AESL declared a full-scale utility in Q1FY27 with Energy Solutions EBIT INR590cr.

I think you mentioned that we have roughly 55 lakh smart meter as we speak. And in the quarter, we did 24 lakh, right? Is it fair to assume that by the end of this year, in this fiscal, we'll have more than 1 crore smart meter installed? And can you please help us with the revenue run rate which you expect from the smart meter in FY '27 based on this 1 crore installation?

Mohit, you are always the opening batsman in our session. With this execution run rate, we are fully confident that we will be going beyond 1 crore smart meter installation by the time we complete this financial year. In fact, we could have done a little better in the current quarter, but the unexpected rain in May affected our progress. But even with that, we continue to have a daily average of about 27,000 meters. And with that, we will be easily completing that 1 crore target that we have taken for ourselves.

And sir, the revenue run rate from the smart meters in FY '25?

Yes. Mohit, so we continue to give the guidance that the revenue would be based on the meter month based on the number of meters as and when they get installed. So roughly, each meter month would give us a revenue of about INR100 per meter per month. Even in this quarter, the 55 lakh meters actually translates to about 106 meter months. And 106 meter months -- on a meter month concept would translate to a revenue of about INR 115 crores in this quarter. I mean we are not reporting segment numbers for the smart meters as of now. But going forward, we intend to do that. But for this quarter, on a meter month basis, the revenue earned is INR 115 crores. Under the Ind-AS and the accounting treatment, the revenue classification is different. But from a conventional perspective, I can share that INR 115 crore is the per meter per month revenue recorded in this quarter.

And sir, is there any update on the smart meter tendering for Tamil Nadu? Has it happened? Has it completed?

No. So, Tamil Nadu bid has been getting extended. In fact, they also revised the bid document a couple of times. Now, they are again planning to go ahead with the bidding process. But still, the Tamil Nadu bidding has not happened.

I think we had last year, we added one project in T BCB. And last quarter, we added 3 more, right? So put together, I think we have added around 38 billion, 39 billion of asset in Q1 FY '26. But the revenues are flat in this quarter this quarter for transmission. Can you explain the anomaly what led to that?

No, you are right. So basically, the key reason for the flat revenue is -- so one is that, of course, as the capex completes and the project gets commissioned. This quarter, we have done an additional transmission revenue of INR 66 crores. But what happens is that in certain assets, which are the traditional cost-plus assets, there is a depreciation factor. And since the depreciation reduces, the cost-plus asset or the revenue also translates into a lower number. So therefore, in case of certain cost-plus assets, the revenue declined, which in this quarter, unfortunately, the transmission earnings on account of new projects got commissioned off-set that revenue. So, INR 66 crores of new revenue which was there on account of new projects that got completed, but it got offset by the higher depreciation charge on the cost-plus assets, which are historically there with the company.

Of late we have been listening to a lot of concerns related to the commissioning of the transmission project, which is leading to delay in the execution of renewable capacity. Just want to get your thought process on this, what is delaying the project? How we are progressing in case of Khavda and other power projects over? And what are the major bottlenecks which are leading to this kind of a delay?

So, Anuj, you must have noticed we commissioned 2 transmission projects relating to Khavda in this quarter. And in fact, both the projects got commissioned prior to their scheduled date of commissioning. So as far as our projects are concerned, we are progressing well. In fact, in all the projects, we are more or less on time, except 2 projects, which is NKTL and WRSR. NKTL, we know the reason. But that project and even WRSR is also on the verge of commissioning. So, all our projects are going on time and schedule. Even HVDC, we are going to commission in this year itself. That will be a landmark for Mumbai region. No project has got commissioned in such a short time frame in Mumbai region. As far as renewable evacuation is concerned, there you are right. There are certain projects of other developers got delayed. It has impacted evacuation of renewable power, both in Rajasthan region as well as in Khavda region. So, the main difficulty which is being faced in the sector is obviously the equipment. But nowadays, the larger issue is not equipment, but it is the ability of skilled manpower for stringing and erection of the tower.

You mentioned about the upcoming INR 90,000 crores of an opportunity in the transmission bids, which are lined up. Can you set a timeline by when can the tenders be floated? Also, you mentioned 2 HVDC projects are also included in this INR 90,000 crores. What would be the quantum of this, sir?

So, this INR 90,000 crores project should get bid out in around one year time. And 2 HVDC projects are one for Khavda, that is Khavda-Olpad and another one is for Rajasthan. So, Rajasthan project would be around INR 25,000 crores and this Olpad would also be around INR 20,000-odd crores.

I believe we still sit at around close to 2.28 crore meters order book, which we have in the smart meter space. And our target was to reach it -- I mean, scale it up to around 6 crores meters over the next 2- or 3-years kind of a timeline. So, any update or status on that because if the projects are not getting added, I mean, the fresh orders. So, in that case, how do we target to attain that 6 crores meters mark?

So, Anuj, the fact remains that still about 12 crore meters are to be bid out. There are many states who has not taken an initiative. We feel that once the positive results from various states where smart metering has been being implemented -- start flowing in, probably those states will also take up those smart metering projects. Meanwhile, what we are doing, we are focusing on our execution. So, we wanted to finish as early as possible our existing order book. So, this year, we will at least complete 70 lakh and reach to 1 crore plus meter. And next year, we plan to complete the balance part. So, we are confident that during this period, 1.5 years, the states which are pending for bidding, those all states will move ahead, and the opportunity will come up.

Sir, continuing the Mohit's question on transmission revenue, despite commissioning, we are not seeing that run rate. So, you mentioned that there is an INR 66 crores drag because of the depreciation adjustment as per the regulatory accounts. So, is that correct, sir?

INR66 crores is the addition on account of new project that got commissioned. But that got offset on account of the depreciation.

So broadly INR60 crores or INR70 crores will be the depreciation impact on revenue? And if my understanding is right, this does not impact your PAT. It just impacts your EBITDA and revenue because your depreciation is lower, your EBITDA is also lower, your revenue is also lower, correct?

INR 58 crores to be precise on depreciation and INR 66 crores on account of increase in revenue on account of new projects coming. Correct. Correct.

And sir, this impact should be for the full year or part of that was already there in the base -- I mean, in FY '25 and this part of it is continuing? For the next quarter it will.

Yes. Next quarter, you will see all the projects which were commissioned during the last 3 or 4 quarters, full revenue will start coming in during the future quarters. So therefore, this will not repeat in the coming quarters.

Got it. And sir, are there any other meaningful such projects where there is a regulatory adjustment pending? I mean probably I think 12 years get over and hence after that, you see a big dip in depreciation. Is that right?

So, these are there in all cost-plus assets, it will happen that way only. So, this was happening in the earlier 2 lines, which were there where 12 years got completed. So, because of that, the depreciation impact got. Now most of the projects are on tariff base. So, you will not see such type of impact going forward.

Okay. So, majority of the drag is already behind now as we have completed their 12 year. And sir, I wanted to -- probably you mentioned about C&I that you have started. I wanted to understand in deep. I'm not sure if that's the time. But if you can share how the economics for the C&I business will work for you? How do you plan to scale it up? What load that you are targeting? What kind of customers that you're targeting?

So, Dhruv, essentially, the concept here is that we will provide an end-to-end energy solution to the customer. And we will take full responsibility of not only cost but also reliability. And creating a right mix for that customer in such a way that they achieve their ESG target as well as their cost is optimized. So, we started with our cement business, and we did an excellent contribution there in terms of reduction in energy cost. Now we have started with third parties as well. And there is total 13 consumer where we are providing these services, 14 industrial customers in fact. And the total load currently is about 717 MW. The bouquet of services will increase as we will contract out that energy storage capacity, then our ability to serve their RTC load will increase significantly. And once we have that storage capacity contracted out with us, we'll be able to scale it up very fast because we will not only be able to offer them a larger share of green power as compared to the existing distribution supply, but we will also be able to reduce their cost. So, our target is to achieve about 7,000 megawatts in another 5 years.

And sir, your economics is the cost at which you purchase minus the cost at which you sell? So, you do a PPA with your -- you do -- I'm not sure buying agreement with some of the developers, including with the developers and you have a selling price, probably fixed selling price with your customers. So how does it work?

There is one fundamental difference. Normally, when you talk of trading, usually, you must have seen through back-to-back contracts. What we will be doing is aggregation of the capacity. And from aggregate capacity, we'll be offering a customized solution. So, in our case, we will hardly see any back-to-back or a mirror contract, whereby you only earn trading margin. So that will be a significant difference there.

So, the guidance for FY '26 as far as the transmission business capex is concerned was INR12,000 crores to INR13,000 crores. And this quarter, we've done about INR1,025 crores of transmission capex, which is nearly 9% of the targeted capex. So, are you on track to meet the targeted capex for the year? And also according to the CEA data, the quantum of transmission line addition in the first quarter of FY '26 was less than 20% of the planned additions. So, what have been the reasons for a decline in capacity addition for the industry?

So, Aditya, we are more or less on the track. But, yes, some impact has happened because of unexpected monsoon in May. But we have realigned our plant, and we are confident that we will fulfil our guidance for the current year. As far as the performance at the country level is concerned, you will see almost every year, the addition during the first quarter is much less as compared to the last quarter of the year. That is the reason one. And, obviously, rain has affected all other players as well. Besides that, the shortage in manpower essentially for erection and stringing that has also caused the dip in the performance in the sector.

Okay. And as far as the transmission tender pipeline stands at about INR 90,000 crores. So, what is your target win rate and are you seeing more competition now from private players?

I don't think competition landscape will change either positively or negatively much during the year. In fact, there are reasons why intensity should reduce, because the project tender pipeline in the sector is a good number. In fact, with almost all players there are sufficient capacity available for implementation. And we will also be very, very disciplined as far as taking up a new project is concerned. We will be taking those projects where we feel confident of executing in time, both in terms of execution and from OEM supply side. And also, that is within our financial metrics and parameters that we have decided for ourselves.

Okay, got it. Thank you so much.

But just to add, I mean, on a year-on-year basis, if you recall last year, we had Dahanu power plant. This time, we don't have it. And that's the reason -- one of the reasons why on a year-on-year basis, you will see a flat growth. So, despite there being a growth -- underlying growth on account of addition of capex because Dahanu power plant not being there this quarter, that's the reason why you have an operating revenue flat even in distribution business.

Just a couple of questions. So earlier, did you mention what is the contracted C&I capacity that you have as on date? And what would be the ticket size of the customers of the average ticket size?

As on date, we have 717 megawatts. So, these are ranging from 5 megawatts to 150 megawatts.

Thanks for the opportunity and congrats on scaling up the smart meter business so well. Just wanted to understand the unit economics around it. Could you please explain the unit economics, what is the initial capex and who pays and how long is the tenure?

So, the initial capex is roughly in the range of around INR 4,500 to INR 4,800 per meter, and we get based on the tariffs which we have quoted which is about INR 11,000 over a 3-month period.

And the eventual payment will come from the respective -- from the government regulator, in this case, the DISCOM or what, who pays eventually for it?

It is paid by the DISCOM, but it comes directly from the customer's wallet as the consumers who are paying to the DISCOM on a monthly basis for the power which they are consuming from that wallet itself, it comes directly into our account.

Got it. And sir, on the -- just one other part was the C&I. I just wanted to understand, would we be keeping the trading margin in it or how does it work in it? Because we would do a back-to-back arrangement with the Genco is what my understanding is as you explained. So, could you explain?

Jalaj, what we will not do is a back-to-back arrangement. We will have to offer a customized solution to each of the customer, and it would be very, very different from customer-to-customer. So, the model here is we will contract different capacity. We will aggregate it and make a customized solution for each of the customer from that aggregate capacity. And when you are procuring power, there is a huge amount of opportunity created when you aggregate the capacity, which is not there in a back-to-back basis. And essentially, we genuinely feel that when you are doing a back-to-back arrangement, you are hardly adding any value there.

I just wanted to ask on your transmission business, what are your capitalization targets for FY '26 and FY '27?

So, the capitalization essentially would mean that once the project gets completed, the underlying asset gets capitalized. So, this year, roughly around INR15,000-odd crores of projects are likely to get capitalized, which includes the largest one being the Mumbai HVDC projects. We will continue to maintain that run rate of close to around INR15,000 crores, INR16,000-odd crores of capitalization to get completed each year. As you know that the company has close to INR60,000 crores of projects, which are to be completed in the next 3 to 4 years.

Understood. And from this Mumbai HVDC, how much is the value of this project specifically?

INR 7,000 crore.

Got it. And just on your C&I business, I just want to understand how much is the revenue and profit contribution in this quarter and in FY '25 to your overall business?

This quarter, it's not that significant. In fact, this was the first quarter where we actually started earning. But on a number basis, it's around INR18-odd crores, which was earned during this quarter, largely from the C&I business.

I missed -- in interstate market, it seems the bidding activity has slowed down a bit. Is it just because you're absorbing all the bids or because of the -- I'm not sure because of the execution challenges, they are waiting and watching. So just trying to understand what's causing this somewhat of slowdown.

Dhruv, the bidding slowed down not because of execution challenges or anything else, but there were a few deliberations happened at CEA and CTU level that was regarding some regulatory issue. And also, they wanted to have a relook at the way the transmission system has been planned and designed. So, they wanted to review it. And having done that, now you will see that bidding happening the way it was happening earlier.

So, no major change in terms of the path that the system was taking earlier and now after the review of the design?

Yes, yes. No major change. In fact, if I can share that, they undertook an evaluation whether HVDC should be implemented, or a battery storage should be implemented. Having done the detailed study, they decided that the system that they have planned, they will continue with that. And therefore, now you will see the bidding happening. In fact, one HVDC bid -- initial bid has already been submitted. Now the bids are under technical evaluation. And maybe in a months' time, they will do the reverse auction.

Sir, my first question is on the Khavda, HVDC. So, this is the one you mentioned that the bids have been submitted, right? And the awards should be done in the next 1 or 2 months, right?

Correct.

Okay. And sir, on the other opportunity at the interstate level, say Maharashtra, there is coming that they are doing some large amount of transmission capex, including HVDC. So how do you see the opportunity? Any discussions going on that side?

So, Mahesh, not only Maharashtra and as we discussed over various calls, but we also see a lot of opportunities coming now from state sector. So, Maharashtra has already started. 2 projects got under auction in last month. We see a couple of more projects in a month's time. Similarly, Karnataka also has come out with a few projects under TBCB. Even Rajasthan has approved a significant amount of transmission project under TBCB. So, we see a lot of projects and opportunities coming for transmission from various states now.

Okay, sir. And sir, one question is on the C&I side. Typically, what is the lock-in period for the contract that you have with the customers?

So currently, few contracts are for 13 to 14 months. And there are 2, 3 contracts, which is a long-term contract, which goes up to 10 years as well.

Okay, sir. And sir, last question is on the 3 other projects apart from Mumbai HVDC that you are planning to commission this year. Any timeline next 6 months or something that you are planning to -- these projects are expected to come online?

So, the way things are progressing, we should be commissioning somewhere in the later part of January or February, but before this year end for sure.

So, you mentioned in your opening remarks about the 45,000 ton refrigeration (TR) cooling facility at Mundra. Can you throw some light on that business? What is the opportunity? What are we looking at? And what exactly could be the potential?

So, Bhavik this concept itself is gaining a lot of traction in the country. So theoretically, all the AC requirements can be converted into district cooling. So, it is certainly a humongous opportunity. But this concept is very, very useful and could be very efficient when cluster development is happening and of a mixed use. So, take any development where multiple buildings of residential, commercial and other things are developing. This could be a very, very good concept because you get cooling as a service. You don't have to invest into those AC and managing and maintaining those AC. And when you have an aggregation and this big size of plant, which is distributing cooled air, you also get a lot of optimization and efficiency. So essentially, when you have a district cooling plant, your energy efficiency will improve by at least 20%. So, this concept we strongly feel will get a lot of traction in coming times in India as well. Like in Middle East and other developed countries, the district cooling is a normal phenomenon there.

Understood, sir. And sir, has it anything to do with the data centers which we are building? Are we going to use it there? Or how is it?

No, the data center can also be one of the end uses, but it could be anywhere, like so any new development that is happening, the district cooling could be a good concept. In fact, we are talking to various developers, a big developer in Pune, Hyderabad as well as Chennai, where cluster development is happening. So, the things have progressed very well there. And we see that getting replicated everywhere else as well.

Understood. Sir, regarding the depreciation on old assets, sir, so this trend will continue, right, for the projects or assets which we have? So eventually, the new income will continue to get offset going ahead, right?

No. So, this will not continue to happen because earlier the projects were awarded on a cost-plus basis. Now most of the projects are awarded on a fixed tariff basis.

Okay. Understood. And sir, like how do we see the impact of the ISTS charges? Like will we be impacted? Or how are generally our terms with the customer?

Okay. So as far as transmission business is concerned, we have no connection with the ISTS tariff, which is being charged to distribution company or customer. Essentially, how it operates is that all the transmission charges of all interstate transmission assets get aggregated and that aggregated costs get allocated to all the customers. So, depending on how much new transmission capacity is getting added, how many assets are getting depreciated basis that the interstate transmission charges keep on varying. So, as far as transmission business is concerned, there is no linkage with the ISTS transmission charges being charged to distribution company or end consumer. In the C&I, obviously, it can impact. But now with the new transmission charge regime in place, which is a point of draw means, so there irrespective from which source you are taking power, the transmission charges payable remains the same. In that sense, whatever that average transmission charge works out at a country level, that will be applicable.

Sir, in the call, you did mention like in the transmission side, we are seeing opportunity. So out of this INR 90,000 crore worth opportunity, which you mentioned, so what would be like the breakup between center and state out there? And second parallel to that, this opportunity -- I mean, are you seeing moving more towards the state in the last couple of quarters and how exactly it is?

In this INR 90,000 Cr, almost 90% currently is from interstate. In terms of state, there are only few states that has recently started. But you are right. As we move forward, we see the pie of interstate project getting bigger as compared to what we have today.

Okay. Got it. And then just from an economics point of view, the central -- interstate and the state one, does this really differ when we are bidding and when we start earnings from these assets?

No, I don't think it differs because conceptually both are same. What only differs is your counterparty. In the state, it is STU, whereas in interstate, it is CTU.

Okay. And then one last thing. Sir, in terms of segmental numbers that we report, where do we club our smart meter business?

So, smart meter currently forms part of the others. We are not showing separately smart meter as a segment because it still is slightly nascent. Going forward, as I mentioned earlier, smart meter will also be shown in a separate segment.

Okay. So, in others, when we see a sharp increase on a year-on-year basis, so that is primarily driven by -- as we are commissioning more smart meter? Or is there any other revenue that is coming -- forming part of the others?

So that is because of the SCA income, as the construction income increases, the service concession arrangement income also increases.

Sir, I just wanted to ask you about this in the recent NCT - minutes of the meeting, they have stated that for every HVDC project, you should have a comparable calculation with BESS. But are these two strictly comparable in that sense? Can BESS replace a transmission line? And even if you have a BESS, you still require transmission capacity, right, to transmit that power from the battery storage systems?

So, answer is both yes and no. Now you can certainly reduce requirement of additional transmission capacity when you have a battery storage co-located with a renewable generator. So today, if you see that if I have a 10,000 megawatt of solar power plant, I will require a 10,000 megawatt equivalent transmission capacity. But if I store half of the capacity, then probably I might require 5,000 megawatts because solar generates during 8 hours where the 10,000 megawatt is being used and rest of the time, it is not being used. So, if you have a battery storage, you can obviously use that capacity -- transmission capacity during non-solar hour. So, it can certainly reduce the requirement of transmission capacity. But it is straightforward -- your point is also valid that to a certain extent, you will require the transmission capacity, may not be to the fullest extent, but obviously, a little more than what capacity comes after consideration of battery storage.