Saatvik Green Energy Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record year, soft Q4 exit: FY26 revenue grew ~111% YoY with record profitability, but Q4 non-DCR margin compressed to 7% as war-driven commodity and currency spikes hit fixed-price contracts.
• Backward integration is the margin story: The 2.4 GW cell line starts production in H2 FY27, and management expects margins to "significantly improve" once internal cell supply replaces imported cells.
• Order book provides 18-month visibility: A robust ~5.89 GW order book, though cash conversion dipped to 17-18% in Q4 on PSU receivables and late-quarter dispatches.
• Capex cycle is accelerating, not slowing: FY27 capex of ₹1,700 crore funds the cell ramp and Phase II expansion to 3.6 GW; FY28 adds ₹1,800-2,000 crore for a 6 GW ingot project, with debt-equity expected to stay between 1x and 1.5x.
• What to watch next quarter: Whether the war-driven input cost pressure eases as management expects from Q2, the pace of cell line commissioning and stabilization, and any new order announcements that management flagged as imminent.

Q4 Margin Compression

• Three simultaneous shocks: Silver prices drove up solar cell procurement cost, aluminum frame and copper costs rose, and the rupee depreciated from ₹88 to ₹94 against the dollar after the war began on February 20, a 5-6% swing that could not be passed through on fixed-price contracts with LCs already fixed at earlier rates.
• Non-DCR margin halved: Q4 non-DCR margin fell to 7% versus the FY26 average of 12%, concentrated in the fixed-price, non-DCR segment where input cost increases hit immediately.
• Industry-wide, not company-specific: Management stressed the compression is "across every industry and every business right now," with oil up from \$60 to \$100 affecting encapsulant, freight costs rising, and the dollar strengthening daily, while customers with fixed project costs and PPAs have limited ability to absorb increases.
• Cash conversion also softened: Cash conversion fell to 17-18% because of large PSU orders with 90-120 day recovery cycles, heavy dispatches concentrated in the last 30-45 days of Q4 with recovery expected in April-May, and dispatches from northern India to southern India taking time.
• Creditor days normalized deliberately: Management paid creditors better to secure better pricing amid war volatility and to reduce cost of production, a trade-off that compressed working capital but aimed to protect future margins.

Mathur: "So there is a compression, but it is across every industry, I would say, and every business right now. The same is in our industry as well right now."

Backward Integration: The Cell Manufacturing Bet

• Phase I on track: The 2.4 GW cell line has civil and building work ready; module equipment move-in starts June, cell equipment move-in starts July, and production is expected to begin in H2 FY27.
• Phase II expanded mid-flight: The second phase was increased from 2.4 GW to 3.6 GW, citing policy stability and market demand for local cell manufacturing; civil work starts in August after Phase I completion, with the full 6 GW expected operational by June-July 2027.
• ALMM tailwind: ALMM-II takes effect June 1, and ALMM-III has been declared starting June 2028, requiring at least three manufacturers with 15 GW cumulative capacity, a regulatory push that favors domestic cell producers.
• Cell sales strategy is flexible: Cells are built primarily for self-consumption, but management will sell externally if better margins are available, taking an informed call based on the order book and prevailing margins.
• Stabilization path: Initial focus will be on the retail segment (PM Surya Ghar, KUSUM) where specifications are less demanding; management expects to stabilize efficiencies quickly and enter the C&I and large utility segment by end of Q3 or beginning of Q4 FY27.

Mathur: "I cannot give you a number per se, but what we see is, you know, overall what is happening long-term is very good for the industry. Short-term pain is there, but overall, you know, the margins will significantly be better in the second half of the year."

Order Book & Revenue Visibility

• 5.89 GW order book: Provides strong forward revenue visibility with an 18-month execution timeline, though individual orders range from 3 to 12 months.
• EPC and solar pumps are small, selective contributors: EPC contributed 150 MW (3-4% of top line) and solar pumps ~₹50 crore (1% of top line); management takes only profitable, high-margin EPC work and expects EPC to stay in the same 3-4% range in FY27.
• New order announcements pending: Management stated it is working on several DCR and non-DCR opportunities and expects to announce new orders soon.
• Capacity utilization healthy: Remained over 84% during FY26, indicating demand absorption kept pace with the rapid revenue expansion.

Capex, Balance Sheet & Funding

• FY27 capex: ₹1,700 crore for the cell manufacturing ramp and Phase II expansion, funded through a mix of debt and equity, with equity coming from internal accruals and debt being arranged.
• FY28 capex: ₹1,800-2,000 crore for a 6 GW ingot and wafer manufacturing project, marking the next leg of backward integration beyond cells.
• Debt-equity guardrail: Management expects the ratio to remain between 1x and 1.5x, a significant improvement from the 1.34x in FY25 that already fell to 0.65x in FY26.
• Balance sheet transformed: Debt-equity improved to 0.65 from 1.34 in FY25, reflecting the equity-funded growth and profitability of FY26.

Portfolio Expansion Beyond Modules

• Encapsulant: A 2 GW EPE encapsulant facility was commissioned in Ambala, with the roadmap expanded to 5 GW; the product serves both internal consumption and external sales, with some manufacturers paying a premium.
• Transformers: Entry via an 80% stake acquisition in Melcon Transformers and Electricals Private Limited, extending the portfolio into transmission infrastructure.
• Battery storage: Saatvik Power Storage Solutions Limited was launched, focused on battery energy storage systems, with expansion planned across BESS for the C&I segment, hybrid and off-grid inverters, and B2C-focused solar kits.
• Ancillary components: Active expansion into aluminum frames, ribbons, junction boxes, and other critical solar components, building a vertically integrated supply chain.
• Power electronics: The UDAY Series on-grid inverters were launched as part of the power electronics portfolio.

Garg: "This is not a cyclical opportunity; this is a multi-decade structural transformation of India's energy infrastructure, and Saatvik is positioning itself accordingly."

Margin Outlook & Pass-Through Dynamics

• H2 recovery thesis: Management expects the war to halt from Q2, and cell production starting in H2 will boost the bottom line; Q1 FY27 will remain softer due to continuing war effects, but margins should "significantly improve" in H2.
• Pass-through is order-specific: On new orders, some allow fluctuation pass-through and some require absorption; management declined to give a specific margin range, stating "it depends from order to order."
• Return to prior margin levels uncommitted: When asked if margins can return to the previous ~15% level, management called it "difficult to give a number" while expressing confidence in the directional improvement.
• Cell production guidance deliberately conservative: Management has internally ambitious targets but will give conservative numbers to the market, expecting to optimize production in H2; no specific volume guidance was provided.

Mathur: "So it depends from order to order. For some of the orders, we will be able to pass on that, you know, change and for other, we will have to absorb some of some of that compression."

Guidance & Commitments

Key Metrics