ReNew Energy Global Plc (RNW) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook: strong commissioning performance and positive project updates are offset by declining margins and uncertainties in PPA conversions. The Q&A reveals potential risks in project timelines, transmission issues, and curtailment impacts. While optimistic guidance exists, concerns about margin normalization and refinancing add caution. With a market cap of approximately $2.36 billion, the stock is likely to experience neutral movement, reflecting balanced positive and negative factors.
Key Financial Performance
Adjusted EBITDA INR 53.5 billion, a 24% growth year-on-year for the first half of the fiscal year ended March 31, 2026. The growth is attributed to strong financial performance and contributions from the manufacturing business.
Manufacturing Business Adjusted EBITDA INR 3.3 billion for the quarter, adding up to INR 8.6 billion for the first 6 months of fiscal year 2026. The contribution is due to high utilization and efficiency levels in production, with margins slightly higher due to cost savings and procurements ahead of time.
Revenue Increased by over 50% for H1 of this fiscal compared to last year. The increase is due to the rise in megawatts and a meaningful contribution from third-party sales in the manufacturing business.
Leverage Reduced from 8.6 in September '24 to 7 in September '25. The reduction is due to asset recycling, cost optimization, and reduction in corporate debt.
Solar and Wind Capacity Commissioned Over 1.2 gigawatts commissioned year-to-date, split into approximately 750 megawatts of solar capacity and nearly 500 megawatts of wind capacity. This represents a 22% increase in operating capacity after adjusting for the 600 megawatts sold during the trailing 12 months.
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Operating Highlights
Renewable energy capacity: Commissioned over 2.1 gigawatts since October last year, marking a 22% growth in portfolio after asset sales.
Manufacturing business: Operational capacity of 6.4 gigawatts of modules and 2.5 gigawatts of cells, producing over 2 gigawatts of modules and 900 megawatts of cells in H1 FY '26.
New facility expansion: Construction of a new 4-gigawatt TOPCon cell facility is on track with land acquisition, engineering, and civil works underway.
PPA agreements: Signed PPAs for 3.8 gigawatts of installed renewable energy capacity over the past 4 quarters.
Third-party sales: Manufacturing business has third-party orders for 650 megawatts this fiscal, with 1.5 gigawatts already delivered.
Financial performance: Adjusted EBITDA of INR 53.5 billion for H1 FY '26, a 24% year-on-year growth. Revised manufacturing EBITDA guidance to INR 10-12 billion.
Leverage metrics: Headline leverage reduced from 8.6 to 7 year-on-year, with operational asset leverage below 6x threshold.
Policy impact: Reduction in GST on renewable energy items from 12% to 5% by the Indian government.
ESG initiatives: Achieved an S&P Global CSA score of 83, highest for an Indian IPP, and recognized in the Fortune Global Change the World list for the third time.
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Risk or Challenges
Global macroeconomic and trade-related volatility: The company acknowledges ongoing global macroeconomic and trade-related volatility, which could impact its operations and financial performance.
Extended monsoon and climatic emissions in India: Unusual climatic conditions, including extended monsoons, have led to muted power demand growth and lower solar PLFs, negatively affecting operational performance.
Subdued PLFs due to lower irradiation: Lower irradiation from extended monsoons resulted in a net negative impact of INR 1.7 billion for the quarter compared to last year.
Lull in the bidding environment: A cyclical lull in the bidding environment for renewable energy projects could impact the company's ability to secure new projects in the short term.
Leverage and debt levels: Although leverage metrics have improved, the company still faces challenges in reducing its consolidated leverage ratio, which remains a focus area.
Dependency on weather conditions: The company's financial performance and project execution are subject to weather conditions, as highlighted by the impact of extended monsoons on solar PLFs.
Cost normalization in manufacturing: Margins in the manufacturing business may normalize due to cost savings and procurement advantages that are not sustainable in the long term.
Regulatory and policy risks: While the reduction in GST rates is positive, the company remains exposed to potential regulatory and policy changes that could impact its operations.
Economic uncertainties: Despite India's relatively stable economic conditions, global economic uncertainties could indirectly affect the company's performance.
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Guidance & Outlook
FY '26 Megawatt Guidance: Reiterated guidance to complete construction of 1.6 to 2.4 gigawatts of capacity in fiscal 2026.
Adjusted EBITDA Guidance: Reaffirmed fiscal year 2026 adjusted EBITDA guidance of INR 87 billion to INR 93 billion. Manufacturing business guidance revised upwards to INR 10 billion to INR 12 billion.
Manufacturing Expansion: Construction of a new 4-gigawatt TOPCon cell facility is on track with land acquisition, engineering, and machinery orders completed, and civil works underway.
Cash Flow to Equity: Expected to generate cash flow to equity of INR 14 billion to INR 17 billion for fiscal year 2026.
Market Trends and Policy: Expectations of rate cuts by the Reserve Bank of India, which could lower future borrowing costs. Reduction in GST rates on renewable energy items from 12% to 5% to enhance affordability.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Could you comment on the contracting environment, expectations for additional PPA signings, and when the entire 25-gigawatt pipeline might be contracted?
A:The company has made progress with 3.8 gigawatts of PPAs signed in the last 12 months and approximately 6 gigawatts of LOAs that could convert into PPAs. However, the timeline for full conversion is uncertain due to DISCOMs' diligence and requirements. Some capacity is planned for execution by 2029-2030, and discussions with DISCOMs are ongoing.
Q:What is the transmission status for projects in the pipeline, especially for 2029-2030, and what are the remaining risks in securing transmission?
A:Most transmission is in place, with connectivity blocked for the entire 25 gigawatts. The company is working to potentially prepone projects using land-based connectivity. However, land-based connectivity is scarce and valuable, requiring careful use.
Q:Why did the solar manufacturing EBITDA margin decline from 40% in Q1 to 33% in Q2, and what are the expectations for future margins?
A:The decline was due to lower realizations in Q2, strategic procurement benefits in Q1, and leaner sales in Q2. Future margins will depend on market conditions and procurement pricing.
Q:What are the timelines for cell expansion and plans for entering ingot wafer manufacturing?
A:Cell expansion is in advanced stages, with pre-commissioning expected by next year and full commissioning by fiscal '27. Plans for ingot wafer manufacturing are under evaluation based on government guidance.
Q:Is there a softening in prices for non-DCR modules, and what is the outlook for DCR modules?
A:Non-DCR module prices have softened due to increased capacity and seasonality. DCR module margins remain strong but may normalize as more capacity comes online.
Q:What is the timeline for the committed pipeline of 7 gigawatts, especially the complex FDRE and RTC projects?
A:The timeline for the 7-gigawatt pipeline is expected to be completed by FY '29, with some potential overflow. The company is also exploring intrastate projects to maintain capacity addition.
Q:Have things improved for transmission project completion or right of way issues?
A:The situation varies by project. Some ROW issues have emerged in Rajasthan, which was previously easier for execution.
Q:Why has ReNew not been active in battery energy storage tenders?
A:ReNew believes the bids are aggressive, and their actions reflect this belief.
Q:Did the company experience curtailment in the last quarter, and what was the extent?
A:Yes, there was curtailment in Rajasthan, amounting to INR 100 crores in revenue for the first half. This is expected to reduce as back-end lines are completed in the coming months.
Q:Is connectivity ready for the target of 1.6 to 2.1 gigawatts this year?
A:Most connectivity is ready, with the Great Indian Bustard issue being the only externality. Any delays would be minimal.
Q:How are the RTC and peak power projects performing?
A:The 400 MW peak power project and 1,100 MW RTC project are fully commissioned and performing well, with no major concerns.
Q:What are the expectations for normalized margins in solar manufacturing?
A:Normalized margins are expected to stabilize over time, influenced by demand-supply dynamics and ALMM regulations. Initial periods of scarcity may lead to higher margins.
Q:What is the status of the privatization bid and timeline for completion?
A:The consortium's final binding offer is expected in November, with the process potentially taking 7-8 months. Discussions with public shareholders and the consortium are ongoing.
Q:Could the 6 gigawatts of solar LOAs without signed PPAs be canceled due to government plans?
A:The government is encouraging PPA signings and will consider cancellations selectively after significant effort. The situation remains uncertain but is not expected to result in blanket cancellations.
Q:What are the plans for refinancing the Diamond II bonds due in 2026 and ING PH bonds due in 2027?
A:The company is exploring refinancing options in both dollar and INR markets, depending on the lowest cost of capital. Financing markets remain strong and robust.
Q:Review of Unclear Management Responses
A:Management avoided providing specific timelines for the full conversion of the 25-gigawatt pipeline into PPAs, citing the need for patience and ongoing discussions with DISCOMs. They also did not provide exact numbers for RTC and peak power project performance or normalized margin expectations for solar manufacturing, citing variability and market conditions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Change World
Fortune
Founder
Global CSA
INR manufacturing
IPP
India expectation
India term
SP Global
SP India
TCFD
TNFD
World list
capacity megawatt
climate risk
commitment
construction gigawatts
energy capacity
energy sector
gigawatts energy
gigawatts module
module megawatt
monsoon
nature risk
option
progress
purpose
recognition
reduction
report
resilience
risk opportunity
score
sustainability result
trade
transparency governance
water
work
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ReNew Energy Global Plc (RNW) Q2 2026 Earnings Call Transcript
Unknown11-10
The earnings call presents a mixed outlook: strong commissioning performance and positive project updates are offset by declining margins and uncertainties in PPA conversions. The Q&A reveals potential risks in project timelines, transmission issues, and curtailment impacts. While optimistic guidance exists, concerns about margin normalization and refinancing add caution. With a market cap of approximately $2.36 billion, the stock is likely to experience neutral movement, reflecting balanced positive and negative factors.
RNW Report
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