Adani Energy Solutions Ltd (NSE: ADANIENSOL) Q2 2025 Earnings Call dated Oct. 23, 2024
Corporate Participants:
Kandarp Patel — Chief Executive Officer
Unidentified Speaker
Anupam Misra — Head, Group Corporate Finance
Analysts:
Mohit Kumar — Analyst
Brett Knoblauch — Analyst
Dhruv Muchhal — Analyst
Bharat Shah — Analyst
Ajay Sharma — Analyst
Pavitra Sudhindran — Analyst
Unidentified Participant
Sagar Parekh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Adani Energy Solutions Limited Q2 FY ’25 Earnings Conference Call.
We have with us on the call today Mr. Kandar Patel, CEO, AESL; Mr. Kunjal Mehta, CFO AESL; Mr. Anupam Misra, Head, Group Corporate Finance; and Mr. Vijal Jain, Head IR, AESL.
As a reminder, all participant clients will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Kandar Patel. Thank you and over to you, sir.
Kandarp Patel — Chief Executive Officer
Hello, good morning, and best wishes to all investors and analyst friends who have joined on the call. I hope all of you must have got an opportunity to go through the results that we have published and uploaded on our website.
I think this was a very strong performance that we reported in quarter two and, in fact, all the three existing business, which is transmission, distribution, and smart meter are in a phase of massive growth. You must have seen those numbers. Another business that we were incubating so far, which was — which is C&I power solution in business. I think from next quarter onward you will see contribution coming also from this vertical. During quarter, AESL raised equity of INR8,300 crores through QIP route, and, in fact, that’s very helpful to AESL for fueling this capex growth in transmission and smart metering. In the current quarter, besides the project under execution which was 17,000 crore, we have secured four new transmission projects and with that, our project under construction has reached to INR31,700 crore from INR17,000 crore. Once those projects are completed of INR31,000 crore, it will contribute to EBITDA of about INR4,200 crore. In the timeline of these projects, entire INR31,700 crore capex would be around two years, so 24 months. So you will see those assets getting commissioned in the current year, next year and some of them in the early part of next to next year.
In the current quarter. In fact, we did exceedingly well as far as capex deployment is concerned. We deployed capex of INR3,000 crore in the last quarter. That was two and a half times of the capex that we deployed same quarter last year and same is the case in the total capex of first half of the current year, which is INR4,400 crore, which was against INR2,000 crore, which is again 1.7 times of the capex that we deployed in the same period last year. So as I said, in fact, in our business it is important to understand that whenever we deploy capex, we to that extent lock in profitability. If asset is long gestation it might reflect at a particular time. But as investors, if you have those numbers, then you are secure that this kind of profitability or revenue has already been locked in.
So in fact, as — at AESL we closely monitor capex number on a quarter-to-quarter and a month-to-month basis. This capex number will also get accelerated for a simple reason. That first half was also having a monsoon. Now we will have a clear season for the next six months and we think that we’ll be able to close this year with the capex of about INR10,000 crore at least. Now this will surely bring the growth in EBITDA that we projected which will be in excess of 15 percentage.
As far as operational update is concerned, we continue to do excellent work. As far as operation is concerned, we maintain that availability of 99.7 percentage. As a result, we also on INR35 crore of incentive we added 140 circuit kilometer to our network and now we have reached to 23,000 circuit kilometer of network. As far as distribution is concerned, the growth in electricity sale was to the tune of 7% and continuously with our endeavor we have been able to reduce distribution losses further. Now it has reached to 4.85%.
And with all this effort on operation and project side, the financial numbers also accordingly show up the result. So revenue increased by 23 percentage reaching to INR4,200 crore. EBITDA as well increased by 31%. It has reached to INR1,891 crore. Similarly, PAT also increased steep growth and reached to 773 crore. Similarly, cash profit has also shown very healthy growth and it has reached to INR1,026 crore. While we do this capex but we make sure that we operate this business with a financial prudence and discipline and that’s how we have also maintained that net debt to EBITDA at the 3.1x.
Now as far as outlook is concerned, transmission remains a major area where we will continue to focus and India is a massive opportunity as far as transmission is concerned. Besides, we already got a four project but still the bidding which is going to happen in next six to seven month time is of the order of INR85,000 crore and we expect that we will maintain our market share. There could be opportunity to increase the market share as well but we will make sure that we follow the prudent investment decision. And even if we take the current market share, then we hope to get about INR15,000 to INR20,000 crore project more in next six months time.
Distribution, we are currently at INR8,400 crore and it will continue to grow as we continue to invest in distribution network in Mumbai. In fact, one of the projects which was supposed to be commissioned in last quarter got delayed because of geographical surprise but now that project is on track and we expect that to commission in next quarter that will add about INR1,000 crore of revenue into the Mumbai asset base. As far as magnitude is concerned now we have started progressing very well. In fact, in last quarter we deployed about close to about four lakh meters at the rate of about 4,200 meters per day. In October, so far we are deploying at the rate of about 7000 meters per day and now we expect to significantly step up the implementation plan because now we will have that clear season without any monsoon and we expect to add about 30 to 35 lakh meter in next six months. So we will close the year with the installation of about 40 to 42 lakh meters.
So these are the basic details. And I will hand over to all our friends. We will give further details during the question answer.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. [Operator Instructions] First question is from Mohit Kumar from ICICI Securities. Please go ahead.
Mohit Kumar
Hi, good morning, sir. Sir, first question on the transmission. Can you just help us with the transmission capex which you do for next three years? Based on the current pipeline is it possible to talk about the expected EBITDA of the lock-in portfolio?
Kandarp Patel
So Mohith, as I. As I said, the project under construction is of the order of 32,000 crore which is already secured and this timeline of all these projects are about two years, so 24 months and we also expect to add another INR15,000 crore at least to this kitty. So it will reach to about INR45,000 crore of project under implementation and with that we will have EBITDA in excess of INR5,000 crore. In fact with this 32,000 crore project under construction it will contribute about INR4,200 crore and another 15,000 projects will contribute about INR1,600 crore to INR1,700 crore of EBITDA and this will happen over ’24 and the new project that we will get will be in 30 months from now. So that’s the outer limit. Understood sir. And given the fact that there’s a huge bidding opportunity, I think first half has been great and I think you have won your fair share. But as far I believe the H2, H2 seems to be likely to be again a very massive opportunity. How do you think about the — can you just explain us the dimension bidding opportunity and the pipeline if you’re looking for the next 18 months to 24 months? So Mohit, we have a clarity as far as the next six months is concerned. So those projects are already identified for bidding, approved for bidding and process has reached to a certain level. So in the next six months, Mohit we expect to see witness a bidding of about 85,000 crore of capex of transmission project. In fact, this also includes two HVDC project which were supposed to get bidded in last quarter but it has pulled over and now it will go under the bidding. And on a long-term horizon one to one and a half year, there will be another at least a INR100,000 crore of capex that will come under the bidding.
Mohit Kumar
Understood. In quarter, there are two HVDC bills, right? First one I think already happened. The second one is can it happen in the second half or do you think it will take another maybe spillover to F ’26? Yes. So certainly it will happen in the second half. And another HVDC. See which is the Rajasthan HVDC which got rebided is likely to happen very soon. Expecting apart from one call up which already happened. Expecting other two HVDC bids, right? Am I correct?
Kandarp Patel
Correct. One of Rajasthan and one of Kabla.
Mohit Kumar
Understood, sir. And sir, on the, second on this part meter of course you spoke about 30, 35 lakhs. In next six months, you are trying to reach 42 lakh in the by end of F ’20 — F ’25. How do you think about F ’26 and F ’27 given the progress on all these areas? Is there any — is there something with the number which you think you can write us,
Kandarp Patel
Mohit? Come again. Sorry. Number for the next year.
Mohit Kumar
For the next year. F ’26 numbers and F ’27 numbers, given your portfolio.
Kandarp Patel
So Mohit, what we have got right now is about 2.6 crore meter. We will complete about 45 in the current year. But now all those issues that we had. In fact, you know when you start implementation there are a lot of integration issues and there are a lot of coordination, which is required to be done with a distribution because you are getting into their operations. So their processes are also need to be aligned and your processes also need to align with distribution company’s processes, and every distribution company has a different processes for billing and meter installation and recollection. So we have gone through that entire phase, entire integration is done. Everything is working stable and now we only have to go and deploy meter on the ground.
So, in fact, in the current month, we have seen it ramping up to 10,000 meters a day from 4,000 which was there in the last quarter. With that kind of work that we have done on the ground at least, we’ll be able to add about crore of meter next year and balance one in the subsequent year and meanwhile, we will also add further meter as and when opportunity comes in. So about 10 crore bidding opportunities yet to be come on the come further bidding.
Mohit Kumar
I think a couple of bids are out there right? Tamil Nadu is one large one, which I think is supposed to. I think got bid out last year [Indecipherable]. Am I right on that?
Kandarp Patel
Yeah. Yeah. So, Tamil Nadu, we expect that it should get close in a couple of months time.
Mohit Kumar
Understood. My last question on the C&I. Of course you did touch on the topic but we are trying to figure out what your targets. What is the business model, what are the revenue model? Can you just please help us with some kind of basic?
Kandarp Patel
You know. Yeah. So, Mohit, this is very exciting thing especially personally for me because I started my career with the powertech. That’s my first love interest in this C&I business. See what we have done and what we have realized is that now with a growing economic activity in the country, there are many, many customers who have a very distinct requirement which conventional distribution company are not able to meet. Like if you take a case of data center they would want a certain level of reliability. At the same time, they would want a certain percentage of green penetration and they would also want power supply to commence and infrastructure to get ready in a particular timeframe because then they will have to, they will also have similar back-to-back contract with other players.
Now this offers a huge opportunity because we have a presence in generation renewable generation transmission as well as distribution and as a distribution or retail arm, we will be able to leverage our renewable capacity that we are creating in the group. And in case, this concept we started in-house. So last year we commenced this kind of activity for cement business, port business, and Wilbur business. In fact, today we are managing power supply for about 100 establishment of these three businesses across the country and having tested ourselves now we have started getting into contracts with the third-party. In fact, currently, we already have a contract about 20 megawatts. We are into active discussion for contracts for about 150 — 250 megawatts. So roughly, in fact, by the year-end, we will be able to close or we will have a volume of about 5,000 million units, and that will contribute on an annualized basis of about INR150 crore of EBITDA going forward and this, I am talking without any major contract with any data center player. There also, we are actively discussing with Google and Microsoft, the world and we hope that we will be able to finalize contracts with them very, very soon. This is going to be a very exciting business for you will see a lot of action happening in this side in next and next quarter and largely you will see a lot of activity in next financial year.
Mohit Kumar
Understood, sir. Thanks and all the best, sir. Thank you.
Kandarp Patel
Thank you, Mohit.
Operator
Thank you. The next question is from Brett Knoblauch from Cantor Fitzgerald. Please go ahead.
Brett Knoblauch
Hi, guys, thanks for taking my question. Maybe first on the smart metering deployment. How difficult is it to ramp up from? I know you guys said you guys were at 4000 a day now, approaching 10,000 a day. What’s the biggest bottleneck for me? Why you’re not doing more on a daily basis? Is it labor? Is it inventory of the meters itself? Maybe just help explain that a bit.
Kandarp Patel
See today so far we were constrained by two, three factors. Obviously, one, we have multiple geography and so we have a contract with Assam, Andhra, Bihar, Maharashtra, and Uttarakhand and BEST, a distribution company in Mumbai. So when you start deploying meters in any geography, first you have to get those integration done with a distribution company. That takes some time. So what we did, we started with one-by-one distribution company. So first we started with Assam, then we started Bihar, then Maharashtra, then Andhra, and now we have also started Uttarakhand. So as we were starting a geography one-by-one the total rate of deployment was less and also there were issues around getting a good labor.
Now having integrated with all the distribution company and having arranged all those contractors and skilled labor, in fact, we have undertook on a massive training program and we trained about 10,000 people as far as metering is concerned and that is helping us now. So with this kind of preparation now we feel that we will be able to significantly ramp up the rate. We have already reached to 10,000 from 4,000 and we expect it to take it up to 16,000 to 20,000. So we will operate between 16,000 to 20,000 meters a day from next quarter downward.
Brett Knoblauch
No, thank you, that’s super helpful. And then on the capex guidance I think you said somewhere around INR10,000 crore for the year, which implies I guess just over six and a half thousand for the rest of the year. Can you just maybe break down how much of that is going to be between the three kind of segments of transmission, distribution, and smart metering? And should we expect relative to the first half smart metering to have a significant growth split?
Kandarp Patel
So out of this 10,000, the transmission would be around, sorry, distribution would be around 1,600 to 1,700 crore. The smart metering would be around INR3,000 crore and the rest will be from a transmission side.
The biggest advantage as AESL to us is that eventually AESL’s profitability is largely defined by the capex. Now since we operate in three segments, even if there is some slippage in capex in some business vertical, we have an option and opportunity of pushing the capex in another vertical of the business. In fact that makes AESL distinct from all other players in the market.
Brett Knoblauch
And then maybe just one more. I think you guys talked about how EBITDA has grown at a CAGR of 9% over the last four years. It was 15% on a trailing 12-month basis as of the end of the second quarter. Can you just maybe big picture talk about where you expect EBITDA growth to go from here? Should we expect, call it that 15% rate to accelerate or maybe just provide some framework for us?
Kandarp Patel
So, certainly, it will be in excess of 15 percentage. Now if you see the already project under execution and those projects including smart meter will get concluded in next couple of years. So that itself is INR50,000 crore of capex, and, therefore, the growth is going to correspond to that kind of capex which will in my view it will be in excess of 20 percentage.
Brett Knoblauch
Perfect. Thank you very much. Really appreciate the time.
Operator
Thank you. The next question is from Dhruv Muchhal from HDFC Asset Management. Please go ahead.
Dhruv Muchhal
Yes, thank you so much. So the first question is on the C&I business. So under this business can you target only the ISTs-connected customers or you can even approach the intra-discom-connected customers? I mean just trying to understand what’s the landscape that you can address.
Kandarp Patel
So, Dhruv, we can connect, we can target both, in fact, ISPs as well as interest rate consumers. You must have noticed that open access regulation which has come from for this green energy, the earlier restriction of allowing open access for consumer, up to 1 megawatt has also been diluted for green energy. So, therefore, in fact, virtually all the customer in the country can become target for you.
Dhruv Muchhal
Got it. And what’s the economic model here? You do a back-to-back with a generator, say for example any green developer, you have Lotte group and a similar contract with the customer and you earn the spread on it. So how does the model work? Economic model?
Kandarp Patel
So what we do is we assume responsibility end-to-end up to the delivery of power and also maintaining those connected assets so that their reliability is ensured. So even last mile connectivity, if we need to invest, we invest and maintain that part. And from a sourcing side, we will have a bunch of assets that we will secure.
And see one of the biggest advantage that you can create is also from the diversity and aggregation of demand and supply. Now if you have a one side number of assets supplying power to you and on the other side you have a number of customers, then you will also be able to create lot of advantage because of diversity in demand and also in generation and also from aggregation side.
Dhruv Muchhal
Perfect. That’s helpful, sir. And so the second question is on the transmission, the outlook, and billing. So if one looks at the overall landscape, it seems one of the larger players in the system has got a very reasonable order book now because it has been more aggressive in the, I mean I got a larger share in the bids in the past. So do you think? And one of the concerns in the transmission sector earlier was that the IRR was not because of lack of bidding and also number of players, but given the changing landscape, do you think IRRs would be better in future bids than some of the recent bids or still the intensity is very high?
Kandarp Patel
So, Dhruv, you must have seen the IRRs have increased in recent times in the bidding. So the level of aggression certainly has reduced and we expect that if not it will further allow us to increase IRR. But at least we don’t see any condition where there will be lot of aggressive bidding forcing you to reduce your IRR.
Dhruv Muchhal
Got it.
Kandarp Patel
I don’t see that is happening because already 85,000 notified for bidding and another one. The road will come in next year and in that timeframe. So there is a huge pipeline available for all the players.
Dhruv Muchhal
And so lastly is that when we look at the execution time period which the system is allowing is about 24 months. I think now it’s about 24 months, which still seems a bit tight given the overall execution cycle that we have seen historically. So when you bid for projects, do you consider that there could be a delay of six, nine months as we have seen some of your projects and some of years also, that typically exhibition happens in two and a half years or three years. So do you consider that when you are looking for bids or when you are bidding for these IRRs or how is the framework that you think or 24 months you think is executable?
Kandarp Patel
So we certainly make a detailed analysis before we take a call. And whenever we are sure, both in terms of supply and execution that we will be able to complete in the time, then only we don’t load it, and if there is a possibility of any delay, then we will certainly factor those kind of cost in our model. But see, Dhruv, most important for us is, and that is how we feel that we don’t usually get into those kind of a situation because we do lot of preparatory work before we bid, before we go on the ground for execution.
Dhruv Muchhal
Yes, sir. Thank you so much. This was helpful and all the best. Thanks.
Kandarp Patel
Thank you.
Operator
Thank you. The next question is from Bharat Shah from ASK Investment Managers. Please go ahead.
Bharat Shah
Yeah, I lost out on the call in between plus I couldn’t fully comprehend your answer to the previous question, but on smart meter, I wanted to understand what is, what are the constraints on the rollout because 4,000 or 10,000 still sounds very modest, and very inconsequential kind of a rollout of smart meters.
Kandarp Patel
So Bharat Bhai, what I was replying to the earlier question is that we had about six different geography. We started to implement in different geography one by one and when you start deploying meter in particular geography, you have to integrate with the distribution system and you also have to integrate and demonstrate your entire smart meter architect and platform to the distribution company. Once they approve, then you start deploying on the ground with full resources.
Now as we were starting geography one by one, therefore the implementation rate was lower and there were also issues around manpower as we speak. So both the issues now we have sorted. We have started implementing and integrated with all the six distribution companies and now having sought out that contractor and manpower issues as well. From 4,000 to 10,000 we have reached in a one month period and we hope to take it to 15,000 plus and we will continue to operate at that level.
Bharat Shah
But if you roll out 15,000 also a day that will take you max to about five million for the next year. That would — that becomes a very small number to my mind. Unless I missed something. I thought you earlier mentioned that you expect to roll out about one crore meters next year. And if I heard it correctly, that’s what I understood.
Kandarp Patel
Correct.
Bharat Shah
So if you 15,000 meters then you will.
Kandarp Patel
So, Bharat Bhai, yeah. I’m talking. I’m talking about the current geography. If I add geography then those numbers will get added.
Bharat Shah
Okay, so what exactly how many smart meters did we roll out last quarter? How much did we expect in the quarter? Yeah, Bharat Bhai. So last quarter we rolled out 3.6 lakh meter. We have reached total of 6.73 lakh meter and in the current year, the balance six months we plan to add another 30 lakh meter to 35 lakh meter. So that means we’ll reach about 40 lakh meters by the end of the year.
Kandarp Patel
Yeah, 40 lakh meter, 40 lakh meter to 45 lakh meter. And Bharat Bhai, why we are confident is because now that season is good. So, we, in fact, we also face quite a good amount of constraints because of extended monsoon. But now that season is over so we expect that our deployment rate will continue and it will improve significantly.
Bharat Shah
So, out of the awarded contract so far. How much do we expect to roll out next year?
Kandarp Patel
Next year it would be around 70 lakh meter out of an awarded contract.
Bharat Shah
And you expect to add another 30 lakhs from the new contracts that you may hope to win.
Kandarp Patel
Correct. And this again, I am giving a conservative number. We will certainly try and push those numbers at a higher level as well.
Bharat Shah
And are we facing any on-ground resistance of any kind either from customers or others in terms of this rollout?
Kandarp Patel
So there are resistance not mainly from a customer, but all those motivated factors on the ground and — but that’s a part of business. We have to deal with that and find a, find your way in implementing it.
Bharat Shah
So that is, that’s not the key reason why there is a delay or.
Kandarp Patel
No, it is, it was. It affected us to a certain extent to begin with but now I don’t see that reason which is going to stop us.
Bharat Shah
Okay. And the economics of the smart meter that we had originally understood, roughly about INR11,000 cost, roughly about INR1,000 comes from the government as an upfront subsidy. So balance about INR9,000 to INR10,000 is what you earn over a period of nine-year rollout per meter. Is revenue almost about 85% of which is the operating profit in the business. So that economics remains right?
Kandarp Patel
It remains unchanged. Bharat Bhai, just one caveat. The subsidy that comes from government is not thousand, it is INR900.
Bharat Shah
INR900. Okay, yeah, no, I said molpat numbers. I was just rounding off and making broad numbers. Also, there were tax right weeks in the current quarter. I could not fully figure that out. So net-net there has been actually tax credit in the first half of the year. In the second half of the year, what is the expected tax liability we need to provide, we should count?
Unidentified Speaker
So this quarter itself we had just one time reversal of the MAD credit which AEML distribution business was accounted. Other than that there is no expected, any expected reversals in the future years. We are expecting an effective tax of around 20 percentage, which will continue as the third.
Bharat Shah
So for the second half of the current year we should count. 20% is effective tax rate, right?
Unidentified Speaker
Correct. Correct, sir.
Bharat Shah
Separately for second half. I’m not talking of mixing with the first half. For the second half, it will be 20%.
Unidentified Speaker
Correct.
Bharat Shah
And that is expected to stay the course going ahead. Yes.
Unidentified Speaker
Okay.
Bharat Shah
One last question on Microsoft and Google transactions. I thought one of the transactions already happened in easing the bait something to that effect. I read the announcements in the papers. Maybe I’m mistaken if you can highlight on that.
Kandarp Patel
You’re right, Bharat Bhai, you’re right, Bharat Bhai, there was an announcement that was for a Google contract where they had a long-term power purchase contract with Adani Green for their part requirement of existing data center or the data center, which is under construction either at Noida. What I am talking is beyond that that’s only a power supply PPA between ADEL and Microsoft, sorry, Google now although and that’s only meeting a part requirement.
Essentially these data center companies wanted someone to handle their entire power supply management because they don’t have that kind of knowledge or expertise of managing this complex regulatory system as well as managing supply on the round the clock basis. So that is where we see an opportunity and in fact, we are discussing with Google, Microsoft, and many other players where they want us to design an energy solution for them, which will define the extent of green energy that we will supply, the kind of reliability and timeline. So those two transactions or these two are very distinct one.
Bharat Shah
Right. And broadly as I understood roughly for sticking together the entire solution that is arranging power, design mix, ensuring fail-safe reliable supply arrangement remaining by stitching together that solution with the various sources you can hope to make about rupee, rupee and half of fees per unit.
Kandarp Patel
So, Bharat Bhai, it will not only be a speeching but sometimes you might also have to invest like last mile connectivity with one of the players that wanted a power solution. We are also investing for them in last-mile connectivity and a small transmission line is to be created. So it will mostly as teaching but you might also require to invest somewhere to make sure that whatever agreed deliverable that you have signed off that is delivered.
And as far as margins are concerned, it obviously would depend on lot many factors including terms and condition and risk profile of that particular contract and that could range right from INR1 to depending on the risk profile of the contract. If the only solutioning or services to be provided like we do for our group companies where they carry all the risk, those margins are around INR0.10.
Bharat Shah
And these arrangements potentially can run into not hundreds of crores of units but actually thousands of crores of units to be supplied in a year potentially, isn’t it?
Kandarp Patel
Yeah. Correct. So what we are targeting is about 7,000 million units to 10,000 million units in a couple of years.
Bharat Shah
700 crore units to 1,000 crore units in a couple of years.
Kandarp Patel
No, 7,000 — 700 crore units to 1,000 crore units.
Bharat Shah
Okay. Thank you so much.
Kandarp Patel
Thank you. Bharat Bhai.
Operator
Thank you. Next question is from Ajay Sharma from Maybank. Please go ahead.
Ajay Sharma
Hi, I just want to check what’s the IRR you are getting on the new transmission projects you just won.
Kandarp Patel
Around 15.
Ajay Sharma
Okay. And what’s the increase in the regulated base for the distribution business, which you are targeting every year?
Kandarp Patel
So we do capex of about INR1,700 crore to INR1,800 crore and minus depreciation.
Unidentified Speaker
INR600 crore to INR700 crore.
Kandarp Patel
INR600 crore to INR700 crore. So around INR800 crore to INR1,000 crore addition of rev every year.
Ajay Sharma
And what’s the current regulated base?
Kandarp Patel
It is 8,405.
Ajay Sharma
Okay. So about 12%, 13%. 10% to 12%, 13%, kind of growth every year, is it?
Kandarp Patel
Correct. See. And why we have been able to add lot of capex in Mumbai distribution company because there you not only add capex in distribution but you also add capex in transmission and we see a lot of capex coming from transmission side within Mumbai because as demand is increasing in Mumbai there is an urgent need to augment transmission capacity within Mumbai. In fact, one of the projects that I mentioned in the call earlier, which got delayed because of one geographical geological surprise, that project itself is about INR1,000 crore.
Ajay Sharma
Right. Okay. And lastly, just a small housekeeping question. If I look at your balance sheet, right. If I look at the plant and equipment and right-of-use assets and capital work in progress. I mean the difference between the September numbers and the March number is more like INR1,500 crore. So I mean where is your capex you said is more like INR4,000 crore. I mean why is there a difference actually did you get rid of some equipment or what?
Unidentified Speaker
So the effect of Dahanu power plant.
Kandarp Patel
Correct. So one is on account of INR2,300 crore on account of Dahanu power plant plus there is certain recognition of the capex is also done under service concession accounting for the smart meter part. So combination of both there, if you add that you will get to INR4,400 crore odds of capex incurred during the year but most important reason is INR2,300 of the asset which was carved out for the Dahanu power plant.
Unidentified Speaker
Let me just outline that. The Dahanu power plant is a 500-megawatt coal-based thermal power plant, which was housed under the Adani Electricity Mumbai Limited. For ESC considerations, we decided that the Board of AML decided and ESL, in fact, ran a process, and based on that it has been carved out. So based on that AML today does not, AML or ESL today does not own any coal-based generating power plant. So that is the. And it’s a book entry of INR2,300 crores of book assets.
Ajay Sharma
And the service concession for smart meter is that part of other non-current assets, is it? Where does that sit?
Kandarp Patel
In other financial assets.
Ajay Sharma
Other financial assets. Okay. Thank you.
Kandarp Patel
So if you look at the cash flow, the cash flow will show a capex of INR3,900 crores, and the balance forms part of the service concession, accounting, and other financial assets.
Ajay Sharma
Yeah, got it. Thank you very much.
Operator
Thank you. The next question is from Pavitra Sudhindran from Apollo. Please go ahead.
Pavitra Sudhindran
Back to the call. Can you give us some information on this steady show cost notice that you got this quarter? What’s the percentage shareholding that is alleged not to be public and what are the next steps here in profitable outcomes?
Anupam Misra
So, Pavitra, that is the show cost notice that has been sent by SEBI to the shareholders as well as to AESL and AESL has made a disclosure to that effect. In due course, we will be responding to that. There’s nothing additional to that that we want to disclose at this stage at this stage. I also have to clarify that there’s nothing to do with the company per se. It is because it is the company, which is listed and hence a show cause notice has been sent to it but it is more pertaining to the shareholders rather than the company.
Pavitra Sudhindran
Got it. Thanks, Anupam.
Operator
Thank you. The next question is from [Indecipherable] from Investec. Please go ahead.
Unidentified Participant
Hi, sir, can you hear me?
Kandarp Patel
Yeah, go ahead. We can hear you.
Unidentified Participant
Yeah, I just wanted to confirm the current regulated equity for the transmission distribution business and also how is it expected to grow.
Kandarp Patel
See, the transmission business has two parts to it. One is Section 62 assets and second is Section 63 assets. The Section 62 assets are the ones, which have a regulated equity. The Section 63 assets is where we bid out the tariff number and once we’ve completed the project we receive the tariff on a monthly basis based on the bid-out schedule. So we would not have a regulated equity number for the transmission business overall. Whatever we do on the Section 62 side, that number is there, and that I think the team can separately provide to you or maybe 5,000.
Unidentified Speaker
Yeah. So Anupam, just to add what you said, in AESL, where we have a transmission business there are few initial project which was on a pass-plus basis where there is a regulated equity. So because we don’t add any regulated RTM project. So there could be few RTM projects like currently whatever is the regulated equity in transmission which is about INR3,400 crore and when we commission that HVDC transmission in Mumbai about INR2,000 crore of regulated equity will get added. As far as AEML is concerned the regulated equity is about INR5,000 crore and as we do a capex of about INR1,800 crore every year, INR1,700 crore to INR1,800 crore we will continue to add about INR500 crore of regulated equity into it.
Unidentified Participant
Okay. Yeah. Perfect. Thank you.
Operator
Thank you. Next question is from Sagar Parekh from One Up Financial Consultants. Please go ahead.
Sagar Parekh
Yeah. Hi. Thanks for taking my question. On this smart meter project, you mentioned about 35 lakhs installation in H2. So assuming INR900 you get. So does that mean like in terms of revenue you will be about INR350 crores, INR400 crores revenue for H2 from first from smart meters, or the revenue accrues much later? How do we account for smart metering revenues?
Kandarp Patel
So that INR900 will accrue with a time lag of about two months to two and a half months. So once we deploy then we have to go and demonstrate to the distribution company that deployed meters are working. Once that is done then billing starts and then that amount is paid. So roughly about, there is a lag of about two to two and a half months.
Sagar Parekh
So next financial year is when we can see the entire like 40 lakh meters 45 lakh meters.
Kandarp Patel
Correct. But part certainly will come into the current year as well.
Sagar Parekh
And the remaining INR9,000 or INR10,000, I mean does it mean that from FY ’26 onwards only this INR1,000 every year will come through or?
Kandarp Patel
No. So the first year one 10th we will receive plus INR900.
Sagar Parekh
Okay. Okay. And how would the margin shape up in this business?
Unidentified Speaker
So smart meters generally have a margin of around 80% to 85% in the initial years because of the initial ramp up the margins may come down to around 75% but overall the project would have an 85% margin.
Sagar Parekh
Got it. And on your C&I business, did I hear it correctly? You said that your margins would range from INR0.10 to INR1. Something like that.
Kandarp Patel
Correct. So depending on the nature of the contract, if it’s only a service contract, then would be in a simple back-to-back contract, then it could be around INR10 but if it is a complex contract, a lot of stitching to be done and position is to be taken, then obviously those margins will be in a higher range.
Sagar Parekh
And you mentioned some 500 crore units you are expecting by year-end with 150 crore EBITDA. So. So like 500 crore units would translate into broadly about INR200 crore to INR250 crore kind of revenue number because I’m assuming about INR0.50 as.
Kandarp Patel
Currently, the majority of contract is only a service contract. Now we have started getting into the contract where we do stitching, lot of stitching, end-to-end solution, also taking a position in the contract.
Sagar Parekh
So if it’s a service contract, then it would be broadly INR0.10, right? So for 500 crore units that we were looking to close, then it will be about INR50 crore revenue.
Kandarp Patel
So there are a mix of it. So few contracts are those contracts as well where we are taking a position.
Sagar Parekh
And the entire revenue would be EBITDA like or is there some cost involved over here?
Kandarp Patel
Very, very miniscule. So roughly the EBITDA would be 98 plus percentage.
Sagar Parekh
Got it. And how much are we looking to invest? You said that we would be investing in last mile connectivity also here in case if it’s a like a complex contract.
Kandarp Patel
Yes. So I don’t have that ready man number. It will depend on the contract to contract and where the consumer’s facilities are located, how far it is, and how complex that particular facility will be to connect. So depending on that location. So if you are doing.
Sagar Parekh
Cash profile or return metrics that we look at when we bid for these projects, let’s say if you’re investing INR100, we get something back. So from that perspective, any sort of number.
Kandarp Patel
Obviously, we will look for more than 15 percentage whenever we do capex.
Sagar Parekh
15%. Okay. That’s it from my side. Thank you.
Operator
Thank you. Next question is from [Indecipherable] from Barclays. Please go ahead.
Unidentified Participant
Yes, hi, thank you for the opportunity. I have one question. So on the Ra Hadato HTSL line, can you give us any update as to the timelines and expected capex remaining on that?
Kandarp Patel
So expected capex is about INR6,600 crore, INR6,700 crore, and the project is progressing very well, and then we will be able to commission within timeline, which is August 25.
Unidentified Participant
Okay, thanks. And I have just one question on AEM. So you mentioned, I think last September you will be able to liquidate about INR15 billion of regulatory receivables. So is that going in line or you expect to continue that beyond FY ’25, FY ’26?
Kandarp Patel
No, it is going online. In fact, we are liquidating more than what we have committed.
Unidentified Participant
Okay. And just a small question. So for the annual capex guidance of AML [Technical Issues]? Hello.
Kandarp Patel
Yeah. So there was some disturbance in between. The annual capex of AEML would be around INR1,700 to INR1,800 crore.
Unidentified Participant
And can you give a breakdown of what projects that would go in and all that?
Kandarp Patel
So it will be a mix of transmission and distribution and within distribution there could be N number of projects starting from your network augmentation, creating new substation, putting up a smart meter, putting up a storage facility. So, usually, the process is that wherever we wanted to do a capex, we have to go to MERC with a DPR, we go to MERC, justify why we are doing it. What is the advantage of that capex? Once they approve, then we do that capex. Okay, perfect. That’s it for me. Thanks.
Operator
Thank you. Next question is from Angel from Prudence. Please go ahead.
Unidentified Participant
Am I audible? Hello.
Kandarp Patel
Yeah, we can hear you.
Unidentified Participant
Okay. I wanted to ask on the show cause notice again as such, I understand there’s two things. There was a peer review certificate that also I believe was in the first quarter earnings as well as this new one regarding shareholding. So is there any other color that you can provide on these two? And especially also for the peer review certificate one, what steps have you taken or what steps would you do together with the new showcause notice moving forward to resolve it? Any timeline that you can give to provide for this to be resolved, what typically are the steps that you need to take to resolve a typical show cost notice?
Kandarp Patel
So the show cause notice was with respect to the peer review which the statutory auditors in 2015, ’16 had to provide, which they have subsequently provided, and now there is a complete peer review available for our existing auditors. So that matter which was there regarding peer review of the show cause notice stands resolved.
Unidentified Participant
Okay. So that’s resolved. Then for the new one of the shareholding. So is there any rough timeline, any guide for that? When will that be resolved and what steps we have to take to actually resolve that?
Kandarp Patel
So that, I think Anupam mentioned is that we are in the process of filing the due response to SEBI and we’ll come out with the necessary disclosures in due course of time.
Unidentified Participant
Okay. Understand. My next question is relating to, again, your transmission growth plans are quite large. And then the question is, what kind of funding options do you have to actually fund this next leg of growth over the next year? Tons over the next couple of years? How do you weigh your various options across like onshore, offshore banks, dollar bonds, USDP, etc?
Unidentified Speaker
So, yes, post this equity raise, we are currently fully funded, and for our debt financing, we continue to have various options which, as you mentioned, it could be bank financing, it could be dollar bonds, and it could be domestic bonds, which can be evaluated at that point in time. Currently, because of the QIP that we raise and the projects which are currently under constructions, both are fully tied up as far as the debt funding is concerned.
Unidentified Participant
Okay, so the QIP rate wouldn’t change your assumptions of like debt-equity mixed funding for a new project, right? Like you will need therefore put in more equity now that you have more equity.
Unidentified Speaker
That would be funded through a project of, I mean, project debt of around 70 to 30 that would continue as it is.
Unidentified Participant
Okay. Understand. And last thing is on existing bond coming in August 2026 and understand, still quite some time away, but is there any thoughts on how to deal with that and internally, or like externally rating agencies, is there any requirement by a certain timeline? Is it six months ahead or one year ahead? Then you have to kind of form up a plan for that refinancing.
Unidentified Speaker
The maturity is still some time away and at the right time, we will approach the market to refinance that.
Unidentified Participant
Okay. Lastly for AESL, I don’t see your second quarter financials out yet. So can you remind me or let me know what is the regulatory deferral account asset as of September 2024?
Unidentified Speaker
So the regulatory deferral account which was there of INR1,600 crore is in the course of complete liquidation. Currently, we have out of the INR1,600 crore only around INR900 crore which is left by the end of September, and by the end of March as per the MERC order, that amount would get fully liquidated through the tariff itself.
Unidentified Participant
And then so about 700 crores close was done over the last six months. So that is cash received.
Unidentified Speaker
Correct.
Unidentified Participant
Additional cash flow. Okay, and what will the use of proceeds of this cash flow?
Unidentified Speaker
That would be used under the normal business view as per the waterfall of that facility.
Operator
Thank you very much. Due to the paucity of time, we’ll have to take that as the last question. I would now like to hand the conference back to Mr. Kandarp Patel for closing comments.
Kandarp Patel
We thank all the investors for the active participation during the call and we look forward to any other questions that you may have. You can reach out to us or to Vijil for any other clarifications. Thanks for coming up and taking this call.
Operator
[Operator Closing Remarks]