ACME Solar Holdings Ltd (NSE:ACMESOLAR) (Q1 2027) Earnings Call Highlights: Record Revenue and ...

Negative Points

• BESS operations carry execution risks: The recent fire incident at ACME Suryodaya facility, though attributed to AC cabling short circuit, highlights potential operational hazards and could impact investor confidence.

• Dependence on timely availability of substations and transmission lines for commissioning 1.5 GW of renewable capacity in FY27; delays could push projects into FY28, affecting revenue recognition.

• BESS revenue is heavily reliant on short-term contracts (85% of BESS revenue), which are subject to market volatility and pricing fluctuations; management acknowledges potential for price normalization beyond the current El Nino-driven demand.

• Curtailment from state-based projects contributed to ~1% revenue loss in Q1, and while mitigation measures are planned, regulatory and operational challenges persist.

• High capital expenditure guidance of INR 15,000-20,000 crore for FY27 (up from INR 3,000 crore in Q1) increases financial risk, especially with rising BESS costs (lithium carbonate volatility) and potential interest rate pressures.

• The company has a significant open capacity of ~1,200 MW (out of 5,080 MW under construction) for which PPAs are yet to be signed, exposing it to merchant market risk and potential revenue uncertainty.

• BESS EBITDA margin (82%) is lower than the renewable portfolio (88-89%) due to power purchase costs, and management expects only a 2-5% variation, indicating limited margin expansion potential.

• The merchant BESS market is nascent and competitive; while management sees strong demand, the entry of other players (e.g., Adani) could compress spreads over time, though management remains optimistic.

• Regulatory changes, such as the CERC free exit option, could lead to increased competition for connectivity and potentially lower returns on future projects.

• The company's growth plans are contingent on continued strong bidding activity from SECI and states; a slowdown in bids (as seen recently) could impact pipeline replenishment and future revenue growth.

Q & A Highlights

Q: What is the outlook for BESS capacity available for the short-term merchant market, and what are the expected realizations from the locked-in short-term contracts? A: CEO Nikhil Dhingra stated that the company is on track to have 10 GWh of BESS capacity by March 2027, with an upward bias as contracting has exceeded this target. Realizations from contracted capacity range between INR 8-10 per unit, depending on the month and volume, as determined by bids on the DEEP portal and HP-TAM markets. Chairman Manoj Upadhyay added that the company plans to maintain at least 10-12 GWh of battery capacity available for the short-term power market annually over the next five years, while ultimately allocating the CapEx towards PPA-backed projects.

Q: Can you provide details on the BESS financial contribution and the revenue locked in for FY27? A: Ankit Verma, Director of Corporate Finance, reported that BESS contributed INR 226 crore to the total revenue of INR 954 crore in Q1 FY27, with approximately 85% from short-term contracts and the balance from merchant sales. The company has secured short-term BESS contracts locking in more than INR 1,400 crore of revenue for partial FY27 BESS commissioned capacity. CEO Nikhil Dhingra clarified that this represents around 70-80% of the targeted 10 GWh capacity, with 20% still available for further monetization.

Q: What is the current capital cost for BESS, and how do you see this trending? A: CEO Nikhil Dhingra confirmed that the capitalized cost is around INR 93 lakhs per MWh (approximately $100/kWh), which includes transformers and all associated costs. While initial battery orders were at lower prices due to volatile lithium carbonate prices, future BESS costs could increase by 5-10%, but this remains within budget. The company has hedged more than $300 million of dollar exposure at rates around INR 89-93, providing a positive bias for cost reduction. Chairman Manoj Upadhyay added that the cost includes all components, with savings being achieved on PCS and other components.

Q: How do you assess the depth and sustainability of the merchant BESS market, given the attractive arbitrage opportunities attracting more players? A: CEO Nikhil Dhingra explained that this is a nascent market with unmet demand for peak power, as states previously relied on thermal power for peak requirements. The supply of pure merchant BESS will remain limited as most players, including ACME, will eventually move capacity into long-term PPAs. Chairman Manoj Upadhyay added that the current peak demand of around 300 GWh is expected to grow to 400-500 GWh or even 1 TWh as the duck curve phenomenon intensifies with more solar and rooftop additions. The company does not foresee a slowdown in pricing for the next three years based on macro analysis.

Q: What is the status of the recent fire incident at the ACME Suryodaya facility, and what safety measures have been implemented? A: Ankit Verma clarified that the detailed technical root cause analysis confirmed the incident was caused by an electrical short circuit in the AC cabling between the transformer and power conversion system, not within the battery system itself. There was no damage to any battery systems or other equipment. The company has deployed enhanced safety measures including AI-enabled video analytics for early fire detection, arc flash sensors within PCS panels, additional aerosol-based fire suppression systems, and enhanced fire barriers. The company also has long-term warranties for BESS and other equipment from suppliers.

Q: What is the outlook for bidding activity in the renewable sector over the next nine months? A: CEO Nikhil Dhingra noted that while the quantum of bids has reduced due to SECI's realignment, the cycle time from bid to PPA will reduce. Large bids are expected in PSP, wind, FDRE peak power, and round-the-clock FDRE categories, backed by firm demand from counterparties. Chairman Manoj Upadhyay added that while megawatt-wise bids may be lower, each megawatt will be equivalent to 4 megawatts of solar due to the round-the-clock nature of power being procured. The company expects strong government-backed bids in the next 6-9 months.

Q: What is driving the strong EBITDA growth, and what is the impact of curtailment? A: CEO Nikhil Dhingra attributed the EBITDA growth to the highest-ever CUF of 30.9% in Q1 FY27, up from 28.5% in the corresponding quarter last year. Chairman Manoj Upadhyay added that continuous repowering of existing plants has also contributed to the improved performance. Curtailment contributed only around 1% of revenue from state-based projects. The company plans to add batteries to state projects to utilize surplus renewable generation and eliminate curtailment, supported by a new circular from the ministry allowing the use of surplus solar generation for battery charging.

Q: What are the plans for entering the C&I and data center segments? A: CEO Nikhil Dhingra stated that the company is actively exploring C&I opportunities, particularly CTU-connected customers, and has made good progress. For data centers, the company is building a team and conducting strategic planning, focusing on segments that provide long-term concessions and leverage their strengths in power infrastructure. Chairman Manoj Upadhyay noted that SECI is also creating a platform to work with data centers for power procurement, which ACME would be happy to participate in. The company will update investors when there is something concrete.

Q: Can you provide the EBITDA margin breakdown between the renewable and BESS businesses? A: Ankit Verma reported that the renewable energy portfolio delivered an EBITDA margin of around 88-89%, while the BESS business recorded a margin of approximately 82%. The difference is primarily because the cost of power purchased for charging the batteries is accounted for within operating expenses. CEO Nikhil Dhingra clarified that excluding BESS, the core renewable EBITDA margin is 91% for the quarter, with a guidance range of 88-92% depending on seasonality. The company expects FDRE projects to potentially improve these margins further due to healthier realizations.

Q: What is the status of the PPA signing for the ACME Marigold project and the overall PPA pipeline? A: CEO Nikhil Dhingra confirmed that the Marigold project PPA is

For the complete transcript of the earnings call, please refer to the full earnings call transcript .