Torrent Power Limited (TORNTPOWER.NS) Earnings Call Transcript & Summary

Ladies and gentleman, good day and welcome to Torrent Power Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Mashruwala, Executive Director and CFO. Thank you, and over to you, sir.

Thank you so much. Good evening to all of you, and thank you for joining Torrent Power's Earnings Call for Q1 FY '26. First, I will take you through the performance of the quarter, after which phone lines will be open for question-and-answer session. We'll explain the performance of the company at PBT level. First, reported PBT for the quarter stood at INR 985 crores as compared to INR 1,315 crores in corresponding quarter last year, decrease by INR 329 crores, a reduction of 25% on a reported basis. PBT for the quarter includes non-recurring loss of INR 59 crores on account of non-cash adjustment due to foreign exchange fluctuations. PBT for the corresponding quarter of last year includes non-recurring credit of INR 102 crores on account of receipt of favorable tariff order of our license distribution area, which primarily includes carrying cost allowances. Adjusted for about non-recurring items, the adjusted PBT for the quarter stood at INR 144 crores as compared to INR 1,213 crores in comparable quarter of last year, which is lower by about INR 169 crores, a reduction of 14%. Company's underlying business remained resilient. However, the company quarter was mainly impacted by lower merchant gain, partially offset by improvement in the other businesses on account of positive operational parameters. Company remains well-positioned to navigate cyclical variations supported by the diversified business operations. The business-wise key factors contributing to the performance are as follows: There are four factors, which I will explain to you. First, reduction in gain from sale of merchant power as well as LNG of INR 333 crores. Demand of the power remains subdued during the -- due to early onset of the monsoon. Further, LNG price remained elevated, impacting the sales of merchant gas with capacity of 1.5 gigawatt. Overall PLF for the thermal generation deteriorated from 60% in Q1 of FY '25 to 39% in Q1 of FY '26 due to lower long-term as well as merchant sales. Second, improved contribution from distribution business by INR 82 crores, mainly on account of two factors. First, improvement in operational parameters like lower distribution losses and higher collection efficiencies. Second, additionally, contribution from the license business was also supported by the increase in ROE as well as ROCE on account of capitalization of assets as well as higher rate of returns on equity as well as new tariff regulations. Third, contribution from renewable business improved by INR 31 crores on account of -- mainly on account of interest income on delayed payment under LPS scheme, higher PLF, partially offset by lower contribution from the new solar project of 300 megawatt of TPLD as well as MSKVY. Fourth, lower interest expenses of INR 547 crores on account of prepayment of debt from the QIP proceeds -- due to QIP proceeds. This completes the explanation of the financial performance during the quarter. Moving on, we'll now give a brief update on the pipeline projects. During the quarter, the company successfully secured a contract under SECI-XVIII, tying up 300-megawatt merchant capacity at a competitive rate of INR 3.97 per unit. Its progresses commissioning of 360-megawatt MSEDCL project. Aggregate installed generation capacity of the company stood at 4.9 gigawatts as on 30th June '25, comprising of 2.7 gigawatt of gas, 1.8 gigawatt of renewable capacity, and 62 megawatt of coal-based capacities. Pipeline project at the end of the quarter includes 3.1 gigawatt of renewable projects, 3 gigawatts of solar projects, 2 transmission projects of Khavda as well as Solapur. Further details on the pipeline projects have been summarized on our latest investor presentation available on the website. I would now request coordinator to open the line for Q&A session. We wish everybody to stay safe and healthy. Thank you so much. Handing over to the operator.

[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.

My first question is of course during this quarter, we are impacted by the lower merchant prices and lower offtake for the gas-based power plant. But is it fair to say that we are guaranteed a certain amount of payment for that till October under the existing PPA, so the Q2 should be better compared to last year. Is that a fair assumption?

So see, the quarter has been impacted mainly by the merchant sales because of the early onset of monsoon as well as elevated gas price. So our NVVN tender, which is operation number of 15th of March and will be continued till 15th of October. So it could speak into two quarters. So whatever supply has not happened under NVVN tender will going to happen -- going forward in Q2, possibly something may see over the Q3 also.

Understood, sir. My second question is on the RE portfolio. Is it possible to spell out the CapEx which you have done for the Q1?

Q1 CapEx is about INR 350 crores.

And how do you expect it to progress the balance year, sir?

Balance, there is a plan. We have a plan. So we have plan to have about 500 to 700 megawatt CapEx is coming in. So progressively, we'll incur the CapEx for the RE portfolio.

Any broad number for fiscal year '26 and '27, sir? Is it possible to share?

Sorry?

Is it possible to share the broad CapEx number for expected number for FY '26 and FY '27 for RE?

So for '26, it should be around INR 7,000 crores to INR 8,000 crores for this year and slightly higher number for next year.

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

First, on the merchant EBITDA for the quarter. I just wanted to understand the PLS was low, but under the NVVN tender, you have minimum guaranteed offtake. So was there some EBITDA contribution this quarter from take-or-pay where even if NVVN doesn't lift, you are guaranteed fixed cost on whatever is not lifted. So just wanted to understand, was there some contribution from there in this quarter?

The contribution from merchant is there definitely because of the NVVN, we have lifted some portion. But it will be -- whatever is a guaranteed thing is going to happen next quarter as well as something spillover will happen in the Q3 also. So minimum guaranteed quantity is going to happen.

Just trying to understand, there will be some guaranteed offtake every day. I think last time we were trying to understand, what I understood was if they don't lift the minimum guaranteed offtake, which would be 2,300 MU, you would -- they will not pay you the entire tariff, but you will be guaranteed at least a fixed cost. So just trying to understand this quarter.

So Satyadeep, I think what you're trying to understand is that this quarter, what was the minimum guaranteed offtake and correspondingly, what was the realization from that. So basically, this tender is for -- until October, right? So the guaranteed offtake they have to take is till October. Now it is not split into every day demand, every -- so if, let's say, on a particular day, if the demand is not there, they may not commission or they may not ask you to provide power. It can spill over to a different day. So basically, what we are saying is that there was some offtake under the NVVN tender and the expectation is that minimum guaranteed offtake will be taken by NVVN going forward progressively. There could be -- there is a possibility that some guaranteed offtake may also get spilled over from October to the next quarter also.

Because my understanding in the tender was there are specific crunch days 111. And during those crunch days, there is a minimum PLF of 50% during non-peak and 100% during peak. So accounting-wise, I thought whenever they're not meeting within this quarter also, you would have booked some fixed cost recovery, but that...

We book based on the sales, which happens, right? And what you're saying should be true in case once the period expires and they have not offtake on the minimum guarantee. Then we'll have to see whether we want to account that for not. But as of now, whatever we have booked is based on the offtake which they have done -- based on the actual offtake we have done. Not based on some estimated number, but based on the actual offtake, we have booked the revenues and contributions.

Fair enough. Just one thing I noticed in the presentation, some merchant wind capacity you had. Is it -- seems like you've transitioned that into SECI XVIII. What is the rationale? Because earlier you were thinking of keeping some merchant wins in the portfolio. It seems to have been gone down. Is that true? And what is the rationale for that?

So we have two merchant projects, in fact, developing. So we got the SECI XVIII tender. So we have shifted the tariff was INR 3.97, which is quite good, I would say. So we have shifted the merchant cap SECI XVIII tenders. So that is what the observed because tariff was good INR 3.97 in the SECI XVIII tenders. So better to switch over the merchant capacity to SECI and contract lock in at better tariff, and we will develop further merchant capacity going forward also.

Just one quick question, if I can squeeze another one. On the parallel licensing, I think there is some news report indicating some CapEx opportunity in Nagpur. I think there is some hearing. Just wanted to understand the steps in that process right now. And I think the news reports indicate maybe PAT losses for the first 4 years. Just wanted to understand why -- is that -- I'm not sure if it was misquoted or something. Why -- if that is, why should there be PAT losses in the first 4 years? If you can you talk about this opportunity, the steps -- and I'm not sure whatever the media reports are. Just wanted to understand your thoughts there.

So we can't comment on the media report, but the fact of the matter is that today, in fact, today is the public hearing happened in Mumbai organized by the MSE. So that happened today. Now we have reserved the orders now. So it will be probably going to be announced in a couple of days, I would say. And then we will come to know the exact status about the current licensing. So public hearing took place today in Mumbai.

So the results of the public hearing will be announced in 2 days. What are the steps after that?

A couple of days, not 2 days -- a couple of days. They will reserve the order whether to allocate -- to give the circle to the Torrent Power or not based on the public hearing.

Okay. So within a few -- within a couple of days or so, we should find out.

Yes, that is what we expect to MSE. Maharastra State Regulatory Commission will announce the result.

MSE. All the three, right? Pune, Nagpur -- all the three areas.

Yes, all the three areas.

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

Could you give us a sense of what is the total sale of merchant units in Q1? And what was your merchant contribution from gas-based power plants in the first quarter of the year? Our sense last year was that in Q1 last year, you had realized almost INR 6 billion of merchant gains.

So it was a merchant sale of about 714 MUs this quarter.

714.

714 MUs, including the NVVN tender also. Contribution was about INR 327 crores.

Got it. This is very clear. The second question is, I think you mentioned to a previous participant that Q1 CapEx was INR 3.5 billion only. I thought that you are...

INR 350 crores for the renewal only. Overall CapEx is about INR 850 crores, but the renewal is INR 350 crores.

So total company level CapEx was INR 850 crores, out of which renewable was INR 350 crores.

Okay. Just to understand, given the numbers that we are looking at on an annual basis are north of INR 70 billion, INR 80 billion. So is there any reason why Q1 CapEx in renewable is so low? Or how should we read this sort of number seems quite low.