducing the risk of land, okay? So therefore, this year, we still see though we're 2,277 -- let's say 2.3 gigawatts in first 9 months. It could be anywhere between 3.5 to 4 gigawatts is what we see. There's a large capacity -- like we ourselves have -- as I said, as we speak, we have more than 200 megawatts precommissioned, means that you can just get on the grid any day. So it's available. So other people also have it. So we're still hopeful that 3.5 to 4 gigawatts is what we should achieved this year. And then next year, we should -- I think with all the efforts what people are putting it should be around 6 gigawatts. And then we -- hopefully, FY '27 -- at least FY '27 onwards, we'd 7 to 8 gigawatts.

The next question is from the line of Arun Kailasan from Geojit Financial Services.

Am I audible?

Yes, yes. You are.

So first of all congratulations on a good set of numbers. And I'm still a novice in understanding this industry. So I just wanted to know that earlier in one of the con calls, you had mentioned that the capacity addition would be somewhere around 5 to 7 gigawatts in 2026, '27 for India in general. And then from then, it would be around the range of 10 gigawatts, right? I just wanted to know at what amount of capacity addition, do we see these tariffs go to a range where like it turns less profitable for the developers? Because -- is there a concern of oversupply when it comes to this? So that is my question, because we are seeing solar module prices correcting and correspondingly, the tariffs have also come down by huge margin. And if that is the tariff risk then how would we look at negating that?

See, the first point is, I agree that in our country the tariff goes up, but the demand will drop, okay? Demand is a function of the tariff. The demand elasticity gets limited if the tariff goes up. Having said that, if you look at -- i keep saying this, if you look at the exchange and look at the demand and the price when wind generates is constantly high. Only thing what you're seeing is the tariffs during the solar time coming down because the supply is higher and the demand is less. So I think there is enough appetite in the market to meet the current load profile for the wind capacity. And the wind tariffs are not -- they're not going up. I don't think any tariffs are going up because tariffs are only falling even for FDRE because the solar prices are falling. On the case of solar, the tariffs have gone up because of the restrictions of this, and that has significantly gone up. If I remember right, the solar stand-alone now is -- almost crossed INR 3 because of the domestic content criteria. So that can increase the tariffs, but the winds are not increasing, wind tariffs remain the same. So the demand does exist for round-the-clock power because as we're growing, the demand is going to keep increasing. To some extent, there was impact of solar tariffs going up because of the domestic content. But I think to that extent, the storage prices that are coming down should be able to compensate.

So this about 10 gigawatts of addition post 2028 that we are factoring in is sustainable, right?

Sustainable is different. We always said that in case for us to meet the 100 gigawatts in wind capacity, is a run rate required and we expected that -- in fact, even compared to our expectations for this year, it is less of the fact that we thought that we'll touch about 4.5 to 5 gigawatts, which we now revised to 3.5 to 4 gigawatts. Next year, I just said, sometime back 6 than 8, and is still feasible in FY '28 with advanced actions what everybody is taking.

The next question is from the line of [ Jinesh Shah ] from [ SK Investments ].

Yes. So my question would be like, as you mentioned, that we have ramped up the capacity from 3.1 gigawatts to 4.5. So I would just -- because of which our depreciation also increased. So I would just like to understand that are all the assets operational and live? Or are we expecting much more CapEx, which will increase the depreciation going forward?

So as I said earlier, we are looking at close to about INR 350 crores to INR 400 crores of annual CapEx for the next 2 to 3 years, which will all go towards capacity augmentation. Of course, as a result, even the older asset base will get depreciated completely. To answer your earlier question, whether all the CapEx that we've incurred till date is operational, most of it is, and some of it is getting operational as we speak. So for the next few quarters, including, of course, the Renom acquisition charge about INR 65 crores of depreciation on a quarterly basis is a steady state that one should assume.

Okay. Okay. And my second question would be with respect to the interest income of INR 70 crores, like I was just validating with respect to -- since in our books as of September, we had borrowings of approximately INR 232 crores gross debt. So I would just like to understand that how do we validate like the interest of INR 70 crores, if you can just say a bit about that?

Yes. So of course, the interest cost is largely due to the LC and BG commissions that we have to pay to our lenders. And there is the INR 232 crores debt that you're referring to is working capital that sits in our 2 subsidiaries, which is SE Forge and Renom. So they have their cash credit facilities as wing capital which attract a normal interest rate. And the other is, of course, LC, BG charges at the stand-alone level, which we pay for giving guarantees to our customers and LCs to our suppliers. That, of course, naturally gets netted off with the interest income that we are able to generate with the cash balance that we have in the company.

The next question is from the line of [ Satpal Singh Khanuja ] from [ Ishaan Ventures ].

It is always a pleasure to talk to you J.P. sir. You are one of the corporate leaders who deliver their promises quarter-on-quarter. Sir, can you help me understand the impact of the Trump era on renewable energy sector in India? Do we see a reduction of prices of the product if Chinese and European players start dumping in Indian markets?

See, the Chinese are already there. And Chinese are not there anyway significantly in the U.S. at this stage. So U.S. market is mainly with GE and Vestas. So I don't think that would make a difference. European significantly present today, they're manufacturing huge amount of quantities in India, but they are exporting because they're unable to compete in India. So therefore, either way, it should not to make a difference. I only look at it is that in case the opportunities for -- first of all, I have no clue about what is going to be impact because every day you're reading a clarification. So suddenly IRA has impacted, next day I see a statement, which is IRA has impacted only to the extent of EVs. It's an evolving situation and there is a clear view that onshore wind turbines won't get impacted. It's only the offshore that is going to get impacted. So therefore, whether you speak or I speak, it is more of a gossiping between two of us and both have opinion. Therefore, I think we should wait for a few more weeks before we see any impact on India. But if at all, there is going to be an impact, in my opinion, it will be a positive impact, but not a negative impact. So investment opportunities, if it comes down in U.S., there will be more investment opportunities coming down here -- coming in India. So I can only see the positive side of it. At this stage, I'm not seeing anything significantly negative for us.

My second question would be since we have 18 to 24 months of normal period of conversion of any contract, plus they are usually delays from the side of the customer now that we have an executable capacity of, say, 4,000 megawatt, as you mentioned in some other discussions previously, would a number of around 10,000 megawatts in the order book be the right number where we can think of coming at full capacity?

Come again? 10,000 megawatts...

Now we say -- when we say that we have an installed capacity of 4.5 megawatt, and we are targeting 90 -- to achieve 90% of that. Given the 18- to 24-month conversion period and the delays that normally happen to come at full capacity an order book of about 10,000 megawatts would be the right number?

No, no, no. Let me clarify. Today, we have an outstanding order book of 5.5 gigawatts as we speak. And obviously, at any point in time, there will be a number of orders which we are negotiating, we'll keep getting converted in the future. okay? So this 5.5 gigawatts is in orders which are confirmed orders backed by the full advance, okay? What I mentioned is that if somebody ask me the question is that how much of it will be for next year? I said contractually, it could be anything, but let us wait and see that what happens in terms of reality of projects. So we have not given any guidance with respect to out of this 5.5 gigawatt, how much will be done next year. But I only said this 5.5 gigawatt will definitely get executed in FY '26 and in FY '27 together. That was my answer.

No, no, what I'm saying is now that we have a capacity of 4,000 -- only 4 gigawatts. What we are targeting is an order book of something like 10 gigawatts?

You're saying that because we've a manufacturing capacity of 4.5. I may have a manufacturing capacity, but they should offtake. Projects are ready to offtake so obviously, yes, your point is right that if I load our manufacturing capacity to the 90%. So then obviously, about 4 gigawatts is what we should supply every year. But that capacity comes only when you manufacturing plant is loaded on a consistent basis every month, but that doesn't happen. Your offtakes are different. So your project offtake is what decides how much capacity utilization happens.

The next question is from the line of Depesh Kashyap from Invesco.

Just a clarification on the interest cost of INR 70 crores. I think last quarter, you highlighted that there's INR 10 crores to INR 11 crores of one-off expenses due to a new contract that you have got, right? So the normal run rate INR 44 crores, INR 45 crores of interest cost. So is this INR 70 crores now a new normal that you think? Or if there's any one-off sitting here?

No, no, INR 70 crores is not a new normal Depesh. There is close to about -- of course, in this -- INR 15 crores gets added in a quarter because of the One Earth lease cost that -- currently that is there close to about INR 15 crores a quarter. That will get on a continuous basis quarter-on-quarter. In addition to that, there is the Renom working capital cost that is getting added. As I said, Renom has about INR 120 crores of working capital facilities with it, which they utilize on a cash credit basis. So of course, whilst we look at optimizing the cost, but we will also look at increased cash balances going forward. So the net interest cost would probably be in the normal region of around INR 40 crores a quarter give or take. But that we will manage through, of course, whether increased interest cost or increased interest income, both net basis, we should assume about INR 40 crores.

Understood. Understood. Understood. Secondly, when do you expect the normal taxation to start hitting your P&L?

So I think that, of course, is very difficult for me to give you any guidance on that. But safe to say that I don't see that hitting us in FY '26, at least, can't say about FY '27 at this stage.

Understood. And lastly, any plans on utilization of cash, any inorganic opportunities you're looking at? Or any dividend payments you're thinking about because now you are a INR 400 crores plus net worth, right, that's how...

So inorganic, of course, we are keep looking on. We'll be very selective. We won't go very aggressive any inorganic opportunities. Any return or payback to the shareholders, well, of course, at the time of annual results, will be deliberated and discussed at the Board before recommending to the shareholders. We'll, of course, need to see the reserves. So as you know, we have -- there is a scheme which is impending that requires for a reclassification of reserves. So once that is done, is when we can have the dividend-paying capabilities. I hope and assume that, that should be completed, that scheme should go through by June, July. Once that is ready and the business exigency is permitting any dividend payout and the Board approving, we would then only be able to recommend the same process to shareholders.

The next question is from the line of Rohan Vora from Envision Capital.

Congratulations on the numbers. Just wanted to check on the Siemens, are you still looking at it? Or what is the update...

I'm sorry to interrupt you, but can you speak a bit louder, Mr. Rohan Vora.

Is it better?

Yes, please.

So sir, I just wanted to check around Siemens Gamesa. So what is the update around that? And are we looking at that particular transaction?

Obviously, Siemens Gamesa, we will not have an update because that is that company to provide. We are not looking at it, we said earlier also.

Absolutely, sir. Are we looking at it is what I'm trying to understand?

No, no. We've always been on record. We never changed our stance. So we are not looking at that asset.

The next question is from the line of [ Deepak Purswani ] from Svan Investments.

Congratulations for good set of numbers. Sir, just wanted to check it out eventually, when we would be looking at 4 gigawatt of execution on a year-on basis. From the order inflow point of view, at some point of time, we are also or considering export market to be tacked going ahead, if you can throw some light on that?

Our manufacturing capacity is 4.5 gigawatts. So therefore, we are in a position to supply 4 gigawatts a year if there is a demand to that extent in India. So when that I really won't be able to answer that because it depends upon various external factors. But we do have a capacity to supply 4 gigawatts a year as we speak today. As far as the integration is concerned, sometime back to a different question I mentioned that. Right now, there's so much happening in India. However, we will -- we are evaluating that what are the opportunities available outside India, if at all -- today is only a valuation phase. So in case -- because we have a capacity that India offtake gets to certain level, can we actually do an incremental capacity and then sell outside. But right now, there is no solid proposal to that, it's only an evaluation process. And by when, we don't know really, all depends upon the market evaluation.

The next question is from the line of [ Falguni Datta ] from an [ Manasarovar Financials ].

I just have 1 question. Is it possible to give volume guidance for FY '26?

We have not been providing that volume guidance for -- not just for the FY '26, we're not even providing for the next quarter. So I think we will maintain that over -- because it depends upon various factors because we don't want to give guidance and then start giving the reasons why it has been achieved or overachieved or underachieved because market is so dynamic outside in terms of execution. So we don't...

So you mean to say because of the execution issue, right, understand.

Yes. But you're seeing the growth. So therefore, obviously, you can guess, growth will continue quarter to quarter.

Ladies and gentlemen, due to the time constraint, this will be the last question, which is from the line of Rusmik Oza from 9 Rays EquiResearch.

Am I audible?

Yes.

Sir, I wanted to check up in next fiscal year, if industry does around 6 gigawatts, can we maintain the market share of 40%, which we -- I think last quarter, we were above 40% market share. If you can just give some color on the kind of market share it would retain next year?

Can you please come again? Sorry.

I just wanted to understand what kind of market share would you be able to retain next year, that's FY '26 in industry?

Market share of what?

Wind -- WTG.

I mean in WTG. What order booking, supply or...

Supply or commissioning of wind energy.

Right now, the publicly available number is only the commissioning, okay? So there is no data or nobody is monitoring the data in terms of order book or in terms of for the supplies. Right now, this year, obviously, the -- 45% is not there at all. We are much more than that at this stage number because we also can't -- we can't measure -- last time also I mentioned, measure the performance based on the market share of COD for us because as you see in our composition, only 20 -- around 20%, 22% is what is EPC, rest all are non-EPC where we don't have the full control. So therefore, our -- now the main indicator is in terms of supply. So that's what we'll decide what is going to be our financial performance and the commission number.

Okay. Okay. And second question, sir, was on the Foundry & Forging business. Our utilization level right now is around 19%. Just wanted to get a feel how much can this utilization go up next fiscal year and the margins, which say at around 12.5%, can they go back to 15%, 16%?

We're working towards that. We are working towards the processing of order book in terms of non-wind as well as exports. And also the -- we are trying to see that we increase our commissioning capacity so that we don't need outsource commissioning so that we increase our margins. You will see the improvement quarter-by-quarter from now onwards.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Himanshu Mody for closing comments.

Thank you, everyone, for joining the call. And I know there is a question queue still pending. My apologies to all those investors. We are unable to take all the questions at this stage. However, I request please do write to us on our e-mail ID [email protected] or reach out to my colleagues Siddharth and Krishna with your questions, and we will be happy to answer those. But apologies, we won't be able to take any further questions at this stage. Thank you very much for being patient hearing us out, and I look forward to being in touch with you all. Thank you so much.

Thank you. Ladies and gentlemen, on behalf of Suzlon Energy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.