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Azure Power Global Limited (NYSE:AZRE)
Q2 2020 Earnings Call
Nov 15, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the Azure Power Fiscal Second Quarter 2020 Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Instructions will follow at that time. Please note this event is being recorded.

I now would like to turn the conference over to your host today, Nathan Judge. Mr. Judge, please go ahead.

Nathan Judge -- Investor Relations

Thank you and good morning everyone and thank you for joining us. After last night's close, the company issued a press release announcing its fiscal results for the second fiscal quarter of 2020 ended September 30, 2019. A copy of the press release and the presentation are available on the investor section of Azure Power's website at azurepower.com.

With me today are Ranjit Gupta, CEO; Murali Subramanian, President; and Pawan Kumar Agarwal, Chief Financial Officer. Ranjit will start the call by going through the finding of the review over the past several months since they joined and what initial actions have been taken, followed by an industry update. Pawan will provide an update on the quarter and then we will wrap-up the call with Ranjit providing commentary on new disclosures we are providing this quarter that we believe highlights the value of the company. After this, we will open-up the call for questions.

Please note, our Safe Harbor statements are contained within our press release, presentation materials, and available on our website. These statements are important and integral to all our remarks. There are risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward looking statements. So we encourage you to review the press release we furnished in our Form 6-K and presentation on our website for a more complete description. Also contained in our press release and presentation materials are certain non-GAAP measures that we reconcile to the most comparable GAAP measures and these reconciliations are also available on our website and in the press release and presentation material.

It is now my pleasure to hand it over to Ranjit.

Ranjit Gupta -- Chief Executive Officer

Thank you, Nathan and a very good morning, everyone. Murali and I have reviewed the majority of the business in great detail and what we have found has been very positive on many fronts. We will continually review the business and will take steps to address areas that we find to be deficient. Last quarter, we provided a framework of our commitment to capital discipline and the important components of the actions we considered important to deliver shareholder value. At our core, we are a shareholder return focused management and only when returns are above our cost of capital, we'll invest in growth projects for future growth.

I want to walk through each of the principals provided and update you on the actions we are taking. One of the fundamental that is paramount to value creation is the execution of the core business. We must deliver our current pipeline on-time and on-budget. During the quarter, we delivered 189 megawatts. We have another 90 megawatts facility under construction in Assam. Most of the land for that has been procured and financing has been secured. We expect this plant will be delivered on-time by the middle of calendar year 2020. We also expect that another 27 megawatts of rooftop will be completed over the next four months or so. We believe that there is a lot of incremental value from making more with what we have, i.e. stretching the assets. To this end, Murali and I have been doing an extensive review of the company's cost structure and have found meaningful opportunities to enhance returns through efficiency gains and cost optimization.

We will be providing more in way of quantification in the future, but wanted to provide some examples now. We believe there are ways to meaningfully reduce our capital cost going forward and expect our cost per watt operating on a DC basis will be between $0.40 to $0.45 per watt excluding safeguard duties, which we recover for projects under construction, which would be up to 15% lower than the capital cost we just reported. For example, we are benchmarking our EPC business against peers to further improve efficiency in our EPC business and if we find that a third-party is more competitive in any specific project, we will potentially outsource the low margin nuts and bolts construction process.

In operation and maintenance, we are benchmarking performance against the expected performance at the time of build and finding opportunities to increase output at least 1% to 2% by closely monitoring performance ratio of each plant. We also see opportunities to increase the generation of our plants through wider deployment of cleaning technology that not only increases output, but also reduces operating costs and very importantly, water consumption. We also believe that we can make more of the scale of our platform by optimizing employees to enhance productivity. We will leverage our scale more in the future with vendors to improve value and service.

During the quarter, we successfully undertook two large capital raises, which included our second green bond of $350 million as well as $75 million private placement with our largest shareholders, CDPQ. We are pleased to note that the completion of the private placement with CDPQ, our contracted portfolio will be fully equity funded. Overall, we believe that this illustrates our access to capital in an environment where capital is at a premium and most of our peers are capital constrained.

Turning to a very important facet of the value creation proposition, we are intently focused on doing only projects that meet threshold return and must be above our cost of capital. During our review over the past three months, we came upon projects that did not meet these thresholds and we took actions to exit 350 megawatts. We are reviewing all projects in our portfolio and exploring an exit from 200 megawatts to 300 more megawatts and we will provide more disclosure once we have something to announce.

Looking at expected equity returns for new project, we believe that our business is a utility and should earn utility type returns over the long run or mid-teen equity return. Having said that, the Indian solar industry is currently in an environment where we may be able to achieve returns above this run rate in the short-term. Overall, there is significant demand for new solar capacity given that it is the lowest-cost source of new electricity capacity in the country. In fact, the amount of new capacity auctions in process is so large that the industry does not have enough capacity to fill demand and auctions are not being fully subscribed. As a result, we are now seeing tariffs for new capacity beginning to rise. Recently, SECI has increased the tariff cap to INR2.78 from INR2.65 or by about 5%. These higher tariffs could present opportunities that could allow us to earn higher than long-term normalized return.

In other news, the Central Government recently implemented a tax cut that we view as a strong long-term positive for business. Importantly, the government reduced the minimum alternate tax rate, which should save us cash taxes. We continue to make progress in improving payment security through letters of credit. At this point of time, more than 20% of our operating megawatts have LCs in place and we expect more LCs will be put in place in the future.

The situation in Andhra Pradesh is evolving rapidly. We continue to be pleased by the Central Government's strong backing of the sanctity of contract. At the moment, we have about $6 million of accounts receivable outstanding with AP, with Andhra Pradesh that are over 90 days past due and we expect that following some of the positive court order that we will begin to see payments from AP sooner than later.

The MNRE, which is the Ministry of New and Renewable Energy recently proposed a new version of safeguard duty called basic custom duty, which could potentially become effective in 2021. It is very early to know how this plays out. In any case, we continue to be covered by our contracts for any such eventuality and do not expect there would be any material negative impact on our business if basic custom duties are implemented.

I would now like to turn it over to Pawan to go through the fiscal second quarter results.

Pawan Kumar Agrawal -- Chief Financial Officer

Thank you, Ranjit. We had 1,798 megawatts in operations as of September 30, 2019, which is about 77% more than what we had at the end of fiscal quarter of 2019. We have another 170 megawatts under construction and 900 megawatts that have PPAs and are in development. Combined, this contracted portfolio is 2,815 megawatts. We have another over 500 megawatts of capacity that have letters of award, although we are exploring some of these. We expect that we will sign PPAs with some of the capacity with LOAs, although some of these projects could be dropped. In the contracted portfolio of 2,815 megawatts has a revenue portfolio run rate of $310 million or about 93% higher than the revenues we realized over the past 12 months. Including the contract with LOAs, our portfolio revenue run rate would be $315 million. Focusing on project cost per megawatt operating for the six months ended September 30th 2019, excluding the impact of safeguard duty, which represented about $40,000 per megawatt, our cost per megawatt on a DC basis decreased by 27% to $460,000. As a reminder, we do expect to recover safeguard duties over-time either through a reimbursement or through an increased tariff. We continue to work through this and once we have better clarity, we'll provide more color to the market.

Looking at the profit and loss, second quarter FY '20 would have been in line with our internal budget after excluding various charges and weather headwinds. Revenues rose 28% year-on-year, however an extended monsoon resulted in a 3% lesser revenue than in the season had ended [Indecipherable]. Our cost of operations rose 44% year-to-year, this increase reflecting the 330 megawatts of solar park projects that were brought online during the quarter. Solar park projects cost more to operate than non-solar park project. However, we expect this negative solar park impact will moderate as all of our future projects under construction or development are non-solar power projects and the gross margins average will revert back to historical level. Our G&A [Phonetic] doubled during this quarter. However, after taking out about $2.1 million of charges and provisions that were generally one-time impact, G&A was slightly better than our internal budget. Second quarter FY' 20 EBITDA increased about 15% year-on-year. However, adjusting for the 2 million charges in G&A and weather, EBITDA would have increased in line with the revenue growth. Longer term, we continue to expect that there will be meaningful EBITDA margin improvement for the next couple of years.

Our depreciation and amortization increased 12% year-on-year to a $9.5 million in the quarter, which reflected the 189 megawatts of projects which were brought online during this quarter. Our D&A has gone up by about $1 million every quarter and we expect this trend to continue for the third fiscal quarter as well. Interest expenses increased by 53% to $27.1 million in the quarter as the gross debt also increased by a similar amount because of more projects coming into the operation. For the third quarter, we would highlight that we expect to record close to $5.4 million charge in our interest expenses related to the recent issuance of our second green bond. On foreign exchange, we've relatively hedged capital cost which is costing us about $1 million per quarter, but reducing our exposure to foreign exchange meaningfully and this would continue for the remainder of the quarter. We also realized a one-time FX saving clause [Phonetic] of around $2 million related to refinancing in this quarter.

On our balance sheet, cash and equivalents ended the quarter at $106 million. Property, plant and equipment increased to about $1.3 billion and net debt was slightly over $1 billion.

I would now like to turn it over to Ranjit to provide some of the commentary on new guidance and disclosures that we are providing in this earnings.

Ranjit Gupta -- Chief Executive Officer

We subscribe to the ethos that transparency breeds trust and trust results in value creation. As we had promised in the last earnings call, today we are rolling out a significant amount of new disclosure and guidance. We believe that this additional information should highlight the value of the company and that the disclosure will make it easier for investors to invest.

On EBITDA and cash flow guidance, we expect the currently operating portfolio of 1,798 megawatts to generate around 200 million of run rate EBITDA and produce run rate funds from operation around $75 million to $85 million once the portfolio is operational for one full year. The net debt required to support this 1.8 gigawatts operational level of capacity is about $1 billion. Looking further out, contracted portfolio of 2,815 megawatt is completed in the next 15 months or so, we expect EBITDA to be around $270 million run rate and FFO to range from $105 million to $120 million annually, effectively in the financial year 2022. We will have about $1.6 billion of net debt on our balance sheet once the capacity is all operational.

To help you further model the financials of a larger portfolio, a 300 megawatt project should add between $22 million to $28 million of EBITDA, $10 million to $15 million of FFO and about $125 million to $135 million of debt. We also are providing NAV oblique share value of the contracted 2,815 megawatt portfolio under various cost of capital scenario. We would highlight that this value does not place any value for growth, the differentiated platform, no cost reductions we believe are achievable. We also believe that there is an opportunity to lower our borrowing cost and every 100 basis points reduction in our cost of debt over the 25-year life of a project equals to about 50% more in NAV per share.

Turning to operating megawatt guidance, we reiterate that we expect to deliver about 1,800 megawatts to 1,825 megawatts operating this fiscal year and grow it by about 1,000 megawatts next year and have the contracted capacity of 2,815 megawatts fully operational by the end of next fiscal year as in fiscal year '21. To build these, we will spend another $600 million to $650 million in capex with about $150 million to $200 million spent in the second half of the current fiscal and the remainder in fiscal 2021.

On liquidity, we wanted to provide better disclosure about funds available to build new megawatts. Whilst we have $417 million of cash on the balance sheet, about $278 million has been since used to refinance debt related to our recent issuance of a green bond and another $108 million is allocated largely for projects that are completed, but where we have yet to make payments and for meeting upcoming debt servicing obligations. This leaves about $30 million of cash for new projects, which was a driver for our recent private placement with CDPQ.

We have also provided new information on plant load factors, on day sales outstanding and credit rating by counterparties in our appendix. We continue to make progress on a sustainability report by the end of this fiscal to increase the awareness of our cultural focus on improving the lives of those in our community and the natural advantage we have of providing clean, sustainable energy for generations.

On guidance, we are reiterating our revenue guidance for fiscal year of revenues between INR12.8 billion and INR13.4 billion which will translate to $181 million to $189 million using the September 30th 2019 exchange rate of INR70.64 for every US dollar.

With this, we will be happy to take questions.

Questions and Answers:

Operator

Yes, thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Philip Shen with Roth Capital Partners. I'm sorry, actually the question comes from Maheep Mandloi from Credit Suisse.

Maheep Mandloi -- Credit Suisse -- Analyst

Hi, everyone. Thanks for taking the questions and a lot of good information on the slides. Thanks for that as well. Just wanted to briefly touch upon the changes we can expect to the existing projects, then apart from the changes to the projects under development. What can we expect around the existing projects, if you could just highlight upon that?

Ranjit Gupta -- Chief Executive Officer

Maheep, I didn't actually get your question right, this is Ranjit here, I didn't get the question.

Maheep Mandloi -- Credit Suisse -- Analyst

Hey Ranjit, just wanted to understand like the levels you have to improve profitability or EBITDA on the existing projects going forward. I think [Technical Issues] something like that in your comments?

Ranjit Gupta -- Chief Executive Officer

Right. So on the existing projects, right. So like we mentioned, we believe that we can stretch these projects more. Over the last three months, Murali and I have visited our projects in Rajasthan, in Karnataka, in Andhra Pradesh, right. And looked at the operating performance, how we are analyzing the data that is coming out from those projects and we are starting to monitor our projects on a week-to-week basis looking at the performance ratios on a week-to-week basis, right. And we have already seen that this focus on a weekly PR as we call it, the performance ratio has made the team a little bit more aware of the generation issues that typically if you do a monthly or a quarterly update, you don't see. So apart from that, we are also, like I mentioned, looking at some dry cleaning options. Typically what happens is when you do water cleaning and you clean your modules, typically you are able to clean modules only, let's say, twice a month or something of that sort whereas if we are able to retrofit dry cleaning on the modules in our projects, then you can clean modules on a daily basis. There are also some repowering opportunities that exist on our projects, which we are currently undergoing, right. I mean we hope that all the repowering that we have put in place will complete by end of January. So there are several opportunities out there for us to stretch our operating portfolio more and we are doing that very aggressively.

Apart from the operational part, we are also looking at the financing of each project very closely. Of course, [Indecipherable] of our projects are in bonds, but there is still almost 500 odd megawatts that are still funded individually either through local debt or foreign debt. So at least two or three of those projects we are looking at refinancing. We are in talks with various lenders, so that we can bring down the cost of debt. So we are not only in the new projects, but in the operating projects, we are looking at very aggressively how we can improve on a project-by-project basis, how can we improve the performance of each project.

Maheep Mandloi -- Credit Suisse -- Analyst

Got it. That's helpful. And just on the mid-teens IRR guidance, could you first clarify whether that's unlevered or levered and as you exit the 350 megawatts and the additional 200 megawatts to 300 megawatts, could you just touch upon the drivers for exiting these projects and then just looking at the project look less, it looks like some of the projects being excluded were not necessarily the lowest PPAs on the market. Just wanted to understand the drivers behind the cancellations.

Ranjit Gupta -- Chief Executive Officer

Right. So Maheep, the cancellations are purely driven by economic reasons, right. So there are two aspects we have to look at. One is, of course that there should be an out on a project, so that we don't get financially hit when we exit the project. And secondly, we have to ensure that we don't get hit reputationally when we exit projects, right. So of course there is economics and then there is the reputation. So we have to balance both of these things. So balancing those, we are exiting projects where we can. Please note that tariff is not the only driver for returns, because a tariff of $0.035 or $0.038 might be great for one state and might be horrible for another state, right. So just because I drop a project, which is $0.04, right, doesn't mean that that project was giving you better returns than a project that was $0.037, but in the state where the installation is much higher, the project is much larger, so I can drive economies of scale. I can get better installation, I can be closer to other projects that I have. So many factors will lead to an equity return on a particular project. So we are taking the decision purely based on economics.

Maheep Mandloi -- Credit Suisse -- Analyst

Got it. And if you can touch upon the IRR guidance?

Ranjit Gupta -- Chief Executive Officer

So the IRR is always levered. We are talking about equity IRR, so these are levered IRRs. Yeah, and this is a yield to maturity. If you hold these projects to maturity, this is what you will get.

Maheep Mandloi -- Credit Suisse -- Analyst

Perfect. And I think one last from me and then I'll probably jump back in the queue for others. The 15% capex reduction you expect going forward, does it include any module price savings and just more from the rest of the balance systems and EPC cost reductions, which you spoke about. And because just looking at the spot prices and we are seeing continuous pressures, downward pressures on the module prices just given the bringing [Phonetic] over-capacity out there. So any thoughts on that?

Ranjit Gupta -- Chief Executive Officer

No. 100%, right. I mean whenever, when you are trying to drive 15% capex reduction, a lion's share will come from modules, right. So the reduction in the other parts when you're looking at a capex of the project, there are largely three or four elements, right. One is of course the module price, then the balance of plant and then the rest of the establishment cost, financing cost and so on and so forth. So as far as the 15% is concerned, a large portion of it will come from module, but certainly on the BOS part and on the financing costs and establishment costs and overheads etc, etc also we are focusing, even though the returns there on our effort might be slightly lower, but on an efficiency basis, we are looking at reducing capex on all items.

Maheep Mandloi -- Credit Suisse -- Analyst

Got it. Thank you.

Operator

Thank you. And the next question does come from Philip Shen with Roth Capital Partners.

Abel Ortega -- ROTH Capital Partners -- Analyst

Hi, this is Abel Ortega. I am on for Phil. Just a quick question from me and I'll jump back into the queue. How do you expect PLF to trend in fiscal year 2021?

Ranjit Gupta -- Chief Executive Officer

Abel, you are asking about the PLF in fiscal 2021?

Abel Ortega -- ROTH Capital Partners -- Analyst

Yes.

Ranjit Gupta -- Chief Executive Officer

So the PLFs in fiscal 2021, we expect to be better than the 2020 numbers simply because of the fact that a large portion of our upcoming capacity is going to be in Rajasthan, which has the best installation. And also if you look at overloading DC to AC of our portfolio with every new project that we build, the DC by AC ratio also goes up. So we are building projects which are in the higher installation area going forward. Almost 90% of the capacity between 1,800 to 2,800 is going to come from Rajasthan and also as you will see that the DC-AC ratio will also continue to increase. So we expect the PLFs to get better.

Abel Ortega -- ROTH Capital Partners -- Analyst

Got it. And jumping on to previous -- sorry, I have one more question. Jumping on to previous question, you mentioned reaching cost per operating megawatts of $0.40 and you mentioned that to reach that it will be because of lower marginal cost. Do you see other levers you expect to use to reduce this cost and how much lower do you think this cost can be as the industry matures. Do you see more low hanging fruits? Thank you.

Ranjit Gupta -- Chief Executive Officer

So like I mentioned to Maheep, Abel, the large part of the cost reduction will continue to come from module. In the next 12 months, we don't see any huge technology advancements that will allow us to reduce capex significantly apart from modules. So there are always design improvements and technology improvements on the BOS side, which enable us to get certain advantages. But like I mentioned in response to the last question, the lion's share will come from module. As far as how low the modules can go, we keep hearing of new technology, which are in development and people talk about the module prices going down really low. But when those technologies will come to fore, when they will become commercial and when we will see the benefits of that to our projects is difficult to access.

Abel Ortega -- ROTH Capital Partners -- Analyst

Got it. All right, thank you.

Operator

Thank you. And the next question comes from Joseph Osha with JMP Securities.

Joseph Osha -- JMP Securities -- Analyst

Thank you, and hello everyone. A couple of questions. First, listening to you discussed your IRRs, I'm wondering have you established a hurdle rate methodology within your company that will affect whether you take on new projects or not. Then I have a couple of follow-ups.

Ranjit Gupta -- Chief Executive Officer

Yes, absolutely Joe. I mean that's the reason why we have dropped those projects that we spoke about. They did not meet our internal hurdle and we are looking to drop some more if we can get out of them, because they don't meet our internal hurdle. So certainly there is a benchmark for us and if we don't hit those benchmarks, we will not participate in future growth going forward.

Joseph Osha -- JMP Securities -- Analyst

Okay. And obviously there is a number there, but it strikes me that the philosophy here is more important. Going back to the initial comments about utility scale returns, I mean over-time is that IRR likely to converge with the IRR realized by Indian [Phonetic] utilities or how do you think about how you should manage that number?

Ranjit Gupta -- Chief Executive Officer

So to tell you the truth, the number, even currently the number that we are looking at is the number that typically the Indian regulator actually allows as a pass-through when they do, I mean when they used to do MOUs or bilateral power purchase agreement. So we are very close to that number already, right. So mid teens is what people expect. Unless and until there is a structural change in India, which reduces the India risk in the eyes of foreign investors, we don't believe that we will see any contraction in the returns. At the end of the day, in this sector, in the renewable energy sector, majority of the money comes from international investors and they all have similar return expectations where they factor in the technology that we are using and also they add a premium for India and unless and until that premium goes down, we expect to see similar returns.

Joseph Osha -- JMP Securities -- Analyst

Okay, all right. And can you share with me what the number is at the moment?

Ranjit Gupta -- Chief Executive Officer

So it's mid teens.

Joseph Osha -- JMP Securities -- Analyst

Okay. And then just on the kind of the other side of the equation if you will. You have all these assets, some of them have green bond financing, some of them have, I presume amortizing debt. What's the philosophy over-time here? Are you going to seek to once you've got a project operating. Are you going to seek to de-leverage over-time or are we going to see you tend to go back and back lever those assets over-time to provide cash assuming that you can identify new opportunities that meet your hurdle rate.

Ranjit Gupta -- Chief Executive Officer

So I mean Joe, we are very clear on this. We are not going to take any riskS on refinancing project or take-up fund 10 years down somehow, I'll be able to make a bullet payment by raising money from somewhere and repay our debt. Debt is a debt. It has to be repaid. As a utility, we cannot be aggressive on this. The reason why we have a non-amort facility is because we are confident that post this non-amort period there is still a 20 year PPA left for us to do an amort refi. And even in this, if you look at our presentation, you will see that we have committed that year four and year five of our bond, we are going to not do any distribution internally, right? So the year four cash and the year five cash will be locked, which will be about 15% of the bond issuance of the debt that we have on those projects that will help us in refinancing. We are going to be conservative, we're not going to over-leverage our balance sheet and as time goes by on our operating projects, the level of debt will continue to go down.

Joseph Osha -- JMP Securities -- Analyst

Okay. So that's a critical point that you're committing that you are over-time going to match the amort schedules on these projects with the PPAs, so that we're not facing any sort of bullets or refi risk down the road. That's the objective.

Ranjit Gupta -- Chief Executive Officer

100%. We are a utility. We are not a start-up.

Joseph Osha -- JMP Securities -- Analyst

Okay, all right, thank you.

Operator

Thank you. And the next question comes from Moses Sutton with Barclays.

Moses Sutton -- Barclays -- Analyst

Good morning, everyone or I guess not for everyone. Thanks for new disclosures. A quick question on leverage to pick up on that point. The go-forward leverage amount on future projects. Could we maybe put like a percent marker on that. So historically the ongoing leverage rate would be 70% or 75%. I'm wondering if you could give us sort of thoughts on that even thinking beyond the committed portfolio.

Ranjit Gupta -- Chief Executive Officer

So Moses, absolutely that is the right number. Typically, we finance our projects 75% to 25%, so 75% debt and 25% equity. If there is a good DSCR cover, if there is a good debt service coverage ratio on some of our projects when we have seen operating history of those projects, sometimes we are able to take it up to 80%-20%, but you know I have not seen at least in the time that we have spent in India, sustainable projects that have been levered more than 80%-20%. And at construction, 75%-25%, once you have a stable established cash flows, maybe you can take it up to 80%-20%, keeping in mind that you want to be able to amortize such that at the end of 80% of your PPA life, so if your PPA life is 25 years, then approximately at the 20-year marker, you should be completely debt free. So that in case there is any hiccup along the way, you still have the 20% runway if you need to do anything with that project, right. So the target has to be 75%-25%, maybe go up to 80%-20% once the cash flows have been established and try and see that at 80% of your PPA life, your project becomes debt free.

Moses Sutton -- Barclays -- Analyst

Got it. That's helpful. And then thinking of debt to EBITDA, I guess I'm going to look at the metrics here. From the full committed portfolio, it would be an implied like 5.4 times using midpoint. So you're putting that in other way or would you say you're comfortable with that level. Obviously, some of it would come down naturally a little bit over-time as projects split out cash flow. So around a 5 times to 5.5 times range, is that sort of a fair long-term target for debt to EBITDA?

Ranjit Gupta -- Chief Executive Officer

Absolutely. And like you rightly pointed out, as we continue to grow and as our project debt keeps getting amortized and paid, this number will continue to come down. On the new projects, when we built new, we target 5.5 times and as the percentage of new build in our portfolio will reduce once we are 4,000 megawatt or 5,000 megawatt or 7,000 megawatt or 10,000 megawatt as the percentage of new build reduces, we will see a continual decrease in this ratio.

Moses Sutton -- Barclays -- Analyst

Got it. That's helpful. And then shifting to capacity factors -- sorry -- shifting to capacity factors, you gave historical numbers. Any updated thoughts on go-forward project capacity factor. So just to put a numbers here. In the past, management disclosed, high 20% given the amount of DC overloading. What are your thoughts there on how we think of the blended capacity factor or even the go-forward numbers to the projects?

Ranjit Gupta -- Chief Executive Officer

So that is the right number still, the high 20%s and of course like I mentioned earlier, when we were talking about tariffs that in some states, you will see lower installation. So there you will see these numbers come down and in some states like Rajasthan, you will see the high 20% numbers including the overloading. Over the last few years, we have seen that the overloading has sort of matured to between 1.35 to 1.5. We have not seen a significant uptick in this number. So assuming that the overloading stays in this range of 1.35 to 1.5 and if you are building projects in Rajasthan, you would tend to see a high 20% number.

Moses Sutton -- Barclays -- Analyst

Great. And then last one from me. NAV per share at the varying cost of debt, that was very helpful sort of metric you have in the presentation. Just thinking going forward, any updated thoughts on selling an entire asset to sort of validate market evaluation there?

Ranjit Gupta -- Chief Executive Officer

You are talking about selling portfolio?

Moses Sutton -- Barclays -- Analyst

Yeah, sort of thinking of selling a single asset that give you a marker.

Pawan Kumar Agrawal -- Chief Financial Officer

So of course we do have in our mind, how do we recycle our capital at best, and we have thought of couple of options. But as you know, the initial focus is more on trying to optimize the capex, trying to set our assets better, try to get the capital structure in place and even if you look at selling any of our asset, the process is going to take its own time. In the current environment where in when there are a lot of projects available, this is not something, which is readily available market and as of now, we are not really looking at selling off our assets very, very actively. Having said that, as a management team, we are extremely clear that anything and everything that can create more value, we will be looking at those and capital recycling is one of the options, one of the bucket in which we are, we have two three options in mind, but to be very honest it is little premature, maybe as you move along in next couple of quarters, we should be in a better position to prioritize that and probably come back to you.

Ranjit Gupta -- Chief Executive Officer

And Moses, to also give further color to this, we will continually look to rebalance our portfolio, right. So as the business moves forward, as the -- I know the risks change for the portfolio, we will certainly look at seeing what makes sense for us. For example, today SECI and NTPC that are the flavor of the month. Today, people are doing very large projects, 200 megawatt, 250 megawatt portfolios. We have one project that is almost 600 megawatt. On the other hand, we have projects in our portfolio that are 5 megawatts and 10 megawatts and 15 megawatts, some of them have state off-takers. So we will continually look to see how to rebalance the portfolio and make it more homogeneous, right. So like Pawan mentioned over the next few quarters, we will take some decisions on this and move forward to ensure that we are deploying our time, our bandwidth in the most optimum and efficient fashion.

Moses Sutton -- Barclays -- Analyst

Great, thank you. That's it from me.

Operator

[Operator Closing Remarks]

Ranjit Gupta -- Chief Executive Officer

Thank you.

Duration: 45 minutes

Call participants:

Nathan Judge -- Investor Relations

Ranjit Gupta -- Chief Executive Officer

Pawan Kumar Agrawal -- Chief Financial Officer

Maheep Mandloi -- Credit Suisse -- Analyst

Abel Ortega -- ROTH Capital Partners -- Analyst

Joseph Osha -- JMP Securities -- Analyst

Moses Sutton -- Barclays -- Analyst

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