Dear Shareholders,
It is with great pleasure that I address all of you today, as we
collectively navigate through the challenges posed by the macro-economic landscape. I want
to express my sincere appreciation for the unwavering commitment and dedication shown by
every member of the SWREL family. Your efforts have been instrumental in helping us
overcome the obstacles of the past year, and I am confident that together, we will
continue to make remarkable progress on our journey forward.
I take immense pride in stating that SWREL has once again emerged as
one of India's leading solar EPC companies. Our success is a testament to the trust
placed in us by our stakeholders and the leadership we have demonstrated in winning and
executing complex projects, both domestically and globally. We have established an
impressive portfolio of EPC projects, totalling 14.7 GWp of capacity, along with a strong
O&M portfolio of 6.4 GWp.
Our partnership with Reliance Industries has been a significant
advantage for us. As RIL accelerates its commitment to establish a new energy
manufacturing ecosystem and transitions towards Green Hydrogen by 2025, we at SWREL stand
to benefit from their vision, financial strength, credibility, and robust supply chain.
This partnership provides us with strong revenue visibility and positions us favourably in
the market.
Over the years we have established a strong brand reputation due to our
unwavering commitment to timely execution, risk management strategies, and a steady focus
on quality. This is a reputation we wish to continue to build upon from year to year.
Industry challenges
Throughout last year, to add to the tough macroeconomic environment and
geopolitical tensions, the industry was buffeted by the rising cost of solar modules,
which make up 55-60% of the cost of a solar project. This rise was driven by higher
commodity prices primarily on account of silicon, as well as logistics and supply chain
issues, including shortage of shipping containers. Rising steel costs and freight costs
adversely impacted anticipated returns (ROE) of solar power projects, and even led to some
developers postponing project plans.
Talking about India in particular, most of the country's solar
panels are imported from China where polysilicon prices and overall panel prices had
nearly doubled for some time, creating inflationary pressures on solar projects. This,
coupled with the sudden rise in commodity prices, especially the prices of aluminium,
copper and steel, created an extremely challenging execution environment for us.
Resilient today. Stronger tomorrow.
Despite these challenges, I am proud to report that we have
successfully delivered projects in the most demanding geographies including the US,
Australia and Chile. Our in-depth understanding of our customers' needs, coupled with
an excellent execution track record and access to cutting-edge technology, reinforces our
commitment to delivering all projects successfully.
We managed to achieve some prestigious project wins during the year.
Our operations were well-supported by a competent and sizeable 175-strong design &
engineering team in India and Dubai. They were responsible for designing innovative and
cost-effective solutions and offering a cost-arbitrage in geographies with high resource
costs.
Today, we foresee healthy traction in key markets such as India, the
US, Australia, and South America, with the total addressable market for solar EPC set to
grow by 14-15% per annum.
Performance in FY 2023
Amidst an arduous environment, SWREL's Revenue from the EPC
business stood at 1,823.5 crore, compared to 4,974.5 crore in the earlier year. The
EPC business contributed 90.5% to the overall revenue, from 95.7% a year earlier. The
Unexecuted Order Value stood at 4,913 crore as on 31st March 2023. Revenue of the
O&M business was 189.9 crore vs. 222.9 crore. The O&M business constituted
9.5% of total revenue, compared to 4.3% earlier. O&M gross margins were impacted by
projects where O&M costs were incurred, however, revenue recognition in these projects
has not yet commenced owing to - delays in final handover. The EBIT margin stood at 4.8%
in FY 2022-23, as compared to 24.9% in FY 2021-22.
Maintaining our "India" focus
Historically, India has been a profitable market for SWREL. 2022 has
been the year of growth in the Indian solar EPC market. As the nation is set to raise its
non-fuel-based energy capacity to 500 GW, it plans to fulfil 50% of its energy requirement
from renewables by 2030, capturing the solar energy value chain fully and optimally.
Creating the right infrastructure to build up capacity quickly will be crucial for the
growth of renewables in the near future.
Amidst this boom, SWREL has emerged as one of the top players in the
domestic market in terms of order booking. Despite an expanding geographic presence
globally, our focus will continue to be on India as the renewable landscape is evolving
towards a substantially high market size, of which we intend to capture a significant
share. We are indeed in a sweet spot now, with policy encouragement giving us the required
optimism. We are targeting an order booking of 3-4 GWp from the Indian market.
Performance in other parts of the world
Australia accounts for the bulk of our revenue at 40%, ahead of North
America (22%), India (31%), Latin America (4%), Middle East and North Africa (2%), and the
Rest of Africa (1%). Despite all the difficulties and headwinds faced by the EPC markets
in the US and Australia, including but not limited to an increase in labour costs and a
subsequent increase in site overheads due to loss of productivity which suppressed our
margins, we are still the #1 player in Australia, having delivered our projects even
during the COVID-19 pandemic and the commodity super cycle.
SWREL is currently working on some of the biggest solar projects in
Australia, including the 400 MW Western Downs solar farm being constructed in southern
Queensland. We are also bidding and are hopeful of maintaining a large market share, which
will help us take our margins back to normalised levels in the near future.
Unparalleled O&M expertise and opportunities
SWREL's proven track record of consistently exceeding performance
guarantees ensures high levels of customer satisfaction, particularly in the O&M
segment. Our O&M plants achieve an impressive average availability of 99.7%,
surpassing the industry norm of 99.5%. We have also established an internationally
certified mobile module testing laboratory, enabling efficient on-site module testing.
Additionally, our cutting-edge network operations centre provides real-time business
insights as an invaluable service to our clients around the globe.
Through digitisation, we are driving towards fully automated operations
and revolutionising the industry with an "uberisation" approach to manpower
utilisation - right from surveillance to module cleaning and remote monitoring. These
advancements enhance plant performance and will pave the way for a more streamlined and
efficient O&M process.
With renewable energy playing a noteworthy role in India's energy
transition, an ever-appealing opportunity transcends the solar O&M industry.
India's solar footprint has matured from 3.7 GW in 2015 to over 60+ GW in FY2022.
With this, domestic solar O&M has emerged as a separate, lucrative market with its own
landscape and dynamics. As more and more solar plants get stable, an increasing number of
O&M contracts are getting re-tendered, presenting a growing opportunity for O&M
providers like us. We are consistently growing our O&M portfolio, with a greater focus
on third-party O&M in international markets through both organic and inorganic routes.
Becoming a diversified renewables company
As a home-grown Indian company, we are continuously working with
different stakeholders to support the country's renewable energy vision. We remain
highly optimistic about future investments in the clean energy market, and today we are
delighted to increase our EPC offerings in this space to cater to the massive capacity
additions being planned across the nation as well as around the world.
As a large part of the global market moves towards micro-grids based on
100% renewable energy, and with an increased focus globally on low-carbon energy
consumption, battery storage is becoming the need of the hour, as it is ideally suited to
overcome the intermittency issues related to renewable energy, particularly solar and
wind. As SWREL's offerings are expanding to also include hybrid energy (Wind + Solar,
Wind + BOS) and waste-to-energy solutions, our immediate aim is to improve our market
share in the battery storage and green hydrogen spaces. This is a logical extension of our
business, thereby making us a diversified renewables company in the rapidly growing ESG
market.
Our long-term plan includes adding a capacity of 2 GW every year.
Readying for a better and brighter future
With module prices coming down once again and with the intensifying
energy crisis resulting from the Russia-Ukraine conflict, renewable energy has emerged as
the most promising solution for ensuring energy security. An unprecedented surge in the
sector is anticipated over the next five years. Considering the abundant opportunities at
hand and the government's strong support for the renewable energy sector, we hold a
profound confidence in the future that awaits us. Our optimism also stems from the fact
that India is working towards becoming the 4th largest renewable energy market by 2030,
accounting for 9% of all global renewable energy usage.
We are emphasising on enhancing our business in margin-accretive
regions, and also maintaining a strategic focus on markets with conducive solar power
policies and high solar resources. Together, let us forge ahead towards a brighter and
more resilient future.
I want to express my sincere appreciation to the Board members,
leadership team, employees, suppliers, and business partners for their constant support in
serving our customers.
Thank you once again to all our shareholders for your belief and
guidance as we advance towards our mission of shaping a sustainable and secure energy
landscape for future generations.
Regards,
Khurshed Daruvala
Chairman