ReNew Energy Global - Earnings Call - Q1 2026

Transcript

Speaker 2

Good morning, everyone, and thank you for joining us. We put out a press release announcing results for the fiscal 2026 first quarter ended June 30, 2025, last night. A copy of the press release and the earnings presentation is available in the Investor Relations section on ReNew's website at www.renew.com. With me today are Sumant Sinha, our Founder, Chairman, and CEO; Kailash Vaswani, our CFO; and Vaishali Nigam Sinha, Co-Founder and Chairperson of Sustainability. After the prepared remarks, which we expect will take about 30 minutes, we will open the call for questions. Please note that our safe harbor statements are contained within our press release, presentation materials, and materials available on our website. These statements are important and integral to all our remarks. There are risks and uncertainties that could cause our results to differ materially from those expressed, furnished, or implied by such forward-looking statements.

We encourage you to review the press release we furnish in our Form 6K and the presentation on our website for a more complete description. Also contained in our press release, presentation materials, and annual report are certain non-IFRS measures that we reconcile to the most comparable IFRS measures. These reconciliations are also available on our website in the press release, presentation materials, and our annual report. It's now my pleasure to hand it over to our CEO, Sumant Sinha.

Speaker 1

Yeah, thank you, Anunay. Good morning, good afternoon, good evening, everyone, and glad to have you all on our earnings call for the first quarter of fiscal 2026. We continue to pursue excellence, and our vision is to be a global leader in clean energy. We recently filed our 20F and our second integrated report, highlighting our unwavering commitment to transparency and sustainability. As we look at the year ahead, we are leaving no stone unturned to outperform over previous years. While there will always be factors that are beyond our control, our focus towards improving margins and capital discipline will continue to create shareholder value. Some of the investments we have made over the past few years, such as our manufacturing business, have started bearing fruit for us.

Turning to highlights for the quarter, since July of last year, we have commissioned around 2.25 GW of renewable energy capacity, marking a 23% growth in our portfolio after adjusting for asset sales. We also continue to expand our committed portfolio and have signed PPAs for 3.7 GW of installed renewable energy capacity for projects that should provide returns towards the higher end of our targeted IRR range, if not better. We reiterate our fiscal 2026 megawatt guidance to remain on track to complete construction of 1.6 to 2.4 GW of capacity in fiscal 2026. In fiscal 2026, we also expect several of the unsigned PPAs to be signed, providing us with an even clearer path beyond the current 18.2 GW of committed portfolio, along with clarity on execution timelines.

We will continue to be disciplined and highly selective in our approach towards bidding for future growth and will look to secure projects with a lower risk and higher return profile. Turning to our financial highlights, we demonstrated superior performance this quarter, delivering an adjusted EBITDA of INR 27.2 billion, which is a 43% growth year over year. In the first quarter of fiscal 2026, we have a profit after tax of INR 5.1 billion, higher than the profit for the full fiscal 2025. We have also meaningfully improved our leverage metrics for operational projects, and we reaffirm our fiscal 2026 guidance. Our manufacturing business, comprising of an operational capacity of 6.4 GW of modules and 2.5 GW of cells, is fully stabilized and produced 900 MW of modules and 400 MW of cells in this quarter.

Manufacturing also made a meaningful contribution of Rs. INR 5.3 billion towards adjusted EBITDA for the quarter, and we are revising our fiscal 2026 adjusted EBITDA guidance from the manufacturing business upwards to INR 8 to 10 billion. We're also steadfast in our ESG commitments, and the second edition of our integrated report is a testament to the standards we hold ourselves to. To name a few, during the year, we successfully reduced our scope 1 and 2 emissions by 18.2% from the fiscal 2022 baseline, surpassing our target of 12.6%, and saved 514,372 cubic meters of water, marking a 51% improvement. Turning to page nine, execution is our topmost priority and a key differentiator for us.

We have commissioned over two and a quarter gigawatts of capacity over the last 12 months or so, and reiterate our guidance to complete the construction of 1.6 to 2.4 gigawatts in fiscal 2026. Year to date, we have commissioned more than 700 megawatts, which is split into more than 650 megawatts of solar capacity and about 50 megawatts of wind. In addition, we have commissioned over 500 megawatts of wind and about 300 megawatts of solar that have already been erected and will enable us to hit our construction targets for this year. We also continue to be optimistic about signing PPAs from our current pipeline in the current fiscal year. Turning to page 10, our solar manufacturing facilities are fully ramped up and currently producing over 10 megawatts of modules and 5 megawatts of cells on a daily basis.

In the first quarter of this year, we produced over 900 megawatts of modules, operating at high utilization and efficiency levels. We have current third-party orders to sell approximately 800 megawatts more this fiscal, with close to 1.9 gigawatts already delivered till date. Earlier this year, in May, we secured a marquee investment from British International Investments for over $100 million for an approximate 10% stake in the solar manufacturing business, and we expect the transaction to close by the end of the second quarter of fiscal 2026. Along with this, we are pleased to say that the construction on our new 4-gigawatt TOPCon cell facility is well underway, with land acquisition completed and civil works already having been started. Our manufacturing business has started contributing meaningfully to the consolidated P&L by delivering an adjusted EBITDA of INR 5.3 billion this quarter at a margin of over 40%.

The EBITDA contribution in this quarter was a bit higher than normal, as most of the production went towards external sales, the proportion of which might decline somewhat in the next few quarters. In addition, the margins were slightly higher due to some cost advantages and some procurement ahead of time, which may normalize to some extent. Now, let me hand it over to Kailash to talk more about the finance highlights.

Speaker 0

Thanks, Sumant. Turning to page 12, we continue to deliver consistent growth across all our performance indicators. Since the same time last year, we have constructed over 2.2 GW of projects, a 23% increase in operating capacity after adjusting for the 600 MW sold during the trailing 12 months. Our cost optimization initiatives continue to help us, with EBITDA margins in the IPP business improving from 80.7% to almost 82%. Our profit after tax stands at 13 times compared to Q1 FY25, largely driven by increase in megawatts, higher PLFs that we got quarter on year on year, meaningful contribution from the manufacturing business, as well as our cost optimization measures. Turning to page 13 and the EBITDA work, we saw subdued solar PLFs this quarter due to low irradiation from the early onset of monsoons.

However, higher wind PLFs made up for the loss from solar, resulting in a net positive impact of INR 1.4 billion on EBITDA year over year. The new projects that we commissioned over the last 12 months contributed INR 1.8 billion to our EBITDA, while the manufacturing business came in at INR 5.3 billion. Over the past year, we have sold over 600 MW of solar assets, as well as a transmission line, due to which we have lost close to INR 300 million of EBITDA for this quarter. Leverage at the operating asset level continues to be well below the 6x threshold that we have set. On a trailing 12-month basis, the leverage was around 5.7 times EBITDA, excluding our under-construction portfolio and the convertible debt contribution from our JV partners. The cash flow from our manufacturing business has also contributed meaningfully towards reduction in our leverage levels.

As we continue to grow our portfolio, the proportion of under-construction projects as a percentage of overall portfolio should come down and will improve the ratios in addition to our efforts to be disciplined in our approach towards capital deployment. Just to update on the offer from the consortium, we announced ReNew had received a final revised non-binding offer at $8 on 3rd of July. Discussions between the consortium and the special committee are ongoing, and the special committee has indicated an update will be provided to the shareholders no later than 30th September 2025. Let me now hand it over to Vaishali for comments on ESG.

Speaker 3

Thank you, Kailash. Now turning to page 15, I'm delighted that we released ReNew's second annual integrated report for fiscal year 2025. This affirms our commitment to transparency, accountability, and leadership in ESG reporting. Building on the strong foundation of our inaugural edition, the FY25 report set new benchmarks in our ESG vision, performance, and disclosure. The report has been crafted in alignment with IIRC, GRI, SATC, IFRS F2, UNGC, among other global reporting frameworks. There are significant enhancements over the previous year's report, including the integration of the Business Responsibility and Sustainability Report, which is referred to as the BRSR framework, to align with Indian regulatory requirements, strengthened interlinkages between financial and non-financial indicators, and a deeper articulation of the interplay amongst the six capitals, namely financial, manufacturing, natural, social, relationship, and intellectual capital.

There is an innovative introduction of an AI chatbot for seamless navigation and learning more about the integrated report, positioning the fiscal year 2025 report as a first-of-its-kind smart report. The financial and the non-financial parameters for FY24-25 have been externally assured by S.R. Batliboi & Company LLP and EY, respectively. ReNew's FY25 ESG performance highlights. In FY24-25, ReNew has made significant strides in its ESG efforts, showcasing a strong commitment to safety, sustainability, and social responsibility. Environment, we successfully reduced our scope 1 and 2 emissions by 18.2% from the FY22 baseline, surpassing our target of 12.6%, and saved 540,372 cubic meters of water, marking a 51% improvement. Our operations saw 76% of electricity from clean sources, exceeding our 2025 target of 50%, and we achieved carbon neutrality for scope 1 and 2 emissions for the fifth consecutive year.

On the social front, through our socioeconomic programs, we have positively impacted over 1.7 million lives, with a CSR spend of INR 320 million this year. Our workforce today reflects a 16% gender diversity rate, with women now representing approximately 12% of STEM roles. We achieved a lost time injury frequency rate, LTIFR, of 0.21, a 5% reduction from previous year, and for the second consecutive year as well. 100% of our critical suppliers were assessed against ESG criteria, which is a big step towards our supply chain commitment. Governance, our board composition reflects our commitment to diversity and independence, with women making up 40% and independent directors comprising 60% of the board. On page 16, we highlight the key value additions we have made with this year's annual integrated report.

Our key value addition this year is our voluntary alignment with BRSR, as I mentioned, India's sustainability reporting framework, underscoring our dedication to enhancing ESG transparency in line with national and global expectations. For the first time also, we have mapped material ESG issues to our Enterprise Risk Management Framework, marking a significant step towards embedding sustainability into our enterprise-wide risk strategy. We have also included a detailed progress showcase against our firm-wide sustainability targets, reinforcing accountability and our commitment to delivery. Additionally, we have expanded our DCOB strategy to cover manufacturing operations and continued our alignment with the EU taxonomy. Now, turning to page 17, we review the progress made across our ESG targets. We remain committed to our overall sustainability target.

We completed the LCA, which is the life cycle assessment of a manufacturing solar module in Jaipur, and published a verified EPD, which is the Environmental Product Declaration under the International EPD system. Additionally, two of our sites are now certified as water positive for operational water at Verniti IOB's water neutrality standard for Indian industry. Social responsibility is core to our mission. We have already impacted over 1.7 million lives, aiming for 2.5 million by 2030. We are on track. We have partnered with IIT and ISM Dhanbad to upskill coal mine workers in green technology. Our CDPA rating for supply engagement reflects our leadership in value chain sustainability. As we move forward, we remain dedicated to embedding resilience, responsibility, and impact into everything we do. I will now turn it over to Kailash.

Speaker 1

Thank you, Vaishali. Turning to the guidance for the fiscal year ended March 31, 2026, we reiterate our guidance provided earlier. We expect to be at the higher end of the adjusted EBITDA range of INR 87 to 93 billion if the weather stays on track for the rest of the year and the asset sales sacrifice in line with our expectations. We also continue to expect to construct 1.6 to 2.4 GW of projects during the year and generate cash flow to equity of INR 14 to 17 billion. During the year so far, while we saw a positive impact versus last year in Q1, as far as weather is concerned, we have subsequently seen a slight underperformance both on wind and solar, taking away most of our weather upside during the first quarter.

We have increased the range of EBITDA contribution from our manufacturing business to INR 8 to 10 billion, given the performance in the first quarter. With that, we'll be happy to take any questions.

Speaker 4

Thank you. If you wish to ask a question, please press star, then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star, then two. If you are on a speakerphone, please pick up the handset to ask your question. Our first question will come from Justin Lars Clare with ROTH Capital Partners. Please go ahead.

Yeah, thanks for the time here. I first wanted to just start out on the manufacturing business here. You had indicated in your prepared remarks that the production volume went primarily to external sales in fiscal Q1, and it sounds like we could see a decline in the volumes in the coming quarters. I am just wondering if you could share how many megawatts were delivered in fiscal Q1, and if you could share how many megawatts you plan to deliver in the remaining quarters in fiscal 2026. I know you have an 800-megawatt backlog, but I am also wondering if you anticipate booking additional volumes with expected delivery in fiscal 2026.

Speaker 1

Yeah, I'd like to take that.

Yeah. Hi, Justin. Thanks for your question. Just to answer it, in Q1 fiscal 2026, we sold almost close to 700 megawatts of modules to third parties, and the balance was basically used for our internal consumption. Largely, the profit and the margins come from our cell business, which is predominantly third-party focused. In that, we sold almost 142 megawatts of direct sales of cells to third party. There was some upside, which was related to that. Got it. Okay. Could you talk about expectations through the back half of the year? Do you think you could sell or book more for this year for delivery, or have you essentially reached your capacity for the year? How should we think about that?

The reason for us revising our guidance on the EBITDA contribution from manufacturing business is that we continue to see a contribution of third-party sales through the remaining part of the year also. How much to the extent that'll happen is something that we will get to know as we progress through the course of the year. Right now, we have reasonable visibility to the guidance that we've given.

Got it. Okay. Just wondering if you could update us on the attractiveness of the bidding environment that you see currently. How is that evolving? Are there any particular areas that you see as being particularly attractive right now? Just how active do you plan to be in fiscal 2026 through the balance of the year when you're looking at new projects here?

Yeah. I would say that the bidding environment is continuing on a steady basis. The government has this target to get up to 500 GW by 2030. They are looking to auction out 50 to 70 GW every year. In line with whatever projects are being auctioned, we do participate in them. I would say that our win ratio has been a little bit lower compared to, say, fiscal 2024 and also 2025 because the competition has become a little bit, I would say, irrational to some extent. We are seeing people really going with much lower return expectations. We have a very disciplined approach when it comes to bidding, as we have demonstrated over the last many years. Unless we make our required rate of return, which is our hurdle rate, we are happy to not win any capacity.

I would say that we have also a very good pipeline that we are sitting on, so there is no urgency for us to really add capacity at lower returns.

Got it. Okay. Appreciate it. Thanks.

Thank you.

Speaker 4

The next question will come from Nikhil Nigania with Sanford C. Bernstein & Co. Please go ahead.

Speaker 1

Thanks for taking my question. Good to see the numbers and the strategy play out of focusing on manufacturing and battery over pump storage. My first question is on renewable execution. The numbers have been good, but just wanted some, if you could share some color on the key issues which others and possibly the sector is facing, whether it's grid availability, right-of-way issues, and transformer shortages. How is that landscape shaping up?

Speaker 2

Let me take that. Sorry. Kailash, go ahead.

Speaker 1

Go ahead, Sumant.

Speaker 2

Okay. No, look, I think that capacity addition is by and large going at a reasonable pace, I would say. There are occasional shortages, not shortages as much as delays on some of the transmission infrastructure that sometimes lags generation capacity is getting put up. It's a few months here and there. It's not something more substantial than that. As for transformer shortages, you know, it's usually if you are relatively good about ordering in advance, which we tend to do, then, you know, that's something that you can work around. I think it's not something that is holding back execution. I think what tends to hold back execution is these usual issues around land acquisition and so on, more than anything else.

Speaker 1

Understood. I remember your earlier statement, I think a couple of calls back, specifically on wind, you said you'd be surprised to see India do more than 5 GW of wind a year, given the challenges that come along land or evacuation. Would you still hold the same views, or do you see that front improving as well?

Speaker 2

Even if you do more than 5, it may be a little bit more. I don't see that number being exceeded this year, by the way. Maybe in future years, if there are more people doing wind projects, the number goes up by a little bit. I don't see it getting to 10 GW or a number of that nature. Maybe 5 would go to 6 or something. Last year, for example, we saw only about 4 GW going down. Maybe this year it'll be 5. Maybe in future years, it'll be around the same is my sense.

Speaker 1

Got it. My second question then is in the solar manufacturing business, which seems to be doing very well. I was surprised to see a 0.8 GW TOPCon cell facility. I thought the entire 2.4 was mono PERC. If you could give some color on that and if there are plans to convert the entire facility to TOPCon going forward.

Speaker 2

No, so Nikhil, that 2.4 is actually mono PERC. I think if we gave the impression that it was 800 megawatts of TOPCon, that is not the case. The whole current facility is mono PERC. The new facility that we are setting up, the entire new 4 gigawatts, that is a TOPCon facility. Now, as far as modules are concerned, by the way, in modules, by the way, there's a 4 gigawatt. That entire Jaipur plant is converted to TOPCon modules.

Speaker 1

Got it. Understood. I think I did it wrong. Appreciate that. Any plans on ingress vapor as some of your peers are doing, or?

Speaker 2

I think we are going to follow government lead in that matter. As you know, the government policy has been really the one that has been driving implementation of manufacturing capacities. At this point, we'll have to wait and see whether they come up with an equivalent of LMM for vapors or not, or they start giving us that indication. At this point, those conversations haven't yet got to a point where we can be comfortable to set up anything on the vapor side. Should that come into place, then yes, for sure, we'll think about vapors as well.

Speaker 1

Got it. I understand that. One last question I had was on the recent ammonia tenders which happened. If you could share some color, did ReNew participate or were the bids just too aggressive for it to make sense for ReNew?

Speaker 2

Yeah, you know, we did not participate for the reason that we felt that those contracts were not appropriately structured. First of all, they are only 10-year PPAs or green ammonia purchase contracts. We felt that was just too short. What happens to your entire plant after 10 years? It was not something that was clear. The second thing is there are some structural other issues with those contracts, like there is no change in law pass-through, for example, and so on. Therefore, we decided not to participate in that tender, actually, because again, as Kailash Vaswani said earlier, you know, we're not sitting in a situation where we need to participate in any new bids desperately. We can be very selective about the quality of the bids that we win and the returns that we win them at.

Our view was that the green ammonia tender was just not structured appropriately. That's why we did not participate. Secondly, if you see some of the tariffs that people have wanted, those also seem actually quite low, especially given all the risks involved and the informalities of the contracting involved in that case.

Speaker 1

Great. I think I appreciate the color. Thank you so much. Those were my questions.

Speaker 4

Again, if you have a question, please press star, then one. There are no further questions at this time. I would like to conclude the question and answer session as well as our conference call for today. Thank you for your participation, and you may now disconnect.