Latest / Investor Exchange / Abandoning Energy Projects, Endangered Birds & A Massive Legal Win. Azure Power Energy First Half 2026

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Abandoning Energy Projects, Endangered Birds & A Massive Legal Win. Azure Power Energy First Half 2026 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome back to the Deep Dive. Today, we're looking at one of the most interesting
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  financial puzzles we've seen in a while, especially in India's renewable energy
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  space. It really is a paradox.
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  Yeah, we have a major player Azure Power Global, or APGL, that posted revenues
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  that were, I mean, basically flat, almost no growth at all. And yet at the same
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  time, they somehow managed to cut their net loss in half.
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  It really does sound like some kind of, you know, accounting magic trick, doesn't it? It does.
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  But when you actually dig into the numbers, these are the unaudited results
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  for the first half of fiscal year 2026. So up to September 30th, 2025.
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  And it becomes pretty clear this wasn't growth. This was a massive financial cleanup.
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  So our mission today is really to give you the shortcut to understanding what
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  happened. We're going to dive into what drove that incredible 50% cut in net loss.
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  And more importantly, we have to ask if those drivers are sustainable or if
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  this was just a one-off fix.
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  Right. So what's the headline number we're talking about here?
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  The key statistic is that APGL's net loss dropped from just over a billion rupees,
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  INR, 1,015 million, down to about half that,
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  INR, 505 million. Wow.
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  That kind of jump on the bottom line when the top line is stalled,
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  that tells you right away the story isn't about operations. Okay,
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  so let's start there, though.
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  Let's talk about the operational side, just to set the stage.
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  APGL is a huge company. Oh, absolutely. As of September, they had over 3,000
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  megawatts of operating capacity.
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  And on top of that, they held letters of award for almost another thousand megawatts.
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  That scale is impressive, but that's where the operational efficiency really
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  started to show some cracks. How so?
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  Well, despite that huge fleet, their operating revenues for the six months actually
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  went down a little bit by about 1%. Only 62 million rupees, but still,
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  it's a decrease. You'd expect growth from a fleet that big. You would.
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  And a 1% dip is a symptom of some real pressure.
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  So what was causing that? Why was it going down instead of up?
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  There were two main things. The first one is sort of out of their control.
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  They called it higher irradiation losses.
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  Meaning the sun just wasn't shining as much as they'd forecast it. Exactly.
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  For a solar company, that's just bad weather. And that alone cost them 179 million rupees in revenue.
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  It's a risk you always have in this business. You can't control the sun.
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  Okay, so what was the second factor? The second was more about their portfolio.
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  They lost about 130 million rupees because some rooftop assets that used to
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  be in their results were transferred out.
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  So if you look at the actual electricity they produce. I'm a doubt.
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  Excluding the rooftop stuff, generation decreased by 2%. And that leads to the
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  key metric, right? The plant load factor or PLF.
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  That fell from 23.1% down to 22.7%.
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  Now a drop of 0.4% might not sound like a lot to you, but why is that so significant?
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  It. It's all about the trend.
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  A falling PLF, even a small drop, signals a real operational dip.
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  It means either equipment isn't performing, there are grid problems,
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  or the weather was just consistently not great.
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  But wait a minute. If you add up those losses, they're in the hundreds of millions of rupees.
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  How did the final revenue only end up down by 1%?
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  Ah, because something else came in to save the day. What was it?
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  The entire decline was pretty much offset by one single crucial item.
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  They received a differential tariff payment for their Carnatica 3.1 project.
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  And that brought in how much? A very healthy 247 million rupees.
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  And you're going to hear that project name a lot because its resolution is the
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  thread that ties all the good news together.
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  That is a perfect transition. So let's talk about what really drove that 50% loss reduction.
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  Because if it wasn't operations, it had to be the finance department. Absolutely correct.
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  The whole story boils down to two lying items, general and administrative expenses,
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  or G&A, and net interest expense.
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  Let's start with G&A. The numbers here are just wild.
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  G&A expenses dropped by 54%.
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  It's a reduction of over 1.3 billion rupees. That's not your normal belt tightening.
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  That is major, major financial house cleaning.
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  So where did that come from? It's not like they just stopped buying paperclips.
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  Not at all. It was about reversing things from the past.
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  Over a third of that entire drop, 500 million rupees, came from reversing a
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  provision for doubtful receivables. Okay, let's break that down for everyone listening.
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  A provision for doubtful receivables is basically when a company thinks a customer
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  isn't going to pay. Right.
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  You set aside money for that expected loss, and it hits your expenses immediately,
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  even though no cash is left. It's an accounting charge that reflects risk.
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  But then they collected the money from that Carnatica 3.1 project dispute.
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  And because they collected it, they didn't need the provision anymore.
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  So they could reverse it, which basically adds it back as income.
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  Erases an old expense. So it's a double win. You get the cash you're owed and
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  you get to reverse the provision, making your expenses look way better. Exactly.
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  And that wasn't the only thing. They also saw a 400 million rupee reduction in asset write-offs.
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  They're cleaning up the books and their physical assets at the same time.
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  And then there's a detail that tells you a lot about the company's recent history.
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  Legal and professional fees went down by almost 360 million rupees.
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  Yeah, and they state this was mainly because the costs related to the whistleblower
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  and special committee investigations are finally winding down. That's a huge signal.
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  It means that whole multi-year distraction, that whole compliance saga is finally
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  coming to an end. It feels like a turning point.
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  They can finally focus on being a power company again, not a legal defense firm.
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  Okay, so that's G&A. What about the other huge swing, the net interest expense?
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  Another massive drop here.
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  It decreased by 25% or about 1.36 billion rupees. And where did that come from?
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  Well, the main reason was that they received 912 million rupees in what's called
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  late payment surcharge income.
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  So basically a huge interest check paid by their customer because they were
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  so late paying their bills.
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  That's it. And it was all thanks to that Supreme Court decision resolving the Karnataka dispute.
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  So let me get this straight. The Karnataka 3.1 project resolution gave them 247 million in revenue.
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  A 500 million G&A reversal, and nearly a billion in late payment income.
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  That single resolution single-handedly drove the entire improvement on their bottom line.
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  It is the absolute central theme of these results.
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  But it wasn't all good news. There was one huge negative factor working against
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  them. Yes, the income tax expense. It exploded.
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  It went up by 2.2 billion rupees, a 500% jump.
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  A 500% tax increase. How is that even possible if they're just climbing out of a loss?
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  It's mostly because of higher deferred tax expense.
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  So for you listening, this isn't necessarily cash tax they paid out the door
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  right now. OK, so what is it then?
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  When you have these huge one-time gains like the windfalls from the Carnatica
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  settlement, it creates a difference between the profit you show investors and
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  the profit you report to the taxman.
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  So deferred tax is them basically setting money aside for future tax bills that
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  got triggered by these settlements.
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  You've got it. It's an accounting entry that partially offset those huge gains,
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  and it's really the price they pay for cleaning up all those old liabilities.
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  But even with that huge tax hit, the cash flow story looks fantastic.
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  Cash from operations more than doubled. It soared from 2.4 billion rupees to over 4.4 billion.
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  And that proves this wasn't just accounting tricks. This was real money coming in the door.
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  And that cash flow surge came from collecting on those old bills, right?
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  Directly. The report shows that collections from receivables increased by over
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  2.1 billion rupees, confirming that the Karnataka cash came through.
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  And they put that cash to good use. They repaid almost 8.7 billion rupees in
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  debt during this period.
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  The strategy is so clear. Resolve the old problems, collect the cash, and pay down debt. It is.
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  Okay, before we get to the future outlook, let's briefly touch on another part
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  of their structure, the restricted group 3, or RG3.
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  Right. This is the group of entities tied to their green bonds,
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  their U.S. dollar notes.
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  And they report under slightly different accounting standards,
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  which gives us another view.
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  And what did that view show? Well, it confirmed the operational strain.
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  RG3's revenue was also down about 1% for the same reasons lower generation.
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  But their profit story was the complete opposite of the parent company.
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  RG3's net profit actually plunged by 78%. And guess what the culprit was? Let me guess.
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  Deferred tax. You got it. A massive increase in the deferred tax charge.
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  Over 1.2 billion rupees just crushed their profitability.
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  So the tax implications are being felt across the whole structure,
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  but they are managing their debt well in that group too, right? Yeah.
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  Finance costs were down 13 percent. They completed tender offers to buy back
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  some of their senior notes.
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  It's all good. Responsible. Housekeeping. And what about their overall cash
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  position? Are they liquid?
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  They seem to be. The parent company had over 11 billion rupees in cash and equivalents,
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  plus more available on undrawn debt. So, yeah, the financial position is stable.
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  OK, so the first half of the year was a huge success in terms of financial cleanup.
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  But now we have to turn to the future. What does the project pipeline actually look like?
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  And this is where the story gets a lot more concerning. Why is that?
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  Because the success in the finance office isn't really translating into future growth.
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  The biggest issue is this 4,000 megawatt manufacturing linked tender.
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  They've now disclosed that they will not continue with construction for over
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  3,000 megawatts of that.
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  Wait, they're walking away from 3,000 megawatts of projects where they already
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  had the agreement signed? They are. It's a staggering strategic shift.
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  They are sacrificing a huge piece of their future contracted revenue.
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  But why would they do that?
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  It all points to the projects just not being economically viable anymore.
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  These are probably older contracts where the tariff they agree to is just too
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  low, given how much costs for materials and everything else have gone up.
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  So they're cutting their losses.
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  It's a smart business move, maybe, but it means their growth path just got a lot shorter.
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  Dramatically shorter. And it's not an isolated case. They also withdrew from
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  a 150-megawatt hybrid project for the same reasons.
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  They even paid 190 million rupees in damages just to get out of that deal.
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  Wow. They're paying to cancel projects. And then there's another 120-megawatt
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  wind project that's stuck in regulatory delays over 16 months.
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  And now the tariff is no longer competitive, so they're appealing.
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  The whole environment is just full of friction.
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  And that friction leads us to the biggest regulatory challenge of all,
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  the great Indian-bustard litigation at the Supreme Court.
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  This is a huge deal. It's massive.
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  This is all about protecting an endangered bird species in Rajasthan and Gujarat,
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  which happen to be prime solar and wind territory.
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  The court had ordered that transmission lines have to be buried underground.
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  Which is incredibly expensive and difficult at a utility scale.
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  Prohibitively so. Now, the court did modify its order in March 2024,
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  narrowing the requirement mostly to about 13,000 square kilometers of priority
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  areas. Oh, that helped a bit.
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  It did, but the fight isn't over. The industry and the government have applied
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  for a full exemption in the wider potential areas, citing the practical difficulties.
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  The judgment on that appeal has been reserved. So we're just waiting to see.
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  And what's the risk for APGL? They say it in their report.
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  If that application is dismissed, the company might entail significant costs and delays.
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  It's the single biggest financial cloud hanging over their future.
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  So if we bring it all together, the story of this half is...
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  Well, it's not what it seems at first glance.
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  Not at all. The huge bottom line improvement wasn't about operational excellence.
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  It was about financial cleanup, plain and simple.
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  It was a textbook case of resolving old liabilities, especially that one golden
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  ticket, the Carnatica 3.1 project dispute. Exactly.
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  That one resolution delivered cash, reversed provisions, and gave them that
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  massive late payment income.
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  But the central tension for you as you look at this company is that they prove
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  if they can clean up the past.
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  They can manage debt and generate cash. But they still face really severe uncertainty.
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  We saw the operational dip with the lower PLF. We saw them cancel thousands
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  of megawatts of future growth, and they have the Jibcorp ruling just looming over them.
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  Which brings us to our final thought. The question for you to think about is this.
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  The reduction in GNA costs was great news, partly because it signals the end
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  of those whistleblower and internal investigation costs.
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  That suggests better internal controls, right? You would hope so.
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  But what does it tell you about their current project's selection and execution
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  when a company that has supposedly cleaned up its internal act is still strategically
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  canceling over 3,000 megawatts of projects because they're not viable?
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  That's the real puzzle to consider as you weigh their financial success today
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  against their operational uncertainty for tomorrow.