SUZLON Analyst/Investor Conference Call July 31, 2006

Transcription

1 SUZLON Analyst/Investor Conference Call July 31, 2006 Moderator Good afternoon ladies and gentlemen, I am Monali, the moderator for this conference. Welcome to Suzlon Energy conference call. For the duration of the presentation, all participants lines will be in the listen-only mode. After the presentation, the question and answer session will be conducted for participants connected to SingTel. After that the question and answer session will be conducted for participants in India. I would now like to hand over to Mr. of Suzlon Energy. Thank you and over to you sir. Thank you very much Ms. Monali and Good Afternoon everybody. Let me introduce my team at the outset, Mr. Kirti Vagadia, Head Finance and Mr. Samir Shah, General Manager Corporate Finance. I am glad to be here with you all. During this Quarter, we have published Stand Alone Numbers only. Our Internal System is gearing up in all domestic and overseas subsidiaries to enable us to Publish Consolidated Results in 30 days. We shall be reporting Consolidated numbers for next quarter. We as a part of having Independent manufacturing of key components of turbine as a separate vertical, started sale of Tubular Tower in its Wholly Owned Subsidiary. The sale of Tubular Tower for this quarter is about Rs Crores. Coming to the results for this quarter, we have continued our story of resounding growth. The first Quarter of financial year 2007 clocked total sales of MW valued Rs Crores as against MW valued Rs Crores during first Quarter of last year. EBIDTA for first Quarter of financial year 2007 is Rs Crores as against Rs Crores for first Quarter of last year. Net Profit stands at Rs Crores for first Quarter of financial year 2007 compared to Rs Crores for first Quarter last year. With the help of Exports, the Company is in a position to reduce the impact of seasonality seen in past years. The provisional unaudited consolidated results of Hansen, Belgium as per Belgium GAAP shows a Sales of Rs Crores and PBT of Rs Crores for the period May 01, 2006 to June 30, Page 1 of 35

2 Now I will update you on the key developments: The construction of manufacturing facilities at China and USA is under full swing and we expect to start commercial production by the end of September 2006 We have recently announced our CAPEX plan of Rs. 750 crores for the coming year for Forging plant including machining at Vadodara and Foundry unit including machining at Coimbatore. The Forging plant is proposed to have capacity of 70,000 MT at a capital outlay of Rs. 250 Crores. The products planned from this plant are Tower Flanges, Gear Rims, Ring Gears and Bearing Rings. It will also produce some components of Gear Box and Generator. We are targeting completion by end of September The Foundry unit involves capital investment of about Rs. 500 Crores. The state of the art facility with capacity of 120,000 MT will manufacture windmills components viz. Yaw Base, Hub, Rotor Shaft, Bearing Housing and Gearbox Parts. Completion is targeted by December These plants will use the latest technology available in the world and in keeping with our philosophy of continuous innovation, be amongst the first to use such advanced technology. We have also announced CAPEX of Rs. 750 Crores for the Integrated Manufacturing facility for Turbine and its components close to port in Karnataka exclusively for exports. The facility will have a capacity of 1,500 MW and is targeted to be completed by June With completion of this facility, our total production capacity will reach 4,200 MW. The smooth transition of the Hansen deal is under way. At present, the capacity of Belgium plants is being expanded by adding few balancing equipments and would reach 4,500 MW before the year end. Hansen currently has a three years firm order book for supply from Europe from its existing clients. The team is now planning the future course of action in terms of expansion in newer markets. The CAPEX plan of Hansen is expected to be finalised in near term. We are in the process of setting up Asia s first Rotor Blade testing facility at Vadodara, Gujarat. Similar facilities exist only in TU-Delft University in Netherlands and NREL in USA. We are establishing these facilities at investment of approx Euro 6 million with the technical tie-up with Knowledge Center WMC, a unit of TU-Delft. This facility will conduct a Life Cycle test, destructive test on the rotor blade. This is expected to be operational by June We have strong domestic order book position of Rs. 800 Crores and international order book of Rs. 2,959 Crores, therefore the total order book is Rs. 3,759 crores. We would now be happy to take any questions that you may have. Thank you very much XXX Page 2 of 35

3 Moderator Thank you very much sir. At this moment I would like to hand over the proceedings to Salvia to conduct the Q&A for participants connected to SingTel. After this we will have a question and answer session for participants at India. Thank you and over to Salvia. Salvia Thank you Monali. We will now begin the Q&A session for participants connected to the SingTel Bridge. Please press 01 to ask a question. Your first question from Stephen Oldfield from Goldman Sachs. Stephen Oldfield Thank you very much for the conference call. I just wanted to check can you whole series of CAPEX budgets of variety of plants over this year and fiscal next year, can you just actually give us sum total of overall with the forging plants and the new export facility the total CAPEX budget for this year and if possible for the next fiscal year as well please. Thank you. Yeah, first of all the current 2 projects are under construction, which we are completing by September 2007 that is US and China facility. The China is $60 million and US is $25 million, which project is almost in completion but new additional investment is coming in forging, foundry and machining and that is the total investment is 750 crore rupees in terms of US dollar is forging is $55 million, foundry is $110 million, and 1500 MW integrated production facility for the export close to the port and that is $160 million, so total is $325 million and that all fund is 1/3 rd is coming is from the IPO amount and inter accurals and 2/3 rd will be coming from the bank debt. It is okay. Stephen Oldfield Yes sir thanks sir and thank you very much. Salvia Thank you sir. Next on line Mr. Rahul from Mirae Asset, Singapore. Rahul Yeah sir just wanted to check they have been talk of accelerated depreciation benefits being changed in India so what is your take on that? I think there is some more confusion in this information whatever the accelerated depreciation will be continued there is no change is coming on that because in India there is 2 type of the customer one is for the captive requirement so accelerated depreciation for the captive Page 3 of 35

4 customer requirement will be continue but there is another customer which is IPP and for that there is a new step that is coming and that is similar like USA. So that new concept can be introduced which will give the very good support for the expansion of the market because that will facilitate very strongly because IPP customer does not have any appetite for the accelerated depreciation so it is a very good strong initiatives from the government and by that way the Indian market will expand. Rahul Okay no from where I was coming from was our sense was about 40% of the capacity comes by investors who put it for financial returns now such investors would probably shy away if that depreciation norms taken away. But they will get the benefit of the production tax credit; so if you can work out as a project IRR or as a return on equity there is no such difference whether they can go for the depreciation benefit or whether they go for the production tax credit benefit. Rahul Okay and also if we. Not losing any commercial benefits but it will support more for market expansion. Rahul Okay and also if you could share your outlook for key markets; such as China and US? The China is growing very strongly because their current base is lower; last year they have done 450 MW and current year some where is 1000 MW will come in the China, so growth rate is very, very high and demand is growing, government support and initiatives are also strong, and lot of players are also interested to develop the China very strongly. So we have established our 600 MW production facility with plant is fully integrated plant most of the components will be manufactured in that plant, and by that way we can able to serve the China market strongly. Another the market growth is coming very strong in USA and that development is going high and currently US developers and the customers are looking up to 2010 projects so there is a 4 to 5 years very good visibility is currently coming in USA. Rahul Okay, just one final question sir if you could give us a break up of the export order book in terms of geographies MWs geographies? Page 4 of 35

5 Yeah just a moment nearly US is 375 MW. Rahul And China is 140 MW. Rahul Australia is a 94 MW. Rahul Okay, thank you sir. Welcome. Salvia Thank you sir. Next on line is Mr. Eric Ritter from Nezu, Hong Kong. Mr. Ritter please go ahead. Participants who wish to ask a question please press 01 now. We have a follow up question from Mr. Stephen Oldfield. Over to you sir. Stephen Oldfield Yes I wonder if you could just clarify for me on a consolidated basis involving the good will of the Hansen roughly each year how much do you expect to hit your income segments in terms of good will amortization related to that acquisition? Yeah. Mr. Kirti will answer. Kirti Yeah, good afternoon as far as international accounting standards as well as per Indian accounting standard we are not required to write off good will because Hansen is ongoing concern and we don t expect any deterioration in the valuation of Hansen. This opinion has Page 5 of 35

6 been confirmed by our auditor also and there is no amortization so there is no good will amortization is required based on Hansen. Stephen Oldfield And that is clear. Thanks very much. Salvia Thank you sir. Participants who wish to ask questions please press 01 now. Next on line Mr. Aditya from Nikko Asset, Singapore. Aditya Hi, good afternoon I just wanted to understand on the Hansen are this is operating profitability fairly sustainable how do you see the profitability in Hansen going ahead? If you see the last year this EBIDTA margin is 15% and going forward it will year-on-year it will little bit improve and sustainability is not a problem because more than 3 years the current capacity order book is fully booked and whatever the additional capacity also the order is not a problem and nearly the growth of 25 to 30% will continue year-on-year. Aditya Okay, thank you. Salvia Thank you sir. At this moment there are no further questions from participants at SingTel. I would like to hand over the proceedings back to Monali. Moderator Thank you Salvia. We will now begin the Q&A interactive session for India participants. Participants who wish to ask questions may please press *1 on your telephone keypad. On pressing *1 participants will get a chance to present their questions on a first in line basis. Participants are requested to use hand sets while asking questions. First in line we have Mr. from CLSA. Good afternoon sir. Yeah very good afternoon. Page 6 of 35

7 Sir congratulations on strong 1Q. Thank you. Sir my first question is on can you give us the volume break up between the domestic and overseas sales in the first quarter? So total MW is 173 MW domestic. Yeah. And 128 MW is export. Okay and sir in terms of the tubular tower sales are coming through the new subsidiary but the latest tower sales would be still coming through Suzlon right? Yeah, it is a very, very less currently latest towers so that latest tower is in build in ACL standalone. Tubular tower is not in current standalone account, it is completely separate. Page 7 of 35

8 And whatever the sales is there export. Yeah. Also there is no tower is there. So that will be added by our US subsidiary. Okay and so if we look at in terms of a domestic sales currently what would be the proportion of tubular towers to latest towers sir? It is when the tubular tower will be 90% and hardly 10% will be the latest tower. Okay they also completely reduced latest towers right now? For 100% we have a switch over to the tubular towers. From this year onwards in the coming quarters we should expect that there will be a very, very little sales of latest towers through your existing entity right? May be almost nil. Almost nil, okay. Sir and what is the EBIDTA margin for this tower manufacturing facility? Page 8 of 35

9 Tower manufacturing facility EBIDTA margin is somewhere is 13 to 15%. 13 to 15%. Yeah. Okay and sir you would not have a rough idea of the consolidated sales EBIDTA and profits? Yeah yet we have not worked out but next quarter we will announce consolidated account. Okay but if one were to you know work try to work that out basically around 40% of the sales are coming from exports so these would have been shipped to the US subsidiary and basically while the sales have been recognized in a standalone basis if you look at a consolidated level this years would not be there and one would have to add Hanson and add the profitability of the tower manufacturing facility unless interest you would have paid on the loans taken for Hanson acquisition, so broadly that would work out tubular consolidate profit? Yeah but another two areas the generator production facility though that profit is not included. And the tower manufacturing facility what is a joint venture is also not included. Right and O&M Company the business is also not included in this. Page 9 of 35

10 But those would be small O&M would not be very. Now we are going in integration like that. And the situation is developing the time lag whatever the supply is going from India that sales realization in the US books it takes minimum 60 to 90 days so that 60 to 90 days back log will always remain. Correct. So that will only effect but after one quarter then it is normal condition only the incremental growth correction will come. Okay fine. Sir and in terms of your overseas order booking you had earlier mentioned that unlike other global players you had not opened up your order books to avoid locking in orders at lower prices now recently you have started accepting new orders so should we expect that over the next 3 to 4 months you should more or less book the orders which should be delivered in FY08? Yeah because just last month we have given a clearance to our international subsidiary to go ahead and finalize the orders so next coming 2 to 3 months we will get good orders from the international market not only from the USA but also geographically we will get some very good orders from the Europe also. Page 10 of 35

11 Okay and there in terms of last year when you received the orders with each success of orders the pricing was better, so how have you seen the pricing trend in the current year? So whatever the order book currently we have compared to that the new orders because of global market and certain price escalation from company policy so it is nearly 3 to 5% will be the higher price new orders. For new orders. Okay sir you are also participating in some bid based supply project in Europe any progress on that? Yeah the Portugal has announced the two tender one is 1000 MW and one is 500 MW and for 1000 MW they have initially shortlisted and finally we are not in 1000 MW orders, but 500 MW tenders till announcement is pending and there is a fair chance for the Suzlon. Okay and if you get that then would you be setting up blade manufacturing facility or partial facility in Europe also? As per the tender condition and based on the industrial license and plant so whatever our commitment is there we have to establish production facility in Portugal and that facility will take care of that order plus that facility will take care of the supply for the other European markets. Okay and how are the realizations in the domestic market compared to the last year on a comparable basis if we include the towers also? So it is almost say at par. At par with last year or full year. Yeah. Page 11 of 35

12 Thanks a lot sir. Thank you. Moderator Thank you very much sir. Next in line we have Mr. Bhavin from Enam Securities. Bhavin Congratulations on good set of numbers. I have couple of questions basically to work you know you have the total sales in terms of MWs at 312 MWs and realization will reflect as about 3 crores per MW, which means that if that additional 1 crore is not booked partly because of the tower which is been booked outside and partly because you have export revenues which will booked at a you know some of the components will be booked outside is that right? Correct, absolutely right. Bhavin Okay apart from that I know I just wanted to have some clarity on some news items one is that PTC which you clarified it will be only for IPPs right or it will be for you know both captive as well as IPP? For that I will give you some insight about what is the PTC. Bhavin Right. The industries in India has been seen a additional of the approximate 3500 MW wind energy capacity in the last 3 years more than half of the capacity additions are from the captive customer of the power in the last 24 months there have been a positive regulatory change in the terms from the RPS mechanism in the states like Maharashtra, Karnataka, and MP, however, the investment in the wind power sector the large utility company and as a independent power projects by financial investor has not taken out with the view of the board way so the client profile and have a large investment in the wind power project in India, the industries has made representation to the engineers to consider the option of the providing the production tax credit Page 12 of 35

13 similar to the prevalent in the US the force have been sector and the PTC will be the optional and the investor will option for the either claiming the depreciation under the depreciation or PTC. The basic advantage of PTC is debt, the fiscal incentive is linked to the performance of the turbines and that will give the very good development of the technology. The ministry has favorable considerable and stated that detail study of the merits proposal to taken in line with the same it is has appointed WISE from the Pune to study the proposal in detail and submit its report. The report was WISE is expected to be completed in 6 months time. So that at this juncture, we have nothing further add on the subject matter but by this corrections we strongly see the market size of the country will increase. Bhavin But there is no scenario of depreciation range benefit reducing or going away absolutely. That we have to check with the finance secretary. Bhavin Okay, fine but there are no indications as of now? I don t see there is any change at this moment. Bhavin Sir one last question there have been some news articles on you know you being a part of an SEZ I just wanted to clarify are you putting any SEZ by yourself are you going to be only a part of some other SEZ? No, first of all we want to establish our production facility for exclusively for export and that is in the Karnataka and close to the port so our associate company is establishing the SEZ because the developer is required to establish the SEZ so that will be established by as a developer and Suzlon Energy will invest in the SEZ for their production facilities. Bhavin Okay, so the SEZ is being actually developed by an associate company and you will just be investing for manufacturing facility within the SEZ right? Yeah and the associate company is also doing for exclusively for Suzlon. Bhavin Page 13 of 35

14 Okay and also sir is there any CAPEX, which will be for wind farm are you trying to invest into wind farm in the sense for your own captive purpose, which is not for sale? No there is no such any plan for our own captive investment in the wind farm. Bhavin Okay sir thank you very much sir. Thanks a lot. You are welcome. Moderator Thank you very much sir. Next in line is Mr. Venkatesh from Citi Group. Venkatesh Sir congratulations on a fantastic set of numbers. Thank you, thanks a lot. Venkatesh Sir just a couple of questions I was just clarify your order back log as of the domestic order back log is around 800 crores and it is 2959 crores of export orders right sir? Yeah correct. Venkatesh Sir and what is the execution cycle for the domestic and the export orders separately? Normally the domestic order we are taking not more than 3 months and because on cycle is 8 to 6 months and the international order is normally we are taking that for 1 year and execution cycle is nearly 5 to 6 months. Venkatesh Page 14 of 35

15 Thank you sir and one more additional question what is the goodwill amount, which will appear on your consolidated balance sheet how much is that? It is not required and it will not come as per that. Venkatesh No sir I am not talking about the amortization, I am talking about the amount, total amount in the balance sheet. Kirti Vagadia Yeah it will be roughly about 290 million euros. Venkatesh Thank you sir. You are welcome. Moderator Thank you very much sir. Next in line is Mr. from UBS. Good afternoon sir. Very good afternoon. Congrats on the results as just quickly 2 questions are there any FOREX gains. Secondly, in terms of the cash position what is it right now. Actually there are couple of more questions one is in terms of on your results you mentioned this percentage of non promoter share holding has gone up from 23% to 30.2%, okay I guess you know, if you could just explain what is that increase for I guess I mean it is I think it was it happened before your IPO and lastly in terms of your capacity right now at the end of the March 2006 how much is it and March 2007 what was the target and March 2008 if there is a target you have already specifying in terms of your production capacities both are domestic and abroad? Page 15 of 35

16 Yeah the first I will answer your last question. Yeah. And then first two question will answer Kirti. Yes sir. So current our production capacity today s date is 1500 MW capacity. Yeah. Right and September 2006, the additional 600 in USA and 600 in China, so total is 1200 MWs. Yeah. Will be added so by September 2006, 2700 MW production capacity will start and June 2007 additional 1500 MW capacity will be added exclusively for export in India so all put together June 2007, the total capacity will build 4200 MWs. Now regarding first and second question Kirti will reply. Kirti Page 16 of 35

17 Yeah your first question is on foreign exchange gain basically our net input right now and with the realization coming in we would be having almost natural hedge position. Kirti But we have quite active treasury in which we are selectively hedging our position depending on market circumstances mainly for euro dollar as well as for dollar rupee. Kirti Okay and your second question was about cash and bank balance position. Yeah. Kirti On September 30 th it was about 140 crores. How much? Kirti crores. 140 crores. Kirti Right. Page 17 of 35

18 Because you know one thing you mentioned of the 325 million dollars and close to 1/3 rd is from IPO so is that from a new IPO or old IPO I am just trying to. No, no old IPO. Okay, and. Plus internal accruals. Yeah exactly okay fine. Kirti And your question on share holding is I think you are. That is already a historical thing but you know just to refresh memory. Kirti Yeah basically 30 th June 2005 is pre IPO. Yeah. Kirti And right now it is post IPO. Okay that fine, I just my memory there, anyway thanks. Page 18 of 35

19 There is no change. Yeah, sure. After IPO there is no change. Yeah, sure. Thank you very much. Moderator Thank you very much sir. Next in line is Ms. Shilpa Krishnan from Kotak Securities. Shilpa Krishnan Yeah good afternoon and congrats once again on the brilliant set of numbers. I have 2 or 3 questions. My first question pertains to our export order back log which is sales around 29-1/2 billion rupees right and you have also given a break up which totals up to 609 MWs so 29-1/2 billion developed a 699 MW what is the nearly 5 crores per MW so I mean is that in the signify more scope in your new export orders or what exactly is the you know is there any this in the calculation? Samir Yeah, Shilpa this is Samir here. Shilpa Krishnan Yeah. Samir With regard to certain orders, in Australia if the scope is much wider it is a total EPC contract and therefore the value is significantly higher and secondly there is a part execution pending of the current 127 MWs that we exported, the part execution which is a balance part from SWECO angle will also be added as rupee value no doubt I can not add the MW. Shilpa Krishnan Samir Page 19 of 35

20 So that is the reason you are getting a skewed number in terms of 5 crores. Shilpa Krishnan Okay and so can you tell us the balance you know to be executed in this particular order. Samir This is will be about 190 crores. Shilpa Krishnan 190 crores, so then that still means around 27-1/2 billion and then you have also suggest that Australia s focus is much wider. Samir Yes. Shilpa Krishnan But even if it is you know even if it is much wider as a percentage the overall order back log it is like in volume terms it is only 94 out of 609, so could that have accounted for such a big swing? Samir Basically you have 5 crores I think per MW average. Shilpa Krishnan Yeah. Samir In the international markets also in case of US and all, the pricing is almost 10% higher than the Indian pricing in terms of even the same scope when I compare a 4 crore order in India for the nacelle, the blade, and other things other than the foundation several other work in India you are at 4 crores and in US the order is almost at 435 to 440. Shilpa Krishnan Okay, fine. Samir Shilpa Krishnan Page 20 of 35

21 Also this 800 crores of domestic order back log is how many MWs. Samir It is 207 MWs. Shilpa Krishnan 207, okay and my second question is pertaining to the transfer of this tubular towers billing to your subsidiary, can you explain to us logic is there any you know benefit that you get by routing it through a subsidiary rather than through the parent? No I will say as the company policy each and every components we are going vertical integration and individual profit centers so that point of view it is a independent subsidiary company. Shilpa Krishnan Okay but an independent profit center motive can also be attained if it is a division if yours lets say divisional accounting can be attained so why a separate subsidiary? Kirti Basically, we wanted to have a separate management also for each component in place basically and one another option component sector also we can deal independently. Shilpa Krishnan I see, okay and a last question pertains to this production tax incentive such like a US, Mr. Tanti made a statement that the fiscal incentive would be linked to performance of turbines, so as against earlier where you did set up a capacity and you automatically get you know this depreciation advantage you have said that it is going to be linked in the performance of the turbine, which is in the essence of the PTC. So you know is there any proposal to make this entire change and are there neutral for the investors and what is the you know PLF that would be assumed over here to have a same IRR? So first just I will explain you PTC it is called Production Tax Credit so it is a directly linked with the performance is always there if you see the USA 1.9 cent per KWA for 10 years it is available. Shilpa Krishnan Right. Page 21 of 35

22 So this is the basic concept now in India, the India government will decide to which way it should be integrated in Indian context so per KWA some amount say example 1 rupee so that way it should be integrated and then it will be decided how many years whether it is a 6 year or whether it is 8 years, or whether it is a 10 years so to keeping in mind whatever the project IRR or and retain on equity should be maintained so that should not disturb so that way I think government will decide. Shilpa Krishnan Okay, thanks a lot. You are welcome. Moderator Thank you very much mam. Next in line is Mr. Dipen Mehta from Dipen Mehta Shares. Dipen Mehta Yes sir congratulations on a great set of numbers. I just wanted to understand that the present order book which you gave, which was 800 crore and 2959 and then also you mentioned the execution time period. So these order books are based on the present capacity or also when you start taking orders for capacity till September 2006, because I sense that capacity utilization may be lower initially and then perhaps to pickup, so what is your strategy on that account? So the current whatever the capacity we have 1500 MW naturally that should be fully utilized and order book is higher than that capacity and once the September China and US capacity will be available so that we can start utilizing that capacity also and the new capacity of 1500 will not come in this financial year so we have to manage with this existing 1500 and US and China so total 2700 MW capacity we have to utilize fully as fast as possible. Dipen Mehta Okay that means eventually that goes to 4700 by June June 2007 the total capacity will be available 4200 but to ramp up the capacity and to utilize the capacity it is normal taking 6 months to utilize fully, right. Dipen Mehta Page 22 of 35

23 Okay, I just wanted to go over 1500 MW at present and another 1200 comes by September Yeah currently it is 1500 is in India and in September in China and 600 in US will be available. Dipen Mehta And then June 2007 another 1500 is it. Yeah June MW will be available so. Dipen Mehta This is the Chennai one that we are talking. Sorry. Dipen Mehta This is the Chennai, the south NSE, which are. No, no that is coming in Karnataka near Udupi, close to the Mangalore port. Dipen Mehta Okay and just going to on the theoretical basis, is there a market for replacement of you know because this technology per se is now what 20 to 30 years old and I am sure that there are the wind mills which were there earlier and cannot be as efficient as now what are your thoughts on that? Yeah if you see in the particularly in Denmark and Germany, there are lot of re-powering processes going on and the same thing is possible in India because Tamil Nadu has started very early 20 years before, so some of the old turbines which is low capacity and with the new state of art technology that is re-powering can be possible and that can be started in Tamil Nadu. Dipen Mehta Page 23 of 35

24 Fine sir. Thank you and all the best. Thanks a lot. Moderator Thank you very much sir. Next in line is Mr. Krishnakant Thakur from Edelweiss Capital. Krishnakant Thakur Good afternoon sir. Hello. Yes. Krishnakant Thakur Yes sir, the question that I have is as you mentioned in by September 2006, we will have a capacity of 2700 MWs and our current gross block is in the range of 1000 crores and you also announced that the capacity that you will be putting up is 1500 MWs at the CAPEX of around 750 crores. Right. Krishnakant Thakur So sir, is it the right understanding that for per MW the gross block will be the range of half a crores? Yeah it is based on the current investment, yes. Krishnakant Thakur Okay, sir but for 2800 MW we have a gross block of around 1000 crores? Yes. Page 24 of 35

25 Krishnakant Thakur So sir based on that the new capacity that we are coming up for 1500 MWs the gross block will be only 0.5 crores per MW. Yeah if you are putting in India then it is coming that way but if you are putting US and China that investment is high. Krishnakant Thakur Okay and sir you also mentioned on the realization front that you will be experiencing some 3 to 5% increase on the new orders so sir is it across the board that is domestic as well as international or that is only international. Only international. Krishnakant Thakur Only international okay and sir my last question is regarding your market share so the last thing you mentioned that you have a market share of around 53% so sir what is the latest update on that? I think we are 50 plus. Krishnakant Thakur 50 plus. Yes. Krishnakant Thakur Okay fine, thanks a lot sir. Thanks a lot. Moderator Thank you very much sir. Next in line is Mr. Siddarth Gupta from McQuarie Securities. Page 25 of 35

26 Siddarth Gupta Hello. Yeah, yes. Siddarth Gupta Congratulations sir on your good set of numbers. Thanks a lot. Siddarth Gupta First of all can you repeat the Hansen results for me. The Hansen result we have given for that first I mean it is 2 months May and June only. Siddarth Gupta And that is 315 crore rupees. Siddarth Gupta And 38 is PBT. Siddarth Gupta Okay, thank you and my next question would be as I mentioned earlier that part of realizations have been booked in US books so what would be the proportion that I believe is at 2/3 rd in Indian books and 1/3 rd in US books. Page 26 of 35

27 It is normally some of our contracts is full. Siddarth Gupta Our is stays up to the say European US port up to that after that the internal logistic is there then further scope of tower is there and some value additions they have to do in their margin so 70% is somewhere is a India books. Siddarth Gupta 30% will be the US subsidiary book. Siddarth Gupta Okay and on those 30% are the margins similar to the Indian margins or they are more or less. It is more value addition so it cannot be possible at the same margin like India. Siddarth Gupta But somewhere it is close to that. Siddarth Gupta Okay and would it be the same for China as well and in terms of proportion and margins. So China is giving 100% from China so there is no such so it is manufactured in China and sales in China. Siddarth Gupta Page 27 of 35

28 Okay will be booked in China. So 100% will be in the China books and there is no and we are not supplying from India to China. Siddarth Gupta 50% production, we are doing in China and we are selling in China. Siddarth Gupta Okay and my last question is that can you give us some yearly guidance in terms of MW installation? As per our corporate policy, we are not giving long term guidance. Siddarth Gupta All right sir, okay, thank you. Moderator Thank you very much sir. Next in line is Mr. Saurabh Kumar from JP Morgan. Saurabh Kumar Hi sir, sir just 2 questions. Sir one is on your China project sir what do you think is the realization difference between say in the China market was the say domestic market? As our interest in our policy and to give the highest return to our share holder, we will try to maintain the same margin in China also. Saurabh Kumar No sir I am talking about realizations not. Page 28 of 35

29 Realization. Saurabh Kumar Yes sir, you think they will be similar? No it is somewhere is 4 to 5% lower than India. Saurabh Kumar 4 to 5% lower than India. Yes. Saurabh Kumar And this is after your discounting I mean would you be discounting in this market. Market level is there. Saurabh Kumar Okay that is the market level. Yes. Saurabh Kumar Okay sir and sir just to refresh my memory sir you said after Hansen acquisition you have started of going 50% of your supplies in FY09, is that correct? Yeah current so 50% supply is from Hanson to Suzlon in financial year Saurabh Kumar Sir and that will be how much of Hansen, I mean, how much of Hansen sales were there, I mean, capacity will be that if you can give guidance or something? Page 29 of 35

30 So the current Hansen capacity is 3300 MW Saurabh Kumar Yeah. And this year we are expanding 1200 MW additional capacity by putting the balance in equipment and some investment, so that new capacity will be 4500 MW Saurabh Kumar Okay, but you don t have any disclosed plans beyond that? Once we are prepare our plan we will come to you. Saurabh Kumar Okay, thank you sir. Thanks a lot. Moderator Thank you very much sir. Next in line is Mr. Arun from Capital Market. Arun Hello. Yes. Arun Congratulations for the good set of numbers. I think I have joined late in the conversation could you throw some light about the international order back log. Page 30 of 35

31 Yeah. Arun I hope the domestic orders are around 800 crores. Yeah domestic is 800 crores and international is 2959 crores and that is from USA, China, and Australia. Arun Sir this 800 crores will be booked as quarterly now for this quarter second quarter likely to be booked entirely in the second quarter or on third quarter. It is normally each and every order we are completing within 3 to 4 months. Arun 3 to 4 months. Yes. Arun The second question is regarding the backward integration. Yeah. Arun So what is that happening in the machine tools went down and you have talked about something in the last conversation of the conference call? Yeah regarding backward integration, we are expanding further more vertical integration in forging, foundry, and machining plant. So will are establishing in India, in Gujarat, and Tamil Nadu. And total capital investment will be $165 million US dollar. Page 31 of 35

32 Arun $165 million okay, for forging and this thing na. Yes. Arun Okay and what about that Udupi plant is following. Yeah that is front line our 1500 MW integrated production facility and we are establishing in Karnataka close to Mangalore port and the capacity will be available start the production by June 2007 in the capital investment will be $160 million and we will generate 1500 employment in that plant. Arun Sir how much time it will take to operationalize this thing, once full attaining full capacity utilization in a new plant? Yeah, in June 2007 it will start the production and within 6 months it will reach full capacity. Arun Okay 6 months. Sir, there is a talk about Suzlon setting up a wind park in Kerala near Palakad or something, what is happening in that front? First of all our business model is sometime is confusing, some of the informations. Arun In Karnataka our role is to establish and build the infrastructure and sell the project. So we are not investing any in the wind power projects. Page 32 of 35

33 Arun And it is ongoing our market requirement and we have to build the project and we have to sell the project. Arun So that is the processes as same in Kerala. Arun Thanks a lot sir. You are welcome. Moderator Thank you very much sir. Moderator Next is a follow up from Mr. Harinarayan of UBS. Harinarayan Yeah hi, this is once again, just 2 questions one is on the SEZ what is the status of that and where are we in terms of applications and second is, I think in terms of what we want competition from players like Gold Wind. Yeah so regarding the requirement of our own production facility we are putting in this in SEZ. Harinarayan Yeah. Page 33 of 35

34 And that approvals already we have first preliminary approval already we have received. Harinarayan And that work will start from 1 st of October and that is exclusively for the Suzlon requirement, so we are not going in any business of SEZ. Harinarayan Okay, the land to be acquired is very little and it is going to be completely 100% process, there is no non-processing part of SEZ. No it is a industry specific and mostly as per the Suzlon requirement. Suzlon and Suzlon subsidiaries requirement. Harinarayan Is there a speculator to real estate part also in that in terms of? We as a company policy we have not at all interested in any real estate business and any real estate development. Harinarayan And regarding your second question regarding China. Harinarayan Yeah. Page 34 of 35

35 The Gold Wind, the Gold Wind is Chinese company and they are doing good business in China. So we have to compete in China market but market demand and other development is different scale and dimension, so we don t see any problem for competition, because in China there is a room for everybody, so that is not a issue. Harinarayan Okay and thanks a lot. You are welcome. Moderator Thank you very much sir. At this moment I would like to hand over the floor back to Mr. Tulsi Tanti of Suzlon Energy for final remarks. Yeah thanks a lot and thanks for your time and thank you. Moderator Ladies and gentlemen, thank you for using WebEx conferencing service. That concludes this conference call. Thank you for your participation. You may now disconnect your lines. Thank you and have a nice day. Page 35 of 35