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Edited Transcript of TTPW.NS earnings conference call or presentation 19-May-20 1:30pm GMT

Full Year 2020 Tata Power Company Ltd Earnings Call

Mumbai Jun 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Tata Power Company Ltd earnings conference call or presentation Tuesday, May 19, 2020 at 1:30:00pm 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

* Aniket Mittal

Motilal Oswal Securities Limited, Research Division - Research Analyst

* Atul Tiwari

Citigroup Inc, Research Division - VP & Analyst

* Bhavin B. Vithlani

SBI Funds Management Private Limited - Senior Analyst

* Dhruv Muchhal

HDFC Asset Management Company Limited - Equity Analyst

* Mohit Kumar

IDFC Securities Limited, Research Division - Analyst

* Puneet J. Gulati

HSBC, Research Division - Analyst

* Rahul Modi

ICICI Securities Limited, Research Division - 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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Operator [1]

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Ladies and gentlemen, good evening, and welcome to the conference call for Q4 FY '20 results organized by The Tata Power Company Limited. We have with us today Mr. Praveer Sinha, MD and CEO; and Mr. Ramesh Subramanyam, CFO from Tata Power. (Operator Instructions) I would now like to turn the conference over to Mr. Praveer Sinha. Please go ahead, sir.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [2]

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Thank you. Good evening, everyone, and welcome to the earnings call to discuss the Q4 results of Tata Power. I have with me my colleague, Ramesh Subramanyam, CFO, Tata Power, along with other senior colleagues over here.

Hope all of you have -- and your families are safe and secure in the current circumstances and are taking necessary precautions. As an essential service provider, Tata Power is committed to providing uninterrupted power supply to ensure that our citizens continue to work seamlessly from home as also our front-line workers, medical staff, law enforcement agencies and other essential service provider to serve the nation.

We were able to mobilize our business continuity plans very quickly as we moved into the first phase of lockdown. And all our generation plants, transmission and distribution locations, renewable plants, continue to operate through planned seamless movement of people, goods and other essential requirements.

With a meaningful portion of the capital employed in regulated business or in stable returns such as in renewables business, our returns continue to be largely protected. The impact of COVID-19 has only had adverse impact in the delay in execution of some of our solar projects, where the import of modules got delayed from China.

The fourth quarter has been driven by consistent performance in all our core businesses, though we have seen some impact in the demand from last week of March in the first phase of the lockdown and which has improved over the last few weeks where the demand has increased. This has ensured that our working and our profit numbers are not impacted any way.

In these tough conditions, we have also been able to close the sale of Cennergi and received the full consideration of USD 112 million while we have progressed significantly on other divestments. Our plans to complete the takeover of CESU has been delayed due to the lockdown, but we have made all preliminary preparations for a quick takeover after the lockdown is relaxed.

As you would see from our results, most of our businesses have delivered consistent performance and significant improvement coming from Mundra, where losses continue to reduce significantly supported by lower coal prices, higher coal blending and better coal sourcing.

The consolidated revenue stood at INR 6,881 crore compared to INR 7,596 crore during the previous year, mainly driven by lower generation in conventional assets, low power purchase cost for distribution business, leading to lower revenues offset by capacity additions in renewables. The consolidated EBITDA in this quarter grew by around 6% to INR 2,031 crore (sic) [INR 2,013 crore] compared to INR 1,901 crore previous -- in the previous year, mainly driven by improved performance in CGPL and all our other businesses.

Some of our solar sites in the South had lower radiations, which impacted generation in the solar plants. We have invested a lot in our space and operational processes for renewable businesses in last few years, thereby ensuring higher availability from these assets.

Our solar assets were at 99% availability while our wind assets availability has improved to 95% in this full year. All other subsidiaries and joint ventures continued to perform well. Underlying businesses, business EBITDA has grown by approximately 8%, from INR 2,163 crore in the previous year without Cennergi & ITPC to INR 2,328 crore this quarter. YTD underlying business EBITDA has grown by 9% to INR 9,269 crore.

The company achieved a PAT of INR 475 crores this quarter as compared to INR 170 crores (sic) [INR 172 crore] reported in Q4 last year, growing by nearly 177% on year-on-year. If we exclude the exceptional items, PAT grew by almost to 13% from INR 323 crore last year to INR 366 crore this quarter. If we take out the PAT for Cennergi & ITPC, which we -- have been held-for-sale, PAT actually grew by more than 20%.

The softening of coal prices by approximately $9 compared to last quarter has reduced CGPL's fuel under recovery significantly from INR 0.67 to INR 0.44. The coal portfolio, meanwhile, has reported a profit of INR 228 crores this quarter compared to INR 166 crores in the previous year.

We have 700 megawatts of large solar projects under implementation, while the solar EPC business has grown rapidly with an order book of nearly INR 7,000 crores on large projects at INR 500 crores -- INR 550 crores of rooftop solar. Solar power -- Tata Power Solar has recently received Letter of Award for 900-megawatt (sic) [300-megawatt] NTPC CPSU-II project at a price of INR 1,700 crores, which takes our total order from NTPC in this year to INR 3,500 crores. While there have been some delays in project execution due to the lockdown, we expect to make up for these delays and achieve our FY '21 revenue targets.

On back of, first, on the domestic manufacturing in India, TPSSL will also expand its manufacturing capacity in 2021.

Let me move now to the divestment process and steps taken to reduce our debt. The COVID-19 issues has impact on the receivables, with many discoms delaying payment, and collection from distribution business was down due to the drop in demand and the moratorium. While this did put pressure on liquidity, we have adequate working capital and CP limits to tide over the liquidity crisis in the short term. With delayed payment charge as per PPA or as allowed by the regulators, the interest cost on the additional short-term borrowings will be adequately reimbursed.

We also expect to receive about INR 1,000 crores from the liquidity package announced by the government for the consolidated business, and a significant part of this receivables will be used for getting the Prayagraj outstanding liquidated.

As a result of this, we have decided not to avail the moratorium on the loans provided by RB (sic) [RBI]. (inaudible) measure, as we had just entered the lockdown period.

The current situation have had some impact on the de-leveraging process, but we have made very good progress in the last few months on our dis-investment targets. As you are aware, subsequent to this (inaudible) USD 112 million on 1st April, while the quarter 4 debt numbers do not reflect the same, we are using the proceeds to repay the debt in Q1. We have also made progress with Ministry of Defense on sale of SED, though due to current situation, we expect this to close by quarter 2.

As we have been communicating to you on sale of overseas assets, we have progressed significantly on sale of our ships, and final documents are currently under discussion. The sale is expected to be completed by this quarter. And we are also working on monetization of other investments, which we expect to realize in the next 2, 3 quarters. The interest in EPC business has been low due to the current economic conditions, and therefore, the valuation is much below our expectation in terms of sale of Tata Projects as an asset. We have decided that we will declassify Tata Projects as an asset held for sale from this quarter.

Accordingly, our results are restated and we are hopeful that with the thrust of government on revival of the economy, EPC business will pick up and improve in the next 12 to 18 months, at which point we can complete the sale of Tata Projects. We, of course, target to conclude this by 2022.

The restructuring of the renewable business has progressed very well. We expect to finalize the new structure very soon, probably by end of Q2. We have also repaid debt of nearly INR 2,000 crores this year and approximately INR 2,200 crores of additional debt was taken for regulated CapEx and renewable capacity additions, which will reflect in the bottom line of next year. Despite the additional borrowings for this CapEx, we have been able to reduce our net debt to underlying EBITDA from 5.28 a year back to 4.70 by end of this year. And the debt-to-equity ratio has reduced from 2.19 to 1.99 for the same period.

The company is committed to strengthen its balance sheet, and we are working to reduce our debt to equity below 1.5 in FY '21. And we have committed ourselves to reduce the debt to a level of about INR 25,000 crores in this financial year. In addition, we have committed ourselves that no fresh borrowing for CapEx in FY '21 will be taken, and we will restrict our CapEx to the free cash flows from the business.

Let me now move to the update on Mundra and coal company. Moving to Mundra, you would have noted that our under recovery has reduced significantly, and with the various initiatives undertaken, loss funding has been brought down. The company made a very, very important breakthrough in its last meeting call by the Ministry of Power, where it was agreed based on legal opinion that separate supplemental PPAs with each of the states is possible, even though a joint PPA with all states may not happen.

Accordingly, the company has moved ahead with the states who agreed to the compensatory tariffs, and Gujarat and Maharashtra are at various stages of approval from their state governments. Once this approval is received, the company will implement the compensatory tariff for the agreeing states. The company also intends to divert the share of other states against payment of penalty, if any, and this sale will, in turn, give a higher return to the company.

As you would be aware, the Indonesian Parliament has recently approved the regulation for extension of coal licenses. While the final regulations are awaited, we understand that the conditions are more or less similar to the draft regulations, which was under discussion covering the extension period area and the other tax related issues. This is a landmark decision, which allows life of 20 years, taking away the significant risk of extension. We'll assess the actual impact once the final regulations are received.

Let me now share with you an update on Prayagraj plant and CESU. Last year, we had taken over the Prayagraj project. And in the last quarter, we stabilized the performance of the Prayagraj plant. We have been able to improve all the performance parameters, including the availability and the fuel supply also has been adequately stabilized. The availability of the units have increased to almost 90% in April. Though receivables are a challenge from UP, we expect that the new scheme of Government of India will help us to do the liquidity for this outstanding amount with UP Government.

On the distribution space, we are prepared to take over CESU from 1st of April. However, due to the lockdown, the takeover was delayed. We are now in discussion with the authorities to take over as soon as these relaxations are given on the lockdown The draft electricity bill is a very promising document and which talks of simplification of the tariff structure, including the setting up of Electricity Contract Enforcement Authority, apart from enabling provisions for distribution, sublicensee and franchisees.

Similarly, with recent tariff policy, which was announced by the government. There are a huge amount of impetus, which has been given to the distribution sector, and the reforms and especially the structural reforms that is proposed to be implemented will give opportunity for taking up distribution business in lot many geographies within the country.

We have also heard that the Honorable Finance Minister announced about the privatization of discoms in the union territories, and we expect that this will be a great opportunity for us to take distribution in these areas. As we have stressed, Tata Power remains very focused on the distribution opportunities, and we are looking at expanding our footprint in distribution space in the next few years.

Let me now turn to the growth areas in value-added services. We continue to roll out our EV charging network in collaboration with Tata Motors and have reached 200 public and captive charging stations. In addition, we have installed around 100 home chargers for individual users. We have also entered into agreement with Prakriti E-Mobility to provide charging infrastructure for the EV taxi fleet in the NCR areas.

Similarly through TP Renewable Microgrid, Tata Power has set up 25 microgrids in Bihar and UP. And another 50 microgrids are in various stages of execution and will be implemented soon after the lockdown is lifted. As you would see that 2021 is a very important year for this company, and we are confident that with our calibrated growth strategy and targeted deleveraging, excellent results will be produced by the company for all our stakeholders.

I now hand over the call to our moderator for question and answer. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a question from Mr. Abhishek Puri from Axis Capital.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [2]

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Yes. Congrats on a good set of results. I have 2 questions. First, I think, just wanted to understand this operational results are actually looking good for the current quarter, and my congratulations for that. In these tough times, you have maintained that. However, when we look at the financial slide, most of the performance, I think, is coming in from JV and associates. So could you tell us what is the contribution there? Is it Tata Projects which is largely helping it? And are there any one-offs in that?

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

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Well, there's one issue clearly that -- you have the JVs and so there's no change except in Tata Projects, actually this -- in this quarter, which is hitting the JVs. So there's no other new JV that is coming in, that's for sure. So you have about INR 196 crores in tax for Tata Projects and another INR 50-odd crores for the profit. So another INR 140-odd crores is the impact coming from JVs, from Tata Projects alone. But other than that, there is nothing new. The same -- if you compare last year, for example, JVs and associates contributed INR 282 crores to the PAT. This year, I think, in this Q4, it's INR 315 crores.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [4]

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Right. I was just trying to compare for Tata Projects because the EBITDA numbers and PAT numbers are the same, almost same, INR 123 crores and INR 122 crores. So what would be the one-off component here?

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

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So the one-off component is the tax. There's a INR 96 crore tax element, which is actually -- which is not covered, of course, in the EBITDA. So what is happening is between last year and this year -- last year, we had ITPC and Cennergi as part of the profit. This quarter, it is not there. And in turns, the Tata Projects comes in, okay, and compared to last year, it is about INR 70 crores higher from quarter-to-quarter. So this is the -- this is why, overall, the [jaws] between the JV profits of last year and this year in the same quarter, it's not much. It's hardly some INR 30 crores. So if you want, we can ask, Rahul will give you the numbers.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [6]

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No, I have the presentation in front of me. So I'll skip on to that. And secondly, for the Mundra compensated tariff, as we discussed last time, what is the status now in terms of our -- have Gujarat and Maharashtra now accorded approval for buying the additional power? Or that has been pushed back due to the lockdown right now?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [7]

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Yes, additional power discussion is yet to happen. But the first thing is to get the basic -- the PPA itself, they have to file with CERC. And that is the internal process due to COVID, a lot of administrative work has stopped. So we expect that to commence soon. Then it will go to CERC for approval, both the states. And then, of course, the -- during that period, we will discuss the additional power, how it is to be made.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [8]

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Understood. Okay. And lastly, in terms of the renewable portfolio, I mean, we have 700 megawatts under construction. So for that, what is the CapEx plan? And for the other businesses, if you can lay out the CapEx plan? And is there any change due to the lockdown period that we will have in the CapEx at this point in time?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [9]

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No. So we will continue. This will be about INR 3,000 crores. The ongoing projects on renewables alone. And then on the regular CapEx, we would -- close to INR 1,000 crores is the routine CapEx that we'll have, as of now that's the estimate.

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Operator [10]

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We have a question from Mr. Atul Tiwari from Citigroup.

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Atul Tiwari, Citigroup Inc, Research Division - VP & Analyst [11]

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First, during the comments, you very briefly mentioned that in FY '21, you plan to bring down the consolidated debt to about INR 25,000 crore from currently about INR 44,000 crore. So I mean, if you could give us some color on this reduction of about almost INR 18,000, INR 19,000 crores, what are some of the big items that you are targeting to achieve?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [12]

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So at this point, let me only give you a broad perspective. One is certainly the restructuring of the renewable business. The collection from the noncore sales proceeds, which is going well. And if we see the growth opportunities as we are seeing, then we'll have to think about what other means are there to beef up our working capital and equity.

So broadly, there is a plan. Some of the things will depend on how we win bids during this coming 6 months in renewables and also how we restructure the renewable business. Overall, there is an aspiration to get there, and it looks like it is quite possible, and we are very much ahead.

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Atul Tiwari, Citigroup Inc, Research Division - VP & Analyst [13]

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So sir, this INR 18,000 crore, INR 19,000 crore is targeted debt. How much you are like trying to get from restructuring the renewables, roughly? INR 8,000 crore, INR 9,000 crore or less than that, more than that? Because it frankly looks like a very big target to be achieved in a single year. And obviously, markets are what they are in the post-COVID world.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [14]

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No. So clearly, today, the only thing I can tell you is, today we have INR 11,000 crores of renewable debt. So restructuring could relieve that debt.

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Operator [15]

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You have a question from Mr. Sumit Kishore from JPMorgan.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [16]

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My first question is around your strategy to manage the cash flow challenges during the lockdown period, especially for the regulated distribution business in Mumbai and Delhi, at a time when both industrial and commercial demand is depressed. Assuming that this situation continues for another 3 months, I mean, how are you planning liquidity in the total?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [17]

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As far as the retail sale both in Delhi and Mumbai is concerned, over here, what we have seen is that the normal collection is definitely happening from the residential consumers and partly from the industrial consumer. The delay has been because the regulator themselves gave us an additional 2 weeks' time for the consumers to pay. And that is why some of the payments, which should have happened but further delayed by another 2 weeks. We also are very sensitive to the challenges that the consumers are facing, especially our industrial and commercial consumers.

And we have -- ourselves offered that you may defer it by 2 weeks. We expect that by end of May and beginning June, the things will improve and people will start paying whatever is the due amount. And the difference is not very large. And we are very positive, in fact, in last 2 weeks, we find both the demand has increased. In fact, in Delhi, where the demand has gone down by nearly 30%, 35%, the difference is now only 10% lesser demand compared to last year's same period. So the demand has also increased. So also, we find that the collection has also improved in terms of absolute numbers. So our understanding is that by first half of June, we'll have things much better than what it is. And we'll continue to have the same collection efficiency as we used to have pre-COVID.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [18]

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Okay. So there won't be an abnormal increase in regulatory assets in Mumbai and Delhi because of current situation?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [19]

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Yes. Not regulatory assets. The delay was in receipt of collections. So it has nothing to do with the regulatory asset, but the liquidity which was stuck up which I think will get released in next month.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [20]

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Sure. I mean, coming back to your INR 250 billion debt target by end of the fiscal I mean, of the INR 110 billion of debt in renewables, even if you do a platform, it would mean for the operational projects only. So debt pertaining to operational projects would largely get transferred, right?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [21]

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I would suggest that just wait because we are working on this, and you will hear the entire plan. I don't want to kind of spell out everything right now because the work is in progress. But when we are aspiring the target, I think we have the numbers clearly laid out. So I would rather urge you we are, even during these COVID times, we are progressing on that. So wait for some time. I think we'll give to you the -- get the full picture out because there will be -- there's no point in talking in bits and pieces at this point of time. What we have said was that's where we are clearly walking to get there, and we are on the right track, and we are progressing very well and just wait.

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Sumit Kishore, JP Morgan Chase & Co, Research Division - Research Analyst [22]

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Sure. The last question on the Indonesian coal mine regulation. I mean in summary, do you see all the changes which have been made impacting the business positively or negatively more at the bottom line contribution level?

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

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So let me first tell you that we're still waiting for the final written approved document to be sure because we are, right now, all we are having is the proposals that have gone into the parliament. And by and large, we have an idea about what the fine print is likely to be. Let me put it this way, the most important thing is if license, there was a discretion at the hand of the government to have cleared. So that's -- the big victory is that the license is getting renewed for potentially another 20 years. That's a big plus.

And the prima facie conditions have very good features of big tax reduction in the corporate tax rate. But they are also coupled with several increases in other taxes, which there may be. We are yet to understand how they will be calculated and what is the basis of that. All that is a little -- little not clear as of now. By and large, it looks like we may be pretty much maintaining the same profitability, plus/minus a little bit here and there. But I think it will take us a month till the President's assent is -- they have a procedure of going to the President who will get it signed. And then the final minister will release the final document. I think at that time, we'll be able to better assess it. But by and large, it is a huge positive, given that the bigger fear was that whether the current mining area would itself be maintained. There was a big debate that it will be curtailed significantly, and that is not happening. The entire 90,000 hectares kind of land which we have, all of that is likely to be renewed. So that's a big -- there's a very big plus there.

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Operator [24]

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We have a question from Swarnim Maheshwari from Edelweiss.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [25]

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Sir, two set of questions. First one, in your opening remarks, you mentioned that you will be restricting your CapEx to the free cash flow. Now given you have got an impending CapEx of about INR 25 billion-odd for CESU. And apart from the INR 30 billion on the existing renewable CWIP. Does this imply that you will be restricting yourself for the new renewable CapEx as well?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [26]

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So Swarnim, while this is the overall CapEx spend, the phasing is phased out. The phasing is not immediate. Much of this CapEx projects would also go into the next year. They are -- so a lot of it is planned. They will start to be getting incurred, but many of them have supplier's credit and other instruments by which it actually gets pushed out in the later, so therefore, that's part of the cash planning. We will do that. Right now, our commitment -- while we may commit something more, but we'll keep in mind the cash flow generation for this year and next year in view. So we want to be disciplined in ensuring that the headline debt, that just -- keeps only coming down and not going up.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [27]

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Okay. So that's the overarching objective here. Okay.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [28]

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Exactly. And we see that with all the good progress there we are making on all the fronts, which we have worked upon, I think we will be able to more than manage that.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [29]

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Got it, sir. Got it. Sir, secondly, if you look at CGPL, I don't know for some reasons that if you look at the under-recovery, it has gone up sequentially. In Q3 it was at about INR 0.33-odd. In Q4, it is about INR 0.45 despite $10 reduction in the coal price. Now what is the reason for this?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [30]

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We have changed the reporting. Because earlier we were reporting in the [same manner], adjustments now we are reporting [differently] so they can understand what would be the (inaudible)

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [31]

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I think it is to do with the Ind AS adjustments around -- I think it's about the lease liability of some of the port-related assets that are getting now reported. I'm told that they are including it now. We were earlier including it, and now we have taken it out. That is resulting in the difference. To reflect the cash under-recovery, actually.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [32]

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Okay. Sir, I'm a bit confused. So does this imply that in Q3 FY '20 that INR 0.33 of under-recovery was also actually there was some profits from the coal SPVs also?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [33]

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No. There is nothing to -- under-recovery has got nothing to do with coal SPVs.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [34]

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Yes.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [35]

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What we are trying to say is the asset -- I didn't mean coal assets. I said the -- in Mundra, there is a change in the accounting policy. It's a lease policy, AS 116, by which certain items, which were going into the landed costs, are now moving out as financial liabilities, okay? That is due to the new accounting standard on long-term contracts relating to offloading of coal, okay? So these are now turned into financial leases. And therefore, they are treated not as part of the landed cost but part of the financial liabilities. As a result, it goes out of the under-recovery and sits in the financial liabilities and depreciation. It splits into finance and depreciation because you have to capitalize those assets as per the accounting standard. So what I will do is I'll ask Rahul to give you a like-for-like picture for a couple of quarters that will give you the comparison.

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Operator [36]

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We have a question from Aniket Mittal from Motilal Oswal.

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Aniket Mittal, Motilal Oswal Securities Limited, Research Division - Research Analyst [37]

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Sir, just wanted to understand on your Indonesian operation, sir, given the current environment, is there any issue that we are facing in terms of the offtake of coal over there? On a quarterly basis, we sell about 15 million tonnes?

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

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Right now, we don't see a major sign of any stress, right now. It's been business as usual.

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Aniket Mittal, Motilal Oswal Securities Limited, Research Division - Research Analyst [39]

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All right. So the offtake of coal is sort of happening over there in some...

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

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Yes. Yes.

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Aniket Mittal, Motilal Oswal Securities Limited, Research Division - Research Analyst [41]

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Okay. Okay. And in terms of Arutmin, I believe the Arutmin mine is also supposed to expire in December '20. So in terms of the flow-through -- of money from Arutmin, how much have we received in Q4? And how do you see that coming along?

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

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We are receiving -- so, so far, we've done about 215 million, and we continue to receive 4 million to 5 million every month. That is likely to continue, albeit a little bit pressure here and there. Because remember that a lot also depends on the coal price, right? If coal price is very low, then the ability to pay also is affected. But we are so far so good.

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Aniket Mittal, Motilal Oswal Securities Limited, Research Division - Research Analyst [43]

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Okay. And I think I missed out on the CapEx number. I think you would have -- I'm not sure if you said the exact number or not. But what would be the overall CapEx for FY '21 that's projected? And if you can break that up for me?

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

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So renewable itself would be around $3,000 crores and the rest would be about $1,000 crores. The phasing will, of course, be dependent on when the ultimate liabilities are paid off. But that's a gross CapEx number.

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Operator [45]

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We have a question from Puneet Gulati from HSBC.

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Puneet J. Gulati, HSBC, Research Division - Analyst [46]

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Can you please help me on -- once there has been a revaluation on SED part, which has resulted in been some kind of loss year?

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

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No. It's not loss. In the SED transaction, there are 2 parts. One is there are ongoing projects. And then there are future orders for which there is a fair consideration. So the provisioning reflects 2 things. On the ongoing projects, the cost increases and additional obligations that are on us, which was not earlier part of the transaction, we had to recognize it.

And the second part is on the contracts, which are now -- we have a milestone by which we have to get the future orders. And that milestone, as of 31 March, whichever was not achieved, we had to take that into account for valuing. And therefore, this results in impairment of the assets. And there is -- there are some R&D expenditure also, which is getting amortized along with it.

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Puneet J. Gulati, HSBC, Research Division - Analyst [48]

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Would you still get the same amount as was promised earlier or will the cash flow also be changed?

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

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Well, that depends on what we achieve before -- at various milestones, okay? If we assume the milestones we'll get right now, this INR 360-odd crores, which we have provided is reflects that -- to that extent, we will not recover.

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Puneet J. Gulati, HSBC, Research Division - Analyst [50]

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Okay. INR 360 crores what you've (inaudible). You also commented --

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [51]

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Sorry, your voice is not clear, Puneet.

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Puneet J. Gulati, HSBC, Research Division - Analyst [52]

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Okay. Is it better now?

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

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Much better. Go ahead.

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Puneet J. Gulati, HSBC, Research Division - Analyst [54]

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Okay. Yes. So secondly, if you can comment a bit about the collection efficiency, both in Mumbai and Delhi, and if you foresee any need for any provisions there going ahead.

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

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No. I don't think we see any delinquency. I think there are delays, which have been because of the -- also the relaxation. We don't see any delinquency as of now. And we are seeing steady increase in collections.

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Puneet J. Gulati, HSBC, Research Division - Analyst [56]

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Okay. That's great. And any time line that you would want to commit for the Indonesian thing?

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

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Indonesian, what?

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Puneet J. Gulati, HSBC, Research Division - Analyst [58]

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The -- when will the final laws be out?

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

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Oh, so as we speak today, the parliament has cleared the bill, and it goes for the presidential assent equivalent, and we expect that in a month's time. That will be the written order, based on which the license applications will have to be lodged. And then they will process it and grant a new license.

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Puneet J. Gulati, HSBC, Research Division - Analyst [60]

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So basically, whatever...

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

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It's a 3 to 6 months' process.

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Puneet J. Gulati, HSBC, Research Division - Analyst [62]

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Okay. So that means it's fairly advanced. And whatever you've said here would pretty much hold through the risk of that changing is very low now.

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [63]

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Yes. Absolutely. The risk of license not getting renewed is virtually nil because we believe that the law will prevail at the end because there has been a parliament legislation. And now the fine print only is that there are any major changes in the terms and conditions, which broadly we know, but we need to see the fine print.

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Puneet J. Gulati, HSBC, Research Division - Analyst [64]

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Yes. And even the area is now very, very certain that you'll retain the area?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [65]

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Yes.

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Puneet J. Gulati, HSBC, Research Division - Analyst [66]

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Okay. Okay. That's great. So just -- I couldn't get the CapEx part right. You will spend INR 3,000 crores on renewable and INR 1,000 crore on other CapEx?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [67]

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Yes.

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Operator [68]

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We have a question from Bhavin Vithlani from SBI Mutual Fund.

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Bhavin B. Vithlani, SBI Funds Management Private Limited - Senior Analyst [69]

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So this is a follow-up on the earlier question. Can you just give us a picture on what is the level of reduction in the demand on the distribution side, both Mumbai and Delhi? And are you actually seeing a drop in the collection efficiency because there is a moratorium given? And is that actually impacting that cash flows might not impact the P&L in the near term?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [70]

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The demand when the lockdown started in the initial 3 to 4 weeks had reduced by nearly 30% to 35% as it was primarily because the industrial and commercial load became 0. But last few weeks when the opening of industries have started in the green and orange zone and also in the red zone in industrial area and industrial states, we find that the demand has picked up. So the reduction, which was nearly 30%, 35%. In Delhi, is about 10% and in Mumbai is about 15% to 20%.

As far as the collection is concerned, the collection from all these consumers, typically, the industrial commercial because of the lockdown got delayed. And also, the regulator gave them additional 2 weeks' time to pay as also to the domestic consumers. So during the month of April, the collection was much less. However, we find that in last 2 weeks, the collection speed has picked up. And we expect that whatever is the balance collection amount, most of the bills are getting due in the last week of May and in first week of June. So most of that collection will happen in next 3 to 4 weeks.

As far as the liquidity is concerned, you would have also read that the government of India has asked the generating companies, especially the CPSUs, that they should delay the fixed charges collection from the distribution companies. So that means that the distribution companies will have to pay only during the period from July to September, especially for the power, which was not scheduled. Similarly, they have asked that some deduction should be given in the fixed charges by CPSUs, both generating and transmission companies. So the cash management is being done in such a way that there will be no liquidity issues as far as the distribution companies are there. And hopefully, by June, it will all get squared down.

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Bhavin B. Vithlani, SBI Funds Management Private Limited - Senior Analyst [71]

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Understood. Second question is maybe you could -- I'm sorry, I joined late. If you can give some picture on the receivables on renewable consolidated. Are you actually seeing an increase because of stress on the discom side? And what would be the total debt renewable consolidated currently?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [72]

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The renewable consolidated debt is about INR 11,000 crores today, INR 11,100 crores

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Bhavin B. Vithlani, SBI Funds Management Private Limited - Senior Analyst [73]

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No, outstanding amount [fee].

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [74]

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You want outstanding?

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

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Then the outstanding also -- yes. So on the outstanding, I will tell you, currently -- Page number?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [76]

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Currently...

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

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Outstanding amount. The outstanding amount on...

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [78]

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Collectible -- receivables -- one minute...

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

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We are not seeing -- I'll give you the exact number, but we have not seen that there's a lot of delay in payment from the state discoms. Most of the places have got -- getting paid. They have also, in some cases, given us the ability to do bill discounting. And so our collections have not been very adversely impacted.

Apart from this, the recent notification from government of India that they will be giving INR 90,000 crores, and that is primarily to pay the gencos and transco, including renewables. And the payment will be done directly by PFC, REC, though the agreement will be with the respective discoms.

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

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So it is not a very, very big number that we are looking at. The only place where we are stuck up is the dispute in Andhra Pradesh where they have given us the 50% payment, which was agreed, and the balance 50%, which is still being heard in the high court of Andhra Pradesh. Once that gets decided, so that amount is about INR 200-odd crores.

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

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So total outstanding over 3 months because I think below 3 months is not a worry, basically, it's about INR 600 crores.

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Bhavin B. Vithlani, SBI Funds Management Private Limited - Senior Analyst [82]

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Understand. And just, maybe conceptually, trying to understand the thought process. Given that we're going through a tight liquidity situation across the country, and this may throw opportunities, more potentially. Do you actually see that, okay, maybe trying to recapitalize the balance sheet have surplus cash on the balance sheet so that if at all there are some opportunities that can come up, we will be able to execute that.

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

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You're talking about the new distribution privatization?

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Bhavin B. Vithlani, SBI Funds Management Private Limited - Senior Analyst [84]

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No. Maybe in new distribution, privatization or maybe some of the assets you are getting at complete throwaway prices.

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

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Yes, we do, and which is why what our immediate clear plan is to complete the execution of the ongoing exercise to reduce debt. So that we bring the debt into a situation where we are completely free of the worry of the debt overhang, and then we could go to the next step of growth. We are doing both in parallel because both the things are progressing well. So yes, the answer is we would be bullish on opportunities, but we'll time it because we expect that this year is we are going to -- we'll be probably bringing the balance sheet back into shape, so that then we are ready for the phase of growth.

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Operator [86]

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We have a question from Mr. Mohit Kumar from IDFC Securities.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [87]

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Sir, my first question is the fact that we have been guiding for this deleveraging and reducing the debt for the last 2, 2.5, 3 years, and we have not been successful, for maybe whatsoever reason. And given with the COVID situation, do you think it's possible to reduce the -- to get the deleveraging done in this fiscal year?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [88]

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Yes, because we have been working throughout -- please remember that we are -- we just completed one deal right in the middle of the COVID where we -- including realizing of the cash of our South African JV. We are progressing on the completion of our defense deal. Then we are -- as we speak, we are close to finalization of another asset of ours all during this period. So some of these things are happening already. Not that -- yes, there are some hiccups because of the physical constraints of people traveling, due diligence, et cetera. But I think we have -- the world is finding a way around all this.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [89]

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Secondly, on Zambia, sir, given the fact that the tariff dispute is still pending, do you think you can sell this asset in the next 3 to 9 months? And again, I believe that there is huge receivables sitting out there in that asset.

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

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So I think to put it in perspective, yes, there is a large outstanding receivable. Yes, the Zambian economy is not doing well. But there are 2 important points here. One, the government is willing to look at any kind of restructuring to settle this. There is no tariff dispute. There is only, let's say, a package, which has already been principally agreed where the tariff will be first brought to line in a certain manner. And along with it, the settlement of the debt will also happen. So it is now more, let's say, acceptance of the package through the system there in the government and then followed by the potential buyer accepting the alternate package.

And both are some things, which are getting discussed, and it is receiving traction, by the way. So people are taking a view on the Zambian asset, not in the next 1 year or 2 years. They are trying to put a structure where the old receivables will be either converted into equity or a government instrument of some kind because government of Zambia has also approached IMF and World Bank for assistance. So the whole package is around how to stitch it around the reform package and the financial package that they are expecting to get.

So there is already a couple of clear ideas on the table on how to go about it, has been discussed with the Zambian partners. Only thing is, yes, we have to get through the process quickly and done with it. So it's not completely out of whack, we expect this to be over in the next 6 months or so. It is not completely out of line.

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [91]

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And we are also in very advanced stage of discussions with the potential people who have shown interest in these assets. Because prima facie, the assets are very good. It has always been operating more than 99% of ability. So it's a great asset, very good tariff. The challenges that the government of Zambia and ZESCO could not make the payment. That -- as per the package, once it gets resolved, then the whole thing can be stitched together.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [92]

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Sir, on Prayagraj, did Prayagraj added anything positive to the bottom line in this fiscal year?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [93]

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Okay. So it's a small net to the consolidated. It add some INR 10 crores or so.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [94]

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Okay. Last one, what's the impact of true-up of Mumbai discom,in the financials for Q4, positive or negative? And what is that amount?

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Unidentified Company Representative, [95]

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(inaudible)

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [96]

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Okay, all put together INR 40 crores.

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Unidentified Company Representative, [97]

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(inaudible)

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [98]

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So apparently, all the 3 put together, it will be negative INR 20 crores.

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Operator [99]

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We have a question from Dhruv Muchhal from HDFC Mutual Funds.

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Dhruv Muchhal, HDFC Asset Management Company Limited - Equity Analyst [100]

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Sir, is it possible to share what are you expecting in terms of proceeds for the sale of the shipping income -- shipping business?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [101]

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Well, it could be anywhere between INR 1,000 to INR 1,400 crores.

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Dhruv Muchhal, HDFC Asset Management Company Limited - Equity Analyst [102]

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INR 1,000 to INR 1,400. And sir, in terms of the subsidiary, which will be -- I mean, the business which will go -- just to correct. It is in your presentation, if I see it is the shipping companies that would go out, right?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [103]

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Yes. No. Not the companies -- the shipping -- we got 3 capesize ships, which we own. Those will be sold potentially along with contracts.

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Dhruv Muchhal, HDFC Asset Management Company Limited - Equity Analyst [104]

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Okay. So I'm just wondering the EBITDA change that I should do is only for the shipping company. The profitability that I actually see in the shipping company's line item, that will be changed -- for this [quarter, right]?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [105]

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Well, the shipping company also gets nonshipping income. So it's not entirely the EBITDA would not go. It's about $20-odd million, $20 million, $25 million is the range of EBITDA that normally gets on shipping.

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Dhruv Muchhal, HDFC Asset Management Company Limited - Equity Analyst [106]

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Okay. And sir, secondly, on the Welspun generation numbers, I was looking at the last 2, 3 quarters, your generation level is quite lower than what it is typically during this period. So is this something seasonal or something else which is happening?

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [107]

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Yes. See, the availability of the plants have been very good in all these locations. The challenge has been the other changes, which have happened. And last year, in the third quarter, the rains were very, very -- it got stretched up to October, November. Similarly, during the period, some of the wind assets could not operate because the wind speeds were very low. So it's more of the seasonality that has happened. Our job is to ensure that the availability of the machines is there and they are able to produce as and when we have good in solar levels or the winds.

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Dhruv Muchhal, HDFC Asset Management Company Limited - Equity Analyst [108]

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So probably FY '19, FY '18 will be a better number to work with for the...

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [109]

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Yes. Absolutely. I think this year has been a little bit of a...

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Praveer Sinha, The Tata Power Company Limited - CEO, MD & Director [110]

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Yes. The weather has been a little fickle.

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Operator [111]

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We have a question from Rahul Modi from ICICI Securities.

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Rahul Modi, ICICI Securities Limited, Research Division - Analyst [112]

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Congratulations for a very detailed presentation and your time and hope you're keeping safe. Just a couple of questions. Sir, we've been reading that the Delhi discom, this BESE is now up for sale. Sir, firstly, is it there means -- actually up for sale finally? Or is just news based? Or secondly, would we be keen on looking at that asset?

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

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We can't respond to this question. You have to ask someone else who owns this asset. We wouldn't be able to respond to this.

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Rahul Modi, ICICI Securities Limited, Research Division - Analyst [114]

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Right. Okay. Sir, just finally one more. Sir, the recent bids that we are seeing at the NHPC 2,000 megawatt solar ISTS which came, that was for around INR 2.5 tariff. Sir, how comfortable are we -- do you think -- what is the level of comfort in terms of tariffs at the current prevailing panel rates and interest rates?

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

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See, the tariff is not only just determined based on the panel rates, but it also depends where it is located, what is the power evacuation arrangement, what is the cost of land over there? Is the land being given free. So there are a lot of factors, which decides the tariff. If suppose the land is being given free, all the infrastructure is being provided and there's no additional charge for that, like many of the solar parks do that. But there is also a huge charge that the solar park developers charge.

So if these conditions are known, then one would be able to really project what is the right tariff. But as you know that we have always been very, very conservative in our approach. Recently, some time back, we had bid to -- for MSEDCL. We had bid at the -- whatever was the maximum price, and we got the bid at INR 2.90. So those are areas where, again, we want to be very conservative and very selective in the areas that we bid, so that it ensures the guaranteed return to us.

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Rahul Modi, ICICI Securities Limited, Research Division - Analyst [116]

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Sure. So just to follow up, in terms of the renewable overall systemic capacity addition that we're talking about, now suddenly, the fixed charges, which have been -- which have become an issue for the discoms for the thermal side because we've got a large terminal presence also, so how do we strike a balance, not as Tata Power, but as a system because if we keep on growing capacity, even though it's renewables as a system, do you think that, again, the viability of assets become a problem going ahead? Because in the near term, demand is actually collapsed. So do you foresee any slowdown in the fresh ordering in the system for the last 2 years, at least?

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

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We were looking at the list of bids, which are expected in next 6 months, and the number that was totaling was nearly 20,000 megawatts. So what will happen is that renewable becomes a very important player in doing the peaking power management. And many of the baseload plants, typically coal-based plants, will not happen, and the implementation of those may get delayed but not of renewables. And with so much of emphasis now on climate change, there'll be more pressure to go for renewables than to go for any conventional power plants.

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Operator [118]

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We have a question from Mr. Mohit Kumar from IDFC Securities.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [119]

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Two questions, sir. First one, trade receivables. How much is trade receivables outstanding to state discoms, is greater than 45 days? And do you expect this to be liquidated for us?

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Ramesh Narayanswamy Subramanyam, The Tata Power Company Limited - CFO & Compliance Officer [120]

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As I said, I think the main trade receivable we have is in renewables, which is about INR 600 crores, which is over 3 months, okay? Apart from that, we have only in Prayagraj, a large outstanding, but other than that, more or less, there is really nothing, because Mumbai also gets paid very well.

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

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Our supplies from our generating plants, they get paid within 60 days, primarily because our tariffs are very low. And in merit order, they always pay us the first before they make payment to anyone else. So like Mundra, most of our payment comes within 30 days. In fact, in some states, we get paid in 3 to 4 days because they take the rebate also. So there's not much of outstanding amounts for us, except in -- but we have a 3-month cycle in renewable. Everything within 3 months gets liquidated. That's the only amount that is receivable for us.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [122]

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Understood, sir. Sir, second, theoretical question, what is the meaning of distribution sub-licensee as you understand? Can you just clarify on that point?

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

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Well, this is still to be defined and accepted in the Electricity Act. But whatever we have seen, which is circulated by the government, sub-licensee is one -- where the distribution licensee allocates a certain specific area for them to carry out the distribution work, subject to the approval of the regulator. I would say it is one step below the distribution licensees, but has similar roles and responsibilities as of a distribution licensee. So they would also be getting some of the things like return on equity, on capital investment and things like that. So that's our understanding, but I think once the final draft is circulated and it is accepted by the parliament, we'll exactly know what is really put into the distribution licensee.

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Operator [124]

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We have the last question from Mr. Puneet Gulati from HSBC.

Mr. Puneet Gulati? Please go ahead with your question. I believe his question is answered. Any closing comments, sir?

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

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Thank you to everyone. And if you have any more questions, please don't hesitate to get in touch with my colleagues. Kasturi and Rahul Shah are in direct connect with you. And any questions that you want even Ramesh and me to respond, please don't hesitate to connect with us.

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Operator [126]

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Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using iJunxion conference service. You may please disconnect your lines now. Thank you, and have a great evening.