SJVN Ltd Q1 FY2024 Concall Summary

Key Takeaways

• A weak hydro quarter, but the build-out story is intact: Generation fell ~25% YoY on low snowmelt, dragging PAT down ~55%. Management framed this as a weather event, not structural, and pointed to a commissioning wave that will multiply installed capacity ~6x in three years.
• The project pipeline is now concrete and massive: Five Arunachal Pradesh hydro projects totaling 5,097 MW were formally allotted, with an MOU signing imminent. This locks in the path to the 25 GW by 2030 target.
• A 4x PAT leap is the explicit three-year promise: Management guided PAT to INR3,500-4,000 crores by FY27, up from a depressed base, driven by projects already under construction or at contract award stage.
• Arun-3’s economics look compelling, but the structure is opaque: Management targets a 16.5%+ ROE on a fixed lump-sum price, yet could not clarify whether the project is regulated, leaving a key return-protection question unanswered.
• What to watch next quarter: The MOU signing with Arunachal Pradesh, progress on the Arun-3 dam repair restart, and any update on monsoon-driven generation recovery in Q2.

The Quarter: A Weather-Driven Drop

• Generation collapse: Output fell ~25% YoY because water discharge in the Sutlej river was 25-30% lower, the result of a mild winter (less snowfall) and a mild summer (less snowmelt). Nathpa Jhakri and Rampur plants still ran at 110% availability, so the drop was purely hydrological.
• Revenue broke two ways: The INR341 crore YoY revenue decline split into INR71 crores from lower generation and INR289 crores from a one-time arrear that inflated last year’s Q1 (a Rampur tariff revision under a CRT order), plus INR19 crores from lower UI charges under the new DSM regime.
• Profit followed revenue down: PBT fell 41% and PAT fell ~55%, with total expenses decreasing only INR62 crores YoY, offering little offset. Total incentives also fell ~22% on the same DSM-driven UI charge decline.
• Receivables bright spot: Receivables dropped sharply from INR1,058 crores to INR329 crores, driven by J&K collections that shrank that state’s balance from over INR600 crores to INR80 crores.
• Secondary energy is no saviour: Generation beyond design energy sells at just INR1.20/unit vs design energy rates of INR4.25 (Rampur) and INR2.25 (Nathpa Jhakri), so excess water flow, when it comes, adds very little incremental revenue.
• Monsoon disruption already visible: The plant was shut down for 3.5 days in Q2 due to high silt, a seasonal risk that has now materialized.

Sharma: "in the coming three years, our installed capacity portfolio is going to be multiplied or increased by about six times."

The 25 GW Roadmap: From Ambition to Allotment

• Arunachal Pradesh award locks the path: Five hydro projects totaling 5,097 MW (Etalin 3,097 MW, Attunli 680 MW, Emini 500 MW, Amulin 420 MW, Mihundon 400 MW) have been allotted, with an MOU to be signed with the state government on August 12, 2023. This single award represents a material step toward the 25 GW target.
• Etalin is the crown jewel, and it is advancing: The DPR is ready, forest and environment clearances are in advanced stages, and management expects all formalities to complete in 1-1.5 years, construction to start in 1-1.5 years, and completion in 6-7 years, with an investment of ~INR40,000 crores. The Ministry of Environment and Forests has raised observations, a risk that is acknowledged but not yet resolved.
• Pumped storage is the next leg: The Government of India has indicated ~10 projects (13,000 MW) to SJVN across 3-4 states. Five to six projects are not viable due to wildlife sanctuary issues, but pre-feasibility reports are underway on the rest, and an MOU with the Government of Maharashtra is being entered separately. Management sees 5,000 MW of PSP capacity with INR45,000-50,000 crores capex over 7-8 years.
• Bundling solves the offtake question: If hydro PPAs are not secured during construction, the company plans to bundle hydro with solar and wind to sell round-the-clock power at an optimum rate, a strategy that de-risks the large hydro pipeline.
• Local opposition is an acknowledged, unquantified risk: Management conceded that "issues will always be there" regarding local opposition and court orders for Arunachal projects, but offered no specific plan or timeline for resolution, deferring action until after the MOU signing.

Sharma: "our target of 25 gigawatt by 2030 is rightly and quite visible. So we will definitely achieve that target of 25 gigawatt by 2030."

The Three-Year Commissioning Wave

• The 10,000 MW milestone is built on visible projects: Management stated that all 54 projects required to cross 10,000 MW in three years (10 in year 1, 19 in year 2, 25 in year 3) are either under construction, at contract award stage, or awaiting LOI after tariff vetting.
• Near-term commissions are stacked: Naitwar Mori (60 MW) within a month; Buxar Thermal Unit 1 (660 MW) by March 2024; Bagodara Solar (70 MW), Gura and Gujrai (125 MW each) this calendar year; Raghanesda Solar Park and Punjab solar (100 MW) in the first year; Bikaner Solar (250 MW) this FY.
• Year-two wave is larger: Arun-3 (900 MW) after one year, within two years; Buxar Unit 2 after one year; Bikaner remaining 750 MW after one year; BBMB Floating Solar, Jamui and Banka (~200 MW), BBMB Ground Mounted (33 MW) all after one year; plus Gujarat projects (~860 MW), Maharashtra (600 MW), Gujarat wind (100 MW), SEKI projects (200 MW), Punjab (1,200 MW), and Rajasthan RUVNL (100 MW) in the second year.
• Arun-3 dam repair is the critical path item: The diversion tunnel caving-in problem is resolved, repairs are ongoing, and dam construction will restart by September end. The project is scheduled for commissioning between September and December 2024, so any further slippage on the dam restart would directly threaten that timeline.
• Delays are expected but contained: Management does not rule out delays across the three-year portfolio but insists they will be "only in months, not in years," a claim that will be tested as the wave of projects moves from planning to execution.

Sharma: "delay, if any, is there in the next three years, I do not rule out this fact that there will not be delay. But delays will be only in months, not in years."

Financial Trajectory: The 4x Promise

• Revenue scales with capacity: Management guided total revenue to INR14,000-15,000 crores after three years, a 4x-5x increase from the current base, driven entirely by the commissioning wave.
• PAT path is explicitly mapped: Next year ~INR1,900 crores; after two years INR3,000-3,300 crores; end of three years INR3,500-4,000 crores, a 4x increase. This trajectory assumes projects commission on schedule and hydro generation normalizes.
• Debt will double to fund it: Consolidated debt is expected to rise from ~INR15,000 crores currently to ~INR27,000-28,000 crores in three years. Management expressed confidence in financing, citing strong cash flows for the next 7-8 years, a REC MOU for INR50,000 crores, and access to bonds, ECB, and banks. Year-wise debt details were not provided.
• Margin profile will compress but stay healthy: Hydro margins are higher; wind and solar margins will be lower. Management expects the overall margin profile to remain in the 40-odd percent range, implying the mix shift toward renewables will dilute but not collapse profitability.
• Arun-3 ROE is targeted above 16.5%: Management stated a target of at least 16.5% ROE and said "it will be more than that even," but the project operates under a fixed lump-sum price, not a CRC-determined tariff, and management could not clarify whether it is regulated, leaving the return protection mechanism ambiguous.

Sharma: "We have targeted ROE of at least 16.5% on this. It will be more than that even."

Generation Outlook & Hydrology Risk

• Q2 expectations are modest: Management expects at-par or slightly improved generation versus previous years, with full water available in the monsoon season. The 3.5-day silt shutdown has already occurred.
• Q3 and Q4 depend on snowfall: Generation in the second half hinges on winter snowfall and temperature; if conditions are good, improvement is expected. This is the same hydrological variable that drove the Q1 miss, so the range of outcomes is wide.
• New capacity adds incremental generation: Additional generation will come from projects being commissioned this year (Naitwar Mori, solar projects), providing a partial hedge against hydro volatility.
• Design energy recovery offers some protection: If actual water flow is below design energy, the company can recover the variable component of the tariff through regulations and also pursues insurance claims, a partial safety net for hydrological shortfalls.
• DSM regime change is a structural headwind: UI charges are lower under the new DSM regulations, and the grid regime is now very strict with penalties and incentives, making the process more complicated and reducing a historical revenue stream.

Guidance & Commitments

Key Metrics