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“Ujaas Energy Limited

Q2 and H2 FY 2017

Earnings Call Transcript”

November 02, 2016

Management: Mr. Anurag Mundra, Joint Managing Director, Ujaas

Energy Limited

Analyst: Mr. Deepak Agrawala, Senior Vice President, Elara

Securities Private Limited

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Moderator: Ladies and gentlemen, good day and welcome to the Ujaas Energy Q2 FY2017 results

conference call hosted by Elara Securities Private Limited. As a reminder all participant

lines will be in the listen-only mode and there will be an opportunity for you to ask

questions after the presentation concludes. Should you need assistance during the

conference call please signal an operator by pressing ‘*” then “0” on your touchtone

phone. Please note that this conference is being recorded. I now hand the conference

over to Mr. Deepak Agrawala from Elara Securities Private Limited. Thank you and

over to you Sir!

Deepak Agrawala: Thank you. Good afternoon everyone, on behalf of Elara Securities we welcome you all

for the Q2 and H1 FY2017 Conference Call for Ujaas Energy Limited. I take this

opportunity to welcome the management of Ujaas Energy represented by Mr. Anurag

Mundra, Joint Managing Director and his Team. We will begin the call with a brief

overview by the management followed by a Q&A session. I will hand over the call now

to Mr. Mundra for his opening remarks. Over to you Sir!

Anurag Mundra: Thank you Mr. Agarwala. At the outset I wish happy Diwali and a very prosperous

New Year. I am also thankful to Mr. Deepak Agarwala and Team Elara Securities for

hosting this concall. Well there would have been some callers who maybe joining in for

the first time, so I will very briefly giving you a view out the company how we started

what work we are doing and I will discuss about the latest result of Q2 and H1.

Well our company Ujaas Energy Limited was stated way back in 1970s. We started

with transformer manufacturing. We manufactured various types of transformer

distribution power, furnace, and mining transformer. There is one product, which has

been called, as a converter duty transformer was the inflicting point for us to move into

solar power generation in 2010-2011 we entered into the field of solar power.

In 2010-2011 we realized there is a huge business potential in solar because there

would have been many in country wants to own a solar power plant the question is

how. So we started with by providing a one-stop solution, a complete solution,

window-to-window solution for anybody who wants to put up a solar power plant.

We launch that product with a brand Ujaas and Ujaas was very well received by the

market. Presently we work under two segments, the first segment is solar power plant

operation where we generate solar power we have 14 MW of solar power plant on our

balance sheet and whatever the solar power plant we commissioned for our client we

also maintain that plant for its life.

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The second segment of our business is a solar power plant or the feel of solar power

plant we have further three subsegments under there one is the EPC business where we

put up a solar power plant on our clients site, second is our Ujaas Power business or in

other words it is a solution business where we provide complete one-stop solution it

start with providing land putting up plant and machinery working for all the licenses,

permissions, approvals, power purchase agreement. In nutshell whatever it takes to

commission that plant and we also maintain that plant for its life. The third segment is

rooftop segment the rooftop segment is further will be subdivided into two sub

segments one is the commercial and industrial or C&I segment and second is the home

rooftop.

You all must be aware the demand of solar power is coming because of a government

regulation that is called a RPO regulation that is Renewable Purchase Obligation. The

government has the target that by 2022 100 GW of solar power plant should be

established, should be commissioned in the country. In my view putting up a 100 GW

in a country like India may not be a very challenging task. Government also has one

more target that out of this 100 GW 40 GW of the solar power plant should come on

the rooftop.

Now solar power has a fundamental strength that is the distributed generation, which

no other form of renewable power can match. What I meant by distributed generation

that you could generate the power at the point of consumption only solar can do that.

If you look at our financial results for Q2 we have touched sales of 121.15 Crores

which brings the H1 sale of this fiscal to 214.85 Crores if we compare this sales with

the last year in the last Q2 FY2016 we did a sale of 52.68 Crores and H1 sale of 64.46

Crores we did an annual sales of around 277 Crores in FY2016.

If you look at this year pattern and we always been maintaining that FY2013 and

FY2014 and FY2016, FY2017 seems to be in pair like in FY2013 we also had sales of

around 228 odd Crores and FY2014 we have a sales in excess of 500 Crores if you look

at FY2016 we had a sales of 277 Crores.

Very important in H2 of FY2016 we made a sales of around 212 Crores if we just add

up whatever the sales we have done till now and whatever the sales we have done in H2

of FY2016 it may give a fair idea what the level we are targeting for the year. This year

we have a target to put up or commission around 80 MW of solar power plant.

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One very important thing, which is happened in last quarter solar power, has achieved

overall parity. What I meant by achieving overall parity that the cost of solar power is

now more competitive than the cost of normal power so it makes a lot of sense for any

customer to put up a solar power plant and whatever the power they generate they can

consume or sell in the market.

Anybody who is putting up a solar power plant gets revenue from three sides one the

tax benefit. Currently the solar power plant takes 100% depreciation and you get a tax

benefit out of it. This tax benefit is likely to be reduced from April 1, 2017 currently

100% depreciation is available from April 1, 2017. This 100% will be reduced to 60%.

The second stream of revenue is through the attribute because we were generating

power through solar the obligating agencies will pay you higher price for your power

and the third revenue comes because of sale of power. Irrespective of the fact how we

are generating. If you take a classical example of anybody who is putting up a solar

power plant and if that customer is able to take benefit of all these three segments so

the current prices he makes an IRR of somewhere between 40% and 45%. If we

completely remove the tax benefit; however, which never be the case therefore the sake

of argument if we completely remove the tax benefit they make an IRR of around 20%

even if we completely remove the attribute part of it and ignoring the fact that the

power been generated through solar, solar power plant owner still makes an IRR of

14% to 15% so in a scenario where the cost of debt capital is less than 12% and it is

expected to fall further in coming year it makes a wonderful business is to have a solar

power plant.

As I explained that this year we are targeting around 80 MW of solar power plant if you

look at the year which is coming up FY2018 government has an ambition of 100 GW

and as a country we have achieved only of close to 10 GW as of now. We expect that in

FY2018 the EPC side of the business alone that is the tendering business mainly alone

will be close to 15 to 20 GW in the country which is a huge number and which is quite

expected also if you want to reach the level of 100 GW by 2022.

We also believe that the big action, which is going to happen in solar power sector, is

the rooftop segment. Currently on the rooftop segment we have a capacity of around 1

GW in the country. Out of this 1 GW around 900 MW are in the C&I segment that is

commercial and industrial segment and on the home rooftop the capacity is only or less

than 100 MW. Now this is going to be a very, very big business opportunity given the

fact that 40 GW out of the complete 100 GW is supposed to be come from the rooftop.

So that market is going to grow by 40 times in next five years. No doubt it is a different

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market and it comes with different challenges, one challenge is on the policy side is the

net metering policy which as per the electricity act, every utility needs to have and

gradually slowly all the utility companies are now coming with this there is a two roll

out of that metering policy and second is the product.

If you want to put up a house rooftop your product should be capable to be

commissioned in one or at the max two days. Very recently we have received an order

from Ureda that is in the state of Uttrakhand where we are going to put up around this

solar rooftop on various zones. We are going to put up this product on around 365

homes. We are expecting many further orders in that segment.

This year we have a target to put up that plant on at least 1000 homes in the next fiscal

year that is FY2018 we had a target to achieve a capacity of around 20 to 30 MW on

the house rooftop segments and a year followed after that we are aiming to the capacity

of more than 50 MW given the prices of electricity in the country we believe it is very

much achievable and it will give a fundamental benefit of the solar power that is

distributed generation to all the households in the country.

That is all from my side and I will be happy to answer any query, any questions,

anybody of you can have.

Moderator: Thank you very much. We will now begin the question-and-answer session. We have

the first question from the line of Mr. Baidik Sarkar from Unifi Capital. Please go

ahead.

Baidik Sarkar: Good morning Mr. Mundra and congrats on a very strong set of numbers. I will start

off with a bookkeeping question of course if you could help us on the revenue split

between your REC sales and O&M revenues in sale of power Sir?

Anurag Mundra: Thank you Mr. Baidik for asking this question. I believe you are asking for our first

segment that is the revenue from solar power generation business. So the revenue from

O&M is around 2.4 Crores for this quarter and the revenue from the sale of power and

REC is around 4 Crores you can say.

Baidik Sarkar: Could you give me a ballpark of how much of REC we realized this quarter just a

rough sense?

Anurag Mundra: Well I do not have a exact number of how many REC has been realized in this quarter

but this information been circulated the clearing ratio of REC is on monthly basis been

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circulated by our IR team so if you allow me I can get back to you on this number I do

not have that number ready with me.

Baidik Sarkar: I will source that off line and what could be the revenue split between your EPC sales

solution sales Sir?

Anurag Mundra: The EPC has given around 60% of the revenue out of 114 Crores from that segment

and the solution business have given a revenue of 40% out of that.

Baidik Sarkar: In terms of the MW that you delivered about 20 for this quarter if you put up the same

ratio 60%, 40%?

Anurag Mundra: Roughly yes.

Baidik Sarkar: So which means about 12 in EPC and about 8 in solution?

Anurag Mundra: Yes.

Baidik Sarkar: Given that your order book is about 20 MW as on date and these are fairly short

gestation execution cycles how do you see the external command environment shaping

up in terms of the solutioning business?

Anurag Mundra: Thank you for asking this if you look at the last ten quarters in none of the quarter we

had an very high order book position because the delivery time of solar power brand is

somewhere between 90 and 120 days so in last ten quarters we never had very strong

order book position and that is the way this business has been done. You receive an

order deliver the order and you get a new order. Currently we have an order book

position of around 20 MW and we have a bid book position of around 80 MW this is a

bid book. Some order we will win and some order we will lose. Now in a scenario

where solar power plant or solar power has achieved overall parity it is a very big

incentive to any power consumer or any investor to put up a solar power plant and

consume that power generating captively. If you look at the state of Maharashtra for

example where the cost of power I mean the cost of energy is close to Rs.7 a unit or

Rs.8 a unit if you generate power to solar your cost is less than Rs.5 a unit. So this I

will be looking at very big traction on that side.

Baidik Sarkar: Can you give us anecdotal examples of this confidence and traction that you are

expecting some as some anecdotal example of how exactly that shaping up obviously

the biggest example is that is your order book but apart from that your coloration that

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you might be having intent to shown by larger SMEs for power capex any

conservations that you can share with us Sir?

Anurag Mundra: Well nothing on top of my mind as such nothing I am able to recall there is nothing,

which is in top of my mind, which I can give.

Baidik Sarkar: Who are your key clients for which you might have delivered the EPC and solutioning

just a few names would be helpful?

Anurag Mundra: No I would like to refrain from giving that thing; however, we are continuously

informing stock exchanges and these information’s in public domain as far as our EPC

side of business is concerned. In our solution business we have now constructed more

than 160 MW as of now and we have almost 60 clients so the key clients are like

KRBL, we have already put up this solar power plant we do get lot of repeat orders

from the existing client as well as we also get orders from various new clients. So the

way we do the marketing till now anybody who has a PBT of more than Rs.3 Crores

become the target audience for us so we have the fairly large spectrum available with

us and thanks to the falling price of solar power plant this spectrum is getting bigger

day-by-day.

Baidik Sarkar: So as on date what is the capex cost up per MW?

Anurag Mundra: It is for a solution business it is somewhere between Rs.5.25 to Rs.5.5 Crores per MW.

Baidik Sarkar: For the EPC business?

Anurag Mundra: Well in EPC it depends from each tender to each tender depending on the bill of

material it may be as low as Rs.5 Crores per MW and maybe as highest Rs.6 Crores per

MW.

Baidik Sarkar: In your opening remarks you mentioned the EPC portion of India were deliver about 15

to 20 MW I am sorry that was not clear were you referring to your the ability of Ujaas

delivered 20 MW of EPC revenue in FY2018 or you were referring to India as a

whole?

Anurag Mundra: No I mentioned 15 to 20 GW that is 15000 to 20000 MW of the tender business will be

going to come up in the next year that is FY2018 so I was just highlighting that this is

the market for the EPC business next year that is FY2018.

Baidik Sarkar: Thank you.

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Moderator: Thank you. We take the next question from the line of Mr. Umesh Gupta from Reliance

Wealth Management. Please go ahead.

Umesh Gupta: Could you tell us a little bit about the last three, four years S3 is quite erratic in 2012

you had a 30 odd Crores revenue that in 2014 500 Crores revenue then 100 Crores and

200 Crores so what has that all been going on in the last four five years?

Anurag Mundra: Thank you for asking this question. The whole solar story in India has started in 2010

and we have the first company or we can say the early mover in the solar power plant.

Yes our journey has started in a significant way FY2013 we have touched the revenue

of around 228 Crores, in FY2014 we touched around 500 Crores, in FY2015 we had

gone down to around 111, 112 Crores types, there are three very important reasons for

that reduction in sales and we keep on we are maintaining that number one reason was

the fear of antidumping duty. At that time it was proposed by Ministry of Commerce to

Ministry of Finance in May 2014 to impose a duty of 110%. In those days this would

have translated into a figure of around Rs.3.5 Crores per MW that proposes a very big,

this gives a very big risk proposition for the company. If you would have taken that risk

and if the antidumping duty would have come it would have cost the company around

Rs.150 to Rs.170 Crores. The whole company would have been wiped out. The second

was the REC price at that time the price of REC was very high around Rs.9 that is

assigned obligating agency was giving an argument that this is too high price to meet

their obligation. They had some merit in that argument. So we liaison and we agreed

with all policyholders and we got it reduced to Rs.3.50 as of December 31, 2014, but in

the process lot of REC been piled up in the market. So these are the three particular

reasons why the revenue has gone down. To mitigate that risk earlier we were not

focusing on the EPC side of the business; however, because of the debt downturn in

FY2015, we have expanded our marketing portfolio and started focusing on the EPC

side of business also. So FY2016 and in FY2017 are very consistent. If you look at last

four, five quarters now the stream is very consistent. We have also mentioned and we

also maintained that this is not a business for say 20%, 30%, 50%, 100% growth. This

is a business where we can say multiple growths. Currently we have done around 200

MW and Ujaas has an ambition that by 2022 we should be able to do around 5 GW that

is 5000 MW. This business has a capacity and this business has a capability to give this

number. Even if we touch 5 GW that is 5000 MW that will be still be the 5% of the

market share. Now a company, which is leader, which is pioneer in this sector and

working on all the three segments quite successfully that is EPC, solution and rooftop

business I believe 5 GW of capacity by 2022 is definitely achievable.

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Umesh Gupta: So could you tell us a little bit about the working capital intensity of the business?

Anurag Mundra: Well the working capital intensity in all these three segments vary from in the solution

business when we receive the orders we receive some advances and then further on the

milestone basis we get the payments. We get almost 80% to 90% before

commissioning of that plant. The similar way it goes with the rooftop business;

however, in the rooftop side your delivery cycle is very small if it is in a C&I segment

you have commissioned a plant in somewhere between 15 and 20 segments in the home

segment which is just started you try to commission that plant in one or at max two

days. If we talk about the EPC segment the working capital cycle or the payment

mechanism of customer again vary from each customer-to-customer and each tender-

to-tender there the delivery time maybe as high as six to eight months and you get the

payment again on the milestone basis but the internal bifurcation or internal division of

the payments again vary from tender-to-tender it is not a very capital intensive business

it is not a very working capital intensive business.

Umesh Gupta: No six to eight months of delivery time that would be in a highly working capital

intensity right?

Anurag Mundra: No so you get your payments on a milestone basis so for example you do a ground

work or they develop the land where the solar power plant is going to come up so when

you do that work we get some payments then when you deliver product X which will

be used in that solar power plant you again get some payments and so on?

Umesh Gupta: What do you mean by solution business?

Anurag Mundra: Solution is the complete one-stop solution to give an example so you want to put up a 2

MW of solar power plant. Now by definition solar is a land intensive plant. What it

means it cannot be near the city it has to be far from the city and the land has to be

cheap typically it is a barren land. Now 2 MW is not a great quantity to put up so

putting up 2 MW on your own may make it unviable so Ujaas provides a complete

solution. We develop big solar parks and so you want to put up a 2 MW, which requires

typically 8 acres of land, we provide that piece of land in our solar park. You become

the owner of that piece of land we put up all the plant and machinery we work for the

licenses, permissions, approvals, and power purchase, agreement. In nutshell whatever

is required to commission that plant. In India we have a big dust issue, it means we

have solar power plant use to be continuously maintained. Now maintaining a 2-MW of

solar power plant far from the city may itself will be very, very challenging but for

Ujaas it is not a 2 MW of solar power plant. For Ujaas it is a complete power, which

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may be as high as 30 MW of solar power plant. So we had economies. In terms of

economies what we are doing we are transferring the economies of scale which is

available for 850 MW and transferring to a person who is putting up say 0.5 MW or 2

MW of solar power plant and during this transform we make a little bit of money

though it seems that it is a B2B business but actually it is B2C business though our

customer is an business entity may be a very big customer but since behavior in this

solar power plant is more like a consumer and B2C definition or in marketing parlance.

Umesh Gupta: Thank you.

Moderator: Thank you. The next is from the line of Mr. Nisarg Vakharia from Lucky Investment

Managers. Please go ahead.

Nisarg Vakharia: Hi Anurag and team congrats on a good set of numbers. Anurag just wanted to ask you

what is the progress and response regarding the home rooftop business? Have you put

the team in place? Has there been any further progress from last time?

Anurag Mundra: Yes this quarter we have started from October 1. We have started putting up those

plants on the various route we started from the one city very soon as I mentioned in my

opening remarks we have received order from Ureda and we will be doing 365 homes

in that particular state and next month we will be launching that product in another city

and this year we have the target of doing putting up that plant in 1000 homes.

Nisarg Vakharia: It is roughly what revenue for you?

Anurag Mundra: So there will not be any significant revenue from that segment but coming forward that

is in the next year FY2018 we are targeting somewhere between 20 and 30 MW from

that business and just to give a fair idea we have just calculate 8 Crores per MW it can

give a number what we can expect in FY2018 from that that side of the business.

Nisarg Vakharia: That margins in that business would be the current solution level margin?

Anurag Mundra: Yes so in solution business we roughly make somewhere between 15% and 17%, in

EPC business we make somewhere between 9% and 10% and this rooftop business we

are likely to make margin somewhere between 15% and 17%.

Nisarg Vakharia: What is the current net debt on your balance sheet?

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Anurag Mundra: So we have debt of around 95 Crores in our balance sheet that is mainly for the 40 MW

of solar power plant we have in our balance sheet as of March 2016 our net gearing

ratio was close to zero.

Nisarg Vakharia: What explains the finance cost being at Rs.5.32 Crores higher Q-on-Q and Y-on-Y?

Anurag Mundra: Thank you for asking this question and our board has taken the note of this thing that

why in this quarter the financial cost has gone up actually. So when you are doing lot of

tendering business you need to keep on opening bank guarantees to participate in

various tenders and if you win the tender you have to give the bank guarantees though

we do not have any very big working capital limits on the fund base side from the

banks but this bank guarantees and LCs costs a lot so we are already started this

negotiation with the banks that we are giving some much of business to you and our

cost of non-fund base limit should come down.

Nisarg Vakharia: Also there is an increase in your employee expenses Y-on-Y from 1.73 to 3.75

assuming that a lot of this also has gone towards the rooftop solar division. This is the

run rate or do you expect increase in this also?

Anurag Mundra: Expense on your human resource will always been a stead manner. So as we expand

your expense on that head will not be linear so you have invested a lot of money and

developing your HR to reach, to take an organization to a particular capacity probably

when you cross say 500 or 700 MW you will again have to further invest again invest

by the term I invest I mean hire more employee and pay salaries towards that. At least

for next two years I believe this will be on the same lines.

Nisarg Vakharia: Last question has there been any discussion with the board regarding dividend payout

policy or sharing cash with the shareholders in terms of buyback whatever is

convenient?

Anurag Mundra: Well yes we keep on discussing it in the board that what should we have. As of now we

do not have any return dividend payout policy but if you look at our track record for the

five years we are continuously paying a dividend and we are likely to maintain that but

yes we are taking it very seriously to have a return dividend payout policy for the

company.

Nisarg Vakharia: Thank a lot Anurag and all the best.

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Moderator: Thank you. Next question is from the line of Mr. Deepak Agrawala from Elara

Securities. Please go ahead.

Deepak Agrawala: Sir I have a few questions. First thing like you have talked a lot of on your scaling up

and adding 1000 homes target on the residential side but how is the overall rooftop

segment you see progressing both on the even on the commercial and industrial side

because we have seen fair bit of orders coming to you as well as to other players from

airports, universities and lot of factory buildings are going up fully on solar plus there

are lot of tenders on the government buildings so how do see this space from a slightly

longer-term let us say 18 to 24 months perspective and overall within your scheme of

thing I really rooftop will become what proportion of your revenue in the next two

three years?

Anurag Mundra: Thank you for asking this. If you look at the complete universe today we are at 1 GW

capacity as a nation 1 GW capacity in the rooftop side 900 MW in C&I 100 MW in

home segment Where we want to go by 2022? We want to go to 40 GW of 40000 MW

this factor is going to grow by 40 times and the government is all determined to

actually that figure because a fundamental strength of solar is distributed generation.

Now what it takes to achieve 40 GW of capacity? Three things, one the policy initiative

which is mainly net metering policy and now every utility companies is rolling out

effective net metering policy. Second product which no doubt companies like Ujaas

will developed and deliver third for all the cost in solar its front-ended it is all capital

cost, it takes very little to run that plant what it means your cost of capital should be

very low. How to achieve that? You get a loan at a very concessional rate and most of

the banks give loan for solar power plant for eth route of solar power plant considering

it is a home improvement loan. World Bank has already given 600 odd million and this

will be distributed through State Bank of India they have made an agreement of another

$1 billion. This will be again routed through State Bank of India and I believe most

likely through Punjab National Bank. The KfW Germany has given a loan to IRDA of

1 billion Euros India is also looking to have strong foot holding ISA between

International Solar Alliance so all the country which falls under tropic of Capricorn to

tropic of Cancer they become a member of ISA and the World Bank has given a

commitment of $1 trillion till 2030 for developing solar projects over there. Now if you

look at specifically to India that C&I segment of that business is fine it has been picked

up and a lot of action is going on whether it is a government rooftop and industrial

rooftop but if you look at the home segment in fact there is nothing which has

happened till now. The story has not yet started so what a huge opportunity that

particular segment is simply nascent nothing more than that. Lot of opportunities going

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up going to come over there say but two years, three years down the line we believe

that rooftop segment will contribute around 50% of the revenue of Ujaas.

Deepak Agrawala: That is quite sizable.

Anurag Mundra: Yes it is quite sizable and the opportunity is there.

Deepak Agrawala: What is your typical buyer profile in a rooftop is that like your independent row houses

like what are you doing in Ureda tender like what exactly is the customer profile?

Anurag Mundra: So there are two profiles two types of customers want holds government tenders like

Ureda where we do not have to worry much about and define our customer per se

because the customer has already been defined and they are applied through agencies

like Ureda. The second challenge is the private customer or in other words the

customers who are not coming through agencies how to market them, which are your

target audience, so very simple one line market segmentation any consumer who has an

electricity bill of roughly Rs.5000 per month they become a target audience for that

segment.

Deepak Agrawala: Like in your opening remarks you mentioned that you see a pipeline of 15 to 18 GW on

the tendering side?

Anurag Mundra: No it is not my pipeline. It is the total market size in that mentioning the next financial

year.

Deepak Agrawala: Because the market is financial in the next 12 to 18 months. Now we have also seen the

tenders that are coming in what is happening on especially the large sized tenders, how

do you define that you are primarily focused on let us say projects up to size of 40 to 50

MW or and you will prefer to stay away from large sized projects because of the

heightened competition and very thin margin that an intermediary can make?

Anurag Mundra: Thank you for asking this question. Yes there are some projects, which are very big,

and there are some projects, which are not that, big in EPC segment. The focus of

company is very clear we want to focus on our bottomline. This translates good

margins. So irrespective of the capacity would be it is 100 MW of tender and 10 MW

we bid aggressive only on those tenders which gives good margins irrespective of the

size so you will find whatever the announcement we had made in 12 months, you will

find certain niche area just to give an example we had recently commissioned a project

in West Bengal on a canal bank which is the first project of the country on a canal bank

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similarly at the same time this is the first project in West Bengal in last two decades

first power project in West Bengal in last two decades. We are doing a 1 MW of solar

power plant yesterday we had announced we are doing another 158 kilowatt on the

Andaman on the airport of Port Blair. These are the very, very niche areas though its

coming through tender but that allows me to make good margin and when the pie is so

big it allows you to pick and choose you can focus what your priorities are. For us our

priorities are to focus on bottomline so we are choosing those tenders you have to

where the margins are good. There may be some other company where their priority

maybe the topline they also has an opportunity to go for that.

Deepak Agrawala: I think just we are entering exciting times?

Anurag Mundra: Indeed.

Deepak Agrawala: That is it from my side.

Moderator: Thank you. We will take the next question from the line of Dixit Mittal from Subhkam

Ventures. Please go ahead.

Dixit Mittal: Sir I joined slightly late so if you can tell me for the first half how many MW did you

execute for this year?

Anurag Mundra: We did around 30, 32 MW.

Dixit Mittal: What is the target for the full year Sir?

Anurag Mundra: We are targeting around 80 MW of business this year, so I just mentioned in my

opening remarks that we had done sales of around 240 Crores or say 215 Crores from

H1 if you look at the H2 sales of the last year FY2016 that is 212 Crores even if we are

able to maintain that number; however, traditionally the Q4 is always very big quarter

but even if you maintain that number this year has been done.

Dixit Mittal: Sir this target of 80 MW can you split it up what will be the home solutions and EPC?

Anurag Mundra: No home we are not targeting any big revenue this year from EPC and solution

business we are targeting around 40 MW each.

Dixit Mittal: Sir secondly in home can you let us know that what is the economics like you

mentioned anyone below 5000 is the target customer?

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Anurag Mundra: No, anybody more than 5000.

Dixit Mittal: But in terms of like roof top size needed and what are areas that we are targeting in

terms of…

Anurag Mundra: Just as a thumb rule though it depends on roof-to-roof shading area and geographies but

just as a thumb rule to put a 1 kilowatt you require a 100 square feet of area.

Dixit Mittal: So I think it will be basically in the tier two and tier three cities right because in metro?

Anurag Mundra: Why not so tier one, two, three everything like Delhi is going to be a very wonderful

market for rooftop.

Dixit Mittal: But in a city like Mumbai it is not viable right?

Anurag Mundra: Not it is viable, very much viable in fact the overall parity has been achieved in

Mumbai at the rooftop segment at the very first. Mumbai is the first city to achieve that.

It is very much viable the only thing in Mumbai you have more of multistories and less

of Bungalows; however, multistory there is a society and it consumes continuously

power for left of our general utility and all those things it is going to be a big market;

however, there maybe some resistance from those housing society to invest money

upfront so you need to develop that model by which they can enter in the segment. No

doubt it is an exciting market but we are not entering in that market in the very first go.

Dixit Mittal: But Sir typically like it is a single household what is the upfront investment that needed

to set up the plant?

Anurag Mundra: Roughly you can say for 1 kilowatt it costs somewhere between Rs.80000 and

Rs.120000.

Dixit Mittal: What is the life span Sir?

Anurag Mundra: 25 years.

Dixit Mittal: So, on an average the power cost will be around Rs.8 per month.

Anurag Mundra: The power cost will be less than Rs.5.

Dixit Mittal: Sir you mentioned you target of doing 5 GW by 2022 so that is a cumulative one right?

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Anurag Mundra: Yes it is a cumulative target.

Dixit Mittal: So in terms of like growth rate what is the growth rate that you are targeting from 80

MW per annum how will you intend to grow?

Anurag Mundra: So currently we have 200 MW close to 200 MW and we are targeting 5000 MW

cumulatively so it is simple mathematical calculation and I mentioned initially this is

not a business to look for 20%, 30%, 50%, 100% growth. This is a business which can

grow multiple times and we being the first company being leader in that segment being

the early entrant in this segment there are all possibilities of we will achieve that.

Dixit Mittal: Sir lastly what is the current price of REC that could you tell us?

Anurag Mundra: It is Rs.3.5 per unit was Rs.3500 per REC and these prices were set to be revised and I

believe from April 1, 2017 it is going to reduce somewhere between Rs.2 and Rs.2.5 or

Rs.2000 to Rs.2500 per REC.

Dixit Mittal: What is the sale price Sir over and above for this?

Anurag Mundra: No this is the sale price.

Dixit Mittal: No this is REC like power sales price in terms of sales?

Anurag Mundra: So it depends on which segment my customers are putting up a solar power plant. It is a

probability of my customer if they want to put up a solar power plant in PPA mode so

the current price is close to Rs.4.5 if they want to sell power through open access

directly to industry the current price is close to Rs.4.80 per unit if they want to generate

and consume it power actively so their saying is somewhere around Rs.5, Rs.5.30 per

unit, but activities are now. Just Mr. Mittal if you have any further queries and if time

does not permit we will be happy to answer that in kindly you can approach us through

our IR team for that.

Dixit Mittal: Okay sure Sir. Thank you.

Moderator: Thank you. The next question is from the line of Mr. Devam Modi of Equirus

Securities. Please go ahead.

Devam Modi: Congratulations Sir on a good set of numbers. Sir just wanted to check once again the

solar power plant operation we understand includes both O&M revenues as well as the

revenues from sale of power of the power plant there?

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Anurag Mundra: Yes.

Devam Modi: Sir and how would this be split?

Anurag Mundra: I mentioned earlier that the revenue from O&M side for this quarter is 2.4 Crores and

the remainder is coming from the sale of power generation.

Devam Modi: Sir how would be the margins because the margins this quarter have been actually

lower than the earlier two quarters?

Anurag Mundra: Yes that is mainly because that was a monsoon quarter the month of July, August and

September you get rains so your solar power generation goes down and especially

when you compare with the previous quarter that is the month of April, May and June

where it is the summer season you get full sunlight over there so that just the indication

of the change in season and it happens every year.

Devam Modi: Just one more thing on the working capital side, we understand that obviously there is a

certain level of activity which has risen in the company so their working capital has

relatively gone up of course there is nothing alarming that is now that is serving to do

with the business and there is no one half or any other negative development of the

working capital side?

Anurag Mundra: No there is absolutely no negative development and there is nothing which is one half

types and this what is that typically the September and March phenomenon because

you have to commission plants by September 30th

and Ujaas office become war room

in the month of September and same thing happens in the month of March so that is the

scenario even if it seems on the paper that working capital cycle is a little bit stressed

but if you look at the company the cash availability in balance sheet is more than 65

Crores still so there is absolutely nothing alarming we are very, very comfortable on the

working capital side.

Devam Modi: Sir and finally when you speak of this 20 Crores order book you have how much of it

relates to the power segments?

Anurag Mundra: You mean 20 MW of order book? We have around 8 to 10 MW from the part business.

Devam Modi: Sir and then you spoke and it can typically take 90 days so for one order to get

executed so is there a case wherein say a park’s order can get executed within a quarter

and the order book would never be visible?

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Anurag Mundra: Absolutely yes.

Devam Modi: In the case of park the order execution cycle can be shorter than 90 days also.

Anurag Mundra: Yes.

Devam Modi: Sir the current park that we have opened over the how much more capacity are we

looking to us?

Anurag Mundra: To answer this question the design is like every six months we start with the new park

currently we have eight solar parks seven in the state of Madhya Pradesh and one in the

state of Maharashtra apart from that we have around 900 acres of land 700 acres of land

is coming through MoU in state of Madhya Pradesh and around 200 acres of land in the

private hands and land is like a stock in trade for us we keep on looking for new lands

as soon as we receive orders and so on. This land 900 acres of land is good for almost

160 to 170 MW of solar power plant.

Devam Modi: So that is the additional you can add from the perspective of the current year what is the

current park that we are developing we have a cap right around 30 to 40 MW we setup

in one location?

Anurag Mundra: Yes around 30 MW. So the two more parks in the pipeline we can expect around two

more parks in this financial year.

Devam Modi: We are saying almost for capacity of 80 MW so you are saying some of the capacity

could come in those two more parks?

Anurag Mundra: Yes.

Devam Modi: That is it from my side.

Moderator: Thank you. Next question is from the line of Mr. Sanjay Sathapti from Ampersand

Capital Partners. Please go ahead.

Sanjay Sathapti: My first question is that Sir can you just give us the sense of what would be your return

on capital employed in this business and considering that you are looking for some

massive 25 fold increase in your execution so what kind of resources in terms of capital

requirement you will have to fund that kind of a growth?

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Anurag Mundra: Well the business we are in we put up a solar power plants for our capacity so the 25

fold growth which we are expecting till 2022, the money is going to be invested by our

clients and not by Ujaas though we will be requiring working capital limits and that

mostly is the non-fund base limit we make a typical margins of 15% to 17% of our

solution business and around 9% to 10% in our EPC business probably these two

figures may be able to give answer for that.

Sanjay Sathapti: Sir what is the return on capital employed for you?

Anurag Mundra: Well I do not remember the exact number but it has been reported if you allow me to

give that exact percentage I will be happy to supply that.

Sanjay Sathapti: Sir just little bit differently if I can ask this question that you will have to probably buy

the land and then wait for it to get utilized so probably land is kind of a working capital

for you and apart from the EPC business working capital so if you put all these things

together then will it not be very important that you will need lot of funding to fund this

kind of growth?

Anurag Mundra: Absolutely not so the cost of land in any solar power plant is less than 3% so before

launching any solar park it is not only in land, you also need to do some development

and also need to develop some common facilities like evacuation infrastructure,

weather system and all that stuff. It is not a very high priced item what you do. It is like

an 80:20 analysis. It is just for the sake of argument it is more of work and less of

money that you need to do. If you do a working capital side, when you do a lot of work

you require non-fund base limits not the fund base limit. So to give an example, say

even in March 2016 where I was having more than Rs.90 Crores in cash, but if you

want to import modules or if you want to purchase anything you need to open LCs to

your vendors for that so the requirement of non-fund limits or to participate in tender

you require further and further bank guarantees limit that will increase and not the fund

based limits.

Sanjay Sathapti: Non-fund based limit is something which is also linked to your networth?

Anurag Mundra: There are various ways the bank assess your non-fund based limits. So again all the

banks have different view to look at but I believe what happened in the last seven to

eight years, this non-fund base limits becomes darling of banks of now what I

understand they adopt a mechanism called RAROC, risk adjusted return on capital

from the bank’s perspective and the risk what they have adheres to non-fund base limits

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it is very, very low compared to fund base limit. So at the current scenario banks are

more than happy to provide more and more non-fund based limits.

Sanjay Sathapti: Sir, my last question is that we keep sharing that even though solar is approaching

parity or something but there are constant complaint that distribution companies are not

buying solar power and they are showing a lot of resistance because of their own

financial space are things changing in the margin and how are they can you just help us

understand that Sir?

Anurag Mundra: Well things are changing but if you talk about the solar power I have not seen any case

where the solar power plant has been commissioned and there is no PPA been done. I

have not seen anything, but I think it is a fundamental question, the financial strength of

utility company are not so great, so here and there you keep on hearing these types of

news even if they buy though it has not happened in solar but it happened in wind that

the payment has been delayed. So Government has come up with scheme like UDAY,

which is going to strengthen the financial strength of the company. Also we do advice

our client around 75% to 85% of our clients sell power directly to the industries and

other commercial estate basement. So this utility company or the payment related with

the utility company does not come in the picture. If you have a little long-term horizon

say around 10 years, now solar is the story which you simply cannot ignore so given

similar example what happened in early 1990s where Department of

Telecommunication and when this mobile came up, you know, many people have said

that DoT is not supporting mobile because of XYZ reasons and today they have

changed their business model, landline to landline is free. The major revenues come in

through the mobile, probably people are more than expert for that rather than me. I am

pretty sure that this is going to happen in the electricity also. To give an example, there

is a company in Germany called E.ON Energy, which is a utility company. They have

bifurcated; they have divided their business what has been associated with the utility

side of the business and the classical form of generation of power and the renewable

form of power. So sooner it will happen in India and sooner it will happen it will be

better for the country.

Sanjay Sathapti: If you a just explain that technology changes that is happening? How does that impact

results?

Anurag Mundra: Probably the time may not permit but I will be happy, because it is a very long subject

and because of certain academic interest I do keep following, so probably on some

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other time we can take it privately and deliberate a lot about the technological

developments.

Moderator: Thank you. We take the next question from the line of Alok Deoraj from IIFL Wealth

Management. Please go ahead.

Alok Deoraj: Good afternoon Sir and congratulations on a good set of numbers. Just a couple of

questions; you mentioned that you are leader in the EPC and also in the solution form

of the business? Sir just wanted to understand like last year itself the solar capacity has

almost increased by say 3 GW so where is that EPC business going? I mean if India is

adding capacity of 3 GW so someone must be doing EPC for that?

Anurag Mundra: There are very good companies who are doing work like L&T, like Sterling & Wilson,

like Tata Power, like Jackson, like Vikram Solar, so I believe there are almost 10

companies who have done more than more than 150 MW in the country. So it is like

you have to fix up what are your priorities are so for Ujaas the priority is the

bottomline. So we are focusing on bottomline and we participate in those tenders where

we can have good margins. Some other company may have different priorities and that

is perfectly okay because the pie is too big.

Alok Deoraj: Sir just wanted to understand so that the 3 GW capacity which was added, so I mean, of

course all the EPC would have been done for these capacity additions so Ujaas might

be having a very small portion of that pie although the pie is very big?

Anurag Mundra: In the EPC side yes, absolutely.

Alok Deoraj: So in FY2016 how much of the EPC orders we did in terms of MW?

Anurag Mundra: FY2016 was the first year and I believe 10 MW of revenue comes from that side.

Alok Deoraj: So 10 MW out of say 3000 MW is that calculation correct?

Anurag Mundra: Because we started our EPC only in FY2016. Till FY2015 we never had any presence

in the EPC segment. Just to stable our quarter-to-quarter revenue and mitigate the risk

of what we have faced in FY2015 we started the EPC line and the result is quite evident

in the last three four quarters.

Alok Deoraj: So Sir there might be a quite big player. I mean for 3000 MW which is you have

commissioned so of course you might be having very big players who might be

significant competition to you and who might be with this higher scale of operations,

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they might be very much competitive as well so do you think there could be some kind

of margin pressure going forward?

Anurag Mundra: Yes that is the very reason that why you make a lower margin in EPC business than

your solution business. When the pie is too big you can always figure out. Just to give

you an example, we are doing a 3 MW project in Aligarh Muslim University; it is again

a tendering business at a comfortable price. Now you have to be very, very focused on

what is your objectives are and because the pie is too big, it is okay if you do not get 50

MW of NTPC project. Probably their margin percentage may be as low as 5% types, I

am just giving an example, I do not know the exact number over there, but because the

pie is too big and every PSUs every university, every airport, every water body is

coming up with tendering business, you have capacity in capability to do a pick and

choose.

Alok Deoraj: So NTPC also like that it might be doing it for effective taking solar plant at all might

be doing EPC for itself also?

Anurag Mundra: No, I have not came across this situation but NTPC is doing on their own.

Alok Deoraj: Who are the real competitors in this segment?

Anurag Mundra: EPC, so I mentioned the name, so L&T, Sterling and Wilson, Tata Power, Vikram

Solar, Jackson, Juwi Solar, these are our competitors.

Alok Deoraj: Okay and what about the solution because who would be the competitor there?

Anurag Mundra: So there is no apple to apple comparison per se because there is nobody to provided

complete solution through single window, but yes we get a competition in bits and

pieces from company like Rays Power and Expert, Enrich Solar, there is another one

company in listed space called Select Energy based in South India though everybody

has different level of operations and the different product offerings, but again the pie is

too big and if you are targeting 40, 50 MW in a year.

Alok Deoraj: Just one last question, actually when you do this solar park from like you when you

develop the solar parks, so the capacity which you actually put in, so that also comes in

the total solar capacity which is given out by CEA, is that right?

Anurag Mundra: Absolutely yes. Every single unit been generated in country needs to be accounted.

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Alok Deoraj: Right, so that is initially that has shown as Ujaas setting up this much capacity I mean

that is what the thing is?

Anurag Mundra: No, Ujaas does not, if you want to put up a solar power plant, Ujaas do all the work, but

the plant has been commissioned in your name only it is not about Ujaas.

Alok Deoraj: No, I was talking about the Park business?

Anurag Mundra: Yes, I am also talking about the Park business.

Alok Deoraj: But I think in Park you first make the Park and you develop the Park and then you give

it to people who require it.

Anurag Mundra: No, when you develop park means you develop the land in common infrastructure, I do

not start putting up a solar power plant unless and until I received confirmed order with

advance.

Alok Deoraj: So the actual capacity comes up only when the order is in place?

Anurag Mundra: Yes, absolutely otherwise would have been, it is a big thing.

Alok Deoraj: That is all from my side and all the best.

Moderator: Thank you. Next we have a followup question from the line of Umesh Gupta from

Reliance Wealth Management. Please go ahead. As there is no response we will move

to the next question. Next question is from the line of Nisarg Vakharia of Lucky

Investment Managers. Please go ahead.

Nisarg Vakharia: Sir, can you give me a breakup of the finance cost in between your regular debt

payment and the LC charges?

Anurag Mundra: I do not have ready with me, is it okay if you allow me to supply it afterwards?

Nisarg Vakharia: No problem. Just one more thing just wanted to reconfirm I heard correct when you

said that you are looking at about 20 to 30 MW in rooftop solar for next year right?

Anurag Mundra: Yes 20 to 30 MW in the next fiscal that is FY2018.

Nisarg Vakharia: Yes which would roughly be around Rs.240, Rs.250 Crores of revenue considering

Rs.8 Crore per MW?

Page 24 of 24

Anurag Mundra: Yes.

Moderator: Thank you. That was the last question. As there are no further questions I would like to

hand the conference back to Mr. Deepak Agrawala for any closing comments.

Deepak Agrawala: We thank Mr. Mundra and his team for giving us an opportunity to host this call. We

also thank all the investors and analysts for joining in this call. Over to you Sir for any

closing remarks.

Anurag Mundra: Thank you very much and once again I wish very happy and prosperous New Year to

all of you. Thank you.

Deepak Agrawala: Thank you. We can close.

Moderator: Thank you very much. On behalf of Elara Securities that concludes this conference.

Thank you for joining us ladies and gentlemen, you may now disconnect your lines.