On the quick commerce side can you give some sense of what is a quantum of cash burn there?
The only thing I would say is on a contribution margin level, we are positive.
Also, can you quantify how much power would you need for your own polysilicon plant here?
I would not necessarily be able to quantify at this point of time, but I can tell you that in a polysilicon production the single most variable is the power cost.
So, would you be selling outside also or it will be like?
I think by that time we would have also expanded our capacity.
One was again with respect to the new energy business. Of the Rs.75,000 Crores investment that was sort of planned in the first phase is it possible to get a sense of what has been spent so far and the second part is now that the expansion plans are pretty much getting visible, is it possible to share the sort of revised capex plan for the entire chain to get to the 100-gigawatt kind of capacity?
From our perspectives, Rs.75,000 crores was effectively committed for our manufacturing ecosystem. Most of it is I would say spent, committed, or in the process of being spent and as we expand the capacity obviously the number will go up. I would not be able to give that exact number at this point of time, in next few quarters probably I will bring more clarity on that.
On retail, what is the impact on EBITDA from, I think you mentioned there are three reasons why there is an impact on margin, the first one is on the difference in the festive period, but you mentioned something on the labour code as well as I am adding one more which is EBITDA from FMCG going away, is there any big number or no that is like a small negative number or so?
No, it is a number which is going out. It is a number as well.
The impact of labour code how big is that and there will be a one-off over there for this quarter?
So when you look at it on an aggregate the labour code obviously there is an impact on gratuity, etc., we have obviously considered it in the P&L, but it is not material, therefore we have not really broken it up, but in the context of retail also it will add a few percentage points in terms of growth rate.
I appreciate you saying that near-term, short-term volatility in growth rate, but is there any other better way in which we can visualize the coming quarters in terms of how you can put that in English?
That was the best I did in terms of explaining that we were very constructive about growth rates and that we would think that some of these things are extremely short-term and these kind of volatility in growth rates, so we are not talking about growth or de-growth we are talking about growth rates. It is something that we expect it to be extremely short-term that is what it is as much as I can say, but yes, but I think you have to step back and see what we have built and what this business is capable of and where we are in this cycle in terms of what the opportunity is and frankly where I am standing you would also go past and look beyond this extreme and more so in the context of fairly valid set of explanations because it is a combination of things unique you do not have this Q2 and Q3 and some RCPL demerger and something to do with GST coming at the same time and accelerating from an EBITDA standpoint, accelerating on quick commerce, lots of things, so you have to see all that in context.
Just one on new energy. You mentioned that Rs.75,000 Crores is for manufacturing-related capex in terms of generation, since you are saying that in about 12, 15 months we will be starting some generation and I think our internal needs would be somewhere around 20-gigawatt or something is what you said so what kind of numbers are we looking at and how would that be funded in terms of debt and equity?
So we have always said that we have an eye on credit ratings and with this A and all that, you know what is the framework, so why I am saying that is when you talk about electricity generation it need not be that every part of all these kind of assets, which will eventually become utility I am talking about the generation part of it. What we take for inhouse consumption, what we give for green chemicals absolutely, so the energy supplied will still be in some way utility, so you can look at those kind of power generation assets in a very different way. It need not be that it has to be entirely on our balance sheet, so all that flexibility to take care of in the broader construct of what we are trying to solve and I am being very, very similar to what I have been answering this question right from day zero and this remains unchanged.
On the retail side. You talked about lot of businesses doing quite well. What are the buckets which you think did not do that well in this quarter which led to slightly lower revenue growth?
So, I think primarily it is on the fashion side where see there was a lot of demand which came in Q2 it was a big festival quarter, so some of that demand went into Q2 versus Q3. We had a very strong Q2 in the apparel business so that is where I would say on a Q2 plus Q3 the growth rate looks healthy double digits, just purely on a year-on-year basis for Q3 it is in single digit, so that is where I would say and also remember when you look at the headline number there is a GST impact, which is there and on the headline side our RCPL revenue, which is going on, so it is not a like-for-like comparison when you are doing it.
On the capex side, can you give some colour on where major part of Rs.34,000 Crores is going and how should one think about capex into next year as well?
Rs.9000 crores was on the O2C-related expansion, about Rs.8000 Crores odd for new energy, about 7500 crores for Jio, about 4000 crores for retail and then the balance real estate and Rs.1200 Crores, but these are broad numbers.
Lastly on the new energy side especially when you come to manufacturing ingots and wafers, do you think in the way current prices are you will be competitive because there at least you will have to compete with China?
Yes, that is correct, but the pricing has also started now moving up with where accommodative pricing is and that in fact further validates our strategy for an integrated ecosystem. One of the key components of the cost through the value chain is also the power cost and that is where our ability to move to round the clock green energy and further optimize in the power cost gives us an additional leverage and the benefit through the value chain.
My question is also on new energy. Firstly, the capacity of solar glass and polysilicon would also be similar to the module capacity that is around 10-gigawatt initially or it could be like different?
Yes that is correct, in fact without necessarily commenting on the capacities, the capacity for our upstream value chain will be probably slightly on the higher side to ensure that we get to the minimum economic scale, so that would effectively provide us not only the capacity for our first phase, but as we expand our capacities.
Second question is on your generation, so you mentioned that 300 billion units you are targeting, previously I think it was 150 billion units which was the number?
We are increasing our capacity.
All this would be like captive, or it will also include?
As I said and we recapped in terms of the avenues for us for selling, it is round the clock electricity, it is converted into also green fuels, which will be used for the export market as well as domestic market and when we talk about the captive use it will be refinery, it will be for our new energy complex and as we also ramp up our data center capacity, so every quarter every year our requirements are also increasing significantly, so most of it will be captive requirements for us or converting into green fuels again for the markets.
So, this will include green hydrogen as well?
Yes, that is correct.
Just last one small question, so you are on track to commission the first generation by start of next fiscal, is that right?
Yes, during next 12 to 15 months our generation capacity will also start coming up.
Jio's growth is very strong, but ARPU growth is 1% sequentially, so any comments on tariff hike? Second your 5G ramp up is quite rapid if market share is very strong what is driving this, is it the 5G SA network or is it your lower tariff or it is just the data boom? Third you had a slide on enterprise including sovereign cloud so can you share what is enterprise services contribution, homes we can back calculate, but what about enterprise?
So, on the first one really no comments on tariff at this point in time no such plans, we are quite happy with the traction, 1% increase in ARPU, over the last year it has gone up by almost 5%, 5.5% and we have certain handles to improve the ARPU while contributing, giving more value to the customers and that is what we will continue to focus on. We are seeing good traction with data consumption to your second question really a lot of uptake in 5G data consumption the key reasons are really the quality of the network, the fact that it is ubiquitously available, helps in people consuming more 5G data, in fact I saw a recent third-party study, which said that when consumers are on the Jio 5G network 99% of the time they are actually consuming 5G whereas on any other network they are consuming 5G for less than 50% of the time because of the nature of the network itself, the standalone architecture that we have given and with that kind of traction we want to continue to see that growing and there are opportunities. Organically, if we can improve our ARPU by 5% to 6% a year, I think that is a good number, good place to be in, while adding many more customers. The short answer to the second question really the quality of the network, the standalone architecture, which is providing us opportunities to give more, and we have not even launched some of these slice services which also are on the roadmap and will be launched. To your third question around enterprises, we do not give that split as you know you will have to wait for some more time and then we will start giving that split, but it is growing much faster than the rest of the revenue line items.
The second question was with respect to the petrochemical business. Sir talked about the drastic changes in cracker economics versus naphtha and ethane and others, we have some ethane-based capacity, some is from ROGC and some is from naphtha, is it possible to sort of look at how that proportion has changed between the three in terms of even if a broad percentage can be sort of shared?
I talked about it, about three-fourth of our capacity is gas based, which is ROGC and ethane combined put together and about one-fourth is naphtha based.
On FWA with 12 million customers now are you facing any capacity constraints and as you go from total of 25 million to your plan 100 million home customer base like where will the maturity come from and can FWA accommodate that or will it be mostly FTTH?
On FWA 5G and FWA UBR as I said, we are using all the three technologies depending on whichever is the best available at a particular location or a particular customer. Most of the recent additions have been in the FWA UBR category and there as you know the last mile is there is no capacity constraint most of the times it is point-to-point and it is in the spectrum which is available. We have our fiber backhaul or we have in some cases even wireless backhaul already available, so we are not facing any capacity constraints there. We are optimizing for the number of customers we are connecting with the 5G FWA because there could potentially be capacity constraints, we have sliced the network for offering this service and we are ensuring that we do not cross that threshold at any location, so bulk of the new additions would come in the UBR and the 5 gigahertz kind of band. FTTH wherever the fiber is there or it is possible to do the last mile very quickly we will continue and do that.
Second one, on mobile you are offering some valuable services now, Google AI Pro, cloud, etc., how do you prioritize like say in your own services Jio AI cloud or Jio AI versus like Google and what are the kind of costs which you incur in these offering these services?
So, as I said the last time as well, Jio is in a very good position. Jio can choose the services that it wants to offer and those could be coming in from the Reliance Intelligence side or could come in from any of the other partners or service providers as well. In this case, given Gemini AI Pro is available is the leading product in the market, Jio has decided to go with them, but not to say that if Reliance Intelligence comes up with something we will not offer that and Jio is now in that unique position where there is no cost to Jio. Jio is taking products to the market and taking good products to its customers. So Jio can optimize the access, the reach, the knowledge of the customers and in fact these are now revenue generating opportunities for Jio, so Jio actually makes revenue out of these things, it does not have to pay for these kind of initiatives.
Lastly, in quick Commerce what is the dark store count now and other players have raised cash and are heavily discounting so how are you managing to get to contribution breakeven because even the number two player is right now not contribution breakeven?
So number of dark stores we have about 800 as of now, the total store count I mentioned that is there on the network is about 3000, so dark stores is still less than 30% of the total store count and my bigger store the order contribution is much higher because dark stores are typically smaller in size. I would not be able to comment on the other players, but remember that we have pretty good margins, we have a pretty large grocery business, we are one of the largest vendors for most of the companies in this country. We have a pretty efficient sourcing built over the last several years, which helps us get good intake margins where we are able to put good pricing to the customers but still maintain healthy margins. So other is the category mix F&V has generally the highest margin and you need to have an efficient sourcing, the biggest cost in F&V is wastage, which happens typical vendors if you look at the mom-and-pop vendors the wastages are as high 30-35%. For us, almost one in every three to one in every orders has an FMV component, which is value accretive to the customers, and it is also margin accretive to us.
As Quick Commerce becomes larger will it remain a headwind for the margins, overall margins for retail?
It depends on you are incurring the extra delivery cost, you have the infrastructure cost, and you have the delivery cost. We are pretty uniquely positioned in the way that we are able to leverage our existing network of 2500, 3000 stores to do quick commerce and remember quick commerce is not just grocery it is also we are doing that in electronics, we are doing that in fashion as well, so I would say that, we are leveraging a lot of that fixed network which is there but there is an extra delivery cost, which has to be incurred to deliver the goods to the customer and it is growing pretty well. Ultimately what I care about is that I need to maximize wallet share within the customer. Store is all about experience, you come, you get the right experience and then you want to come buy at the store, you want to get it delivered at your home, I am fine to do both ways. As far as the margins are healthy at an aggregate level it is margin positive, it is adding rupee margin to my bottomline, it is accretive for me.
This is the first quarter where there is an RCPL demerger and from the next quarter it will be entirely there, so if you could just give us a sense of ex the merger what the like-to-like growth would be for the retail business and a little bit of back of the envelope suggests that it would be like a 1% impact but would want to kind of know from you, especially because it comes fully in the quarter and more so on the margins as well, how much of a margin impact would the demerger have from next quarter we start looking at the numbers?
From a revenue perspective, there is a month of revenue which has gone out, out of RRVL it was there when it comes next quarter the entire full quarter would be there you have seen the RCPL revenues which are there, which has gone out of my portfolio. It is a meaningful impact adjusted for RCPL adjusted for you have seen the net gross versus net and adjusted for seasonal it is a decent double-digit growth that we have in revenues.
Do we expect this kind of single digit bit to be there going forward until the RCPL goes out of the system is that the way to think about the next three or four quarters going into FY2027?
No, I do not think that is correct. The underlying business is pretty strong. The underlying business is growing, even this quarter we have a double digit you just adjust for the one-off, there is already double-digit revenue growth, which is already there. You have to look at retail. If you look at Q2 plus Q3 you have a decent 13%, 14% revenue growth, which is there. This will always happen in any year, sometimes festival quarter is in Q2, sometimes in Q3 if you recollect we had a very strong 18% kind of growth year-on-year last year that will always continue to happen and you have to look at on an aggregate basis. Aggregate basis will continue to deliver double-digit revenues.
The last thing was on square feet, there has been significant gross addition, but there has also been closure, so if you could give us a sense of when do we see net addition starting to pick up as you have completed almost all your consolidation work so just some sense on that would be very helpful?
Consolidation I would say more or less done it is normalized now. Last year was the year when our square feet has reduced, it had reduced because we were consolidating. Now, quarter-on-quarter you are seeing an increase, so it is more BAU, it is more or less kind of BAU I cannot think of, yes at every point in time you will always make some mistakes, the attractiveness of the location may change, retail is very location specific, but that is normalized, 2%, 3% of your portfolio you will keep churning, you will keep relocating. Even what falls here in this is also a relocation, if the store lease is ending and that is not the best location I may take it to another location because I anyways have to incur the capex at that point in time, so that also comes as an addition and a closure. On a net area, quarter-on-quarter I expect that will continue to keep adding area.
Can you share some digital services. Any update on the JPL IPO progress you want to share that is number one? Number two on the fiber connectivity now that DC-to-DC connectivity is becoming prominent and probably it will grow, whether this business will sit in JPL or will it sit in the fiber in where the revenue will sit? Number three on the sovereign cloud you spoke about, are we offering the Reliance Intelligence through service or we are offering GPU as a service, private cloud, public cloud which is built on the JPL platform?
Thank you. First one, the Jio IPO, internally we are working on it of course, we are awaiting the new notification to come from the government to see what the final details are going to be. We are working on the assumption that it is in line with whatever SEBI has recommended, but we will still have to wait for that before we finalize and then start the process, but it is imminent now, so we are just awaiting the final notification, so it should happen in the next few months for sure. On your other question on fiber, the DC-to-DC connectivity it depends on what kind of requirement the customer has, so if the customer's requirement is connectivity, then RJIL provides that. Now RJIL well in the back end go and lease some more dark fiber from JDFPL because the dark fiber belongs to JDFPL, but connectivity is provided by RJIL. The cloud solution we spoke about is being offered by Jio, so Jio AI Cloud is offered by Jio as a service that infrastructure has been created by Jio, the sovereign cloud, MeghRaj we have spoken about in the past with you all, is a Jio service that Jio provides to the government to NIC, similarly to enterprise clients, to banking clients Jio is providing that as a service. The AI layer that will get added on top of it. Those intelligence products will be made by Reliance Intelligence, which will then come and offer those to Jio.
Setting up the GPUs or Reliance Intelligence will be by your GPUs?
Infrastructure, even today the data centers are in RIL, so the infrastructure spend is going to be done by Reliance or Reliance Intelligence depending on the nature of the investment that is being made and Jio accesses those through long-term lease arrangements that Jio has got with RIL, so Jio will not incur the capex but as a service Jio Cloud is a Jio service, so it can lease data center space from RIL, from Reliance Intelligence, GPUs, etc., it can lease it from anybody else as well. Capex will be RIL or Reliance Intelligence. Service provision will be done by JPL; it will be asset-light service. Products will be developed by Reliance Intelligence, AI products and capex will be incurred there.
Just one last question on the capex per sub on the fixed broadband are substantially lower now that we are 25 million how is the capex per customer in FTTH, FWI and UBR FW?
The capex per sub, actually per incremental sub, of course it is lower now because the fixed capex is now getting spread over a much larger base, so the allocation that we do, etc., but the last incremental capex that we incur for connecting a sub is actually not much different between the three. If at all it is a little bit higher in FTTH because the last mile if the fiber needs to actually be laid to connect the last mile it will turn out to be higher. The CPE, the customer premises equipment, is kind of similar in cost. Yes, so in the case of FWA anyway there is a receiving C6 which is installed in the premise. If it is the FWA UBR, we install the C6, but now we are able to split the signal from that into multiple homes. In which case, as we start getting multiple customers for the same C6, the cost per customer starts going down quite significantly.
China has recently instituted a restriction on export of silver, and they are one of the largest exporters, so is that expected to impact us in any way operationally, economically, in terms of economics of the project any comments on that?
Obviously, there are few other sources also for the silver. Silver is talked about a lot in terms of solar module manufacturing, solar cell manufacturing, but I think there are a few factors that you need to consider. One, HJT as a technology itself has a lower silver consumption than TOPCon and IBC Tech progresses. Second is we are also working on a number of initiatives to reduce the solar consumption within the production of our own solar cell. Third is the amount of solar which is used is significantly very, very less when it comes to in terms of, it is effectively milligrams per watt we are talking about, kgs per gigawatt, we are not talking about significant number of tons as a consumption is required, so from that perspective the diversified supply chain, the overall plan to reduce the silver consumption and the technological choices, if you see it through that prism we are not unnecessarily concerned about the situation.