Inox Green Energy Services Ltd Management Discussions

Management Discussion and Analysis

Economy Review Global Economy

The global economy demonstrated remarkable resilience as it navigated various headwinds, including persistent geopolitical turmoil, supply chain disruptions, rising inflation and increasing energy and food prices. However, owing to effective monetary policies implemented by central banks worldwide, inflation steadily returned to its target levels. Global growth, estimated at 3.3 % in 2023 further fall to 3.2% in 2024. Global headline inflation is expected to decrease from an annual average of 6.8 % in 2023 to 5.9 % in 2024 and 4.5 % in 2025,

Advanced economies are forecasted to grow by 1.7% in both 2023 and 2024. In the United States, growth is expected to increase from 2.5% in 2023 to 2.6% in 2024, driven by gradual fiscal tightening and a softening labor market that reduce aggregate demand. In contrast, growth in emerging markets and developing economies is projected to decrease from 4.4% in 2023 to 4.3% in 2024. This stability is due to a slowdown in emerging and developing Asia, counterbalanced by rising growth in the Middle East, Central Asia, and sub-Saharan Africa. Low-income developing countries are expected to see gradual growth, increasing from 3.9% in 2023 to 4.3% in 2024 as some growth constraints ease. Growth in emerging and developing Asia is forecasted to decline from an estimated 5.7% in 2023 to 5.4% in 2024, with Chinas growth projected to slow from 5.2% in 2023 to 5.0% in 2024¹.

Outlook

According to the IMF World Economic Outlook for July 2024, the global economy is expected to grow by 3.3% in 2025. Advanced economies are projected to see a rise of 1.8% in the same year. In advanced economies, the revised forecast indicates that the pace of disinflation will slow in 2024 and 2025. This is due to the expectation of more persistent inflation in service prices and higher commodity prices. However, the gradual cooling of labor markets, combined with an anticipated decline in energy prices, should help bring headline inflation back to target by the end of 2025. In emerging markets and developing economies, inflation is expected to remain higher and decrease more slowly compared to advanced economies. Nevertheless, thanks to falling energy prices, inflation is already approaching pre-pandemic levels for the median emerging market and developing economy.

Global headline inflation is forecasted to decrease from 5.9% in 2024 to 4.5% in 2025, with advanced economies likely to reach their inflation targets sooner than emerging and developing markets. For emerging markets and developing economies, growth is anticipated to remain stable at 4.3% in both 2023 and 2024. Growth in emerging and developing Asia is expected to decrease from 5.4% in 2024 to 5.1% in 2025. In China, growth is projected to slow to 4.5% in 2025 as the effects of one-time factors such as the post-pandemic surge in consumption and fiscal stimulus wane, coupled with ongoing weakness in the property sector².

Indian Economy

According to the provisional estimates of Indias real GDP by Ministry of Statistics and Programme Implementation (MoSPI), the GDP is estimated to reach INR 173.82 lakh crore in 2023-24, compared to the First Revised Estimates (FRE) of INR 160.71 lakh crore for 2022-23. The growth rate for Real GDP in 2023-24 is projected at 8.2%, up from 7.0% in 2022-23. Nominal GDP, or GDP at Current Prices, is expected to attain INR 295.36 lakh crore in 2023-24, up from INR 269.50 lakh crore in 2022-23, indicating a growth rate of 9.6%.³

In the industrial sector, manufacturing Gross Value Added (GVA) grew due to increased corporate profitability from reduced input costs. Production in infrastructure and capital goods benefited from the governments focus on capital expenditure. The government continued to support the industrial sector, particularly in emerging areas. To advance the renewable energy initiative, royalty rates for the extraction of crucial minerals such as lithium, niobium, and rare earth elements (REEs) were set to attract bidders in the auction process. Additionally, the government introduced a viability gap funding (VGF) scheme to support the development of battery energy storage systems (BESS) by reducing storage costs for distribution companies and consumers. The Pradhan Mantri Surya Ghar: Muft Bijli Yojana represents a major step towards promoting sustainable energy solutions⁴.

Outlook

India could become the worlds second-largest economy by 2031 and the largest by 2060, driven by a stable investment rate, macroeconomic and financial stability, favorable demographics, and growth multipliers such as digitization, according to the Reserve Bank of India (RBI) deputy governor . With the Government of India emphasising on growth-inducing capital spending, it is expected to continue in FY 2024-25 as well, with more than half of the borrowings allocated for capital outlays. The central government has extended the financial assistance scheme for states capital expenditure to FY 2024-25, with an allocation of INR 1.3 lakh crore.

With the planned reduction in gross market borrowings from 5.3% of GDP in FY 2023-24 (Revised Estimate) to 4.3% of GDP in FY 2024-25 (Budget Estimate), it is expected to increase the flow of funds to the private sector and support private investment. According to estimates, CPI inflation for FY 2024-25 is projected at 4.5%, with balanced risks. To sustain the path until inflation reaches the 4% target on a durable basis, the Monetary Policy Committee (MPC) kept the policy repo rate unchanged at 6.5% in its April 2024 meeting⁵.

Industry overview

Global renewable energy sector

Global annual additions to renewable energy capacity surged by nearly 50% to approximately 510 gigawatts (GW) in 2023 marking the highest growth rate observed in the past two decades. Ahead of the COP28 climate conference in Dubai, the International Energy Agency (IEA) emphasised the need for governments to support five key actions by 2030, including the ambitious target of tripling global renewable power capacity. These priorities were echoed in the Global Stock take text adopted by 198 governments at COP28, aiming to triple renewable energy capacity and double annual energy efficiency improvements, annually, until 2030. If the target of tripling global renewable power capacity in the electricity sector by 2030 is achieved, it will help in aligning with the International Energy Agency (IEA)s Net Zero Emissions reaching 11,000 GW by 2050. However, based on current policies and market conditions, global renewable capacity is projected to reach 7,300 GW by 2028, suggesting global capacity would more than double from its current level by 2030.

Chinas accounts for almost 60% of new renewables capacity expected to come online by 2028. Despite the phase-out of national subsidies in 2020 and 2021, the deployment of onshore wind and solar PV in China is accelerating, facilitated by economic viability of these technologies and supportive policy environments. Furthermore, Solar PV and onshore wind capacity additions are anticipated to more than double in the United States, the European Union, India and Brazil, as compared to the last five years.

In addition to this, with spot prices for solar PV modules declined by nearly 50% year-on-year in 2023, manufacturing capacity increased three-fold as compared to 2021. With the manufacturing capacities steadily strengthening, global supply of solar PV will reach 1,100 GW by the end of 2024, increasing three times than the current forecasted demand. In 2023, approximately 96% of newly installed utility-scale solar PV and onshore wind capacity had lower generation costs than new coal and natural gas plants.⁶

Global wind O&M market

With the renewables sector marking a nearly 50% increase from the previous year, it proved to be particularly significant period for wind energy as it recorded additions of both 106 GW in onshore wind and 10.8 GW in offshore wind⁸. However, the industry faced several headwinds, including permitting delays, grid constraints and economic volatility. Moving forward, global wind expansion needs to accelerate rapidly to meet the ambitious targets set for 2030.

Offshore wind commands a disproportionately large share of the global Operations & Maintenance (O&M) market in terms of value relative to its installed capacity, however, onshore wind remains the predominant segment in the overall O&M market in Megawattage terms. Currently, Europe leads as the largest regional market for wind O&M services, followed by Asia Pacific and North America. As per significant O&M markets, China is anticipated to emerge as the largest national market for wind O&M by the middle of decade, driven by extensive and rapidly expanding installed base. Other markets include the US, Germany, India and the UK.

The industry is witnessing a paradigm shift towards adopting predictive maintenance strategies leveraging AI, machine learning (ML), and drone inspections to enhance O&M efficiency. There is also a focus on innovating turbine components and materials to reduce failure rates and prolong operational lifespans.

Looking forward, challenges may persist especially in the offshore sector, especially due to increasing project depths and distances from shore. However, with the growing trend of consolidation among leading OEMs, it will help in acquiring independent entities, maintaining competitiveness, investing in necessary digital O&M solutions and expanding into new geographical markets⁹.

Indias renewable energy sector

As per REN21 Renewables 2024 Global Status Report, India ranks 4th globally in renewable energy installed capacity (including Large Hydro), 4th in wind power capacity and 5th in solar power capacity. India has set an ambitious target of achieving 500 GW of non-fossil fuel-based energy by 2030, representing the worlds largest expansion plan in renewable energy. Over the past 8.5 years, Indias installed non-fossil fuel capacity has increased by 396%. As of May 2024, renewable energy sources, including large hydropower have a combined installed capacity of 190.57 GW¹⁰.

India has been a key player in wind energy for over forty years, and as of May 2024, it has a cumulative installed capacity of 46.4 GW, making it the fourth largest producer of wind energy worldwide. To fulfill its Nationally Determined Commitments (NDCs), India is focused on expanding its wind energy capacity, which is essential for meeting the goal of deriving 50% of its electricity from nonfossil fuel sources by 2030 and achieving net-zero emissions by 2070. In the fiscal year 2023-24, Gujarat, Karnataka, and Tamil Nadu were recognized by the Minister of State for Power and New & Renewable Energy for their major contributions to expanding wind capacity. The Ministry of New and Renewable Energy (MNRE) has called for unified efforts to meet renewable energy targets, reinforcing Indias role as a leader in wind energy and contributing to a sustainable future.¹¹

India wind O&M market

The Indian O&M market has traditionally been dominated by both local and international wind turbine OEM players, controlling more than 75% of the market share. However, with the emergence of independent entities, the landscape has evolved in recent years, currently capturing 25% of the O&M market. Currently, there are over 10 Independent Service Providers (ISPs) offering comprehensive O&M services for various wind turbine generator (WTG) models nationwide, focusing on specific states such as Tamil Nadu, Gujarat, Rajasthan, Karnataka and Madhya Pradesh¹⁶.

Both Indian ISPs and OEMs have adopted advanced technologies and best practices, including handling heavy equipment methods, nacelle-mounted wind monitoring units, crane-less technology, central monitoring systems (CMS), lasers and advanced AI and ML for predictive maintenance through detailed data analytics. These technological advancements coupled with comprehensive service agreements between developers and O&M contractors have contributed to reducing per MW O&M costs¹². Additionally, government policies are designed to rejuvenate the wind energy sector, setting a goal to auction 50 GW of renewable projects each year, with 10 GW specifically allocated to standalone wind and 10 GW for hybrid/RTC/FDRE projects which would require the installation of at least 40% capacity of wind projects.Over the past 7-8 years, Indias installed wind power capacity has grown at a compound annual growth rate (CAGR) of around 7%. As of March 31, 2024, India ranks fourth globally in installed wind power capacity, with approximately 46 GW. Wind power contributes nearly 10.4% to Indias total installed utility power generation capacity, predominantly distributed across the southern, western and north-western states. Tamil Nadu, Gujarat, Maharashtra, Rajasthan, and Karnataka are the leading states for wind power installations.

According to the National Electricity Policy (Volume-I) Generation, the installed generating capacity required to meet the anticipated electricity demand in the year 2026-27 is estimated to be approximately 609.6 GW. This total includes approximately 277 GW of renewable generation capacity, with 73 GW from wind, 186 GW from solar, 13 GW from biomass and 5.2 GW from small hydro projects¹⁴.

Government initiatives Union Budget 2024-25 allocation

n line with its ambitious commitment to achieve 500 GW of renewable energy capacity by 2030 and to ensure that fifty percent of the countrys installed energy capacity comes from renewable sources, the Government of India, has allocated a substantial INR 19,100 crore for the Ministry of New and Renewable Energy in the Union Budget for 2024-25. This represents a remarkable 143% increase from the revised estimate of Rs 7,848 crore for the 20232024 Budget, underscoring a strong commitment to accelerating renewable energy projects and initiatives¹⁵.

Green Energy Corridor - Inter-State Transmission System for 13 GW RE Projects in Ladakh

The Ministry of New and Renewable Energy (MNRE) plans to establish 13,000 MW of renewable energy (RE) projects, along with a 12,000 MWh Battery Energy Storage System (BESS) in Ladakh. In FY2023-24, the Cabinet Committee on Economic Affairs approved the construction of an Inter-State Transmission System for power evacuation and grid integration of these 13 GW RE projects. An interconnection is also planned from this project in Leh to the existing Ladakh grid, ensuring reliable power supply to Ladakh. It will also be connected to Leg-Alusteng-Srinagar line to provide power to Jammu and Kashmir¹⁶. POWERGRID, the implementing agency, is currently conducting the Front End Engineering Design (FEED) study. The report is expected to be published by December 2024 and based on the report, POWERGRID will invite bids for the construction of the transmission system.

Offshore Wind Energy

India, with its approximately 7600 km mainland coastline, holds significant potential for offshore wind energy generation. The Government of India aims to harness an estimated 70 GW of offshore wind energy potential off the coasts of Gujarat and Tamil Nadu. A revised strategy has been issued, detailing a bidding trajectory for the installation of 37 GW of off-shore wind energy capacity. The Central Transmission Utility has completed planning the required transmission infrastructure for an initial 10 GW offshore capacity (5 GW each off the coasts of Gujarat and Tamil Nadu). The Government of Gujarat and Government of Tamil Nadu have agreed for power offtake at INR 4.00 per unit from initial offshore wind energy projects¹⁷.

Green Energy open access rules

The Ministry of Power introduced the Electricity (Promoting Renewable Energy through Green Energy Open Access) Rules to boost the development of renewable energy projects in India. According to these rules, consumers with a connected load over 100 kW can access renewable energy through various means, such as setting up their own renewable energy plants, entering into power purchase agreements (PPAs) with renewable energy developers, or establishing captive power plants. They also have the option to buy green energy from power markets, acquire it through DISCOMs, or purchase renewable energy certificates (RECs). On February 20, 2024, Gujarat updated its green energy open access regulations, including changes to banking charges.¹⁸

Setting up of Ultra- Mega Renewable Energy Power Parks (UMREPPs)

As of April 2024, India has successfully reached 144.75 GW of installed renewable energy capacity. Numerous renewable energy projects, including UMREPPs, are currently under various stages of development across several states such as Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Mizoram, Odisha, Rajasthan, and Uttar Pradesh. According to the MNRE, 50 UMREPPs with a total capacity of 39,785 MW are planned for development. Of this total, 22,449 MW has been awarded for setting up of UMREPPs while 17,336 MW is in the award or tendering process.¹⁹

Waiving off of ISTS charges for solar and wind projects

The Government has implemented various measures to advance the development of renewable energy, including solar and wind power. According to the MNRE, inter-state transmission system (ISTS) charges will be waived for the inter-state sale of solar and wind power projects commissioned by June 30, 2025; for green hydrogen projects until December 2030; and for offshore wind projects until December 2032.²⁰

Growth drivers²¹

Emerging Opportunities in SECI Tenders

New opportunities have emerged in Indias wind sector with SECI tendering projects that include hybrid, round-the-clock, peak power supply and FDRE projects. However, the exact split between winds and solar for hybrid projects depends on developer choice and technical design. Similarly, round-the-clock, peak power supply, and FDRE projects generate substantial demand for wind capacity as developers seek to optimize efficiency by mixing sources such as solar, wind, and energy storage. With the increasing trend of such tenders, wind power additions are expected to rise gradually over the long term.

Technological Advancements in Wind Turbines

Newer wind turbines with better capacities and hub heights (120140 m) are being introduced, making it feasible to set up at low- quality wind sites. However, plant load factors and subsequent viability may vary. Industry interactions indicate that increased capital costs reflect improvements in turbine technology, with installations of 3 MW and above wind turbine technology already underway. Innovations in blade technology, such as lower weight and longer blades with reduced mass, are expected to reduce levelised costs and drive capacity additions outside traditional windy regions.

Substantial Central Allocations

Since SECIs competitive bidding of 1 GW in February 2017, approximately 15 GW of capacities have been allocated through wind-only schemes from March 2017 to February 2024 (excluding cancelled contracts). The MNRE plans to tender an additional 10 GW of plain vanilla wind and 10GW of hybrid capacity each year through RE Implementing Agencies. This central allocation strategy is beneficial as it reduces counterparty risk, mitigating risks such as delay in payments and poor financial ratings.

Initiatives such as stringent late payment surcharge rules, mandatory LCs by discoms, regulation of power supply in case of non-maintenance of payment security mechanisms, and denial of open access for non-payment of dues beyond 75 days have improved payment security and instilled discipline in discom payments to renewable energy generators helping the OEMs and the O&M service providers to get their payments with little to no delays.

Enhanced Renewable Purchase Obligation (RPO) Goals

The Ministry of Power (MoP) has outlined a revised long-term trajectory for wind energy RPO targets until fiscal 2030, starting with a target of 0.67% in fiscal 2025 and escalating to 3.48% by fiscal 2030 for wind energy. Despite the MoPs ambitious targets, most states in India have set lower RPO goals (with the pan-India average non-solar RPO target for fiscal 2023 at 8.9%, compared to the 10.50% mandated by the MoP), leading to challenges in meeting compliance standards. To achieve these heightened targets, states may need to procure more renewable energy through mechanisms such as Renewable Energy Certificates (RECs) or competitive bidding for allocated capacities.

Additionally, the waiver of Inter-State Transmission System (ISTS) charges by the Central Electricity Regulatory Commission (CERC) for projects commissioned until June 2025 facilitates procurement from states with greater renewable energy potential to those with lesser potential. However, effective RPO compliance hinges on rigorous enforcement by regulatory bodies. Proposed amendments to the Electricity Act, 2003 aim to introduce stricter penalties for non-compliance, although these amendments still need approval.

Impact of High Industrial Tariffs

In states like Maharashtra, Karnataka, Tamil Nadu, and West Bengal, where industrial tariffs are relatively high (ranging from INR 6 to 6.5 per unit), wind power emerges as an attractive option due to its competitive generation costs of approximately INR 3.0 to 4.0 per kWh with no variable costs. This cost efficiency makes wind energy viable for installation under the open-access mode, facilitating direct bilateral agreements between generators and consumers such as commercial and industrial entities.

Opportunities driving the growing demand for green energy and O&M services in India

Wind capacity targets

India has been generating wind energy for over four decades and, with a cumulative installed capacity of 46.4 GW by May 2024, has become the fourth largest wind energy producer globally. To meet its Nationally Determined Commitments (NDCs), India aims to increase its wind energy installed capacity to 125 GW by 2032 as per the National Electricity Plan, which is critical for achieving 50% of its electric power installed capacity from non-fossil fuel sources by 2030 and reaching net zero by 2070.

During the fiscal year 2023-24, the Minister of State for Power and New & Renewable Energy recognized Gujarat, Karnataka, and Tamil Nadu for their significant contributions to wind capacity expansion. The MNRE has also emphasized the need for collective action to achieve renewable energy targets, positioning India as a leader in wind energy and paving the way for a greener, brighter future.²²

National Wind - Solar Hybrid policy

The Union Minister for New & Renewable Energy and Power announced that the government issued the National Wind-Solar Hybrid Policy in 2018. The policy aims to provide a framework for promoting large grid-connected wind-solar PV hybrid systems to optimise and efficiently utilise wind and solar resources, transmission infrastructure and land. It also seeks to encourage new technologies and methods for the combined operation of wind and solar PV plants. As of December 2023, approximately 1.44 GW of hybrid projects have been commissioned²³.

National Green Hydrogen Mission

India aims to achieve energy independence by 2047 and Net Zero emissions by 2070. The Government of India, upon recognising the crucial role of Green Hydrogen, has leveraged the countrys vast renewable energy resources to produce Green Hydrogen. Currently, India imports over 40% of its primary energy needs, costing over USD 90 billion annually; key sectors such as mobility and industrial production heavily depend on imported fossil fuels.

The National Green Hydrogen Mission, approved by the Union Cabinet on January 4, 2023, aims to establish a comprehensive Green Hydrogen ecosystem and address the opportunities and challenges of this emerging sector with the initial outlay for the Mission is INR 19,744 crore. The distribution will include INR 17,490 crore for the SIGHT programme, INR 1,466 crore for pilot projects (INR 455 crore for low carbon steel projects up to 2029-30, INR 496 crore for mobility pilot projects up to 2025-26, INR 115 crore for shipping pilot projects up to 2025-26, and INR 400 crore for hubs and other projects up to 2025-26), INR 400 crore for R&D, and INR 388 crore for other Mission components²⁴.

Viability Gap Funding for offshore wind projects

The Union Cabinet has approved the Viability Gap Funding (VGF) scheme for offshore wind energy projects with a total outlay of INR 7,453 crore. This includes INR 6,853 crore for the installation and commissioning of 1 GW of offshore wind energy projects (500 MW each off the coasts of Gujarat and Tamil Nadu) and INR 600 crore for upgrading two ports to meet the logistics requirements for these projects.

The successful commissioning of 1 GW offshore wind projects will generate approximately 3.72 billion units of renewable electricity annually, leading to a yearly reduction of 2.98 million tons of CO2 equivalent emissions over a 25-year period. This scheme is anticipated to not only initiate offshore wind energy development in India but also create the necessary ecosystem to support the countrys ocean-based economic activities. This ecosystem will facilitate the development of an initial 37 GW of offshore wind energy requiring an investment of about INR 4, 50,000 crore.²⁵

State Renewable energy capacity

Rajasthan targets a renewable energy capacity of 90 gigawatts (GW) by the fiscal year 2029-30 as part of its new energy policy. The Rajasthan Renewable Energy Policy 2023 envisions 60 GW of this capacity to come from variable renewable sources by 2030, with equal contributions from solar photovoltaics and wind energy. Businesses are adapting to evolving values and economic shifts by emphasizing resource efficiency and clean energy.²⁶

The Gujarat Renewable Energy Policy is a comprehensive framework designed to support the development of renewable energy projects, including Wind, Solar, and Wind-Solar Hybrid technologies. Effective until September 30, 2028, the policy covers a range of projects, such as ground-mounted solar, rooftop solar, floating solar, canal-top solar, wind, rooftop wind, and wind-solar hybrid systems. The policy sets an ambitious goal of achieving 50% renewable energy capacity by 2030, with anticipated investments of around C5 lakh crore and land utilization of approximately 400,000 acres. It aims to harness the states potential of 36 GW of solar and 143 GW of wind capacity. Benefits under this policy will be available for 25 years from the commissioning date or the projects lifespan.²⁷ Moreover, by the end of May 2024, Gujarat had an installed wind power capacity of 11,722 MW and a total renewable energy capacity of 25,472 MW, the highest of any state in India. The state has set an ambitious goal to reach a cumulative 100 GW of installed renewable energy capacity by 2030.²⁸

Wind repowering policy

The Ministry of New and Renewable Energy (MNRE) has introduced a revised policy for the re-powering and refurbishment of wind projects, replacing the previous policy framework. Under the new guidelines, repowered wind projects are required to achieve a minimum of 1.5 times the actual generation compared to before repowering within a maximum period of 3 years from commissioning. The actual average generation over the last 3 years prior to repowering or refurbishing will be used for this assessment.

India currently has approximately 25 GW of turbines with capacities under 2 MW that are eligible for repowering or life extension. The policy also continues to allow agencies like the Indian Renewable Energy Development Agency (IREDA) to offer an additional interest rate rebate of 0.25% for repowering projects, in addition to the rebates available for new wind projects. Additionally, IREDA has the flexibility to design suitable financial products tailored for debt financing of repowering projects²⁹.

Challenges

The Slow Uptake of Advanced Technologies

The adoption of cutting-edge technologies such as Artificial Intelligence (AI) and Machine Learning (ML) has been observed to progress slowly within the sector. This gradual pace hinders the industry from fully leveraging the benefits that these innovations offer. However, there is an expectation that the implementation of these advanced technologies will accelerate in the coming years. This acceleration is anticipated due to increased participation from Internet Service Providers (ISPs) and leading developers who are expanding their focus beyond mere machinery performance monitoring into the realm of operations and maintenance (O&M). It is important to note that existing conventional practices in the wind energy sector, such as Supervisory Control and Data Acquisition (SCADA), do not offer the same level of sophistication as AI and ML technologies. Therefore, there is a pressing need to upgrade these practices to mitigate risks associated with equipment malfunctions and failures.

Overreliance of OEMs

The O&M service sector in India is predominantly controlled by original equipment manufacturers (OEMs), resulting in significant delays in obtaining essential operational data. This situation, compounded by challenges related to the unavailability of spare parts, adversely affects power generation and revenue streams for plant owners. Additionally, instances of OEM bankruptcy have occurred in the past, prompting the industry to adopt technologies aimed at mitigating operational risks. The procurement of spare parts remains heavily dependent on specific OEMs. Moreover, there is a concern regarding forecasting and scheduling, which can lead to additional deviation settlement costs. These costs are borne solely by the power generator in cases of system unavailability.

Challenges in Land Acquisition and Transmission Connectivity

Developers encounter significant obstacles related to securing contiguous land and acquiring land parcels. Obtaining large, strategically located tracts often requires coordination among multiple stakeholders, which can slow down project implementation. The 40GW solar park scheme, which provides land to successful bidders for project development, helps mitigate this challenge.

Another issue is the timely availability of transmission connectivity. Robust transmission planning is crucial for optimizing costs, utilization, and minimizing losses. Concerns about connectivity for renewable projects have been raised by various stakeholders. In response, nodal agencies like Power Grid Corporation of India Limited (PGCIL) and Solar Energy Corporation of India (SECI) have introduced schemes to reduce grid congestion and enhance connectivity.

Company overview

Inox Green Energy Services Limited (IGESL) is a subsidiary of Inox Wind Limited (IWL) and part of the INOXGFL Group. IGESL specialises in providing long-term O&M services for wind farm projects, focusing on predictive maintenance practices to keep reactive maintenance at the minimum. The Company offers a variety of O&M contracts, including comprehensive and common infrastructure contracts and has over a decade of experience in the wind energy Operations and Maintenance (O&M) industry.

IGESL has established a strong track record in wind farm development and operation as of March 31, 2024. The company is active in all eight wind resource rich states, managing a 3.35 GW portfolio of O&M assets and additional value-added services contracts. The Company enjoys a stable annual income stream from long-term O&M contracts and recorded a total income of INR 261 Crores in FY24.

Presence

With an unwavering commitment to delivering clean energy solutions, the Company has strategically positioned itself in key states. With a pan-India footprint, the Company ensures effective management and optimisation of over 3.35 GW of assets, providing an uninterrupted energy supply.

Key highlights for FY24

IGESL is a leading provider of wind O&M services in India, with a portfolio exceeding 3.35 GW of assets as of June 24. The company plans to grow this portfolio to 6 GW by FY26. Additionally, for FY24, the company has achieved a machine availability rate of 96.1%, reflecting ongoing improvements over time.

IGESL acquired a 51% stake in I-Fox Windtechnik India Limited, which expanded Inox Greens capabilities to offerings to service third party turbines in addition to Inox turbines. The strategic acquisition has provided Inox Green a deeper access to the South Indian market, where I-Fox has a strong presence. In addition to O&M services, the company is also providing value added services including restoration/repair of old turbines and wind farms. In FY24, I-Fox won an order from NLC India for the restoration of 33 WTGs at its wind farm in Tamil Nadu. The execution of this project is under full swing I-Fox has performed phenomenally well since acquisition and is set to double its annual EBITDA in FY25.

IGESL is focused on expanding its O&M portfolio through both organic and inorganic growth. The Company plans to reach a portfolio of 6GW by FY26 through 6,000 MW through a combination of organic and inorganic growth strategies. For organic growth, the execution of orders by Inox Wind will add to the existing O&M fleet. Additionally, the pricing of O&M contracts, whether for shared services or comprehensive coverage is reset upon renewal to enhance profitability.

On the other hand, inorganic growth is anticipated to enhance upon acquiring the O&M business of turbines supplied by other OEMs. According to current estimates, around 10 GW of wind generation capacity is maintained by various players, including distressed OEMs and non-OEM aggregators and technocrats, who are largely unorganized and financially weak. Furthermore, retail customers are seeking a transition to a strong and credible Indian O&M service provider. IGESL is poised to seize this opportunity through outright acquisitions of business from such aggregators and facilitate the natural shift of customers to its services.

IGESL achieved on consolidated basis a revenue of INR 261.2 crore in FY24 up from INR 237.5 crore in FY23, representing a growth rate of 10%. The company also saw a significant increase in EBITDA, rising to INR 128.7 crore from INR 97.3 crore the previous year, which translates to a 32% growth. Additionally, standalone basis reported a PAT of INR 29.8 crore for FY24.

IGESL has introduced the VayuVeer program to address rising market demands and the need for operational scaling. This initiative focuses on developing a highly skilled workforce through six months of technical and on-the-job training. By improving business operations with enhanced efficiency and cost control, the program aims to deliver optimal results. Additionally, VayuVeer will create job opportunities for local youth and reinforce IGESLs commitment to social responsibility.

Financial overview

S. No.	Consolidated		Standalone
	2023-24	2022-23	2023-24	2022-23
1 Total Revenue Income	26,118	29,009	24,127	29,081
2 Profit/(Loss) before exceptional item and tax from operations	3,339	(1,819)	4,169	(3,815)
3 Profit/(Loss) before tax from operations	3,339	(1,819)	1,578	(3,815)
4 Total tax expense	360	2,831	428	2,871
5 Profit/(Loss) after tax for the year from continuing operations	2,979	(4,650)	1,150	(6,686)
6 Profit/(loss) from Discontinued operations (after tax)	(213)	(1,559)	-	-
7 Profit/(loss) after tax for the year	2,766	(6,209)	1,150	(6,686)

Key ratios

S. No.	Ratios	%/Times	2023-24	2022-23	% change	Reason for variance
1	Debtors Turnover	times	1.92	3.21	(40.19) %	Due to increase in trade receivables due to increase in inventories correspondingly reducing cost of consumption.
2	Inventory Turnover	times	2.33	4.4	(47.05) %
3	Interest Coverage Ratio	times	3.69	0.38	871.05%	Due to increase in operating profitability and correspondingly repayment of debt and decreases interest cost.
4	Current Ratio	times	2.15	1.02	110.78%	Due to repayment of current borrowings and unbilled revenue has shifted to billable period.
5	Debt Equity Ratio	times	0.09	0.33	(72.73) %	Due to increase in Equity Share Capital and repayment of long term and short- term debt.
6	Operating Profit Margin (%)	%	20.11%	6.78%	196.61%	There has been increase in operating profit.
7	Net Profit Margin (%)		5.69%	(26.97) %	(121.11) %
8	Return on Net Worth		1%	(6) %	(114.50) %	There has been increase in Net profit.

Human Resources

The Company acknowledges the significant contribution of its human capital to its growth. Thereby, its human resource strategies focus on fostering excellence and attracting as well as retaining top talent in the industry. The Company also undertakes relentless initiatives to upskill its employees and empower them to effectively contribute to organisational goals. These initiatives, including training sessions, workshops, and certifications, help in keeping employees abreast of industry trends and best practices.

The Company promotes transparent communication and collaboration across all organizational levels, encouraging employees to collaborate towards shared objectives. The Company strives to create a positive and engaging work environment, enabling the employees to create a meaningful impact.

The Company adheres to a Code of Conduct for trading activities to ensure compliance with insider trading regulations. In addition to this, the Company has several policies in place to ensure equal employment opportunities through nondiscriminatory HR practices.

As of March 31, 2024, the company employed 314 individuals, including contractual employees.

Risk management

Advancements in technology and innovation	The Company has implemented implementing 24/7 centralized asset monitoring, conducting detailed SCADA analysis, developing a mobile-centric operations and maintenance management tool and transitioning towards the upgraded SAP HANA platform.
Risks associated with third-party transactions	IGESL believes that all transactions are conducted fairly and impartially. The Company is dedicated to promptly addressing any conflicts of interest that may arise.
Regulatory challenges	The Company proactively monitors regulatory changes and takes necessary measures to effectively safeguard against any potential adverse policy changes.
Shortage of skilled workforce and talent retention	The Companys robust human resources team conducts various training and development programs to enhance the skills and competencies of its workforce, ensuring alignment with the evolving demands of the business environment.
Fluctuations in market demand and project delays	Contracts signed by IGESL may experience delays, modifications, or cancellations, affecting the Companys operations.
High competition in the market	The Company prioritises predictive maintenance practices over reactive maintenance to mitigate any risks occurring due to fierce competition.

Internal control

The company maintains robust internal control systems to ensure effective governance and compliance. This includes a well- defined organizational structure and comprehensive policies and procedures. A Code of Conduct framework and Whistleblower mechanism are overseen by a dedicated committee. Technology plays a pivotal role, with ERP systems, CRM integration, and a Shared Service Centre enhancing efficiency and control. Regular audits and a centralized Revenue Assurance function bolster financial controls. An internal financial control framework and compliance management tool provide ongoing oversight.

The Audit Committee conducts regular reviews to assess the effectiveness of internal controls. The company fosters a culture of fairness, transparency, professionalism, and ethical behaviour across all operations. It encourages directors and employees to report any concerns or misconduct through its whistleblowing policy, ensuring a safe environment for disclosure. The company also evaluates the structure, qualifications, and seniority of the internal audit department, along with the reporting structure and the scope and frequency of internal audits. Additionally, the company has implemented a vigil mechanism to safeguard employees and directors from any form of victimization when using the mechanism. It facilitates direct access to the Chairperson of the Audit Committee, allowing directors and employees to report genuine concerns or grievances effectively.

Cautionary statement

This Management Discussion and Analysis report contains forward-looking statements, which are predictions, expectations, projections, or estimates regarding the Companys objectives. These statements rely on specific assumptions and expectations about future events. However, actual results may differ from these statements due to various factors, including changes in government regulations, tax laws, and other statutes. Readers should consider the context in which these statements are made and acknowledge that they may not accurately reflect future outcomes.