EKI Energy — Q3 FY25 earnings call

So, during last 20- 25 years, if you see, US, had never supported for the establishment of the compliance carbon market within USA, so that means it is not going to create any impact because for last 25 years they were not there in the settlement or establishment of the compliance carbon market like Europe and Korea and similar to India, what all these other developing and developed nations are doing. Coming over the voluntary carbon market so definitely like 40% credits usually goes to the Europe, European Union in the voluntary carbon markets, global or international voluntary government markets 40% goes to US and Canada, so obviously 5-10% will be the impact that you would be able to see but due to growing demand related to sustainability, many companies into the science base, target initiative or voluntary pledges they are coming from various nations, which includes Russia, Japan, Australia and New Zealand, European Union and other developed nations including USA, so we hardly see there would be any impact in reference to the compliance or the voluntary carbon markets.

Addresses a significant macro-political risk to the carbon market business, with management downplaying the potential negative impact based on historical context and market dynamics.

Asked by Aniket Kulkarni

Revenue decline carbon business there is no decline in the revenue in EKI per se as a standalone, and I'm just clarifying that, but at a consolidated level obviously revenue is declined because this is the off-season for the power business and in first half the power business has contributed the revenue at consolidation level, but now the second part of the query is, The EKI power business is vertically is getting closed, that is not getting closed we are planning to move it to EKI. Therefore, we have decided as a strategic decision that we will close down the subsidiary account, our subsidiary company and moved to business to the extent possible in EKI itself, as EKI objective has already changed in last AGM.

Clarifies the reason for the consolidated revenue decline (seasonal for power business) and provides an update on the strategic restructuring of the power business, indicating a de-merger.

Asked by Sandesh Mathre

Yeah. So, there is good potential like many companies, as I have mentioned across the globe, are looking to become carbon neutral or net-zero companies and definitely life cycle assessment and greenhouse gas audit or buying the credit for their residual emission to achieve their goals. Definitely a good growth prospect is there, and as the time like year 2050 will do come as per the Paris agreement, all nations should become net-zero by that specific year under the Paris agreement and as we move near to that specific target year, definitely the market should go bigger and bigger and we are very well positioned to capitalize over the same, we do have internal capacities and we are continuously adding the additional capacities to onboard various lines and supplies and quality services.

Highlights a key growth area for the company, driven by global corporate sustainability goals, and confirms EKI's preparedness to capitalize on this demand.

Asked by Yash Kothari

The inventories we have, whatever the turnover is being booked, we have, as a management, decided to sell, sell from our own inventory in the quarter three quarter two the inventory was of the value of around 90 to 93 crores which is down to 75 crore in quarter three. We are selling the credits on a daily basis from our own inventories as compared to the pure trading by buying the credits from open market. That's why there is a change in the inventory and to the extent of 17 crores. ... we are generating, we credit generation from the own intangible assets has been started and we are amortizing those assets in a gradual manner. That's why the depreciation has been increased in quarter three on account of amortization of intangible assets.

Provides specific reasons for changes in key financial metrics, explaining inventory reduction due to sales from own stock and increased depreciation from intangible asset amortization.

Asked by Lalit Agarwal

So, as I mentioned earlier, also developing nations are the seller of the carbon credits and the company's, private companies in the developed economies they are the buyers. So hardly whatever the credits and that we or the overall industry within India are used to sell the credits, it's majorly goes to the, the companies who are looking the developed economies and hardly we do have any buyer within India, so I think within India almost some two and a half to five million would be the demand from the voluntary buyers within India, but most of the credits used to export the same to the developed economies.

Offers a clear picture of the Indian voluntary carbon market, emphasizing its role as a seller and the export-oriented nature of its credits, with limited domestic demand.

Asked by Viraj

Yes, so just to let you know you may be knowing about ICVCM and VCMI, both agencies are walking towards a fixation of green washing issue, both at the buyer end and the seller end, so with us with the seller end, ICVCM is working to to approve the programs which used to issue the carbon credits, to approve the methodologies on the basis of which the projects used to get registered and, get the issuance of the credits, so to get the quality credits from specific methodologies, various sectors had got approved and further sectors are waiting to get approved, so that is related to the seller of the credits and related to the buyer of the credits. VCMI is working towards establishment of the rating system wherein,based on the procurement strategy and the disclosure strategy of the buyers, the rating would be given to them and there is also working finance of our information . So yes, the issue is getting resolved, but it will take definitely some time to fix within the industry.

Acknowledges the industry-wide greenwashing challenge and outlines the ongoing efforts by key bodies (ICVCM, VCMI) to resolve it, indicating a path towards market credibility, albeit with a time lag.

Asked by Rajiv Jain

Yeah so actually, once this green washing issue that I was discussing to the last question, once it, it will get fixed and do get good demand from the CORSIA. That means the compliance carbon market articles 6.2 to 6.4 market and voluntary carbon market. So, definitely we do have good inventory which we are holding. We do have good number of consulting projects from which the credits will do come, and we also have invested in good number of projects related to the clean cooking, LED and water filters, so definitely we are going to get good gain from the growing demand or the stable demand and we would be able to clock in good top line and bottom line from the same, but again it depends on how fast the industry will do fix this green washing issue and specifically the sentiment which is there within the buyer of the voluntary carbon markets and within the upcoming compliance carbon market. How the market or the policies will do evolve, how their trust will do get evolved so definitely we'll do gain good, good momentum from all those specific momentums

Provides management's qualitative positive outlook on potential profit gains from carbon credit price improvements, contingent on the resolution of greenwashing issues and maturation of compliance markets, leveraging their existing inventory and projects.

Asked by Viraj

Yeah, so we are working on various different fronts now for the business growth and expansion and the good point in time, once it will do it materialized as per the regulations we will do make full disclosures and then we would be able to take more questions related to this specific activity.

Indicates ongoing efforts to form strategic partnerships for growth, signaling potential future M&A or collaborations that could impact the company's trajectory, with disclosures expected upon materialization.

Asked by Rohit