Gujarat Industries Power Co Ltd Q4 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- Gujarat Industries Power Company Limited (GIPCL) is focusing on renewable energy expansion, particularly solar power, with a 600 MW solar project (Khavda) expected to start commercial production by November 2024.
- A total capacity of 1,200 MW solar is planned to be operational on their own by December 2024-25.
- The company aims to continue capacity additions through a 2,375 MW park development, with a second phase deadline by December 2026.
- Renewable projects currently yield ~12%+ IRR, expected to improve profitability over next 2-3 years as depreciation and interest cost reduce.
- Revenues from the 600 MW solar plant post-commissioning are expected to reach around INR 430 crores.
- Operating cash flow is stable at ~INR 400 crores yearly, supporting growth investments.
- Expansion is largely driven by contract-backed projects and backed by a skilled team to meet timelines with one- to two-months margin.
See what Gujarat Industries Power Co Ltd management said on margin guidance — free account, 30 seconds.
Fundraise plans
Yes- The company anticipates a total investment of around INR 3,780 - 4,000 crores for park development and solar projects by FY25.
- Funding mix is expected to be approximately 70% debt and 30% equity.
- Equity requirement is around INR 2,000 crores.
- Cash generation of about INR 400-500 crores per year and existing cash of INR 600-700 crores will cover INR 1,500 crores equity internally over two years.
- For the remaining equity (approx. INR 500 crores), the company plans to raise funds via market instruments such as rights issues, QIPs, preferential issues, or direct promoter infusion.
- Debt funding is in principle approved from two or three large lenders at around 8% interest.
- The company recognizes the need to take on debt proactively to not miss development opportunities despite the increased leverage.
See what Gujarat Industries Power Co Ltd management said on order book — free account, 30 seconds.
Capex plans
Yes- Total capex for Khavda project and park development is INR 3,780 crores (INR 600 crores for park development first phase and INR 3,600 crores for the solar project).
- INR 600 crores of park development capex to be incurred by FY25; INR 180 crores equity share from GIPCL.
- Solar project capex of INR 3,600 crores funded roughly 25-30% equity (around INR 2,000 crores equity) and 70-75% debt.
- Available cash generation of INR 400-500 crores annually; INR 600-700 crores cash on hand; equity funding gap to be raised via rights issue, QIP, preferential allotment, or promoters’ contribution.
- First 600 MW solar capacity commissioning expected by November 2024; full 1,200 MW first phase capacity by December 2024.
- Expenditure on solar project mainly post-monsoon; INR 50-60 crores spent to date.
- No expansion planned for lignite-based capacity; focus on R&M for 10 years life extension with allocated capex.
- Debt cost expected at around 8% with in-principle lender approvals.
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Margin guidance
Category 3- Renewable projects currently provide ~12%+ IRR, expected to improve as depreciation and interest costs decline over next 2-3 years, leading to higher profitability.
- Operating cash flow around INR 400 crores annually is sufficient to support equity portion of expansions.
- Upcoming 600 MW solar project expected to start revenue generation by November 2024, contributing ~INR 430 crores revenue after reaching optimum PLF.
- Large renewable expansion with expected debt of INR 3,000 crores by FY25, but management confident projects will generate revenue to cover debt servicing.
- EBITDA from renewable segment is INR 231 crores, and combined EBITDA with non-renewable is INR 500 crores, indicating growth potential.
- Management assures timely project completion with a 1-2 month margin, aiming for sustained earnings growth.
- ROE currently low due to early stage investments but expected to rise to double digits as projects mature.
Order book
- The company has two major tenders in process:
- - Balance of supply for structural parts valued at INR 1,300 crores (already available on the website).
- - PV module tender, expected to be published next month.
- Both tenders are expected to be concluded by the end of the monsoon season.
- For the Khavda 600 MW solar project, the total project cost is about INR 3,600 crores under process with in-principle debt approval from lenders at around 8% interest.
- The first 600 MW solar capacity in the park is planned to be commissioned by November 2024.
- The balance 600 MW from the first phase will be tendered out by GUVNL.
- For the second phase (1,175 MW), expected deadline is December 2026; decisions on capacity uptake and funding will be taken post next year.
- Capex for this fiscal is expected to be on the lower side with major spend post-monsoon.
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