Adani Energy Solutions: Q2-25 Earnings Call Highlights
Strong Q2-25. Robust capex & execution across core businesses. Positioned to capitalize on opportunities in transmission & C&I segment. Ambitious growth targets. focus on operational efficiency
adanienergysolutions.com | NSE: ADANIENSOL
1. Key Takeaways
1.1 TLDR
Overall, AESL delivered a strong Q2 FY25 performance, underpinned by its robust capex plan and execution across its core businesses.
The company is well-positioned to capitalize on growth opportunities in the Indian power sector, particularly in transmission and the emerging C&I segment.
The management remains confident in achieving its ambitious growth targets, driven by strategic investments and a focus on operational efficiency.
1.2 Operational Highlights:
Financial Performance:
Operational revenue increased by 23% to Rs 4,200 crore.
EBITDA grew by 31% to Rs 1,891 crore.
PAT reached Rs 773 crore, representing a significant increase.
Cash profit reached Rs 1,026 crore, demonstrating strong financial health.
Net debt to EBITDA maintained at 3.1x.
Strong Q2 FY25 performance: Driven by robust growth in transmission, distribution, and smart meter businesses. C&I Power Solution business is expected to contribute from the next quarter.
Significant equity infusion: AESL raised Rs 8,300 crore through a QIP, facilitating capital expenditure (capex) for growth in transmission and smart metering.
Transmission business expansion: Secured four new projects, increasing the value of under-construction projects to ~Rs 31,000 crore, expected to contribute ~Rs 4,200 crore to EBITDA upon completion within two years. Anticipating an additional Rs 15,000 crore to Rs 20,000 crore worth of projects in the next six months.
Robust Capex deployment: ~Rs 3,000 crore deployed in Q2 FY25, 2.5 times higher year-on-year. Total capex for H1 FY25 is Rs 4,400 crore, 1.7 times higher year-on-year.
Focus on operational efficiency: Maintaining a reliability of 99.7% resulting in an incentive of Rs 35 crore. Network expanded by 140 circuit kilometers to reach over 23,000 circuit kilometers.
Distribution business growth: 7% growth in electricity sales, distribution losses reduced to 4.85%.
Smart meter deployment acceleration: Installed 4 lakh meters in the last quarter. Targeting installation of 30 to 35 lakh meters in the next six months, reaching a total of 40 to 42 lakh meters by FY25 end.
C&I business poised for growth: Expecting to close contracts for 5,000 million units by year-end, contributing an annualised EBITDA of ~Rs 150 crore. Actively pursuing contracts with major data center players like Google and Microsoft.
1.3 Key Themes:
Capital Expenditure as a Key Driver: AESL emphasizes capex deployment as a direct indicator of future profitability. The robust capex plan and execution are crucial for achieving growth targets.
Transmission Business Dominance: Transmission remains a significant focus area for AESL. The company is leveraging the vast opportunities in the Indian transmission sector, aiming to maintain its market share and capitalize on a strong pipeline of upcoming projects.
Increased competition has led to higher IRRs in recent bids, expected to remain stable or even improve further with a healthy project pipeline.
Smart Meter Deployment Picking Up Pace: After initial integration challenges, the smart meter deployment is gaining momentum. The company is confident in its ability to scale up installations significantly, supported by operational improvements and favorable seasonal conditions.
C&I Business as a New Growth Engine: The C&I power solution business is positioned as a promising growth driver for AESL. By leveraging group synergies and addressing the specific needs of demanding customers, AESL aims to secure large contracts, particularly in the data center segment.
AESL provides end-to-end power solutions, including last-mile connectivity investments, aiming for margins ranging from Rs 0.10 to Rs 1 per unit depending on the contract complexity.
Funding Transmission Growth: The recent QIP provides sufficient funding for ongoing projects. Future financing will be evaluated based on market conditions, with options including bank loans, dollar bonds, and domestic bonds.
1.4 Key Quotes
"This was a very strong performance that we reported in Q2 FY25 and in fact, all the three existing business, transmission, distribution, and smart meter are in a phase of massive growth."
"In our business, it is important to understand that whenever we deploy capex, we to that extent lock-in the profitability."
"Certainly, it will be over 15% [EBITDA growth]. Now, if you see the project under execution, including the smart meter, will get concluded in the next couple of years. So, that itself is Rs 50,000 crore of capex. Therefore, the growth is going to correspond to that kind of capex, which it will be in excess of 20%."
C&I Business: "This is going to be a very exciting business; you will see a lot of action happening in this side in next and next quarter. And largely, you will see a lot of activity in next financial year."
Bajaj Housing Finance Q2 FY25 Earnings Call FAQ
1. What were the key highlights of Bajaj Housing Finance's Q2 FY25 results?
Bajaj Housing Finance achieved two significant milestones in Q2 FY25:
Listing on the stock exchange
Surpassing INR 100,000 crores in Assets Under Management (AUM).
Other key highlights include:
Strong AUM growth of 26% year-on-year.
Profit Before Tax (PBT) growth of 23%.
Robust risk performance with Gross Non-Performing Assets (GNPA) at 0.29% and Net Non-Performing Assets (NNPA) at 0.12%.
Improved operating efficiency with Operating Expense to Net Total Income (opex to NTI) ratio decreasing to 20.5% from 22.1% in Q2 FY24.
Successful completion of the IPO process and listing on September 16th.
2. What is the breakdown of Bajaj Housing Finance's loan portfolio?
The portfolio composition remains largely stable:
Home loans: 57.2%
Loan Against Property (LAP): 9.8%
Lease Rental Discounting (LRD): 19.6%
Developer Finance: 11.7%
Other: 1.7%
3. How did disbursements perform in Q2 FY25?
Q2 FY25 disbursements were slightly lower than Q2 FY24, primarily due to a decline in LRD transactions. This was attributed to two large, marquee transactions in the LRD business during the same quarter last year.
4. What is Bajaj Housing Finance's strategy for managing its cost of funds?
Bajaj Housing Finance employs a diversified borrowing mix:
44% from banks
45% from the money market
11% from the National Housing Bank (NHB).
The company focuses on enhancing its floating rate mix and actively manages relationships with 17 banks for bank lines. The recent uptick in cost of funds is primarily due to the increase in the Marginal Cost of Funds Based Lending Rate (MCLR) by banks.
5. What is the outlook for credit costs?
The reported credit cost for Q2 FY25 was 0.02%, but this was due to an overlay release. Excluding the overlay release, the credit cost would have been 0.14%. Bajaj Housing Finance anticipates credit costs to remain stable in the range of 0.14% to 0.17% going forward.
6. Does Bajaj Finance source loans for Bajaj Housing Finance?
No, both companies have separate sourcing strategies and branches. Bajaj Housing Finance primarily sources loans directly from developers or through distribution partners. However, Bajaj Housing Finance receives consented customer leads from Bajaj Finance's digital platforms and existing customer base, which contributes to approximately 12% to 15% of its home loan disbursals.
7. What is Bajaj Housing Finance's approach to developer finance and LRD?
Developer Finance: The company focuses on a granular approach with an average ticket size of INR 46.6 crores and an average outstanding per project of INR 17 crores. This strategy helps mitigate risk.
LRD: Bajaj Housing Finance views LRD as a low-risk, scalable business offering optimal returns. The company is bullish on this segment and is open to large ticket sizes, however, regulatory norms regarding residential asset exposure limit the potential growth.
8. How does Bajaj Housing Finance approach asset quality and provisioning in its LRD and developer finance portfolios?
The company maintains a conservative approach to provisioning:
LRD: Despite a historically low-risk profile and no stage 2 or 3 assets, Bajaj Housing Finance maintains an ECL provision of 0.61% on the entire stage 1 LRD portfolio.
Developer Finance: Similar to LRD, the company carries an ECL provision of 0.62% on the stage 1 developer finance portfolio.
Bajaj Housing Finance's granular approach to developer finance and focus on high-quality LRD customers help maintain robust asset quality even during industry downturns.
Source: Link to Earning Call Transcripts
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