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Orient Green Power Company Ltd Management Discussions

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Jul 4, 2025|12:00:00 AM

Orient Green Power Company Ltd Share Price Management Discussions

Global Economy Overview

Over the previous year, the global economy has navigated a landscape characterized by resilience in the face of difficulties. The year 2024 witnessed elections across some of the worlds largest economies and increased regional instability due to Russia-Ukraine and Israel-Hamas conflicts. Nonetheless, global growth in 2024 was fairly moderate and steady and is estimated to have grown at 3.3% according to the International Monetary Fund (IMF) 1. Risks to growth have increased due to trade related uncertainty following series of tariff and counter tariff measures by the United States and its trading partners.

IMF in its April 2025 update had estimated global growth for 2025 and 2026 at 2.8% and 3.0% respectively considering the tariff rates announced and tariff related uncertainty. With the temporary suspension of extra tariff and if the status quo were to be continued, it is expected to provide a major boost to the global economy. growth, as per second advanced estimate by National Statistical Office (NSO), is estimated at 6.5% for 2024-25, nonetheless, the growth is much below that achieved in the last year. Coupled with softening of CPI inflation, to support economic growth, Reserve Bank of India (RBI) embarked on liquidity and monetary policy easing in second half of 2024-25.

At its monetary policy meeting in October 2024, RBI changed its stance to neutral from withdrawal of accommodation and in its meeting in December 2024 it reduced the Cash Reserve Ratio (CRR) maintained by banks to 4.00% from 4.50%. Further, in its February 2025 monetary policy meeting, it reduced the policy repo rate from 6.50% to 6.25% and further to 6.00% in the April 2025 monetary policy meeting while also changing its stance from neutral to accommodative. In absence of any shocks, the change in stance to accommodative indicates RBIs focus towards stimulating economic growth through softer rates from possible rate cuts.

Indian Economy Overview

The Union Budget 2024-25 laid the road map for achieving the aspirations of Viksit Bharat @ 2047. Union Budget 2025-26, while fostering inclusive long term growth in line with Visit Bharat @ 2047 vision also reaffirmed the governments commitment to fiscal discipline. The Income Tax Bill 2025, aimed at simplifying the existing Income Tax Act 1961, was also introduced in the Budget Session of the Parliament. The bill proposes April 01, 2026 as date of commencement and is expected to be taken up for discussion in the upcoming Monsoon Session of Parliament.

In 2023-24, the GDP grew at rate of 9.2%, the highest in the last 12 years (except for 2021-22)2 This growth can be attributed to double digit growth in manufacturing, construction and financial, real estate & professional services sector. However, GDP growth estimated to have slowed down to 6.0% in H1 2024-25 compared with 8.2% in H1 2023-243. Growth in first quarter was affected due to lower government expenditure and capex from election related restrictions, while deceleration in private consumption and investment impacted the GDP growth in the second quarter although government spending recovered. In the third quarter of 2024-25, GDP growth rate gradually improved to 6.2% from the low of Q2 2024-25 driven by recovery in consumption demand and overall investment. The GDP

Furthermore, Union Budget 2025-26 also revised downwards tax slab across all income tax brackets and the income tax relief is expected to enhance disposable income, boost household consumption and investments. Coupled with bright prospects for agricultural sector from healthy reservoir level, robust crop production and anticipation of normal monsoon, for 2025-26 GDP growth rate is projected at 6.5% with 4.0% CPI inflation while for 2026-27 the GDP growth rate is estimated at 6.7% with 4.3% inflation4.

Forward looking, the domestic GDP growth rate has started to improve from the second half of FY 2024-25 and Indias economic growth in near term is expected to improve supported by healthy rural demand, gradually improving urban demand, uptick in discretionary spending, improvement in investment activity due to sustained higher capacity utilization, governments infrastructure spending and healthy balance sheets of banks and corporates while risks from geopolitical conflicts, protectionist trade policies of major economies, volatility in global financial and commodity market and adverse climatic events are to be monitored. Over the medium-term, to sustain, reinforce Indias medium term growth potential and to support higher economic activity levels, improvement in global competitiveness, structural and regulatory reforms including deregulation are necessitated.

Indian Power Sector Overview

India is the third largest producer and consumer of electricity globally5. As on 31st March 2025, India had total installed power generation capacity of approx. 475 GW6. Over the last 15 years, the total generation capacity has grown nearly 3 times (at CAGR of about 8%) from 159 GW in 2009-10 to 475 GW in 2024-25. The bulk of the capacity additions has been in the renewable energy space with share of renewable energy source (RES*) including large hydro increasing from around 33% in 2009-10 to nearly 47% in 2 0 24-257. Private sector has been the major driver of the capacity additions with their share in the overall installed capacity increasing from 18% in 2009-10 to nearly 54% in 2024-25.

The source wise break up of capacity as on 31st March 2025 is as below:

*RES excludes large hydro.

The total power generated has grown at CAGR of about 6% from 805 BU in 2009-10 to about 1,829 BU in 2024-25. However, despite the significant capacity additions in the renewable energy space, dependence on Thermal Power continues to be high. In the last 15 years, thermal Power share of generation has declined by only about 5% i.e. from 80% in 2009-10 to 75% in 2024-25. The decline in thermal share is being taken by renewable energy sources.

The source wise break up of generation in percentage as on 31st Mar 2025 is as below:

On the supply front, the increase in the power generation capacity has had a positive effect. The supply - demand deficit which was nearly 10% in 2009-10 has declined to 0.1% in 2024-25 (upto February 2025) with peak deficit also declining from 12.7% in 2009-10 to miniscule levels in 202425 (upto February 2025). The power supply has grown at nearly 6% CAGR over 2009-24 outpacing 5% CAGR demand growth during the same period. Nonetheless despite the demand and consumption growth, Indias per capita power consumption is only 1,395 units in 2024 when compared with international average of 3,358 units.

For the year 2024-25, India generated 1,829 BU as against 1,739 BU generated during 2023-24, a growth rate of about 5.2%. However, the growth rate has decelerated from CAGR of around 7.3% over 2021-25 due to the slowdown in the economy.

On the capacity front, India added near 33 GW of power generation capacity in 2024-25 up from about 26 GW added during 2023-24. Nearly 88% of the additional capacity was in the renewable energy segment. Over the next 5 years the annual average capacity addition will be nearly 50 GW8 given Indias ambitious target of achieving 500 GW of non-fossil fuel based power generation capacity by 2030.

Renewable Energy Sector

Indias energy landscape has undergone a major transition, with the focus shifting towards renewable means in the era of sustainability. As the world repositions itself towards sustainability, Indias renewable sector unleashes a new scope of opportunities.

Over the past decade, India has made significant strides in diversifying its energy mix, gradually reducing its dependence on conventional fossil fuels. This rapid shift has made India the fourth largest renewable energy based power generator globally9 with total installed renewable energy capacity of 220 GW as on 31st Mar 202510. The renewable energy capacity has grown at CAGR of around 10% from 52 GW in 2009-10 to 220 GW in 2024-25.

The year 2024-25 saw a record-breaking 29.5 GW of renewable energy capacity being added - about 24 GW of solar capacity, 4 GW of wind capacity and balance others, reflecting near two-fold increase in solar and wind installations compared to 2022-23. This surge was driven by government incentives, policy reforms, and increased investments in domestic solar and wind turbine manufacturing.

With the government setting an enhanced target at the COP26 of 500 GW of non-fossil fuel-based energy by 2030 while also aiming at meeting 50% of its energy requirement from renewable energy, the outlook for the sector is overwhelmingly positive with no signs of slow down11.

In order to achieve the objectives, Indian Government, apart from traditional on shore solar and wind capacity additions, is also focusing on leveraging alternate avenues through rooftop solar power additions under PM Surya Ghar Mufti Bijli Yojana Scheme and through offshore wind projects with the announcement of Viability Gap Funding providing a fillip and paving the way for offshore wind capacity development. Simultaneously to secure power offtake, Energy Conservation (Amendment) Act, 2022 was also notified which mandates minimum share of non-fossil energy consumption for designated consumers from 01st April 2024.

As on 31st March 2025, of the total capacity of 220 GW, solar power is having largest share of nearly 48% followed by wind and hydro power at about 23% each and the balance bio-mass. The segment wise percentage break up of renewable energy capacity as on 31st Mar 2025 is as below:

5%

India has the fourth largest installed wind energy based power generation capacity in the world with total capacity of 50.03 GW as on 31st March 2025. After modest growth of 5% CAGR over 2018-2023, the installed capacity has increased nearly by 8% in 2023-24 and by further 9% in 2024-25. As per Ministry of New and Renewable Energy (MNRE) nearly 26.19 GW of wind energy capacity additions are under implementation stage while another 0.6 GW are under bidding stage as on 31st December 2024. The target is to reach 140 GW of wind energy capacity by 203012.

The gross wind power potential as per MNRE in India is assessed at about 1,164 GW (at height of 150 meters above ground level). Most of the potential exists in eight key states amongst which Rajasthan (24%) hold the highest potential. However, as at 31st December 2024, Gujarat (26%) followed by Tamil Nadu (24%) hold the majority of the wind energy installed capacity in the country. Nonetheless, given the current installed wind energy capacity being only about 4% of the overall potential, significant capacity expansion opportunities exists across all the key states.

With regards to the offshore wind energy capacity, as per MNRE, India has potential for about 71 GW of offshore wind energy capacity in states of Gujarat and Tamil Nadu13. The National Offshore Wind Energy Policy was approved in 2015 and MNRE had targeted capacity of 30 GW by 203014. The Government now plans to auction 37 GW of off shore wind energy projects by 2030. However, the segment is yet to kick off for want of financial and non-financial support.

The financial support has been addressed partially by way of viability gap funding (VGF). In 2024, the Union Cabinet approved a Rs. 7,453 crore Viability Gap Funding (VGF) scheme to set up Indias first offshore wind energy projects. The scheme includes Rs. 6,853 crores for 1 GW of offshore wind capacity (500 MW each off the coasts of Gujarat and Tamil Nadu) and Rs. 600 crores for port upgrades to support logistics for these projects15. In addition to financial support, critical non-financial support (infrastructure access such as ports, transmission lines) are also needed to enhance the segment attractiveness.

One of the major advantages of wind energy is its inherent strength to support rural employment and uplift of rural economy. Further, unlike all other sources of power, wind energy does not consume any water- which in itself will become a scarce commodity. Overall, the future of Wind Energy in India is bright as energy security and selfsufficiency is identified as the major driver.

CCDC Wind Initiative16

With the objective of advancing Indias wind energy project development, in June 2020, the Centralized Data Collection and Coordination (CCDC) Wind Initiative was launched with the objective to facilitate wind energy development through centralized data collection and research, to provide accurate wind resource assessment for better site identification and to promote private sector investments and public-private partnerships in wind energy projects.

The initiative provides valuable insights for project developers, helping them identify the most promising

locations for wind energy projects and also supports the efficient implementation of large-scale wind energy projects while encouraging investments in the wind sector. The Government, through National Institute of Wind Energy (NIWE), has installed over 800 wind-monitoring stations all over country and issued wind potential maps at 50m, 80m and 100m above ground level. These initiatives have resulted in enhanced wind resource mapping which in turn have contributed to the successful identification of over 50 potential wind energy sites and significant growth in wind energy capacity to reach 50.03 GW in March 2025 including development of over 10 GW of new wind energy capacity from 2020-2024.

Solar Energy

India is 5th largest globally in terms of solar power installed capacity with capacity of 105.64 GW as on 31st March 2025. The year 2024-25 was a record breaking year for solar power sector as India crossed 100 GW in installed capacity. In the past decade, the solar power capacity has witnessed monumental increase from only 2.63 GW in 2013-14 to over 100 GW in 2024-25. The share of solar power in renewable energy capacity has also increased multifold over the last decade to reach 48% in 2024-25 from a minuscule share till 2013-14. Similarly, the share of solar power generation in generation from total renewable energy sources has also increased from minuscule levels in 2013-14 to reach nearly 36% in 2024-25. Some of the key growth drivers of the sector in the past decade are decline in module prices, availability of financing at low cost and governmental thrust.

The potential solar power in the country has been assessed at 750 GW by National Institute of Solar Energy (NISE). The Optimal Generation Mix 2030 Report of Central Electricity Authority estimates solar power addition of 292 GW by 202930. As of 31st December 2024, 120.5 GW capacity was under implementation and an additional 78.67 GW was under tendering stage.

PM Surya Ghar Muft Bijli Yojana approved in 2024 aims at adding about 40-45 GW of overall solar power rooftop capacity by 2026-27. The rooftop solar installation witnessed tremendous growth in 2024 with 4.59 GW of capacity installed reflecting a 53% increase over the previous year17. As of 31st December 2024, the all India installed capacity of roof top solar power was about 15.67 GW.

India has also made significant strides in solar module manufacturing. In 2014, the country had a limited solar module production capacity of about 2 GW. Over the past d ecad e, capacity has surged to about 80 GW currently.

Further, solar cell manufacturing capacity of about 25 GW

have also been installed. It is expected that module

manufacturing and cell manufacturing will reach capacity of

150 GW and 100 GW respectively by 203018.

SWOT Analysis

Strength

1. We operate in the rapidly growing renewable energy sector, which benefits from increasing demand for electricity and supportive government policies.

2. We have a flexible business model that is scalable and sustainable and that enables us to deliver growth from a diversified and balanced portfolio of projects.

3. We have an experienced management and operating team with relevant industry knowledge and expertise, including the ability to improve operational performance.

4. Increasing demand from C&I customers for power from Renewable sources to reduce their carbon foot print will provide us with opportunity to expand our business.

5. Long association with established track of good service with customers gives us the advantage of being the most preferred suppliers for them.

6. Renewable energy reduces greenhouse gas emissions and improves air quality, addressing climate change and promoting public health.

7. Continued innovation can further reduce costs and improve efficiency.

8. Improving financial health with all major SPVs receiving investment grade rating from Credit Rating Agencies (CRA).

Weaknesses

1. Revenues from our business are exposed to market based electricity prices.

2. Our business is seasonal in nature and is dependent on weather conditions that are unpredictable and beyond our control.

3. We rely on Original Equipment Manufacturers (OEMs) and other service providers for maintaining our windmills.

4. While costs are declining, renewable energy

technologies still require significant upfront

investment.

Opportunities

1. Government of India has set an ambitious target of 500 GW for renewables by 2030 and this is expected to give ample opportunity for growing the business.

2. Increasing demand from C&I customers for power from Renewable sources to reduce their carbon foot print will provide us with opportunity to expand our business.

3. Improved credit ratings, and access to capital markets enable us to raise capital for funding capital expansion projects.

Threats

1. Transmission, evacuation constraints and the possibility of grid curtailment with increase in penetration of RE Power

2. Changing government policies with regard to Renewable Purchase Obligations and incentivizing other modes of renewable energy, Regulatory uncertainty.

3. Technological advancements in the renewable energy sector such as reduction in cost of solar & new wind power may make our plants obsolete/unviable.

4. Delays in recovery of dues from state owned distribution companies (Discoms) may result in acute working capital shortages.

5. Repowering old windmills involves significant capital expenditure.

6. The companys capital structure include significant amounts borrowed from various banks and financial institutions. Increase in the interest rates affects the profitability of the company.

Our Proposed Solar Business

To expand our presence in the renewable energy space our company has set a target to reach an installed capacity of 1 GW by venturing into wind, solar and/or wind-solar hybrid. To start with our company proposed to develop through a subsidiary, Delta Renewable Energy Private Limited a solar capacity of 39.6 MW in two phases with 19.8 MW developed under each phase. The first phase of the 19.8 MW AC solar power project was proposed to be developed using proceeds from the rights issue. In light of evolving trends in the solar energy market, the planned capacity to be developed with these proceeds has been revised to 25 MW AC, as against the

stated 19.8 MW AC capacity, without any increase in the overall project outlay.

Segment Wise and Product Wise Performance

The company, along with its subsidiaries, is engaged exclusively in the "generation and sale of power from renewable energy sources”. As this constitutes the sole business segment, the financial performance has been discussed accordingly under the section titled Financial Performance.

Revenues from operation for the year amounted to Rs. 263 crore as against Rs. 259 crore during FY24, higher by about 2%. The current year was a moderate one in terms of wind availability which resulted in only a marginal increase in revenue from operations. Total Income on consolidated basis for the year stood at Rs.283 Crores as against Rs.269 Crores during FY24, higher by about 5% as other income during the year was higher when compared to previous year.

EBITDA for the year stood at Rs. 189 Crore as against Rs. 185 Crore reported during last year, marginally higher by 2% as the other income for the current year is higher. EBITDA Margin for the current year stood at 67% as against 69% reported during the last year. Nonetheless, operating EBITDA margin improved to 72% in the current year as against 71% in FY24.

Depreciation for the year amounts to Rs. 84 crores as against Rs. 82 crores in the previous year, higher by about 2%.

Debt (Rs. Cr)

FY21 FY 22 FY23 FY 24 FY25

Interest outgo for the year stood at Rs. 72 crore as against Rs. 80 crore in the previous year, lower by10%. The reduction is mainly attributed to timely servicing and progressive reduction in debt from repayment of debt obligations and credit rating improvement to investment grade. During the previous year, over Rs.780 crore of secured borrowings were refinanced at interest rates which were ~300 bps lower. The refinancing and debt repayment have significantly reduced the debt burden on the company. Consequently, the interest coverage for the year improved to 2.62 times, as against 2.31 times in FY24.

The profit before exceptional items for the year stood at Rs. 33 crore as against Rs. 22 crore in the previous year representing a growth of 48%.

Significant Changes in Key Financial Ratios

The details of significant changes in key financial ratios for the year are comprehensively detailed in the Financial Statements.

Details of any change in Return on Net Worth

The details of change in Return on Net Worth for the year are provided in the Financial Statements.

Challenges

Evolving policy changes regulatory uncertainty and ongoing disputes with distribution companies (Discoms) continue to pose challenges for the company. While many of these issues have been effectively addressed through formal representations, delays in their resolution remain a concern.

Dependence on Original Equipment Manufacturers (OEMs) for the supply and servicing of critical spares and components poses a significant challenge - which may lead to increased cost of maintenance and higher down time. The company has been progressively developing alternative sources for critical spares to reduce dependence and also carries adequate inventory of select spares with long lead time to minimise the downtime.

Human Resources

Our employees are key contributors to our business success. As of March 2025, OGPL has a workforce of 135. We believe the quality and commitment level of our professionals is at par / highest amongst the power generating companies. OGPL continues to focus on key drivers of employee engagement like career growth, learning opportunities, fair performance and rewards and employee well-being by enhancing its HR processes for scale, agility and consistent employee experience.

Further, it also organizes workshops enhancing the skill sets of its employees and promoting their overall involvement. Frequent and outcome-oriented session has resulted to superior employee experience. The Company also assigns individual goals to the employees, consistent with the overall objective of the business which not only acts as a strong motivator but also contributes towards improving the overall efficiencies of the business.

Lastly, the Companys transparent working environment wherein employees can raise their concerns and opinions results in high engagement levels and lower employee turnover ratio.

Internal Controls and adequacy

The Company has independent Internal Audit team with well- established risk management processes both at the business and corporate levels. Internal Auditor submits their reports, directly to the Chairman of the Audit Committee of the Board of Directors, which ensures process independence.

The Company believes that every employee has a role to play in fostering an environment in which controls, assurance, accountability and ethical behaviour are accorded high importance. This complements the Internal Audits conducted to ensure total coverage during the year.

The overall aim of the companys internal control framework is to assure that operations are effective and well aligned with the strategic goals. The internal control framework is intended to ensure correct, reliable, complete and timely financial reporting and management information.

Managements Responsibility Statement

The management is accountable for making the Companys consolidated financial statements and related information mentioned in this annual report. It believes that these financial statements fairly reflect the form and substance of transactions, and reasonably represents the companys financial condition and results of operations in conformity with Indian Generally Accepted Accounting Principles / Indian Accounting Standards.

Safe Harbour

Some of the statements in this Annual Report that are not historical facts are forward looking statements. These

forward looking statements include our financial and growth projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our business and the markets in which we operate. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward looking statements. These risks include, but are not limited to, the level of market demand for our services, the highly competitive market for the types of services that we offer, market conditions that could affect our services, our ability to create, acquire and build new businesses and to grow our existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market fluctuations in India and elsewhere around the world, and other risks not specifically mentioned herein but those that are common to any industry.

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