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    RattanIndia Pow.

    RTNPOWERGood
    Power·30 May 2024
    Management Summary

    RattanIndia Power reported a stable operational performance for its 1350 MW Amravati plant in FY24, achieving an 82-83% PLF. The company significantly reduced its balance debt to ₹522 crores by March 31, 2024, with an aggressive target to clear all external debt in the current financial year. Management highlighted substantial regulatory receivables of over ₹2500 crores expected in the coming years and outlined future growth plans including thermal capacity expansion and renewable energy investments, while also initiating merchant power sales.

    Highlights

    8
    • Amravati 1350 MW plant operated at 82-83% PLF in FY24.

    • Balance debt reduced to ₹522 crores as of March 31, 2024, with a target to pay off in FY25.

    • Regulatory receivables of over ₹2500 crores are expected to be realized over the next 3-4 years.

    • EBITDA has remained stable around ₹1000-1100 crores since 2015, with FY24 also in this range.

    • Initiated merchant power sales in Q4 FY24 at an average rate of ~₹7/unit, with plans to expand up to 100 MW in FY25.

    • Exploring capacity expansion at Amravati (660-800 MW unit) or investments in renewables, with an estimated ₹6000 crore project cost for thermal expansion requiring ₹1500 crore equity.

    • Historical losses of ₹2000-3000 crores provide a tax shield for the next few years, ensuring future profits will not incur income tax.

    • The Sinnar 1350 MW plant is currently in NCLT, with RattanIndia Power exploring options to bid.

    Key financials

    Metrics

    6

    Periods

    4

    Headline

    2
    • Balance Debt
      ₹522 Cr
    • Regulatory Receivables
      ₹2,500 Cr

    Q4 FY24

    1
    • Interest Cost
      ₹239 Cr

    FY23

    1
    • Interest Cost
      ₹565 Cr

    FY24

    2
    • EBITDA
      ₹1,000 Cr
    • PLF
      82.5%

    Guidance & targets

    8
    CategoryTargetPriority
    Debt
    Kotak Debt Repayment
    ₹522 crores
    Medium
    Debt
    All External Debt Repayment
    All
    High
    Receivables
    Regulatory Receivables Realization
    ₹2500 crores
    Medium
    Capacity
    Thermal Capacity Addition (Amravati)
    660-800 MW
    Low
    Capex
    Thermal Expansion Project Cost
    ₹6000 crores
    Low
    Capex
    Thermal Expansion Equity Requirement
    ₹1500 crores
    Low
    Sales Volume
    Merchant Power Sales
    up to 100 MW
    Medium
    Profitability
    EBITDA
    ₹1000-1100 crores
    High

    Risks & concerns

    3
    RiskSeverity

    Uncertainty in Regulatory Receivables Realization Timeline

    Realization of ₹2500 crores is subject to court processes, making the timeline (3-4 years) difficult to predict.Management acknowledged

    medium

    Judicial Process for Sinnar Plant Resolution

    The 1350 MW Sinnar plant is in NCLT, and the outcome of the bidding process, including RPL's potential bid, is uncertain and can take 1-2 years.Management acknowledged

    medium

    Challenges in Water Allocation for New Thermal Capacity

    Inland water allocations are difficult due to pressure from other industries and domestic uses, posing a challenge for future thermal plant expansions.Management acknowledged

    medium

    Q&A highlights

    3

    “It's very difficult to put a time around the court process, but we hope to realize that over the next three, four years.”

    Highlights the uncertainty around a significant cash inflow (₹2500 crores) crucial for future plans.

    asked by Hiral Nandu

    3 min read7 chapters

    Detailed Narrative

    01

    Amravati Plant Performance and Debt Reduction

    The company's 1350 MW Amravati power plant, commissioned in 2015, operated at a robust 82-83% Plant Load Factor (PLF) in the last financial year. Management highlighted that the plant's EBITDA has been stable around ₹1000-1100 crores since 2015. A significant achievement was the reduction of balance debt to ₹522 crores as of March 31, 2024, down from ₹1125 crores taken from Kotak in June 2023, with a total of over ₹3500 crores of principal and interest paid off to previous lenders over the last three and a half years.

    02

    Regulatory Receivables and Future Cash Flows

    RattanIndia Power has accumulated regulatory receivables totaling over ₹2500 crores, which management expects to realize over the next three to four years. These receivables stem from past litigations, primarily related to coal import shortfalls not being passed through by DISCOMs, a matter eventually decided in the company's favor by the Supreme Court. The company noted that the worst of the litigation cycle is behind them, and regular energy bills are now being received on time.

    03

    Future Growth Avenues: Capacity Expansion and Renewables

    The company is strategizing for future growth, considering two primary options: capacity expansion at the Amravati plant and venturing into renewables. For thermal expansion, they are looking at adding either a 660 MW or 800 MW supercritical unit, which could be a ₹6000 crore project requiring approximately ₹1500 crores in equity. The company also has experience in renewables through a previously sold solar business and plans to finalize concrete plans in the near future, after paying off existing debt.

    04

    Sinnar Plant Status and Asset Monetization

    The 1350 MW Sinnar power plant project is currently undergoing the NCLT process, which commenced around January or February 2024. RattanIndia Power is exploring options to bid for the plant as a sponsor. Additionally, the company owns 800 acres of valuable land in Mansa, Punjab, under its subsidiary Poena Power, which was originally acquired for a thermal plant. Management is working with the state government to put this land to commercial use, potentially for industrial or agro-commercial purposes, expecting it to yield returns to RattanIndia Power in the future.

    05

    Merchant Power Sales Strategy

    RattanIndia Power recently commenced merchant power sales in Q4 FY24, procuring coal through Coal India subsidiaries' auctions and selling power on the exchange. This initiative has been successful, with an average realization rate of approximately ₹7 per unit. The company aims to expand its merchant sales capacity from the current 28 MW to up to 100 MW in FY25, leveraging the healthy exchange prices driven by the country's power shortage and limited new capacity additions.

    06

    Financial Outlook and Interest Cost Savings

    With the ongoing debt reduction, the company anticipates that its profit before tax (PBT) will no longer be negative going forward, as interest costs will continue to decrease. The interest cost for FY23 was around ₹560-570 crores, and Q4 FY24 saw an interest payment of ₹239 crores. Furthermore, due to historical losses estimated at ₹2000-3000 crores, RattanIndia Power expects to have a tax shield for the next few years, meaning future profits will not incur income tax.

    07

    Industry Demand and Future Outlook

    Management expressed a bullish outlook on India's power demand, noting that the country is operating at almost full capacity, leading to discussions about adding more thermal plants. They emphasized that coal-based power will remain the base load for at least the next 20-30 years, as renewables are intermittent and gas resources are limited. Maharashtra, being the largest power-consuming state and economy, provides a strong market for the company's Amravati asset.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.