Shareholder Letter of Sterlite Power

Document Summary

Shareholder Update: Q4-FY24

The demerger of Sterlite Power Transmission Ltd. (SPTL) has been approved by NCLT and will be effective in the last week of September 2024. All SPTL shareholders will receive one share of the resultant entity (Infra business Co) – SGL5, for every SPTL share held as of the record date. The Global Products & Services (GPS) business order book closed at an all-time high of Rs 6,705 Crs at the end of FY24.

Business Highlights for Q4-FY24

Regarding the 'Infra' Business in India, SPTL was selected as the successful bidder for a significant Tariff Based Competitive Bidding (TBCB) project, receiving the Letter of Award (LoA) in Q2-FY25. Significant progress has been made in completing key projects, with commissioning on track for Q3-FY25. These include the MUML-Part B & Part C project (annual tariff of Rs 452 Crs upon completion), the GTTPL-400 kV DC Xeldum to Mapusa Line, 220 kV DC Xeldum to Xeldum Line & 220/400 kV Xeldum Substation (annual tariff of Rs 156 Crs upon completion), and the NBTL - 132kV DC Hastinghmari - Ampati Line along with associated Bays (annual tariff of Rs 57 Crs upon completion).

The company has also secured new GPS order wins of Rs 2,498 Cr this quarter. These projects include conductor supply for green energy power transmission projects in Rajasthan, specifically the Fatehgarh-Bhadla Transmission line project, along with export orders for Optical Ground Wire (OPGW) in Africa and CIS (Commonwealth of Independent States) markets. Furthermore, the company secured multiple orders for Extra High Voltage (EHV) & High Voltage (HV) cables for infrastructure projects in Madhya Pradesh, West Bengal, Karnataka, Odisha, and Gujarat. The MSI unit signed a turnkey project contract with Odisha to upgrade the 132 kV Pratapsasan-Kesura-Ransinghpur transmission line using high-performance conductors.

Financial Highlights for FY24

The snapshot of the Profit & Loss statement for the year ending Mar. 31 '24 for the three key businesses are as follows: For the Demerged SPTL-GPS Co (consol.), Total Income was Rs 4,842 Cr (47.1% Y-o-Y growth), EBIDTA was Rs 522 Cr (27.0% Y-o-Y growth), PAT was Rs 241 Cr (30.9% Y-o-Y growth) and Net Margin was 4.9%. The GPS business achieved a high ROCE of 43% and ROE of 66%, and closed FY24 with no long-term debt.

For the Infra Business - India, Total Income was Rs 1,630 Cr (94.1% Y-o-Y growth), EBIDTA was Rs 112 Cr (-65.4% Y-o-Y growth), PAT was Rs -259 Cr. For the Infra Business - Brazil, Revenue was Rs 1,545 Crs, EBIDTA was Rs 66 Crs and PAT was Rs -370 Crs.

The consolidated SPTL Balance sheet metrics are as follows: Networth is Rs 1,333 Crs. The long-term & short-term borrowings was Rs 6,739 Crs. The Fixed assets of the company was Rs 6,151 Crs. The cash and bank balance is Rs 1,224 Crs.

Regarding financing updates, the process for the formation of a new Transmission Infra JV platform (SGL-32) has concluded. SPTL owns a majority stake of 51% and GIC owns the remaining 49% stake. NCLT's final order on the demerger will be made effective in Sept. '24, with the Infra business being demerged into SGL-5. The company is exploring raising up to USD 100Mn from private equity investors for the 'GPS + Convergence' businesses. A financial closure of Rs. 1,373 crore was achieved for Neemrana Kotputli Transmission project, and debt disbursements of ~Rs. 1,700 Crs were availed across various Infra projects.

Sterlite Power was awarded the Great Place to Work® (GPTW) Certification for three consecutive years.

Future Outlook

The order book of the company as of Q4 end (Mar. 31st '24) is as follows: Conductors + OPGW has Rs 4,748 Cr, Power Cables has Rs 1,130 Cr, MSI has Rs 827 Cr and Infra has Rs 5,456 Cr. Total Order Book is Rs 12,151 Cr.

For the GPS Co – Demerged SPTL, the India conductor market demand in FY26 is expected to double that of FY23. The company is undertaking a capex of Rs 450Crs towards increasing Conductor capacity by 45% to 1,55,000 MT and foray into Solar and EHV cables segments, which will enable 30% Revenue growth upto FY26, with PAT growth of 62%. The estimated average ROCE of 33% and average ROE of 26% is expected up to FY26. The Convergence business has a track record of annual Free cash generation runrate of Rs 100 - 125 Crs which is likely to sustain over next 3 years.

For SGL5 - Infra Co, income/revenue streams will be derived from EPC revenue, interest from SGL-32, and dividends from SGL-32. SGL-5 is long-term debt free. In FY26, EBIDTA and PAT are estimated to be Rs 943 Crs and Rs 737 Crs respectively, leading to a ROCE of 37% and ROE of 29%. SGL-32 targets to acquire up to ~18% of the upcoming TBCB Projects at higher than average market Equity Returns.

Business lines of the Company

Infra develops power transmission infrastructure, GPS manufactures conductors and cables, and Convergence focuses on OPGW based Optical Fibre Telecom Infra.