Ladies and gentlemen, good day, and welcome to the Investor Analyst Conference Call, hosted by Torrent Power Limited, to update on the acquisition of Nabha Power Limited, announced today. 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 and then zero on your touchtone phone. On the call, we have the management team of the company, represented by Mr. Jigish Mehta, Whole-time Director, Generation, and Mr. Saurabh Mashruwala, Executive Director and CFO. I now hand the conference over to Mr. Saurabh Mashruwala, CFO. Thank you, and over to you, sir. Thank you so much. Good evening, everyone, and thank you for joining the call. As communicated earlier today, we have entered into a definitive agreement with L&T to acquire 100% of equity stakes and convertible instruments in Nabha Power projects. Nabha Power operates 1.4 GW supercritical coal-based power plant located at Rajpura, Punjab. The enterprise value net of cash for the transaction is approximately INR 6,889 crore, comprising of three components. First, INR 3,661 crore of equity and convertible instruments, INR 495 crore for repayment of the promoter's loans, and INR 2,733 crore of net debt. The transaction is based on lock box date of 31 March 2025, with customary closing adjustments at the time of consummation. It is expected to be consummated by Q1 of FY 2027, subject to necessary regulatory approvals. For FY 2025, the company reported an adjusted EBITDA of INR 1,153 crore, adjusted for the lease accounting, implying an EV/EBITDA multiple of 5.97x, and as per the per megawatt cost of INR 4.92 crore. Now, let me give you the brief on the some basic parameters of the acquisition. First, company operates 1,400 MW coal-based power plant, which is fully tied up to 25 years PPA under Case 2 competitive bidding guidelines, and has been operational for more than 12 years, with balance life 13 years. PPA allows for further extension based on the mutual discussions. Second, PPA is two-part tariff mechanism, comprising of, first, a fixed capacity charges payable based on the plant availability, irrespective of the demand scheduling. The second, variable charges linked to actual landed cost, coal cost, and normative operating parameters. Third, over the last three years, plant has demonstrated strong operational performance, with availability consistently above 90%, auxiliary consumption maintained at or below 4.6%, and station heat rate maintained well below the CERC recommended level of 2.59 kcal/kWh. Acquisition adds high quality, best-in-class, and established operating assets in our portfolio, supported by fully contracted cash flows and strong operating track record. It's expected to be EPS accretive from day one. The acquisitions allow us to extend our footprint without introduction of execution complexity and accelerating our growth in the thermal sector. With this addition, our operating capacity has increased from 5 GW to 6.4 GW, and is aligned with our philosophy of having stable cash flows, accretive equity returns with minimum risk. We expect the asset to deliver more than mid-teen IRRs, with certain upsides not considered, such as there are four, five upsides which have not been considered. First, further expansion of 800 MW, for which certain infrastructure is already available, and land is also available for the expansion. Second, higher O&M expenses has been considered compared to the historical average. Third, higher SHR degradation considered compared to the historical average. Fourth, lower realization from the fly ash assets. The fifth is higher interest rate assumed compared to our current average cost of borrowing of Torrent Power. This concludes my remarks. I request the coordinator to open the line for the Q&A session. Thank you so much. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one. Our first question comes from the line of Sumit Kishore from Axis Capital. Please go ahead. Good evening, Saurabh. My compliments on this acquisition. My first question is, could you speak about the residual PPA life for the project, and your assessment of the residual useful life of the project, as well as what you intend to do after the signed PPA term gets over? That's my first question. So, Sumit, thank you so much. So PPA life is 25 years, which is a fully contracted basis with the Punjab State DISCOM. Out of this 25, 25 years, twelve years is already over, and 13 years is yet to go. And as you know, the plant is, it's, manufactured by the Japanese technology and built by the, which was, L&T. It's a very good plant... technically very sound plant, very good plant, and we expect, beyond PPL, PPA, it, at least it will run more than 10-15 years, I would say. Okay. So maybe 12-13 years, 12 years of residual, 13 years of residual PPA period, plus another 10-15 years of useful life. 10-15 years it can easily run because of the good technology, supercritical plant. It's a good machinery also. So while this is still quite some time away, post the 13-year residual PPA period, should we assume that on mutual agreement, you will continue to operate that plant, you know, with Punjab being the off-taker, but or on a on a on the similar tariff, or would you have some other plan? No, tariff needs to be negotiated by the end of the PPA. But we expect the tariff will be competitive, I would say. And if you look at the MOD, basically, merit order dispatch, this plant ranks high on the ranking, basically. And you know, and as well, Punjab is only seeing the electricity growth rate of 5%-6%. Considering all things, so we expect that the demand of the energy will continue in Punjab. And based on the current rankings high on merit order dispatch, we expect that we can able to get the expansion also from the Punjab discom. Makes sense. Just one accounting question. In terms of the adjusted revenue of INR 4,866 crore that you have reported in your presentation, versus the Nabha Power reported revenue of somewhere around INR 4,400+ crore. So if you can help us bridge the difference as to what you know restatements have you made to arrive at the- About INR 450 crore restatement is required because, because of the lower revenue, the-- because the lease accounting, lower revenue is accounted, basically, as compared with the actual cash flows. If you look at the cash flow statement of Nabha Power as of March 2025, so you can see the operating cash flow of INR 1,500 crore, against the reported EBITDA, I would say, is about INR 1,050 crore. So, without working capital adjustment, I would say the INR 450 crore is the incremental cash flows we expect from this power project, as compared to the reported numbers. Okay. So what was the operating cash flow in FY 2024-2025 for Nabha Power? So cash flow reported about INR 1,500 crore operating cash flows. In 2025, 1,524 it was around INR 1,350 crore. Okay. So operating cash flow will be better than the reported numbers, reported P&L numbers. So just one to understand, the EBITDA number that you've given for FY 2025 is INR 1,153 crore, and operating cash flow is INR 1,500 crore. So are there some, you know, was there accumulated working capital that got released, because of which operating cash flow was higher than EBITDA? Yes. Yes, yes, that could be the reason. Yes. Okay. Okay. So what is the accumulated working capital in Nabha right now, in terms of number of days of revenue or whichever way you want to sort of- Net current, as said, net current is about INR 700 crore. INR 700 crore. Yes. -on a revenue base, on a revenue base of INR 4,866 crore. So, okay. Absolutely, absolutely. INR 4,600 crore, I would say. 600. Okay. Yeah. I think, what are the expansion opportunities that you sort of hinted at, and what kind of capital commitments you would look to make, to that expansion, if at all, over the next few years? One more unit is possible. The land is available around infrastructure. Infrastructure is also available, so one more unit is possible. But it's we have to take over the plant, and then we have to see how we can able to expand the more, one more unit. But one more unit expansion is possible at this particular site. Okay. Just last question, your thoughts on what your consolidated leverage level looks like on a pro forma basis after you absorb this acquisition, and basis the CapEx that you have over the next couple of years, how does the, you know, leverage look? It will add about INR 7,000 crore, INR 6,000 crore debt to our current power balance sheet. At the same time, NPL, Nabha net worth is also available. It is about INR 5,000 crore, I would say. So... Sumit, on a net debt to EBITDA basis, it comes at around INR 6,000 crore divided by INR 1,100 crore, is the net debt number. Okay, net debt to- It's five, 5.5. It's five, 5.5 at the start. And if I look at my overall projections going forward, I think we are comfortable in terms of net debt to EBITDA numbers are concerned for next five-six years. Because all those investments which we are making in thermal, renewable, and pump storage, they will be over a period of time. So- Yeah. The good part is that it is also coming with significant EBITDA, right from day one. Yeah. Yeah, so it will be ROE attractive from day one, because it's not highly level, so it will be ROE attractive as well. Is that right? Yeah. Yeah. Okay. Thank you so much. I have taken too much time. Thank you so much. Thanks. Thank you. Thank you, Sumit. Thank you. A reminder to all the participants, you may press star and then one to ask a question. Our next question comes from the line of Atul Tiwari from JP Morgan. Please go ahead. Yeah, so thanks a lot, and congratulations on the acquisition. So my first question is, in FY 2025, what was the fixed charge in the tariffs, and what was the actual fuel cost? Because I believe, obviously, coal has to be hauled over long distances here. So fixed charge, capacity charge, I would say, would be about INR 1,400 crore. Per unit, sir? INR 1,400 crore. Per unit. Per unit, it is about INR 1.49. Capacity charge. Okay. Capacity charge. And the variable cost will be about INR 3.28, kind of a thing. Okay. And the variable cost, there was no under recovery based on that number, right? You were able to recover the actual- Yeah. fuel cost on a landing basis. Yeah, it is completely passed, so it is recoverable- fully recoverable. Okay. So this INR 1.49 capacity charge in FY 2025, so what does this number become in FY 2030 and 2035, in the, as per the, you know, PPA? It will be about, one rupees, forty-one paisa, kind of thing. Not materially different, I would say. Okay, so not much decline. So the decline is very less. Okay, so that's good to know. Okay. Yeah. So, these were the two questions that I had. Thanks a lot for your time. Thank you so much. Thank you. Thank you. Participants, you may press Star and then one to ask a question. Our next question comes on the line of Anuj Upadhyay from Investec. Please go ahead. Mr. Anuj Upadhyay Yeah, hi. Thanks for the opportunity. Yeah, Anuj. Yeah, hi. Yeah, so, so there was an agreement between the Punjab government and the Nabha Power to set up certain, green energy projects as well, which I believe falls under the same, SPV, which we have taken over. So would... We will be continuing with the, the green capacity addition, or it would, continue to be under the L&T part? Just for a clarification on this thing. As of now, no such agreement, I would say. Okay. Yeah. Okay. So nothing on the brown field side, on the green energy side. So just, sort of, just to add to this, I think it was more of a statement between the, I mean, by the Punjab administration, rather than any such agreement. So there is no such agreement. Okay. Okay, fair point. Fair point, sir. Thanks for this. Thank you. The next question comes from the line of Aniket Mittal from SBI Mutual Fund. Please go ahead. Thank you. I joined the call a bit late, so apologies, if any questions are repeated. Just to understand on the, on the adjusted EBITDA part, when I look at the P&L, the EBITDA number over there is a bit low. But I do see certain amount that is flowing into the cash flow, which seems to be some sort of capital cost recovery. If you could just help bridge that gap for me. I mean, you know, why is the number in the P&L lower? What is exactly flowing into the cash flow that doesn't seem to be flowing into the P&L? The main difference is the lease accounting, which they have adopted since the start of the plant. Because of the lease accounting, we have to amortize the capacity charges over a period of lease, over a 25-year PPA period. Because of the accounting thing, we are able to report about INR 450 crore of lower revenue as compared with the actual cash flows. There is a difference. Adjusted EBITDA and as well as cash flow will be higher than the reported numbers by INR 450 crore. By 250, okay. So on an average, if I look at FY 2025, there seems to be some, you know, one-off because of certain fixed deposits that have been redeemed. But roughly INR 1,100 crore is like a fair cash flow from operations that this plant should throw. Is that a fair understanding? Yeah, yeah. Yes. How does that number, you know, sort of progress, let's say, over a period of time? Let's say if I look at FY 2030, FY 2035, given the capacity charge, I guess, will move downwards. What's the steady state view? Yeah, as I explained earlier, the current capacity charge is INR 1.49. Going forward, it will be around the level of 1.42-1.43. So maybe reduction of about 5-6 paisa, and energy cost, which means fully recovered. There won't be any material impact as compared to what is, what currently we are reporting. Got it. And are there any, you know, maintenance CapEx related costs that you envisage for the plant? What would be the annual- Not, not materially. Not materially. Okay. Yeah. The other thing that I noticed in the P&L, that there's no tax being paid. It seems that there are certain tax benefits that one can still avail. Could you provide some light on that? What's the tax holiday period that can look like over here? So maybe... They may have MAT credits available. So if they have MAT credits, they are under MAT right now. So their MAT credits will be available for the use going forward. Okay. And till what time could this be available? Like, if you would tell me. Our expectation is that they are able to use MAT credit by next two, three years, I would say three years. Next three years. Fair. I had, you know, one more question to understand. So when I look at, I look at the EV that's been, you know, of the transaction that has been reported, the net debt number that has been reported is of March 2025 end. I just wanted to understand, what would be the current net debt number over there, and, like, is the transaction based on the EV value or the, or irrespective of the net debt, it's the equity amount of INR 4,100 crore that you'll pay? Just for clarification. The equity value. Sorry. And what would be the current net debt over there? Would you be able to? Net debt will be lower. March number was, net debt was INR 2,738 crore. It is lower than the current number, deliberately. March 2025 numbers, because there's some repayment has happened over the course of nine months. Right. Okay. Just another aspect, you, you mentioned that, you know, this transaction would be funded through, through debt. What's the average borrowing cost that one should assume? Average borrowing cost, current borrowing cost is about 8.5%, and Torrent Power average borrowing cost is about 8%. So that is what we look to manage the borrowing Torrent Power borrowing cost going forward. Okay. We got that. Got it. Thank you. Thank you. Before we take the next question, a reminder to all the participants, you may press Star and then One to ask a question. Our next question comes from the line of Bharanid har from Avendus Spark. Please go ahead. Yeah, good evening. Am I audible? Yes, yes. Okay. So, to clarify, the EV of INR 6,900 crore, that is at the end of FY 2025, would be paid from totally debt from our director. We'll take new debt. Is that the right understanding? Bharani, if you look at it, we are supposed to pay INR 3,660 crores as equity value, and around INR 500 crore would be infused in the SPV for repayment of promoter loan from there. Total net outflow from Torrent would be around INR 4,000 crore-INR 4,100 crore. Balance is the debt, net debt, which is there at the SPV. Which will add to the debt that we will have. That's right. So- That is. Yeah, that's what. What I meant was INR 4,100 crore incremental debt we will take, plus whatever debt is coming from them will get added. So INR 6,900 crore. Yeah. of debt will be added to our consolidated numbers from FY 2027. Yeah, yeah. Yeah. Yeah. Okay. Second question is this, EBITDA, there are three numbers, 1, the P&L EBITDA of around INR 750 crore, and then the adjusted number you are telling it is INR 1,153 crore, and then the OCF, OCF of INR 1,500. So what will actually be our accounting policy? Will it include the lease accounting? If not, how much actually would be the expected EBITDA accretion that will happen? No, no. See, as per the reported EBITDA, it is, 755 crores, because traditionally, we are following the lease accounting. So that numbers of FY 2025 will remain there. But in terms of cash flows, because there is a contract with cash flows, two-part tariff available, cash flows will be higher by 450 crores, because of the principal repayment, is going to come, basically. So cash flow will be higher by 450 crores. Okay. Operating cash flow. So in other words, okay, go on. Please go on. Operating cash flow include the working capital adjustment also, but in terms of EBITDA, it will be INR 1,150 crore. So, this operating cash flow adjustment due to working capital, is it, will it continue for the next, how many years? It is under working capital adjustment, actual working capital adjustment. No, no, so Bharani, I think what we are discussing here is that the reported number is based on lease accounting, which is lower by INR 450 crore, if we had to follow the normal accounting practice. Now, if you want to tally that INR 450 crore, if you look at the cash flow of FY 2025, there is a line item which says that INR 458 crore because of lease impact accounting. And if you look at the cash flow from operations from that cash flow, it is INR 1,500 crore. So Saurabh bhai was referring to that number. Understood. So, to rephrase again, when we are consolidating, there will be INR 750 crore odd at our end also, at the P&L level, but actually the EBITDA is around INR 1,150 crore. That's right. Yes. Cash flow will be much better than the reported number. That I understand. Correct. Next question is, the fact that, sometime back, there was a dispute between the client and the NPL. This was regarding, coal transportation charges, import of coal charges, et cetera. Have all those been closed? And would we get all types of variable cost pass-through from our side going forward? Jigish, can you respond? So basically, the thing is that while we had done, I mean, this transaction, we have mainly- I mean, taken care of it, that all the ongoing issues which were there are closed, or if the ones that are not closed, they are appropriately, taken care of or ring-fenced. So as such, no major issues are there. Some certain regulatory issues are there, which have been appropriately accounted while we were doing our assumptions. Okay. So, to rephrase, all the actual fuel costs, including cost of coal from SECL and transportation costs, all that will be passed on? There must be, but, I mean, a few issues here, we may have to look into that if they are there. But however, the regulatory issues appropriately have been factored. So, could you highlight what are these some few issues? We can do it on a separately, because some of these maybe... Because as of now, we have done it broadly on a major level only. Sure. No problem. My final question is on the improvement in IRRs we highlighted in the opening remarks. Like, of course, you were talking about expanding by one more unit of 700 MW in the future. And there were two, three other points which I missed. I, you know, one was related to higher interest rate of L&T, but when we take it up, it will be lower. That I understood. I think two more points were mentioned. Can you repeat that? And- Yeah, I get it. because I missed it. Yeah. I get it. So basically, we have budget, we have considered a higher O&M, higher O&M expense as compared to actual O&M expense, which has happened last 2-3 years. So that cushion we are building the our budget allocation projection. So SHR degradation, we have budgeted, which historically, this plant doesn't show any degradation in the SHR. That also we have budgeted in our projections, in our estimations. And we have assumed a lower fly ash income, which is possible to going forward, we can able to get higher fly ash income also. That also, we have budgeted, we have considered lower fly ash income. So those are, these are the upside, which we have not considered in our projections, which can, which may come in going forward. So, to rephrase, because we are conservative, we are assuming more SHR degradation and higher O&M expense, but in reality, we will be spending lesser, so that will result in more cash. Yes. The last thing I didn't clearly understand, lower what income, sir? Lower Fly Ash income? What did you mean? Lower Fly Ash income. Fly Ash income. Okay, you're considering lower fly ash income, but it could actually be higher. Yes, it could be higher, yes. Okay, great. Thank you so much for answering my question. Thank you. Thank you. Participants, you may press star and then one to ask a question. Ladies and gentlemen, if you want... if you are wishing to ask a question, you may press star and then one now. As there are no further questions from the participants... I'm sorry, we have a last-minute registration coming from line of Mr. Anuj Upadhyay from Investec. Please go ahead. Yeah, hi. Thanks for the opportunity again. Just a clarification to the previous participant. The entire INR 6,009 crore of funding would be through debt. Is this what you mentioned, sir? So, yeah, it's a mix of debt and equity, but yes, max higher amount from the debt. Okay. And, in terms of the project valuation or forecasting, 30% should be equity funded, is what we should consider? Anuj, I think it will all depend on when the consummation happens and actually what is the cash flow requirements, but I think major part- Mm. of it would be from debt, debt funded. So here, it, 70/30 rule may not apply. Okay. Okay. Fine. Thanks for the clarification. Thank you. Our next question comes from the line of Satyadeep Jain from Ambit Capital. Please go ahead. Hi, thank you. So just one question on the fly ash income. You're saying there is potential for increase there versus what Nabha was doing. These are typically long-term contracts for fly ash to, you mentioned UltraTech and Ambuja Cement there. So how do you. Just trying to understand, how do you plan to increase it? And maybe is it possible to quantify what are you charging for fly ash right now? What Nabha is charging? So, Satyadeep, quantification would not be possible. What we are trying to say is that there are certain contractual agreements which provides for a higher recovery, but on a conservative side, we have taken some lower recoveries out of that, and that's why we are saying that on a conservative basis, there could be a higher revenue from fly ash disposal. We will not be able to share exact numbers on the contractual basis. So what exactly? I'm not able to understand. The contract allows for higher pricing, but Nabha was charging for. No, no, no. How is that optionality? Because these are typically longer-term contracts. I'll tell you. I'll explain. So basically, the contract allows for certain escalations on a year-on-year basis or on a five-year basis. On our MOD projections and in our model, we have considered lower escalation compared to what the contract provides for. Okay. Okay, understood. So, there is some potential just based on escalation? Yeah. If I understand correctly, it's going to be fly ash income, given typically the contract price for fly ash is not that material in the overall earnings, but I can, I can take it offline this way. Yeah, yeah. Thank you. Thanks. Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Saurabh Mashruwala for closing comments. Thank you, everybody, for joining this Nabha Power call. Thank you so much. Thank you. On behalf of Torrent Power Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.