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Genus Power Infrastructures Ltd
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Ladies and gentlemen, good day, and welcome to Genus Power Infrastructures Limited Q2 FY '23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jitendra Agarwal, Joint Managing Director of Genus Power Infrastructures Limited. Thank you, and over to [indiscernible]
Good evening, everyone. A very warm welcome to the Q2 FY '23 earnings call of Genus Power. Along with me, I have Mr. Kailash Agarwal, the Vice Chairman; and SGA, our Investor Relations adviser. The results and investor presentations are uploaded on the stock exchange and company website. I hope everybody has had a chance to look at it.
So we have recorded sales of INR 219 crores in quarter 2 FY '23 up by 23% as compared to INR 178 crores in last quarter. Revenue growth for quarter 2 was impacted on account of reduced capacity utilization due to disruptions in supply of semiconductors and some other essential and economic components. However, we anticipate a start revenue rebound in H2 on account of robust order book and healthy order inflow and normalcy in supply chain to be restored within the next 3 to 4 months.
Post that, we expect to carry forward that momentum in financial year '24. For quarter 2 FY '23, EBITDA stood at INR 17 crores as compared to INR 15 crores in last quarter, an increase of 16%. Higher prices of raw materials and a lack of operating leverage as a result of lower capacity utilization continued to hamper operating margins. Profit after taxes stood at INR 10 crores as compared to INR 7 crores in the last quarter, a growth of 56% on [ Y-on-Y ] basis. Quarter 2 [ FY '21 ] comparing quarter from quarter 2 FY '22.
In April, 2022, we received the LOA for appointment of AMISP, including design of AMI system with supply, installation and commissioning of about 10 lakh smart prepaid meters, DT Meter level energy accounting and FMS for these meters from a state utility. That total order worth INR 828.57 crores net of tax is the largest single order finalized by any state utility in India for AMISP during that period.
As on 30th September 2022, our order book stood at INR 1,761 crore net of tax. On 30th July 2022, Prime Minister Shri Narendra Modi Ji launched the Power Ministry's flagship RDSS Revamped Distribution Sector Scheme, which aims to improve the operational efficiencies and financial sustainability of stressed power distribution [ revenues ] and state power departments, while modernizing and strengthening distribution infrastructure. The union cabinet has approved an outlay of over INR 3 lakh crores for RDSS which the ministry also describes as requirements based [ resulting ] scheme. DISCOMs suffer massive losses due to power test AT&C losses, meter tempering, inaccurate billing. RDSS is touted as a lifeline that can help DISCOMs turn around their fortunes and strengthen the power sector.
RDSS is intended to assess DISCOMs in improving their operational efficiencies, reducing their losses and becoming financially stable. Half of the scheme's outlay is for the better [indiscernible] and transformer metering and prepaid smart meters. The scheme aims to reduce technical and commercial losses to pan-India levels of 12% to 15% by 2024, '25 and eliminate cost revenue gaps by '24-'25.
Rural Electrification Corporation and Power Finance Corporation has been nominated as the nodal agencies for the scheme. One expect that distribution RDSS from previous government schemes is the [indiscernible] on mandatory smart metering infrastructure.
Smart meter enable consumers to learn about their consumption patterns, while also assisting utilities with system monitoring and customer billing without the need of manual intervention. This can significantly reduce in [indiscernible] DISCOMs billing and collection can lead to significant operational improvements. The schemes impact can be set on the account and almost every state electricity board has issued inquiry recruited tender for smart meter installation. As a result, we anticipated -- anticipate strong order inflow in coming quarter of financial year '23.
All reforms implemented to improve the efficiency of the power sector over the last 3 decades have followed the letter of [indiscernible] The central government has done away with 1 size fits all approach of previous schemes. Most of the [indiscernible] SEBs has been addressed by customizing the policy guidelines as per their respective special issues, thus all stakeholders are on board in the rollout of the smart meeting scheme across India is anticipated to be very smooth of it.
With the implementation of RDSS, we expect the entire landscape of the Indian metering industry to drastically change is multiple in the annual industry size. This will also lead to momentum shift from conventional meters to smart meters in Indian metering industries, thus enabling much improved operating margins.
The TOTEX model is now getting increasingly accepted among SEBs wherein the CapEx will be undertaken by AMISPs, also known as system integrators under the design build filings on operate and transfer arrangement.
From the monthly savings made on account of the smart meters, SEBs will [ entertain ] monthly payments to system integrators for a period of 6 to 8 years known as Pay-As-You-Save model. All these developments will calculate into robust order inflows, healthy top line growth, better operating margins as well as improved working capital cycle for coming 6 to 10 years starting from next quarter or next half yearly [indiscernible] in the metering industry.
We plan to play dual role of being system integrators ourselves as well as being vendors to other system integrators for the smart metering records. We are confident of significant improvement in our business operations in half yearly -- in the next half of financial year 2023. We can now open the line for Q&A.
[Operator Instructions] The first question is from the line of Anshuman Ashit from ICICI Securities.
Can you hear me now?
Yes. Yes. We can hear you now.
Okay. Sir, the first question is on the tenders which have been floated recently. If you could quantify and give us some more details on which states have come out with -- what amount of tenders? And how confident are you of these being awarded over the next 3 to 6 months?
So I'll just give the brief, in the interest of everyone, the tenders to the tune of INR 60,000 crores in the market right now. And this includes the already participated and tender which will be participated. So tenders which are already participated to the tune of INR 36,000 crores within the CapEx model or AMISP. Not every tender win a certificate as a system integrator. So we participate a few tenders as system integrators, few tenders as a meter manufacturer.
As I said earlier in my statement, like we will be playing the dual role in this industry. So that CapEx model like tender production of INR 36,000 crores, which are already participated. Conventional meter tender stood a tune of INR 726 crores have already participated. Live tender, which are -- for smart meters, which are on the CapEx model are INR 950 crores, which are already participated. So in total, around INR 38,000 crores tender has been participated. There are some different state utilities from UP, Power Grid for Gujarat, BRPL, BYPL, Jharkhand, [indiscernible], Tamil Nadu et cetera. So these are the tenders which are already participated.
Tenders, which will be participated in next, I would say, 2 to 3 months, these are already in the market, but it will be participated in to the [ 2 months ] to the tune of -- for TOTEX model as [indiscernible] to the tune of INR 20,000 crores from MP, Maharashtra, [indiscernible], West Bengal, Himachal, Chhattisgarh from multiple space has come out with the system integrator tenders on the TOTEX model.
And thus, for the conventional meters it will be participated in the next couple of months to that [ INR 50 crores ] So in total, that is around INR 20,000 crores tenders will be participated in the next 2 to 3 months. So in total, tenders either participate or to be participated at a INR 56,700 crores.
INR 56,700 crores Sir, would you please repeat the conventional meters forthcoming tenders, the amount what you had said?
As I said that conventional meter tenders which are already participated to the tune of INR 950 crores, which will be participated in next 2 to 3 months in the tune of INR 1,045 crores.
Sir, so we already have Bihar in our fold as AMISP. How much more capacity and capability do we have to take AMISP orders?
So as I said, Genus will be playing the dual role. As you see there are live tenders to the tune of INR 36,000 crores which are already being participated. So Genus has not participated as system integrators in all that stuff. So we have decided our own capacity, our appetite to quote as system integrators, and we are working on that lines only.
Okay. So off late, we have seen some slowdown in the installation. So if I look at the smart meter installation monthly data, so last month, in fact, it has been only 85,000. Is there a particular reason for it? If you could give some color on it?
There is no particular reason for order last month because very few tenders are on ground right now. So the real momentum has come in the last 3 to 4 months only when the bids are getting decided or bids are coming out. So real momentum of installation, we will see from next year onward. So this 85,000 or maybe because of the very limited orders which are decided on the ground.
That can be the only reason and other reason can be Diwali holidays and Chet definitely across my 20 years experience in installation business, Diwali month and the Chet month are the lowest, always across the country.
Understood, sir. Sir, next question is on our guidance for H2. So do we still stand by our EBITDA margin guidance for FY '23? Would we see a bit of drop in it?
So we are maintaining our [indiscernible] guidance we gave in the last quarter in the conference call, we are maintaining that, but we don't see not achieving it.
So given the first half has been 7.7%, so EBITDA margin of 13% to achieve that, we need to have more than 15% growth EBITDA margins in the second half. So do you see that as a possibility?
So in the last conference call, we gave you the guidance of 12% to 13%. I am confident that yes we should be able to achieve that.
Sir, how does the semiconductor supply issue? And where do we currently stand now? Are we getting the supplies as it eased a bit.
So I won't say is it back to normalcy. It will still take some time. As I said in my speech also that it will take 3 to 4 months to become further normal, but it is improving every day.
Sir, one final question before I move back into the queue. Could you please give us the order book breakup in terms of smart, conventional, FMS and all.
So our order book stands at INR 1,700 crores -- INR 1761 crores net of tax. Out of that supply portion is around INR 1,000 crores. So you want the breakup of supply and system integration-wise or conventional and smart meters?
Conventional, smart, FMS. And so what portion is for expenses, if you can share that.
Around INR 100 crores is the export orders.
The breakup between conventional and smart?
Conventional is around INR 200 crores. And if smart meters supply is around INR 600 crores, INR 750 crores -- around INR 750 crores, INR 200 crores is the conventional meters, INR 300 crores is export order and remaining is all FMS and installation.
[Operator Instructions] The next question is from the line of Nikhil Jain from Galaxy International.
I just wanted to understand, in the last quarter, say, July to September, how much tenders were actually awarded? Do you have any idea?
Can you repeat your question? From there in between.
So I was just trying to understand, in the last quarter, so like while the tender processes have started, like how much worth of tenders were awarded?
In last quarter?
Last 3, 4 months, let's say, from -- since the time the activity has [indiscernible].
Our value of orders [indiscernible] tenders has been awarded.
Yes. Not to us but to the industry globally or to the industry here?
I don't have the exact figures with me, so I don't want to comment on that because very few tenders have been decided in the last 2 quarters. But cannot give you any figure right now often.
And the second question was that we read in the news that Adani has actually got an order for Bombay for 10 lakh meters plus kind of a thing.
From the [indiscernible] there.
Yes. So is it like we are also participating or supplying to them? Or we will be able to [indiscernible] in that thing? Or that's not [indiscernible]
We are the -- as of now, we are their main vendors. We have been supplying maximum smart meters, purchased by Adani is all by Genus in their own utility in Mumbai. Rather, we have the 100% market share of smart meters in Adani Electricity Mumbai. So we'll definitely have our own share in [indiscernible] supply also.
But that is not included as part of our order book or is it already included?
No, that is not -- no. Whatever we already --purchase order we have received, that is part of our order book. At [ BSD ] not yet released the order.
Okay. But let's say, from our past experiences and with our good relations with Adani, you would definitely be participating in that kind of [indiscernible].
We are confident of getting business from them.
The next question is from the line of Srijan Sinha from Future Generali India Life Insurance.
Sir, just a couple of questions. One, you mentioned that there are INR 36,000 crores worth of orders where tenders have already been floated. The AMISP piece, I'm talking about. What would be quantum where Genus has participated?
In the TOTEX model..
Yes. AMISP piece.
So our quantum will be of this around 30% is quoted by us also as system integrators. And all the remaining tenders we are working with almost everybody as meter suppliers.
Okay. So out of INR 36,000 crores, you would have participated in, let's say, INR 10,000 crore, INR 12,000 crores directly plus you will be applying to the other AMISP players as well, is that right?
Yes, that's right.
Okay. And sir, my second question is, is Adani manufacturing meter on it own as well or are they completely sourcing it from other players?
As of now they're completely sourcing it from the market. And we are their main suppliers from Mumbai utility. [indiscernible]
What percentage a share in Mumbai utility?
For the smart makers. I'm talking about as of now.
Yes, of course, of course. Sir, my second question is on -- you mentioned that you expect a sharp rebound in revenues in H2. We have already witnessed significant sequential improvement in Q2 INR 180 crores going to INR 220 crores. What is the number that we are looking at for Q3 and Q4? What can be the potential top line for us in Q3, Q4?
In the last con call, I reduced the guidance and overall guidance that gave around INR 1,000 crores. So we definitely expect that to be done looking into the performance, what we're doing on for quarter 3 and quarter 4.
INR 1,000 crores for the full year, meaning that [indiscernible] we have already done about INR 400 crores so we should be doing about INR 300 crores in both the quarters on an average?
On an average. Yes.
Okay. And sir, have we started supplying to Bihar utility the AMISP order?
No, we will start from this month end.
This month and [indiscernible].
Our pilot will start from this month.
Okay. And sir, apart from the Bihar AMISP order that we won, has there been any other orders in Q2 for us? Have we won any other orders?
Nothing of this size, but you yes, multiple supply orders, we have been winning from different utilities of small, small sizes, but nothing of this size.
Okay. So sir, internally, what is the number that you are working with in terms of order book, let's say, for this fiscal year and over the next 2 quarters, what would be the new number which you say will excite you in terms of order book? Which will make you happy that okay we have our -- we have achieved our targets.
I don't want to comment on any number because it gives a lot of idea of how we are thinking about the market. I want to be little conservative on speaking those numbers. But yes, we are targeting the market with the best potential that we have. And you will see a very, very healthy order book in times to come.
Okay. And my final question, sir, these orders that are being -- the INR 60,000 crores worth of tenders that is in the market, these are fixed-priced orders or is there some bit of input prices [indiscernible]
These are all fixed price orders. In our business, there is no price variation clause. They are all fixed-priced tenders.
The next question is from the line of Shreya Verma from MR Securities.
Just had a couple of questions. Firstly, when you think the supply of semiconductors will return to normal?
So as I said earlier, it is improving by the day, but it is not yet normal, not yet to the pre-COVID level. That will take some 3 to 4 months.
Okay. And what are the primary reasons for decline in operating margins in H1 despite increased sales? What has been our capacity utilization for the first half?
No, as I said during the [indiscernible] it due to lower capacity utilization and some increase in the raw material prices.
And can we expect the revenue traction to pick up given our strong order book? And then can we expect the company to return to its historical margin profile, 16% to 17%?
So next financial year, definitely, we'll be back to our normal numbers.
Okay. So I also wanted to ask what are the factors that led to decrease in our financing costs in Q2?
Can you repeat that?
What were the factors that led to a decrease in our financing cost in Q2 FY '23.
Actually, that is because of the improvement in working capital earlier because of the COVID. A lot of payments were getting delayed in the electricity boards and all. So there is a significant improvement in the working capital cycle and the payments you received back. So there was less utilization of the working capital limits. So that resulted in the improvement in the financial cost for this quarter.
Okay. Right. That helps. And how much top line growth and operating margin expansion can we expect in H2 FY '23?
So as I said earlier, we gave the guidance of around INR 1,000 crores to be achieved in this financial year in the last conference call, and we are confident of achieving that, and we are maintaining the same guidance for the next 2 quarters.
Okay. And what is the same guidance for FY '24 to next year? If you could give some color.
So it will be much, much better from wherever we are today. I don't want to speak on any numbers right now, but would like to give guidance closer to the financial year.
[Operator Instructions] The next question is from the line of Akash Mehta from [ Cap Ways Investment ].
I had 3 questions mainly. So first 1 on the CapEx side. So what is the level of capital expenditure that the company is required to make for participating as a system integrator becoming in the next 2 years?
Kailash, you want to answer this?
No, no CapEx, I think there won't be much CapEx required. We already have a meter manufacturing capacity of 10 million meters, we have to increase -- even if we have to increase to 20 million meters that would require a lot of CapEx also. That will be -- it will be done, it will be hardly INR 25 crores, INR 30 crores for making it just [indiscernible]. So you can just assume that for doubling the capacity, there might be our CapEx requirement in next 2 years [indiscernible]
Okay. But given the exact multifold increase in size, basically, are we -- and when will be required to undertake CapEx? Any guidelines on that?
Sorry, can you come again, please?
In terms of the time line, when will we be required to take this expecting the multiple [indiscernible]
That depends on the order book, how we build up order in the next 3 to 6 months. Right now, we have a 10 million-meter capacity, and we highest we have made around 7 million meters and all. We have a sufficient capacity to grow at the existing capacities and all. So basically, that -- and it takes hardly a 6 months' time to increase the capacities and all. That won't be -- we will take a decision on this in next financial year in the month of April, but our order book will be at the closure of this financial year .
So we don't have the current participant in the queue. [Operator Instructions] The next question is from the line of [ Fahad Sultani ] fron [ PK Advisors ].
I have 2 questions. So does the company have any significant entry barriers give it an advantage over its competitors? And given the expected multifold increase in the industry size, are we witnessing any new players entering the smart metering industry?
Being the leader of the industry and providing end-to-end solutions, I don't say there is a entry barrier for others to do it but since we have been doing it and the reach that we have created for ourselves across the country is definitely not easy for anyone to do it and they will need a significant time to reach to this level.
It's definitely not easy for anyone new coming in between and creating the reach, the kind of reach we would have across the country. So that is 1 of the major -- and the complete product range end-to-end and all kind of certifications, what we have, [indiscernible] 3 to 4 years minimum time to create this kind of technical capability certification approvals.
So these are some major entry barriers, I would say, for any new entrants. So industry is growing. New people are coming. So -- but I don't see a major influx of a lot of new companies coming in. Old companies, which are already into the conventional meter business, yes, they are moving from conventional meters from smart meters. That is what we are witnessing.
Okay. Okay. Got it. Got it. My second question was, will the AMISP or the CapEx model have a negative impact on company's working capital cycle and creates additional strain on the balance sheet? And can you explain in detail how our role or -- as a system integrator will impact our overall business operations?
No...
You have to understand that the company has already -- I have told earlier also that company is already planning to take all this business in the subsidiaries of company or that company has already made a few subsidiaries, and we will be participating in a tender through the main company and through the subsidiaries companies and all. And there, the company will be acting as a supplier of meters to them. And then -- and we will be doing a fundraising on those subsidiaries for executing those projects. That already we have told earlier also in a given the exchanges also in our this [indiscernible] results.
So basically, we won't be taking too much of a strain on our balance sheet. We will also going forward too much of debt on our balance sheet directly as we have clear plans that we will be taking mostly of the business in subsidiary companies and raising funds in those companies for execution of those projects.
Okay. Okay. Got it. Just the last one, how much revenue growth can we expect from the current level in the next 3 to 4 years? And also with the smart meter replacing the traditional meters, what is our outlook for operating margins in the coming year for the overall industry and [indiscernible]
So that we will -- this guidance, we will be in [indiscernible] con call of fourth quarter of this financial year because we had a lot of business is coming in the market issues. New business is coming in the market. So we are aggressively bidding all that and we just want to build our order book and we see that how much we will be able to bid our order book. All our plans and everything will be depending on the order book. So it's on it better from our side to give a guidance after 3 to 4 months on that.
[Operator Instructions] The next question is from the line of Srijan Sinha from Future Generali India Life Insurance.
Sir, I just wanted to check on the Power Grid order. They were supposed to float a INR 1 crore meter order, has that order been floated yet? Or are you still waiting for them.
That tender is already floated. We are also bid that tender. So POC is going on right now. I expect the order to be decided in the next couple of months.
Next couple of months. Okay. And sir, my second question is on the AMISP piece. I mean what is the kind of IRR that you are looking at, let's say, in your Assam project or any other project, what's the assumption that you build in -- when you bid for the those models?
That again, this is [indiscernible]
I'm answering that. Basically, we would not like to give any numbers on that. Right now, a lot of orders are going on [indiscernible]
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Jitendra Agarwal for his closing comments.
So thank you, everyone. We apply our deep industry domain knowledge to manufacture quality products and successfully resolve our clients' challenges. We are confident of delivering sustainable growth as it is on the back of robust processes. The rapid adoption of smart meters over the coming years, we are committed to continuing to deliver top-notch innovative smart metering products to meet evolving demand in the Indian marketplace. We shall continue to raise the bar in stride to maintain our leadership position.
In case you have any further queries, please get in touch with SGA, our Investors Relation advisers. So thank you, everyone. Take care. Be safe, thank you.
On behalf of Genus Power Infrastructures Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.