Lanco Infratech Ltd Q2FY13 Earnings Conference Call

Transcription

1 Lanco Infratech Ltd Q2FY13 Earnings Conference Call MODERATORS: MR. T ADI BABU - COO (FINANCE & ACCOUNTS), LANCO INFRATECH LIMITED MR. DHEERAJ SOOD HEAD INVESTOR RELATIONS, LANCO INFRATECH LIMITED MR. SHREEGOPAL JAJU AVP (CORPORATE ACCESS), EMKAY GLOBAL. Page 1 of 18

2 Ladies and gentlemen good day and welcome to the Q2FY13 earnings conference call of Lanco Infratech Limited hosted by Emkay Global Financial Services. We have with us today Mr. T Adi Babu COO (Finance & Accounts) and Mr. Dheeraj Sood Head Investor Relations of Lanco Infratech Limited. As a reminder, all participants lines will be in the listen-only mode and there will be an opportunity for you to ask questions at the end of today s presentation. Should you need assistance during this conference call, please signal an operator by pressing * followed by 0 on your touchtone telephone. Please note that this conference is being recorded. I would now like to hand over the conference to Mr. Shreegopal Jaju AVP (Corporate Access) of Emkay Global. Thank you and over to you sir. Shreegopal Jaju: Hi. Good morning everybody. Thank you for joining us today. We would like to welcome the management of and thank them for giving us the opportunity to host this call. I would now like to handover the call to Mr. T. Adi Babu. Over to you sir. T. Adi Babu: Good morning all of you. Adi Babu here. I will ask my colleague Dheeraj to give the brief report Q2 results. Dheeraj Sood: Good morning everybody and thank you Gopal for arranging the call. On behalf of Lanco Infratech I welcome you all to this second quarter earnings call. I will just walk you quickly through the results and then we can open the floor to Q&A. By looking at our reported revenue numbers we have seen a YoY increase of 68% in the quarter from Rs billion in the Q2FY12 to Rs billion this quarter. The reported PAT loss for the quarter is Rs billion compared to a loss of Rs billion for the corresponding quarter last year. Forex gain during the quarter was Rs billion. There was a cash loss of Rs. 496 million during the quarter. Cash profit for the first half of the fiscal year was Rs. 572 million. Coming to the power segment the commencement of commercial operations of Udipi II has added to the capacity. The 400 KV transmission line for Unit-2 is also operative now. If you compare on a YoY basis, the traded volume is up by 22% at billion units. This is primarily due to the added generation from Anpara, Udipi Unit-2 and Budhil. On the revenue front we have almost doubled the revenue year-on-year. We have total power sales revenue of Rs billion during the quarter versus the revenue of Rs billion in the corresponding quarter last year. Average PLF for all generating units for the quarter was 48% versus and average PLF of 70% in the same quarter last year. Lanco Udipi showed plant availability of 95% during the quarter. Similarly Unit-1 of Lanco Kondapalli also showed availability of 95% during the quarter. Our PLF for both units of Amarkantak were lower due to the annual maintenance shutdown that we have taken during the quarter. PLF of Anpara has been low on account of coal and infrastructure constraint however PLF at Anpara is expected to improve in the current quarter. In the power vertical if you look on a consolidated basis we have had adjusted EBITDA margins that is excluding the forex impact of 33% for the quarter. Cash profit generated by the power segment was Rs billion during the quarter. Details of various projects have been given in the press release. We have also given the status of the project under construction in the press release itself. On the infrastructure side, the NH 48 project earned the revenue of 89 million during the quarter. In the EPC business we Page 2 of 18

3 have had a decrease in revenues by 43% YoY and there has been a drop in the adjusted EBITDA margin from 21% last year to 12% in Q2FY13. Current order book for EPC and construction stands at Rs. 241 billion. In the Solar vertical we have a total order book of Rs. 40 billion. On the natural resources front, at Griffin we have had a top-line increase of 26% for the quarter as a result of better exports. The production for the quarter was up by 15% YoY at 0.68 million tons from 0.59 million tons in Q2 last year and the sales were up by 17%. So this is essentially the summary of the results. I will stop here and I will open the floor for questions now. Gopal over to you. Thank you sir. Participants we will now begin with the question and answer session. We have the first question from the line of Sumeet Kishore from JP Morgan. Please go ahead. Sumeet Kishore: I have a couple of questions. The first question is on the concerns around Anpara which have led to a loss during the first half of the year. Could you please talk about the coal and infrastructure constraints at the project? The second question is on your pipeline projects under construction. Amarkantak-III, IV, Babandh and Vidarbha. Could you please give us a sense on the CAPEX and the equity invested in each of these projects separately up to now? Your COD guidance and progress on fuel visibility for this projects separately, thank you. T. Adi Babu: In Anpara we were having multiple problems which we were attending in the last quarter and we could not completely resolve those issues. First issue is the coal supply under the FSA. The coal supply under FSA is closely around 54-55% and the remaining coal is being purchased through the open market purchases, because of that the coal whatever we purchased from the open market and also we take from the linkage the coal is being supplied in the mix of bottom open wagons as well as side open wagons. This project, Anpara project was a big project with a pit head mine coal supply. So a MGR system was created for the project. The coal from this segment is not supplied till date. It might take some more time to get supply from the coal, the designated coal mine. Coal India is still working on that it might take some more time. In such a time coal is being supplied from other mines, distant mines where the transient system is through wagons which are not always the bottom opening. It is a mix of both, whereas within the plant the entire system is created for the bottom opening wagons. In fact if you see land-wise, it is only just a 250 acre land where in 1200 MW plant was created; it is a compact land. Any additional infrastructure within the land is not possible. To address that we have taken land outside the project and developed a facility wherein the side open wagon material is unloaded over there and it will be loaded back into bottom opening racks and it will be sent into the project for operation at the plant level. This creation of this infrastructure facility is done to a large extent. There are certain signaling and other related issues which should get over may be by this month end or sometime during next month. With that whether we get coal in the bottom opening wagon or side opening wagon it should be addressed. In addition to that sometimes the open market purchase are done to get material through the road system also, because if the rail system is not available we get material through trucks also. For that also we are creating a facility to unload the material from the truck and reload that into the wagons which are bottom opening. That is also getting ready. By December end both these facility should be ready. Once these facilities are ready then Page 3 of 18

4 we will irrespective whether we get coal from bottom opening, side opening or by road transport system. The plant should get enough coal to operate at full capacity. That is one. The second one is of course the even, whatever the power generated and supplied to Uttar Pradesh, the payment mechanism from Uttar Pradesh is still not update. There is always a backlog. We are also perceiving with the government to create a equality mechanism wherein we need not waste much time on the follow up of the realizations because it is one of the cheapest power the Uttar Pradesh government must be getting it. So we are trying to create a securitization mechanism so that the money is available as and when it is due. So that the focus should be on operation of the plant and we are focusing to improve the performance of the plant to say to 65-75% in the current quarter. By December 31 st we want to bring the plant, both the units to 65-70% level operation and stabilize the operations at 85% plus in Q4 that is our plan on Anpara. Coming to the projects under execution that is Amarkantak, Babandh, and Vidarbha, the progress in last quarter was a bit slow because of various multiple issues. We are trying to address those issues and we would like to confirm that the progress in these three projects would be made normal by quarter 4. The current quarter also we lost some days here and there because of some local issues or some of the weather conditions and other things. But we are hopeful of getting into normalcy from quarter 4 onwards in these three projects also. And coming to the fuel supply for these three projects, the fuel supply is linked to the PPAs. PPAs are linked to the state Discoms coming up with the bids. So recently there were only two bids but we would like to have some more bids coming in, then only we will be in a position to have a 100% tie up of the power that will be generated from these plants. It may take some more time because now only the Discoms because as such the major problem is the liquidity at the Discoms. Liquidity I think, slowly it is improving which is a tariff revision that has happened at many of the Discoms; the funding institution started funding to the Discoms. There then only they start buying power then only there will be a demand for power and overall bidding requirements will come in. We are hoping that there may be a lot of bids coming forward may be after sometime. Then only we will win a position to tie up or power with those bids and get into a PPA, after that only the fuel supply is going to be addressed. Sumeet Kishore: Sure, could you sir also give me the absolute number of CAPEX that has been incurred for Amarkantak-III, IV, Babandh, and Vidarbha so far? T. Adi Babu: So far all the three projects put together we have incurred close to 11,500 crores. Thank you. We have the next question from the line of Abhishek Puri from Deutsche Equities. Please go ahead. Sir two questions, one regarding the order book clarifications, if you can give us the press releases that the current EPC order book is close to 28,500 crores and there is a dispensed Solar EPC order book of 4000 crores. Is that a correct number because I think heard the presentation. T. Adi Babu: 24 is of PPC, 4 is of Solar; total put together is 28. Page 4 of 18

5 28 considers the 14 Solar? T. Adi Babu: Yes correct. Secondly on, for the last two quarter you have not been providing for any of the taxes in the standalone division. So any reason for the same. We don t expect any profitability to return back in the second half? T. Adi Babu: I am afraid; could you repeat the question back? First half standalone numbers you have not been providing for any taxes. So any reason for the same? T. Adi Babu: Because of the depreciation available. 35 MW of Solar is in the book of which we commissioned in the fag end of last year. So because of that, that depreciation is available. So, that 80% accelerated depreciation we can book. T. Adi Babu: That is available; that is the reason. Lastly on the EBITDA margin on the Solar EPC business we have seen a major shift in this quarter. Any specific reasons for the same? T. Adi Babu: In fact the Solar did almost 17 MW of EPC in the last year. Some of those plants where the wind related matter and the weather related matters affected some of the plants, there were some replacements and other things that has happened in the current quarter. The rectification and strengthening of some of those things were done in the current quarter for which the actual work was done in the previous quarter and the revenues were recognized in the previous quarter but due to some weather storms wind storms and other things there were some damages that got reported to some of the sides. So all those things were incurred in the current quarter that was the major reason to have a loss compared profit in the last quarter compared to the previous quarter. What would be the amount of that one off expenses that you would have done? T. Adi Babu: The expense was close to around crores. And in terms of revenues also I think we have seen a 40% decline in the current quarter? T. Adi Babu: Yes, revenues of course. There is an order book position of close to 4000 crores, in that bulk of the revenues in Solar will start happening from the current quarter. So it will be almost close to a 100MW PV EPC which we are doing to state Discoms, then to NTPC to MAHA GENCO and other state Discoms. All those activities we just started, because last quarter we got the land position and other things. The works were already started and current quarter we have revenues Page 5 of 18

6 from these projects and in addition to that the Solar thermal activities also getting up geared up and this revenues also will come. So going forward current quarter next quarter we will have good revenues from the solar side. And lastly on the Budhil plant. I think the realizations were close to Rs.1.56, any reasons for lower realization in the... T. Adi Babu: Budhil, initially it was under UI. For hydro the UI, the maximum tariff is Rs So that is the reason why it was at Rs 1.55 level during that period and now Budhil is supplying through the power exchange. Now, the current realization for Budhil through power exchange is anywhere between Rs 3.50 to Rs And in terms of the dispute on the PPA, has that been resolved. What is the status there? T. Adi Babu: PPA issue with Haryana is still there; we have to see whether they are going for an appeal; the first level we have won that matter and so far they have not gone on appeal. We are waiting whether they will go for the appeal or not, then also we have a strong matter. The other one is we are also parallely working out with other state Discoms for a PPA. In a months time I think we will conclude the PPA with some other state. And just one last question on the Udipi Plant. I think the average realization for the current quarter were close to What is the actual realizable tariff that we are getting from the state at this point in time? T. Adi Babu: There are two issues. One is the state government has already approved a particular tariff as per the old calculation and as per the old exchange rate and old coal price. Subsequent to that the coal price got changed. The exchange rate got changed. Those effects were not incorporated in the present payment what Karnataka Discoms were making payment. That is linked to the CERC tariff. CERC gave an interim tariff which was appealed by the Karnataka Discoms and the appellate authority has asked CERC to take their player and determine the tariff again. For which the hearing was already done and we are expecting the tariff order any time. Once we get the tariff order then the balance whatever is there almost close to a rupee plus; Rs.1.30 is the gap. Once we get the interim tariff then those realization should get realized from the Discom. Rs.1.30 is the gap sir, so actual the approval currently on which the cash flow is coming to us in on Rs T. Adi Babu: Rs.3.12 is the present rate at which they are paying. What is the petition that we have asked for in terms of from CERC? T. Adi Babu: Once the CERC also in the interim this will not give entire 100%. They will give PL 100% the fixed tariff they give only 90%. The remaining 10% will be given when they do the final tariff determination. So in the interim tariff itself we are hopeful of getting Rs The first interim Page 6 of 18

7 order was close to that. After the appellate authority asked the CERC to take the player of the Karnataka Discoms and reconsider the interim tariff that is also the hearing was completed. We are expecting the order anytime, but the amounts should remain the same, because the issue was not on the amounts, but the issue was there player was not taken on record, that was the issue. Thank you. We have the next question from the line of Amit Golchha from Emkay Global. Please go ahead. Amit Golchha: In case of Udipi sir since last 2-3 quarters we are reporting almost either a loss or this quarter also this is for the forex gain. It is almost breakeven. So even after realizing or recognizing the revenues based on CERC tariffs we are still not able to make profits. What is the reason for that sir? T. Adi Babu: The reason is Udipi Unit-1 was operating, Unit-2 started operating only from the middle of August. During August and September the Unit-2 which started, started stabilizing its operations. Unit 1 it was doing well and it was operating at close to 94-93% level. At Unit-2 just started generation we got stabilized. As overall both the units put together we did 70% during quarter 2 which itself is a good achievement. In the current quarter both the units do well and because Unit-2 is also stabilized, now it is doing well and we are confident of both the units doing 85% plus from current quarter onwards. Amit Golchha: But sir in your press release you have mentioned that the plant availability for both the units was at about 95%. So you would have actually recognized revenues based on the availability factor in the CERC? T. Adi Babu: Availability factor for 95% it is done, but our Unit-2 is getting a stabilization gap during the stabilization we will not have the 95% payout, it will be post 95% stabilization only you get the 85% payout from the state. Thank you. The next question is from the line of Murtuza Zakkiuddin from HSBC. Please go ahead. Sir my question is on your CAPEX. You said on Amarkantak-III and IV, Vidarbha and Baban we have done a CAPEX of 11,500 crore and so I wanted to question on how much equity we have already done and what is the balance equity we need to do and what are the timelines on these projects? T. Adi Babu: We have done close to almost a equity of close to like was the equity contribution that has already gone into the system and we need to pump in may be close to another 1900 odd crores into these projects to complete these projects. And what are the timeline for this sir? T. Adi Babu: For this 1900 we need to complete by March Page 7 of 18

8 So your projects you are assuming when sir, to get completed? T. Adi Babu: All the three projects should get into operations in FY Sir there has been news about you were looking to sell some of your stake in your power assets and stuff. Any update on that sir? T. Adi Babu: The dialogue still continued and we are hopeful of getting into some finality by December month end. So you are looking only in hydro assets and road assets T. Adi Babu: Hydro asset we are looking, power holdco level; we are also planning to have some strategic investors at the SPV levels. We are working no a multiple option as a fall back arrangement, to one is getting delayed at least the other one will be there. Definitely, we are hopeful of concluding a major transaction by December 31 st. And you plan to use that money into investment in these projects, is it sir? T. Adi Babu: The purpose of that is one is to invest into these projects for their equity requirement and also to use for the group overall cash requirements. And any update like you were looking for any restructuring right now for this Kondapalli thing, because Kondapalli right now still the gas is not available. So any update on that sir? T. Adi Babu: Kondapalli we have requested the bench to change the COD from March 2013 to March Any update on the gas? T. Adi Babu: Force Majeure, there is a facility, so we have requested the banks to change the COD, because the gas availability is not certain in the next couple of years. So in the meanwhile you don t have to pay the interest and debt repayment on that project sir? T. Adi Babu: No debt repayment and interest also will be part of the project cost and the project cost will get revised and it will be part of IDC during the project execution like. Thank you. We have the next question from the line of Rohan Juneja from Sea Wolf Capital. Please go ahead. Rohan Juneja: One follow up from the previous question on any kind of equity infusion into the company, you said that it will go into the future project and also to meet the cash flow needs of the company, I just wanted to find out if there was any plan to pay back any debt, that is my first question and the second one is in your press release you had mentioned as well that you have over 3100 crores Page 8 of 18

9 of receivables from Discoms and I think you mentioned you are hopeful of receiving that by March end. Can you just throw out a time frame as to if you expect the bulk of it to come between January or March or how much do you expect to come between now and December? T. Adi Babu: There are two major Discoms where this 3160 crores is involved. One is the Karnataka discom and the other one is Uttar Pradesh discom. The realization from Karnataka discom is dependent on the CERC tariff determination and the CERC tariff determination for Unit-1 is expected in the current month and for Unit-2 is expected in the next month. The realization of Unit-1 should start from December; the realization of Unit-2 should start from January. But bulk of our receivables are for Unit-1 only. So therefore we should start realizing our money from Karnataka Discoms from December. December-January-February-March, we are hopeful of getting totally realized. That is the Udipi project. The other one is for the Kondapalli, then the Anpara, then the Amarkantak, reduced from Uttar Pradesh. In fact the first realization of Uttar Pradesh Discoms started coming in the last week of the current month. We have started making the payment, because now they started getting funding from the lending institutions. We are hopeful of getting this payment from UP discom progressively every month and the entire dues as promised by them should get cleared by February but we are hopeful at least by March it will get cleared. Rohan Juneja: And then just my first question which was a follow up on previous, is there any plan to pay back debt or is it just want to go towards... T. Adi Babu: For the time being the debt will be paid as per the agreed repayment schedules. There will not be any prepayments of debt as of now. Whatever is the debt due as per the schedule that will be paid, that itself will give a lot of reduction in the debt equity because one is, there will be some additional inflow of equity and also some earnings by these entities thereby the net worth of these entities should be increasing continuously and also the debt will be paid as per the repayment schedule which is already in existence to that extent the debt will be repaid. So therefore the debt will be continuously reducing in operating side and the net worth will be increasing, but the project under execution there is plan to augment the equity from external sources thereby to maintain the debt equity at the project cost approval levels. Thank you. We have the next question from the line of Rohit Sanghvi from Prime Securities. Please go ahead. Rohit Sanghvi: Just one question. I wanted to know what is your guidance for revenue in FY13? T. Adi Babu: These are linked to the operations. I was mentioning that operations were below 45% in Q2 which we are confident of bringing them between 65 to75% PLF level in Q3 and maintaining them at 85% plus in Q4 barring Kondapalli which is to a large extent that is dependent on the gas. We are also pursuing with the government for a gas cooling and other arrangements. If something happens then there will be improvement in the performance of Kondapalli plant also. Otherwise the Kondapalli plant will continue to perform at the present levels only. There will not be better performance from the Kondapalli side. So once these PLFs increase from levels Page 9 of 18

10 to level accordingly the revenue is linked to the operations of this plants. So significantly the revenue should go up in quarter 3 and quarter 4 accordingly and coming to the EPC also, EPC quarter 3 may not be significantly different from Q2, but definitely it will be significantly different in Q4. Rohit Sanghvi: Sir for the full year what is your expectation? T. Adi Babu: For the full year I will get back to you. Thank you. We have the next follow up question from the line of Abhishek Puri from Deutsche Equity. Please go ahead. Sir two more questions regarding one is the eliminated profit that you have given in this quarter for the first time I think it has turned into a loss. So would that mean that the internal projects that we are doing are making losses at this point in time on EPC division for us? T. Adi Babu: No it is not like that because the elimination is always done on a free tax basis and the profit is seen as on a consolidated basis post tax. So because of that even though you had higher number for elimination purpose when you add consolidated it is a lower number, because one-third is taken as tax because internally let us say 100 crores, 33 crores is taken as tax. So when you eliminate, you eliminate 100 crores, but when you add to the bottom-line you add only 66 crores. So when the other units they have some loss and this elimination if you reduce more then the loss will be even more. That is the problem in fact we have represented to the institute also, there is an anomaly compared to the international accounting standards on that. Even in the IFRS also the tax component also is addressed in the elimination but unfortunately in our consolidated standards the consolidation is done as line by line but the elimination is always done pretax that is the anomaly which is pursuing with the initiative; if there is some remedy then this also can be addressed going forward. Sir just for my clarification, in that case you have provided for 33% tax for those projects which we are doing internally for associates despite the overall tax rate being different for the overall company? T. Adi Babu: That is okay, that is for the power companies which is at less than mostly at MAT at 20% level, but whereas EPC operates at full tax level. Abishek Puri: So the provisioning has been done at full tax level? T. Adi Babu: Correct. The next question on I think one of the notes to account I think from the auditors, the auditor comment is just that you have unpaid dues of close to 310 crores as of September 30 th which has led to probably the downgrade of the rating from the rating agencies also. Page 10 of 18

11 T. Adi Babu: See the downgrade of the thing happens because of the delay in making this payments. Particularly, the bullet payments that was there on 23 rd October which got delayed. So because of that the downgrade was triggered. But that was related to 23 rd October. But this 310 crores is unpaid as of 30 th September; so what is this related to? T. Adi Babu: This related to the mostly in relation of Udipi and the Amarkantak. It is not related to Infraech Limited. It is related to two SPVs where the discom dues are mounting, the realization from the Discoms was not up to the expectations because of that there was some delay in addressing these two companies. Had these dues be repaid now or what is the status at this point in time, we are towards the end of. T. Adi Babu: It was repaid to a large extent, but still there is a small amount pending which I think they should once they get a next round of realization from these Discoms then they should clear up those things also. And in terms of the credit rating downgrade which has happened on Lanco Infratech, would this impact the entire group funding related issues at this point in time and would this be.. T. Adi Babu: Of course definitely because since it is the holding company there is always going to be an effect where the holding company is the sponsorer for these projects but we have communicated to all the banking system what is the reason for this because of the huge Discom delay that is happening with the holding company was supporting this companies for their operations, because of these the holding companies also got into the liquidity trap and once these realization start coming say from December for Karnataka and from current month from Uttar Pradesh I think some of these realization will be pulled back by the holding company thereby the entire liquidity will be brought back at the group level. Once that is done I think the addressing of the repayment or servicing of the debt is not a concern. We are hopeful of mobilizing close to 5000 to 6000 crores before 31 st March and of that the overall repayment requirements or debt servicing requirements to the group as a whole will be less than 2900 crores. So there is going to be a good liquidity going forward by the year end at the group level. And this crores you are expecting about 3000 crores from receivables? T. Adi Babu: Not 3000, we are expecting around to be received from the receivables and also the equity investments at the holdco levels by disinvestment in our stakes, they are planning to mobilize may be another and the regular realization and the normal cash flows will be there of another crores. In all these the upside is around 6000 crores but I am telling at least 5000 crores we will be in a position to realize before 31 st March. Page 11 of 18

12 Thank you. We have the next question from the line of Parag Gupta from Morgan Stanley. Please go ahead. Parag Gupta: Just taking on from your previous answer itself, you mentioned that receivables and disinvestment in your holding is going to be one of the key ways of generating cash, but just assuming that if these two were to come in with some delays can you give us a sense of what are your repayment obligations in terms of what are your next few dead lines that you need to meet for this 2900 crores, if you can give us some indication of when these come up for repayment and T. Adi Babu: For a large extent we can take equally in each month end like because not many bullet payments are there, all you can say at each quarter end there is a payment and each month end there is an interest payment. Parag Gupta: So you are saying 2900 crores over 12 months, so somewhere around 250 crores every month? T. Adi Babu: More than that, may be around 300 crores plus. Parag Gupta: So given that your operations currently are not generating enough cash because a lot of your operational cash flows are being eaten up interest and by working capital and how do you think you will be able to meet these payment if your other plans on raising liquidity go wrong, in the sense do you think there are going to be further defaults possible or there are other avenues where you can get cash flows coming in. T. Adi Babu: There will not be further defaults. So in the current scenario there are certain defaults which may continue for sometime till we start getting the inflows from these two major Discoms. I told you it should happen from December. So December onwards the things should be better and all these should get cleared up and the liquidity should be better going forward. So we are quite confident of getting around crores from the state Discoms and the realization of the receivables that is one, and the second one is we are also confident of at least getting one or two transactions done either bringing the strategic investors or the PE investors at the SPV level or at the holdco level and garnering around 2000 crores that is also we are quite confident. Apart from these the regular operations and the regular realization where there are no tariff related issues, those realizations will be there. These three things put together I said on upside it will be around 6000 crores and the downside it will be 5000 crores and even if you take a conservative look even at that it may be 4000 crores but our obligation is less than 2900 crores, there should not be any further problems in this regards. Parag Gupta: Just one more question, the second thing is on your under construction projects, are you facing any issues in receiving disbursements from banks are they going slow on those disbursement or is that business as usual? Page 12 of 18

13 T. Adi Babu: Like in the past normally the disbursement is to happen once the lead institution gives its green signal to participating institutions to participate in accordance with the guidance given by the lead institute. Now-a-days each of the lending institute is taking their internal clearances for each of the disbursements. In the process definitely there is a delay happening. Parag Gupta: Is there an obligation more on you to put in more equity upfront as against having an equal proportion of debt and equity? T. Adi Babu: It is not related to equity because whatever is the equity we put in to then only we can request for the disbursement. But the disbursement process itself is taking its own time because not only to us I think many of the developers also are communicating the same thing, Now it is because each of the institute is taking their internal clearances and thereby there may be some approvals which the SPV has to get may be the environment related approvals or some field related approvals. Some of these things are some clearances of the write-off issues. Some of these things we assume that okay we get in next three months, by the time some of these things might not have been obtained then unless we get an exemption or clearance by the approving authority of the respective bank we will not be in a position to go ahead with the disbursement. Like that there are some delays happening, otherwise you don t see any further problems, on account of equity not giving and debt not being released because of that. Parag Gupta: And lastly as far as Griffin is concerned we have been reading lot of these articles on increasing production, etc., I am sure you must have firmed up your CAPEX plans by now. So can you give us the sense of what is your CAPEX plans for the next 3-5 years on an annual basis and how do you see financing that? T. Adi Babu: For Griffin there is two step processes which we are adapting. The first step is to increase the production from the current level to say 5 million tons, we will go without any CAPEX. This will be increasing the productivity and enhancing the production of existing manpower with the existing equipment. Okay? This is the first level to bring the operations to a breakeven level. So once it is a breakeven level we are seeing the operating Unit-will operate at this breakeven level in the next 2-3 years where in the expansion of the mine from 5 million ton to 16 million tons should happen. The CAPEX of this expansion is still being worked because that is all dependent on the approval to which you are seeking from the assuring authorities particularly at the port level. What type of approval we get accordingly the port visit will be created within the approved limits. The CAPEX also is dependent on the type of port we are going to create. All these approvals may take another 6-8 months time. After that only we will win a position to firm up the CAPEX how much it is going to be. Roughly may be after one year we can formally say that the CAPEX is going to be so much. Parag Gupta: Sir we need to assume that in person you will not incur any further CAPEX for next at least next 9-12 months? T. Adi Babu: No, there is no need to have any further CAPEX for the next one year at the Griffin level. Page 13 of 18

14 Thank you. We have the next question from the line of Barindar Vijayakumar from Spark Capital. Please go ahead. Barindar Vijayakumar: My question is regarding the receivables of the 3100 crores of receivables. You said major is from UP and Karnataka, if I add up the revenue so far reported from Anpara is about 800 crores is it fair to assume that all the 800 crores is still not collected from UP? T. Adi Babu: No. Actually the UP receivables was of Amarkantak, majority was of Amarkantak, of last year, not even current year, it is the last three year power which is sold to UP Discom which was not realized and funds are close to 600 crores. Barindar Vijayakumar: So from Amarkantak I which we are selling in merchant right now it is not being supplied to UP? T. Adi Babu: Now no; now Unit-1 is going to get into PPA with Madhya Pradesh, we are hopeful of getting into the PPA with Madhya Pradesh in CERC tariff mechanism. Barindar Vijayakumar: And what would be the merchant realization sir, Amarkantak-I and Kondapalli-II for the quarter? T. Adi Babu: Kondapalli-II is good, Kondapalli 2 was 5.4 plus and the Amarkantak was at 3.5 level. Barindar Vijayakumar: And it has been contact that these kind of levels going forward, what is the scenario like? T. Adi Babu: It is because the Kondapalli is done already for the next one year and Amarkantak will continue at this level. Thank you. We have the next question from the line of Mohit Kumar from IDFC Securities. Please go ahead. Sir one question, this is regarding the plant availability factor for Amarkantak and Udipi; can you give separately for the quarter and what was it for the October month? T. Adi Babu: October Udipi continue at 70%. The PLF or PLF plant availability? T. Adi Babu: Plant availability is think, but operation wise it is at 70%. Okay because these are the plant availability factor for this Kondapalli-I and Amarkantak-I. T. Adi Babu: Kondapalli-I is 95% and Amarkantak it is 72%. Sir this is for all projects, can you give us the break up of the equity infused in each of the projects? Page 14 of 18

15 T. Adi Babu: We will give you that breakup offline. Dheeraj will give you those details. And all our projects for debt disbursements do you need to put our entire equity upfront, or is it on a proportional basis? T. Adi Babu: Initially the first equity you need to put up to 25%. The first disbursement condition is always suppose if we have to say invest 1000 crores in a project as equity first 250 has to be brought in, that is the first milestone for getting a first disbursement. Afterwards it is proportionate. Thank you. We have the next follow up question from the line of Murtuza Zakkiuddin from HSBC. Please go ahead. Sir one follow up question on this Kondapalli. You said realization were about 5.4 plus and on the merchant and what is the cost over there sir, fuel cost? T. Adi Babu: Fuel cost may not be more than Rs or so, but the rest is on the PLF, at what level you are operating. If you operate full capacity then the result is totally different, but since we are operating at only 28-29% the incidence of fixed cost is more. So that is in addition to this 3.6. T. Adi Babu: Yes correct. Sir a question on the same thing, Kondapalli-I you said availability is 95%, so you are getting more like the gas availability is different to both the plants, both the units or it is one and the same. T. Adi Babu: Both are separate, because Unit-1 is from GAIL and Unit-II is from D6. So for Unit-1 there is no problem in terms of availability? T. Adi Babu: Unit-I there is no availability issue and the tariff is on availability basis not on operation basis. So the reason for the lower PLF is lower drawn from the EP right? T. Adi Babu: No in fact lower supply of gas also. But you said availability at around 95% for Kondapalli-I. T. Adi Babu: If the gas is not there then the Unit-has to run as per the supply of gas and government is not inclined the Unit-on naphtha. So because of that the government will make the payment on availability basis but the Unit-will be operating on the supply of gas. When you say even on naphtha you say the availability right? Page 15 of 18

16 T. Adi Babu: Naphtha is always available at the plant, but the plant will be run on naphtha provided the government asks for to run on naphtha. What would be the incremental cost sir for the T. Adi Babu: Naphtha will be more than double. That is the reason why the government is not willing to run the units on naphtha. Thank you. We have the next follow up question from the line of Rohan Juneja from Sea Wolf Capitals. Please go ahead. Rohan Juneja: Any update on what you all are planning to do with the real estate business? T. Adi Babu: Real estate to a large extent is dependent on the political decision of Hyderabad. The Telangana issue, otherwise the Hyderabad realty market is not having similar growth like other pockets of the country. We need to wait and watch the situation. We don t expect an immediate change in the growth prospects. Thank you. We have the next follow-up question from the line of Amit Kumar from IDFC Securities. Please go ahead. This is Mohit Kumar. This is regarding the plant availability factor of Anpara; how you witnessed an improvement in October and what are the numbers like? T. Adi Babu: October month I think I am not too sure, but I am telling approximately should be around but I will ask Dheeraj to give you the exact number, but I remember it was around level like These are plant load factor or plant availability? T. Adi Babu: Plant availability and in fact the plant load factor is also close to that. And as you are targeting 85% PLF by the end of this fiscal year, right? T. Adi Babu: Yes, there is continuous operation at 85% level. So where is the problem, is the problem that the Coal India is not supplying the coal from? T. Adi Babu: Actually I mentioned in the past I think whether you have heard or not, this project was a bid project, with a pithead coal mine and coal to be supplied from the pit head coal mine to the project, so for that we have created an MGR system, a merry go around system where in dedicated wagons will go around the mine and the project continuously to supply the coal. Accordingly a bottom opening system was created, but unfortunately Coal India has not completed the mining activity in that mine and they have not even started supplying coal from Page 16 of 18

17 that mine. At present coal is being supplied from other mines to the extent of around 52-53%., the remaining coal is being purchased from the market either in the e-auction or through the imports because of that coal is being transported in wagons which are not 100% bottom opening, they are either side openings or some times through road transport system because of these, this coal which is coming through the side opening of the road transport system getting into the plant at that coal handling system level. For that we have created an additional facility outside the plant wherein this coal will be unloaded and put back into bottom opening wagons and these wagons will operate at a merry go around system. With that coal will be supplied to the plant to the required levels. This creation of this infrastructure facility is to a large extent is done but the last leg of that is under completion. We are hopeful of getting that total system in place by December. One last question sir, how was the fuel supply for Amarkantak Thermal Power Plant in this quarter? What is Amarkantak fuel supply under FSA? T. Adi Babu: Under FSA we are getting 80% -85% assurance for effectively get around. we purchase to a large extent in e-auction. Thank you. The next question is from the line of Annirudh Gangadhar from Nomura. Please go ahead. Annirudh Gangadhar: Sir two queries, one if you can just once again recap what went wrong with our Solar EPC this quarter and what do we look for in the next 6 months as far as execution and more importantly the contribution is concerned and secondly on a quarter-on-quarter basis you have seen a reduction in our interest expenditure on a consolidated basis, could you just help me understand why is it been a bit of reduction instead of a rise considering the full impact of Udipi should have been hitting us this quarter? T. Adi Babu: The first question on the Solar EPC side as I was mentioning we have done around close to 85 MW EPC works of Solar PV modules in the last fiscal and particularly in Rajasthan because of some storm that has happened in the current fiscal there was lot of damage to many of the panels and many of the other equipment related to these plants and there was lot of replacement that has gone into that because of that there is almost crores the cost that has gone into that. That was the major reason at EPC to, because it was in the defect liability period post completion of the plant within one year we need to have the defect liability assurance by the EPC contractor. So because of that only this cost was incurred. Of course definitely we will get bulk of that amount should get realized from the insurance policies and other things but that will take some time till we get that policy claim. Annirudh Gangadhar: So we did not have any subcontracting in this; where the entire cost is to be born by us, if we have not been indemnified first, sub contractors the only thing we have is the insurance available to us. Page 17 of 18

18 T. Adi Babu: There are very small petty contractors we take over the real execution on EPC state basis like, but otherwise the entire work is done by us only. Annirudh Gangadhar: And sir the second question on the interest cost if you can just give some color? T. Adi Babu: There is a small reduction in the interest cost, actually the interest cost should have gone up but it is in the lower side may be because of the buyers credit the component of buyers credit in the overall debt, because of that only the interest cost was less compared to the previous quarter? Annirudh Gangadhar: Sir how much was the reduction in the buyers credit then. T. Adi Babu: Composition suppose we have say 1000 crores debt, in that only 100 crores is the buyers credit then the weighted average of interest is say around 11.5%. Instead of 100 crores if the buyers credit is 200 in 1000 crores, the weighted average of interest cost will be reduced from 11.5% to 11% or 11.1%. So that was the reason for the reduction in the overall interest cost. Annirudh Gangadhar: Okay sir, the proportion of buyer side has gone up. T. Adi Babu: Quarter-on-quarter it will increasing for the projects which are under operations basically the coal is being taken through this buyers credit. Annirudh Gangadhar: All the imported coal sir, basically. T. Adi Babu: Correct. That was the last question from the participants. I would now like to hand the floor back to Mr. Shreegopal Jaju of Emkay Global for closing comments. Over to you sir. Shreegopal Jaju: On behalf of Emkay I would once again like to thank you all for joining the call today. Have a great day and wish you all a very Happy Diwali. Thank you. T. Adi Babu: Thank you Gopal. Thank you very much everybody, wish you all a very Happy Diwali as well. Thanks for arranging the call. Thank you sir. Ladies and gentlemen on behalf of Emkay Global Financial Services that concludes this conference call. Thank you for joining us, you may now disconnect your lines, thank you. Page 18 of 18