Sterling and Wilson Renewable Energy Limited (SWSOLAR) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sterling & Wilson Renewable Energy Limited Q2F527 EARNX 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 on date of this call. These statements are not the guarantees of future performance and involve risk 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 than zero on your touchstone phone. Please note that this conference is being recorded. Today on this call, we have Mr. C.K. Thakur, Global CEO, Mr. Ajit Patap Singh, CFO from Serling and Wilson Renewable Energy Ltd., and SGA, who are their IR partners.

Thank you, and good morning, everyone. Thank you for joining us to discuss the results for the second quarter's first half of Fiscal 2027. As we flagged on our last call, the first half 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 what is to proceed. I'll begin with where the industry stands today, because it shifts both our opportunities and our discipline. I'll then cover our operating performance and outlook, and Ajit, our CFO, will take you through the financial updates. I'll just touch upon the industry overview. India's renewable energy journey continues at an extraordinary pace. Renewable and large hydrocapacities stood at about 308 gigawatts as of September 26, roughly 53% of the country's total generating capacity. Solar remains the engine of this growth. 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 first half of this year, 38 percent more than a year earlier, And full-year additions are expected to be in the range of 50 GW DC, ahead of the record 49 GW set in 2025. That said, the near-term has been more challenging. Two factors showed new utility-scale awards in the first half of the year. A third-factor competition has influenced how we did. First, the shift to domestic solar cells. Since June 2026, projects must use modules made with Indian cells as per ALM2. India has over 200 gigawatts of module capacity, but about only 35 gigawatts of cell capacity. So compliant models are scarce and costly, may raise project costs by around 15 to 17 percent. 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. Each prices and restored award activities. In the long run, it will give India a stronger and more secure purchase agreements and transmissions. About 40 to 50 gigawatts of awarded renewables capacity is still awaiting for signed power purchase agreements, being curtailed in some parts of western India because of grid limitations. As a result, projects pipelines in Nazareth and Gujarat have been living in landscapes. We saw similar cycles in 2011 and around 2015-16, and disciplined experience players came out stronger each time. The government is now acting firmly on some of the issues related to transmission bottleneck. On 30 September 2026, the Cabinet approved Green Energy Corridor Phase 3 with an outlay of around 1.86 lakh crore. This includes 6 lakh crores from the state's transmission networks with central support of around 54,000 crores. It aims to connect up to 135 gigawatts of renewable energy to the grid by financial year 2033. 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 of construction. These measures will take time to deliver, but they directly address the transmission bottleneck that is holding back PPAs and new hours. Of course, the blue side of this circular has to be seen once the high 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 loop is also robust. The Cricill 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 26, up from about 5% per year. 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, actively monitoring the best opportunities and are selective in bidding new best projects. Battery prices have risen in 2026. After years of decline, the non-stick 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, revenue was 527 crores in Q2, and it is 3,118 crores in the first half, about 11% lower than H1 FY26. This decline is primarily from our international businesses. International revenue was 165 crore in the first half, compared with 929 crore last year. Our four older international projects in South Africa, Spain, and Italy were completed, and the new ones are at the start. Meanwhile, our domestic businesses grew. Domestic EPC revenue in H1 FY27 rose about 13%, which is 2,768 crores, and O&M revenues in H1 rose 48%, 183 crores. The lower revenue, therefore, reflects the timing of international progress. In our order books, four in India and four overseas are yet to start. Since contract timelines start only from LOI to NTP, these delays do not expose us to potential, to penalties or bank guarantee risks. 30th September 2026, our order book stood at 12,481 crores, about 34% higher than a year ago, and up from 11,813 crores in March 2026. The order book is diversified and well-balanced, with about 56% from India, that is rupees 6,943 crores, and 44% from international market, that is rupees 5,538 crores. We own orders worth rupees 3,626 crores in the first half, 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. 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, executions bandwidth, and right partners. Q2 finance year, year 2027, order wins and pipelines. In Q2, we own two orders, worth over rupees 985 crores, including taxes, as announced in September 2026. We own a 534-megawatt project in Rajasthan. It's a balance of systems order from leading Indian ITP, who is a new customer for us. We own a 616-megawatt project in South Africa. It constitutes two battery storage projects of 308-megawatt each on a turnkey basis from a leading Middle East-based developers and repeat customer. This is our second largest utility-scale battery project. These wins add to the contract we signed in June 2026 for the West Mania projects in Egypt. This is a 1,000-megawatt AC solar plant with 600-megawatt hours of storage, worth about $560 million, which will execute through our 50-50 joint ventures with Hassan Amman Construction. We expect it to start contributing to revenue. Our work orders work under the five-year framework agreement with the Adani groups also continues as planned. Our floating solar projects at Tulaya 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 From this experience, positions as well for upcoming floating solar standards from NDPC-DVC and DVC alone and several state governments. Looking ahead, our solar bid pipeline, excluding battery storage, 4 gigawatt from 27.7 gigawatt last quarters. About 74 percent of this is in India and 26 percent overseas. Battery storage bids are in addition to this. We see bidding opportunities worth about US$45,000 to US$50,000 across solar and storage in the second half of this year. Now coming to projects from Reliance Group. Our work with our promoters, the Reliance Group, continues to depend. As Reliance has publicly announced, it's building one of the world's largest integrated renewable energy hubs in Kach, Gujarat, Combining solar power with battery storage at a 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 within robust margins. Our international order book now stands at Rs. 5,538 crores across Egypt. Execution starts in the second half, and international revenue is expected to rise significantly. Now coming to our operation and maintenance business. Our O&M business continues to grow strongly. Our portfolio has reached a record 18.9 gigawatt, up from 13.5 gigawatts in March. O&M revenue grew about 55% to Rs.99 crores in Q2 and 48% to Rs.183 crores in the first half. This business gives us a steady recurring income with low overheads, FY27. We are maintaining our guidance of up to 10% revenue growth for FY27. We are confident for three reasons. First, eight projects in India and overseas will move into execution in the second half. Second, execution will commence on our international order book of over Rs. 5,500 crores with the West Mania projects in Egypt as the key contributors. Third, we have done this before. In Q4, FY25, we delivered revenue of over 2,500 crores in a single quarter. We expect Q3 to be clearly better than the first half and Q4 to be our stronger quarters. We expect EPC gross margin of 8 to 10 percent depending on the mix of term key and balance of system projects and O&M gross margins of around 20 percent. We expect our order book to remain above which is 10,000 crores 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 is consolidated, we believe this discipline will set us apart. With that, I will hand over to Ajit for the financial performance.

Thank you, CKD sir, and good morning, everyone. The revenue from operations for Q2 FY27 was Rs. 1527 crore, compared with Rs. 1749 crore in Q2 FY26 and Rs. 1590 crore in Q1 FY27. The Mystic EPC contributed Rs. 1366 crore, International EPC Rs. 62 crore, and O&M Rs. 99 crore. First-half revenue was Rs. 3118 crore, compared with Rs. 3510 crore last year. As CKD said, the decline was predominantly due to lower international revenue as older projects were towards frag end of completion and new ones are yet to start. Domestic EPC revenue grew about 13% in the first half and O&M revenue grew about 55% in Q2. Gross profit for the quarter was Rs. 140 crore. Gross margin improved to 9.2% from 8.9% in Q2 FY26. For the first half, gross margin was about 9.5%. 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 system projects and better gross margin, momentum gross margin was about 23% this quarter, and we expected to settle at around 20%. Operational EBITDA, which is gross profit minus recurring overheads, was Rs. 56 crore, a margin of 3.7%. This compares with Rs. 62 crore at 3.5% in Q2 F526. Recurring overheads were Rs. 84 crore, about 11% lower than Rs. 94 crore a year ago. The reported EBITDA, including other income, was Rs. 66 crore, compared with Rs. 96 crore in Q1. Profit before tax and profit after tax were both Rs. 17 crore, compared with the loss of Rs. 478 crore in Q2 FY26, and a profit of Rs. 53 crore in Q1. First half profit after tax was Rs. 70 crore, compared with the loss of Rs. 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 U.S. arbitration outcome and related provisions. On an operating basis, first half operational EBITDA was Rs. 134 crore compared with Rs. 184 crore last year because of lower international revenue this year. Our recurring overheads have stayed within between 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 second half, 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. Net working capital was negative by Rs. 301 crore as at 30 September 2026, compared with negative Rs. 260 crore at the end of Q1 and negative Rs. 329 crore in March. Receivers including unbilled revenue stood at Rs. 3005 crore. Receivers days increased to Rs. 176 from Rs. 138 in March and payable days increased to Rs. 164 from Rs. 135. Gross borrowings fell by Rs. 244 crore in the first half to Rs. 920 crore as we repaid term loans as scheduled. With cash and bank balances of Rs.319 crore, net debt was Rs.601 crore, broadly unchanged from Rs.589 crore in March. Shareholders' equity rose to Rs.719 crore from Rs.651 crore. Most of our existing term loans will be repaid over this year and next year. Our banking relationships continue to remain strong. We have secured over Rs. 3,000 crores of new credit lines, including local lines in South Africa during the current year. And 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 settlement with a 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 156 crore under indemnity in the current year from the promoters. To sum up, the first half was a transition period for our international business while domestic EPC and O&M continued to grow. We are well placed for a strong second half with an order book of nearly 13,500 crore, 8 projects moving into execution, a growing O&M business. With that, we can open the floor for questions. Thank you.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 from the line of Samir Dalal with Dr. Lal and Sun Stockbroker. Please go ahead.

Yeah, good morning. So, honestly, not very impressive results, and I wanted to ask you this question up front. You know, 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, Maybe the customer is not able to get the land or whatever he's supposed to do, but it keeps getting delayed, and because of which, what's happening is our profitability is getting affected. I know you've 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, and then, you know, by the end of third quarter, 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. So what exactly is the problem? Why are the new projects, which you said, the four in India and the four in the international market, not starting? What has been the delay for that?

Yeah, thanks, Samir. If you look at the EOB 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 Colindia that we announced, and two projects from NTPC. Normally, when the projects are being announced in the 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, right? 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-off the Q2. That's region 1. The four projects in the international market, so that NTP was supposed to be somewhere around, let's say, August, and 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 has come from Egypt, Mania, they are the short gestation project and the project is moving. The entity 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, I mean, the right way, this. Yes, but yes, so I do agree with you with the large orders. So I was just telling that had these new projects been started, sometimes in the middle of the quarter too, the results could have been better. But having since 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 the Q1 only. And we are here. We are here. We are in the range of Q1 only. So, going forward, I mean, 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.

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, you know, that we can maintain our cost at the current level, and as the top line goes, the operating leverage will play out at the, I mean, this is at the central office, right, at the headquarter. But we're seeing that this is continually rising. Now, where do you see it stabilizing for FY27 and FY28 from 300-320 crores that you all do? Where do you see it going over the next maybe two years?

I think if you see the recurring over, if you're 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, so as a percentage of revenue, it looks high, because around 5.5%, and the moment revenue will increase, this cost will remain the same, and we expect it to be in the range of around 4.5% for the current year.

Fair enough, but no, once you said that you are waiting for the Reliance orders, so 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? And, of course, the question that eventually lies is, by when do we expect Reliance to actually give the orders which we can start executing?

So, majority of the cost will be at the site, which will be part of varied cost from the Reliance orders also. There will not be any significant increase in overhead cost.

And if you can just give us a particular date, then that's the last question I have.

No, so basically, this we discussed last time also. So, from the overhead side, I mean, the implied cost and all, and the other expenditures is only part of the project cost, which would be part of, you know, the overall project cost. So, to that extent, some addition would be there at the head office, but proportionately it will not increase our button, because the revenue also will be coming. When the project will come, I'll maintain the same status, because the site readiness work is going on. And post-monsoon, the work is supposed to be started. So it is just on to the final leg of, you know, the finalization of some of the technologies on the tracking side and all. So I'm not in a position to give you much details, but I can tell you that now this is almost at the flag end of the, I mean, the planning process and the work. You can see the, I mean, some good news you will, I mean, hear out soon. That's what I can tell you at this stage.

Okay. Thank you very much.

Thank you. Next question comes from the line of Disha from Safire Capital. Please go ahead.

Yes. Yeah. Okay. So, a couple of questions. Firstly, so we've still maintained our growth violence at ground percent. So, that would mean that we need around 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? And what numbers are we targeting? Because that will give us better clarity.

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 first, the Q1 was little subdued, Q2 also because of various factors, non-moving, PPA adaptions, all those factors have affected new projects not to get started. But Q3 and Q4, because the international projects have already taken off, so I am expecting the traction to increase more. So for sure, the Q3 and Q4 will not be in the proportion of 2,600, 2,600, but Q3 will be better than Q2, and the Q4 will be heavily loaded.

And so we don't see any risks to the replication, right?

So, basically, we are pretty confident of our ability to execute the projects. Why it has impacted me, 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 am expecting the four stalled projects in India and few ITP 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 deleted 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 other four. So, unfortunately, this is not only with us. The entire EPC community and the whole industry, India, Indian industry, and the solar sectors have been impacted because of the reasons. The reasons, two reasons, one that I have told in my opening remarks also, that the settlement in Rajasthan and Gujarat that have slowed down the order, the inflow from the IPPs and even for the PSU, the requirement of and obligation of the BES systems to be installed. The desk is now mandated to be with the domestic, Indian make kind of things, but you don't have the self-production capacity. With this mismatch and understanding, people are quoting, I mean, any crazy prices, the orders you must have seen, they have been all terminated, right, the contractors could not, it should dissolve. So, the developers are also becoming very careful that, I mean, you can have the wish list for a number of things, but Indian industries are not supported. So, although the pipeline, the requirement, the development plan is already in place, but on the overall execution side, all these technologies and other things are taking time, which is not specific to the industrial industry alone, but it is specific to the industries. Right.

And so for the international projects, do we see a major margin differential between the domestic and the international projects? And if so, what is the differential?

So, see, so domestic market margin is always under pressure from the fact that in all the solars and the best projects, there is no entry barrier, right? Right. So anybody and the outside some of the business infrastructural projects also, they feel that Sorrel being vanilla projects, they can earn a lot of money. And without understanding the efficacies of technologies, the supply chain disruptions and all, they are entering into the market and they are quoting any price. Right. And therefore, we have seen that despite the fact that, I mean, good amount of contracts have been finalized in H1, but none of the government conditions we are there. Because it has gone below the, you say, from our appetite point of view, it has gone below the cost, right? And then people have taken. God knows how they are going to execute, but we have been keeping away from all kinds of decisions. What I said, in 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, right? So that has created the margin. Of course, for us also, I mean, we have to sustain, therefore, the margin that we expected, right, The domestic market would be lowering down because you have to take a business call and you have to survive. So, but not to the extent that people are doing, then strategically you have to move from domestic to international market. And therefore, you could see that despite the fact that we thought that this year we will be around 70-30, domestic and international, but we are even more. We have to see it skewed towards international. Why international margin is more? Because the market is stable. People understand all those things in the 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's a turnkey project, our absolute number will be more than the domestic margin.

As the execution also scales up in the second half, can we expect for this entire EBITDA margins to be in the range of 4, 4.5%?

Yeah, I think that's the minimum requirement that you have to maintain, right? Yeah, yeah.

And so what about those O&M revenues that you're expecting for this entire year?

10-20%, in the range of 20%. So revenue, you're asking?

No, revenue, revenue, okay, sorry.

O&M revenue we expect in the current year should be more than 400 crore.

Okay, okay. And so, this IGIA project that you mentioned that we are starting to expand revenues from this year itself, why, when exactly do we expect this revenue to come in by Q3 or be more skewed towards Q4? And what sort of amount are we planning to book for this year or for the next year? And what are the margins for this project?

So, the BINIA project is for, let's say, around 14 months, right? And the NTP has started. So, let's say, 40% of the time to go for this financial year. In the similar proportions, Q4 would be heavily loaded for the supply to commerce. So, I'm expecting that, I mean, good margin to come from these projects, and Q1 and Q2 net financial would be the completion dates. So, that's the reason that I say that the Q3, Q4 of this financial, because of MINIA, definitely would be loaded. Margin is a pretty good margin, so we are around, on the overall turnkey lap, it is more than 8%, more than 8%.

Thank you. Ms. Desha, please reject the queue for more questions. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Faisal Hava with HG, Awa & Co. Please go ahead.

Sir, when do we see the overall our banking situation coming back to normal where we can issue BDs at will and our credit rating also improving? That's one. And 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 Khawada?

So, I will come for the order positions and then Ajit will address your banking position. So, as you are aware that we have been into the framework for five years. So first year was around 1.2 gigawatt, and the RSQ for the next 1.2 gigawatt has already come to us, and 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? So that is on to the Adani side. Reliance side, it's premature to tell you that how much order will come, but we believe we would be the very, again, for the preferred CPC partners, and we're stepping the large number of order to come through us. But I mean, unless it comes to us, I can't come to you, right? But then, yeah, it's going to start soon.

So, on the credit line side, last year we have added from the banking system around 1,800 crore new credit lines, and in the current year we have added till now around 2,800 crore new credit lines. So basically put together, if you see last year and current year, we have added around 4,600 crore new credit lines from banking system, and over and above, more than 700 crore from surety bonds also we got. So we are sitting on a pretty good position in terms of our working capital requirement for non-fund based limits, banking, 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 a very comfortable position in terms of our bank guarantee requirement and asset requirement. Our current utilization of the credit lines is around 70%, so that gives a 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 upgrade earlier. And the movement will probably have reliance orders or any other large positive news, definitely will go back to the rating agencies for review of the rating.

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?

No, so 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. And now what we see the trend getting reversed is that from all the PSU companies, the large-sized 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, and then we have a better opportunity to get into. So that would be the kind of scenario in maybe the Q3 and Q4, the next huge pipeline that I have already told is projected. So 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. These orders that they had bagged at the, I mean, very, we'll say 50% discounted price from the battery cost. When the battery cost was, let's say, around 75, 80 US dollars per kilowatt hour, their tender price was around 45, right? And then it was a non-moving kind of orders, and therefore, I mean, the order was terminated. There are a few orders which have again been getting annulled because even despite the fact that they have taken as a low price, but still it's not coming for the hybrid tariff appetite for the developers. And therefore, some of the new schemes are being launched to import under the more schemes, and then you see that if you get the custom benefits, so that the hybrid price will come under these things. So all those things are, and frankly speaking, disturbing the best market and all those things. So I think all these consolidations for sure will happen, but this fiscal will probably continue like this, in my opinion. But the consolidation has to happen, otherwise it will be a serious problem for the industries. The 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 west side, the cell productions, if not maybe Q3, but Q3, Q4, but Q1 of the next financial, many large periods are doing. And then I can, and then the, your domestic cell capacity in the module side, they are increasing, so now it is at 35 gigawatts, it may reach up to 100 bytes, these things. 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, and you can see that the things should be in the right directions. Thank you. Sorry, 2026. So, for this financial year, at least, despite the fact that there are many ups and downs, but we will be around the guidance that are given to the market.

So, is it now time that we forget about the Nigeria order?

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. So, I mean, the last update was that it was to be taken by the finance industry, but you know how these African countries work. But then the new government coming and all, and the tariff war, I mean, every new day you take the news from our honorable U.S. president, right, every country, you know, they are all, how they are affected. So, this was a dream project from U.S., so, I mean, the project is still on, right, we are pursuing this. But, I mean, I can't commit you to the timeline at this moment.

Thank you. Mr. Hava, please rejoin the queue for more questions. A reminder to all the participants, please restrict yourself to two questions. Next question comes on the line of Jayesh Shiroff with Kask Capital. Please come in.

Yeah. Hi. Thanks for taking my questions. My first question is, actually, if I'm 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 your parents. So I'm surprised why management is saying that you're maintaining the guidance. And 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, it's a small point, but why has our finance expenses increased this water in spite of slower execution?

Now, second question, can you repeat, please?

Yeah. So, why has our interest and finance costs increased this quarter in spite of lower execution compared to Q1?

Okay. So, on your revenue guidance, I have already explained the overall industry scenarios, right? So, the way the last year, the last fiscal market was pretty stable, because that means the sales were imported from Chinese, Chinese sales were there, and everybody was up and up running, so everything went well. Suddenly, the implication of ALN 2 came, and you're mismatched between the module, I mean, the cell capacity in India and the plan that is being executed. On the best side, the obligation of the best installation came that was during the fag end of the last fiscal, and still being not manufactured, still people are waiting, I mean, the market to get to civilize. Now, you see, India make, but then everything is coming from, I mean, outside India, mostly from China. You have a land water close, that also is impacting. So with all those things, and then the developers are looking for the stringent guarantee and warranty condition. So what all 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 not, I mean, primarily to the developers for their programs to be launched as they thought of, and then, of course, the ETC company that have to follow them. So, 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 have not started. My expectation by that, out of the four projects, which was around 40% of our total order in hand, I had won 1st April 2026. So, there was no reason that I could have not gone up to the 15%. Now, since the project in Q2 also, they have not started because of the NTP not coming in. So, therefore, I am not changing. Maybe the support will come from the international projects. It will be quite possible. But at this stage, what I say that, I mean, since the projects have not started, the possibility that we should be able to maintain around 10% of the revenue.

So, it is actually a downgrade of guidance from 10% to 15% to 10%.

So, 10%, I mean, our range was 10% to 15%, I still say that 10%, it's not 0%, I'm not between 0% and 1%, it will be around 10%.

Okay, and this is X-reliance, if I understand this correctly.

For sure, for sure, yes, X-reliance.

And on the interest side? Yeah, in terms of interest scores, the cost has increased, primarily for two regions. As I mentioned, we have availed some new credit lines during this year. So, cost for that, and also the LC cost, we are now opening the LC for a little longer period, so that additional period for LCRs 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's almost a steady level, because our cash balance has come down.

Just one last thing. You know, I know a lot of questions have been asked on the Reliance order. I think Mr. Thakur talked of, you know, it being very imminent. So, and Reliance also in its last con call talked of starting the project post-monsoon. So, do you think that post this GeoIPO, we can see something from November onwards in terms of execution? At least, will there be some execution in this quarter?

I don't think that the GeoIPO 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, you know, all the reliance, what's the second issue? Every single bit of decision is being taken very carefully to ensure that the ROI on the investment comes, I mean, more than the industry expectation. So, it's 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 the annual general statements. So they are committed to commission something, right? So keeping all those things in mind, so we are also expecting the order to start coming soon. Things will happen now, this quarter for sure.

Thank you. Mr. Sharaf, please rejoin the queue for more questions. A reminder to all the participants that you may present. Please restrict yourself to two questions. Next question comes from the line of Nilesh Doshi with Prosperity AMC. Please come back.

How are you, sir? Very good. Very fine. 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 15.9 gigawatts. I would like to understand, is the complete portfolio is under the fees model, or we have some obligation pertaining to the EPC project or EPC obligation, and what is the O&M chart per megawatt for the domestic as well as the international project, and we are mentioning that our GP guidance for the O&M project is 20%. This means the ONM are really raw material intensive or labor intensive, because there will be some, so naturally, if the GP is only 20%, the EBITDA or EBITDA margin may be much more lower than that margin. And so last question, do the company receive the ONM charges up front, and how do we recognize the revenue every quarter, and what is the minimum period of ONM contractors? These are all questions related to the ONM only.

Okay, so great. So basically to your first question, so with the mix of the order book and O&M is now almost 50-50%. So when you say 18 hot gigawatts, so 50% is to our own EPC. I mean, we have the EPC contract. We signed the contract with two years or three years of O&M contract. And around 50% is from third party. Third party means our O&M business, they get the O&M contract from the other O&Ms, from the other developers, other developers, right? So, having said that, so this is the mix of, you know, the order proportions. The O&M business is, of course, labor intensive. It's not basically raw material intensive. So, we have to maintain certain spares that is sometimes the high-cost spares are being provided by the customers, and some consumables, some other things we have to maintain. On the costing of the ONM per megawatt, I think it will not be proper to, I mean, reveal this fact here in this call, but just for you to give to understand, this is all basically depending upon the scope. So, basically, they are all basically depends on the scope. So, scope means somewhere we have the transmission line, somewhere we have the substations, 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 pricing mechanics. And with this, international is doing slightly better, of course, because our margin appetite in domestic, as I have told you, is almost 35-40% higher than the domestic market margins. Right. So, there is no upside risk in the O&M business, right, 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.

And one of the questions you raised on this, OREX, in O and M, OREX are very minimal. Very minimal, yeah. Cross margin generally will convert to EBITDA with very minimal change.

So, it means the labor cost is a part of the GP margin because you are considering the after- Okay, sir, once the EPC project is completed, O and M contracts start, and we are charging 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? And then you have the DVO 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. They have to only operate and maintain, and they are mostly, you know, the manpower intensive contract. So, that's how this O&M contract is operated.

Thank you. Mr. Doshi, please rejoin the queue for more questions. Next question comes from the line of Soro Srivastava with Arista Consultant, Priskabar.

Sir, it's regarding the OEM only. First of all, are we also bidding for the OEM in international circuit? First question. Second, is there any underbidding in the OEM in the domestic market also, sir?

No. So, the first question is, yes, we are bidding for international OEM business, And we have got one third-party O&M business in Saudi Arabia last year. We are about to close the project from the other geographies. I have not revealed the fact now, but yes, it is on the final stage. So we have our international division for the O&M business as well.

Your first part, yes. So as I have told you that the business model is mixed from the one EPC versus third-party.

So third-party EPCs, because of our high credential in the O&M business, So, I've seen that here, I mean, you, normally you are approached by the client for the performance of the O&M team that we have and the new spreads, right? So, we don't see major challenge in, I mean, grabbing the orders, and that's how we have, phenomenally, it has grown from 11, 12 gigawatts to now 18.5 gigawatts. This year, I'm expecting another, maybe, I mean, 25% of this, by the year end, I'm expecting it will go around 22, 25 gigawatt kind of fees. So, that's how it runs.

And, sir, what kind of revenue mix do you see a couple of years down the line of this OAM business in the total business, sir? Or rather, in the total net profit, in the total bottom line, sir?

That is not the right comparison because, you know, the overall margin and, you see, comparison…

Or on whatever metrics do you feel like? What sort of…

This is a steady business. Like, I could say that now we are at around 200 crores. We will move up to 400 crores, right, in the beginning of next year. And then 20% is the margin. So, if you see that our project margins and then on 420%, let's say it comes to 80%, 80 crores, right? So, it will not be right to compare, but then we can understand that, I mean, on the business size of, let's say, 400 crores 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 the right comparison to say that in overall margins will be what? Because the cost, our, let's say, your EPC cost is, say, 1.5 crore per megawatt peak, whereas the O&M cost comes to be, I mean, what? I mean, 1 lakh, 1 lakh 50,000 per megawatt peak, something like that, depending upon the scope and all. So it's a huge difference. It will not be the right comparison. But it will be the steady margins coming in from this office.

I was telling in terms of revenue mix, as you know, it's around 5% of our revenue. Going forward, it may be in the 5%, it may increase to up to 10-10%. Because this will continue to increase, and if PPC business remains stable, it will continue to increase.

The reason for asking this, a lot of parts 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. And what sort of net margin do we settle down for this OM business? Roughly?

The gross margin is around 20% and as I mentioned, over rates are not much in this business.

Got it. And then my last question. Sir, what sort of international geographies are we looking for than new geographies?

So, one that wherever we have the O&M project from our own EPC, for sure that geography is our target. Like we started from Africa, and Africa first project is doing very good. So the contract is also very unique. We have the bonus cost. So if we perform better, if the yield and generation becomes better, then we get also the share of that profit. And year on year, we have been getting fantastic bonus from these orders. So for Africa, like we understand this market, we have done the Jambia, Namibia, South Africa. Africa region is our focus. Then we are now into Saudi Arabia. Saudi Arabia is a huge, you know, the capacity addition being happening, you may be knowing So at right times we have entered into this market. So gradually we will expand. Now we are doing two own EPC projects, basically one in Spain and other in Italy. So that means we are open to the European markets as well, right? And we have experience in Southeast Asia also, but primarily the reasons we are known and we have our presence, that would be the, I mean, basically the reasons for our choice.

Thank you. So, 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.