Torrent Power (NSE:TORNTPOWER) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Torrent Power Limited Q1 FY 'twenty seven Earnings Conference Call. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Mashrwala, Executive Director and CFO. Thank you, and over to you, sir. Thank you. Good evening to all of you, and thank you for joining earnings call for Torrent Power for Q1 FY 'twenty seven. We'll first take you the performance of the quarter, thereafter, we welcome the question and answer.

0:51 Next is the performance of the company at PBT level cost, and then we'll take you through the tax expenses separately. Reported PBT for the quarter stood at INR $9.25 crores as compared to INR $9.85 crores in the corresponding quarter of last year, reduction of INR 60 crores. PBT for the corresponding quarter of the last year include a nonrecurring loss of INR 59 crores on account of non case adjustment due to foreign currency fluctuations. Adjusted order is one off. PBT for the quarter stood at INR $9.25 crores as compared to $10.44 crores, the comparable quarter of last year, a reduction of INR 119 crores on an adjusted basis. Tax expenses during the quarter has increased by 28% as compared to 25% for the corresponding quarter of last year. The increase is mainly on account of completion of tax already per year availed in the Section ATI A for some of the units.

1:50 Business factors contribute the performance are as follows. First, contribution from the thermal generation business remains resilient despite elevated gas price arising from ongoing geopolitical tension in Middle East and increase in O and M expenses. Adjustable nonrecurring items in the corresponding quarters of previous year, the business pro form was lower by 123 crores, primarily on account of three factors. Fourth, despite elevated cash price during the quarter, the company maintained healthy operating margins in its merchant power operations. However, the gains from the merchant sales and LNG trading were lower by INR 87 crores. During the quarter, we have undertaken upgrade exercise to our KS based plan to improve the plant flexibility and availability resulting into the increase in O and M expenses by INR 51 crores.

2:43 Benefit of these are being demonstrated during the quarter, whereby we were able to realize better margins on merchant power sales. While some of the upgrades are implemented, others are being progressively rolled out in our gas base unit, which will help us improve our margin realization going forward. This will also help us manage the evolving operating environment, which has significantly changed recently on back of increased renewable energy penetration, requiring our units to operate more frequently in a cyclical mode and respond to varying demand patterns. These measures are expected to support higher availability, improved operational reliability and optimization of long term O and M costs as well as despite the increasing flexibility operating regime.

3:35 Company on 06/25/2026, consummated acquisition of Napha Va plant, which contributed INR 15 crores in the quarter. Lower contribution of thermal generation was partly offset by increase in gain from Distribution and Renewable segments. The second reason on the Distribution and Transmission segment In total, East Caucus contributed 71% additional profit, driven by three factors. First, the shift of favorable orders from the regulator, approving carrying cost of INR 41 crore. This is a normal course of business due to regulatory assets we have, we are getting the favorable regulatory orders. Second, improved contribution from the operation by INR 19 crores supported by two factors, for increase in ROE and ROCE on account of capitalization of assets and higher rate of returns on equity as per the new tariff regulations and other incentives.

4:32 The third is second is improved contribution from the distribution franchise business on the back of improved volumes and increased tariff. Volume across the financial distribution business improved by 4%. The third reason is additionally, new commissioning transmission projects has contributed INR 11 crores in principal profit. Coming to the renewable operations. We have renewable operations contributed INR 19 crores positive contributions. Due to generation from newly recommissioned capacity and improved PLF across the wind and solar, both partially offset by gain in similar quarter of previous year on account of LPS income on related payments.

5:20 The fourth reason is other factors lowering the profitability INR 90 crores. There are two main reasons. First, increase in the finance cost on behalf of higher capitalization and related borrowings and second, increase in miscellaneous expenses and depreciation, which was on account of higher capitalization, mainly in revenue segment. This completes the explanation of the financial performance within the quarter. Now coming to the update on the various projects and the implementations. Renewable energy project of 70 megawatt got commissioned during the quarter, taking up the aggregate installed capacity installed generation capacity of the company to 6.6 gigawatt as on 06/30/2026, comprising of 2.7 gigawatt gas based project, 1.8 gigawatt gold based project and 2.1 gigawatt renewable capacity.

6:15 First on renewable energy projects. As on 06/30/2026, renewable energy project of 4.6 gigawatt under implementation, which we expect to commission progressively as under. About 1.2 gigawatt capacity is expected to commission in FY current year FY 'twenty seven, between 1.4 to 1.6 gigawatt capacity is expected to commission in FY 'twenty eight and balanced capacity in FY 'twenty nine. CapEx of INR $15.50 crores was incurred during the quarter against INR 1,200 crores CapEx in Q4 FY 'twenty six and INR $3.55 crore of CapEx in Q1 of FY 'twenty six comparable quarter of the last year. Of the total CapEx of INR 29,600 crore of INR projects under implementation, cumulative capital of INR 8,800 crore has been incurred up to 06/30/2026.

7:11 In FY 'twenty seven, total CapEx of approximately 10,000 crores is expected to be incurred for all RE projects. Moving on to the implementation under the Anupur thermal project of 1.6 gigawatt, the update is as under. First, activity are underway, wherein following major milestones have been achieved. First, Power agreement executed with the M and power management company, Limited. Second, letter of award issued to the BTG as well as balance of plan third, environment clearance received for the project the fourth, the project is expected to commission in the next six to seven years. A total CapEx of INR $4.50 crores has been incurred as of 06/30/2026. Coming on the hydro project of three gigawatt in Maharashtra, the update is the activity are underway, wherein following major milestones have been achieved. First, energy storage facility agreement with MSC was executed.

8:11 Later of award issued to the civil hydro mechanical and factories. And second, electrical and mechanical factories. Environment and foreign clearance has been received for the project. The project is expected to commission in the next three to four years and total activities of INR eleven thirty crores has been incurred to 06/30/2026. In terms of transmission project, solar ore is under implementation expected to be commissioned this year. Cumulative capital of INR $3.30 crores has been incurred as on 06/30/2026. Further details on the pipeline project have been summarized in our latest news presentation available on our website. That's all for the quarter. Now I request to open the line for Q and A session. You wish everybody to stay safe and healthy. Thank you so much. Handing over to the operator.

8:59 Thank you very much. We will now begin with the question and answer session. Your first question comes from the line of Mohit Kumar with ICICI Securities. My question is on NAVA Power. Can you help us with the revenue adjusted EBITDA NAVA Power for Q1 and gross debt on the Torrent Power post the acquisition of NAVA?

9:52 So the Q1, we acquired on the June 25. So there is hardly five days of income we have booked, not for the entire quarter. So five days, I would say, EBITDA was about total I mean, very overall 15 plus profit we have booked in the in our result, not material amount we have booked because it's a five days operation. We have consolidated in our books of accounts. As far as gross debt is concerned, so it is around INR 6,000 INR 6,500 crores of gross debt, which is added in the books. Because of the Napha power project. About INR 3,000 crores is in Napha power and about INR 3,800 crores in the Torrent Power Group.

10:41 Understood. And is it fair to expect that now probably at INR $2.50 crores core EBITDA per quarter going forward? So on a yes, you are right. So on a steady state basis, around 1,000 crores of EBITDA should be a good enough number. Yes, exactly. Understood. My second question is... Yes, I understand. The CI call team... Yes, not on the reported basis because reported basis is... Adjusted EBITDA. Yes, adjusted yes. The second question is that can you help us with the reason for lower contribution to EBITDA of renewables in this quarter despite 30% increase in generation?

11:28 I'm talking about EBITDA, which is which was which you reported in this segmental. Yeah. I see only INR 20 crore incremental. So different, sir, you can see this number. But if you look at recollect that the last year last year similar quarter, we have a income about INR 47 crore of the LPS claim was available, which was not available in the current quarter. That is why you are seeing the differential number really is lower. Otherwise, on a stand alone basis, number is higher as far as EBITDA is concerned. That's on the RE side, right, sir? RE side talking about? RE side, yes. RE side, I'm talking about. Understood, sir. My last question, of course, I think you spoke about your capital expenditure program for FY 2020 INR 10,000 crore.

12:14 But how much you incurred in the Q1? Q1, we have total incurred. So around INR 1,500 crores was incurred in Q1 for renewable projects. For the project? The RE project. For the RE project, yes. We haven't spent anything on the coal, nothing on the PSP in the Q1. That's right, Thermal basically coal, we have INR 125 crores. INR $1.05 crores. Understood. Very helpful, sir. Thank you, sir. Thank you, best of luck, sir. Thank you. Your next question comes from the line of Satyadeep Jain with Ambit Capital. Please go ahead.

13:01 Hi, thank you. First of all, wanted to understand, I think, your demand across different distribution centers. While Ahmedabad, you registered 10% volume growth Y o Y, the Surat, the other Nagar, the all these other licenses and all had very muted growth. Just trying trying to understand what was happening in these regions when overall at the all India level, we had a very strong growth in the quarter. And the AT and T losses also increased in all these almost all cycle AT and T losses increased substantially, both demand and AT and T also? You Amdavan is a benchmark, I would say 10% is a growth, which is comparable with the country's average, I would say. Industrial town always growth will be not comparable with the overall demand growth, I would say.

13:52 The hedge is also industrial area basically. So it's comparable to the Torrent growth. E and S, DDES, there is some lower demand is exceptional case, I would say. It's not a repetitive kind of an HR. In terms of AT and T losses, I would say, in Agra particularly, the last year similar quarter, have we got some good realizations from our Agra become limited. But past realization we got, which has reduced our AT and C loss substantially, which is not the case in the current quarter. So that is what the difference I would say in AT and C losses. Otherwise, government in our S and P is not materially different, I would have compared to last year. Agra is a main there is a substantial difference in the Agra, mainly because of the higher realization we have received in the comparable quarter of last year, which is not the case in the current quarter.

14:52 Okay. And so what was the I'm not sure if I missed it in the opening remarks. What was the merchant EBITDA and energy EBITDA in this quarter? So differential lower profit is about INR 87 crores, like what we have said. We sold about four forty five MUs in the merchant market in the current quarter. And this was largely in high demand market? Yes. Yes, yes, yes. Okay. Just trying to understand how do you look at this market given have a large entire capacity and many players are adding battery and given the merchant best installation that we see for this year and projections, do you see a case for any risk? How do you evaluate merchant gas If potential for you look at the demand pattern in the country where the peak demand and the summer demand will always be there. And now the peak demand period is also prolonging, I would say. So during the evening time and the summertime, we keep on getting this opportunity in the merchant market for our mutualized capacity and kind of capacity, I would say.

16:07 So being when the gas price becomes normal, we will keep on getting more opportunities are going forward, I would say. Lastly, on some... There is some delay in one FDRE project, it seems, and some other project also slight. I know you're talking about 1.2 gigawatt in general for this year. But are you seeing any delays on the s... These are all... Some of these are your own discounts. Have... Seems like STU... Are you seeing some delays in STU commissioning and the latest estimate you have for 1.2 gigawatt? What kind of visibility do you have for transmission availability? So as you know, as you aware that the these all this project connectivity really means transmission line availability basically, Commission of the transfusion line, onward transmission line is bit of a issue and some of them because of the ROW issues, which we are trying to work with the transfusion ability to ensure see that they should come their project on time to that our project progress should also align with them, their time line.

17:18 And, Sattarib, what we have said is after factoring in all those issues, so our expectation is that we should achieve this target, what we have given. Now if something unfortunate happens, we'll update you on a quarterly basis. But this is what we feel that is a reasonable estimate right now, looking at the current scenario. Thank you. Your next question comes from the line of Sumit Kishore with Access Capital. Please go ahead. My first question is in relation to your 1.2 gigawatt peak commissioning target. What kind of phase out are you expecting of project commissioning after 70 megawatt in Q1?

18:10 Is it actually to be more Q3, Q4 heavy? Or is there any payout that we should be mindful of? So we expect about though first quarter, our commissioning was 70 megawatt. But by Q2, we expect about 400 megawatt will get commission and the balance will happen in H2, I would say. That is what we are progressing. Okay. So H2 will be about 800 megawatt peak and H1 is 400? Yes, exactly. Okay. And we were reading in the media that your Amgen plant is supposed to be sort of shifted to another location, and in due of that, you'll set up a 800 megawatt replacement power plant.

19:02 Is there... What is the official... What is your version of what has... Developments have happened so far? So Amgen power project is about three sixty two megawatt capacity. And it is... We have a permission to ramp up to December 2030. And what has happened is since after December 30, it's not going to be in operation. So we have expresses and it's basically plant available for Tamdao distribution. So we requested state government for the coal allocations. That was the coal allocation of capacity of three sixty two megawatt. So that coal state government has approved the coal allocation, but they have requested the central government for the coal allocation. Once the central government approved the coal allocation for this plan, he plans to set up about close to about 800 megawatt unit to replace the engine power project. That is what the plan is.

19:59 So has the land for this plant been or located to you? No. I think it... We are working out on where exactly to place the plant. So it may not be in in Gujarat also. So so we are working on that where where this new plant will come in. Work in progress kind of a thing right now. But core allocation is being done by the state government. We offer the central one for the allocation. Once the allocation is available, then we form up our plan and implement one year by 800 megawatt for the two degrees of engine power project. Quarter on quarter, we have seen some movement in your RE portfolio, mainly around C and I projects.

20:45 So what is your general outlook for the year in terms of how your portfolio for RE will build up? Is there any traction that you are seeing in terms of bidding activity... Tendering activity for RE projects? Your thoughts here will help. So we are participating almost all the project, but as we as you know, our philosophy restrict our meeting at some point of time so that we can actually that you meet in IRR. So that is what the philosophy we continue to add up going forward also. I mean our benchmark will be the IRR, not to acquire the more and more capacity. So that is what philosophy we are following, and we continue to follow that philosophy going forward. Our next question comes from from IIFL.

22:01 Please go ahead. Hi, sir. Thank you for the opportunity. Sir, I want to know your thoughts on a couple of things. First of all, on this increased competition from batteries. I think you touched upon this a little bit earlier as well. But where do you see the marginal cost of gas power settlement sort of heading towards given the price at which probably batteries can supply electricity? And also secondly, I would also like to know your thoughts if we have any plans of entering the T and I space. So I think, Apurva, there are two questions here. So if you are asking the levelized cost of energy battery versus gas power plants, right? So now with this elevated gas prices, the cost of variable cost would be higher for our LNG merchant power plants. But if you look at the slightly in a short term or a long term horizon, we expect that gas prices should settle somewhere in the range of $5 to $8.06 dollars to $8 per MMBtu. Now if that is the scenario, your variable cost could be INR $4.4.5, which is very competitive even compared to battery also because I think INR 2, 2.5 of solar cost plus if you add INR 3 of battery cost, that would be INR 5, 5.5 of battery storage solution cost. So I think we are confident enough that our gas based power plant, particularly in merchant markets, would be highly competitive.

23:30 That is the first question, if I'm not wrong, right? I think on the second part, if you can just reiterate what was the second question. Right. So second question is on your views regarding the C and I market, the corporate market. Even for your open gas project, is there any plan to maybe tie it up with the data center to supply sort of firm power or any of those thoughts? So, Apur, I think as far as gas based power plants are concerned, with C and I segment, I think C and I segment would want renewable power, be it on RTC or anything, they would want a renewable power. So gas may not fit into that category. On as far as data centers are concerned, so we are looking at those opportunities.

24:17 As of now, there is nothing concrete as to tell you on data centers where we can tie up our gas based power plants. But again, data centers also are looking at more of renewable energy. So scope of that is slightly lower. And also on an economic side or commercial side, if you look at it, I cannot hedge my gas based prices gas prices on a long term basis. So if they do an PPA for a long tenure with a fixed price, there is an inherent risk, which I'm taking by locking in my tariff. So I think as of now, in our short to medium term, we don't see tying up gap with power plants on a merchant sorry, on P and I or on a data center basis. Sure, sir. Understood. Thanks a lot.

25:06 Thank you. The next question comes from the line of Shriyam Kapoor with Jefferies. Please go ahead. Hi, sir. Thanks for the opportunity. Just firstly, on your renewable segment where a previous participant also asked about the lower EBITDA year on year, you mentioned that we had some favorable claims from last year that is not available this year. Are we is that could you maybe quantify how much that was for the full year? And is that going to be absent for this entirety of FY 'twenty seven? As in is this a fair run sort of quarterly margin rate to assume for the balance of the year? Are we going to see it reduce each quarter? So Shirom, I think we will not be able to give you guidance for the full year. But if I tell you on the absolute basis, this year, the profit was around higher our EBITDA was higher by around INR 66 crores, which compared to previous year, there was a LPS income, which was booked previous year, which is INR 46 crores. So if you remove INR 46 crores, then the EBITDA is higher by INR 66 crores.

26:14 Right. So and entirety of FY 'twenty six, could you quantify how much was that LPS gain, which might be after in FY 2020 yes, for the full year? For the full year, this was the number. So in Q1, there's LPS of INR46 crores and for the full year also was the same number. Understood. Got it. Got it. And just secondly, on your the capacity pipeline that you shared in your presentation. For quite a few of the projects, it seems that you have maybe delayed your expectation of when the plants are going to come up. For example, SEK 12, SEK 16 wind, they've been slightly extended into FY 'twenty eight as well. Similarly, for your some of your hybrid projects, could you explain what is driving this delay in capacity addition plans? Is it maybe transmission infra?

27:11 Is it some any other delays, if you could explain that? So it is mainly because of transition availability, because of the we plan our execution based on onward transmission line. So it's going to have the transmission line. And transmission line, basically, where large like PTCRs and other players are developing. So we plan our execution in a way so that we can there will not be any CapEx, which will be ahead of the CapEx spending not ahead of the transition line availability. Understood, sir. And just if you could share a couple of bookkeeping details here. One is, I know you said Nabha Power plant was only operational for six days, but if you could give sort of an indicative PLF for those six days, how much that was?

28:04 And just secondly, on your expenses, basically, we're seeing your employee costs have actually come down year on year. So is there any reason for that? And are we expected to see employee costs further reduce year on year in the subsequent quarters? See, Nababa, about your first question about Nababa pre ALF, quarterly we are about D and A over 85% PLF. So that is what generally the PLF level of Nababa was it. Regarding the reduction of salary cost, it's maybe a one off item, but maybe because of the capitalization, we have capitalized more salary cost. There is no other specific reserve that's why it is continuing to go coming down. Right, sir. Got it. Thank you so much.

28:54 That's it. Thanks. Thank you. Next question comes from the line of Atul Tiwari with JPMorgan. Please go ahead. Yes. Thanks a lot. Sir, on the LNG availability and pricing, what is the kind of availability you are seeing? I believe you had indicated that you had contracted a few cargoes in the last call. So are they coming through? And what is the landed price currently? So three cargoes, which was contracted for the summer meeting, summer demand was already acquired and getting used also. So as for the balance of the year, bank on the basically the spot cargoes. So we are banking the spot cargoes. So we as and when the opportunities available, we import cargo on a spot basis.

29:47 But the next roundabout, yes, we have a contract of 10 cargoes available. So which will be at a link with the brand rate, not at the spot prices. Spot prices is higher at about 20 kind of a thing. So it is not affordable. So we plan our purchase in a way that it is affordable to the consumer. And we can able to get better margin basically. It's affordable in the merchant market also so that we can have a reasonable margin available in the merchant market also. So this year, only it's a merchant market we are looking at, so whatever summer demand was there, we have completed we have on the road summer demand by these imported sea cargoes. And as well as availability is concerned, there is no issue of availability. It is a question of what price those cargoes are available.

30:36 So if required, we can import as many cargoes as you want, but the issue is of the price. So we keep on looking at what is the demand and what is the price which can be absorbed under our PPAs and under the merchant market. Okay, sir. And sir, what are the CapEx in the first quarter? I missed that number. I think you said it. Our total CapEx is about 2,300 crores, all put together. Auto build renewably INR $15.50 crores and thermally CapEx is INR 125 crores and transmission is about INR 120 crores and light distribution is about INR 500 crores. Thanks. Thank you. You. The next question comes from the line of Harsh Singh with Samiksha Capital. Please go ahead.

31:31 So just one thing, sir. I was part of the franchisee distribution business. Is there any significant pipeline in terms of new business? No, no, no, voice is not audible. I'm audible now? Yeah. You can you can go ahead. It is still the same. If I can request you to use the handset, please. Yes. Exactly. Sir, echo is coming. Am I audible now? Yes. Yes, sir. This is much better. Understood. So thank you for taking my question. Just one thing. So on the franchisee distribution side, is there anything in the pipeline in terms of any new franchisees that the UP or the partner, anything that you could provide there in terms of guidance? I think UP will come post election only.

32:18 So they have tried to they have attempt to do it before election. But I think considering the agitations and all those things, I think it is post election, UP election. As you know, is a state subject. Think it's there, but we expect something will come possibly in the midst of Maharashtra. Otherwise, there is no concrete things, I would say, in the franchise right now. Understood. Thank you for having me. No other questions from me. Thank you. Your next question comes from the line of Vishal with PL Capital. I think this is could be linked with the previous I mean, one of the questions participants asked. So so plan that is is on imported LNG.

33:15 And in this quarter, we also reported a PLS. Though it's a lower PLS, but we are able to generate and sell power. So so, I mean, like, you know, at a $20 MMBtu, are they still buyers, takers? That's why there's a P and L? Or or cargo is we are getting at a lower rate, and that's why we're able to sell. So just to take our perspective on this. So if you look at $20 your variable cost will be about 13 rupees kind of a thing. So though it's very difficult, I would say. But since we have our old cargoes available, we are able to buy at a competitive rate bits and pockets, would say, which will help us in targeting the merchant market, peak demand, which is kind of a thing. Basically, it's about demand and peak demand kind of target market.

34:04 We are able to sell at a much higher rate and on our contribution in the on those market, right. So $20 a bit quite challenging, I would say, this rate. So I think, Vishal, just to add, at $20 you can sell in a high demand market, not in the regular market, which is a cap at INR 10. So we have been selling in the high demand market, and we have been getting better realization. This is doable because we have made a lot of flexibilization in our plants, wherein frequent start and stops can be done and can be run on a cyclical basis. So our variable cost would be higher, but at INR 20, we were able to serve the high demand market, but they will not give you an opportunity to work at a very high PLF. This is around two, three hours of every day, two, three hours, you can get that pricing.

34:52 And certain slots also, slot on a continuous two, three hours busy. It's a very challenging $20 to sell at a self powered at $20 MMBtu is quite challenging, I would say. Okay, okay. And then the cargo that you have mentioned, so at what rate we are able to get it? Or are we exhausted or probably, I mean, is there and then we can have still maybe like mid teens sort of PLF in quarter two and three and going forward as well? So Cargo was mainly for our distribution business. So for making the summer, Dima. So but though any opportunity available, we keep on buying in a small lot, not in a big cargo full cargo kind of a quantities. Okay. Okay. Okay.

35:41 Sure, sir. Nothing. That's that's all from my side. Thank you. Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you, everybody, for joining Torrent Power earnings call. Stay safe and healthy. Thank you so much. Thank you. On behalf of Torrent Power Limited, that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines. Thank you. Thank you.