Sterling and Wilson Solar Ltd (SWSOLAR) Q1 FY23 Earnings Concall Transcript

Sterling and Wilson Solar Ltd (NSE:SWSOLAR) Q1 FY23 Earnings Concall dated Jul. 14, 2022

Corporate Participants:

Sandeep Thomas Mathew — , Head Investor Relations

Amit Jain — Global Chief Executive Officer

Bahadur Dastoor — Chief Financial Officer

Analysts:

Mohit Kumar — DAM Capital — Analyst

Faisal Hawa — H. G. Hawa & Co. — Analyst

Rahul Modi — ICICI Securities — Analyst

Abhinav Bhandari — Sohum AMC — Analyst

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Unidentified Participant — — Analyst

Harsh Jhanwar — Centrum PMS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Sterling & Wilson Renewable Energy Limited Q1 FY 2023 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]

I now hand the conference over to Mr. Sandeep Thomas Mathew, Head, Investor Relations for his opening remarks. Thank you and over to you, sir.

Sandeep Thomas Mathew — , Head Investor Relations

Very good afternoon, everyone. I welcome you all to the Q1 FY 2023 earnings call. Along with me I have Mr. Amit Jain, Global CEO; Mr. Bahadur Dastoor, our CFO and Strategic Growth Advisor, our Investor Relations Advisors. We will start the call with an update on the solar power industry and operational highlights for the quarter by Mr. Amit, followed by financial highlights by Mr. Bahadur, post which we will open the floor for Q&A. Thank you.

And over to you, Amit.

Amit Jain — Global Chief Executive Officer

Hi. Thanks, Sandeep and a warm welcome to all the participants on this call. I would like to give a quick update on the solar power industry, other allowed renewable businesses and status of our business operations. So to start with the industry update, there are strong levers which will drive robust growth globally over the coming years. Stronger policy support from the government for tax incentive, favorable policies for renewable sector, coupled with ambitious climate target announced for COP26 are going to drive demand for solar energy to new record worldwide.

Solar industry is well-poised to grow in long-term as IPPs have huge plans for global capacity additions, the global tariffs have already corrected upwards with the revision in prices and a lot of projects are expected to get finalized in financial year 2023, including in HY FY 2023. Despite the record increase in modules, commodity and fleet over the last 18 month, the levelized cost of electricity for solar plant is still cheaper than the traditional source of energy, as well as the renewable source of energy.

With the Indian government accelerating its plan for clean energy transition with Prime Minister, Narendra Modi, planning to build 500 gigawatt of renewable energy and ensure that half of our energy requirements will come from renewable resources by 2030, we expect outstanding growth in Indian solar power industry in the years ahead. India has also announced a roadmap to become a hub for production and export of green hydrogen made from water and renewable electricity. India has set a 5 million tonne green hydrogen production target by 2030 to help most of its geopolitical heft and be a game changer for the country’s energy security. With the government promoting the new-age emission-free fuel, Reliance Industry has also shown significant interest in the space. With this development, we expect huge increase in the scale of average project size in Indian solar industry.

The U.S. utility-scale solar market saw the sharpest decline in the Q1 of calendar year 2022 and experienced its lowest quarter of installation since 2019 and the lowest number of new projects added to the pipeline since 2017. On June 6th, the Biden Administration announced a two-year duty exemption for solar products from Cambodia, Malaysia, Thailand and Vietnam to accelerate execution of projects delayed by Department of Commerce anti-circumvention investigation. This executive action brings massively to the U.S. solar industry and we expect significant ramp-up in the project execution activities going ahead.

In Australia, the recent election has been a game changer in terms of policy support for renewable energy. The new labor government has plans to unlock renewables investment, upgrade the grid and bring federal policy more in line with the states and territories, many of which have more ambitious climate goals. In June 2022, the EU Energy Ministers agreed to increase the share of European energy consumption, coming from renewables, such as solar or wind power to 40% by 2030. According to BNEF, Europe is expected to add 27 gigawatt to 33 gigawatt per year for the period of 2022 to 2025 and 36 gigawatt to 56 gigawatt per year for the period of 2026 to 2030.

As per the International Energy Agency, by 2026, global renewable electricity capacity is estimated to rise more than 60% from 2020 level to over 4,800 gigawatts, equivalent to the current total global power capacity of fossil fuels and nuclears combined. Renewables are set to account for more than 95% of the increasing global power capacity through 2026 with Solar PV alone providing more than half.

Our focus is to grab large share of EPC capacity additions in FY 2023. For example, U,S. is going to 23 gigawatt of capacity addition, 16 gigawatt of capacity addition in Europe, 3 gigawatts in Australia and 16 gigawatt of capacity additions in India. It is estimated that solar PV utility-scale market excluding China is expected to grow at 15% CAGR over the next few years, with growth led by developed markets like U.S., Europe, Australia, as well as Indian market.

I would like to state that with our global reach, strong relationship with customers and lenders, as well as the induction of Reliance Group as an additional promoter of the company, we are well-positioned to capitalize on these growth opportunities. Reliance Group’s investment in company has led to strengthening of company’s balance sheet and increased confidence in customer supplier, bankers and other stakeholders.

Now coming to our operation and maintenance business, solar O&M portfolio as on date is 5.8 gigawatt. O&M constituted 3.7% of the revenue in Q1 FY 2023 and stood at INR44 crores. Reduction in O&M portfolio is primarily on account of sale of plants by clients to customers having their own O&M team. We are focusing on increasing international O&M portfolio through organic and inorganic route. Our enhanced value to customer through O&M differentiate us like drone, thermography, strong analytics and predictions, IV curve tracer, underground cable fault reader etc. will help us to expand our O&M portfolio.

Now as we have creeped you around our battery energy and storage system businesses, so battery energy storage system and energy storage system is expected to grow two times in next four years to USD12 billion annually, U.K. and Europe will be the next big consolidated markets with U.K., Germany, France, Italy and Spain being top five countries.

With this, I will ask Mr. Bahadur, our CFO, to take you through the order book and consolidated financial highlights. Thank you very much. Over to you, Bahadur.

Bahadur Dastoor — Chief Financial Officer

Thank you, Amit and good afternoon. Coming to the order book, solar modules constitute about 55% to 60% to the cost of a solar project and prices of the same had increased by about 40% from January 2021 to March 2022, driven by higher commodity prices, primarily on account of silicon and supply chain issues such as shortage of shipping containers. Steel contributes 5% to 10% to the total cost of a solar project, while it’s rates have risen by 25% during the same period. This has adversely impacted the ROE of solar power projects resulting in developers postponing the awarding of solar power projects, consequently, resulting in order finalization getting pushed to Q2 and H2 of FY 2023.

The module prices, commodity prices and logistics costs which had hardened due to the Russia-Ukraine war have started to soften slightly. Thus we expect the tendering activity to gather momentum, which should result in robust order finalizations. We expect to bag major solar PV EPC projects in our addressable markets in the coming quarters.

We expect to bid for projects constituting 23.1 gigawatt with India having the highest share at 32.5%, followed by MENA and Africa at 19.5% and U.S. and LatAm at 19.1%. We are targeting around USD1 billion of new EPC orders in the international and Indian market in FY 2023. We expect a lumpiness in order inflow with significant consolidation being observed in the industry with stronger players expected to take a larger share of the market in the future and low-level players moving out. Our unexecuted order book as on June 30, 2022 stands at INR2,098 crore, which is executable over the next 12 months. Our order bid pipeline remains robust.

Now, I will take you through the consolidated financials for the quarter ended June 30, 2022. Revenue for Q1 FY 2023 has been INR1,206 crores as compared to INR1,071 crores in Q1 FY 2022. O&M constituted 3.7% of the total revenue in Q1 FY 2023. The region wise revenue breakup is as follows. Australia contributed 59.79%; Americas contributed 21.28%; followed by India, which contributed 15.02% and the balance 3.9% by MENA and the Africa region.

At a company level the gross margins remain suppressed primarily on account of international EPC projects. In the U.S., labor costs increased due to shortage of labor supply and in Australia labor cost site overheads increased to the loss of productivity on account of extreme weather conditions. Further, there was a significant translation loss due to adverse movement in the exchange rate of USD/INR and AUD/INR compared to March 2022.

O&M margins was suppressed in the quarter due to one-off final punch points, as well as demobilization costs incurred in the current quarter, relating to large projects handed over to developers in the previous year. We anticipate O&M margins to normalize from the next quarter. Recurring overheads for Q1 FY 2023 increased 17% to INR94 crores.

As part of the transaction with the Reliance Group, the Company has signed an indemnity agreement with SP Group, KYD Group and the Reliance Group on December 29, 2021. According to the agreement, the SP and KYD Group would indemnify and reimburse the company and its subsidiaries for a net amount if it exceeds INR300 crore on settlement of liquidated damages pertaining to certain past and existing projects, old receivables, direct and indirect tax, litigations, as well as certain legal and statutory matters. These amounts would be settled on 30th of September of each succeeding year on the basis of the final settlement amounts with customers, suppliers and other authorities.

SP Group and KYD Group are consequently entitled to net of the amounts payable with specific counter claims levied and recovered by the company and its subsidiaries on its customers and vendors relating to these matters. As at 30 June, 2022, the company and its subsidiaries have made provisions equivalent to INR300 crore, thus there will be no further impact on the results of the company on settlement of liquidated damages pertaining to past and existing projects as on the date of signing the transaction documents with RNEL, old receivables, direct and indirect tax litigation, as well as legal and regulatory matters in accordance with the Indemnity agreement.

Coming to the balance sheet. As on June 30, 2022 net worth stood at INR596 crores and cash and cash equivalents stood at approximately INR272 crores. Our debt grew by INR131 crores with net debt equity ratio at 0.22 times. Advance and performance guarantees encashed by four customers amounted to INR588 crore, with one customer we have signed the final settlement agreement and the encashment amount of INR319 crore relating to two projects have been refunded by the customer.

With respect to the balance two customers whose projects are completed, the Company is in advanced stage of discussion with them and is confident of recovering the amount in the coming quarters. As on June 30, 2022, we had a negative working capital of INR277 crore as compared to negative working capital of INR302 crores as at March 2022. Receivables due for more than one year as at June 30 stood at INR261 crores, compared to INR251 crore due for more than one year as at March 31, 2022. They comprise related party receivables of INR10 crore, which is net of INR196 crore that the company needs to pay back to the related party against advance received for the waste to energy project.

With this, we can now open the floor to questions and answers.

Questions and Answers:

 

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Yeah. Good afternoon, sir. First question is on the gross margin, the gross margin for the quarter is again negative. We were expecting a positive gross margin from this particular quarter. So what went wrong and when do you expect it to correct going forward? That’s the first question.

Amit Jain — Global Chief Executive Officer

So, let me take it question-by-question in case you have a second one. As we have explained, the gross margins were suppressed in this quarter, primarily due to increase in labor cost in Australia and U.S., as well as extreme weather conditions in Australia. Due to the same, we continue to see slight erosion in the gross margin. Coming to your question on when the gross margins are expected to go back to normalized levels? We are looking at bidding and winning almost USD1 billion of projects, which will help us to take the margins back to its normalized level in the near future.

Mohit Kumar — DAM Capital — Analyst

Secondly on the O&M side, on the O&M side, we were the — of course, last year we did 200-odd — INR220 crore is our run rate for the year if I’m not wrong and the margins have been suppressed, I think you mentioned about something about the one-offs, which happened in this quarter, but what is the normalized run rate for the O&M based on your portfolio, which you expect in a year? What kind of EBITDA margin you were expecting in this particular segment?

Amit Jain — Global Chief Executive Officer

In the case of O&M, again as we had mentioned, there was a movement of almost 2 gigawatt worth of projects which were transferred from our existing customer to a new party who has his own O&M division, that led to a loss of revenue and a reduction of almost 2 gigawatt from our O&M portfolio. We had to do certain punches and closures for those projects in the current quarter, which led to a suppression of the margin as of one-off figure end. We expect the margins to go back from this quarter and onwards, I mean Q2 and onwards back to its 25%, 30% benchmark for these jobs, for the remaining part of jobs.

And hence there is a reduction in the overhead run rate. Today, in the first quarter, we had about INR44 crores, slightly lower than the annualized turnover of the previous year, but there are other bids which the O&M team is working on, which would help us take it back to where it was, we will keep you posted in the quarters to come.

Mohit Kumar — DAM Capital — Analyst

Lastly, sir, what is the impact of the prices going up, solar module deal and etc., etc., on the project cost, if I have to make a comparison for Y-o-Y?

Bahadur Dastoor — Chief Financial Officer

Yeah. So, as far as the module prices are concerned, there was — they had started correcting and there was softening in the prices, but due to certain recent events in the China market, the prices have again gone up. So there is fluctuation in the module prices and hope — but hope with the kind of capacity additions, which are coming in China market and globally, we expect in coming quarters the prices have softened and stabilized.

Mohit Kumar — DAM Capital — Analyst

So what would be the module price right now from China and what is the freight costs from China to let’s say Saudi Arabia or anywhere else?

Bahadur Dastoor — Chief Financial Officer

The freight, as far as the module prices are concerned, they’re hovering between $0.26 to $0.27 per watt fee and trade depends upon the geography we’re working in that comes to India, it can be $0.015 to $0.02 and if you’re going to other geographies like Australia or USA, they can be up or somewhere close to $0.04 per watt.

Mohit Kumar — DAM Capital — Analyst

At current freight cost?

Amit Jain — Global Chief Executive Officer

Pardon.

Mohit Kumar — DAM Capital — Analyst

At current freight cost, am I right?

Amit Jain — Global Chief Executive Officer

Yeah, that’s correct.

Mohit Kumar — DAM Capital — Analyst

Otherwise, this is just about I mean much, much lower, roughly around $0.01?

Bahadur Dastoor — Chief Financial Officer

Yeah. If the logistic market also corrects itself, so even there would be impact on logistic cost as well and they will also normalize in coming quarters.

Mohit Kumar — DAM Capital — Analyst

Understood, sir. Thank you and all the best, sir. Thank you.

Amit Jain — Global Chief Executive Officer

Thank you.

Operator

[Operator Instructions] The next question is from the line of Mr. Faisal Hawa from H.G. Hawa and Company. Please go ahead.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Yeah. Can you hear me?

Bahadur Dastoor — Chief Financial Officer

Yeah.

Amit Jain — Global Chief Executive Officer

Very clearly Mr. Hawa.

Operator

You’re audible. Please go ahead.

Faisal Hawa — H. G. Hawa & Co. — Analyst

So, there is a public limited company which is on the FR saying that they have like contract from you to hire like 3,000 engineers in the coming year. So is this true and what is the utilization that we could be having for these engineers?

Amit Jain — Global Chief Executive Officer

I don’t think that that’s the correct information and we are not aware of any such contract. I think that information is not correct.

Faisal Hawa — H. G. Hawa & Co. — Analyst

And, sir going forward, when do you feel that we can actually have any kind of orders from Reliance’s own module factory kind of where we could be more assured of supply orders from them?

Amit Jain — Global Chief Executive Officer

Reliance is — I think they are working on establishing their plants for module manufacturing, so it will take some time and next few quarters when they will be ready with their plant and manufacturing start, then we’ll get to know the plan how much support we can get from Reliance as far as the module supply is concerned. But we expect in next few quarters not only Reliance, but multiple new players will be on the block. So we don’t see few quarters down the line there will be any issue with respect to module supply.

Operator

Mr. Faisal Hawa, do you have any other further questions?

Faisal Hawa — H. G. Hawa & Co. — Analyst

No more question ma’am, thank you so much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead.

Rahul Modi — ICICI Securities — Analyst

Thank you for the opportunity. Sir just, I had one question, sir. Historically, we’ve seen that our margins have been impacted due to the volatility as you also mentioned of the module prices. So how are we changing or evolving our contracts when we are actually going and taking orders to mitigate this risk because obviously, the volatility probably five years back we had a one-way movement, which was downward in module prices. So we were beneficiaries of that, but today when the — it’s more of a Zigzag pattern, so how are we mitigating that risk in terms of the contracts? Thank you.

Amit Jain — Global Chief Executive Officer

See, as we have elaborated on this particular strategic aspect in our last few calls also, so we — there is a two-pronged strategy to address this particular issue and we are addressing it with vendors, as well as with our customers. So vendors, we are negotiating much tighter contract and asking for a much higher amount of bank guarantee to be backed up, which can assure us that they will stick to their contracts and we can procure the modules at which we have estimated in our bets. Secondly, along with the customer also, we are building a pattern like if there is a willful default by the suppliers, so there are built-in mechanisms in the contract, which we are negotiating with our clients to provide a safeguard against that particular moment. So this is a strategy, which is being worked both with the suppliers, as well as the client to safeguard against any unprecedented price rise in the modules.

Rahul Modi — ICICI Securities — Analyst

Sir, in the recent past, you’ve seen any such thing which had to be invoked or you have to go — any recent memory of this, which whereas the resolution could be found?

Amit Jain — Global Chief Executive Officer

Yeah, yeah. So we are in touch with all our customers and there is a perceptible change in like the way the customers also approached. So one of the contracts which we are negotiating with our key customer in Europe. So the customer is ready to take the risk or the — at which we agree at the time of getting the notice to proceed on the contract till the last shipment of the modules. So the market trend is moving towards that direction and some of the customers which we recently discussed, which are the global big player that they’re derisking EPCs with respect to the module supply risks. So we see a change in the market with respect to that. So the customer thinking on those lines are also changing and they are — they appreciate that EPC risk profile also has to change. So in coming quarters, we will see lot of movement on that front and which will derisk our business significantly as far as the module price risk is concerned.

Rahul Modi — ICICI Securities — Analyst

Sir. Secondly, in terms of the origin of modules that we are taking, are you seeing any change in terms of the buyer, whether it is because there are many customers in the U.S. who are actually directly importing modules as well. So are you seeing any kind of change in the buyers way of thinking in terms of buying either from China or Sterling Wilson procuring modules from the Indian manufacturer because the export orders for Indian manufacturers have also picked up. So, just wanted to know —

Amit Jain — Global Chief Executive Officer

You’re absolutely right, yeah, you are absolutely right. So IPPs and our clients across the globe, they are looking for derisking their supply chain. So all the potential players in the market, anywhere in the world, right now want to develop and they are working on developing alternate supply chains. So — and the various players, not only in India, Europe and U.S., lot of additional module manufacturing plants are coming online, which will be commissioned and I would say, couple of years down the line and some would be operational as early as last quarters of next year. So we’ll see its movement and shift in the supply chain with respect to modules. So all the suppliers that are looking for alternate supply chain so that the whole entire solar capacity addition across the globe can be derisked.

Rahul Modi — ICICI Securities — Analyst

Sure. And sir, lastly, sir, the Indian market is also short of EPC players that’s what we understand now. And the recent bids that we saw they were actually growing at a much higher margin or at least per megawatt basis. So, any rethinking your strategy that you want to look inwards also along with — because typically you had a 20% kind of an order book historically towards India. So any change you are looking there?

Amit Jain — Global Chief Executive Officer

Yeah, definitely, you are absolutely correct I would say in that front because Indian market, we expect the Indian market is an inflection point and I would say with the kind of capacity addition which government has announced and the targets we have plus the new hydrogen roadmap which has come in would lead to not only the capacity going up and there will be much bigger plants which will be coming online, all the private players in the country they have announced their ambition around green hydrogen and they will also be coming out with mega projects.

So, considering that, we see that there will be definitely — witness volumes will be much more and there are like limited number of EPC. So we see that the margin profile should improve going forward, because capacity addition and the strong balance sheet which particularly the past track record, which is there will come into play. Particularly for Sterling Wilson, we’ll say the strong parentage which we had earlier from SP Group and now both SP Group and Reliance put together as our promoters could provide lot of confidence to the bank’s investor and IPPs. So it will help us not only domestically and globally as well. So we’ll be able to take bigger orders and will be considered by all international players which are coming to India and all the mega projects corporates, which we will be setting up in India will be considered favorably for that and margin profile should also change.

Rahul Modi — ICICI Securities — Analyst

Perfect. Sir, just I’m slipping in last one more question. Sir, incrementally we are seeing a lot of bids coming in on hybrid tenders. So how are we as experts in solar, how do we hover or how will be EPC work in such tender restructure? Thank you very much.

Amit Jain — Global Chief Executive Officer

Yeah, so actually we have announced that earlier and that was a part of Sterling Wilson Group, but now a couple of quarters back that business was moved to solar and we already have skill set and IT in that particular area. So we have strong teams and we are further building on teams to handle the best part of the projects in India. We are already working on multiple bids, not only in India, globally in Australia, U.K. and Europe with respect to best projects and we’ll be handling as we are handling the solar the EPC part of that will be taking on both with or without the supply of batteries as per the business model of a particular geography demand.

Rahul Modi — ICICI Securities — Analyst

Perfect, sir. Thank you and all the best, sir.

Amit Jain — Global Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhinav Bhandari from Sohum AMC. Please go ahead.

Abhinav Bhandari — Sohum AMC — Analyst

Yeah. Thanks for the opportunity. Just couple of questions. One is, do the current results contain any component which would get reimbursed back because of the indemnity agreement? And secondly, as of 30th June, how much amount would be there on the balance sheet which would get liquidated on 30th September once the settlement is done under the agreement? Thanks.

Amit Jain — Global Chief Executive Officer

Results do not include any amounts, which are reimbursable under the indemnity cost, the company had already made all provisions two quarters ago to reach INR300 crores. So it has not taken anything into account as such, because it will be a pass through. The money will come against the abstract of liquidated damages etc., which have already been paid for by the company. The crystallized amounts, Abhinav, are still in process, 30th September is the final date wherein the crystallized amounts will be worked out and sent out to the erstwhile promoters and on that basis, they have about one month to make payment against that. It is right now moving and accumulating target, not be in a position to give a singular number at this point in time.

Abhinav Bhandari — Sohum AMC — Analyst

Okay. But fair to assume that it would be — so that amount sitting on the balance sheet would be more than INR300 crores at this point, a broad idea on that understanding?

Amit Jain — Global Chief Executive Officer

Yes. It is more than the INR300 crores, which the company has to bear.

Abhinav Bhandari — Sohum AMC — Analyst

Okay. Got it. Thanks. That’s all from my side. Thank you and wish you the best.

Amit Jain — Global Chief Executive Officer

Thank you, Abhinav.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhishek from Emkay Global. Please go ahead.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Hello. Thanks for taking my question. I have two questions. Can you elaborate on the region-wise pipeline of the projects? And my second question is, what are you expecting in terms of the overall inflow for the year?

Amit Jain — Global Chief Executive Officer

Okay. So as far as the region-wise bid pipeline is concerned approximate with U.S. and Australia, the pipeline is 3 gigawatt each. MENA region is right now, without considering mega projects in question is 2.5-gigawatt, Africa is 1.5-gigawatt, Latin America is 2-gigawatt and Southeast Asia is 1-gigawatt. So total, we are talking about international pipeline of 16-gigawatt and a domestic pipeline 7,500 gigawatt taking to approximately 23-gigawatt of the total bid pipeline, which we are under — working on at this point of time.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Yeah, Australia and U.S. both you told six, India is 7,500 gigawatt correct?

Amit Jain — Global Chief Executive Officer

Yeah. India is — we are expecting because of the multiple project by PSU and private players announcing. So we expect a pipeline which is our addressable market, it’s close to 7,000 — 7.5 gigawatt.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Your addressable market, but the pipeline is for India 7,500, correct, am I right?

Amit Jain — Global Chief Executive Officer

Yeah, yeah, yeah. So, my pipeline is my addressable market. So that is for 7.5 gigawatt which we’ll be bidding for.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Okay. 7.5 gigawatt. Okay. Africa you told 1.5, Latin America I didn’t — I was not able to capture the figure.

Amit Jain — Global Chief Executive Officer

Latin America was 2 gigawatt and Southeast Asia is 1 gigawatt.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Southeast Asia is 1 gigawatt? Okay. And what expectation in terms of overall inflow do we have?

Amit Jain — Global Chief Executive Officer

We are expecting the order inflow of in excess of both the markets put together close to have USD1 billion, both international and domestic put together, but it is going to be lumpiness in the order booking. So we can’t forecast like as we have said the major order booking is going to happen in H2 this year and there will be lumpiness. So there can be few big orders in the like third quarter or fourth quarter, but the total expectations is around USD1 billion in the fiscal year.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Sir, will FY 2023 you’re expecting USD1 billion, correct?

Amit Jain — Global Chief Executive Officer

Yes, that’s correct.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

So FY 2024, we can expect same run rate of USD1 billion?

Amit Jain — Global Chief Executive Officer

It will depend like at this point of time I will not like to forecast, but the way market is growing, we — as expected, the market is growing at the rate of 15% CAGR annually and we see that even Indian market will be growing at much more robust rate. So we can expect we will follow the market trend, the way market is growing, we’ll also grow at least in the similar proportion.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Okay, thanks. Okay, thanks. Thanks for the answer.

Amit Jain — Global Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Hi, sir. Two questions, sir. Firstly on the green hydrogen side. One of the slide talks about lot of multiple projects on the gigawatt scale, is it something which you believe we can get 55 for us in terms of opportunity in the next 12 to 18 months, given this is Australia is I think there are a lot number of projects which are coming by Australia which are really large?

Amit Jain — Global Chief Executive Officer

Yeah. Yeah. So, give you a perspective that all the big players, which we would like our all the global customers and with the biggest IPPs across the globe, they’re very bullish on green hydrogen and working on green hydrogen project across the world, though the projects only in Australia is getting more visibility at this point of time. The projects are getting announced, big projects in UAE, Oman, Saudi Arabia and one of the biggest projects in the globe with respect to green hydrogen has already started is under execution in Saudi Arabia.

So as we see the projects are already materializing and taking up from the ground, but we see considering Australia, the size of the projects which have been announced in Australia next 18 to 24 months we’ll see start that firmer movement on those projects, but it can be definitely in the Middle East also, there can be movement on the green hydrogen projects like I can say 18 to 24 months period.

Mohit Kumar — DAM Capital — Analyst

Is there any strategy to talk to the large players and get us some sense of, is there any chance that we will have some kind of lumpy order inflow from this green hydrogen in the next 18 to 24 months? Do you think that you are targeting that?

Amit Jain — Global Chief Executive Officer

Yeah, there is always likelihood, because we are some of our clients already existing clients are in this business and they are going to set up the plant. As far as Australia where the most of the projects are getting announced, we have the EPC in that market and despite all the difficulties and headwinds, which are faced by EPC market we have perhaps one of the players which have delivered even in the COVID period despite the commodity cycle, it’s commodity super cycle. We have — we are on the course of deliver all our projects, which have created a very, very strong brand for us in the market. And with the Reliance coming in as the one of the promoters, so we have the financial strength and financial I would say credentials to associate with developers on the project of that scale. So that places us favorably to work on those projects, but as you know the projects are in initial stages, we’re identifying we have started discussion but exact how the things develop can be predicted in next 18 to 24 months period.

Mohit Kumar — DAM Capital — Analyst

The last one, the cash flow side, given the nine month, next nine month, I think, do you see any space or any need to raise capital or debt over the next nine months to tie it out the lack of revenues?

Amit Jain — Global Chief Executive Officer

Yeah, Bahadur will take that question.

Bahadur Dastoor — Chief Financial Officer

The company is actively engaged in raising debt for a short-term period to meet its cash flow mismatches on account of the losses that have been faced in certain projects. We expect that this will be for a short-term period of about 18 months or less, right now that is being looked upon with various bankers and financial institutions which the company is engaged with.

Mohit Kumar — DAM Capital — Analyst

Understood, sir. Thank you and best of luck, sir. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Bala from Arihant Capital Markets Limited. Please go ahead.

Unidentified Participant — — Analyst

Hello. Good afternoon, sir. Thank you so much for taking my question. Sir, like, how the Chinese players are competing in current situation? Because Chinese players are occupied global regions countries like Middle East Australia and U.S. —

Bahadur Dastoor — Chief Financial Officer

We could not hear you clearly. Can you be bit louder, we are not able to hear you clearly.

Amit Jain — Global Chief Executive Officer

Mr. Bala, you will have to be a little more audible.

Operator

I would request Mr. Bala to use the handset.

Unidentified Participant — — Analyst

Sir, right now, am I audible?

Amit Jain — Global Chief Executive Officer

Yeah. Still, well, like, better than last time. Yeah.

Unidentified Participant — — Analyst

Yeah. Yes, sir. So, how do you see competition from Chinese players, because they were occupied in low regions countries like Middle East, they have supply at lower prices in these projects. In Australia and U.S. they have minimum base contract, how they are dominating, how they are competing in these regions?

Amit Jain — Global Chief Executive Officer

Yeah. So if I have understood correctly, because voice — the audio quality was still not good that you want to understand the impact or how the Chinese are — Chinese competition in various markets, which we are present in. So I would say that the maximum intensity of Chinese competition was faced by us in Middle East and Africa market. And Australia, Europe and USA, there was no significant competition from Chinese players. As far as, as you know, the way Chinese contractor and Chinese vendors, they have not kept up to the contracts which they signed for a lot of contracts were vanished and in Middle East mega projects what we are witnessing that, the performance is not up to the mark, the projects are running behind schedule and there is I think the confidence, which was there on China is coming down and all the big IPPs are looking for alternate EPCs to work on mega projects, even in Middle East and Africa market.

So we see the change in trend coming forward in next few quarters and the competitive intensity even in the Middle East and Africa market will come down and will be better placed and be considered favorably by major developers.

Unidentified Participant — — Analyst

Thank you, sir.

Operator

Thank you. [Operator Instructions] The next question is from the line of Faisal Hawa from H. G. Hawa & Company. Please go ahead.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Changing our bankers and getting some more bank guarantee limits and how are we actually now going to hire, if you are saying that you have — there’s no demand for the 3000 engineers from your end. What is our hiring plan for the upcoming year and how many engineers do we plan to hire for our EPC groundwork?

Bahadur Dastoor — Chief Financial Officer

So, I will take the first question on the bank guarantee part. Company is actively engaged with its consortium of bankers to increase its limits, it does have spare limits available right now to take care of any short-term requirement, but it is engaged for much enhanced number, taking into account what we will require for FY 2023 and FY 2024. Bankers are looking at it very positively and we expect to meet our requirements once the assessments are complete.

I will let Amit take the second question.

Amit Jain — Global Chief Executive Officer

Yeah, so as with respect — to address the global and domestic markets, we are taking an initiative of capacity building in the organization and we expect to add close to 1,000 personnel to our project management, engineering, procurement and other execution teams, which we’ll be building gradually. So that’s the plan to address the increase in order book and mega projects, if they come on the way that they can be addressed properly.

Bahadur Dastoor — Chief Financial Officer

We are taking the costing for —

Faisal Hawa — H. G. Hawa & Co. — Analyst

[Technical Issues]

Amit Jain — Global Chief Executive Officer

Your voice was little audible.

Operator

Sorry to interrupt. Mr. Faisal Hawa, we couldn’t hear you. Can you please repeat your question.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Solar modules, we are now quoting for any new tenders according to the price, which is at presently being charged. So there could be a possibility that in six months, seven months when solar modules market was flooded with more supply and we actually get them at much lower rate and that would add to the bottom line, is that correct way of thinking?

Amit Jain — Global Chief Executive Officer

Yeah, there is always a possibility of that happening. That has happened in the past when we encashed on downward trend in module prices, but I guess cyclical and with the all kind of module at capacity addition coming online that’s always a possibility, that’s the part of the business cycle we have suffered on the negative side, of course, we’ll be entitled to take the positive side of it as well.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Solar modules costing according to what is presently being charged by that?

Amit Jain — Global Chief Executive Officer

Pardon. I didn’t get your question, could you repeat that again.

Faisal Hawa — H. G. Hawa & Co. — Analyst

We are charging solar modules, we are costing out solar modules at the present rates only?

Amit Jain — Global Chief Executive Officer

Absolutely. Absolutely what are the current rates in the market and which is backed up by the bids from Tier 1 contractors. If we commit anywhere, it will be as per prevailing market prices only.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Competitive intensity has also decreased in most of the tenders being now put out because of so many of who may have suffered losses like just like we have suffered?

Amit Jain — Global Chief Executive Officer

Could you come again?

Faisal Hawa — H. G. Hawa & Co. — Analyst

Intensity has decreased —

Operator

Sorry to interrupt Mr. Faisal Hawa, I would request you to use your handset.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Certainly. So, you feel that the competitive intensity could reduce in the present tenders which have been sent out? [Speech Overlap]

Amit Jain — Global Chief Executive Officer

Yeah, so I would say with the market size going up, the multiple bids coming down and limited number of EPC players in the market, we can see that competitive intensity going down because order books people will be booking orders and as and when the capacities get booked, that will be of course the market will correct itself and there will be reduction in competitive intensity.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Is there any thinking within the management to also bid for larger ticket size orders?

Amit Jain — Global Chief Executive Officer

Come again please. Again I could not hear you properly. Hello?

Faisal Hawa — H. G. Hawa & Co. — Analyst

One min, yeah. One min. Can you hear me now?

Amit Jain — Global Chief Executive Officer

Yeah. Much better. Thank you so much.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Yeah, I just tried something. So, you feel that — we will now be bidding for much larger ticket size contracts as well?

Amit Jain — Global Chief Executive Officer

Yeah, we were doing that in past as well, as you know, we had executed one of the biggest project in the world at that point of time that lot of the largest commissioned project till recently. So we had participated in such bids earlier and based on how strategically well placed we are, we’ll continue to do that.

Faisal Hawa — H. G. Hawa & Co. — Analyst

And is there now more clarity on whom we will report to and you know, are we now having some kind of structure of communication?

Amit Jain — Global Chief Executive Officer

No, no. Sterling Wilson remains to be a professionally run company and we report to the Board. So all the policy decisions are taken in the Board and we report to the Board and run by the board of the organization.

Faisal Hawa — H. G. Hawa & Co. — Analyst

And you feel that we can go back to the ROC and the ROE that we used to have like three to four years back, just before the IPO and that could be [Speech Overlap].

Amit Jain — Global Chief Executive Officer

Definitely, we are on path of recovery and we’ll be there and we’ll update you during our next investor calls, how we are progressing on that out.

Faisal Hawa — H. G. Hawa & Co. — Analyst

Okay. Thank you very much.

Operator

Thank you. The next question is from the line of Abhishek from Emkay Global. Please go ahead.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Yeah, thanks for taking my question. In terms of the pipeline-wise — region-wise pipeline of projects you had told India 7.5, Australia/U.S. 6. I think somewhere one of the management team had mentioned 16, so just wanted to know 16 gigawatt of breakup, how does it come to arrive, excluding India it is 13, if I’m right gigawatt?

Amit Jain — Global Chief Executive Officer

No, no. Excluding India it is 16. So we have stated that total pipeline is around 23 gigawatt, all of which 16 is the international point, around 15.6, and 7.5, we have set as the India pipeline. USA, if you want exact number, USA and Australia is around 6 gigawatt, Europe is 2.5 gigawatt, MENA is 3 gigawatt, Africa is 1.5 gigawatt, Latin America is 2 gigawatt and Asia is 1 gigawatt.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Okay. Southeast Asia is 1, Latin America is 2, Africa 1.5, Middle East 2.5 and Europe is 2.5, correct? Hello?

Amit Jain — Global Chief Executive Officer

Yeah, that’s correct.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Yeah. Yeah.

Amit Jain — Global Chief Executive Officer

And USA and Australia put together is 6 gigawatt. Yeah.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

So, I think the total comes to around 15.5, so I think one more here and there is there. Yeah, okay, okay.

Amit Jain — Global Chief Executive Officer

15.6 and 7.5, so that takes to 23 gigawatts.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Sorry, sorry. Can you repeat that, I didn’t get, 15.6?

Amit Jain — Global Chief Executive Officer

15.6 for international and 7.5 for domestic that takes to 23.1 gigawatts.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

23.1. Okay. Yeah. Fine. 15.6, so it is only — Europe is 2.5 or 2.6?

Amit Jain — Global Chief Executive Officer

Europe is 2.5, MENA is 2.5, Australia and US put together is 6.1.

Abhishek Mody — Emkay Global Financial Services Ltd. — Analyst

Okay. 6.1. Yeah, so I was — fine, fine. Okay, okay. Yeah. Thanks. Thanks.

Operator

[Operator Instructions] The next question is from the line of Harsh Jhanwar from Centrum PMS. Please go ahead.

Harsh Jhanwar — Centrum PMS — Analyst

Yeah. Hi, sir. Thanks for the opportunity. Sir, I just wanted one clarification. So as we — as I understand when we book an order we do back-to-back booking of all the modules and inputs, which are required. So how do we benefit if the PV module prices are going in downward trend? So it is done back-to-back on the same time. So we have fixed our spread, right? So how do we benefit out of if it goes down?

Amit Jain — Global Chief Executive Officer

See, once we are bidding we approach multiple Tier 1 suppliers and upon based on that we bid to our customers. But if between the time we bid and at the time of award of the contract, if there is a downward movement, by the time we are placing the order, if there is a downward movement we are able to take benefits of that particular aspect, otherwise we’ll go on back-to-back basis.

Harsh Jhanwar — Centrum PMS — Analyst

Okay. Okay. Understood, sir. And generally, how much is the time gap between bidding and awarding of contract in general?

Bahadur Dastoor — Chief Financial Officer

That depends on customers where it can be like three to six month.

Harsh Jhanwar — Centrum PMS — Analyst

Okay. Understood, understood. And sir my second question was also more of a clarification. So the order book, which we already have will continue to have negative gross profit margins and the new order books — new orders which we win that will have normalized 10%, 12% kind of gross margins and slowly we’ll will see the trend of gross margin percentage going from negative to positive in FY 2023 — 2023 — by the end of FY 2023, is that understanding correct?

Amit Jain — Global Chief Executive Officer

Mr. Bahadur will provide you more details on that front.

Bahadur Dastoor — Chief Financial Officer

See, it is not that the order book which is now executable has a negative gross margin, because all the impacts of the negatives had been taken majorly up to March and whatever new items came in June. So the order book carries a positive gross margin, which is a low-single digit margin and future orders will come at our normalized margin, therefore going forward if one looks at it, the margins are expected to be positive.

Harsh Jhanwar — Centrum PMS — Analyst

Okay, understood sir. Understood. Thank you so much for clarification.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Amit Jain for closing comments.

Amit Jain — Global Chief Executive Officer

Thank you. With the robust backing of Reliance Group and Shapoorji Pallonji Group, we endeavor to accelerate our growth trajectory by aggressively pursuing our international markets, where we foresee a huge potential of growth. India too has reached an inflection point from where we anticipate the growth of Solar Power Industry to garner further pace and momentum. With our deep-rooted client relationship, global presence, ability to provide customized solution, strong track record of executing complex and large-scale projects supported by robust balance sheet and strong parentage of Reliance Group and Shapoorji Pallonji Groups, we are confident of regaining our leadership position.

I would like to thank everybody for joining the call. I hope we have been able to address all your queries. For any further information kindly get in touch with Sandeep Thomas Mathew and/or Strategic Growth Advisors, our Investor Relationship Advisors. Thank you once again and have a great day. Thank you.

Operator

[Operator Closing Remarks]