The Tata Power Company Limited (500400) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tata Power Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Praveer Sinha, MD and CEO of Tata Power. Thank you, and over to you, sir.

Thanks, Darwin. Good evening to everyone, and thanks for joining the Q3 FY '24 analyst call. I'm joined today by my colleagues, Sanjeev Churiwala, CFO; Mr. J.V. Patil, Financial Controller; Mr. Kasturi and Mr. Rajesh Lachhani from the Investor Relations and other team members from the finance team. We have already shared the details with you, but just for the benefit of everyone, there are a couple of issues I thought I'll bring to everyone's notice. One is that the power demand in the country has grown at a very fast pace. We have seen a nearly 10% demand surge in the last quarter. And during the last 9 months also, the growth has been nearly 9% to 10%. This higher demand is expected to continue in future quarters and future years also, considering that there has been a huge surge in demand in all sectors, whether it is the commercial industry or the domestic residential sector. As also in villages where we see that the consumption has increased tremendously because of the government's Saubhagya Scheme. What we are expecting is that with the increased demand in power, Tata Power will continue to provide supply of power from all its existing assets. Coming to this quarter, this is the 17th successive quarter in which we have shown the PAT growth, thereby demonstrating that solid business fundamentals are there of the company. And this is especially happening because majority of the profits have come from the core businesses, unlike previous years when we used to get large quantum of profit from our non-core business, especially the coal business. This quarter we have a PAT of INR 1,076 crores, which is nearly 2% higher than the last quarter. And similarly, our EBITDA has increased by 15% to INR 3,250 crores. On a 9-month basis, our EBITDA has jumped by nearly 34% to reach an all-time high of INR 9,342 crores. Similarly, our adjusted PAT before exceptional items has gone up by 4% for the 9 months to INR 3,000 crores. And this is on back of robust performance by all our core businesses, including generation, transmission, distribution, renewables and also some of the new areas that we have gone into in EV charging as also in the rooftop solar. While we made huge progress in our various businesses, our commitment to net zero continues to be there, and we will become net zero by 2025, which as a utility, we were the first one in the country to announce. During the quarter, our renewable business commissioned 72 megawatts of renewable capacity and 343 megawatts of capacity in our utility scale projects in the last 9 months and with our green portfolio and seeing portfolio becoming nearly 5,600 megawatts. This, of course, includes our hydro, thereby accounting nearly 39% of our capacity in the clean generation capacity area. We have won number of projects during this quarter, namely the 1,316 megawatts of RTC project. And this is the first RTC project that we have won from SJVN, which is a combination of solar, wind and battery storage. And with this, our project pipeline has become 4,752 megawatts. Over and above our existing 4,200 megawatts, we'll have nearly 9,000 megawatts of projects, renewable projects, which we would be setting up. With all this, we do expect that next quarter, we should be in a position to cross 10,000 megawatts of renewable projects and moved to nearly more than 50% of our capability coming from renewable sources. Our solar EPC business has again reported a very good performance during this quarter, both in terms of revenue and EBITDA, as also our utility business, where nearly orders of 612 megawatts worth INR 2,849 crores have been received in this quarter. Rooftop business continues to see excellent traction with nearly 146 megawatts installed and nearly 87 megawatts of orders won in Q3. During the last 9 months, we have installed 350 megawatts of rooftop solar. And why I'm emphasizing this is, considering that Government of India has recently announced that 1 crore houses will be provided with the rooftop solution. Once the details are out, and we know exactly what sort of capacity is being envisaged, we expect a capacity addition of nearly 30 to 40 gigawatts of rooftop opportunity in the next 2 to 3 years. And that's where I think Tata Power will play a very, very important role going forward. In all our renewable businesses, we have seen a huge amount of growth. And we do expect that this trend will continue in the future quarters also. In our manufacturing plant, out of the 4.3 gigawatt of solar cell and solar model. The 3 gigawatt of solar modules have been commissioned and the manufacturing has started at our plant, and the 4 gigawatts module manufacturing will start in the next 2 to 3 weeks. Similarly, on our 4.3 gigawatt of cell line, the first cell is expected to be out in the month of April. And the plant should stabilize to the full capacity by June, July. We do expect that going forward, there would be a large number of projects, including the rooftop solar project of the government, the 1 crore that has been announced, which will use local make solar modules. And thereby, we will have a great opportunity going forward to meet the production that comes from this plant. During this quarter, we have energized 412 public EV chargers. And with this, our total number of EV chargers, which are operating, installed is much higher, operating is 5,300. And this is also on back of nearly 73,000 of home chargers and 690 of bus chargers, which are operating. We have recently tied up with Indian Oil Corporation to use their outlets to put nearly 500 of fast and ultra-fast EV chargers at different locations. Our T&D business has been doing consistently very good. We -- in the last quarter, we won 2 bids of -- worth INR 2,300 crores. This is the 344 circuit kilometers Bikaner-Neemrana transmission line and the 80 circuit kilometers Jalpura-Khurja line with a total investment of nearly INR 2,300. And all these projects will get completed in next 24 months. Our Odisha discom continues to perform very well. It has been a very challenging experience, but the teams over there have ensured that better quality service and reliability is provided to the customer. And that has been demonstrated by not only good service to the consumer, but also in terms of financial performance, whereby in Q3, the PAT has gone up by nearly 75% to INR 63 crores and on a 9-month basis, it has become INR 217 crores. We have also installed nearly 3.6 lakh smart meters in Odisha and replaced nearly 27 lakh meters in Odisha out of the 95 lakh consumers over there. This has helped us to improve our billing efficiency and collection efficiency and the results will start being seen in the subsequent quarters. Our balance sheet remains very steady in spite of increasing capital. We have spent nearly INR 3,600 crores in the last quarter. And in spite of all this, our net debt has increased only by INR 2,000 crores and is at a very healthy level of INR 38,600 crores. Our leverage ratios are very healthy. Our net debt to underlying EBITDA is 2.86%. In the previous quarter, it was 2.7%. And our net debt to equity has been virtually at 1x level. We do expect that our increase in CapEx in future quarters will also help us to generate better EBITDA and profitability for the company. During the quarter, the company also received $50 million out of the pending receivables of $125 million from the investment done in Zambia. And we expect that the balance will also be collected in the next 12 to 14 months as per the arrangement agreed with the discom in Zambia. Acknowledging all these efforts, CRISIL has upgraded Tata Power's credit rating from AA stable to AA positive. And India Ratings has upgraded from AA stable to AA+ stable, which I think is two-notches improvement in last 1 year. As Tata Power continues to move forward with a better performance and consistent performance. We do expect that new investments which is in our renewable business, transmission and distribution as also the pump hydro project, which will start in later part of this year, we will start showing much better consistent and stable performance for the company in the future. I thank you all for all your support. And this is especially required considering that Tata Power crossed the market cap of INR 1,00,000 crores a few days back and continues to improve its performance going forward. I believe that all our existing operations will continue to do well in future, and we look forward for your continued support. I will now ask Darwin to open the floor for questions and answers.

[Operator Instructions] The first question is from the line of Sumit Kishore from Axis Capital.

My first question is, over the past 1 year, Tata Power has commissioned about 353 megawatts of RE capacity. What is the expected phaseout of commissioning of close to 4.75 gigawatt renewable project pipeline here on? How much is expected in FY '25, FY '26, effectively?

This is Sanjeev Churiwala, CFO, here. As you rightly said, when we look at our YTD commissioning is 353. Normally, we do a big commissioning towards year-end. So the last quarter is supposed to be a big quarter for us where we would expect another 250 to 300 megawatts of commission happening. But looking at our current bid, which is in the pipeline, while we are still working on our overall strategy, but looking at our date of commissioning, in '25, we could commission anything between 1.5 gigawatts to 2 gigawatts, maybe closer to 2 gigawatts. And in subsequent years from the existing pipeline, another 2 gigawatt plus will get commissioned. As you would have seen, the numbers as of now are smaller. That's because it was a strategic decision that we took many months back given the very high cells and modules prices to defer some of the projects so that the cells and module prices could bounce back to normalcy. Luckily, our strategy has worked. And as you are aware that the price of cells and modules have come down and to that extent, we are back in profits in many of these protects that we are executing now.

So, a related question now with the cells and modules prices having collapsed and you are at the Brink of commissioning your expanded cell and module capacity, would it make sense to use this output for utility scale projects in India at present without implementation of ALMM? And what are the margins that you could expect to make on the manufacturing side in FY'25 as you ramp up your manufacturing capacity?

So as you are aware, the ALMM will kick in from 1st April. So many of the projects where they were given the concession till 31st March, if they have not got completed, then they will have to only procure Indian-make modules. So that's where our benefit is there, though the international prices have crashed. But I do expect that with this condition and also the new opportunity of 1 crore houses, which will have only domestic-make modules, we will have a great opportunity. In fact, there is now huge demand that we are seeing from various of the CPSUs and various of the other procurers who want to set a project in the next financial year that they would like to tie up on a long-term basis from us. So we don't expect that we will have any challenge in supplying modules from our factory and our margins to that extent will be quite protected.

So would it be reasonable to expect margins closer to 15% in manufacturing of cell plus module? Or is it early to talk about that?

Well, I would always expect more than that.

Okay. Finally, a question on your -- the line that we see on your cluster summary, cluster-wise summary. Has there been significant improvement in Tata Projects in Q3 on a year-on-year basis or even quarter-on-quarter, which is driving some improvement in this quarter?

Yes. The Tata Projects has made profit in last quarter. And this is the second quarter in which we have made profits. So last 2 quarters, they have made profits. And Tata Power -- Tata Projects will surprise you going forward because all the projects where they had to make provisions for the under-recovery or losses has been completed, and hereafter, it is only thing that will happen in Tata Projects.

Sure. Has there been a significant increase in profit from Tata Projects in this quarter? If you could give us the absolute numbers maybe, Sanjeev?

Yes. No, I think the way to look at it, a significant reduction in the losses. So if I look at the 9 months operations, what I had as the losses last year versus the profit I have, difference is almost close to INR 220 crores. To that extent, Tata Projects have come a long way. Last 2 quarters, we are starting to see the profits coming in and this is a kind of current working that is happening there. I think it's on a transformational path.

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

Congrats on good numbers. My question is with respect to the future commissioning for Tata Power renewables. Since ALMM will come in place, what kind of module price do you expect post 31st March 2024? I'm sure you would have tied up for those already. If you can give some color on the module prices there?

I can't do prediction of module prices what will happen. But I can only tell you that there will be huge demand for domestic-make modules after the ALMM is fixed from 1st April. So I think the commissioning of the plant has happened at the right time. And we will have a huge upside because of the market demand that will take place.

From Tata Power renewables perspective, the consumer of these modules where you intend to commission 1.5 to 2 gigawatts, has something been tied up for FY '25?

So Puneet, the other way to look at it is, in our renewables business, when we look at our large-scale utility business, we already have 4.8 GW of project under pipeline. And this pipeline consists of all the various bids that we have won. So when we look at just the module prices considered in the bid versus our cost, we will definitely have margins over there. So we're not immediately concerned as to how the market will behave. So the past couple of things will have to be kind of taken into consideration in the BCD of the cells and the modules will continue. To that extent, the price parity will continue to happen in spite of the Chinese cells and modules prices dropping in, number one. Number two, as you're aware, most of the cells and manufacturing facility have been put on the backing of the PLI and the state incentives, right? So that will also count when we're looking at our returns. So I think we're in a very good position that we have commissioned a part of our modules, we already have a healthy pipeline of projects coming in, we have the protection of the BCDs there, as well as the incentive put in together. So I think at least we don't see a concern going forward, but you never know what happens after 1 year, 2 years, but definitely, our pipeline is quite healthy as of now.

Understood. And if you can comment on what is the progress in pump storage, have you placed orders for equipment, et cetera?

The pump storage, as we had announced on the 28 November, we are completing the feasibility and getting into the progress. Any pump storage could take easily 4 to 5 years to get commissioned. And hence, at the movement, we're trying to tie up with various things. At the right time, when we have the proper approvals from the board, we will be coming back to you with more details.

Understood. Lastly, transmission projects also, you've once again started an initiative towards bidding for that. How is the competitive intensity there? If you can give some color? And what kind of IRRs are you aiming for there?

I think the way we look at the transmission business, 50% of the bids on the market presently is still with PGCIL. And then the overall private sector market share is close to about 10%. We have recently won 2 bids and I think we continue to work on further bids coming in because as and when you develop a portfolio of bids, you are in a position to kind of dictate better pricing in the marketplace from the vendors and suppliers. And of course, we want to ensure that we are getting good competitive returns on these bids and without that we are not bidding.

The next question is from the line of Subhadip Mitra from Nuvama.

My first question is with regard to the captive solar module manufacturing. Given that you're looking at setting up, let's say, roughly about 2 gigawatts of capacity every year, is it right to assume that you would be looking at roughly 50% of module sales for your captive usage and the balance 50% would go to the external market, be it rooftops or otherwise?

So when we are talking about 2 GW of our own utility scale, we also would be doing third-party EPCs and there would be some quantity that would go. Similarly, we are already doing something like 300 plus megawatts of rooftop which we expect to increase to 500 megawatts. I also mentioned to you that now that the big opportunity has come from the 1 crore houses to be provided with rooftop solar. So I think we have a huge opportunity, both to supply within the country, as also maybe supply some quantity outside the country. So we will have to see what sort of market opportunities are there and what sort of prices and returns we are seeing and then we will take a call based on the market requirement.

Understood. Secondly, on the transmission side, given that there is such a large opportunity opening up over there. Is there any targets you have in mind as to an X percentage market share or X quantum of projects that you would like to keep on winning every year and ramping?

We don't look at investments on those principles of market, but we are more interested in what sort of returns we can get from these projects. So we don't want to just, for the sake of market share or just for winning projects, take any projects at any margin. So for us, if it is not meeting the threshold of returns, we will not take such projects. So opportunities are phenomenal, whether it is in transmission or renewables or it is on any of the other areas that we've seen. But for us, the guiding principle will be what sort of return is there and what sort of risk and reward are there.

Understood, sir. And what is the ideal threshold for returns that you typically look at?

Very difficult to say, but you have seen how we have been in the regulated business. Anything above that is the minimum that we would expect.

Understood. Sir, lastly, on -- I will refer to Slide #41 of your presentation, where you've given the 9-month breakup of the income EBITDA and PAT and cluster-wise. So firstly, thank you very much, this is very helpful for us to understand it in detail. Secondly, just wanted to understand the last line over there, which is the other segment that includes Tata Projects, Nelco and other eliminations. What, at least, we are able to decide is that out of the overall hit that has come from the coal front, maybe there's INR 1,000 crores, INR 1,200 crores kind of a hit that's coming over there. So while the renewables and the transmission pieces have all contributed maybe INR 300 crores and offset that hit, there is a large benefit that is coming from that others piece, almost about INR 1,000-odd crores. And then maybe INR 225 crores of that is Tata Projects, as you mentioned. If you can throw some more light on this because that's a very large piece of business.

We are on slide 41. Are you referring to the line, which is Others (T&D including TPADL, TPTCL and eliminations)?

Yes, I'm referring to the fourth line from the bottom, Others, including Tata Projects, Nelco and inter-cluster eliminations. So the YTD FY '24 number is negative INR 413 crores and the YTD FY '23 number is negative INR 1,426 crores, that's a INR 1,000 crore gap over there.

Yes. So let me explain you. This is basically the dividends that we received from various associates and joint venture companies. To that extent, this will also include dividend from our coal mines, which we are not spilling out specifically out here. But what you can see is on a YTD basis, to that extent, it is lower by INR 1,000 crores, and that has been fully mitigated from the income from the 4 businesses, which is coming from our renewables, T&D, transmission and our distribution businesses.

The next question is from the line of Sudhanshu Bansal from JM Financial.

Congratulations, sir, for the good set of numbers. Sir, how do you see the trajectory of coal prices and power demand for next 2 to 3 years? Secondly, any color on the Mundra PPA will be very helpful, sir.

So on the power demand, I think you have seen last 2 years, CAGR has been 10% and I do expect that this sort of demand will continue in the subsequent years also. As far as the Mundra is concerned, the plant is operating under Section 11 and this is applicable up to 30th of June. We are in active discussions but since the Section 11 is already in force, there has been a little bit of delay in finalizing because this will eventually be applicable post the Section 11 period gets over. So we do expect something on similar lines will get finalized much before the Section 11 period gets over.

And sir, about the coal prices?

Well, the coal prices is very difficult. I don't think there is anyone who can predict what the coal prices will be there. But what we have seen in last 6 months is that the coal prices have stabilized, and this is expected to be in the same range, provided there are no other geopolitical changes that takes place.

The next question is from the line of Apoorva Bahadur from Tata Power Company Limited (sic) [Goldman Sachs].

This is Apoorva. Sir, wanted to understand this dividend, I think INR 416 crores we have recognized. Is it onetime and what sort of cost this payment?

Sure, I'll take this question. Just wanted to understand, you are from which company. Our system is not showing.

I'm from Goldman Sachs.

You are from Goldman Sachs. Okay. Basically, if you see this is a turnaround story of one of our associated company joint venture in Zambia, where we have hydro plant, which has been underperforming for many, many years, and there were tariff disputes, which has now been settled. And because tariffs dispute has been settled, the company is now making profits and has decided to declare a dividend of $100 million, and we have received the $50 million in this particular quarter. But that profit, which is reflected on the PAT as INR 311 crores is more than -- less than offset by the onetime gain also that we had because of Section 11 in the same quarter last year. So net-net it is about INR 30-odd crores. So it's not really impacting to the extent in the bottom line.

Right, sir. No, no, I wanted to understand that will this be a recurring feature, this INR 416 crores benefit? Or what's the annual PAT typically now that we have received...

So let's put it that way, that given that this is an accumulation of the profit which they are now distributing, of course, we have received a bigger number. But this company is capable of declaring a dividend, an yearly dividend of maybe $25 million, $30 million going forward. So yes, we would think that there will be some recurring income coming through every year, but this company has just revived, right? So we're kind of at the moment crossing the fingers and see how the performance shapes up to be able to give you a very confident answer, maybe four quarters down the line, we will have better comfort. But the good part is this company where we were not kind of looking at any cash flow coming through, has been revived and at least we're receiving a $50 million to that extent, of course, the company's return profile improves.

Right. Sir, second question is on the pump hydro projects. Wanted to check at what stage are we in, in terms of the CEA approvals. Has the TPREL been consulted and all the approvals in place?

So all the documents have been submitted, whether it is for TPREL or for environment clearance and all. And these are going through various motions of approvals in various departments. So we do expect that by first quarter of the next financial year, we'll have major approvals. And hopefully, in the later part of this year, maybe by third quarter of the next financial year, we will be in a position to start work.

Sir, by FY '20 -- sorry, CY '25, around mid of CY '25, you expect to start work and then it will take another 4, 5 years. So I believe I saw in the PPT sometime '27, '28 is what we are guiding for the commencement?

We are trying to stick to some sort of similar time line.

So are we beginning work before we are getting all the approvals, civil work and all?

No, no. We'll start work only after we get all the approvals and that's what I'm saying that maybe in the last quarter -- in the third quarter of FY '25, we will possibly start work.

Okay. Okay. And for these pump storage projects, how much of capacity tied up for group captives with the Tata group, any color on that?

Those are still being discussed, and we'll figure it out.

Sure, sir. Last question on this module manufacturing. If you could share the cost structure, what's the final cost of production for these modules? Or how much closer are we to the Chinese prices without the duties and with the duties as well?

As I mentioned to you, these modules are one a different putting all together compared to what prices we see in other countries because this is the DCR and any module that comes from outside, there is a custom duty. Also, they are not approved in the list of module manufacturers. So this has to basically cater to the local requirement within the country and we need to do the pricing based on that.

Sir, what would be our cost?

Those details are being worked out and once we are ready with that, we'll possibly in next quarter, we will be able to give you some idea.

The next question is from the line of Satyadeep Jain from AMBIT Capital.

Just one question on the pump storage. Do you are close to starting construction in the next few quarters? And let's say, if you don't sign up the capacity before you start construction, as you look at financing, I understood previously banks were somewhat unwilling to lend to untied RE capacity. Is that for pump storage, if you do start construction before tying up, raising finance, is there any challenge on that front? I just wanted to understand how do banks lend on these projects.

So what we are seeing is that there is a huge amount of bids which are coming up. In fact, in the next few weeks and months, we are expecting nearly 7 gigawatt of bids, which are coming, which are the TPREL bids. So we are seeing huge demand. There's also a huge demand from industrial and commercial users. They are looking at 24/7 power. And this will be a packaged power of solar, wind and pump storage so as to give 24/7 availability of power. So we do not expect that we will have any challenge in tying of this quantity of power.

So just wanted to understand, you'll basically tie up this entire 2.8 gigawatt before you start construction, right?

Not necessary. We will take a call on that. So let's see how the market evolves. But yes, some quantity will definitely get tied up, but maybe not 100%.

The next question is from the line of Aniket Mittal from SBI Mutual Fund.

Firstly, on the TPREL side, when I look at the 9-month numbers, excluding other income, the EBITDA margins at about 77%, which clearly has been on a downward trajectory despite capacity additions that we've been doing. So just wanted to understand over the years, what's the reason for the decline in EBITDA margins over here and over the next 3 years as we commission capacity, how should we look at the EBITDA margin for TPREL?

EBITDA margin is dependent on the project concept. And as we have seen, now that the module prices have come down and large-scale projects will come in the last quarter as well as in the consequent 2 quarters, you will see a huge improvement in EBITDA.

So for the coming, let's say, 2 years if we commission the remaining capacity, what sort of EBITDA margin should we look at for TPREL?

I won't be able to give you guidance at this stage. But definitely, it will be much better than what we were doing 1 year ago.

I think if you look at this business and also the industry, the EBITDA margin would be in the range of 75% to 80% given that it has a mix of both solar and wind. And this particular quarter, normally third quarter, the wind is always low in terms of the generation. But yes, what we feel is once we go live with our cells and modules and with all the projects that are in the pipeline, this will keep on improving in the coming quarters. Deliberately as of YTD, as I said in the earlier discussions, as we only have commissioned 363 megawatt. And of course, to the extent, the fixed cost absorption did not happen that much. But in the coming quarters, we will have further commissioning happening. And the bigger commission will happen in the first 2 quarters of the next year. So you will see sequentially the improvements coming in.

Okay. And in terms of commissioning, I think you mentioned 1.5 to 2 gigawatts for FY '25. How much would come in FY '26?

Given the current bid pipeline and the COD commissioning, definitely, as of now, we would expect another 2 gigawatts to come in and if we're able to win something more in the coming quarters, this can go up to 3 gigawatts. But yes, definitely, 2 gigawatts is for sure that we will be commissioning in '26 also.

Okay. And on a medium- to long-term basis, what's the optimal capital structure that you're looking for in terms of, let's say, the debt-to-equity or debt-to-EBITDA?

It's a very complicated answer because, again, you have to think about whether you're looking at the consol level, are you looking at a specific platform level because at a platform level...

At a consolidated level.

Yes. At the consol level, presently our debt-to-equity is about 1x, right? And then with all our plannings, we don't think that will go anything beyond 1.5 and 2x in the near future, right? But at the entity level, where we plan to bid, the issues will be different. But finally, what we do intend to ensure that with all our non-core that will keep on coming from time to time, equity raise if at all that has to happen, we keep our debt-to-equity definitely below 2.

Okay. Fair. And lastly, in the 4.8 gigawatt of under-construction projects, how much of it is wind?

That number is there. It's Slide #9.

If you can go to Slide #9, you'll have the breakup of that.

Slide #9. Okay. Fair. Fair. Sir, this slide actually includes hybrid as well, right, which would also have a wind component in it. So if I were to take the wind component in the hybrid as well, I just want to understand how many capacity of wind that you have under construction right now, including the component in hybrid.

So we'll be able to share that with you. We will give you that.

But I think it's better to look at it when we are bidding for solar separately and for wind separately, but when we bid for the hybrid and also for the RTC, it's a various combination that we need to do for solar, wind and battery, right? So we have to look at it in that sense and as a combined sense because the installed capacity and the TPA capacity will also differ. So my urge to all of you would be not to break up that, otherwise, it will become more and more complicated.

The next question is from the line of Anuj Upadhyay from Investec.

Sir, first question relates to your standalone business. So the decline in profitability, is it purely because of lower dividend income or there's some other factors as well because our sense was the Mundra under-recovery would have gone significantly due to Section 11, but in spite of that, the profit is down to nearly one-third?

Yes. So basically, the profits that we get for our coal mines have significantly come down and that is what is contributing to a lower standalone. But for us it is always looking at the consolidated picture.

Okay. And your margins across the EPC continue to remain quite volatile. This quarter, we are back to close to 5% kind of a margin. Last quarter, probably, you have given a guidance at a low margin order basis, more or less the execution has been completed. So now we will be executing projects where margins are relatively closer to a double-digit or somewhere in the range of 7% to 9%. So any comment on that, sir?

You're talking about the EPC margin?

Yes, EPC one.

Yes. So the EPC margin, our targeted margin is close to 5%. But as you're right, the market has been very volatile, especially because of the commodity prices, FX, cells, modules. It is now stabilizing, and we think with the current bided pipeline, we can still target that 5% kind of EPC margins.

So this applies even to your current order backlog -- I mean, order book. over there as well we are targeting close to 5% to 6% kind of an EPC margin.

You're talking about PAT margin of 5% on the EPC business, that's correct. But of course, that is what we're targeting in. It will be a little higher or lower depending upon how things move. But when we do a particular bidding, we kind of target EPC margin of 5%.

Okay. And any possibility, sir, where Mundra can participate in the open market? Currently, whatever selling has been happening, I believe is under Section 11. But any possibility that we can participate in the merchant market provided we are venturing into a scenario where the company is going to participate in.

I think Mundra today is operating full capacity and all the procurers are taking it because it's a very efficient plant. And if they don't buy from Mundra, then they will have to buy it from the market at a much higher price. So none of the procurers are ready to leave the opportunity to schedule power from this plant. So I don't think we have an opportunity to sell outside the procurers. But in case they don't take the power, then, of course, we have the freedom to sell in the open market.

Okay. And lastly, can you just mention the offtake price on Mundra, like what is the generation cost and what price they're selling to consumer.

It's there in the schedule. The Gujarat SLDC releases the -- on a deal basis, the merit order. I can check and let you know.

Yes. And also, I think it's basically a cost-plus markup for us. So to that extent, what matters to us is this is a pecking order, so that all the procurers can take out power. Beyond that, I think the cost doesn't matter because it's still under Section 11 level for us.

No, fine. Just wanted to get a sense if at all we get an opportunity in the open market and that could be our cost and the spread on the machinery.

It's available. We can provide you separately. But it will not actually serve a purpose because it's all cost-plus markup. So depending upon the coal prices and everything, it will just move up and down. So it's kind of an arithmetical formula.

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

My question is on your EV charging business. There was a -- are you aware that Tata Motors is also engaging into EV charging business? And how does that fit into the collaboration with Tata Motors?

So I've not heard about that, that we cater to full Tata Motors requirements whether it is for the 4-wheeler or it is for buses. So I don't know of any other opportunity that Tata Motors is working on EV charging. All their present requirements, whether it is for home charging, public charging, bus charging, free charging is being done.

Okay. That's very interesting. And secondly, if you can comment a bit on the profitability even on a Y-on-Y basis was a little weak for the renewables business despite adding significant capacity. How should we think of it? Is it a function of part utilization, higher depreciation? How should we think of that?

So what happens, as Sanjeev mentioned, that it's very difficult to do on a quarter-to-quarter basis because there are certain periods in the year in a certain quarters when you have better radiation and you have better solar generation. Similarly, there are certain periods during which you have better wind speeds and better wind generation. So I think you need to do it on a 12-month basis rather than just trying to do on a quarter-to-quarter basis.

Okay. So what was weaker this time, the wind part?

Beg your pardon?

So if you can comment on what was weaker this time in terms of solar or wind, where was the PLF lower?

See, what happens is for us, what is important metrics is the availability of the plant and all the availability, whether it is solar or wind are very, very high in benchmark in the country. So abilities of the plants, solar is virtually 100% and wind is also in 98% level. Secondly, we have shared what is the PLF for the solar and it's on Slide 49, you can see it.

Right. So this other income part, INR 45 crores versus INR 106 crores, I thought that was generally operational income, but what exactly is that if you can throw some light?

It will be a combination of some operating income, scrap, some interest income on investments, a combination of that. But if you really see for the quarter, the number is quite small, INR 45-odd crores.

Correct. Versus INR 106 crores previous quarters.

Yes. Yes.

The next question is from the line of [Mithil Bhuva] from unlistedindia.com.

Coming to Slide #40. If I see Mundra coal and shipping, the profits are down from INR 924 crores to INR 89 crores. Just to understand, because of the lower coal prices, the profits are down, right?

Yes, that's correct.

So Mundra is just a cost pass-through which means that we are not benefited by the lower coal prices?

No. So yes, in a way, whatever coal we are procuring, that cost plus the markups that is pass-through. Dropping in coal prices, to that extent doesn't benefit. It's kind of small on a rolling basis. Yes, on an annualized basis, you're right. But then what matters to us is the contribution that comes from coal mines, which is a PAT contribution, that has significantly dropped. As a result, you see overall lower profits from generation in coal and hydro.

Okay. Sir, I was asking this because we have invested more than INR 25,000 crores in the Mundra and coal business. And if the profits are to remain at this level, then we won't generate sufficient cash profits to repay our debt, right? That's the concern actually.

See, you need to look at it is that from a loss-making. Today, we are not. So to that extent, I think we need to look at the totality rather than just looking at it in terms of what sort of returns.

But in the future, can we expect good profits from standalone Mundra also? Or the cost pass-through will be very minimal only?

In today's scenario, when we have Section 11, it's cost-neutral. So whatever is the actual cost of generation is getting paid to you. In future, based on what sort of CEA we enter with them, we will have to see what sort of returns we'll try to be able to get.

And to your question if I add, there are two approaches; a, when you look at the PAT contribution coming from the coal mines, that is perfect. But on top of that, you also get dividends, right, which on a consol basis gets netted off. But when I look at the cash flow, a significant cash flow comes from the dividend perspective.

Okay. Okay. My second question was that the management has guided that the revenue will double in the next 3 years to around INR 1,00,000 crores. Can you just give a brief on like where the revenues are going to rise actually? Because in the last 3 years, the revenue has risen only in the Odisha discoms mainly. So can you just give a brief on where the revenue is going to rise in the next 3 years?

Well, I think the presentation that we had made in the analyst meet, if you see that, it will give you a very good idea that where we are putting the CapEx and where is the total income. So I think it is a direct correlation to that.

I think part of the question we tried to answer in our renewable pipeline itself. We're talking about 2 gigawatt of commissioning happening next year and more than 2 gigawatts happening in '26. So currently, we are at 4 gigawatts And then the 4 gigawatts itself, we are talking about 9 gigawatts in the next 3 years' time, right? So I think to that extent that will contribute in a big profit. Plus, I think the new manufacturing also we spoke about the commissioning of the cells and modules that will also start contributing towards profit. The opportunity in rooftop solar is big for us. We will also look at that. So I think it is a well-thought-through strategy in terms of looking at where we want to reach in our aspiration 3 years down the line and we're tracking on that.

Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Dr. Praveer Sinha for closing comments. Over to you, sir.

Thank you. Thank you to everyone for joining in the call. And in case you have any further queries, you can connect with our Investor Relations team, and we'll be more than happy to share with you. These presentations have been made quite detailed. But if there is any further improvement that you would like in the presentation or any more details, please connect with us. And I'm sure, with your support, we have been able to get a market cap of more than INR 1,00,000 crores, and we are now looking for next milestones. And I'm sure you will support us in this direction. Thank you, everyone, and take care and good night.

Thank you. On behalf of the Tata Power Company Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.