Tembo Global - Infrastructure proxy?

Q&A: Questions & Answers Company Q&A
22

Yes, I did have the call with EY relationship manager for Tembo Global

These are the key discussion points:

  • Expansion plans were initiated in 2022, focusing on Engineering (EPC), solar, and defense due to thematic alignment.
  • Margins are reportedly improving, and cashflows are expected to stabilize within the next six months as projects are executed.
  • The representative mentioned high-skill international projects like marine jetty orders contributing to the growth phase.
  • Cashflow strain was attributed to aggressive EPC expansion but is expected to normalize post-project execution.
  • Not entirely convinced that fees like the 10% caution fee have significantly impacted cashflows.
  • Another preferential issuance is planned, assured to be the last with no further fundraising anticipated.
  • Independent director resignations were addressed, with replacements carefully chosen for qualifications and governance.
  • CFO appointments have been made with extra care to strengthen company direction.
  • The call ended early as the representative was on leave.

D: Plan to hold the investment for 4–6 months as the current valuation is cheap, though market confidence remains low in the company’s execution capabilities.

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25

The proposed fundraising is intended to support the Company’s business expansion and strategic investments in the defence and solar energy sectors. These initiatives are in line with the earlier disclosures made to the stock exchanges and the press release dated January 22, 2025, announcing a ₹1,000 Crore investment agreement signed with the Government of Maharashtra and setting up of Tembo Defence Products manufacturing unit for manufacturing of small arms and ammunitions through technical collaboration with a European Company. The fundraising also aligns with the press releases dated October 15, 2024, regarding the receipt of an order from Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) for a 25-year Power Purchase Agreement (PPA) to develop solar photovoltaic power generating stations with a total capacity of 124 MW (AC).

from the latest circular

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27

I want to understand from everyone, isn’t Solar CAPEX looks like Capital Miss allocation?

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28

Better if somebody ask in concall. IMO Solar IPP is generally 12% ROCE buisness in india

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31

FOR SOLAR IPP
The key monitorable to watch is debtor days and cost of funds .
Assuming 25 years for breakeven:

  1. At 9% interest rate – 10.18% annual returns needed
  2. At 9.5% interest rate – 10.60% annual returns needed
  3. At 10% interest rate – 11.02 % annual reurns needed

So basically whatever extra returns made on top of above minimum returns, will be the profit of the company.
Fixed parameters are - Interest rate is generally 9% , and ROCE is approx 12%.
But debtor days (Payable days by electricity dept.) will change above breakeven returns on 9% interest as follows
Debtor days
0 days. — 10.18%
30 days – 10.25%
90 days. – 10.40%
180 days – 10.62%
365 days. – 11.10%

So Given fixed annual return ,
Profits = Fixed annual return(~12%) - Breakeven returns (depending on payable days)

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34

On 2nd January, company announced it has received Defence Manufacturing Licence for Small Arms Facility in Maharashtra from the Government of Maharashtra.

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Regarding the technology transfer from Austrian company, below are some ammunition companies based out of Austria:
Stey Arms, Glock GmbH, Voere, Hirtenberger Defence Systems.
Could not find with which company they had this tech transfer agreement.

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35

You have the answer from 2nd Jan announcement..
Still sceptical sir? Your view please

36

I have not looked at the company recently. However, Reliance has had the license since more than a decade I think. Recently had an MoU with a reputed German company(Rheinmetall) too. Has a JV(not only an MoU) with Dassault too. What is its condition? But I will be happy for the investors if I am wrong.

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