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Orient Green Power Company LtdQ1 FY19

Orient Green Power Company Ltd Q1 FY19 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹9.31P/E: 20.4Market Cap: ₹1.1K CrSector: Power

Management growth scorecard

Revenue

Category 4

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 4
  • Revenue for Q1 FY19 was lower by 26% due to a late start to the wind season but recovery and "makeup" expected in subsequent quarters, especially July onwards.
  • Management confident of improving profitability and sustaining operational momentum in coming years with better wind availability.
  • Expansion plans include a 43.5 MW project in Andhra Pradesh pending tariff negotiations; project expected to start post-approval.
  • Repowering of wind mills expected, with around 1,000 MW in Tamil Nadu and 300-400 MW in Gujarat targeted by 2020.
  • Wind season performance improving compared to last year, indicating better volumes ahead.
  • Strategic initiatives, debt reduction, and improved grid availability should support consistent growth in sales and volumes.
  • REC trading revival and monetization also expected to strengthen revenue streams.
  • Expansion in solar and wind may be considered once competitive bidding stabilizes and financing costs reduce.

See what Orient Green Power Company Ltd management said on margin guidance — free account, 30 seconds.

Fundraise plans

Yes
  • The company is actively working to reduce interest rates on existing debt through refinancing, targeting a reduction from around 13% to single-digit levels, which could save Rs. 35-40 crore annually.
  • They have attempted Qualified Institutional Placement (QIP) to raise equity for debt reduction but timing was not favorable due to prior grid backdown issues affecting investor confidence.
  • Currently, with biomass divested and improved portfolio quality, they are approaching investors interested in their wind assets for refinancing and potential growth funding.
  • Future expansion or fundraising through QIP or other equity routes is possible once interest rates ease and profitability is assured.
  • Strategic options under consideration include reverse merger possibilities (e.g., with IL&FS) and other initiatives to facilitate expansion or better capital structure.
  • No immediate large-scale equity fundraise is planned in the next couple of quarters; a "wait and watch" approach is adopted amid competitive bidding and market conditions.

See what Orient Green Power Company Ltd management said on order book — free account, 30 seconds.

Capex plans

Yes
  • The company is currently negotiating with the Andhra Pradesh government for tariff rates (Rs. 4.50 to Rs. 4.70) to proceed with the planned 43.5 MW expansion in Andhra Pradesh; once finalized, funding will be raised and the project started.
  • No immediate large-scale expansions are planned due to non-viable tariffs in competitive bidding for wind and solar projects at suboptimal levels.
  • Strategic initiatives under consideration include possible reverse merger with IL&FS and other merger options to unlock growth and capital.
  • The company is actively working to reduce interest rates on existing debt to improve profitability before pursuing major capital investments.
  • Repowering of wind capacity is planned, particularly in Gujarat and Tamil Nadu, with an estimated 1,300-1,400 MW to be repowered by 2020 following emerging repowering policies.
  • Overall, expansions or capital investments are being delayed until market conditions (tariffs, interest rates) stabilize and strategic initiatives progress.

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Margin guidance

Category 3
  • Q1 FY19 performance was subdued due to late wind season start but improving in Q2 with expectations to make up lost ground.
  • Profitability and cash flow position showed improvement, with confidence to sustain momentum going forward.
  • Strategic initiatives and balance sheet deleveraging are expected to drive consistent growth and improved earnings.
  • Refinancing efforts aim to reduce interest costs significantly, saving Rs. 35-40 crore annually, supporting profitability.
  • Improved grid availability and pure wind portfolio post-biomass divestment bolster operational efficiency.
  • REC trading revival is expected to support revenues, with potential to monetize previously escrowed RECs at higher value.
  • Potential strategic actions like mergers or expansions under consideration, dependent on easing of competitive bidding pressures and interest rates.
  • Management optimistic about better future earnings and EPS growth with operational leverage and cost efficiencies.

Order book

  • The company is actively pursuing expansion projects such as the 43.5 MW wind power expansion in Andhra Pradesh, which is currently delayed due to rate negotiations with the state government.
  • There is ongoing negotiation with Andhra Pradesh government to finalize tariff rates (between Rs. 4.50 to Rs. 4.70) before starting the expansion.
  • No specific details on a formal order book size or pending order backlog were provided in the transcript.
  • The company is monitoring competitive bidding environments closely and is cautious about immediate expansions due to low tariffs and financial feasibility.
  • Strategic initiatives like possible mergers and reverse mergers are being considered, which could impact future order flows and expansions.
  • The management expects growth opportunities to materialize once interest costs reduce and credit conditions improve, likely in the next few quarters.

How does Orient Green Power Company Ltd rank vs peers in Power?

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