ReNew Energy Global - Earnings Call - Q4 2025

Transcript

Speaker 1

Thank you for standing by, and welcome to the ReNew Power Q4 and FY2025 earnings call. All participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I will now hand the conference over to Anunay, Head of Investor Relations. Please go ahead.

Speaker 2

Thank you. Good morning, everyone, and thank you for joining us. We put out a press release announcing our results for fiscal 2025 fourth quarter, ending March 31, 2025, today, as well as for the year ending March 31, 2025. A copy of the press release and the earnings presentation are available in the Investor Relations section on our website at www.renew.com. With me today are Sumant Sinha, Founder, Chairman, and CEO of ReNew; Kailash Vaswani, CFO; and Vaishali Nigam Sinha, Co-founder, ReNew, and Chairperson, Sustainability. After the prepared remarks, which we expect will take about half an hour, 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 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, and these reconciliations are also available on our website in the press release, presentation materials, and annual report. It is now my pleasure to hand it over to Sumant. Sumant, please take it away.

Speaker 0

Yeah, thank you, Anunay. Good morning, good afternoon, and good evening, everyone. I'm glad to have all of you on our earnings call for the fourth quarter of fiscal 2025. We have concluded fiscal year 2025 with significant achievements, and the outlook for the renewable energy sector in India looks extremely promising. In our 15th year, we constructed more megawatts than we have done in the past, taking our total operating megawatts to 11.2 gigawatts, which is a new high for us. This is 17% higher than at the same time last year and 21% if we compare on a like-for-like basis after excluding asset sales. Since April 2024, we have constructed over 2 gigawatts of RE assets, of which 1.95 gigawatts have already received COD approvals, and another 250 megawatts should receive them shortly.

Not only this, but we also continue to extend our contracted portfolio by adding new bids and signing new PPAs. Our contracted portfolio now stands at 18.5 gigawatts, along with 1.1 gigawatt hours of BESS, which is additional to the 18.5. This is 18% higher than at the same time last year. We have added 1.3 gigawatts of PPAs since Q3 fiscal 2025, and have signed PPAs for a healthy 5.3 gigawatts since April 2024, i.e., in the last 12 months of the financial year. In addition, once we include other projects where we have won and not yet signed PPAs, we have a pipeline of over 25 gigawatts of renewable energy and an additional about 3 gigawatt hours of batteries. The macro environment in India remains robust, and with the supply of auctions continuing to be more than 50 gigawatts plus a year, the IRRs remain quite attractive.

In fiscal year 2025, we won 4.8 gigawatts plus 800 megawatt hours of BESS, giving us a 14% market share in the bids that we participated in. Further, our existing solar manufacturing facilities, comprising of 6.4 gigawatts of modules manufacturing and 2.5 gigawatts of cells, are now fully stabilized and at industry-leading efficiency levels and have started contributing to our P&L in a meaningful way. We also have a current external order book of 1.4 gigawatts, in addition to having already supplied 1.3 gigawatts till date in the manufacturing business. I am also pleased to announce that we have secured $100 million in equity funding to expand the existing cell facility by 4 gigawatts more to take it up to 6.5 gigawatts to be in line with our module manufacturing capacity.

This enables us to fully secure our supply chain for solar cells and modules, which is imperative given the ALMM for cells on the import of cells that has been announced. Our broader capital recycling engine is also chugging along, and we have raised $260 million in the last six months, including deals that yet have to close. Turning to our financials, we delivered more than 14% EBITDA growth year-on-year, in spite of a weaker-than-anticipated wind resource. In addition, our cost-saving initiatives are helping us improve margins, with EBITDA margins in our IPP business at almost 83% from a little over 80% last year. Finally, the interest rate environment remains benign, with the RBI having announced rate cuts in the last few months, which are now beginning to be reflected in new greenfield financing.

Our profit before tax for the year is at INR 10 billion, up 23% for the year. We have also delivered a second consecutive year of profit after tax. While the whole world has been in flux due to geopolitical strife, inflation, tariffs, and trade tensions, our business and our outlook have only become stronger. We will continue to work on our strengths and expand our renewable energy footprint in India. On page nine, I wanted to take a minute to highlight our key strengths. As you know, we are a pan-India renewable energy company, and we pride ourselves on executing projects year after year consistently for the past 15 years. We are also present in multiple market segments, therefore reducing our concentration risk, and have a fully integrated business model with project development, EPC, and O&M all in-house, thus reducing costs and giving us better control of our projects.

We also have connectivity for all of our pipeline projects, which is a critical differentiator, and are also judicious with our capital allocation, striving to continuously improve our IRRs. Before jumping into updates from our businesses, let me brief you on some industry updates on page 11 of our presentation. The regulatory and macro environment in India continues to be very supportive as renewable energy continues to see the highest capacity additions amongst all power sources in India and is also the cheapest source of energy as of date. While there has been some softening of demand driven by weather patterns of late, most analysts continue to forecast a sustained increase in energy demand as well as peak demand. The push for indigenization in the supply chain also has continued. While we already had ALMM for modules, this year we also saw ALMM for cells being announced by the government.

This helped firm up our decision to expand the cell capacity by another 4 gigawatts, and the requirement for domestic cells and modules would also help with third-party sales from our manufacturing business. On page 12, as you can see, we continue to see high amounts of renewable energy auctions. The major update this year has been the increasing use of BESS in both complex projects as well as the introduction of standalone solar plus BESS auctions. With the decline in battery prices, we are now seeing a greater percentage of BESS and a lower percentage of wind in the project configuration of complex projects. The percentage of clean vanilla projects was only around 25%, which has been the lowest ever. We also saw a few more hybrid auctions this year as grid operators try to create a balance between various sources of renewable energy.

I expect this to be a temporary phenomenon. However, we will continue to see the use of more auctions where BESS plays a significant role. During the year, we have won around 5 gigawatts in auctions, bringing our total pipeline to over 25 gigawatts, which additionally will also have another 3 gigawatt hours of BESS. As you will recall, we were the first IPP to have commissioned a utility-scale battery energy storage system in India when we executed 150 megawatt hours in our peak power project. PPA execution also remains healthy, where we signed more than 5 gigawatts of PPAs in the last financial year of 2025. Turning to page 13, last year we laid emphasis on execution by commissioning about 1.9 gigawatts. This year we have tried to build on that performance by constructing approximately 2.2 gigawatts of capacity.

While more than 1.9 gigawatts, and when I say this year, I meant FY2025, while more than 1.9 gigawatts have received COD approvals, another 250 megawatts should soon be commissioned. An 18% growth rate over the past five years showcases our consistent performance as well as a strong in-house EPC capacity built over the years. During the year, we also commissioned one of the largest BESS sites in India with 150 megawatt hours, and I'm pleased to inform you that our peak power project is performing in line with the monthly compliance requirements, further solidifying our belief in complex projects. Moving to page 14, we have been disciplined in our capital allocation strategies and have made investment decisions only where the returns are materially above our cost of capital.

We have also recycled a certain portion of our portfolio to further improve returns as well as provide growth capital for our greenfield projects. As part of this, we have sold a 300 megawatt Sekchi solar asset and have signed definitive agreements to sell another 300 megawatt Sekchi solar asset. In our manufacturing business, we recently secured a marquee investment from British International Investment for $100 million for an approximate 10% stake. This investment will provide the necessary equity for expanding our cell facility by another 4 gigawatts. The transaction closure is pending customary approvals from lenders and regulatory authorities. Overall, we have been able to sign agreements for over $260 million in the past six months, taking advantage of the strong investor interest in our projects and our business.

Turning to page 15, our manufacturing facilities are now running at full tilt, producing around a little bit more than 10 megawatts of modules and about 5 megawatts of cells per day. We have supplied total orders of 1.3 gigawatts to date, and our current order book stands at an additional 1.4 gigawatts. External sales contributed around INR 4.2 billion to our consolidated fiscal FY25 EBITDA and around INR 3.6 billion in the last quarter of FY25. With the expansion of the new cell facility, we will be able to fully secure our supply chain up to cells once it starts production in fiscal 2027. Turning to page 16, transmission and land are the critical differentiators to ensure that the projects are delivered on time and the country's renewable energy targets are met.

Beyond our operating portfolio, we have connectivity for an additional 17 plus gigawatts, which fully covers our 25 gigawatt plus pipeline and beyond. Of this, 7.5 gigawatts plus of our interconnection approvals are land-based, which allows us to use them for any projects that we want. We are actively securing land parcels around the highest radiation and strong wind regions. During the year, we added 7.5 gigawatts of new connectivity and have been able to largely secure land for our projects getting executed this year. We will look to further drive home this advantage over the next two to three years by building large land banks along with connectivity. Now, let me turn to Kailash for financing and other highlights. Kailash, over to you. Thanks, Sumant. Now, let me turn to the highlights for the quarter on page 18.

During the fourth quarter, we delivered INR 22.1 billion of adjusted EBITDA, which is 32% higher than last year, driven primarily by cost optimization initiatives, gain on sale of assets, as well as contributions from third-party sales from our manufacturing business. EBITDA margins for our IPP business improved by more than 250 basis points, driven by tighter cost control. We also continue to deliver profitable growth with our profit before tax for Q4 FY2025 at INR 3 billion, up from INR 2.1 billion in the same quarter last year. We also delivered INR 3.1 billion of Q4 profit after tax and INR 4.6 billion profit after tax for the full year FY2025. We continue to grow our business responsibly and by living within our means by managing growth with internal accruals and asset recycling.

We have signed agreements of over $260 million during the past six months by raising equity through capital recycling at returns higher than our base case. We are focused on tapping only the cheapest sources of capital, not only for equity but also debt, where we have raised around $2 billion debt financing this year from a variety of debt providers. With respect to the non-binding offer received from the consortium comprising of CPP Investments, Masdar, ADIA, and Sumant Sinha, active discussions between the special committee comprising of the new independent directors and the consortium are ongoing, and we will provide an update on the outcome as soon as possibly, reasonably practically. While we understand that our stakeholders are eager to know what's going on, however, you will appreciate that currently we cannot comment further on the timing or the status of the process.

Turning to page 19, we remain committed to growing profitably. We have seen 17% growth and 21% if unadjusted for the assets sold in our operating capacity portfolio by commissioning 1.95 gigawatts of capacity. Our adjusted EBITDA margins have expanded, driven by cost control measures as well as reduction in ONM costs. Our profitability also continues to grow year on year. We will continue to take these initiatives to ensure that costs continue to remain in check. Our DSOs also continue to trend lower and are now at 71 days as compared to 138 days two years ago and 77 days one year ago. Turning to page 20, our financial performance is now being driven by our IPP business as well as our manufacturing business. While our manufacturing business is a relatively lower margin, high volume business, our IPP business is a large scale and high EBITDA margin business.

While we saw slightly higher EBITDA margins for our manufacturing business, primarily driven by low volumes, as volumes increase, we expect that they will normalize in fiscal year 2026. Additionally, we expect that it will contribute about INR 5 billion-INR 7 billion of our consolidated EBITDA in fiscal year 2026. On slide 21, we continue to take measures to ensure our leverage is in check and have ensured that leverage for the operating portion of the business is under 6x. While our portfolio continues to scale up and the percentage of our under construction portfolio goes down, however, this year, sorry, our this year weather has some impact on our adjusted EBITDA, offsetting some of the benefits due to which the overall leverage is marginally higher than last year.

In future, ramp up of our manufacturing business along with continuous asset sales and increase in our operating portfolio, this should help our leverage levels normalize further. Turning to slide 22, we are now in an environment of rate cuts in India. The Reserve Bank of India, India Central Bank, has cut repo rates by 100 basis points in the last six months or so. Inflation has also fallen to a 75-month low in May 2025, signaling there may be room for further rate cuts. While we have seen some benefit of the rate cuts in our greenfield financing, we should see further transmission on existing floating rate debt going forward as well.

During the year, we raised around $2 billion at competitive rates as well as negotiated and refinanced better rates for $600 million of debt, saving around 40-70 basis points on the interest cost on some of that debt. Turning to slide 23, our stable assets continue to demonstrate healthy returns on capital deployed, which has improved compared to last year. If you recall, last year we showed these figures on 7.6 gigawatts of stable operating assets. This year, we have extended these to over 9 gigawatts of assets, which were commissioned on or before 1st April 2024. Also, we have included our manufacturing operations which started contributing to the bottom line. Let me now hand it over to Vaishali for comments on ESG. Hello, this is Vaishali Sinha. Thanks, Kailash. Turning to slide 25, we do the advancement in our ESG initiatives and targets.

As fiscal year 2025 concludes, the global ESG landscape is marked by newer regulations, a sharper focus on climate and social issues, and an evolving investment landscape. ReNew has not only navigated this complexity but excelled. We achieved our target and generated top ESG ratings, cementing our global leadership. In quarter four of fiscal year 2025, ReNew made significant strides. On our ESG ratings front, we achieved a score of A, a grade of A in the LSEG ESG rating, which is the erstwhile definitive, scoring 84.35, leading the electric utilities and IPP sector. Morningstar Sustainability also recognized us in their 2025 top rated ESG company list with a low risk score of 13.1. On the green certifications front, our commitment to green products continues.

We completed our first life cycle assessment, the LCA, for our Jaipur plant solar modules and will be publishing an environmental product declaration, the EPD, through the international EPD system. Our Dholera manufacturing plant achieved the certification, which reflects our deep commitment to environmentally conscious and sustainable solar manufacturing. As far as leadership awards are concerned, ReNew received the CII Climate Action Program, which is CAP 2.0 award in the highest category. Resilient within the energy, mining, and heavy manufacturing sector, recognizing our futuristic climate strategy, we also became the first company to be included in the very prestigious S&P Global Sustainability Yearbook from the electric utility sector in India. If we could now move to slide 26, we will review the progress made across our ESG targets. ReNew remains committed to achieving its SBTi validated net zero target.

We have completed the development of a manufacturing decarbonization roadmap and initiated annual assurance calculations and disclosures to accurately monitor, report, and reduce our emissions. Social responsibility is core to our mission. We've already impacted 1.7 million lives, aiming for 2.5 million by 2030. In quarter four, we have partnered with IIT Dhanbad to upskill coal mine workers in green technologies. Multiple candidates are being trained under this program. We are on track to meet our company-wide sustainability rating target, a testament to our first integrated report. We look forward to building on this momentum and sharing further progress in our second integrated report in 2025. Thank you, and now I'll pass it back to Kailash. Thank you, Vaishali.

Turning to page 28 for our guidance, we expect between INR 87 billion-INR 93 billion of adjusted EBITDA in fiscal year 2026, assuming weather patterns are similar to previous fiscal year. This includes INR 1 billion-INR 2 billion from asset sales, as well as INR 5 billion-INR 7 billion from our manufacturing operations. Do note that the contribution from manufacturing only includes external sales, and we will update during the year if there's any change in the ratio of internal versus external sales from our manufacturing business. We expect to construct around 1.6-2.4 gigawatts of projects in this fiscal year 2026. These projects exclude the projects we've already included in 11.2 gigawatts of commissioned capacity. We have given a slightly wider range to account for any potential delays and build-out of the grid network connecting some of these projects.

In addition, we expect to deliver cash flow to equity holders of INR 14 billion-INR 17 billion in next fiscal year. With that, we'll be happy to take questions now. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Justin Claire with Roth Capital Partners. Hey, guys. Thanks for taking the questions here. I wanted to start off first with the fiscal 2026 guidance. And so in fiscal 2025, the PLF for your wind and solar assets had both declined a bit year over year.

Just wondering what you're assuming for your PLF as we head into fiscal 2026, if you could talk about the trend that you're expecting and if you could share what the PLFs are that you're assuming for solar and for wind. Sure, Justin. Basically, what we have assumed for fiscal 2026 is that the PLF levels will be similar to what we saw in fiscal year 2025 at the lower end of the guidance range. To the extent it's better than that, obviously, we would end up higher in the range as we have laid out currently. Okay, got it. Just wondering, for the module sales here, could you talk about your expectation in fiscal 2026 in terms of the megawatts of cell and modules you're expecting to sell externally? I believe you have a 1.4 gigawatt order book.

Just wondering what the timing is in terms of the expected completion. Is that all in this year, or does the order book potentially extend further out? Yeah, so I think in terms of timing, we can circle back to you because this would happen through the course of the entire fiscal year, and we've also started already supplying some portion to third party. In terms of mix between of the 1.4 gigawatt, it's largely going to be DCR-based, which will also include NRCells as part of that. So that's going to be 1.1 gigawatt. And non-DCR, where we would largely be doing mostly a tolling arrangement or something along those lines, which is going to be the non-DCR segment, that's going to be somewhere in the range of around 300 megawatts of solar. Okay, got it.

Just one more, the CapEx $330 million-$350 million that's expected for the Topcon facility that you're building. Wondering if you could just speak more about how you plan to finance that facility. You raised $100 million selling a 10% equity stake. Wondering if you are anticipating additional capital recycling beyond what you've already announced in order to fund the facility, or if you're expecting to use any debt financing in the financing mix. That's correct, Justin. We will be using debt financing similar to what we used, which is 70-30. 70% would be financed with debt and 30% would be equity. That's the ratio that we had followed for the phase one of the module and cell plant also. For the expansion, we will continue to maintain that. We are already in discussions on that financing with a few lenders.

All capital that we would raise from capital recycling during the course of the year would be used to grow our IPP business portfolio. I see. Okay, thank you. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Mahip Mandler with Mizuho. Mahip, your line is open. Sorry, I was on mute. Hey, good morning from here, and thanks for taking the questions. Just following up on that, if we could just talk about the module sales. It looks like most of us in India have just wanted to confirm that if you have any plans to end the guidance to sell outside of Indian markets over here. And separately on the module sales margin, how should we think about that in FY2026?

Somewhat in line with this 30% you saw this quarter or going back to those mid-teens level you saw historically? Thanks. Yeah, sure. I can answer that, Mahip. Basically, as far as the order book to outside India is concerned, obviously we're in the process of building that. What we have contracted currently is largely for suppliers within the Indian market. That is why I said largely the component is DCR cells where there is a requirement to use domestic content, including cells and modules. As far as margins are concerned, again, we are cautiously optimistic that they remain at the same range during the course of the year. We will have to see how the entire supply situation sort of develops.

We believe that given that we are operating our cell plant at sort of industry-leading efficiency levels, we have a head start in terms of having that additional output and stabilized operation. We would expect the margins to continue through FY2026 at least, and as long as beyond that is something that we would hope for. Got it. How many of the module sales have been logged in for the year? Or is it in the guidance? Are all being in your bookings, or do you expect more book and bill during the year for FY2026? I would say that largely we are contracted for the full year. To the extent we get any opportunities, we can always change our mix in terms of internal and external sales. Just last one from me on financing. Kind of talked about declining interest rates in India.

We'll see what happens in the U.S. also, but at least in India, we're seeing some of these rate cuts over here. Could you just talk about how you could take advantage of that with either the new debt or refinancing the existing debt? Yeah, obviously, on an opportunistic basis, we will relook at our entire debt portfolio, and wherever we can refinance and get the benefit of the lower interest rates, we will obviously explore that. On new debt, in any case, we also get the benefit of all this. All the debt that we take for expansion of our cell facility or whatever we need to take to construct additional capacity between 1.6-2.4 gigawatt, some of that, we will see the benefit of that. As I said, on refinancing, opportunistically, we'll look at doing that.

The idea would be that because almost 30-40% of our debt is floating rate, there we will see the benefit of rate transmission happen in any case in the near term. Beyond that, if we want to further get the rates lower, given that government has cut even the ratio on the CRR, we will try to optimize that for sure. Thank you. Thank you. We have a couple of questions through the web link. The first question is from Navshalma, JPMorgan, which is, "Could you share the plans for refinancing the bonds due in July 2026?" Kailash, could you take that? Yeah, sure. Hi, Love. Basically, as far as refinancing plans are concerned, we are monitoring the market continuously.

Whenever we think that the US dollar bond markets are attractive, then some of the hold-co-portion of that debt, which is due in 2026, is something that we will refinance in that window. Some of the operating company debt, which is there, we will be opportunistic in case we get a lower rate in India, then we may move some of that debt into India and see on a weighted average basis whether it is accretive to do that or we continue to maintain the same structure. That is something that we will decide as we move forward. The next question is from Macaulay Smith. Sumant, if you do not mind taking this, the question is, "Are you seeing rare earth supply disruptions impacting ReNew or any of our peers?" So far, it has not really surfaced as an issue. I think that is the short answer. Okay, thank you.

Kailey, if there are no other questions on the phone line, maybe we can close. Perfect. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.