Speaker #3: Ladies and gentlemen, good day and welcome to the Suzlon Energy Limited Q2 FY27 earnings conference call. During this call, the company management may make certain statements that reflect their outlook for the future, which could be construed as forward-looking statements.
Speaker #3: These statements are based on management's current expectations and are associated with uncertainties and risk, as detailed in the annual report. Actual results may differ so these statements should be reviewed in conjunction with the risk the company faces.
Speaker #3: As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Speaker #3: Should you need assistance during the conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.
Speaker #3: We will begin with the opening remarks, followed by a Q&A session. To be fair to others, we kindly request each participant to ask no more than two or three questions.
Speaker #3: From the management, we have with us Mr. Ajay Kapoor, Group CEO, and Mr. Rahul Jain, Group CFO, and Senior Members of the Finance team.
Speaker #3: I now hand the conference over to Mr. Ajay Kapoor. Thank you, and over to you, sir.
Speaker #4: Thank you. Good evening, everyone, and thank you for joining Suzlon's Q2 FY27 earnings call. Let me start by talking about the industry. This year marks a significant inflection point for India's wind energy sector.
Speaker #4: The industry has moved beyond proving its relevance and is now increasingly being recognized as a strategic pillar of India's energy security, manufacturing growth, and decarbonization agenda.
Speaker #4: During the quarter, India crossed 59 gigawatts of installed wind capacity, while maintaining one of the world's largest and most indigenized wind manufacturing ecosystems. The focus is on building a resilient domestic industry capable of supporting India's long-term energy ambitions and emerging as a global export hub.
Speaker #4: The Green Energy Corridor Phase Three, approved by the cabinet recently, is a significant step towards strengthening intrastate transmission infrastructure, enabling evacuation of up to 135 gigawatts of renewable energy capacity. This long-awaited industry demand enhances transmission readiness, reduces evacuation risks, and provides greater certainty for project execution, supporting India's target of 100 gigawatts wind and 300 gigawatts solar capacity by FY30.
Speaker #4: Equally encouraging is the strength of the industry's execution pipeline. With over 40 gigawatts of projects under various stages of implementation, annual manufacturing capacity exceeding 20 gigawatts, wind equipment exports have emerged as a major growth opportunity with exports exceeding 12,000 crores in FY26, demonstrating India's growing global competitiveness.
Speaker #4: Bid momentum is also gaining traction, with almost 8 to 9 gigawatts of wind RTC, FDRE, wind-dominated tenders being awarded in H1, FY27. CNI pipeline also stands robust.
Speaker #4: This sets the stage for a multi-year growth cycle with annual installations expected to cross 10 gigawatts in the near term and reach 15 gigawatts by FY31.
Speaker #4: Overall, the convergence of energy security, prioritizes manufacturing strength, repowering opportunities, offshore wind development, transmission expansion, and rising power demand provides strong visibility for a sustained multi-year growth cycle for the Indian wind sector.
Speaker #4: Now, taking you through the Q2 FY27 business highlights, Suzlon delivered 710 megawatts in Q2, with 40% jump quarter on quarter, making our ever-highest second quarter India deliveries.
Speaker #4: This performance was achieved despite Q2's seasonally being a lean quarter on account of the monsoon. The most salient achievement for the quarter was in terms of commissioning.
Speaker #4: Wherein Suzlon installations grew more than 69% from 269 megawatts to 454 megawatts in Q2 FY27. Talking about half-year, H1, the installations reached 723 megawatts.
Speaker #4: Further, 1.25 gigawatts of erected turbines in the pipeline for future commissioning will pave the way for an uptick in commissioning going forward. Our order book of 6 gigawatts reaffirms our market leadership.
Speaker #4: In F127, in H127, we have already secured 1.5 gigawatts of orders, and continue to have strong pipeline. The current order backlog provides coverage for 18 months, and healthy order pipeline gives strong confidence and comfort for maintaining the growth momentum.
Speaker #4: Order book is not constrained with strong demand in industry, and DEFCO model offering in place to help keep momentum growing. Our focus remains on closing quality orders at regular intervals, rather than achieving quarterly run rate.
Speaker #4: With the 175 5X and 163 6X, Suzlon is expanding its technology portfolio with high-capacity turbines that deliver superior yields, better reliability, and lower LCOE, unlocking opportunities across repowering and new build projects worldwide.
Speaker #4: 4.5 gigawatts manufacturing capacity fully operational, expanding footprint with three AI-enabled smart blade factories to drive efficiency and scale, Suzlon 2.0 is translating into a tangible growth opportunities across multiple adjacencies.
Speaker #4: Our RE tech successfully commissioned the proto of first S175 5-megawatt turbine, and secured the first customer order of 21 turbines of 105 megawatts. Our DEFCO shows a strong market acceptance, reflected in 900 megawatts of orders already booked in H127.
Speaker #4: On exports, we are seeing good traction, with customers expected to receive orders in the next few quarters. With respect to integrated offering in terms of FDRE, we are in active discussions and finalizing the terms with prospective partners.
Speaker #4: Suzlon 2.0 is a five-year journey, and I'm personally satisfied with the progress made so far. Our RE AMS India business remains strong with 16.5+ gigawatts of installed base, with EBITDA margins maintained north of 40%.
Speaker #4: Our foundry and forging continues to scale strongly, in Q2 delivering revenues of 167 crores and EBITDA of 50 crores, with continued momentum driven by domestic demand and export growth.
Speaker #4: Now I'll invite Rahul Jain, our group CFO, to take you through our financial performance. Rahul.
Speaker #5: Thank you, Ajay. Good evening, ladies and gentlemen. I would be using slides 18 to 27 of our investor presentation which has been uploaded on our website, as the reference point for my discussion during this presentation.
Speaker #5: In Q2 FY27, revenue grew 27% Q1Q to rupees 4,869 crores, from 3,819 crores in Q1 FY27. EBITDA improved to 720 crores, up 21% from previous quarter.
Speaker #5: Profit after tax stands at 394 crores, up 29% from Q1 FY27. The company has delivered strong sequential growth on key financial parameters. When compared on YOY basis, consolidated EBITDA percentage has been impacted on account of below.
Speaker #5: Declined WTG contribution margins, from 26.9% to 21.2%, primarily due to segment, customer, and scope mix changes, and additionally, forex and commodity volatility, making it a key driver of the EBITDA margin decline.
Speaker #5: We are working on several levers to optimize the impact in the near to medium term. Operating expenses increased by about Rs. 80 crore during Q2 FY27, versus Q2 FY26.
Speaker #5: Largely led by higher Suzlon 2.0 related branding, travel, SG&A related to associated costs, which are around 50 crores. This is expected to be phased down in subsequent quarters.
Speaker #5: This non-recurring expense had an adverse impact of around 1% on EBITDA margin. In H1 FY27, deliveries grew 21% YOY to 1,217 megawatts, from 1,009 megawatts in H1 FY26.
Speaker #5: With commissioning, capacity rose from 270 megawatts to 723 megawatts, a significant jump of 168%. Revenue grew 24% year over year to ₹8,688 crore, with EBITDA at ₹1,315 crore.
Speaker #5: That for H1 stands at 699 crores. Last year, Q2 and H1 PAT included significant DTA recognition benefits, making the reported numbers not directly comparable.
Speaker #5: In contrast, the current year's PAT is largely impacted by DTA reversals, which are non-cash in nature. Hence, for a like-to-like comparison, PBT is a better metric to compare.
Speaker #5: Coming to the balance sheet, we are pleased to report on our balance sheet as of September 26, reflects a position of exceptional strength, with consolidated net worth crossing 10,000 crores mark to 10,277 crores.
Speaker #5: Our net cash position at ₹2,048 crore further enhances our financial flexibility and resilience. Adequate working capital limits tied up for execution of the current order book are also in place.
Speaker #5: Our net working capital looks higher primarily due to seasonality, and us gearing up for higher volumes in H2. You would be pleased to know that CRISIL has elevated our long-term rating to AA minus stable, and the short-term rating has been upgraded to A1 plus.
Speaker #5: I believe that our integrated business model backed by a robust supply chain strong execution capabilities and industry-leading service network continues to differentiate Suzlon and create a sustainable, competitive advantage.
Speaker #5: With that, I would now like to hand over the call to the operator and open the floor for questions.
Speaker #4: Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone.
Speaker #4: If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question.
Speaker #4: Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Sumit Kishore from Axis Capital.
Speaker #4: Please go ahead.
Speaker #6: Good evening. Thanks. Two questions from my side. The first one is if you could elaborate on your comments around the depressed contribution margin of 21.2% in Q2.
Speaker #6: And also, till what time will the higher fixed expenses in WTG business continue? So you mentioned a 50 crore number on granting travel, SG&A, this quarter.
Speaker #6: So I mean, what kind of a hit should we expect or impact should we expect in coming quarters? And so what should be your normalized or when would the operating leverage benefit with growing volume start reflecting in numbers?
Speaker #6: That's my first question.
Speaker #5: Thank you, Sumit. I'll take the question. The contribution margin the part of the margin impact is attributable to high volatility in effects and commodity.
Speaker #5: Which is largely, I would say, due to the West Asia crisis. Now, when we think about it, this is a crisis that has been ongoing.
Speaker #5: And all of us have been hoping that some of this should get sorted out. It is difficult to predict the timing of this resolution.
Speaker #5: Given the nature of the externalities, any such resolution should normalize this impact. Again, like I said in the opening remarks as well, we are working on several initiatives to normalize the impact as well.
Speaker #5: And optimize comms, which should address part of this issue. WTG contribution margins are expected to remain in the 22–23% range.
Speaker #5: For FY27, is the belief. And it should get normalized subject to some of these externalities getting normalized. I hope that answers it, Sumit.
Speaker #6: How much is the effects impact?
Speaker #5: See, again, it is difficult to be able to, let's say, articulate it, but I would say when we think about it, a commodity and FX impact put together has about a 50 basis points impact.
Speaker #6: Okay. And on the fixed expenses, yeah.
Speaker #5: Okay. So can I come in? So just add to what Raul just mentioned. You know, if you look at the key components of the margin decline, one is the customer and scope mix.
Speaker #5: It's about 150 to 180 bips segment mix, because, you know, we have our service business which generates much higher EBITDA margin. But the share of that changes as the wind turbine revenues go up.
Speaker #5: So that has an impact of around 50 bips. Non-recurring OPEX, which you which you are, I think, asking, has an impact around 1%. So between commodity and effects, 50 bips and between non-recurring OPEX, 100 bips.
Speaker #5: So you could take about 1.5% is something which is, of course, I cannot comment about commodity and, you know, effects, but for sure the recurring will not be there in future.
Speaker #6: 100. Okay. Customer and scope mix, this is basically the EPC shift that you have made.
Speaker #5: No, this is also the kind of customers we have. Like last year, similar time, we had certain customers orders. You know, so yeah. So those had a little higher margin.
Speaker #5: At the same time, they also had a impact on the working capital, which we have spoken in past. So that's something we can say.
Speaker #5: It's about last year, same time, our margin was 18.8%. EBITDA margin. And now we are at 14.8. So if I give you all the calculation, this is the basically a, you know, commentary from 18.6 to 14.8.
Speaker #5: Normalized EBITDA margin should be, if I normalize for the non-recurring and also commodity, should be around 16.5% to 17%, excluding non-recurring costs pertaining to Suzlon 2.0, effects of commodity, and impact of the West Asia crisis.
Speaker #6: Okay. There is no pass-through provision in contracts for commodity effects. These you have to bear.
Speaker #5: See, steel is a pass-through by and large. But rest, I think, there are many commodities where, you know, like copper, aluminum, carbon, these are, you know, you need to absorb.
Speaker #5: And at the same time, having said that, we have always programs running to improve our comms. So what Raul mentioned just now, those programs are being further expedited.
Speaker #5: So I'm sure part of this we will be able to negate it. And in time to come with the higher volumes which happen in H2.
Speaker #5: Normally, we will get operating leverage effect. Generally, H2 is about 1.5 to 1.65 times of H1. We believe the same will pan out this year as well.
Speaker #5: So that will give us a leverage effect of close to 100 bips.
Speaker #6: Just my second question. How much seed capital have you committed to your DevCo business so far? And you may and the Suzlon 2.0 plan included winning FDRE, EPC projects in solar and best, and exports.
Speaker #6: So, what is the progress on those accounts? Thank you so much.
Speaker #5: So from a capital allocation perspective, we had said this earlier as well, Sumit, that we are looking at about ₹500 crore total allocation. As of date, the net number is in the ₹125–130 crore range, because some of these assets that we have developed through DevCo have also been sold off again.
Speaker #5: We've also got when we look at our order book, almost 900 megawatts of the orders have been through the DevCo model only. With respect to the overall position, I think the number remains at 500 is what I would say.
Speaker #5: Ajay, you'd like to take the next one.
Speaker #3: Yes. So your question on solar and best, as of now, no CAPEX has been made. We are going for asset light model. Currently, we are on track to build our teams to start negotiations which are already progressing well, which I also mentioned, and I think Raul also mentioned in the opening.
Speaker #3: And I think this will take the next couple of quarters. And post that, we'll start our, you know, journey of CAPEX. I hope I've answered your question.
Speaker #6: Yes. Thank you so much.
Speaker #1: Thank you. Next question is from the line of Shakuntala Agarwal. And individual investor, please go ahead.
Speaker #6: Yeah. Hi. I would like to ask basically two basic questions, three basic questions. One is, like, Adani and GSW has also entered into GSW wind energy.
Speaker #6: So how, in competitively, we are getting impacted? Second is, the cash conversion cycle, I want to know about that. Thirdly, the cash, as on date, we have been informed that 2,100 is the net cash position.
Speaker #6: Out of which, how much is encumbered and how much is non-encumbered? And third, the Renault acquisition which we did. So we have the FY26 profitability.
Speaker #6: While the top line has increased only by 5%, the profits have halved. So, we have paid around ₹700 crore approximately on the acquisition cost.
Speaker #6: The profitability is around 3 to 4 crores. That's okay.
Speaker #3: So Shakuntala, thanks for your questions. Let me address the question around the competition. You're right, we have Adani, JSW, and many other competitors in the Indian wind sector.
Speaker #3: The good news is the sector is expanding. We are looking at close to 8 gigawatts, Gen 2—you know, September kind of a demand already.
Speaker #3: And Suzlon continues to, you know, win orders. Our market share in the H1 is still near 28, 29%. On deliveries, we are at about 23% in this first half, if I compare that with the previous year.
Speaker #3: It's a substantial jump. So there is competition. At the same time, you know, Suzlon continues to win its own customers. And these two companies are also, if you see, they have a large platform of their own.
Speaker #3: So, a large part of their production also gets used in their own captive platforms. Now, your second question was on cash conversion. I'll just hand it over to Raul.
Speaker #6: Thank you, Ajay. See, again, I think there is an element of seasonality. In our business, and we must build inventory. For our H2 deliveries, it is actually therefore unfair to measure us on a percentage of the trailing 12-month revenues.
Speaker #6: This is also related to commissioning and RR gap, which is results in a hold of partial small receivables with respect to deliveries that have happened.
Speaker #6: Again, you must also appreciate that we are funding our entire CAPEX and volume growth. At the same time, have been able to maintain a healthy cash position as well.
Speaker #6: So the net cash position is about ₹2,300 crore that remains. Largely, some of this we also use for our working capital. But I think the number on the encumbered piece is something that I will have to dig more detailed into and then come back to you.
Speaker #6: The balance sheet position is about ₹2,300 crore on cash; this is what I want to talk about. On the third question on Renault, we are doing various things on Renault.
Speaker #6: I think the way we look at it is the fact that there have been new additions that have happened in Renault. Business is starting to grow as well.
Speaker #6: Overall, when we think about it, going forward, we believe there is a large opportunity that Renault can take up, given where market sizing is.
Speaker #6: In H1, I think we added about 178 megawatts. In renewable, what the market is seeing is large capacities being added, where EPC is not there.
Speaker #6: And service ability is not there. We believe it's a great large opportunity for Renault for the future. That's how we would really look at it.
Speaker #3: Yeah, I'll just add on to thank you, Raul. See, Suzlon has a great opportunity. It's a blue-chip company. In the ISP space, you see every year we are looking at 8 to 10 gigawatts of installations in the next 3 to 4 years.
Speaker #3: And large part of these will come into there is a process by which it flows into the market. Renault is rightly placed to serve these customers.
Speaker #3: We already won close to 200 megawatts in the last quarter. As I speak, there again, discussions going on for further customers, marquee customers. So I think it's a great opportunity for Renault to build a scaled business which I think Suzlon as a backbone can offer Renault to, you know, scale up fast.
Speaker #6: Okay. So actually, my question was, like, we have paid around 700 to 800 crores. Out of which annual profitability is around only 4 crores here.
Speaker #6: And as per the Crystal report which I was seeing, 2,600 crores was the net cash position as of June 30th, out of which 50% was encumbered.
Speaker #6: So that is what that is the follow-up question that I was trying to mention.
Speaker #5: So again, you were talking about June. I was talking about September, November when I was talking about 2,300. That's the position it's available in our results release as well.
Speaker #5: The I think the number of encumbrance remains at about 40, 50 percent only. But we'll have to drill into it to understand the exact number.
Speaker #5: So again, that's not a separate number that we disclose.
Speaker #6: Okay.
Speaker #3: And your question for Renault, as I rightly mentioned, Renault is a long-term business. We acquired it and, as I mentioned, I'm looking at this business to be scaled up to multi-gigawatts.
Speaker #3: In time to come, and I think that's when this whole leverage effect will play out. Okay. Thank you.
Speaker #6: Okay. Thank you so much.
Speaker #4: Thank you. Next question is from the line of Raj Shah. From Inami MC, please go ahead.
Speaker #7: Yes, sir. Good evening, sir. Sir, my question was again on margins front. During the Q1 concall, you had mentioned that though we had done 18 percent EBITDA margin, in FY26, but this year should be around 17 percent.
Speaker #7: Few bips here and there. However, as you mentioned in the initial part of the call about various reasons for margin decline, see, 50 bips relating to FX and commodity is understandable.
Speaker #7: But the customer and scope changes, as well as the non-recurring nature of expense for Suzlon 2.0, are something that you would have planned for.
Speaker #7: You have that kind of visibility in terms of deliveries as well as the orders that you have under execution. But despite that, we have only reported 14.8 percent margins which is much below than what we would have anticipated.
Speaker #7: If you can elaborate, why did this happen? And secondly, for the remaining part of the year, what kind of margins do you see as well as for the full year?
Speaker #3: Okay, so let me give you more clarity on the margins. As I mentioned earlier, we have multiple businesses, with the leading one being our wind turbine business.
Speaker #3: Our deliveries have been a very good number at 26, 27 percent, both on sales as well as on on-ground execution. Both have shown substantial progress.
Speaker #3: The share of our wind turbine business has exceeded the share of the ratio interstate last year, same time versus this time, almost a couple of percentage points.
Speaker #3: That itself has an impact of about 50 bips. I mentioned non-recurring OPEX around 100 and commodity. So this itself is two percentage points. The customer mix changes also depending on the site availability, you know, while in the full year, we plan X, but in a quarter, sometimes certain sites go faster than the other sites, depending on the execution of those sites.
Speaker #3: So that's how you see this a little bit of a, you know, mismatch between what you are asking. For the full year, I would say we have done 15.1 percent margin in the H1.
Speaker #3: With the leverage effect, with H2 being 1.5 to 1.65 of H1, more or less, I expect the same to pan out this year as well.
Speaker #3: You can say 15 percent plus upside of 1 percent.
Speaker #7: Okay. So from the H12, 17 percent plus or minus. Now we are saying 15 percent plus or minus. Is that correct?
Speaker #3: Exactly. Yeah, yeah. Because of this, you know, some of the commodity is playing out as of now. And we don't know if it comes back.
Speaker #3: This can further go up to 17%.
Speaker #5: See, again, even at that point in time, so we had said that there could be a variation given we were aware of the impact of some of these West Asia crisis and commodity impacts, right?
Speaker #5: So we had given that positioning assuming that there will be a positive change which has not happened.
Speaker #3: Yeah, and also, just to clarify, my guidance was 15.1 plus 1 percent—not minus, huh? So this is basically the leverage that's panning out, huh?
Speaker #7: Understood. Secondly, on the debt side, I mean, the finance cost side, I think what we were guiding for or estimating was around ₹300 crore of finance cost.
Speaker #7: However, in H1 itself, we have crossed ₹250 crores. You did mention about this strained working capital position because of higher inventory. But when you see the full-year picture, where should this number go? And similarly, what would be the sustainable net working capital, sir?
Speaker #5: Okay. So I don't think multiplying H1 FY26 gives you a position to say that it will be 300 next year, right? You also have to look at the deliveries.
Speaker #5: H1, FY26, we did almost 1,000 megawatt of deliveries. This year, we are higher by 21 percent, right? We have already done 1,217. Overall revenue also is higher by about 24 percent.
Speaker #5: So there will be an effect of this. That will come into the working capital. What I can tell you is our overall interest costs are coming down from a percentage like to like basis.
Speaker #5: Also, I think when we look at a sustainable working capital the question that you asked, what we are currently focusing is on growth, right?
Speaker #5: And effectively, we are deploying slightly higher working capital for being able to manage growth as well. So no single number, but yes, we are working on various levers to manage our working capital better as well.
Speaker #5: I would like to say that.
Speaker #7: Okay. Okay. Lastly, sir, you did had you mentioned about an export opportunity for repowering some other related to smaller turbines. If you can elaborate where we are in terms of any export opportunity in repowering or any other opportunity on the export front.
Speaker #3: Yeah. So, as I mentioned, export is one of the five on our Blue Sky platform, which has 5 megawatts and 6.3 megawatts, as I already mentioned in the opening.
Speaker #3: We are currently in certification. Likewise, there is a good interest shown in small turbines of 2.1 megawatt as I had mentioned in my last call also.
Speaker #3: So these are customer engagements very much in place. For each of these geographies, teams are now actively working alongside our technical center based out of Germany and also repowering opportunities internationally.
Speaker #3: I think all these orders should start showing first somewhere around, I would say, next year, we should be able to better position to give you a firm position.
Speaker #3: But currently, the pipeline is getting stronger. Customer engagement is there. All the work which is needed to seed the market is currently on, including technical specs, certification.
Speaker #3: And in India, we have already got first repowering order, as I mentioned, with Tatas. Which we are working at a project site. It's a small order, but we are working on that site.
Speaker #3: And I think I believe there's a great opportunity for us. In India itself, there is a 25 gigawatt opportunity. Internationally, also, there is a huge opportunity for this in time to come.
Speaker #7: Okay. Okay. Thank you, sir. All the best.
Speaker #3: Thanks. Thank you.
Speaker #2: Thank you. Next question is from the line of Shweta Jain from Anantarati Shares and Stock Brokers Limited. Please go ahead.
Speaker #6: Good evening. So, most of the questions on margins have been answered. We wanted to ask if you could elaborate on why there is a realization dip on our quarter-on-quarter basis, yes.
Speaker #6: Like, I think we were maintaining a run rate of six crores per megawatt kind of a number, but that has slipped below six this quarter.
Speaker #6: Despite that, I'm assuming EPC makes as a scope of business improving.
Speaker #5: So thanks, Shweta, for your question. When you look at our Q2, FY27 ASP, we are roughly at about 5.9 crore. Right? While when you look at it from a Q2, FY26 perspective, this was at 5.7 crore.
Speaker #5: Overall position, I would say, is that this has remained in a good range. There is no price reduction. This is as per contracted positions that we have created.
Speaker #5: It is a function of the business—it depends on what customer you are supplying, at what time, and what type of order. Is it an EPC order?
Speaker #5: Whether the full supply has been completed or not, there are SPSS supplies and other supplies also. So I don't think there is a negative in that sense.
Speaker #6: So we do maintain a six crore kind of a run rate going forward. Obviously, some pressure.
Speaker #5: It is not a question of pressure. We have not reduced any prices here. It's. It's a position that is played out. Obviously, there is a higher project activity that has come in, which creates this position for the price.
Speaker #5: In the last quarter, it was higher. So project activity created the price advantage in the last quarter.
Speaker #6: So what do you mean by project activity?
Speaker #5: There are various activities within the so there is the turbine supply, there is DOP, there is other activities that go on. Equipment plus SPSS, stubs and others as well, right?
Speaker #5: So when you look at it from an averaging perspective, each has a different element to it.
Speaker #6: Understood. Understood. And sorry.
Speaker #5: Yeah, that's fine. Thank you. Go ahead.
Speaker #6: Okay. On the second question is on the working capital requirements. So is it linked to the Devco model being developed?
Speaker #5: Not really. I don't think there is any linkage between the Devco model and the working capital. I think in a previous answer, I had said that there is what amount of capital that we are committing to the Devco side.
Speaker #5: It does come in the working capital, but the intensity of working capital here is not because of Devco—that I can assure you.
Speaker #6: So could you elaborate the reason? Like, why we are seeing this stretch in working capital impacting the numbers?
Speaker #5: So again, I think when you look at last year, there is a seasonality element that plays out here, Shweta, right? So if you look at it, last year the numbers were in a similar range.
Speaker #5: Right? And again, I answered this question earlier as well. We are building for our H2 position. Ajay also answered, saying that it is 1.5, 1.65 in terms of the overall position.
Speaker #5: And I think we have also said that, if you look at it historically, 40:60 or 45:55, 35:65 has been the range that this H1 and H2 have panned out.
Speaker #5: So we are building for our future sales as well.
Speaker #6: Thank you. Got it. Thank you so much for those answers.
Speaker #5: Thank you.
Speaker #2: Thank you. Next question is from the line of Abhishek from Motilal Oswal. Please go ahead. Abhishek, your line is unmuted. Please go ahead with your question.
Speaker #2: Abhishek from Motilal Oswal, please go ahead with your question.
Speaker #5: Yes, yes, please. So my question is actually on localization. You know, last year there was a lot of hope that, you know, localization would come in and there would be subsequent rounds, and overall for the domestic guys it would be a big positive.
Speaker #5: So just wanted to see, you know, you know, check if there are any updates over there and how is that playing out so far.
Speaker #3: Yeah, it's a good question. Abhishek, as you know, the notification came on 31st July 25 with grandfathering provision provided for 18 months for CNI and 36 months for IBP.
Speaker #3: Already bid projects. And currently limited to six components and subcomponents, which is natural, blade, tower, generator, gearbox, and special bearings. The grandfathering has been extended for certain components in case of lack of availability or constrained supply chain.
Speaker #3: One year for yaw and pitch bearing, that is up to 31st 28, and two years for main bearing, that is 31st Jan 29. So ALM, as you know, provides a level playing field for the Indian OEMs, especially Suzlon.
Speaker #3: Reducing the price gap and ensuring quality of wind turbine gets added to the grid. And Suzlon, I believe, is very well placed since we already have 80% plus local content.
Speaker #5: Okay. Okay. So basically, you are saying maybe in about two years' time, the advantage will become more sort of.
Speaker #3: Yeah, it's already becoming. It's already becoming because most companies have set up their local manufacturing here. And the ones who haven't, they have to.
Speaker #3: And India, as I mentioned earlier, almost 12,000 crores of export of turbines are happening from India. And components also. So India has a very good ecosystem.
Speaker #5: Okay. And this 12,000 crores, is it directly like you know, directly does it coordinate with what you are exporting? Or are there like, you know, other elements in this 12,000 crores which like, you will not qualify for at this point of time?
Speaker #3: No, this is all put together. This is not our numbers. This is the industry numbers I'm telling you. What the whole.
Speaker #5: Yeah. So. I understand. I understand. But is it something like, like, you know, some.
Speaker #3: So, so, so one of our companies our forging and foundry company, which also does you know, backward integration for us, they are exporting, for example, to many geographies.
Speaker #3: Elbit, not in a very big manner. It's a small company, but has big ambitions in time to come to grow. You know, and as it grows, the leverage effect makes the cost better, even for Suzlon when it buys from it.
Speaker #3: So I think what is happening is nacelles are going by the European OEMs are exporting nacelle gearboxes and components.
Speaker #5: Okay. So this is basically nacelle gearbox and various components or all of those.
Speaker #3: Yeah. Yes. Yeah. That's right.
Speaker #5: Okay. Got it. And just a last question on the localization thing. So, what we've seen for solar manufacturing is that there have been subsequent rounds, and the government has tried to go back from, you know, module to cell, to ingot wafer, and maybe eventually to polysilicon.
Speaker #5: Is there a discussion with the government that, okay, you know, after the first round is done, maybe we want to localize further and, you know, backward integrate further?
Speaker #5: Is that on the cards?
Speaker #3: I think right now, as I mentioned, the current policy and messages, these components I mentioned, nacelle, blade, tower, generator, gearbox, and special bearing, on top of it, pitch bearing and main bearing.
Speaker #3: I think if you add all this, you almost nearly hitting 85% of the cost. And I believe we can do 100% also in India.
Speaker #3: I think India has a very good ecosystem. Made for India, for the world. We can certainly do it. And that I'm sure should be the roadmap ahead.
Speaker #5: Okay. Perfect. That answers my question. Thank you so much.
Speaker #3: Thank you.
Speaker #2: Thank you. Next question is from the line of Park Machithya from Ambit Capital. Please go ahead.
Speaker #5: Yeah. Am I audible? Thank you for the opportunity. Could you be a bit louder, please? Thank you.
Speaker #2: Yeah, yeah. Is this fine?
Speaker #5: Yes. Much better.
Speaker #2: Yeah, yeah. So most of my questions were answered, but I have one follow-up on a question that was asked earlier regarding the competition bid. A few names like Adani and JSW were mentioned.
Speaker #2: So recently, Adani won multiple orders. So they have an order book of one gigawatt outside their group. And major customers were NTPC, Aditya Billa Renewables, Purva, all of these were Suzlon's customer in the past.
Speaker #2: So considering these orders that they have won and 40% market share target given in Suzlon 2.0, what's your read on that?
Speaker #5: No, it's a very good question. You know, all the names you're saying continue to remain our customers. We continue to get repeat orders from them.
Speaker #5: Aditya Birla Group, we are currently implementing some of the largest projects, which you would have seen in the recent announcements also. So I think the India market is maturing.
Speaker #5: I believe what we should be looking at is that Suzlon has three decades of leadership, has seen number of global players. Has itself operated in global markets.
Speaker #5: Has a presence across geographies. Our R&D centers are in three parts of Europe. We are preferred partner for customers over the lifetime due to reliability and also the way we manage the ONM.
Speaker #5: We have today almost reached 22 gigawatt of, you know, installed capacity over the years. I think we are in a unique position on top of it.
Speaker #5: Many of these companies are largely meant for their own captive consumption. And of course, they are supplying to outsiders. And it's good for us because end of the day, Indian market is now likely to go to 15 gigawatts by FY 35.
Speaker #5: And Suzlon at 40% of that, I'm very confident, should be able to reach that number. And also, there is space for everybody. So I think India itself becomes such a big geography.
Speaker #5: If you see China's demand, you know, what we do in a whole year, they do in a month. I'm not saying we become China tomorrow, but I can see that as we navigate the potential on wind, solar already has a lot of investments already made.
Speaker #5: Today, we have almost 1,100 gigawatt of potential in India. We only used at 59, about about 5%. So even if we go to 20%, there is enough room for everybody.
Speaker #2: Right, right. Okay. Understood. Another question was on the ALMM bid. That was again asked earlier. So the costs of competitors, which were basically based in China, will increase.
Speaker #2: Because of that, and that will give us a level playing field for Suzlon. But right now, there will be a particular date. So some of the parts, the deadlines are extended.
Speaker #2: But for some of it, the deadline, if I'm correct me if I'm wrong, was Jan 27. So after that, you feel that the market share for Suzlon might increase?
Speaker #5: So I would not, you know, I have given my guidance that by FY 31, I want to hit 30, 40%. I'm trading more closer to 30% right now, like 28, 29, to be precise.
Speaker #5: I have an order book of six plus gigawatt. After doing record deliveries of 1,200 in the first half, and also getting 1,500 megawatt of orders, and all from marquee customers, repeat customers, new customers, and I currently, again, have a very healthy pipeline.
Speaker #5: And then with the DEF CO, we are in dialogue with the leading CNI and other customers. For year three, four, five, which means I'm actually talking now FY28, FY29, FY30, FY31 kind of a business with them.
Speaker #5: I think that should give us a lot of confidence going forward. ALM has impact on building Indian supply chain. And not necessarily the margin.
Speaker #5: So I think that both the impacts are there. You know, because there's a need for India to become self-sufficient. And with FX impact, I think once you have all these things made in India, you also have a much stronger resilient supply chain and this 12,000 crores of exports out of India.
Speaker #5: I believe can actually triple. In time to come.
Speaker #2: Right, right. Okay. Thank you. Those are my questions. Thank you. Next question is from the line of Mahesh Patil from ICICI Securities. Please go ahead.
Speaker #4: Yeah. Hi, sir. Thanks for the opportunity. So my first question is on our inflation, right? Commodity inflation, that we are seeing for most of the part is not passed through.
Speaker #4: So one thing here is for the new orders, right? For the new orders, at least we'll be factoring in the higher cost in our prices, right?
Speaker #5: So very good question, see, end of the day, you are in the market with the price and, you know, you also have to see what customer gets the price from other competitors.
Speaker #5: So pricing is more dynamic. You know, we do try to pass on as much as we can, but then, you know, end of the day, customer also wants to get his best, you know, price for them.
Speaker #5: What we do is we keep developing alternate supplier basket. So our cost of fresh purchases, cost of manufacturing, we keep running initiatives which help us improve our COGS.
Speaker #5: And I'm happy to see the projects in Suzlon we are running. Across our various models. I think that will help us to mitigate to a large extent the commodity risk.
Speaker #5: But in short term, it hits you. When it becomes a little near term, it actually tends. And then this FX and commodity impact will hit everybody.
Speaker #5: Especially the ones who are importing more, will be hit even more.
Speaker #4: Got it. And sir, second question is on the pipeline, right? So how do we see the pipeline of projects where the projects are awarded, but the orders are rejected to be placed?
Speaker #4: Any number that we have?
Speaker #5: Just to clarify, you are talking about the order pipeline?
Speaker #4: Correct, correct.
Speaker #5: Ajay, so we have this six gigawatt orders. We expect that with the current run rate that we are seeing, I think next 18 months, we have a very solid visibility.
Speaker #5: And you can see our acquisition rate also is pretty good. Which I also mentioned in the first half, we already got 1,500 megawatts of new orders.
Speaker #5: So you add both these, I think we are in a very good position. Our order book is not a constraint with strong demand in the industry.
Speaker #5: And the DEFCO-modeled offering in place will help us keep the momentum growing. Our focus would remain on closing quality orders at regular intervals, rather than achieving a rush to do quarterly run rates.
Speaker #4: Sorry, sir, just to clarify this, six gigawatt you are mentioning is over and above the order book, right? The pipeline that we have.
Speaker #5: Absolutely, absolutely.
Speaker #4: Okay, okay. And this is largely FDRE RTC, right?
Speaker #5: Wind specifically, this is largely wind I'm talking about. In time to come, as we come and talk to you more about our best offerings—as I mentioned—currently, we are in the process of incubating these businesses.
Speaker #5: The new leadership teams are joining us. And I think in time to come, we will start getting into best and, you know, other FDRE offerings as well.
Speaker #4: Okay. And sir, last question. On the CA and I side, also, we are seeing quite a bit of traction. So how do you see that?
Speaker #4: I mean, UTT scale versus CA and I, the pipeline coming ahead.
Speaker #5: You look at our overall order book, I think almost 78% is between CNI and, you know, PSUs utility scale. All leading CNI, we are very happy that, you know, we are repeat customers repeat suppliers to them.
Speaker #5: Many of them have engaged us for end-to-end EPC. Many of them, we are engaged on DEF CO. So, and I think each of them have their own large requirements to do their own decarbonization journey.
Speaker #5: So because it's not just wind sector standalone for the IPP and utilities, but also corporates who have big steel plants, cement plants, chemical plants, large industries.
Speaker #5: You know, they all want to decarbonize. So I think there's a huge demand. And I think, and the questions asked to me earlier about others, competitors, entering the segment.
Speaker #5: I think we need this kind of a supply chain so that India can meet its wind potential. And thereby, not only offer a long-term green supply, but also at a reasonable price.
Speaker #5: I think there's enough room.
Speaker #4: Okay, sir. Thank you and all the best. Thank you.
Speaker #2: Thank you. Next question is from the line of Sumit Kishore from Axis Capital. Please go ahead.
Speaker #4: Thanks. Just one follow-up on the working capital. The question is on a sequential basis. I see that the working capital deterioration is mainly on a sequential quarter-on-quarter basis.
Speaker #4: Mainly because of increase in receivable date. And not really a build-up in inventory date. So, you know, on Rao's clarification, just wanted to sort of get his insights on this.
Speaker #5: I think, Sumit, we had answered that. We are building certain inventories. To be able to meet our requirements for H2 supplies. And yes, we will meet a slightly higher.
Speaker #4: Yeah, inventory has not really gone up in terms of date.
Speaker #5: Slightly higher is what I said.
Speaker #4: Receivable has gone up more. Is what I see. Receivable date.
Speaker #5: Yeah, you are right. Receivables are up. I think there is also a timing of the supply positioning that gets created here. Some of the receivables are also related to commissioning and other positions that get created.
Speaker #5: And as our commissioning see, again, I think when you look at it, our total commissioning this quarter, this quarter and both half year, has been very, very, very robust.
Speaker #5: As our commissioning levels improve, some of these let's say receivables that are effectively not due and are linked to commissioning, should get converted to cash as well.
Speaker #4: Okay. And one comment made that you're exploring DEF CO orders for delivery up to FY 2031. Just want to understand the profile of the projects which have been booked under DEF CO so far.
Speaker #4: I mean, are almost similar in terms of delivery to other normal standalone WTG projects?
Speaker #5: So there are two kinds of orders. I think the orders we have announced of 900 megawatt odd, these are COD in the next 18 months.
Speaker #5: So these are like normal ones. But here we already have land available. So these are like near term. What I am really saying is, for year three, four, five, those orders we will announce in time to come.
Speaker #4: Got it. Thank you.
Speaker #2: Thank you. Next question is from the line of Satpal Singh Kanuja from Ishaan Ventures. Please go ahead.
Speaker #6: Hi sir, good evening. Thank you for the opportunity. Sir, what is it that total megawatts which are pending to be installed? Like how many megawatts are still pending to be installed?
Speaker #6: Which have been delivered and are pending for installation.
Speaker #5: So this close to 3,900 megawatts. Of which closer to 1,300 are already erected. Which I think with the current 725 odd already done in H1, give us a very good visibility for the full year.
Speaker #5: I think I'm very, very positive that it should be a very good year for our deliveries.
Speaker #6: For the installation, sir.
Speaker #5: Yeah.
Speaker #6: Okay. Sir, what is the percentage of revenue that gets held up for the installation? And what is the aggregate held up amount currently?
Speaker #5: So just to answer that question, it depends on customer-to-customer, right? Some customers.
Speaker #6: Can you give me a ballpark figure, sir?
Speaker #5: I'm just completing the answer, sir. Some customers, it is between 5 to 10%. For certain other customers, it could be in the range of about, let's say, so again, I think the range remains between 5 to 7.5% to 10% max.
Speaker #5: That's the way it works.
Speaker #6: Okay. So there would be revenue which has been booked for which the installation has not been completed yet. Am I correct?
Speaker #5: And estimation gets completed is when I receive the cash.
Speaker #6: But the revenue has been booked already.
Speaker #5: Yeah. That's how accounting gets done.
Speaker #6: Okay. Okay. Okay. Sir, when do you see an impression point coming when the installations will start exceeding the deliveries?
Speaker #5: Very, very good question. So if you've seen first signs of execution on ground uptake from Suzlon last year in a whole year, we did 700, 50 odd.
Speaker #5: Year prior to that, we did some 350. In the current year, in the first six months, we have almost delivered what we did in the whole of last year.
Speaker #5: So I think that's a good sign. We have also on top have a erected stock of 17, 1,300. What we have also done is reorganize the company rather than having one chief project officer of the group, we have appointed three regional chief project officers with their own independent team.
Speaker #5: And I can already see with this management bringing in new leadership in our India business. So I'm already seeing a tremendous efficiencies happening. I think it will take another 12 to 18 months, more like 18 months journey, when we will start seeing even sharper commissioning on the ground.
Speaker #5: So I think I'm very, very confident that over the next year and a half, we'll see this turn around.
Speaker #6: Okay. Sir, my second question we have an unutilized capacity. Like we have a capacity for four and a half gigawatts. We have cash and working capital.
Speaker #6: What is stopping us from, you know, going faster?
Speaker #5: So you know, two things. Number one, we are looking at a plan which we unveiled a couple of months back as part of Suzlon 2.0.
Speaker #5: Wherein we have said from our 30, 33 percent market share, we wish to increase our India market share to 40 percent. This we said we'll do by FY 31.
Speaker #5: We also mentioned we are looking at an order book from current six gigawatt to 15 gigawatt as an exit of FY 31. We also mentioned we are looking at an annual sales of close to 10 gigawatt.
Speaker #5: From current last year 2,500, current 100, you can already calculate. 1,200 in the first half, 1.5 to 1.65 second half. And then we have also given a trajectory of 25 percent CAGR.
Speaker #5: If you take that trajectory, and also I mentioned about gigawatt order book by FY 31. We're looking at one gigawatt sale by FY 31.
Speaker #5: You work backwards. So I think capacity will not be a deciding factor. It's basically the pull from the projects. The current has the order book.
Speaker #5: The future DEF CO strategy. I think as they play out, I think this 25 percent CAGR which I've guided, should more or less pan out.
Speaker #5: And that will help us not only utilize this, and this 4,500 is with 3.3 megawatt, you know, capacity turbines. As we go for higher, of course we have to do some new blade points.
Speaker #5: This capacity can state away be increased and enhanced. So I think that will not be a constraint for us.
Speaker #6: Right, sir. Sir, when are we planning to recognize more deferred tax assets for the unabsorbed losses?
Speaker #5: Okay. See, again, I think this is an annual exercise that has to be done, right? The deferred tax assets so again, I think there will be an evaluation that will get done in March 27, based on discussions, based on future profitability projections.
Speaker #5: Will there be a recognition that will come through?
Speaker #6: Usually we're doing it half yearly, sir.
Speaker #5: See, again, I think the scale and size has changed, right? So at that point in time, we were doing it half yearly because there was a very large we were growing 60 percent.
Speaker #5: And therefore, confidence building measures were also being taken into account. So but we now believe that the like Ajay said, a 25 percent CAGR is the one that we are looking at.
Speaker #5: And therefore, we believe and the auditors also believe that it is a good time to do this on an annualized exercise basis.
Speaker #6: Right. Sir, can I make a small suggestion? In one of the presentations, investor presentations, I think it was four or five quarters back, Mr. Imanju Modi did that.
Speaker #6: There was a clear presentation of the position of the installations. Like how many the foundation work has been completed, how many have been erected, how many are pending for the machine installation and all.
Speaker #6: Like I think it was divided into three or four stages. So that thing has been taken out of the presentation. If it can be included again, that will be they'll give the investors a lot of clarity.
Speaker #5: So we will evaluate that. We'll think about it. But again, you the point is that we can keep drilling into more and more detail, right?
Speaker #5: I think what Ajay has talked about and what we've been talking about is a thematic and industry positive that we've all kind of created here.
Speaker #5: The DEF CO model, the export positioning, the AMS growth. I think you have to look at it from that perspective, rather than drilling down into details.
Speaker #5: Yeah, Ajay?
Speaker #6: I understand, sir. But that was a very good information that was shared.
Speaker #5: Yeah, yeah. So what is important is, you know, how is the on ground execution? As I mentioned, we did almost 169 percent growth in the on ground in the current period.
Speaker #5: This is the highest ever done by the company. We have also given a number of close to 1,300 megawatt erected already. And I've also guided how does the H2 look like.
Speaker #5: So I think by and large, these numbers are there. We can separately engage as well. And you know, have a discussion if you wish to get more detailed insights.
Speaker #6: Thank you for the clarity, sir. Thank you.
Speaker #1: Thank you. Ladies and gentlemen, we'll take the last question from the line of Nikhil Poputana. From Kizuna Wealth, please go ahead.
Speaker #3: Yeah, hi sir. Most of my questions have been answered. So I just wanted to ask what is there any.
Speaker #5: Could you be slightly louder? Your voice is a bit muffled.
Speaker #3: Yes sir. Is it clear now?
Speaker #5: Slightly better. Thank you.
Speaker #3: Yes sir. So sir, most of my questions have been answered. And sir, I just need to ask like one question. Like what is the update on the European export side that we talked about?
Speaker #3: Like the two megawatt, which are really going on in the European and Australian markets. Blue Sky platform. So is there any kind of update on that?
Speaker #6: Yeah, yeah. Good question. Actually, this was asked before, but I'll answer it for you. Blue Sky platform is for the larger wind turbines. We have launched in Europe.
Speaker #6: Five megawatt and 6.3 megawatt. These are currently under various stages of certification and, you know, the local requirements of grid requirements. So those studies are currently underway.
Speaker #6: At an advanced stage, the two megawatt is not Blue Sky, but it is also having a demand in repowering as well as we have seen some good demand in some of these geographies you mentioned.
Speaker #6: So this also we need to get a certification for the local countries. So that is also work is undergoing. I think next year we should be in a better position to start reporting our export orders.
Speaker #6: But the order book, the detailing from the customers, I think the business development outreach is very, very encouraging. It's basically now the technical aspects to be sorted out.
Speaker #6: And then we start reporting the orders and shipping the turbines.
Speaker #3: Okay, thank you sir.
Speaker #1: Thank you. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for the closing comments.
Speaker #5: Thank you very much everyone for joining Suzlon's H1 FY27 call. We've been I hope we've been able to answer some of your questions. Our teams will be happy to engage if there are any additional questions that we are for us to be possible to answer.
Speaker #5: Thank you.
