Gujarat Industries Power Co Ltd Q2 FY23 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- Current revenue is around Rs. 1,200 to Rs. 1,300 crores and is expected to remain flat in the next year due to ongoing capacity addition timelines.
- Capacity additions of 200 to 300 MW are planned within the next year, which will contribute to revenue growth one year down the line.
- From FY25 onwards, with approximately 50% capacity addition at the Khavda project, incremental revenue is expected based on tariffs around Rs. 2.75 to Rs. 2.80 per unit and capacity utilization factors of 27-29%.
- The Khavda solar park is planned with a total capacity of about 2,375 MW, developed in 4 phases over 5-6 years, with the company targeting to develop over 50% of this capacity on its own.
- The company expects phased capacity additions primarily in renewables (solar), aiming for substantial top-line growth by mid-decade linked to these projects and improved utilization of existing assets.
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Fundraise plans
Yes- For the Khavda project, Gujarat Industries Power Company Limited plans to fund capacity addition in a phased manner using a 70:30 debt-to-equity ratio.
- The company intends to raise debt from the market while infusing the equity portion over 4 to 5 years, utilizing internal cash flows and depreciation.
- So far, the CAPEX incurred on park development is around Rs. 100-120 crores, with an additional Rs. 400-500 crores expected to be spent next year.
- Discussions/dialogues with various financial institutions and banks have been initiated for debt, with the likely interest rate (coupon rate) ranging between 7% to 7.5%.
- The company has enough cash generation to fund the equity portion without the need to restructure earlier projects or seek more equity urgently.
See what Gujarat Industries Power Co Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- Khavda Park development CAPEX incurred till date: Rs. 100-120 crores; expected Rs. 400-500 crores next year.
- Total park development CAPEX: Rs. 1,100 crores with 30% MNRE subsidy.
- Capacity addition planned at Khavda: Four phases of 600 MW, 600 MW, 600 MW, and 575 MW solar capacity, over 5-6 years.
- Target to add at least 50% capacity in Phase I (600 MW), finalized by last quarter of the current financial year.
- Per MW cost at Khavda: Rs. 5.6 to 5.8 crores including everything.
- Funding strategy: 70:30 debt-equity ratio; equity infusion phased over 4-5 years with internal accruals.
- No immediate plan to add new thermal capacity; focus is on renewables and green hydrogen exploration for future phases.
- CAPEX for new solar projects estimated at Rs. 1,600-1,700 crores for 300 MW solar capacity with 15-18 months execution timeline.
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Margin guidance
Category 3- Revenue outlook for next year is expected to be flat around Rs. 1,200 - 1,300 crores due to current capacity.
- Capacity additions of 200 to 300 MW planned in the next 1-2 years will positively contribute to revenue beyond next year.
- EBITDA is approximately Rs. 220 crores currently; renewable segment contributes roughly Rs. 115 crores.
- Profitability could improve with commissioning of new Khavda park phases from FY25 onwards, expected to add significant revenue.
- Dividend policy may see revision in future as profitability improves; currently cautious due to ongoing expansions.
- Gas-based plants remain non-operational due to high gas costs; viability expected if gas price falls to $8-8.5 per MMBtu, enabling cost-plus tariff supply.
- Focus is shifting more toward renewable energy with phased capacity additions and development of green hydrogen initiatives in 3-4 years.
- Operational lignite-based plants have good life visibility with captive mines supporting capacity for PPA life plus 10 years.
Order book
- The company has initiated dialogues with financial institutions and banks for funding, with expected interest rates between 7% to 7.5%.
- CAPEX for the Khavda park development incurred till date is Rs. 100-120 crores; additional Rs. 400-500 crores expected next year.
- Total CAPEX for 300 MW capacity addition at Khavda is estimated at Rs. 1,600-1,700 crores, with a 70:30 debt-equity funding mix.
- They plan to add capacity in four phases: 600 MW, 600 MW, 600 MW, and 575 MW, primarily solar.
- No specific pending orders mentioned for renewable projects, but a 75 MW solar project on mining reclaimed land is in tendering process pending approvals.
- Park development is underway, with phased capacity addition over 4-5 years, expecting more than 50% of capacity additions to be in-house.
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What Gujarat Industries Power Co Ltd's management said in earlier quarters
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