NLC India's FY25 Capex Target: ₹3200 Crore

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00:00We're going to talk to one management and we're going to also talk to an analyst to

00:04get us perspective with regard to elections in this particular segment of the Small and

00:10Mid Cap show.

00:11Let's quickly take it straight off to our first management, NLC India stock.

00:16Under a bit of pressure post the Q4 results, we have Prasanna Kumar Motupalli, who is the

00:20Chairman and Managing Director at NLC India joining us.

00:23So first off, talk to us about margins.

00:25Why have margins compressed?

00:26Of course, the higher base in terms of revenue for Q4 FY23 versus Q4 FY24 is understandable.

00:33But what's caused the margin compression?

00:35Okay.

00:36In the quarter four of the last financial year, our operation performance was excellent.

00:45Whatever losses we had in the first three quarters because of the land acquisition issues,

00:51they could be compensated and we could generate electricity maximum.

00:57And the lignite and coal production was also maximum in the quarter four, because of which

01:03in the last financial year, we could produce lignite plus coal at all time highest quantity.

01:10And all our power generation stations, 17 stations were in operation to meet the requirement

01:16of the grid.

01:17So the quarter four compared to other three quarters, it was a very good performance resulting

01:24in very good performance in the financial year.

01:26Understood.

01:27But Mr. Prasanna, I am trying to understand that the margins have significantly gone down.

01:33So why has that happened, reasons for the same and going forward, do you expect them

01:37to improve?

01:38Yes, madam.

01:39Last financial year, as you know, madam, in the first three quarters, there was problems

01:45in the lignite production because of the land acquisition issues.

01:50Because of that, on a continuous basis, we were losing the generation capacity.

01:55But last year, we could complete the major land acquisition activities and substantial

02:01portion of the land is in our possession.

02:03And also the long pending issue of diversion of river, Paramanar river was also completed.

02:09So that facilitated uninterrupted mining operations for the next 25 years.

02:14So with all these things, we are doing well compared to the previous financial year in

02:20the current financial year.

02:22And going forward, this will further improve and our lignite and coal production as well

02:28as the power generation will be further improved.

02:31Understood.

02:32So are you suggesting that margins will again breach 25% go above 25% Q1 itself?

02:43We cannot exactly say the 25% but there will be certainly an improvement over the last

02:48financial year and the last quarter.

02:50Understood.

02:51Mr. Prasanna, I also want to understand as to, you know, what is the under recovery number

02:56being like in FY24 because, you know, your power generation revenues have been impacted

03:01because of that.

03:02So one, what is the under recovery number being like in FY24 and going forward, how

03:07is it set to be, you know, improved in FY25?

03:12Our under recovery in the last financial was around 600 to 650 crores.

03:18That was mainly attributed to the shortfall in lignite production because of the land

03:22reasons and also the technical problems in TPS2 expansion.

03:28And both the issues we addressed in the land acquisition, we already acquired major portion

03:34of the land.

03:35So that under recovery will not be there in the next financial year and already in the

03:39quarter one that under recovery is not there.

03:42And similarly, the other part of the technical problem in TPS2 expansion, the modification

03:49activity we are taking for the one unit in the next month and the second unit in the

03:57second half of this financial year.

03:59With these things, finally, we are targeting to reduce the under recovery to minimum possible

04:05in the current financial year itself and from next financial year onwards, it will be zero.

04:11Understood.

04:12And so, what's the guidance like for FY25 in terms of top line and margins?

04:17Good.

04:18Top line and margins will be substantially better than the previous financial year because

04:28the major issues that resulted in reduced revenue and PAD are addressed.

04:35So in the next financial year, the performance is much better than the previous financial

04:41year.

04:42Understood.

04:43So, sir, I also want to understand that you have two projects which are set to be completed

04:49in FY25.

04:50So, what kind of revenue potential and margin potential are you expecting from these two

04:54projects?

04:56Madam, we are targeting completion of our Gattampur thermal power project which is almost

05:02two gigawatt project.

05:03The first unit we are about to declare the commercial operation from next month and subsequently,

05:10the balance two units also we are targeting for the commercial operation in the current

05:14financial year.

05:15So, with the start of operation from all these three units, the PAD will be increased by

05:24around 500 crores and because one unit will be from next financial next month and others

05:32will be in the subsequent part of the financial year.

05:35So, from next year onwards, once all three units are in operation, there are around 600

05:39to 700 crores contribution will be there in the PAD.

05:43This is regarding the Gattampur thermal power project.

05:46We are also expecting capacity addition of around 300 megawatt at Barsim Sir in the solar

05:53capacity.

05:54There we are expecting increase in the profit of around 150 crores in the PAD.

06:02Understood.

06:03So, cumulatively put together, you are expecting almost a 900 crore PAD increase only from

06:11these two projects.

06:12Is that correct?

06:13Exactly.

06:14Understood.

06:15And that is by FY26.

06:16Yes.

06:17Exactly.

06:18And this is in addition to the growth that you are likely to clock on your current capacities

06:24as well.

06:25Exactly.

06:26Understood.

06:27So, a substantial PAD increase expected.

06:33What's the new investments that you are looking at beyond FY26?

06:37What's the new growth drivers?

06:39As on date, we are having 1.4 gigawatt capacity of renewable capacity.

06:44We are having 2 gigawatt renewable capacity projects in pipeline, 2 gigawatt in solar

06:55and around 50 megawatt of wind in the state of Gujarat and Rajasthan is already in pipeline.

07:01We are expecting the completion of these projects by the financial year 26.

07:07And subsequently beyond 26, we already entered an MOU with the Rajasthan government for capacity

07:14addition of 1,000 megawatt of solar and 125 megawatt of lignite-based power generation.

07:21That also will be coming after 26.

07:23And we are also having an MOU with the government of Assam for addition of 1,000 megawatt solar

07:28capacity.

07:29That also will be coming after 26.

07:32Also, we are envisaging 2 into 60 megawatt, 1320 megawatt lignite-based power station

07:40at Naiveli.

07:42Already it is tenderized.

07:43So, that capacity will also be coming in the financial year 29.

07:48In addition to that, our Talabhera thermal power project, which already, the work has

07:52already started, 3 into 800 megawatt, that will be coming in the financial year 29.

07:58And the second stage of Talabhera thermal power project, we are going to tenderize and

08:02that is, we are expecting by the next month.

08:05So, that also will be coming after 26.

08:09So, then, sir, I want to understand that all of these projects that you have mentioned,

08:14what is the kind of revenue contribution you are expecting from all of these projects,

08:18you know, going forward beyond FY26?

08:21And how quickly do you think that you will get to a break-even for these projects?

08:27From the existing 6 gigawatt capacity, we are targeting more than 17 gigawatt capacity

08:32by 2030.

08:34And also in the mining fund also, from the existing around 44 million metric ton, we

08:40are targeting more than 100 million metric ton by 2030.

08:44For all these activities, a capex of around 1 lakh crore, we are planning to invest.

08:49And as on date, we are having regulated equity of around 9,000 crores.

08:54And by 2030, this will become almost 24,000 crores, where a return of around 15% is assured.

09:01So, we are expecting a substantial improvement in the PBT and PAT going forward.

09:09Understood.

09:10And, sir, one last quick question.

09:12So, if you're expecting your capacity to go from 6 to 17, that's almost triple of your

09:16capacity, do you expect this to be fully utilized by 2030?

09:22And secondly, what are the capacity utilizations right now and FY25, how are you expecting

09:27them to be?

09:29See, madam, as on date, the power requirement is growing like anything.

09:33If you take the CAGR of last 10 years, it is 6 to 7%.

09:37But last two, three years, the growth is more than 9%.

09:41And that growth is expected to continue in future also.

09:44So, taking all these factors into consideration, the capacity utilization factor of our thermal

09:50power stations is going to be maintained at more than 75% level.

09:59And we don't expect any backing down from these thermal power stations because there

10:05is a huge power demand going forward.

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