Gujarat Industries Power Co LtdQ1 FY23Power

Gujarat Industries Power Co Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Revenue 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.

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.

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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.

→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.

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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