Notes from the Q1 FY17 Con Call
You can find their earnings presentation here, which really gives most of the numbers in detail. So I have refrained from discussing them again. Please feel free to add any points that I might have missed.
1) The management maintains its full year guidance of 20-25% growth, with Inox expected to install 900-1000MW wind mills. They hope to maintain their market share at 25%(expect Indian market to be at 4.0-4.5GW this year).
2) Expect EBITDA margins to increase going forward due to the taller wind mills and economies of scale.
3) This quarter was majorly focused towards reducing their working cap by clearing their inventory backog. (though the overall inventory and receivables numbers remain the same as last quarter)The aim is to reduce overall working capital to Rs1,600cr. There will be a lot of commissioning happening in Q2, which should see strong cash flow into the company.
4) Receivables:- The aim is to get the overall receivables to Rs1,400cr by the end of the year. As mentioned on several occasions in the past, they maintain that the high receivables are due to 2 reasons- mismatch in the production of all the turbine components, and the lag between production and commissioning. Point 1 should not be faced due to new facilities coming on board, but point 2 will still need time to rectify since more states will be announcing their tariff in this quarter.
The problem of high receivables was also because some producers just refused to pay up due to PPA issues. Around 500-600MW of turbines installed in Gujarat did not have PPAs signed since the state tariff was not decided at that time. With the Gujarat tariff being announced at the end of August, we can expect payments soon and this should lead to a quantum decrease in receivables.
Some customers do not follow the part payments after each step of installation inspite of contractual obligations, as they wait till the entire turbine is commissioned. Keeping this in mind, Inox has decided to back up all future orders with LCs.
In Maharashtra, around 900MW of wind mills are still without PPAs due to a tussle with the government. Inox has only 40MW out of these 900MW and only 20cr is blocked here.
5) Key balance sheet figures as of June 2016:- Equity- 1915cr, LT debt- 52cr, ST debt- 1900cr, cash-550cr.
6) 1GW of wind projects are going to auctioned by the government this year, along the same lines as solar auctions(more details in the company presentation).
7) Approximate expected business by state this year:- 50% Gujarat, 20% AP, 9% Karnataka, 15% MP, 5% Rajasthan.
8) 500MW turbines remain uncommissioned for the company. For this FY, the orders have more or less been tied up and orders for next year can be expected from Q4.
9) There are some delays in payment by the government to the IPPs, but the IPPs have already factored in this delay in their models and the IRR does not change by more than 0.5% due to this.
10) Offshore wind mills will still take a long time to be practical in India as the costs associated with it are too high and countries only do this when they are out of land to build mills.