Operator: conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Today on this call, we have Mr. C.K. Thakur, Global CEO, Mr. Ajit Pratap Singh, CFO, from Sterling and Wilson Renewable Energy Limited, and SGA, who are their IR partners. I now hand the conference over to Mr. C.K. Thakur.
Operator: Thank you, and over to you, Mr. Thakur.
C.K. Thakur: Thank you, and good morning, everyone. Thank you for joining us to discuss the results for the Q2 H1 of fiscal 2027. As we flagged on our last call, the H1 of this year turned into a transition period. Our ongoing projects are in their final stages, while eight new projects, four in India and four overseas, were moving through LOA and notice to proceed. I will begin with where the industry stands today, because it sets both our opportunities and our discipline. I will then cover our operating performance and outlook, and Ajit, our CFO, will take you through the financial updates. I will just touch upon the industry overview. India's renewable energies journey continues at an extraordinary pace. Renewable and large hydro capacity stood at about 308 gigawatts as of 26 September, roughly 53% of the country's total generating capacity. Solar remains the engine of this growth.
C.K. Thakur: Installed solar capacity has grown from under 3 gigawatts in 2014 to about 171 gigawatts today. Calendar 2026 is on track to be the strong year for solar capacity addition in India. India added about 34 gigawatts DC in H1 of this year, 38% more than a year earlier, and full-year additions are expected to be in the range of 50 gigawatts DC, and after record 49 gigawatts set in 2025. That said, the near term has been more challenging. Two factors slowed new utility-scale awards in H1 of the year. A third factor, competition, has influenced how we bid. First, the shift to domestic solar cells. Since June 2026, projects must use modules made with Indian cells as per ALMM 2. India has over 200 gigawatts of module capacity, but about only 35 gigawatts of cell capacity.
C.K. Thakur: Compliant modules are so scarce and costly, may raise project costs by around 15% to 17%. As a result, developers are reworking project economics and tariffs, and many have delayed EPC awards until prices and economics settle. We see this as a temporary phase. Cell capacity is expected to reach about 100 gigawatts by December 2027, which should ease prices and restore award activities. In the long run, it will give India a stronger and more secure supply chain. Second, delay in power purchase agreements and transmissions constraints. About 40 to 50 gigawatts of awarded renewables capacity is still awaiting for signed power purchase agreements. Solar output is also being curtailed at times in Rajasthan and in some parts of western India because of grid limitations. As a result, project timelines in Rajasthan and Gujarat have been pushed out of several quarters. Third, the competitive landscapes.
C.K. Thakur: Competitive landscapes has affected how we win the projects. Entry barriers in reverse auctions are low, and some new players have bid at prices we believe are tough to maintain margins and may not be sustainable. We have been very much cautious and selective in such bids, and hence our own order wins in domestic markets have been lower. We saw similar cycles in 2011 and around 2015-16, and disciplined, experienced players came out stronger each time. The government is now acting firmly on some of the issues related to transmissions bottleneck. On 30 September 2026, the cabinet approved Green Energy Corridor Phase-III with an outlay of around INR 1.86 lakh crore. This includes about INR 1.36 lakh crore from state transmission networks with central support of around INR 54,000 crore. It aims to connect up to 135 gigawatt of renewable energy to the grid by financial year 2033.
C.K. Thakur: In addition, on 6 October 2026, the Ministry of Power issued new rules to pay landowners market rates for the land used by the transmission lines. This should reduce disputes and speed up construction. These measures will take time to deliver, but they directly address the transmission bottleneck that is holding back PPAs and new awards. Of course, the flip side of this circular has to be seen once the high land cost will come into play. Battery energy storage systems. Battery storage in India has moved from pilot projects to large-scale deployment. India added about 8.2 gigawatt hours of battery storage in the first half of 2026, compared with less than 100 megawatt hours a year earlier. Almost all of this came from large standalone projects. Rajasthan and Gujarat, two of our core markets, account for over half of installed capacities. The outlook is also robust.
C.K. Thakur: CRISIL expects 45 to 50 gigawatt hours to be commissioned in financial year 2027 and financial year 2028 alone. Projects with storage made up nearly 40% of renewable capacity auctioned in financial year 2026, up from about 5% earlier. The Central Electricity Authority expects 236 gigawatt hours by financial year 2032. The government also plans to require storage of new solar and wind projects from July 2027. We expect most large solar tenders to include storage going forward. We are actively monitoring the BESS opportunities and are selective in bidding new BESS projects. Battery prices have risen in 2026 after years of decline. The domestic battery supply chain is still developing, and customers increasingly expect long performance warranties from EPC contractors. Now coming to operating performance for Q2 financial year 2027.
C.K. Thakur: Revenue was INR 1,527 crore in Q2 and INR 3,118 crore in the H1, about 11% lower than H1 FY26. This decline is primarily from our International EPC businesses. International EPC revenue was INR 165 crore in the H1 compared with INR 929 crore last year. Our four older international EPC projects in South Africa, Spain, and Italy were completed, and the new ones are yet to start. Meanwhile, our Domestic EPC businesses grew. Domestic EPC revenue in H1 FY27 rose about 13% to INR 2,768 crore, and O&M revenues in H1 rose 48% to INR 183 crore. The lower revenue therefore reflects the timing of international EPC project execution. Eight projects in our order books, four in India and four overseas, are yet to start. Since contract timelines start only from LOA to NTP, these delays do not expose us to potential penalties or BGs risks.
C.K. Thakur: As of 30 September 2026, our OB stood at INR 12,481 crore, about 34% higher than a year ago, and up from INR 11,813 crore in March 2027. The OB is diversified and well-balanced, with about 56% from India, that is INR 6,943 crore, and 44% from international market, that is INR 5,538 crore. We won orders worth INR 3,626 crore in the H1, nearly 90% of them international. This was a deliberate choice. When domestic awards slowed down and pricing became aggressive, we avoided low-margin bids and focused on international markets, where we are winning at healthy margins. However, in international market, we are very selective in terms of geography and are actively pursuing only in certain countries where we have a strong track record, execution bandwidth, and right partners. Q2 FY2027 order wins and pipelines.
C.K. Thakur: In Q2, we won 2 orders worth over INR 985 crore, including taxes, as announced in September 2026. We won a 534 MW project in Rajasthan. It is a balance of systems order from leading Indian IPP, who is a new customer for us. We won a 616 MW project in South Africa. It constitutes 2 BESS projects of 308 MW each on a turnkey basis from a leading Middle East-based developers and repeat customer. This is our second-largest utility-scale BESS projects we have received the LOA. These wins add to the contract we signed in June 2026 for the West Minya projects in Egypt. This is a 1,000 MWac solar plant with 600 MWh of storage, worth about $560 million, which will execute through our 50/50 joint ventures with Hassan Allam Construction. We expect it to start contributing to revenue this year.
C.K. Thakur: Our work under the 5-year framework agreement with the Adani Groups also continues as planned. Our floating solar projects at Tilaiya in Jharkhand, one of the largest in India, for the NTPC DVC joint venture is nearing completion. Our evacuation will begin once the related transmission line is ready. This experience positions us stable for upcoming floating solar tenders from NTPC, DVC, and DVC alone, and several state governments. Looking ahead, our solar bid pipeline, excluding BESS, has grown to 34 GW from 27.7 GW last quarter. About 74% of this is in India and 26% overseas. BESS bids are in addition to this. We see bidding opportunities worth about INR 45,000 to 50,000 crore across solar and storage in the H2 of this year. Now coming to projects from Reliance Group.
C.K. Thakur: Our work with our promoters, the Reliance Group, continues to deepen as Reliance has publicly announced it is building one of the world's largest integrated renewable energy hubs in Khavda, Gujarat, combining solar power with battery storage at very large scale. We are working closely with Reliance on technical design and execution readiness. International business. Our international business is now on a strong footing. We recently completed four projects in South Africa, Spain, and Italy, giving robust margins. Our international order book now stands at INR 5,538 crore across Egypt and South Africa. Execution starts in the H2, and international revenue is expected to rise significantly in H2. Now coming to our O&M business. Our O&M business continues to grow strongly. Our portfolio has reached a record 18.9 GW, up from 13.5 GW in March.
C.K. Thakur: O&M revenue grew about 55% to INR 99 crore in Q2 and 48% to INR 180 crore in the H1. This business gives us steady recurring income with lower rates. Outlook for FY2027. We are maintaining our guidance of up to 10% revenue growth for FY2027. We are confident for three reasons. First, eight projects in India and overseas will move into execution in the H2. Second, execution will commence on our international order book of over INR 5,500 crore, with the West Minya projects in Egypt as the key contributors. Third, we have done this before. In Q4 FY2025, we delivered revenue of over INR 2,500 crore in a single quarter. We expect Q3 to be clearly better than the H1 and Q4 to be our stronger quarters.
C.K. Thakur: We expect EPC gross margin of 8% to 10%, depending on the mix of turnkey and balance of system projects, and O&M gross margins of around 20%. We expect our order book to remain above INR 10,000 crore at the end of financial year 2027. We believe success in this business is not just about winning orders. It is about completing projects without negative surprises. As the industry consolidates, we believe this discipline will set us apart. With that, I will hand over to Ajit for the financial performance. Ajit, over to you, please.
Ajit Pratap Singh: Thank you, C.K. Desai, and good morning, everyone. Revenue from operations for Q2 FY2027 was INR 1,527 crore, compared with INR 1,749 crore in Q2 FY2026 and INR 1,590 crore in Q1 FY2027. Domestic EPC contributed INR 1,366 crore, international EPC INR 62 crore, and O&M INR 99 crore. H1 revenue was INR 3,118 crore, compared with INR 3,510 crore last year. As C.K. Desai explained, the decline was predominantly due to lower international revenue, as older projects were towards fag end of completion and new ones are yet to start. Domestic EPC revenue grew about 13% in the H1, and O&M revenue grew about 55% in Q2. Gross profit for the quarter was INR 140 crore. Gross margin improved to 9.2% from 8.9% in Q2 FY2026. For the H1, gross margin was about 9.5%.
Ajit Pratap Singh: We expect EPC gross margin of 8% to 10%, depending on the project mix. Turnkey projects have lower percentage margins, but higher absolute profits, while balance of systems projects earn better gross margin. O&M gross margin was about 23% this quarter, and we expect it to settle at around 20%. Operational EBITDA, which is gross profit minus recurring overheads, was INR 56 crore, a margin of 3.7%. This compares with INR 62 crore at 3.5% in Q2 FY26. Recurring overheads were INR 84 crore, about 11% lower than INR 94 crore a year ago. Reported EBITDA, including other income, was INR 66 crore, compared with INR 96 crore in Q1. Profit before tax and profit after tax were both INR 17 crore. Compared with a loss of INR 478 crore in Q2 FY26 and a profit of INR 53 crore in Q1.
Ajit Pratap Singh: H1 profit after tax was INR 70 crore compared with a loss of INR 439 crore in H1 FY26. It is worth noting that the loss in the previous year was primarily attributable to a one-time impact arising from the US arbitration outcome and related provisions. On an operating basis, H1 operational EBITDA was INR 134 crore compared with INR 184 crore last year because of lower international revenue this year. Our recurring overheads have stayed within INR 79 to 84 crore a quarter. Most of the people we have added work on specific projects, and their costs are included in project budgets. As revenue grows in H2, overheads as a percentage of revenue should fall, and operational EBITDA margin should improve. Now coming to balance sheet and working capital. We continue to operate with negative working capital.
Ajit Pratap Singh: Net working capital was negative by INR 301 crore as at 30 September 2026, compared with negative INR 260 crore at the end of Q1 and negative INR 329 crore in March. Receivables, including unbilled revenue, stood at INR 3,005 crore. Receivables days increased to 176 from 138 in March, and payable days increased to 164 from 135. Gross borrowings fell by INR 244 crore in H1 to INR 920 crore, as we repaid term loans as scheduled. With cash and bank balances of INR 319 crore, net debt was INR 601 crore, broadly unchanged from INR 589 crore in March. Shareholders' equity rose to INR 719 crore from INR 651 crore. Most of our existing term loans will be repaid over this year and next year. Our banking relationships continue to remain strong.
Ajit Pratap Singh: We have secured over INR 3,000 crore of new credit lines, including local lines in South Africa during the current year. Our lenders continue to support as we win orders. On claims and indemnity, we also continue to make steady progress on legacy claims. We have signed a curtailment with the Chile customer. Part of the amount is expected to be paid by the customer once their transaction completes, and the balance will be claimed from the promoters in the next cycle. We expect to receive around INR 156 crore under indemnity in the current year from the promoters. To sum up, H1 was a transition period for our international business, while Domestic EPC and O&M continued to grow. We are well placed for a strong H2 with an order book of nearly INR 12,500 crore, eight projects moving into execution, a growing O&M business.
Ajit Pratap Singh: With that, we can open the floor for questions. Thank you.
Operator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes on the line of Samir Dalal with Motilal Oswal & Sons Stock Broker. Please go ahead.
Sameer Dalal: Yeah. Good morning. Honestly, not very impressive results, and I wanted to ask you these questions upfront. We keep talking of the fact that we have a very strong order book, but the execution, for whatever reason, it may not be your problem, and maybe the customer is not able to get the land or whatever he is supposed to do, but it keeps getting delayed. Because of which, what is happening is our profitability is getting affected. I know you have maintained your 10% top-line growth for the current year, which is what you had initially said. But what is the reason for these delays? Are we going to constantly have this? Then, by the end of Q3, we say, "No, now we may not be able to achieve the number," because that sends projections off track, that sends our expectations off track.
Sameer Dalal: What exactly is the problem? Why are the new projects that you said, the four in India and the four in international markets, not starting? What has been the delay for that?
Ajit Pratap Singh: Yeah, thanks, Samir. If you look at the OB positions at hand at the start of the year, we had pretty robust order books in hand. Having said that, there were three projects, one large-sized project from Coal India that we announced, and two projects from NTPC. Normally, when the projects are being announced in Q4 or Q1 of the following years, around 70% of the revenues you consider in the following years. That means your contributions from the loop before new orders could have been much larger. Unfortunately, the Coal India and the two NTPC projects, because of the PPA not being signed with the utilities, the final NTP did not come to us, which we expected that the execution of these projects could have been started in the, let's say, mid of Q2.
Ajit Pratap Singh: That is reason one. The four projects in international market, so that NTP was supposed to be somewhere around, let's say, August. There, for two projects, we were expecting the major revenue to, of course, come from Q3 and Q4, and some revenue in Q2. So those NTP also were delayed because of their financing arrangements and other things. Fortunately, one large size order which had come from Egypt, Minya, they are the short gas stations project and the project is moving, the NTP has come and the work has started. So with this, historically, if you look at our performance in the last financial year also, I mean, with respect to that, we are at the right pace. But yeah, so I do agree with you with the large orders in hand.
Ajit Pratap Singh: Yeah, so I was just telling that had these new projects been started, sometimes in the middle of Q2, the results could have been better. But having faced this delay in the Q1 results, I have already given the guidance that probably Q2 will not be as promising. It will be in the range of Q1 only. We are here in the range of Q1 only. So going forward, I am pretty sure that the international revenue will keep on adding. Domestic four projects may take some time, another maybe one to two months, but the substantial revenue from the new projects, PSU projects will come in Q4.
Sameer Dalal: Okay. The second question comes on costing. One thing that we have noticed is that the cost is continually moving up. Now, we had talked about the fact that we can maintain our cost at the current level, and as the top line grows, the operating leverage will play out at the, I mean, this is at the central office, right, at the headquarter. But we are seeing that this is continually rising. Now, where do you see it stabilizing for FY2027 and FY2028 from INR 300, INR 320 crore that you all do? Where do you see it going over the next maybe two years?
Ajit Pratap Singh: I think if you see the recurring overheads, if you are talking about that, then the cost is almost flat. There is not significant movement on either side, neither lower nor higher. As a percentage of revenue, because the revenue was lower in the current quarter and in the last quarter also, as a percentage of revenue, it looks high because around 5.5%. The moment revenue will increase, this cost will remain same, and we expect it to be in the range of around 4.5% for the current year.
Sameer Dalal: Fair enough. But once you said that you are waiting for the Reliance orders, my question is, once the Reliance orders come in, would you need to hire a lot more people at the offices? Would that push the cost up? Of course, the question that eventually arises, by when do we expect Reliance to actually give the orders which we can start executing?
C.K. Thakur: Majority of the cost will be at the site, which will be part of direct cost from the Reliance orders also. There will not be any significant increase in overhead cost.
Sameer Dalal: If you can just give us a particular date, right? That is the last question I have.
C.K. Thakur: No, this we discussed last time also. From the overhead side, the employee cost and all, and the other expenditures is only part of the project cost, which will be part of the overall project cost. To that extent, some addition will be there at head office, but proportionately, it will not increase our burden because the revenue also will be coming. When the project will come, I will maintain the same status because this site readiness work is going on. Post-monsoon, the work is supposed to be started. It is just onto the final leg of the finalization of some of the technologies on the tracking side and all. I am not in a position to give you much details, but I can tell you that now this is almost at the fag end of the planning process and the work.
C.K. Thakur: You can see some good news you will hear out soon. That is what I can tell you at this stage.
Sameer Dalal: Okay. Thank you very much.
Operator: Thank you. Next question comes on the line of Disha from Sapphire Capital. Please go ahead.
Disha Chordia: Yes. Yeah. Okay. So a couple of questions, of course. So we've still maintained our growth guidance at 10%. So that would mean that we need around INR 2,600 sort of quarterly run rate for the next two quarters. So first question being, do we see any risk in execution for us to achieve these targets? And how are you looking at execution for Q3 and Q4? Like, what numbers are we targeting? Because that will give us better clarity.
C.K. Thakur: Yeah, so madam, so based on to our guidance, we still maintain up to 10% growth in the revenue this financial year. I've already told earlier, the Q1 was little subdued, Q2 also, because of various factors, non-moving, PPA adoptions, all those factors have affected new projects not to get started. But Q3 and Q4, because international projects have all been taken off, so I'm expecting the traction to increase more. So for sure, the Q3 and Q4 will not be in the proportion of INR 2,600, INR 2,600, but Q3 will be better than Q2, and the Q4 will be heavily loaded.
Disha Chordia: And so we don't see any risks to the execution, right?
C.K. Thakur: No, so basically, we are pretty confident of our ability to execute the projects. Why it had impacted is basically some of the projects have not started. So our team is in place, we understand everything, so everything has been all planned. So now since the project has been launched and there is a definite timeline, so from the international project, the revenue has to increase. I'm expecting the four stalled projects in India and few IPP projects in between that they have come, they are all on track. All the ongoing projects, all projects are on track. None of the projects is getting delayed because of our ability to not execute the projects. So what I say that, I mean, out of the four projects in India and few more projects, if they come and they are at the faster track, they should be contributing towards the Q4.
C.K. Thakur: Unfortunately, this is not only because the entire EPC community and the whole industry, Indian industry in the solar sectors have been impacted because of the reasons. The reasons, two reasons, one that I have told you in my opening remarks also, that the curtailment in the Rajasthan and Gujarat that have slowed down the order inflow from the IPPs and even for the PSU. The requirement of or obligation of the BESS systems to be installed. The BESS is now mandated to be the domestic Indian mix kind of things, but you do not have the cell production capacity. This mismatch and understanding, people are quoting, I mean, any crazy prices. You have the orders you must have seen, they have been all terminated, right? The contractors could not execute this work.
C.K. Thakur: The developers are also becoming very careful that, I mean, you can have the business for a number of things, but Indian industries are not support. Although the pipeline, the requirement, the development plan is already in place, but on overall execution sides, all these technologies and other things are taking time, which is not specific to Sterling and Wilson alone, but it is specific to the industries.
Disha Chordia: Got it. For this international EPC project, do we see a major margin differential between the domestic and the international project? If so, what is the differential?
C.K. Thakur: See, domestic market margin is always under pressure from the fact that in all the solars and the BESS projects, there is no entry barrier, right? Anybody and the outside, some of the business infrastructure projects also, they feel that solar being vanilla projects, they can earn a lot of money. Without understanding the efficacies of technologies, the supply chain, the substance and all, they are entering into the market and they are quoting any price, right? Therefore, you have seen that despite the fact that, I mean, good amount of contracts have been finalized in H1, but in none of the government projects we are there because it has gone below the, you see, from our appetite point of view, it has gone below the cost, right? Then people have taken.
C.K. Thakur: God knows how they are going to execute, but we have been keeping away from those kind of business. What I said that India, this kind of entry barrier problems and all, and not much opportunity in the other sectors being seen, people are coming and jumping left, right. That had created the market. Of course, for us also, I mean, we have to sustain. Therefore, the margin that we expected, right, in domestic market would be lowering down because you have to take a business call and you have to survive. But not to the extent that, I mean, people are doing. Strategically, you have to move from domestic to international market. Therefore, you could see that despite the fact that we thought that this year it will be around 70/30, domestic/international, but we are even more. We have skewed towards international.
C.K. Thakur: Why international margin is more? Because market is stable, people understand all those things. There is healthy competitions, and with healthy competitions and overall turnkey projects, in terms of percentage, even if it is slightly lower, I mean, as per the Indian old condition, but since it is a turnkey project, our absolute number will be more than the domestic margin. Therefore, the contribution will be much more.
Disha Chordia: Okay. As the execution also scales up in the H2, can we expect for this entire EBITDA margins to be in the range of 4% to 4.5%?
C.K. Thakur: Yeah. Yeah, I think that is the minimum requirement that we have to maintain, yeah, right?
Ajit Pratap Singh: Yeah, yeah.
C.K. Thakur: That's yours.
Disha Chordia: Okay. As of what was this O&M revenue that we expected for this entire year?
C.K. Thakur: 10%, 20%, in the range of 20%?
Ajit Pratap Singh: No, revenue you are asking?
C.K. Thakur: No, revenue.
Ajit Pratap Singh: Revenue, okay, sorry. O&M revenue we expect in the current year should be more than INR 400 crore.
Disha Chordia: Okay. Sir, this Egypt project that you mentioned that we are starting to expect revenues from this year itself. By when exactly do we expect this revenue to come in? By Q3 or it will be more skewed towards Q4? What sort of amount are we trying to book for this year, for the next year? What is the project and what are the margins for this project?
C.K. Thakur: The Minya project is the project for, let's say, around 14 months, right? The NTP has started. Let's say 40% of the time to go for this financial year. In the similar proportions, Q4 will be heavily loaded for the supply to commence. I am expecting that good margin to come from this project. Q1 and Q2 next financial would be the completion dates. That is the reason that I say that Q3, Q4 of this financial because of Minya definitely will be loaded. Margin is a pretty good margin. We are around, on the overall turnkey wrap, it is more than 8%. More than 8%.
Operator: Thank you. Ms. Disha, please rejoin the queue for more questions. A reminder to all the participants, please restrict yourself to 2 questions. Next question comes from the line of Faisal Hawa with H.G. Hawa & Co. Please go ahead.
Faisal Hawa: Sir, when do we see our overall banking situation coming back to normal where we can issue BGs at will and our credit rating also improving? That is one. My second question is, sir, how much orders can we expect from Ambani, Reliance Industries in the coming financial year, and also from Adani Enterprises in the coming financial year for Khavda?
C.K. Thakur: I will come for the order positions and then Ajit will address your banking position. As you are aware that we have into the framework arrangement with Adani for 5 years. First year was around 1.2 GW, and the RFQ for the next 1.2 GW has already come to us, maybe yesterday. We are expecting that this order, as per the framework arrangements, should be getting closed soon, right? Maybe this month or maybe the next month, right? That is onto the Adani side. The Reliance side, it is premature to tell you that how much order will come, but we believe we would be the preferred EPC partners, and we are expecting the large chunk of order to come to us. But unless it comes to us, I cannot commit you, right?
C.K. Thakur: But then, yeah, it's going to start soon. On the banking side, Ajit, if you can just, yeah.
Ajit Pratap Singh: On the credit line side, last year we have added from the banking system around INR 1,800 crore new credit lines. And in the current year, we have added till now around INR 2,800 crore new credit lines. So basically put together, if you see last year and current year, we have added around INR 4,600 crore new credit lines from banking system. And over and above, more than INR 700 crore from surety bonds also we got. So we are sitting on pretty good position in terms of our working capital requirement for non-fund based limits. Bankers are supporting. In the current year, we got three new sanctions from Indian banks and one new sanction in South Africa from a South African bank for Egypt project. So we are pretty much on very comfortable position in terms of our bank guarantee requirement and LC requirement.
Ajit Pratap Singh: Our current utilization of the credit lines is around 70%, so that gives lot of comfort to manage bank guarantees and LCs. In terms of cost and credit rating, credit rating is under renewal as of now, but since last year we have taken that write-off, so we could not get the credit rating update earlier. And the moment we'll probably have Reliance orders or any other large positive news, definitely we'll go back to the rating agencies for review of the rating.
Faisal Hawa: And sir, you did talk about the competition underbidding in most of the solar projects. So do you see this competition now weakening and overall their financial situation not being so good that they may not be able to, or they may be blacklisted by many agencies, they may not be able to participate in many more contracts and overall the competitive intensity going down? Or you feel that more such players will come in now?
C.K. Thakur: No, for sure, we are waiting for the consolidation to happen. What is happening now, the financial qualification requirement for all such solar projects is not very stringent. What we see the trend getting reversed is that from all the PSU companies, the large size project orders that are coming, they are coming with the modules, and therefore the project cost is in the high range. There I am expecting that the small players will not be competing, right? Then we will have a better opportunity to get into. That would be the kind of scenario in maybe Q3 and Q4, the next and huge pipeline that I have already told is projected. The consolidation for sure will happen. On the existing orders that they are bagging, you must be tracking the news in the market. Few of them have been already terminated.
C.K. Thakur: Few, I mean, these orders that they had bagged, right, at the, I mean, very, we will say 50% discounted price from the battery cost. When the battery cost was, let us say, around $75, $80 per kilowatt hours, their tender price was around $45, right? Then it was a non-moving kind of orders, and therefore, I mean, the order was terminated. There are few orders which have again been getting annulled because even despite the fact that they have taken at a low price, but still it is not coming for the hybrid tariff appetite for the developers. Therefore, some of the new schemes are being launched this year, the import under the MOH schemes, and then you see that if you get the custom benefits so that the hybrid tariff price will come under these things.
C.K. Thakur: All those things are, and frankly speaking, disturbing the BESS market and all those things. I think all this consolidation for sure it will happen, but this fiscal will probably continue like this in my opinion. But consolidation has to happen, otherwise it will be a serious problem for the industries. Government is working on this. As I have already told that for the green corridors, the government has taken a lot of actions. On the BESS side, the cell productions, if not in maybe Q3, Q4, but the Q1 of the next financial, many large players are doing. Then I can, and then your domestic cell capacity in the module side, they are increasing. Now it is at 35 GW. It may reach up to 100 by these things.
C.K. Thakur: That would be the time when I say that the price level also will get consolidated, the government policies versus the actual requirement will all be getting settled, and then that would be the healthy time where you can see that the things should be in the right directions. But till such times, because of some of the industries paralysis, I will say, some of the policies which are to be implemented, but the industry not ready, all those things are impacted everybody's. I mean, few of them switch, they can keep on adding because of the IPO they are just looking for, but we are not into the race. Therefore, not that only we are. Fortunately, I will say that we are a very healthy order position as on 1 April 2026. Right? I am sorry, 2026.
C.K. Thakur: For this financial year, at least, despite the fact that there are great many ups and downs, we will be around the guidance that I have given to the market.
Faisal Hawa: Is it now time that we forget about the Nigeria order?
C.K. Thakur: I will not say to forget about this, but yes, it is still cold because now election is going to happen and all those kind of things. I mean, the last update was that it was to be taken by the finance ministry, but you know how these African countries work. But then the big new government coming and all, and the tariff wars, I mean, every new day you understand, you take the news from our honorable US president, right? Every country, you know, how they are affected. This was a green project from US, so I mean, the project is still on, right? We are pursuing this, but I mean, I cannot commit to the timeline at this moment for this project.
Operator: Thank you. Mr. Hawa, please rejoin the queue for more questions. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Jayesh Shroff with Cask Capital. Please go ahead.
Jayesh Shroff: Yeah. Hi. Thanks for taking my questions. My first question is, actually, if I am not wrong, last quarter we downgraded our guidance from 15% to between 10% to 15%, and this quarter we are saying it is up to 10%. So, it is actually a downgrade of guidance rather than maintaining of guidance. So, I am surprised why management is saying that we are maintaining the guidance. Secondly, when you talk of up to 10%, it is between 0% to 10%. So, can you be a little more specific in terms of what does up to 10% mean? My second question is, of course, it is a small point, but why has our finance expenses increased this quarter in spite of slower execution?
C.K. Thakur: No, second question, can you repeat again? I am sorry, I could not. Second question, can you repeat, please?
Jayesh Shroff: Yeah. So, why has our interest and finance cost increased this quarter in spite of lower execution compared to Q1?
C.K. Thakur: Okay. On your revenue guidance, I have already explained the overall industry scenarios, right?
Jayesh Shroff: Yes
C.K. Thakur: the way the last year, the last fiscal market was pretty stable, because that means the cell was imported from Chinese cells were there, and everybody was up and uprunning, so everything went well. Suddenly, the implication of your ALMM 2 came, and your mismatch between the module, I mean, the cell production capacity in India and the plant that is being executed. On the BESS side, the obligation of the BESS installation came that was during the fag end of the last fiscal, and cells being not manufactured, still people are waiting, I mean, the market to get stabilized. Now, say India make, but everything is coming from, I mean, outside India, mostly from China. We have a land border close, that also, I mean, impacting. With all those things, and then the developers is looking for the stringent guarantee and warranty condition.
C.K. Thakur: Overall, if you see in the renewable sectors, other than maybe the wind, I mean, this kind of, you know, the imbalances are happening, and that has impacted, I mean, primarily to the developers for their programs to be launched as they thought of, and then, of course, the EPC company that had to follow them. To that extent, market is uncertain. But I say that with all the projects that we have in our hand, that they were contributing, let's say, four projects, four new projects, they are still not start, they have not started. My expectation was that out of the four projects, which was around 40% of our total order in hand as on 1 April 2026. So, there are no reason that I could have not gone up to the 15%.
C.K. Thakur: Now, this is the project in Q2 also they have not started because of the government, the NTP not coming in. Therefore, I am not changing. Maybe the support will come from the international projects, maybe quite possible. But at this stage, what I say that, I mean, since the projects have not started, possibility that we should be able to maintain around 10% of the revenue growth.
Jayesh Shroff: Okay. So, it is actually a downgrade of guidance from 10% to 15% to 10%.
C.K. Thakur: 10%, I mean, our range was 10% to 15%. I still say that 10%. It is not 0%. I am not between 0% and 1%. It will be around 10%. Yeah.
Jayesh Shroff: Okay. This is internalized, if I understand.
C.K. Thakur: For sure. For sure. Yes. Internalized.
Jayesh Shroff: Okay. On the interest side?
Ajit Pratap Singh: Yeah, in terms of finance cost, the cost has increased primarily for two reasons. As I mentioned, we have availed some new credit lines during this year, so cost for that. Also, the LC cost, we are now opening the LC for a little longer period, so that additional period for LC also is factored as interest cost. So that has led to our increase in interest cost. Although our gross borrowing, if you see, that is on reduction cycle, and we have reduced our gross borrowing. Although in terms of net debt, there is not much change. It is almost a steady level because our cash balance has come down.
Jayesh Shroff: Okay. Just one last thing. I know a lot of questions have been asked on the Reliance order. I think Mr. Thakur talked of it being very imminent. Reliance also, in its last con call, talked of starting the project post-monsoon. So do you think that post this Jio IPO, we can see something from November onwards in terms of execution? At least, will there be some execution in this quarter?
C.K. Thakur: I do not think that the Jio IPO has any link with this, but in this quarter, the commencement, of course, is expected. So I say that the readiness for overall technology to be integrated in these schemes is at the final end. So, how the Reliance works basically, every single bit of decision is being taken very carefully to ensure that the ROI on the investment comes more than the industry expectation. So, it is interesting for everybody that why it is taking time, but as per their announcement and their commitment that this financial year, they will commission something, right? We have seen their annual general statements. So they are committed to commission something, right? So keeping all those things in mind, we are also expecting the order to start coming soon. Things will happen now, this quarter for sure. Yeah.
Operator: Thank you. Mr. Shroff, please rejoin the queue for more questions. A reminder to all the participants, Nadir, my best, please restrict yourself to two questions. Next question comes from the line of Nilesh Doshi with Prosperity AMC. Please go ahead.
Nilesh Doshi: Hello. Am I audible, sir?
C.K. Thakur: Very good. Very fine.
Nilesh Doshi: Thank you. Thank you, sir, for the opportunity. I have two questions. One is related to the O&M business. Sir, we have an O&M portfolio of 18.9 gigawatts. I would like to understand, is the complete portfolio under the fees model, or do we have some obligation pertaining to the EPC project or EPC obligation? What is the O&M charge per megawatt for the domestic as well as the international project? We are mentioning that our GP guidance for the O&M project is 20%. This means the O&M are really raw material intensive or labor intensive? Naturally, if the GP is only 20%, then our EBIT margin may be much lower than that margin. Last question, do the company receive the O&M charges upfront, and how do we recognize the revenue every quarter?
Nilesh Doshi: What is the minimum period of O&M contract, sir? These are all questions related to the O&M only, sir.
C.K. Thakur: Okay, so great. Basically, to your first question, the mix of the order book in O&M is now almost 50-50%. When you say 18-odd gigawatts, 50% is through our own EPC, meaning we have the EPC contract. We signed the contract with 2 years or 3 years of O&M contract. Around 50% is from third party. Third party means our O&M business, they get the O&M contract from the other OEMs, from the other developers, sorry, other developers, right? Having said that, this is the mix of the order proportions. The O&M business is, of course, labor intensive. It is not basically raw material intensive. We have to maintain certain spares that is sometimes the high-cost spares are being provided by the customer, and some consumables, other things we have to maintain.
C.K. Thakur: On the costing of the O&M per megawatt, I think it will not be proper to reveal these facts here in this call. Just for you to give you to understand that this is all basically depending upon the scope. Basically, they are all basically depends on the scope. Scope means somewhere we have the transmission line, somewhere we have the substation, somewhere we have other things. I mean, then robotic cleanings, semi-robotic cleanings, manual cleanings, the water cleanings, all those things depends on the various, the pricing mechanics. With this, international seems slightly better, of course, because our margin appetite in domestic, as I have told you, is almost 30%, 35%, 30% to 40% higher than the domestic market margins, right? There is no upside risk in the O&M business, right?
C.K. Thakur: Except for sometimes there are certain obligations on the warranty and all, but they sometimes impact very minimally, not to the extent that basically the EPC business is sometimes getting impacted. One of the question you raised on this overheads, in O&M, overheads are very minimal.
Nilesh Doshi: Very minimal, yeah.
C.K. Thakur: Gross margin generally will convert to EBITDA with very minimal change.
Nilesh Doshi: So, it means the labor cost is a part of the GP margin because you are considering after this. Okay, sir. Once the EPC project is completed, O&M contract start, and we are charging extra, it is not the inclusion of the EPC cost. It is separate, and we are charging for each and every megawatt we are doing the O&M work.
C.K. Thakur: Yeah, so basically, contract is basically, as you were trying to understand, it is, let's say, rupees per megawatt peak. The contract composition is like this, right? Then you have the DBO for the billings. So, once the project is commissioned and handed over, taking over is done, certain obligation during the DLP is there, but that is part of the EPC contract. If something goes wrong, then the EPC contract is affected, not the O&M contract. O&M contract is very clean. It is there to only operate and maintain, and they are mostly the manpower-intensive contract. That's how this O&M contract is operated.
Operator: Thank you. Mr. Doshi, please rejoin the queue for more questions. Next question comes from the line of Saurabh Srivastava with Arista Consulting. Please go ahead.
Saurabh Srivastava: Sir, it is regarding the O&M only. First of all, are we also bidding for the O&M in international circuit? First question. Second, is there any underbidding in the O&M in the domestic market also, sir?
C.K. Thakur: No. The first question is, yes, we are bidding for international O&M business, and we have got one third-party O&M business in Saudi Arabia last year. We are about to close few projects in the other geographies. I will not reveal the fact now, but yes, we are on the final stage. We have our international division for the O&M business as well. Your first part, yeah. As I have told you that the business model is mixed from the own EPC versus third party. Third-party EPCs, because of our high credential in the O&M business. I have seen that here, I mean, normally you are approached by the client for the performance of the O&M team that we have and the major strengths, right? We do not see major challenge in, I mean, grabbing the orders.
C.K. Thakur: That is how we have phenomenally, it has grown from 11, 12 gigawatt to now 18.5 gigawatt. This year, I am expecting another maybe, I mean, 25% of this by the year end, I am expecting it will go around 22, 25 gigawatt kind of things. That is how it runs.
Saurabh Srivastava: Sir, what kind of revenue mix do you see a couple of years down the line of this O&M business in the total business, sir? Or rather say the total net profit in the total bottom line, sir?
C.K. Thakur: That actually is not the right comparison because the overall margin.
Saurabh Srivastava: Or on whatever matrix do you feel like, you know, how this is.
C.K. Thakur: One is that.
Saurabh Srivastava: What sort of.
C.K. Thakur: This is steady business, right? Like you say that now, we are at around INR 200 crore, we will move up to INR 400 crore, right, in the beginning of next year. Then 20% is the margin. If you see that our project margins and then on 400, 20%, let's say it comes to 80%, INR 80 crore, right? It will not be right to compare, but we can understand that on the business size of, let's say, INR 400 crore next year, every year if you increase minimum 10% to 15%, and to that extent, the margin also will go up, right? But it will not be right comparison to say that in overall margins will be what? Because the cost, let's say your EPC cost is say INR 1.5 crore per megawatt peak, whereas the O&M cost comes to be what?
C.K. Thakur: I mean, INR 1 lakh, INR 1.5 lakh per megawatt peak, something like, depending upon the scope and all. So, it is a huge difference. It will not be the right compare, but it will be the steady margins coming in from this office.
Saurabh Srivastava: In terms of net margin, sir? Yes, sir. Please, sir. Please.
C.K. Thakur: I was saying in terms of revenue mix, as of now, it is around 5% of our revenue. Going forward, it may be in the 5%, it may increase to up to 10%.
Saurabh Srivastava: 10%.
C.K. Thakur: Because this will continuously increase, and if EPC business remains stable, still O&M will continue to increase.
Saurabh Srivastava: The reason for asking this, a lot of parks are coming in India also, and people are developing, and as you rightly said that people are underbidding, so it will not be possible for many of them to continue. So, there will be a lot of things open to you people going forward. That was the reason. Sir, what sort of net margin do we settle down for this O&M business, roughly?
C.K. Thakur: Gross margin is around 20%, and as I mentioned, overheads are not much in this business. So, that ultimately translates to the net number.
Saurabh Srivastava: Got it. Sir, my last question. Sir, what sort of international geographies are we looking for, Madam, and new geographies, sir?
C.K. Thakur: One that, wherever we have the O&M project from our own EPC, for sure that geography is our target. We started from Africa, and Africa first project is doing very good. The contract is also very unique. We have the bonus clause. If you perform better, if their yield and generation becomes better, then we get also the share of their profits. Year on year, we have been getting fantastic bonus from these orders. For Africa, we understand this market, we have done the Zambia, Namibia, South Africa. Africa is definitely our focus. We are now into Saudi Arabia. Saudi Arabia is a huge, the capacity addition being happening, you may be knowing about. At right times, we have entered into this market. Gradually, we will expand.
C.K. Thakur: Now, we are doing two own EPC projects, basically one in Spain and other in Italy. That means we are open to the European market strategy. We have experience in Southeast Asia also, but primarily the regions we are known and we have our presence, that would be the primary, basically the regions for our choice.
Operator: Thank you. Ladies and gentlemen, due to time constraints, that was the last question. With that, we conclude today's teleconference on behalf of Sterling and Wilson Renewable Energy Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines.
