SJVN — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
DIRECTOR – SJVN LIMITED · MR. A K SINGH – DIRECTOR FINANCE – SJVN LIMITED
MR. A K SINGH – DIRECTOR FINANCE – SJVN LIMITED SJVN Limited February 15, 2021
Moderator · Conference Operator
Thank you very much.
We will now begin the question and answer session.
The first question is from the line of Dhruvam from HDFC Fund.
Please go ahead.
Dhruvam
Thank you so much Sir and congratulations on a new project win.
Sir I wanted to understand when you are competing for this project what do you bid for?
I mean how do you secure this contract?
You mention there were two other bidders, so how do you secure this contract?
SJVN Limited February 15, 2021
N L Sharma
The Government of Nepal had invited bid for this project, so three companies including ours bid for it.
Apart from us one bidder was a JV, one company from Nepal and one company from China, Power China Company and the third bidder was also a JV.
One company from Nepal and one company from Japan, so the bid was on various counts like free power, the period of construction, and other things which the Government of Nepal has taken Sir.
Dhruvam
So there are multiple parameters?
N L Sharma
Yes multiple parameters.
Dhruvam
Got is Sir.
So you have got the contract or I mean the go ahead is given to you or it is still pending?
N L Sharma
Just the Government of Nepal has issued the allotment letter.
Now they will invite us for signing of MOU and subsequently the project agreement will be signed.
In the mean while all the investigations, DPI preparation, interpretation of the DPR and credence will be required.
Thereafter after obtaining all the clearances and investment approval from the Government of India the construction will be started.
Dhruvam
Would be fair to assume it will be about two to three years before the construction starts or it can be before?
N L Sharma
Can you repeat the question.
Dhruvam
Can it be a few years before the construction starts or it can be earlier?
N L Sharma
Otherwise typical hydro projects take around five to seven years before starting the construction, but in this project we are sure that it is just downstream of our project so we will optimize and we will use our resources, manpower and other resources.
We are hopeful that we will start the construction of this project between two to three years.
Dhruvam
Got is Sir.
Sir one thing I wanted to confirm was you mentioned the inflatable number of Rs.522 Crores by the end of Q3?
N L Sharma
Yes.
Dhruvam
Okay and if I am not wrong this number was Rs.745 Crores at the end of the last year?
N L Sharma
Last year, it was Rs.745 Crores.
SJVN Limited February 15, 2021
Dhruvam
So we have seen a decent reduction in receivables, so we have benefited from the Atmanirbhar package?
N L Sharma
Yes.
Dhruvam
Got it Sir.
Sir how much of this will be more than say 45 days receivables now closing?
N L Sharma
We will provide.
119 Crores is more than 45 days.
Dhruvam
Sir, in Q2 end your receivable were about 822 Crores I had noted the number earlier and now they are 520 Crores, we have a decent reduction in the total receivable, but I thought whenever you recover the receivables we also recover the late payment surcharge along with that and you record late payment surcharge in cash basis, but your other income amount has not increased significantly, so I am just wondering there is no late payment surcharge here?
N.L Sharma
Late payment surcharge is different, accounted separately, but this is the main receivable more than 45 days and without interest also, LTS we are having with the Himachal Pradesh, J&K and Uttar Pradesh mostly, so we are also in discussion with them to see if they can do something just to liquidate that LPS also, so that is one thing.
Dhruvam
Sir, when you recover the amount do not you first adjust it with the LPS and then adjust with the principal amount?
N.L Sharma
No, first the principal charges are recovered, not the LTS.
Dhruvam
Okay, first the principal charges are recovered and then the LPS is recovered?
N.L Sharma
Yes.
Dhruvam
Got it.
This has been policy forever or this has changed now?
N.L Sharma
This is the policy.
Dhruvam
This has been long.
Got it.
Sir, I saw the other company do it differently they adjust LPS first and then they adjust principal?
N.L Sharma
We are not giving this...
Dhruvam
I am not able to hear you, your voice is a bit low.
SJVN Limited February 15, 2021
N.L Sharma
They are not giving the discount.
Dhruvam
They are not giving discount that is why they are adjusting the LPS upfront?
N.L Sharma
Yes.
Dhruvam
So, we will be giving discounts that is why we are not adjusting it?
N.L Sharma
Yes.
Dhruvam
So, we will be giving discounts on the LPS amount?
N.L Sharma
Yes.
Dhruvam
Got it.
N.L Sharma
Both the parties decide how to go, what is the discounting the bill, if they are paying the front payment so we are accounting that payment in the books accordingly.
Dhruvam
Sir, I am a bit confused, you mentioned that two things discounting of bills or discount on the LPS amount?
N.L Sharma
There is no discount on the LPS, LPS is a separate entry in the book.
If it is recovered it is taken to an account otherwise not.
Dhruvam
I think that was not I am asking, some of the other companies what they do is when the recover the old receivables, they adjust the LPS first and then they recover the principal, I mean they adjust with LPS?
N.L Sharma
The beneficiaries or discount to the LPS is quite high and we do not offer them the discounts, the other companies are also doing I think the same package.
Dhruvam
Got it.
Sir, one last point was on the dividend amount, thank you for the increase in the dividend, one thing I wanted to know, I normally used to assume above 50% payout, which we have largely maintained historically, but with the current number should we assume the payout ratios go beyond 50%?
N.L Sharma
Regarding the dividend?
Dhruvam
Dividend, yes.
SJVN Limited February 15, 2021
N.L Sharma
Our payout ratio is above 50%, it is close to 80%.
Dhruvam
So, broadly if I see last few years on a per share basis you have given around Rs.2 to Rs.2.2 of dividend?
N.L Sharma
Yes.
Dhruvam
2.1, 2.2 kind of dividend and this year also it seems you are in the same track, I mean you are reaching that 2.2 numbers?
N.L Sharma
Last year we gave Rs.2.20 paisa and before that Rs.2.15.
Dhruvam
Yes, and before that 2.10?
N.L Sharma
Yes, 2.20.
Dhruvam
And seems this year also we are on the same number around 2.2, 2.1?
N.L Sharma
Yes, we are close to these numbers.
Dhruvam
About 800 Crores to 850 Crores of numbers that we are likely to get?
N.L Sharma
Yes.
Dhruvam
Sir, how should we think about this number, the point is because some of our capex is coming up so you have Arun III which is coming, you have the Buxar project, you have interest in solar and some of the other projects that you are looking to start, so the capex amount is increasing, so would we maintain the similar amount of dividend on a per share basis, should we think of that, that Rs.2 to Rs.2.2 can be maintained for next three to four years?
N.L Sharma
We are holding the same position, keeping annuity capex and the increase investment in the projects, the projects, which are under construction we have utilized equity upfront, so the money now, which is going to be spent capex is going to be there on the running projects we believe debt from the bank and we are also planning to issue bonds, so we have also good cash reserve with us, so we will be meeting the cash requirement and maintaining the dividend at the same time.
Dhruvam
So, upwards of Rs.2 per dividend can be maintained of the next 2 to 3 years also?
N.L Sharma
Yes, we can say that.
SJVN Limited February 15, 2021
Dhruvam
Got it.
One probably the last question for the key project that are currently under construction, one is Arun-III, then Buxar and the Naitwar project, so if you can give the project cost what is already spend and of that how much is contributed as equity?
N.L Sharma
Regarding Arun-III, the total project cost is Rs.7000 Crores and so far the spent was Rs.1400 Crores and on the Buxar the total capex will be Rs.10000 Crores and we have spent Rs.1350 Crores on these both the projects also equity and on Naitwar Mori, the total cost is Rs.650 Crores, we have spent so far Rs.506 Crores.
Dhruvam
Sir, you mentioned the project cost is, sorry?
N.L Sharma
Rs.650 Crores.
Dhruvam
Rs.650 Crores, you have spent Rs.506 Crores and of this how much is equity?
N.L Sharma
Equity is 100 Crores loan from bank and rests are equity about 400 Crores is equity.
Dhruvam
So, we have significantly, so we say even this equity where debt is required?
N.L Sharma
Yes.
Dhruvam
Got it, Sir.
Thank you so much.
That is all from me.
Moderator · Conference Operator
Thank you.
The next question is from the line of Mohit from DAM Capital.
Please go ahead.
Mohit
Good evening, Sir.
Two questions, what is the capital requirement for FY2022, FY2023, and FY2024, and second is on the renewables, I think we have been bidding for too long in the past few months do we have any target to do so much renewables in the next couple of years and how are we going to fund it, are we willing to fund in that?
N.L Sharma
Yes, the estimated capital to be spent in these coming two to three years for the FY2022, we are going to spend about Rs.5000 Crores and FY2023, nearly around Rs.8000 Crores and for FY2024, it will be more than Rs.10000 Crores and so far as the funding is concerned, contribution from equity as well as debt from the banks and we are also going to issue bonds also.
Mohit
Sir, what has changed in the environment that we are bidding now very, very aggressively compared to previous, we did not use to bid at all, right, now bidding below 1.99, Rs.2, there is something a change in the environment for us?
SJVN Limited February 15, 2021
N.L Sharma
Because the company is a joint venture company, so both the shareholders, Government of India and Government of Himachal Pradesh has to take a call, so we are just waiting the decision of both the shareholders as the both shareholders decide we will go for the buyback.
Moderator · Conference Operator
As there is no response, we will move to the next question, which is from the line of Dhruvam from HDFC Fund.
Please go ahead.
Dhruvam
Thank you.
In the earlier answer you mentioned that the total capex is about 5000 Crores in 2022, 8000 Crores in 2023 and 10000 Crores in 2024, which is about 23000 Crores in the next year, if I consider 30% of that, that is about 6900 Crores the total equity contribution that you will require?
N.L Sharma
Yes.
Dhruvam
Sir, if I assume a profit numbers to be about 1200 Crores to 1300 Crores odd, so that would mean 4000 Crores of contribution from the profit?
N.L Sharma
Yes.
Dhruvam
And a cash balance is about 2000 Crores?
N.L Sharma
Yes.
Dhruvam
So, we will still need 900 Crores of surplus equity to be generated, which I believe we have already over invested in some of the project, so that you will be using?
N.L Sharma
Yes.
Dhruvam
Sir, then how we fund the dividend because we are planning to payout more than 60% to 70%, so how will you fund the dividend because all your profit will go to a part of the equity contribution in projects?
N.L Sharma
We have more than 1200 Crores and we will raise 1500 Crores and when some projects will come into operation addition of profit will also be there, but in most of the projects, which we are executing right now we use the equity up front and secondly the debt portion, in some projects we have gone for 20:80, 20 is equity and 80 is debt, so we will be using 80% debt and 20% equity, so we have done the analysis and we have worked out the cash flow, we are comfortable with the cash flow at the same time we are maintaining the dividend to the shareholders as well as meeting the cash requirement equity also.
SJVN Limited February 15, 2021
Dhruvam
Got it.
Sir, the 80% and 20% will largely be in the renewable project, you will do that in the renewable project?
N.L Sharma
Yes, we are doing renewable also.
Dhruvam
So, in the renewable project, you will do 80:20, and for the other projects you will do 70:30?
N.L Sharma
No, it is not like that, in hydro we are using 80:20 also, in the renewable 70:30 to 80:20 as per the availability of funds we are doing that.
Dhruvam
Sir, when we do 20% as contribution will you regulated equity be capture 20% or you will get it as 30%?
N.L Sharma
Regulation will be as per CRC regulation, only on 20% we will get that return of 60.5% ROE.
Dhruvam
Got it, so in ROC are you contributing, what would be your planned equity in ROC?
N.L Sharma
ROC total project is Rs.7000 Crores both generation and transmission component, our equity will be 5100 Crores, we have already spent about 1400 Crores from equity.
Dhruvam
So, in Arun-III it is 30% equity contribution?
N.L Sharma
Yes, 30%.
Dhruvam
And in Buxar also it is 30%?
N.L Sharma
Again 30%.
Dhruvam
So, in the new projects you will be doing 20% not in the existing one?
N.L Sharma
Yes, 20% we are doing in Luhri hydro projects.
Dhruvam
Got is, Sir.
That is all from my side.
Thank you so much.
Moderator · Conference Operator
Thank you.
The next question is from the line of Anant Mundra from Mytemple Capital Advisors.
Please go ahead.
Anant Mundra
Good evening, Sir.
Just wanted to understand that there are lot of projects that are under construction right now for the company, what are the commercialization dates or SJVN Limited February 15, 2021 commencement date of all the projects if you can just highlight, all the projects that are under construction?
N.L Sharma
Yes, under construction Arun-III project, the date of commencement on the project that the commissioning of the project as per the project development agreement is February 2025, but we are putting in place the acceleration plan and as per the acceleration plan if everything goes well there is no force majeure or things beyond our control we are planning to complete it by April, Mary or June 2023 and regarding the Naitwar Mori project, the project will be completed next year 2022 by September 2022 and Buxar project the commissioning will in the year January 2024, so these are three projects, which are under construction.
Anant Mundra
Sir, any renewable projects, I assume there are solar project also that we had bid for?
N.L Sharma
Yes, we are bidding for solar projects and one of the projects in Gujarat, we had already won the project Raghanesda project, but that Gujarat electricity regulatory commission annulled the allotment to all the allottees, there were other allottees on the reason that tariff is high they should re-tender it and get the new range so that was one project we were otherwise ready to start bidding that was another project, there are other project in Gujarat and the same state of this project that government of Gujarat electricity regulation annulled the process on the basis of high rates and they are re-tendering it.
Anant Mundra
Alright and Sir, what are the projects in Bhutan?
N.L Sharma
In Bhutan, JV project now all the debts have been cleared, we are going to award the work to the contractors, already board has approved and shortly we will award the projects due to corona might be the induction of labor there all these things that is the issue and we will be soon awarding the contracts to the bidder.
Anant Mundra
Sir, what is the commercialization target date for that project and what is the project cost for that and how we plan fund it debt equity, what would be the ratio?
N.L Sharma
Project cost is about Rs.5000 Crores, debt equity is 30:70, we are having a dialogue with the bankers, so soon we will go for the financial closure also, the project will take around 5 years from the date of construction to the date of commissioning, date of starting commercial construction.
Anant Mundra
How much is amount that we have already invested in this project?
N.L Sharma
It is about 190 Crores.
SJVN Limited February 15, 2021
Anant Mundra
Alright and Sir, just wanted to ask another question because of this unfortunate incident that happened recently because of the landslide there was some ban to hydro projects as well, has there been at the government level and even at the level of Nepal government and Bhutan government are they trying to rethink the hydro project or is there some reconsideration or anything happening at the micro level?
N.L Sharma
No, in Nepal it is not like that.
Government of Nepal is equally keen to start more hydro project.
Anant Mundra
Alright.
Thank you.
That is it from my side.
Moderator · Conference Operator
Thank you.
The next question is from the line of Mohit from DAM Capital.
Please go ahead.
Mohit
Sir, one question, what is happening with the Bhutan project and the entire portfolio of Bhutan project is there something, which you can update?
N.L Sharma
Portfolio of?
Mohit
Portfolio of projects, which we have in Bhutan is something part from this large project we have?
N.L Sharma
Yes, there is one project, which is being executed in a JV mode, this is 600 megawatt project, the cost of construction will be around Rs.5000 Crores and our share is 50% and 50% share is of one PAC of Government of Bhutan, DGPC, Druk Green Power Corporation.
Mohit
My question is where are we in terms of equity infusion and all those and the tendering, I think tendering is not done as of now, am I right?
N.L Sharma
Tendering has already been done, now we are at the stage of awarding the contract, tendering has been done, all technical bids have been opened and price bid has been opened and contractors have been finalized for all the three packages.
Mohit
Have we given the tender to the contractors, LOA?
N.L Sharma
Letter of award is yet to be issued to them, but the contractors have been finalized, there is an issue of arranging labor in Bhutan, Bhutan is very particular because of corona induction of more labor from India, so as and when the situation eases out we will be awarding the work to the successful bidder.
SJVN Limited February 15, 2021
Mohit
Sir, are we looking to award any other hydro project in next 6 to 12 months?
N.L Sharma
In Bhutan or in India?
Mohit
For the entire company in India?
N.L Sharma
Yes, in India we are doing the tendering for 66 megawatt project and we will start investment approval and the tendering process for another project this is 382 megawatt project, Suni Dam project, so we expect that work on this will be started in this year, 2021.
Mohit
That is it, those two projects, right?
N.L Sharma
Yes.
Mohit
Understood, Sir.
Thank you.
That is all from my side.
Moderator · Conference Operator
Thank you.
The next question is from the line of Anant Mundra from Mytemple Capital Advisors.
Please go ahead.
Anant Mundra
Sir, one more question, there is some exceptional expense that we have recorded in our P&L for this quarter, so if you could just highlight what that is and how much of that amount can we pass on to the DISCOMS?
N.L Sharma
Exceptional expense is arbitration award, in case of our Nathpa Jhakri project, this was old case going on arbitration so we gotten into the recovery from DISCOMS discount will be extended to Rs.253 Crores.
Anant Mundra
Sir, are we going to challenge this arbitration or do the final?
N.L Sharma
Yes, we have decided to challenge the award in the court.
Anant Mundra
Alright and what is the arbitration amount, what is the amount?
N.L Sharma
Net amount is Rs.161 Crores and along with interest overall Rs.450 Crores with the interest.
Anant Mundra
450?
N.L Sharma
Yes.
Anant Mundra
Alright, out of that only 253 Crores will be able to pass on to the DISCOM?
SJVN Limited February 15, 2021
N.L Sharma
Yes.
Anant Mundra
We will have to take a hit on our balance sheet?
N.L Sharma
Yes, in this year.
Anant Mundra
In this year, okay, so balance will pass on in the next year?
N.L Sharma
In the remaining life of the project.
Anant Mundra
Got it.
Thank you.
Moderator · Conference Operator
Thank you.
The next question is from the line of Rupesh Sankhe.
Please go ahead.
Rupesh Sankhe
Sir, my question is what is our roadmap in the renewable space as recently we have signed MOE to energy projects, also signed MOE with PHH REC, can you throw some light on that?
N.L Sharma
Yes, because in the times to come there is a lot of emphasis from the Government of India side also to go for renewal, but it will be solar, and the trajectory, which has been planned for the entire country what will be the fuel mix, this high growth thermal solar wind and other renewals, so we have decided to go into solar and wind also, we are competing and we are exploring the possibilities in the states of Gujarat, Rajasthan, Goa, Karnataka, Madhya Pradesh for solar as well as wind, so we are quite hopeful that we will get success in it and get some project on the renewal side, how much that we will come out when we succeed.
Rupesh Sankhe
Okay, Sir.
Moderator · Conference Operator
Thank you.
Ladies and gentlemen, due to time consumes that was the last question.
I would now like to hand the conference over to the Mr. Rupesh Sankhe for closing comments.
Rupesh Sankhe
We thank Mr. N.L.
Sharma for giving us an opportunity to host this call and we also thank all the investors and analysts for joining this call.
Thank you so much
N.L Sharma
Thank you very much, Rupesh.
Moderator · Conference Operator
Thank you.
On behalf of Elara Securities Private Limited that concludes this conference.
Thank you for joining us.
You may now disconnect your lines.
Questions and answers
As above “SJVN Limited