INOXGFL to branch out into more chemical segments, sees strong growth in wind energy business: ED

Edited excerpts follow:

How has the journey been for your group (INOXGFL) since the split in 2021-22?

If I go back to two years ago, our (undivided) group market cap was approximately Rs 6,000 or Rs 7,000 crore. Today, our (INOXGFL)  group market cap is Rs 72,000 crore. At that point in time, the group EBITDA was virtually, I would say, zero, because chemicals was reporting Rs 500-600 crore and wind was losing Rs 400-500 crore. Today, if I look at it, the group EBITDA is Rs  2,000 crore. We now have a very large base of businesses built, what I would call the airport. Now the flights will start taking off.

For GFCL EV, where we have announced close to almost a billion dollars of investment, we are setting up India's largest battery chemical complex. We've also announced that we will be raising capital.

GFCL Green Hydrogen, is an entity that will also, God willing, become a multibillion-dollar play as we move forward. It's still early days. We've now got patents, we're working to commercialise that. That business is going to become very large. So we've created multiple entities under the chemicals vertical.

Two years ago, Inox Wind was a dead duck. I don't think anybody wanted to touch it but it was a solid asset. So, we stood by it, and if you look at it today, what's happened is that there are two players who control 50 percent of the Indian market. We are sold out. Every month, we are revamping our business plans to do more and more and more.

Many of your peers in wind energy have vanished…

You've seen 30 players go bust. Today, my order book is 2.6 GW; we are negotiating for another 2 GW today. Sulzon sold Skeiron (renewable energy platform). We had built Inox Renewables back in the day, which we sold. So we are creating INOXGFL Renewable Energy (IGREL) again, and we made it a JV (joint venture) so that the debt is not in the group.

So, it's a JV with one golden share. And that means the group is not annotated ... plus there is no group support or guarantee for anything.

What we have done over these two years is we've created GFL EV, which is a multibillion-dollar play, where we are raising capital at a multibillion-dollar valuation. We've created GFL Green Hydrogen, which will play out as we move forward. We have now completely turned around Inox Wind, which alone has a market cap of about Rs 20,000 crore. We've carved out Inox Green, which is at Rs, 4,000 crore market cap and expanding significantly.

There are reports that the government may bring back reverse auction in wind energy, something that is upsetting wind players. What do you make of this? 

This is a non -event; there is no policy flip-flop. In the past 12 or 15 months, about 18 gigawatts (GW) of tenders have been awarded, which include round-the-clock, hybrid, FDRE (firm and dispatchable renewable energy), and plain vanilla. All of them were based on reverse auctions.

Out of that 18 GW, 5 GW was plain vanilla, which was also a reverse auction and the tariff discovered in all of this has been about Rs 3.1-3.5. There's roughly another 15 gigawatt already in the public domain under reverse auction. What the government said is that for certain plain-vanilla wind tenders, they will do closed bidding. They carried out one tender in January where the tariff discovered was Rs 3.62-4.24 and it was undersubscribed by almost 40 percent. So the government has said, not in an official notification but in internal communications, that if tariffs are such you may consider doing a reverse auction, which is logical. When 18 gigawatts is between 3.1 to 3.5 and another 15 gigawatt is being bid out between 3.1 to 3.5, why will they buy power at 4.24?

Inox Wind turned profitable in Q3FY24 with a net profit of Rs 1.81 crore. What kind of profitability are you expecting going ahead and what’s the next financial year looking like?

Our aim is to get back to our 14 to 15 percent EBITDA guidance margins next financial year. Given the current financial year, we had said every quarter would be better than the previous quarter.

Q3, we turned net profit positive. Q4 will be better. Obviously, now we've turned net profit positive. So, better means obviously better profitability. And this will continue to keep happening as we continue to keep ramping up supplies, execution, and business in the market.

In the next financial year, we have broadly stated we intend to do 15 percent to 20 percent  of the Indian market...we expect to do about 800 megawatts (MW) next year which can broadly translate to a top line of Rs 6,000 crores (for FY25).

How competitive is the wind energy market right now and what’s your strategy when it comes to the tradeoff between margins and market share?

We don't look at market share; what drives us is profitability. There's no point being number one and losing money for 15 years, going for five CDRs (corporate debt restructuring) or Rs 15,000 crore bailouts. I would rather be number two or number three and be the most profitable. And that's exactly what we did from 2014 till the sector shut down. Only two players survived. The other player survived as it underwent CDRs; we survived with the promoters pumping in Rs  700 crore from their family office and backing it with guarantees; nobody had to take a haircut. For this INOXGFL Group enjoys respect in the financial community.

But you mentioned that you aim to capture 15 to 20 percent market share; could you elaborate on that?

Historically, we've been at 15-20 percent. We may be 25-30 percent, going forward. The point again is we are more focused on the megawattage.

What is your execution likely to be by the end of this financial year?

I can't give exact numbers, but I think a broad number of analysts expect us to do a top line of about Rs 2000 crore this year. And I think we should be on track for at least that.

In the green energy business, how much is the turnkey projects and equipment business worth as of now ?  What kind of mix would you ideally look for given the difference in the margins in both businesses? 

We are guiding for a blended 14 to 15 percent. Absolute profitability is more in turnkey, but on the margin side, both remain almost the same. Having said that, our goal is to do 50 percent equipment supply and 50 percent turnkey, but it could be 60:40. Broadly, the Indian market ideally wants everything turnkey, but that's not happening. I would say the Indian market wants about 50 to 60% turnkey and 40 to 50% equipment supply.

What is the status of the Inox Wind Energy merger?

We've already got all our EGM approvals, board approvals, stock exchange approvals. What I know is, as of yesterday the order at NCLT ... has been reserved. It's an administrative process now. From my understanding it'll be an 8-12 month process where the merger will get completed. It may happen in FY25.

Are there plans to get the IPP business listed at some stage?

It's a joint venture, as I said, with a global private equity fund. So, it's still too early, but all options are open. We'll evaluate things as we move forward. We like to list companies.

Are you looking at any more fundraising in the IPP,  beyond the private equity investment that you already have? 

We've not closed it. We're in the final stages of closing it. It's worth $100 million. But that's all that we can say at this point, in terms of equity.

Is there any further requirement for fundraising by the listed entities?

Not at all...We may raise capital. We have access to capital. If we see acquisition opportunities or we see something... From (debt of ) Rs 3,000 crore, we're now down to  Rs 500 crore. internal accruals can take care of that. There's always an opportunity if you want to raise capital for any high-value growth or anything we'll see, but we don't need capital.

On the GFL side, what is the business mix you are looking at?  Will the profile of the company change as you keep investing in these new businesses?

We are in fluoropolymers, we are in gases, basic chemicals, and a small amount of specialty chemicals. As EV chemicals kick in, they will be part of our high end fluoropolymer business.

EV Chemicals is another segment. So, yes, the profile to that extent will change where more products are being added, higher value products are being added. But at the end of the day, it's just making the company larger and larger.

Will your expansion be across chemicals?

Our core will remain fluorine, it’s 90 percent of our business. Whether it's EV or fluorine or the a-age vertical, it's  all backed by fluoropolymers, which are fluorine linked.

What kind of capex are you looking at in GFL with new capacities, revenue streams planned? 

Very limited. GFL would only need about two hundred crore  to three hundred crore of capex in a year. All our primary capex is in GFCL EV.

How many listed companies would you continue with and what is the model there?

So certainly today we have four listed companies, three of which are operating entities: Gujarat Fluoro, Inox Wind, Inox Green. These will continue to remain listed. The fourth is IWEL (Inox Wind Energy Limited), which is a holding company with minority shareholders of IWL.... So that will get merged into Inox Wind post NCLT approval.

Are there plans for and opportunities to look at value unlocking?

Yes, certainly there will be various. unlocking opportunities within the chemicals business and also in the larger renewables platform, not at Inox Wind, not at Inox Green, but the larger renewable energy platform, whether it's IGREL or whether it's something else.

In chemicals for sure, within the two businesses we spoke of, which are SPVs of GFL, Plus, there are various other things we're doing in the chemical space, which could also potentially lead to more unlocking opportunities as we move forward.

Is there a timeline in place to unlock value in the two SPVs?

So, there is going to be value unlocking when we raise capital at a certain value. Now, naturally, as it is part of the DNA in our group, we list our companies once they become sizable and can stand on their own feet.