Category
🗞
NewsTranscript
00:00Capacity addition, higher merchant sales, higher EBITDA, that to my mind was the story for JSW
00:06Energy's quarter four numbers. But I think there's a broader story outside that about what's happening
00:10in the power sector, peak power demand and what it does to merchant power sales and in broadly
00:16the EBITDA numbers for a lot of companies which might be in this space. JSW Energy right at the
00:21forefront. Let's get in the management to try and talk about the numbers gone by and the outlook
00:27ahead. Mr. Sharad Mahindra, he's joint MD and CEO of JSW Energy, joins us right now on the show.
00:32Mr. Mahindra, great having you. We're talking for the first time. Thanks for taking the time out.
00:35This is Neeraj here. Good morning. Sum up the quarter in a year for us, because it almost
00:41seems that what quarter four has shown is a depiction of what could happen for FY25 and 26
00:49as well, arguably. Thank you, Neeraj. Yes, I think what you have said exactly that what quarter
00:57four has demonstrated and what last year, we have to understand that how the scenario first we'll
01:03talk in terms of demand if we see that how the demand is shaping up. Demand during the full year
01:08has shown a growth of 7.5% over a larger base of FY23. And also in quarter four also demand was
01:15almost the same at 7.4%. And this continues because the April numbers have been out and we
01:22know that in April, the demand growth has been 11% to 11%. So this is the scenario. But this is one
01:29side is the demand. But when we see in terms of capacity addition planning, what the government
01:35has focused, maybe about a year back when government announced a 50 gigawatt of bidding
01:40every year to take place. I think government has demonstrated almost the same what they said
01:45about a year, year and a half back. And we have witnessed a significant fresh bidding in quarter
01:52four, which was of almost 19 gigawatt. Prior to this, we know that we have been away from the
01:58bidding in the competitive bid space for last almost more than two years. But when we see that
02:05now the environment is conducive, and the demand requirement is going to be huge. We participated
02:12and we were successful in getting almost 18 to 19% of the total bidding which took place. We were
02:17successful in winning the bids, which is almost 3.6 gigawatt of it which we have won in the month
02:24of February and March of the previous quarter, which has helped us in creating a healthy order
02:29book going forward. Oh, yes, certainly, I'll come to that as well. But just broadly, Mr. Mahindra,
02:36the belief seems to be that because demand, as you said, 7.5% for FY24, or above 7% as the demand is,
02:45means that during a year wherein we are going to see power deficits, meaningful power deficits,
02:51and if the CapEx drive starts the way we envisage, then that could only get heightened.
02:59That question marks, if any, around EBITDA growth for companies like yours or some others should not
03:06come into the picture because if anything, you will shoot on the upside when it comes to those
03:10numbers. Would that be a fair assessment? Yes, exactly. Absolutely right. In fact,
03:15the peak demand when you say the kind of demand growth which is there,
03:19if we compare with past few years back when the demand growth was being met by thermal,
03:23we have to remember that if there is in energy terms, there is a demand growth,
03:27like about 16, 20, 16, 25 billion unit was the demand last year. And if we assume an 8% growth
03:33on that, and we convert into megawatt capacities, assuming that 5 to 6 gigawatt capacity of thermal
03:40will get added, which will take care of this demand, we need at least 40 gigawatt of renewable
03:45energy capacity to meet this growing demand of 8% every year. So we see a huge opportunity.
03:52And that is what we see that the renewable energy will play a significant role.
03:57But we have to remember that it is not only plain renewable energy. If we are replacing thermal,
04:02it has to be a solution of RTC power, hybrid power or MTRE. So those are the areas where
04:08renewable energy capacity is going to play a significant role.
04:11Hmm, okay. Now, for you, Mr. Mahindra, the two things, I mean, you are meeting or beating the
04:23target set up in a comfortable fashion. I was reading a note wherein they point out that for
04:30MITRA as well, while you had pointed to a number of 16.5 annual EBITDA run rate by FY25, you already
04:38had 14. And therefore, one, are you under promising and over delivering? And are you
04:43revising any of these targets? So if you are at 14 billion already for FY24, do you believe you
04:51want to revise your FY25 targets higher or will you take it as the day comes? Part one of my
04:56question is that. Part two is what about your own capacity additions as they shape up? Are the
05:03timelines getting revised over FY25 and FY26? See, regarding MITRA, first question when you
05:10said that, yes, we had earlier announced of reaching the number of 16.5 crores EBITDA by FY25
05:18and we are in the right direction and we have reached, we have done about 1403 crores EBITDA in
05:24the previous fiscal. This all has been possible on the various steps in terms of ensuring and
05:30improving the efficiency or operational efficiency and ensuring the increased availability
05:36of the machines. So that is why this is looking a very significant increase, but we have been
05:42successful in increasing the availability both of wind and solar. Last year, we have to remember
05:48that quarter four has been a low wind season than what is normally anticipated and normally happens
05:54January Q4 of last fiscal. So otherwise, this would have been slightly more and we will would
06:00have been slightly higher than what we have delivered. But 1650 is a reasonable number
06:07that we will be achieving to have the maximum efficiency from the available assets.
06:12As yes, going forward, maybe this may not be the best time to tell, but we are exploring
06:18of more optimum utilization of the existing capacities which are there in Mitra assets,
06:26that if we can increase the capacities by using some of the assets which we are identifying,
06:34can be utilized even with higher capacities. So whether it is in terms of transmission capacity
06:39or whether it is the substation capacities. So with that, we are looking towards that
06:46maybe some optimization going forward may possible. Then we will be in a position to
06:51if in case there is any revision in number is required and our focus through these increased
06:56capacities is possible in Mitra assets or is in the CNI space where we are not present in a big way.
07:05Okay, but wouldn't the higher merchant rates in any fashion help you beat these targets?
07:15You are saying that you are in the right direction. That is evident, sir. The question is,
07:18can you beat the numbers that were believed to be? Wouldn't higher merchant rates help you do
07:22that for FY25? See, the thing is that merchant rates are something which is very, very
07:30dynamic. We cannot assume that it will continue. Demand is good in the merchant market.
07:38If we see that, we see an upside on that, but if you see the total out of our total capacity,
07:43it is only 15% which is the open capacity in the market. So as and when the opportunity comes and
07:51with the coal cost, especially from the thermal side, if we talk of the coal costs, which are
07:58at a reasonably low level, if that persists, definitely the margins are going to be good.
08:04But this is something which is very dynamic and very difficult to estimate
08:10and we have to wait and see as the things progress. Got it. Fair call and appreciate that.
08:17I'm reading a note which says that not only are you on track to go up to 11.5 gigs by FY27, but
08:25they are saying that your 20 gigawatt capacity target by FY30 could be advanced. Now it's too
08:31long term a target, but I'm still trying to understand, are you thinking around those lines
08:35of advancing those targets? Yes, we are definitely thinking as I told you that now
08:40with a total order book of 13.2 gigawatt, which we have and the opportunities which exist,
08:47we are quite confident that we will be accelerating this growth by a few years
08:51instead of FY30. We'll be reaching earlier at 20 gigawatt number and we are evaluating
08:58and as and when the right time we want to deliver our first milestone of 10 gigawatt by FY25
09:05and that is the time that we will be absolutely sure of what is the number for FY30. But 20
09:12gigawatt, definitely the growth will be accelerated and there are opportunities.
09:16One is as we talked about a lot of demand which is there and the opportunities which are there
09:21and also the inorganic opportunities which exist in the market. So we keep evaluating
09:28as and when any opportunity which is favorable, which is giving us the desired returns,
09:34we will definitely be going for that. That will also help us in reaching that number earlier.
09:40Well, confident sounding JSW Energy. Let's wait and watch. The stocks come off a little bit.
09:47It's an expensive stock, mind you, and it came off a little bit yesterday after reaching highs
09:51and in today's session too has started off lower. Let's see what happens during the course of the day.