NLC India LtdQ3 FY22Power

NLC India Ltd

Q3 FY22 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.

Full analysis

Revenue guidance

Category 3

→NLC India Limited targets significant capacity expansion, with total CapEx planned at over INR 72,000 crore up to 2030 to drive growth.
→FY 2023-24 CapEx target is INR 8,244 crore, expected to increase in subsequent years, supporting higher production and sales.
→Coal production target for current year is 13 million tons, nearly doubling previous year's 6.35 million tons.
→Coal supply prioritized to internal plants (NTPL) and NTPC under MOUs, with surplus coal to be auctioned, reflecting strong demand.
→Renewable energy capacity completed 1,421 MW with an equity investment of INR 1,675 crore; no current solar projects under construction but planned expansions implied.
→Power generation and exports show modest growth; coal production and sales increasingly contributing to revenue.
→Emphasis on augmenting lignite and coal supplies in demand-constrained regions like Rajasthan to meet customer needs and improve realizations.

Margin guidance

Category 3

- NLCIL's profit after tax for H1 FY23 rose by 77.76% to Rs. 985.86 crore compared to previous year. - Coal mining profits significantly increased (Rs. 819.36 crore in H1 FY23 vs Rs. 377.24 crore last year). - Expansion projects like Ghatampur (1,980 MW) nearing commissioning, expected to boost revenue and profits. - NTPL power plant started contributing to revenue, enhancing earnings. - CapEx plan of Rs. 72,000+ crore till 2030 to drive growth; FY24 CapEx target is Rs. 8,244 crore. - Improving coal production and sales (target 13 million tons FY23) support operating income. - Dividend payout expected to be maintained alongside growth plans, indicating confidence in earnings growth. - Reduction in under-recovery in thermal segment, and mitigation of surcharge risks improve profitability. - Strong operational performance with increasing PLF (up to 92.27% in NNTPP) enhances operating income. Overall, NLCIL expects steady growth in earnings driven by capacity additions, improved coal production, and efficient operations.

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Fundraise plans

Yes

→NLC India Limited is undertaking significant CapEx plans totaling around INR 72,000 crore plus over the next eight years, with targets of INR 8,244 crore for FY 2023-24.
→The company has revised its corporate plan to avoid seeking any financial assistance in terms of equity.
→It is focused on internal generation of funds and improving revenues through commissioned projects like Ghatampur (1,980 MW) and NNTPP.
→Rakesh Kumar confirmed there is no plan to raise equity in the near term to finance expansions due to consolidated net worth and improved cash flows.
→No explicit mention was made about new debt fundraising, but ongoing large CapEx projects and joint ventures indicate possible continued debt utilization or structured financing.
→The company aims to balance shareholder dividends with growth capital requirements without adverse impact.

Order book

→The Talabira coal power plant tender for 3x800 MW is under techno-commercial bid evaluation, with L&T and BHEL as bidders. The process is progressing with finalization expected soon. (Page 6)
→The estimated cost for the Talabira project is Rs. 19,422 crore, combining three major packages into a single package for bidding. (Page 6)
→For the Neyveli 1320 MW power plant, discussions on land acquisition and Power Purchase Agreement (PPA) progress well; PPA signed for 400 MW with KSEB, completing 2,000 MW out of 2,400 MW capacity with other PPAs already signed. (Page 6)
→GA4 package in Ghatampur valued at Rs. 979.61 crore was awarded on 30th September to expedite project completion. (Page 4)
→Overall, large projects are moving forward with ongoing evaluations and contract awards, but some technical issues remain under resolution. (Pages 4-6)

Capex plans

Yes

→Total CapEx target up to 2030: INR 72,000 crore plus, with INR 8,244 crore planned for FY23-24, likely increasing thereafter.
→FY22-23 CapEx target: INR 2,920 crore split as follows:
→ - Mining projects: INR 190 crore (including Talabira mine 2 & 3, area extension, South Pachwara mine JV).
→ - Power sector: INR 860 crore (including NNTPS, NUPPL, Odisha thermal plant).
→ - Joint ventures: INR 1,770 crore (Pachwara INR 110 crore, NTPL FGD INR 250 crore, NUPPL Ghatampur INR 1,510 crore).
→Coal gasification project approved by board with a cost of Rs. 4,394 crore; EPC tender initiated.
→Talabira coal power plant and Neyveli 1320 MW power plant tenders progressing; award targeted by current financial year.
→Ghatampur project (1,980 MW) progressing, expected to commission within a year.
→Corporate plan revised to avoid equity infusion; growth to be funded internally without affecting dividend policy.

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