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Edited Transcript of TATAPOWER.NSE earnings conference call or presentation 1-Aug-19 1:00pm GMT

Q1 2020 Tata Power Company Ltd Earnings Call

Mumbai Aug 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Tata Power Company Ltd earnings conference call or presentation Thursday, August 1, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Praveer Sinha

The Tata Power Company Limited - CEO, MD & Director

* Ramesh Narayanswamy Subramanyam

The Tata Power Company Limited - CFO & Compliance Officer

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Conference Call Participants

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* Abhishek Puri

Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power

* Apoorva Bahadur

Jefferies LLC, Research Division - Equity Associate

* Dhruv Muchhal

Motilal Oswal Securities Limited, Research Division - Research Analyst

* Inderjeet Singh Bhatia

Macquarie Research - Head of Research

* Puneet J. Gulati

HSBC, Research Division - Analyst

* Rahul Modi

Antique Stockbroking Ltd., Research Division - Former Research Analyst

* Rahul Modi

ICICI Securities Limited, Research Division - Analyst

* Santosh R. Hiredesai

SBICAP Securities Ltd., Research Division - Research Analyst

* Sumit Kishore

JP Morgan Chase & Co, Research Division - Research Analyst

* Swarnim Maheshwari

Edelweiss Securities Ltd., Research Division - Research Analyst

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Presentation

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [1]

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Thank you very much, and good evening, and welcome to all for the earnings call to discuss the Q1 FY '20 results of Tata Power. I hope all of you had a chance to take a quick look at the results.

As you would have seen, the company continues to achieve a consistent performance despite several sectoral challenges. Q1 FY '20 performance has been driven by strong consistent operational performance in all our regulated businesses, namely Mumbai operations, Maithon, Delhi distribution. And in all these, we have realized higher-than-regulated returns.

Apart from this, our renewable businesses have also performed consistently, though there were certain challenges in the wind projects, which have been a little lower than the last quarter.

The consolidated revenue has grown by 5% from INR 7,199 crores in Q1 FY '19 to INR 7,567 crores in Q1 FY '20. Similarly, the consolidated EBITDA in this quarter grew by 27% to INR 2,210 crores compared to INR 1,746 crores to last year's Q1 quarter.

Renewables continues to report a very strong EBITDA of INR 663 crores, up by 12% due to the new capacity addition. All our subsidiaries and joint ventures continued to perform very well. The underlying EBITDA has grown by 13% from INR 2,327 crores to INR 2,638 crores, which the previous years that we have taken out the synergy in ITPC, which on the -- to compare it on like-to-like basis with this year.

The company has achieved a PAT before exceptional items of 240 -- 2 54 crores this quarter as compared to 2 52 crores last year. This translates to a growth of approximately 25% if we exclude the impact from synergy and ITPC for the same period last year, as both these we have taken as for sale and are not including the PATs.

What we have seen is that the softening of coal prices in the last quarter has reduced the deal move, in fact, for the coal company. And because of that reason as well as because of better blending of coal, we are right now at something like 49% blending of coal. We have been able to reduce the fuel and the recovery for Mundra from 93 paisa last year to 55 paisa in this quarter. The renewables in this portfolio continues to grow, and we have commissioned 250-megawatt solar in Q1. Similarly, our solar EPC business has grown and has shown a total order pipeline of nearly 4,400 crores. [PP IDA] has 600 megawatts of solar projects under implementation, and another 100 megawatts is now pending for letter of award from Russia.

Now let's look at some of the challenges or some of the issues that have been facing us. One is about the reopening of the PPAs by Uttar Pradesh. We have received the letters from the -- our discounts regarding WREL-run renewable PPAs and the Tata Power renewable PPAs. We did approach the honorable High Court, and it has stayed the order of the discounts. Similarly, on -- some of the other developers have gone and have got a stay from the discounts not scheduling power. The High Court has asked that they should give valid reasons, if it all, they are not scheduling power, as these units are on must-run basis. And we expect that based on the intervention of the honorable High Court, we will be able to get this (inaudible) from the unilateral decision, which was taken by the honorable Court (inaudible).

Let's come to the Mundra aspect. Mundra, as you know, that out of the 5 states, Gujarat had already approved it. There was a meeting, which was held there last month on 17th of July, in which all the 5 states [power PPAs and the discount heads] led in the Ministry of Power, government of India. And all of them have agreed that they would be going ahead and completing the process of approval of PPA through their respective state governments and state cabinets. And thereafter, they will inform the CERC about the supplementary PPA. So we expect that the resolution of this should happen.

There has also been a few other developments. Especially, there has been news about the coal license of renewal. There was a proposal, which was approved initially to modify the coal license renewal policy of the government. But since there were elections in the month of May and the new government was to reform, the decision could not be taken. Now that the elections are over, and we understand that the new government and the cabinet will be in place by October, we expect that thereafter, this issue will get finalized. There are certain processes that need -- they need to do in terms of getting it approved by the parliament in Indonesia, and thereafter notifying the new policy and the process of renewal of licenses.

And as we feel that KPC is one of the biggest mines in Indonesia and some of the other big mines which are awaiting their mining license renewal that this will happen because, all said and done, all these mining companies have huge taxpayers and pay huge amount of royalty to the government. And the government of the day will like to protect their revenues from all these mining operations.

As regards our position on divestment and reduction of debt, that continues to be top of our agenda. We have to reduce our debt. And we have been taking steps to run a process whereby we can divest our stake both in [synergy] as well as ITPC Zambia. There has been good discussions, and the sale in South Africa is going through the process. We are in the process of talking to some of the potential investors. And hopefully, we expect that in this financial year, this will get closed.

Similarly, we are running the process for ITPC Zambia. And we hope that within this financial year, we'll be able to discover the price and close with the divestment process.

Similarly, we keep on looking at other opportunities where we can reduce our debt. Debt and there is a plan, how we can -- all the other noncore assets which are there, how do we divest on that. As regards the Georgia project. The good thing is that we have got the insurance money. The full money has come, and the project work is going on. We expect that the plant will be ready to operate in the month of January, February next year. And we have also been able to work out a draft [BP agreement] arrangement with the Georgia government, which also should get finalized soon. So I think all said and done, the Georgia project should be up and running next year by second quarter. And we expect that it will thereby be able to generate the revenue for which it has been designed. The last area that I would like to touch upon is on the 1,980-megawatt Prayagraj project. As all of you are aware that through Renascent and Resurgent, we have taken over and we have submitted our bid, which was accepted by the bankers. And we wanted to go ahead and take the project, but unfortunately, the approval process through the discount in UP has -- also through the regulatory commission over there got delayed. We went and challenged the order which was there. We went first to the High Court, and the High Court asked the regulator -- the Uttar to examine it. The hearing in Uttar is over, and the order is expected any time now there since the order is resolved. So we are confident that we will be able to go ahead and complete many of these things which are work in progress. And we'll be able to come out of the very tough conditions that the industry is going through.

I'll now hand over the call to the moderator for question and answers. And my colleague, Ramesh Subramanyam, CFO, and I will try to respond to all of you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of (inaudible) from Macquarie.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [2]

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This is Inderjeet. My first question is on Mundra. So in terms of the next steps, so what are the next steps which need to be taken? And any sense as to what kind of time line? And another related question is that do we need to be in a situation where all off-takers need to agree? Or can we have separate agreements with separate states and start supplying at a higher rate?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [3]

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So the answer to your last question is -- I'll start with that. So this agreement was -- the bid was done jointly with 5 procurers. So -- and the terms were agreed upon, the 5 procurers together. Therefore, it may not be -- while legally, there are separate contracts, but it may not be practically possible to have an arrangement separately with each one. So therefore, the approach is to seek alignment. And that's what we're working on.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [4]

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Okay. So does that mean there is actually a veto with states?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [5]

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Not really. I think it is more about not having a situation where all states have to answer why their terms are different than the others. So we are seeking a consensus, which is -- more easily can pass through their own internal approval process.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [6]

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And regarding the next steps?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [7]

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So the next step is that we are awaiting the approvals of the 4 states. As you know, Gujarat has already approved it. The other 4 states are in a advanced stage of moving their papers internally on things like cabinet approval, et cetera. So there's been good movement. Of course, elections in some of the states we know delayed the process, and we are trying to expedite it.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [8]

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Okay. And then second question on Indonesia, just to kind of understand the situation better. So why was there an understanding earlier that this will be an automatic kind of an extension of the licenses, why the situation has come about? Is there -- are there any demands there to kind of put in these mines for bids? Or this is just a procedural issue that we should not get worried about?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [9]

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So you must know one thing that the issue of license is not something that has come out in the last few months. The last 2 years, the government of Indonesia has been working on a draft legislation on the whole process of extension of licenses of the CCOW contracts. So we are not the only one. And this process has kind of culminated or reached the final stage before it hits the final approving authority in the government. So it's gone through extensive negotiations and discussions with all the mining companies. So there is a good amount of clarity on what the government wanted to do in terms of the extension terms.

Now, yes, it is yet to be fully signed off by the government. So the issue, which you are talking about is because of the articles appearing saying that one company, in particular, got the license canceled. But that according to us was a procedural kind of question mark. And before the legislation was in place the PPA got renewed.

So also, it's important to note that there is already a existing legislation. It is no that this is a first-time legislation. All they're doing is to amend the legislation. So the existing legislation is getting amended, and that's why all the government is taking consensus of all the stakeholders.

So we believe that it's more procedural as of now because what has come out in the news reports, there is cancellation, is more of -- it's just saying that extension was granted before the new law came into place. So therefore, they have stopped it for the moment, saying, wait for new legislation to be passed before you do the renewal. So according to us, a smaller procedural issue.

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Operator [10]

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The next question is from the line of Puneet Gulati from HSBC.

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Puneet J. Gulati, HSBC, Research Division - Analyst [11]

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Just continuing a bit more on Indonesia side, do you expect any change in terms and conditions when the renewal happens?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [12]

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So yes, in the new legislation compared to the existing legislation, there are changes. There are changes in tax, royalties. There are some PAT adjustments. Even there's a discussion around how the assets of the existing mines have to be treated. So all that is part of the legislation. So -- and then we are well aware that some of these changes may pass the final test or it may not. So -- and we also know that by and large, it's not some material deterioration in the current terms of the license. That's what we understand based on the current draft.

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Puneet J. Gulati, HSBC, Research Division - Analyst [13]

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Okay. And what is the time line for this to go through?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [14]

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So look, the first of the licenses is the one which got renewed and then kind of revoked. Ours is coming in '21. So therefore, 1 year before, they are supposed to renew the license. That's what the new legislation states. So -- and it applies 2 years before. And therefore, which is -- we are expecting that during this year, this [iteration of] legislation will pass, but we will be able to then formally apply it. That is our expectation.

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Puneet J. Gulati, HSBC, Research Division - Analyst [15]

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And would you need to pay something more as well?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [16]

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Well, I think we're going to wait for the legislation to tell us that. As of now, we don't have any major negative -- or it's a major concern around that although we have not heard that there are major amounts that are to be paid, et cetera, to get the extension. As far as we are concerned, we don't know any of that.

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Puneet J. Gulati, HSBC, Research Division - Analyst [17]

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Okay. Okay. On the Mundra issue, would the change be effective retrospectively from October? Or will it be prospective?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [18]

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As of now, yes, that's where the proposal is.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [19]

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It's supposed to be effective 15th October 2018.

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Puneet J. Gulati, HSBC, Research Division - Analyst [20]

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Okay. And for Mundra, you also said that there has been an agreement in the states -- between the states, and now they're going back to get approvals from Cabinet. Can you give some more light on what kind of agreement has taken now? Is it better than what you thought or was discussed earlier or worse, adverse?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [21]

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So the process was like this. The HPC committee report came in and the comment of Gujarat made certain changes to it and that's why they're opting it and shared it with all the procuring states saying this is what we believe we can sign up on. All the states are free to add and delete what they felt like. So some of the states have asked for some additional conditions, which according to them will help them to take their approval. And some of them, we've agreed. So we don't know finally where it will end up, but we are -- we have in mind that it could be slightly lower than what [this office] offered, could be possible. But it's not yet finally approved, so we can't say anything. So the upper limit being whatever was offered.

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Puneet J. Gulati, HSBC, Research Division - Analyst [22]

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Okay. Also on this, your 2 new assets, which you've listed now as held for sale, ITPC and [synergy]. I thought one of the assets also had issues in terms of government not paying because of currency, is that sorted out now?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [23]

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Not really. We are still in touch with the government, and the government has promised to take steps. But the reality is that the Zambian government yesterday -- the economy of Zambia is a bit of a weak spot. So we are working, along with our shareholders and staff and stakeholders of the company. And we're looking at other options also to ensure that we mitigate our risk.

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Puneet J. Gulati, HSBC, Research Division - Analyst [24]

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Okay. But would you get buyers in this scenario? Has anybody expressed interest on discussion?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [25]

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Well, we can't reveal all the details, but let me say it this way that there are buyers for every asset at a price. So we'll have to figure out how to get the best price out.

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Puneet J. Gulati, HSBC, Research Division - Analyst [26]

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Okay. And what would be your expectation? Do you expect to get at least a book value out of it or...

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [27]

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Well, our expectation is quite high, but we also want to be realistic. So we will have to take on -- yes, your book value would be in this circumstance -- it could be also not a bad deal. But I think we shouldn't speculate. We're still running a process around it, and let's figure out where we end up.

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Operator [28]

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The next question is from the line of Apoorva Bahadur from Jefferies.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [29]

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So just quickly, first of all, I think going onwards this thermal mechanism has come into play. Just wanted to know if we have received or started receiving LCs for all our assets. So basically, even the renewable ones, are they in the coverage now?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [30]

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Yes. We have seen progress. I don't have the -- today's latest numbers, but I guess that we have reached, I mean, some percentage of people already approaching -- or openings LCs. So we see action on the ground.

And I'm told by our team that now about 400 megawatts of LCs have already equivalent, let's say, value of LCs, have already received. And remember that the whole clarification around this only came yesterday. So I guess that discounts will take time to react. But on the thermal assets, we're already seeing discounts really diverging overnight to put in their compliance.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [31]

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So I think the power supply would be stopped, right? There was some deadline if they don't provide LC within the [stated] deadline.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [32]

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Yes.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [33]

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So what -- when is that? By when is that?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [34]

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That is basically decided by the state load dispatch center in terms of scheduling of power. So I think now that -- for conventional, it was sent quite some time back. But for the renewable, the clarification came only yesterday. So let's wait for a few days, and I'm sure these state load dispatch centers will suitably respond to Ministry of Power on the same.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [35]

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Okay. Sir, also, you mentioned about the insurance payout received in Georgia. So that -- is there now other income that we have received?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [36]

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No, no. This is for the project. It's not going to come to us. It's gone to the project, which they are using for the [stated] activities.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [37]

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Okay. Sir, also, I was just going through your annual report. So among the guarantees given for various subsidiaries and JVs for Mundra, basically, it has increased from roughly INR 31 billion to INR 78-odd billion. Why is this sharp increase?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [38]

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So we had to raise further debt there. If you recall, we raised bonds in the last few months, and it is to cover them.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [39]

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Okay. So they're a bit the recourse?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [40]

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Yes.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [41]

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Okay. Fine. Sir, one last question, and this is a bit hypothetical. Just wanted to understand basically, so linking this Indonesian mine renewal and along with the HPC, so supposedly unfortunately, when we do not get an approval for renewal, in that case, will the additional loss, basically, or the lack of profit sharing, will that be a pass-through under the HPC mechanism?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [42]

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I'll answer in 2 parts. One is it is a hypothetical question. And number two is -- so these are -- there could be some gray areas around it because they're all working on a theory that there will be supplies of coal and there will be these mines. There are some provisions we are aware of, which cover this for us, but I would not go that far because these are areas where I think that we have to test the ground for reality.

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Apoorva Bahadur, Jefferies LLC, Research Division - Equity Associate [43]

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Okay. So finally, basically, for any further changes under this HPC tariff, will we have to, again, approach these states for basically probably changing the agreement? Or will it be sort of an automatic mechanism that will be followed?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [44]

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Basically, these are multistate PPAs, so it will go to CRC. CRC will be the agency which will take all the inputs of the states. And then there will be a common PPA which will be agreed upon and signed.

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Operator [45]

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The next question is from the line of Swarnim Maheshwari from Edelweiss.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [46]

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Sir, my first question is actually, when you look at your coal mining profit for Q1 FY '20, and when I compare this on a sequential basis, we have seen that [mining] operating performance has been very steady at about INR 100-odd crores, but there is a sharp fall in the PAT. So what is this attributed to?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [47]

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Where are you seeing?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [48]

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[The coal.]

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [49]

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In the coal mines text?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [50]

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[the tax]

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [51]

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Yes.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [52]

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(inaudible)

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [53]

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(inaudible) Coal mines or coal SPV?

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [54]

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Yes. That's the integrated one, the coal mining inside...

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [55]

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Okay. Okay. So there is a one-off -- it's an amount accumulated. There's a tax of 111 crores, which is pertaining to dividend distribution, which has accumulated over the last 1 year. If you remember, we were showing that amount as a shareholder loan. And that amount has got converted into dividend, part of that amount. Therefore, the tax on that amount has been paid. That is something, which affects [the tax].

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [56]

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So this number, basically, that withholding tax, is -- that number is about 111-odd crores. So that would actually be there in every first quarter, is it?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [57]

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Yes. In the consolidated...

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [58]

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No, no. It will not be there. This is a one-off.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [59]

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I believe this should have been charged off in the respective quarters had the dividends been declared regularly. And these were declared once in a while. It happens. There's another -- in the coal SPV, there is another charge, which in the coal segment will come as the guarantee commission, which Tata Power as part of the transfer pricing mechanism to charge off the (inaudible). But it gets eliminated in the consolidation. Since you are looking at only the coal companies, I'm telling you that there is an impact there.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [60]

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Okay. And what is that amount?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [61]

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That is about INR [37,] INR 41 crores?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [62]

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INR 41 crores.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [63]

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INR 41 crores. Okay. Okay. So my second question is there was this news on -- that the Delhi Chief Minister moving off the tariffs for 0 to 1 -- 200 units? So any possible impact on Tata Power's daily distribution?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [64]

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There is no impact on this because as far as the tariff is concerned, we collect that money. The only difference is that this money will now come directly from the government and not from the consumers. So whatever is the subsidy that the government has to give, they will give directly to us. And to that extent, it will actually improve the collection efficiency of the discount.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [65]

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But that is assuming Delhi government will be pay us on time.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [66]

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They always pay on time. There has never been a default.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [67]

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All right. And sir, my third question would be, you did alluded to the draft legislation on the Indonesian coal mining policy. I mean, just a ballpark figure over there. I'm sure you would have seen the legislation, and you did mention that there is no material change with respect to taxes or royalty. So when you say material, what is -- it is like less than 5%? What is it?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [68]

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Yes, material as less than 5% is a good number because materiality accounting is an accounting term. So yes, you are right. That's a good number to have. So look, please understand. I think we are all going by the draft that was in circulation. But the point is that it has had to go through the government systems and lawmakers have to clear it, so let's wait for it. But what we saw was that all of the changes were squaring off each other and it was not making a major overall impact on these assets.

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Operator [69]

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The next question is from the line of Dhruv Muchhal from Motilal Oswal Securities.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [70]

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Sir, on Maithon, we have seen some improvement in EBITDA, about INR 300 crores versus last year, same quarter of about INR 1,900 crores. In the [PPT], you mentioned about some active order, can you please elaborate on this?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [71]

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So this is about the order relating to the CapEx approval that happened in Maithon. There was a dispute on the calculations, which went up through the (inaudible) there and then got decided in our favor. So that's INR 165 crores...

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [72]

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[It was decided at] INR 135 crores as the CERC level.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [73]

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At the CERC level, and INR 135 crores is the amount which has been -- which ends up getting to EBITDA.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [74]

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So this will be a recurring? This INR 135 crores pertains to the current quarter or even the previous quarters?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [75]

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So this is accumulation so there will be a recurring impact also of this order. But it will not be of this large order. It will be a smaller amount. We can give it to you separately.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [76]

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Sure, sir. And so is it right to assume now in this quarter, there was no DMO impact? And these are the underlying numbers, I mean, without any DMO issue?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [77]

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For the coal companies, yes. Yes.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [78]

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Sir, thirdly, you mentioned that the coal JVs had this INR 111 crores of this withholding tax impact. Now our coal JV PAT is about 170 -- 150 -- INR 160 crores. So should I add back this INR 111 crores to get the recurring PAT? Or I mean, is there something which I am missing?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [79]

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You are right. You are right there.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [80]

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(inaudible)

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [81]

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And then all the -- that guarantee commission which we talked about will be the other item because that is also a one-off which is not recurring.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [82]

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Okay. So in that case, you have seen a significant -- we'll be seeing a significant improvement in our PAT versus our [EBITDA] will not have changed much. So to give it this way, KPC's EBITDA was about INR 280 crores in 4Q. And it has increased to about INR 330 crores in 1Q, which is about INR 550 crores increase. But our PAT would have increased significantly if I add back this tax adjustment. So what -- I mean, there's INR 100 crores delta impact versus only INR 50 crores delta in EBITDA.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [83]

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Can you just take it offline?

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [84]

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Yes, sure. And sir, lastly, now that coal price are falling, do you see any delay in the payment from (inaudible)? Or that should continue what we're expecting in this to be recovered this year next year?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [85]

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Well, it's not directly linked only to pricing. But it always helps that prices are higher. So I would say that they are 2 parallel tracks. It helps to have a higher coal price, so that the majority owners have a bit of cash flow.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [86]

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Sure sir. And then lastly, on Tata Projects, any update on that? Are we expecting it anytime soon?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [87]

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No, nothing to report as of now, but we are working on it.

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Operator [88]

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The next question is from the line of Sumit Kishore from JPMorgan.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [89]

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My first question is on tax expenses as reported on Slide #8, against the total PAT before share of JV of INR 446 crores, the corresponding tax expenses are close to about INR 414 crores, up significantly on a year-on-year basis. I mean, is there any non -- is there any nonrecurring item here, which we should know? And how should we be looking at this absolute tax rate that you have? I know there are losses for Mundra UMPP, which sort of distort the tax calculation.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [90]

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So we'll give you separately this one because you have to also understand, in last year, what was the items which would have been one-off. So our team will get back to you on this.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [91]

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Okay. And second one is that for discontinued items, discontinued businesses, operations, you have a loss for Q1 FY '19 of INR 34 crores. While if I look at Slide #6 for both ITPC and [synergy,] you had disclosed a profit for both these entities. So I mean, I don't understand why it should be a loss?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [92]

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This is [Syrie]. INR 19 crores loss is Syrie -- and because it is held for sale. Last year, it was INR [34] crores and now, this quarter, it is INR 19 crores.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [93]

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Okay. So ITPC and [synergy] share of profit do not appear in this count?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [94]

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No.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [95]

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No. They are treated directly in the -- assets held for sale. They go to -- sale.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [96]

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No, no. They don't -- we don't consolidate them.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [97]

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We don't even consolidate them. They will -- direct adjustment to -- as and when the sale happens. So you stop accruing profits on those items.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [98]

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Okay. So they're not part of discontinued operations?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [99]

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Yes, they are not part of it.

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Operator [100]

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The next question is from the line of [Ghirti Shen] from Sundaram Mutual Fund.

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Unidentified Analyst, [101]

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Hello. Sir, any update you wish to share on the startup projects divestment firm?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [102]

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No, we just -- we're still working on it, and let's see how we can structure it. We're still working on it.

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Unidentified Analyst, [103]

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So when -- like as on this Mundra, is there any time line you expect, sir, internally? That by December, you should get it completed or March? Any time line you are having expectations sir, internally, when will we see the reduced losses?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [104]

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Well, our intent is to do it ASAP. It is not exactly in a -- as we are chasing all the 4 governments to approve it. Yes, the next few months, we should be -- actually, there's so much pressure that hopefully, we get that thing resolved in the next few months.

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Unidentified Analyst, [105]

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Okay. Debt collection, is there any target you have for the full year, sir, FY '20?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [106]

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So the debt reduction, the only things which are there really is the whatever noncore assets which we will be able to liquidate in the year. And we are working on a couple of them. So therefore, that would probably be the one. And yes. I think those are the ones for the year. And of course, any accruals that are there, which were diverted to the debt and also any realization from [Arutmin] That would be the other piece.

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Unidentified Analyst, [107]

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Sir, last year, when we see our annual report, our working capital increased. So given that this LC opening is being done by the State Electricity Board, do you expect that any reduction in working capital will happen this year? In terms of number of [states]?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [108]

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Yes, of course. Because this is directed towards clearing overdues and preventing delays. So we do expect an immediate impact on working capital. Because the LC gives you the right to withdraw to -- in-cash. So precisely, that's the reason why it has been put in place.

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Unidentified Analyst, [109]

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But how it will happen. So practically, your relationship with your customer will go in -- tough. In a short term it will be tough because you have to meet them day-in and day-out. You will have worked with them all day, regular basis. If you exercise an LC and it would not look nice to your customers, sir?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [110]

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No customer likes in-cash collateral, no seller would like to in-cash collateral. But you know what, that creates more discipline in the system is what our understanding is. And therefore, it is not that our expectation is to encash LCs every month. Our expectation is that, that will build enough kind of resources and discipline to pay the bills on time.

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Operator [111]

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The next question is from the line of Abhishek Puri from Axis Capital.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [112]

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So 2 things. First, on the debt numbers, largely, they have gone up. So apart from regulatory asset decrease, what will be the reason for the increase in the debt profile? And specifically, for the renewable energy assets, also, you have given, I think, INR 9.8 billion, that has gone to INR 11.9 billion. That's second. Third, I think, on the distribution franchise also related to your comment on the [AGM] circle, how has been the progress?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [113]

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So debt [investing center], one is really the renewables. Also, there's been temporary working capital increases also in a couple of places that have led to increases. And we hope to bring it down soon. And regular CapEx that have been the other issues, everywhere. All the distribution businesses you have there the CapEx, maintenance CapEx that goes on and that's why [debt increases]. And so apart from that, there's no real -- there's no real new investment other than renewables and the regular maintenance CapEx.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [114]

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And the CapEx plan for the current year on this renewables. Specifically, you have won quite a few projects this year.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [115]

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So currently, our pipeline is about 450-megawatt equivalent, so which means about INR 1,800 crores to INR 2,000 crores of total CapEx would be there on renewables alone in this year. And it could be not just this year. It could be spread over 18 months, let's say, 18 to 24 months.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [116]

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Okay. And in terms of the working capital increase, this is largely for the distribution circles? Or is it for the other businesses as well?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [117]

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No actually, the increase has been across the board and in Mumbai, we have had delays from the large bulk customers. In Delhi, it's a temporary thing, which we -- I think it's more seasonal. Then we have renewables where some of the states have delayed. Our overall, however, receivables is still okay. Some states have delayed.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [118]

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And on the distribution franchisee, [Ajmer] part?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [119]

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[Ajmer] is doing well in terms of operations, business is doing well. It has brought down the [AT&C] losses also quite successfully from where we started. Previous year, it was about 17.5%. This year, we are about 9.5%. So that's the kind of progress that's been achieved.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [120]

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I'm sorry, you said 9.5%?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [121]

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Yes.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [122]

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A substantial reduction, actually.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [123]

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Yes.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [124]

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Okay. And lastly, if I can ask one more on the restructuring part. I think we've been hearing about some restructuring being planned and specifically on the renewables efforts. So if you can briefly talk about that in terms of whether this is supposed to be the growth area for us? And if it isn't, without it, what will be the growth vehicle for the overall company? Or is it that the debt reduction is the primary driver for this kind of restructuring as of now?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [125]

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No, the objective is both. We want to have a controlled debt number in absolute terms. We're trying to contain it. And also, we also need profitable growth. So in the asset-intensive industry, debt normally goes along. So we are talking about several ideas. And therefore, have a couple of options really available, but nothing has been decided. As of now, business is as usual. We want to build -- our focus is now to really contain debt by actually ensuring that all our assets which are worth disposing, we kind of do that and, say, clean up the balance sheet. Then the next step is to build a good robust portfolio of renewable assets. So therefore, we'll be very selective, choosy, in going after those assets. So that's our [program]. But really, in terms of what you call it, a restructuring. I don't see any restructuring that we have decided right now.

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Operator [126]

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The next question is from the line of Rahul Modi from ICICI Securities.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [127]

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Sir, just a couple of quick questions. So firstly, what is the average receivable days that we are seeing in the renewable business, consolidated today for us?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [128]

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Just a minute Rahul.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [129]

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That's the overall number.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [130]

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Well the overall -- okay, this is actually including the thermal portfolio, we are around less than 2.3 months? Wait. Rahul, I don't have it readily.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [131]

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But we will give it to you.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [132]

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Sure sir, sure no problem, sir...

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [133]

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But I can assure you that in renewables, we have only a couple of states where we have larger volumes. Whereas really, we have a very good track record on the other states.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [134]

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Do they pay -- for renewables, if there is delay, do they pay surcharges?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [135]

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Oh, you mean direct payment charges.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [136]

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Yes, Yes, yes. LPs.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [137]

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So some of the states are paying. Some of the states ask you for some concessions or... So this is state to state.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [138]

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But it covers our cost, broadly?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [139]

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Well, yes, many, many cases it does. Sometimes, we take a view that if we don't take that view, how long it will take further to collect. So sometimes we do but by and large, it is [forward].

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [140]

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Sure. Sir, I just wanted to ask you about the regulatory asset. We've seen that increasing in Delhi. So what's the part of the liquidation in both Delhi and Bombay going ahead? And the reason for Delhi increases.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [141]

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The Delhi increase has been a nominal increase, not a very high increase. And that was because of the tariff revision that did not take place. Now that the tariff revision has happened yesterday, we expect that going forward they should be in a position to reduce their [regulatory] assets. Also, Mumbai regulatory assets is all getting amortized. The last order of the regulators in -- last year has helped us to reduce the regulatory assets. So it has come down to INR 2,000 crores. And the amortization plan is in place. So hopefully, we should be able to amortize by next year.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [142]

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Sure. And sir, any update on the [Seisu] license in the distribution space?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [143]

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[Seisu] license, as you know that the billing process was done because of the election, the important process came to a standstill. I'm told now that they have restarted working the revaluating of the offer. And now that besides also looking at privatizing some of the other discounts, also the other 3, they are now very keen that they close for the Seisu and then quickly decide on the other 3 discount. So hopefully, this should happen much faster now.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [144]

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So sir, do we look to participate in the franchisee systems if bids come up in the sector? Or we are more focused towards the licensed areas?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [145]

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Our preference is licensed, but we also selectively look at franchisees, provided it meets our investment criteria.

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Rahul Modi, Antique Stockbroking Ltd., Research Division - Former Research Analyst [146]

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Sure. And sir, any outlook on coal prices that we are seeing from current levels. So this time, I believe the BMO, as the earlier caller had mentioned that was asking about the impact this quarter. So I believe there isn't any. So what is your view forward on the prices?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [147]

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The international coal prices have softened in the last 1 year. It went to a peak of more than $105 last year. And it's in the $70 range now. And we expect, at least for next 2 quarters, it will remain [mild]. So thereafter, we don't know, but at least for next 2 quarters, it looks like it will stabilize at the present level.

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Operator [148]

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The next question is from the line of Puneet Gulati from HSBC.

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Puneet J. Gulati, HSBC, Research Division - Analyst [149]

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Yes. The last thing on this Arutmin, you alluded that because of low prices, there might be a real slowdown in payment. Do we have any serious bargaining power here? Or is it more like on the mercy of when they really want to pay?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [150]

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So Puneet -- I think we have to understand one thing that the counterparties who have to pay us money are conservative companies under restructuring. And as you are aware, therefore, a lot depends on how they manage their finances. So therefore, I think we have to be cognizant of that. That is the only way we could put some incentive there. And we are also chasing and actively working with them.

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Puneet J. Gulati, HSBC, Research Division - Analyst [151]

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Okay. And would you have an idea of where is the other debt, what -- where are we in terms of in the hierarchy of getting paid?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [152]

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So certainly, there is no such waterfall, in which we are clearly a [leader] party, but remember that we have an understanding with them as to what and how we will get paid. And that process may not be exactly as we want or not exactly fast as even they would want. We're trying to do whatever we can to speed it up okay.

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Operator [153]

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The next question is from the line of Santosh Hiredesai from SBICAP Securities.

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Santosh R. Hiredesai, SBICAP Securities Ltd., Research Division - Research Analyst [154]

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So you mentioned about having a healthy renewable pipeline. I'm just trying to get a sense of what would be our yearly target as such for this?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [155]

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We don't normally give forward-looking targets. So we can't share that with you. But yes, we will be selective, but we will be participating in the [bid] system. But we'll be selective based on our criteria.

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Santosh R. Hiredesai, SBICAP Securities Ltd., Research Division - Research Analyst [156]

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So this current 450, 500 megawatts you talked about. So 18 -- INR 1,800 crores to INR 2,000 crores of CapEx. Is that something which we can build in or...?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [157]

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Oh yes, because those we have won. So we have to...

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Santosh R. Hiredesai, SBICAP Securities Ltd., Research Division - Research Analyst [158]

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No something -- is that the run rate that one could work with, let's say, on a repeating basis?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [159]

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That's up to you. But I'm just saying that you could look at the trend and see that -- how we participate. And therefore, it's difficult to give you an exact number because, a, we don't know how the bids will turn up and we're not going to be trying to win every bid type. So therefore, you have to be a little calibrated on that.

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Operator [160]

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The next question is from the line of Dhruv Muchhal from Motilal Oswal Securities.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [161]

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So most of the questions are answered. Probably just one last thing. On the LC scheme which has started now. One thought is that this scheme is applicable only for the interested clients. So the state discounts, probably, given this squeeze will want to squeeze out the state-based [end cos] and most of our plants are at least state based. So do you also think that could be a risk? And I mean, how do you see that?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [162]

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I think we have yet to really study that in that it will be -- whether we feel that is risk or not. For it's too early to us.

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Operator [163]

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(Operator Instructions) As there are no further questions. I now hand the conference over to the management for their closing comments.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [164]

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So thank you very much. We have responded to all the questions which are there. On some of the queries, we will come back. And if you have any more queries please get in touch with my colleagues, and we will be more than happy to respond to you.

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Operator [165]

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Thank you very much.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [166]

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Thank you.