Ladies and gentlemen, good day and welcome to Sterling and Wilson Solar Limited Q1 FY 2022 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Jain, Head of Investor Relations from Sterling and Wilson Solar Limited. Thank you, and over to you, Mr. Jain. Welcome you all to Q1 FY 2022 Earnings Call. Along with me, I have Mr. Amit Jain, Global CEO, Mr. Bahadur Dastoor, CFO, and Strategic Growth Advisors, our investor relation advisors. We will start the call with an update on the solar power industry and operational highlights for the quarter by Amit, followed by financial highlights by Bahadur. Post which, we will open the floor for Q&A. Thank you, over to you, Amit. Thanks, Vishal, and warm welcome to all the participants on this call. I would like to give a quick update on solar power industry and status of our business operation. The global solar industry has been adversely affected in last nine months due to an unprecedented increase in price of modules, commodity prices, and freight cost that have pushed the prices up for projects. In last one month or so, the module and commodity prices have been stable, though we continue to see an upswing in the freight prices. The freight charges have been on continuous uptrend fueled by various reasons, including the shortage of containers, the congestion at ports, and closure of ports in different countries because of the COVID-related reasons. This increase in freight cost has heavily impacted the transport cost of solar modules and other raw materials worldwide. The shipping rates have increased from five to seven times over the last nine months. This has been a significant cost input. Just to give an example how it has impacted. We were freighting before the last quarter of FY 2021, the sea route from China to Chile around $2,000 for a 40 feet container, which has now increased to $13,500 in July, which is approximately six to seven times cost increase. Given the situation, many solar developers have delayed the finalization of orders. Consequently, the order finalization in international markets for FY 2022 has seen a lull till date and have been postponed to H2 FY 2022. We expect around 80% of the orders for FY 2022 to be finalized in H2 FY 2022. Our pipeline continues to remain robust. We expect about 15 gigawatt of orders as compared to 13 gigawatts, which we finalized in FY 2021 to be finalized this year. We expect to maintain strike rate of 14%-15% for this year in line with our past performance. Our unexecuted order book as on 14th August 2021 stands at INR 8,731 crore, which is executable over a period of next 12-15 months. This includes order amounting to INR 2,030 crore, which may now be unviable for developers considering increased module and commodity costs for which we are in discussion with our customers. On the growth market and opportunity over medium term, we continue to see a lot of traction in key markets, especially U.S., Australia, and Europe. Currently, we have limited presence in the two markets, that's North America and Europe, and we will be targeting to increase our market share in these markets. As for ISF market, the overall market is expected to see a growth of 15% over next three to five years. Our global presence provides us a lot of flexibility in selecting projects globally. Most of our clients are looking at significant capacity addition, and we continue to remain confident of the opportunities going ahead. Our O&M portfolio as at date is 8.7 GW and 40% of these are third-party EPC contracts. We expect O&M portfolio to grow by 40% during the year to 11.5-12 GW by end of FY 2022. We are focusing on increasing international O&M portfolio by pursuing projects where EPC has been done by a third party. We expect O&M margins to remain robust at 35% during the year. With an aim to expand our renewable offering, we have decided to pursue EPC business for hybrid energy power plant, battery energy storage, and waste to energy, subject to shareholder approval. Hybrid energy market is expected to grow at 8% CAGR to US$3.7 billion by 2025, whereas battery energy storage system and energy storage system is expected to grow two times in next four years to $12 billion annually. Australia and USA, where we already have sizable presence, are the large market in battery energy storage systems. We continue to see the trend of even the standalone and all the projects being proffered by both battery energy storage systems. Further, as battery prices are coming down, we are seeing a lot of traction for customers to combine solution in terms of solar, plus BESS hybrid energy share to increase. We will quickly be able to ramp up our battery storage business by adding a team of battery experts, whereas sales, execution, and design and engineering teams will be common for the businesses. We see a lot of opportunity to grow this business, as most of the clients for BESS are large IPP players with whom we have strong relationships. With ever-increasing generation of municipal waste globally and requirement of government to stop reduced landfills, the market for converting waste to energy continues to grow. Waste-to-energy market is expected to grow annually by US$5.25 billion over the next six to seven years, with addition of 70 new plants annually. U.K. and Europe constitute more than 40% of the global market, which will be our key focus market in initial years. With carbon emission reduction becoming a global consensus, there are enormous opportunities in these emerging field of hybrid energy power plants, energy storage solution, and biomass waste-to-energy. We can leverage our existing relationship with clients, further exploit our technical expertise, and maximize the inherent benefits of our hub-and-spoke business model thereby becoming a diversified renewable company into a rapidly growing ESG space. With this, I will ask Mr. Bahadur, our CFO, to take you through the consolidated financial highlights. Thank you very much. Thank you, Amit, and good morning, friends. I will take you through the consolidated financials for the quarter ended June 30th, 2021. Before we run through the financials, I would like to reiterate that being an EPC company, the revenue, order inflow, and gross margins would be lumpy due to geographical mix and stage of execution of the project in any particular quarter. Hence, comparison on corresponding previous period will not be a true reflection, and performance for a quarter may not be representative of the full year. Before commenting on our financial performance, I would like to update you on the recent event of resignation of our statutory auditors. Pursuant to the COVID-19 situation and its impact on the operations of the company, there has been a sharp focus to reduce overheads across the organization. From time to time, we have been in discussion with BSR and Co. LLP, our statutory auditors, for a substantial reduction in audit fee. However, as we couldn't reach a common ground, BSR and Co. LLP resigned as our statutory auditor. We would like to thank BSR & Co. For all the cooperation they have extended to us during the various audits to date. On the recommendation of the audit committee, we have appointed M/s Kalyaniwalla and Mistry LLP as the statutory auditors of the company to fill the casual vacancy caused by the aforesaid resignation from August 15, 2021, till the ensuing fourth AGM, and to further appoint them for a period of five years, subject to approval of the shareholders of the company at the ensuing AGM. Revenue for Q1 FY22 grew by 12% to INR 1,195 crore as project execution was impacted in Q1 last year due to COVID. Region-wise revenue break-up for EPC is as follows. Australia contributed about 64.3%, Americas contributed 25.3%, followed by India, which contributed 8.7%, and the balance contribution by MENA region and Africa. Our O&M revenue stood at INR 61 crore in Q1 FY 2022 and constituted 5.1% of revenue in Q1 FY 2022. O&M margins in Q1 FY 2022 have been 35%. Due to the impact caused by the increase in module and commodity prices, adjusted gross margins in Q1 FY 2022 continue to remain suppressed for ongoing projects and stood at 2.3%. The orders booked in the current year have come at our historic margins of 10%-11%. Recurring overheads on absolute terms remained at the same level in the corresponding previous quarter, despite the previous quarter having lower salary and travel costs due to COVID-19. Our recurring overheads as a percentage of revenue reduced from 7.5% in Q1 FY 2021 to 6.9% in Q1 FY 2022. EBITDA losses for Q1 FY 2022 stood at INR 93 crore due to lower gross margins and accelerated mark to market on cancellation of forward cover contracts. Accelerated M2M represents loss of INR 49 crore on account of cancellation and rebooking of forward contracts on expiry related to ongoing projects. This resulted in accelerated accounting of losses, which has been explained in detail in note 11 of the Q1 results. The same has been flushed out from effective portion of cash flow hedge of other comprehensive income, resulting in negligible impact on shareholder funds. Coming to the balance sheet. I would again like to reiterate that as per the amended articles of association, the company cannot give loans to promoters or their affiliates post-listing. The external term debt outstanding as on August 14, 2021 is INR 64 crore. Decrease in borrowings is on account of repayment of ICDs and cash flow from operations. Since listing, we have repaid a total of INR 2,447 crore through internal accruals and money received from group companies on collection of Inter-Corporate Deposits. The repayment schedule of term debt in Q2 FY 2022 and Q3 FY 2022 involves payment of INR 24 crore and INR 40 crore respectively. We have a cash and cash equivalent of approximately INR 336 crore and a net worth of INR 651 crore as on June 30th, 2021. As of June, we had a negative working capital of INR 571 crore as compared to negative working capital of INR 530 crore as at March 2021. Negative working capital is driven by a combination of higher collection, efficient management of working capital, and advance from customers. There do exist, however, delay in payment to certain vendors. Of the receivables due for more than one year, which stood at INR 445 crore as on June 30th, 2021, they comprise of related party receivables of INR 136 crore, which include receivable of INR 102 crore against which the company has received unconditional assurance of proceeds from sale of plant. We have been able to collect settled old receivables of INR 18 crore during the year to date and are confident of recovering most of the balance overdue. The total intercorporate deposits repaid till date from 1st of April was INR 172 crore. As at 14th August 2021, ICD stood at INR 741 crore, including interest accrued. On the cash flow front, during the quarter, we had a negative operating cash flow from operations due to payment towards MTM losses on cancellation and rebooking of forward contracts, as explained above. Cash flow from investing activity was positive in Q1 FY22 due to receipt against ICDs and interest thereon. Here, I would also like to add that in accordance with the Sterling and Wilson Solar Limited Employee Stock Option Plan, the nomination and remuneration committee at its meeting held on August 14, 2021, has approved the grant of 13,001,213 out of a total of 16,03,600 employee stock options, which were approved by the shareholders. Two eligible employees, exercisable into not more than 13,01,213 equity shares of a face value of INR 1 each, fully paid at an exercise price of INR 238 per share. With this, we can now open the floor to questions and answers. Thank you very much. We will now begin the question and answer session. The first question is from the line of Mr. Vivek Gupta, an individual investor. Please go ahead. Yeah, hi. Hello. Good morning. Thanks for the opportunity for asking the question. Sir, being an individual investor, I've been invested in Sterling and Wilson on account of considering it as a global EPC player. The numbers which are coming quarter after quarter is not giving me any confidence. On top of it, I've been seeing that management is attributing these losses to COVID, but I have seen that there are companies which are performing, and we should not just attribute this to COVID. On top of it, like post-listing, we have been seeing that diversion of funds was there, and we have been committed for ICDs repayment. What is pushing management to settle these ICDs at the last leg of the committed date? Because being investor, I'm losing my confidence in Sterling and Wilson totally. How you are going to assure me that Sterling and Wilson is on the right path of development, and how you can reassure that confidence? Thank you. I will address your question. I believe there were three parts to it. The first part, which you said is we should not attribute everything to COVID. Mr. Gupta, COVID is a reality. It has been there from the last 18 months. We have faced the impact. We were one of the first companies to mention that COVID is going to impact us in March 2020, and it did. COVID has impacted all organizations during this year, and there has been a substantial increase in module and commodity prices. This is also a reality. This is something that has affected the solar entities all across the world amongst other businesses, and Sterling and Wilson Solar has been no exception. We have attributed where it needed to be attributed. Coming to the question of the ICD repayment, as we have mentioned, there has been a lot of ICD repayment in the previous financial year, as well as almost INR 172 crore of ICD repayment from the start of this financial year. The figure is now down to INR 740 crore. In the last board meeting, the promoters have given confidence to the board of meeting their objectives of taking off all the ICDs by the appointed date of September 30th, and we are hopeful and confident that they will do the same. That is all the information that I have, which is based on the confidence given by the promoters to the board. It means we can be rest assured that these ICD payments won't be delayed further. I've seen that you have attributed some INR 150 crore or INR 105 crore of securities in case there's ICDs as a part of this ICD's repayment. The only thing is, see, this ICD is a big overhang on Sterling and Wilson. The IPO price which came was somewhere around INR 770, INR 790, and post-listing, it has eroded shareholders' wealth to a great extent. Till date, being an investor, I don't know about others, but I am not at all comfortable in booking losses, and on top of it, being a part of S&W, the Sterling and Wilson shareholder. At least it's a sincere request from my side that management or promoters, they should be transparent enough to make this trust, to regain the trust of investors. It would be good. Thank you. Mr. Gupta, thank you for your confidence. As I said, the promoters have given this assurance to the board, That's what we are transparently projecting to you. I once again thank you for remaining invested, Thank you for the confidence. Thank you. Thank you. Participants, you may press star and one to ask a question. The next question is on the line of Ankit Gupta from Alchemy Capital. Please go ahead. Hi, sir. Good morning. Sir, what's the status of our negotiation with our Chinese vendors regarding solar modules pricing? Like in the last call, we discussed something about that we are negotiating with them. Is there any progress on that front? Yeah. As we discussed in our last call, that going forward, whatever new orders we are going to negotiate with our Chinese module suppliers, we are going to ask for higher amount of bank guarantees. It is on the same line. Whatever new orders we are going to take, and if it is not passed through to the customers, in that case, we are going to seek higher amount of bank guarantee as compared to what we were taking earlier, to safeguard against all the risks arising from the module or uncertainty in the market. Okay. Sir, generally seeing these solar module prices to again mean revert in our view, what's causing this? Is it because of the chip shortage or where it end? I think it has increased to now $25 per watt peak or levels. What do you think can be the peak? Actually, past one month or so, what we have been seeing the trend, that module prices are stabilizing. Whatever the market reports are, we are hearing that a lot of capacity addition is happening in China, both on for the module manufacturing as well as the upstream raw materials of polysilicon and glass. That is happening, and we hope that it continues to be stable, but it's very difficult to give how it is going to pan out in next coming quarters. Certainly last one month or so, we have seen prices getting stabilized. Got it. Sir, you talked about that out of INR 8,700 crore of order book, around INR 2,000 crore of order book might be unviable. What was that number? I missed that number. That number is around INR 2,000 crore, where we see that it may not be viable for developers, but we continue into the negotiation, which we expect. With that we say it may not be viable, but discussions are ongoing with the customer, and we will get more clarity on how it pans out in next coming quarters. Sir, for the remaining INR 6,000 odd crore of order book, our gross margins would be negative, or they would be like 2%-3%? What can be an approximate number for the remaining order book? Yeah. I will request Bahadur to give you guidance on that. The gross margins obviously would be suppressed, and they would not be the historical gross margins that we have. I would just like to add that the gross margins which we have seen in this particular quarter also bear the effect of projects which were in the negative, and for which all the losses were taken in March 2021. However, in the current quarter, you do have revenue and cost equal to revenue because all the losses have to be front-ended, and this has suppressed, in percentage terms, the margin. If we were to remove out the impact of such zero level, zero margin jobs which are ongoing. Yeah. Margins actually would have been slightly higher than 5% in this quarter. Going forward, we do believe that the margins will be much higher than 5% by the end of the year. Okay. That's good to know. The last question from my end, sir. Why are the other expenses also continue to be higher? Is it because of the freight cost? What's the key item in that figure? When you're looking at other expenses, it does not include freight costs because all costs which are attributable to the project go out before the gross margin. What you are seeing as overheads, which is about INR 80 crore, is comparable with the INR 80 crore last year, where also the salary costs as well as traveling was much lower due to the higher impact of COVID. In spite of that, it has been maintained, though the management is looking at reducing cost overheads all across the board, and that is what we are working on to bring it down much lower than what it was in the previous year, the number being INR 324 crore in the previous year. Okay. We are aspiring for that number for the full year, full FY 2022? To come down much below that. Yeah. Okay. Yeah. Okay. That number that we gave you was FY 2021. We are trying to bring it down as much as possible, which is why efforts are ongoing across the board. Okay. Sir, you talked about new businesses for energy storage and hybrid. Just on our capability front, how are we hiring our team for that and how can our costs be increasing for those kind of projects? Those costs will be front ended, I believe. Right? We have to bid on any project, we must have some capability in our team. How are we doing that? Let me start off with this and then Mr. Amit can add. Yeah. The business pipeline that we are looking at for this kind of projects are between INR 800 million to about INR 1 billion. Okay. At that point in time, you would require to build up your business development team, and there would be costs incurred for that. Yeah. If that is the kind of pipeline that we are looking at, we would be seeing some kind of overheads in the range of about INR 25 crore-INR 30 crore, which is normal to build up a project this size. That is, of course, assuming that there are no orders which come in. The group has evaluated its capabilities in doing this. There are certain pre-qualifications which would require the involvement of partners, which will be taken up appropriately from time to time. If Amit has anything which he would like to add, he may go ahead. I would like to add that our geographical presence across the globe and existing teams and existing clients will help us in leveraging. Overheads, despite adding a new business, would be minimal, and we'll be achieving a lot of synergies, which will give us a lot of cost advantages even in the new lines of businesses by keeping overheads low. Just one more point that I would like to add is that this line of business has long-term orders. It is not like solar orders which get executed between 12-15 months. These take anywhere between 24-36 months. We will also be having not only order book visibility, long-term order book visibility, also revenue visibility. Okay. I got it. Thank you so much. Thank you. Next question is from the line of Mr. Kunal Koladiya from Anova Capital. Please go ahead. Yeah. Hi, sir. Good morning. Good morning. Sir, I have two questions, if I may. Sir, first one is, given the commodity impact, would you consider bidding for EPC contracts excluding the module procurement for shorter duration contracts as well? Yeah. That's what we are considering. We are, in our existing two big markets, U.S.A. and India, already we are bidding for projects without modules, and even in the geographies we are bidding with modules. We are now adopting a strategy of passing the risk onto the customers. That is very much on board. We are considering both the options. We're bidding without modules, and where we are bidding with modules, passing on the cost risks to the customers. It is also important to further add that, unlike in India, where ex modules, your price of BOS is much lower. It's almost 2-2.5 t imes that in the international market. It is not that if we were to bid ex modules or modules as a complete pass through, there would be a very heavy shrinkage in revenue because the two BOS markets are not comparable, the India and the international. Okay. That's helpful. Secondly, sir, what is our current status of project execution or you may say, operating efficiency in Australia in the light of COVID-19 lockdowns? In Australia, so far COVID-19 lockdowns have not impacted our project execution because the lockdown in the cities and project sites continue to operate the same manner. However, there have been some delays on account of delay in module supplies, but the project's execution remains unimpacted on account of COVID. Okay, sir. Thank you. Thank you. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Mr. VP Rajesh from Banyan Capital. Please go ahead. Thanks for the opportunity. My first question is just trying to understand this price impact that we got hit by. I apologize in advance if some of these questions are repetitive. Just trying to understand how much did you book in the last year, the losses on the current order book. In the current order book, what percentage is still going to be impacted by these price escalations? I'll start off on that. As you would have seen in our investor presentation for March 2021, the one-offs which had an impact on that quarter were about INR 374 crore. This included the cost [audio distortion] going bankrupt due to COVID. This is also the cost escalation due to elongation of time due to such contractor having gone bankrupt. It included the module freight and commodity price increases, and it also included certain provisions for liquidated damages, which the management prudently felt should be made on account of extension of time due to COVID. The impact that was there was about INR 370 odd crore. In the current quarter, we have taken the margins which were there for March 2021 and continued that further. There have been no further losses on those projects, except in case of one where a particular module supplier had asked for an increase in price, and that was to a significant extent also agreed to be compensated to us by the customer. That has been mentioned in our investor presentation for this quarter, where we have put it as price variations. Other than that, there has been no other major impact in this current quarter. Whatever had to be taken was taken in the last quarter. Margins though continue to remain suppressed because the impact of that will continue over the execution and life cycle of the project. Right. Out of that INR 370 crore figure last quarter, how much was due to non-recurring things like bankruptcy, et cetera, if you remove all that pertaining to price escalation, freight cost and module pricing? What was that portion of INR 370 crore? I will just respond to that in a minute. The total amount of- No problem. Just a minute. That amount was about INR 102 crore for approximately, as I remember. It was INR 102 crore for the subcontractor going bankrupt, roughly about INR 80-INR 85 crore on modules and freight, and about INR 100 crore, if I remember correctly, on other extension of time due to COVID-19. Okay. The price impact was- I'm sorry, your voice broke. Sorry. The impact of the price escalations and freight was around INR 80-85 crore. Roughly speaking, right? From out of that INR 370. The extent it pertained to the last quarter. You have to understand that. Thank you. As the project progresses. Unless there is a loss, only that loss would be booked front-ended. If there is anything which the project remains positive, that suppressed profit would continue over the life cycle of the project. Understood. Okay. Now coming to this year, out of this book of INR 6,000 crore, which you think is viable, how much is the price hit you are taking because of which our margins are going to be suppressed? The price hit that had to be taken has already been taken. The margins that are there in the particular quarter, in this one, we have said that it is also impacted by no margin coming where the loss has been booked in the previous year. As I mentioned, if that was to be eliminated, the margins would be in the region of 5%. Orders that we have booked in the current quarter have come at our historical margins. We believe that we should have a much more than 5% margin at the end of the year. We will be in a position to give a correct margin guidance by the time we come to the next quarter call. Okay, just last one question on this topic. How should I think about it, that out of the INR 6,000 crore book you have on the book, what% is where you are not able to pass through these price escalations, and therefore that will be on a lower margin trajectory? I understand that because it is not negative, you can't book the losses up front. We know that over the next few quarters, your margins are going to be subdued. I'm just trying to get a sense what% of the book is in that particular bucket. About 40%-45%. Okay. Understood. The new business initiatives you talked about in the presentation, are you also thinking about getting into data centers or? Your voice is not clear. Oh, sorry. You'll have to repeat your question. I'm sorry about that. My question is, in the new business initiatives that you have talked about in the presentation, are you also planning to get into the data centers as well, or what's the thinking on that side? No, we will not be getting into data centers. Okay. All right. Thank you. I will get back in the queue if I have more questions. Sure. Thank you. The next question is from the line of Subhadip Mitra from JM Financial Service. Please go ahead. Yeah, good morning, and thank you for the opportunity. Just wanted to get a sense of how do you see the Indian solar market evolving, because we've seen a lot of entrants and lot of existing utilities who are coming up with big plans. How do you see the EPC market here evolving in India? I'm sorry if you've already answered this question. I joined the call a little late. No. Thanks for the question. We see, as you yourself have said, that there is a lot of plans and a lot of announcements are happening. We continue to see the robust uptrend in the solar market, both domestic and international. In India this year itself, we see a bid pipeline of more than 6 GW, which is coming in. Internationally, we expect a bid pipeline of more than 15 GW to be finalized this year. For the EPC industry, the prospects remain strong and the market will continue to grow at the rate of approximately 15% per annum for next three to four years. Understood. Within this, let's say, bid pipeline of 6 GW in India, would there be any target market share that you're looking to get? Let's say, over the period of the next maybe three to five years, what is the target market share, say, within India and international? If you could just throw some light on that. See, our target hit rate usually has been 14, 15% of the targeted pipeline. We expect in India this year to be going somewhere around 1.5-2 GW, and depends upon the project closure which are going to happen in coming year. We'll continue to maintain our market leadership position. If you see our investor presentation, we have won about 623 MW already in India from April onwards. Understood. Do these also tend to be fixed price contracts, or they tend to be more of variable cost where you can pass on the module risk to the final customer? No. As far the Indian market is concerned, the module risk is on developer. We are bidding in Indian markets without any module risk. Understood. In terms of the international market, the 15 GW market size that you talked about, there again, you would be targeting about 14%-15% market share? Yeah, that's correct. Our historical strike rate has been 14%-15%, and we'll maintain that as well in international markets. Understood. That can vary across geographies, but consolidated hit rate would be 14%-15%. Understood. Would the international contracts then be more of these fixed price contracts? No. As we elaborated on our earlier questions, that U.S. is a market where we bid without modules, and in all other markets, wherever we bid EPC with modules, we'll pass on the price risk onto our customers. Understood. Thank you so much for answering my question. Okay. Thank you. The next question is from the line of Priyanka Singh from Arihant Securities. Please go ahead. Good morning, sir. I have a couple of questions. First of all, what is the global market size of the new business verticals that we are targeting? What would be the industry margin profile over here? We expect the hybrid energy market to be close to $3.5 billion-$4 billion by 2025, and the energy storage systems to grow to a next three to four years up to $12 billion. That's a significant market size, and most of the clients in this market are our existing clients. When we come to waste to energy market, that is going to be in excess of $5 billion market in next few years. There we see the market is pretty big, and we expect to maintain our historical strike range, which we have for our existing business. That's what we expect to maintain. Margin profile of the industry is 10%-15% where the markets are currently, and we'll be also maintaining margins in that particular bandwidth. Okay. What kind of synergy benefits we expect to get from these new verticals? There will be significant synergies because we are in the same line of business as far as hybrid and energy storage is concerned. The client profiles are same, clients are same, and geographies are same. Majority of the business is expected to come from Australia, Europe and U.S.A., where we have significant presence now. There we'll be just adding, going forward for the hybrid and battery storage system, only the project execution team. We'll be taking the advantage of our existing BD engineering project execution teams in those geographies. Synergies are going to be significant in these markets. As far as waste to energy is concerned, as we look forward to more order bookings, so we'll be significantly building teams there. We expect order book from these two new verticals going forward in excess of $ 500 million-$ 1 billion in coming year. There will be proportional INR 25 crore-INR 30 crore of overheads on this count in coming years on new verticals. Got it. That was helpful. Thank you. Thank you. The next question is on the line of Amit Shah from Ace Securities. Please go ahead. Hello. Good morning, sir. Sir, I have one question. Sir, can you indicate the expected margin for FY 2022 and 2023 based on the current commodity prices and freight cost? Do we foresee any further provisions due to current prices? As we had mentioned, the current year's margins, why we will give a better range when we come to the second quarter call. Right now we're at about 5% and are expected to grow. Over this year. As far as FY 2023 is concerned, that will also be something we will try and put out as the year goes by. The new orders, though, as we have mentioned, comes at our historical margins of between 10%-12%. Okay. Sir, do we see any further provisions? At this stage, we do not see any further provisions that are required. Okay, sir. Thank you. Thank you. The next question is from the line of Faisal Hawa from H.G. Hawa and Company. Please go ahead. To me, this looks like a business which has a very good tailwind because of continuously the world shifting to solar power. Somehow I feel like our place in it as an EPC player has, first of all, very low margins. Those low margins probably make us deal with not the very top end of suppliers of solar panels, et cetera. That is why when we deal with the more fragile suppliers, they are not able to fulfill their commitments or they go bankrupt because the industry may not have done this. We are actually in a small disaster to another and the promoter also having his own problems, and it is looking like one storm is over and another comes in after six months. Can you just comment on it? Because this is looking more structural rather than any kind of management problem. Mr. Faisal, two points. First of all, we take solar panels only from the tier 1 solar manufacturers. We do not work with tier 2 and below solar manufacturers at all. The ones who have reneged are not the small and the fragile. They are the ones who have the largest capacities in the market. Out of that, two of them are the ones who have reneged on their contract. It is an industry-wide issue. It is not something which is related to Sterling and Wilson Solar alone. Secondly, as far as the customers and developers are concerned, we also deal only with the top-tier customers and developers. Therefore, it is not a question of our margins getting affected because we deal with fragile vendors and customers. Okay. Thank you. The next question is from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead. Yeah, thanks for the opportunity. My first question is related to this current order book. You mentioned that out of which around INR 2,000 crore order book is currently not viable. By when do you see that the negotiation of higher prices will be over and we can start executing that order as well? We are in discussion with our customers, and I hope by the time we get on the next earning call, we would have concluded and get some sense of direction where we are with respect to those particular orders. Discussions are on, and we'll get to know in the next few weeks where we are with respect to those orders. Okay. Secondly, the remaining order book of INR 6,000 crore approx., that entire will be executed this year? Yeah. Most of it will be executed this year. As we have said, we will be finishing the entire order book in the next 12- 15 months, but the majority of it will be executed this year. To that, of course, you would add orders that you have booked in the current year or book and bill, as we call it. A part of that would also get executed in the current year, which would add to the revenue. Okay. Last question, can you give a guidance of what kind of order inflow you expect for this year? You mentioned that we expect a strong inflow in H2. In terms of amount, if you can give a broad range, because you did mention in terms of how much gigawatt, but sometimes it varies a lot because in India, the per megawatt order book is much different than per megawatt in Australia. Yeah. As we said, the bid pipeline which we see and which we likely to see will get concluded is an excess of 15 GW, and we maintain our strike range of 14%-15%. They're going to be large. At this point of time, it is difficult to give geography-wise breakup because this pipeline is spread across geographies and what will be the conversion rate across various geographies. That we'll be able to give you more color to answer the next one quarter where we are with respect to that. We'll maintain our historic hit rate of 14%-15% over one on a pipeline of more than 15 GW across the globe. Just broadly, I don't hold you, but broadly, INR 6,000 crore-INR 8,000 crore of order is a fair range? Let us not put a number. It can, of course, be calculated because like you yourself said, it is different across different geographies. Yes, we are expecting it to be larger than last year and a corresponding order book. Okay, sure. Thanks. That's it from me. Thank you. The next question is from the line of Shantanu Mantri from MK Ventures. Please go ahead. Good morning, sir. Sir, I just wanted to get this correct. These new lines of business that we're talking about, where we have our existing clients already there. One is this hybrid energy and the other is this waste to energy. Can you throw some more light that, what exactly would we be doing? I also heard you saying that our order book or what we are trying to get is somewhere around $ 500 million-$ 1 billion. Is that right? Sure. First of all, we'll be setting up as far as the hybrid and battery energy storage systems are concerned. We are looking at standalone projects in these markets and the projects which are coupled with our existing solar portfolio. Where we'll be providing these services, where our clients are coming up with both solar and storage solution, or they want some other additional power generation sources, renewable power generation sources coupled with solar. That we'll be providing to our existing client, and we see a lot of these kind of projects coming up with our existing clients in existing geographies. With the order pipeline, which we are talking about, that we'll be building up gradually in years to come. That is the revenue forecast which we have and which we'll be finalizing after getting our shareholders' approval, and that will be in years to come. We'll build up gradually what will be the revenue and order book in next two to three years from the new business segments. All right. Sir, say, let's just skip FY 2022 for now with all that has happened and major part of our order book will be facing this suppressed margin. If I'm to go ahead in, say, FY 2023, FY 2024, what should we take on the solar EPC part? What normalized EBITDA margins can we consider, or will there be a new normal here? I just wanted to get your sense there. We do not believe the present is the new normal. We believe that FY 2023 onwards, we should be back to our historical margins of between 10%-11%. When I say historical margins, I'm talking about the gross margin. All right. Of course, as the revenue size increases and overheads are in control, we will have operating leverage because the overheads would come down percentage points below what it is right now, thereby giving us an increase in the EBITDA. We are looking at 10%-11%, and if everything falls into place, overheads of between 3%-3.5%. That's our target. Sure. Understood. Sir, one last question, if I may. For these new lines of hybrid and waste to energy, what I heard was that around INR 25-INR30 crore would be spent as overhead, right? Other than that, any capital expenditure we would have to incur? First of all, this INR 25, INR 30 is not going to be a day one expenditure. It will be a gradual build-up. Sure. Seeing as how orders are there, new markets, business development team, engineering team, et cetera. As Mr. Amit mentioned, there is a significant amount of synergy. What we have given you is what we believe would be an estimate in case no orders come in. What Mr. Amit mentioned was this is something which will be built up because these are long gestation projects, unlike solar. As I mentioned, this can take between 24 to 30 months. It will give us an order view, a long-term order view, as well as a long-term revenue view, which right now has been missing insofar as the standalone solar EPC business is concerned. Good. All right. Thank you, and all the best. Thank you. Thank you. The next question is from the line of Danesh Mistry from Investor First Advisors. Please go ahead. Hi, good morning, and thank you for taking my question. I had a couple of questions. The first one is on the receivables piece. Whilst you've touched upon the IL& FS receivables, if you could give us some sense on the time period for recovery of the receivables of INR 102 crore from the related party, as well as some status update on Argentina. That was question number one. I'll just have two more. That's fine. Yeah. As we have mentioned in our investor presentation, that the matter as far as Argentina is concerned, it is under arbitration. This is something that will happen in the U.S. In the U.S., generally, arbitration takes about a year, and we are hopeful of getting a response by that time. There have been claims and counterclaims by both parties. We believe our claims are extremely strong, and we have a legal opinion to substantiate that. Matter will be resolved in that period of time. As far as the related party receivables against the sale of plant is concerned. We believe that the plant is just in the final stages of commissioning. We believe that we should be able to have this somewhere towards the end of this year. Got it. This is the scale of plant of. This is our estimate at the moment, yes. Got it. This is scale of plant of the related party itself, right? Yes. The plant that we are making. Understood. Essentially, hopefully by March 2022 is when we'll get recovery of this INR 102 crore. That's right. Fair enough. In your commentary as well as in your presentation, you've touched upon the negative working capital. Correct. Which is excellent. You did touch upon some delay in payment to vendors. Right. Was this on a contractual basis or was this for any other reason? It was a mix of contractual as well as cash flow issues. Right now, the overdue vendors would be in the region of about INR 200 crore-INR 250 crore. Even after that, you would see that the working capital would still continue to be negative. Yes. Got it. We've paid off the overdue vendors now or do we continue with the cycle? We paid off about INR 50 crore of those vendors in the previous month, and we are looking at liquidating them as soon as possible. Interesting. One more question was on our term loans. We've brought it down very strongly, and we have about INR 64 crore, you mentioned INR 24 crore in Q2 and INR 40 crore in Q3. Do we plan to refinance these or just pay them off and be zero term loans? It depends on a combination of how soon the promoter inflow is coming, last date of which is September 30th. Yes. Whether we have operational cash flows to take care of it. In the absence of which, of course, there could be ways and means to do a bridge refinance till such time as it is completely closed. Understood, Bahadur. Sorry, one last question from my end, and then I'll just get off. In the solar module piece, you mentioned that this has resulted in an overall increase in an estimated cost of projects by $ 21 million. Is that the margin hit that we expect to flow through by the end of this year, this $21 million? A major part of it has already been taken in the previous year. Okay. The balance is what has suppressed the margin over the existing contracts. Of course, as we said, we have received a substantial amount of variation also from the customer to compensate us for this. Got it. Broadly, can we say about two-thirds was booked last year and one-third is left? No, not really. It would be closer to half and half. All right. Got it. Great. Okay, thank you so much. Thank you very much. Thank you. Thank you very much. Ladies and gentlemen, that would be the last question for today. I will now hand the conference over to Mr. Amit Jain for closing comments. We would like to again thank everyone for joining this call and for your continued support all this while. We hope we have been able to address all your queries. For any further information, kindly get in touch with Mr. Vishal Jain, our Strategic Growth Advisors, our investor relation advisors. Thank you once again. Have a great day. Bye. Thank you very much. On behalf of Sterling and Wilson Solar Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you. Thank you.