HPL Electric & Power Ltd
NSE:HPL
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
197.5
672.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
HPL Electric & Power Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the HPL Electric & Power Limited's Q1 FY '24 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions]. Please note that this conference is being recorded.
I would now like to hand the conference over to Mr. Rohit Harlikar from Elara Securities. Thank you, and over to you, sir.
Thank you. Welcome, everyone. On behalf of Elara Securities, we welcome you all for the Q1 FY '24 Earnings Conference Call of HPL Electric & Power Limited. I take this opportunity to welcome the management of HPL Electric & Power, represented by Mr. Gautam Seth, Joint Managing Director and CFO. We will begin the call with an introduction by the management followed by Q&A session.
I will now hand over the call to Mr. Seth for his opening remarks. Over to you, sir.
Yes. Thank you, Rohit. Good afternoon, ladies and gentlemen. I'm pleased to welcome you to HPL Electric & Power Limited's Q1 FY Earning Call. Thank you for joining us today and being part of the journey we are on as we discuss our financial performance this quarter.
Our performance this quarter is led by year-on-year revenue growth of 9% with a revenue from operations at INR 321 crores, a rise from INR 296 crores from the same period last year. On the bottom line, our EBITDA stood at INR 40 crores, reflecting an uptick of 6.3% from the previous year.
Looking into our segment-wise performance. Our strategic emphasis on Smart Meter growth is yielding sustainable results. The Metering & Systems segment experienced a year-over-year revenue growth of 20% landing at INR 176 crores in Q1 from a steady base of INR 147 crores by year before. This growth not only underscores our role as a leader in smart meter segment but also signifies the growing momentum in the smart metering market in India with a good beginning for us to a long-term projected growth.
We're also pleased to share our entry into AMISP contracts with securing a substantial order valued at INR 417 crores for the deployment of an AMI project. This project is supported by World Bank and is in tandem with the WBSEDCL. This achievement not only highlights our readiness for change, but also emphasizes our preparedness to seize the opportunities in India's smart metering evolution.
When looking at our Wire & Cable segment and India's growing demand for electricity and connectivity, the potential for steady growth in high-quality wire and cable products also holds promise for us. The machine of 5G technology with our vision is geared towards revolutionizing connectivity, setting standards within the dynamic space. Within the Consumer & Industrial segment, our performance is fairly good in switchgear and wires and cables. Despite of industry-wide value erosion driving down prices in Lighting, we have adapted to navigate this with positive growth recorded in Switchgear and Wire & Cables.
Looking ahead, our commitment to research and development, operational excellence and sustainable growth remains resolute. We are determined in fortifying our leadership position in shaping India's energy future, a journey that not only meet today's demands, but also anticipate the challenges and opening of tomorrow.
With an expansion in our network and steady growing market demand, the rise in momentum has led to a positive start to the financial year. Our order book value stands at over INR 2,000 crores. As we head into the festive season, we anticipate good growth in the order book in the Switchgears, Wire & Cables and Lighting segments alongside Smart Metering as well.
Thank you for your presence and for participating in this interactive session with us today. We can now begin with the question and answers.
[Operator Instructions] The first question is from the line of [ Moorthy Ram ], an individual investor.
Congratulations for the nice set of numbers for the Q1. Sir, I have a simple question. For the past few days, I have been going through the news from Tamil Nadu government that they are pushing aggressively for tendering process for smart meter implementation. Sir, whether I know we are having good presence in North India. Whether we are contesting for the tendering process regarding the smart meter installation in Tamil Nadu, sir?
Yes. I think if you see our presence for the past over a decade in metering and now in the smart metering, we are present across the country. So it's -- so in almost every state in the past, whether it's Tamil Nadu, Andhra, Telangana, Kerala, all these states, we have been supplying meters and not once but on a regular basis. So definitely, depending on who the service providers and how the tendering process is, but we will definitely be looking at all the states. And so we are present on a pan-India basis. So I'm sure our teams are focused on Tamil Nadu as well.
Okay, sir. Another question regarding the cables. Sir, whether we are producing underwater cables also?
No. You mean underground cables or underwater?
Yes. No, underwater. There are some projects which will be implemented by the government in the next 1 or 2 years.
No, I don't think -- specifically on underwater, I don't think we are currently doing that range. Yes. But definitely -- and definitely look in that. If there is potential, we can probably make it then.
Okay. Have a nice coming quarters, again.
The next question is from the line Chandresh Malpani from Niveshaay Investment.
Congratulations on the robust order book you have. So sir, firstly on this AMISP that you have entered into. So what is your long-term outlook on this? Basically, you were, firstly, a smart meter producer. And just to sell that, now seems you have entered into this AMISP thing. So you don't think your short-term borrowings will again like it will pick up from here, which is already at high levels. So your outlook on this?
Yes. So our basic focus is as a supply of smart meter. And I think that would continue to be so. So if you look at most of the orders, what we have, we are basically for supply of smart meters to the AMISPs, which are there. Now this particular project, what we are talking about, this is not under the RDSS, though -- and it is funded by the World Bank. So it is a little -- although the broad specifications and the overall scheme is as per the general guidelines followed by the RDSS, but this is the state requirement, which the state standard and which came with the funding from the World Bank. As you are aware, once the World Bank funding happened, the cash flow and the surety of funds becomes much more better.
And even you can call it like a hybrid model where against the supply of meters, which would happen in the next 2 years, about 40% of the total amount gets paid. So in effect, the cost of meter and the certain related supplies would all get covered by that payment and then thereafter -- since the overall project is, again, for 10 years, but the majority of the funds required for the supply would get covered. So it's a little different to what the normal AMISP is under the RDSS scheme. And we thought it's a good opportunity for us to expand. And I think within our resources, yes, on a short-term basis, certain funds would be required to ramp up. But being a World Bank project and looking at the way the funding is, it is manageable, and it can be done. And it also gives us -- although as HPL Electric, we are approved as an AMISP, it also gives us a performance for the future as well.
But our broad focus still remains as a supplier to the AMISPs and which is right now also, as we talk there are a lot of inquiries, a lot of orders, what we anticipate, which would come, which would be purely on supplies based to the AMISPs.
Okay. Okay. And sir, secondly, that you have entered in AMISP contract, so that you have the technical ability like do you have the building ability, but then after installation that -- on the EPC side, you have the resources...
Yes, very much. Projects is -- we have been doing projects in different types of projects for over a decade now. And these have involved earlier in meter installations also, which have been done even more than 10 years back, plus a lot of different type of projects have been happening.
Now coming to this one, we have -- if you see this project involves almost covering 500,000 consumers within the area of Kolkata. And this involves apart from the supply, creating the communication network, linking the smart meters to that and also providing the IT infrastructure, maintaining that. So we have the capability of that. We've already been doing it for a leading private -- distribution company. So we've already been doing it where we have got orders of over INR 300-plus crores earlier.
But -- that was with the difference and the payments were all in within the, let's say, the -- within the time. So the financing element as perceived in the DB foot was not there. So as a -- from a technical capability, we have that. What did not excite us so much to go into a regular AMISP was always the 10-year funding aspect. So that was 1 thing. So in both these -- the earlier what we have been already doing successfully and now with the new World Bank order, I think those aspects have been well taken care of us -- by us when we are quoting and when doing the agreements.
Okay. And sir, another thing on the capacity. So you -- like, you have 1.1 crores of meters for [indiscernible]. Do you think that is quite sufficient enough to cater to this market, which is like in the next 3 years, government has a plan to install 25 crores of meters. So do you think you will be on short of supply or something like that?
So based on the projections, if you take in the next, let's say, 24 months, we don't see any shortage of capacity. I would say probably the figure what government is talking about, that would probably happen in 5 years, but that's my personal opinion, maybe 3 to 5 years. But in terms of capacity, what we have is sufficiently enough to look at that. And -- we have, in the past, having over 20% to 25% of the metering market. And even if you have to look at that kind of a similar one or even grow the, let's say, our -- because our ambition is to grow the market share, even if you look at the, let's say, a 30% plus market share, we should be good enough with that capacity, maybe a little larger.
So the certain part of capacities can be enhanced as the orders are coming in. But on a medium-term basis, looking at even at 24 months, I think we have sufficient capacity. And that should be enough to look at it. On a flexible basis, we have been also going on certain automations what we have done in our assembly lines for smart meters and the output with the same resources has been really increased. The standardizations have also gone up in terms of the meter specifications and the ask what is required for that.
So when we look at it with better productivity with a little -- maybe some enhancements and automation, what are happening, which is obviously a continuous process. So with that happening, we don't see any big issue towards the capacity when we look at the entire opportunity, which is going to be rolled out by the government.
Okay. Okay. Got it. Sir, and lastly, on the Consumer & Industrial segment, if you can brief, this segment has been a INR 150 crores kind of quarterly business and 11%, 12% EBIT margin. So where do you see this in the future? Basically, you have guided for expansion in the retail, which is very retail touch points, have been like 3x by March '25. So where do you see this segment going?
We see the Consumer & Industrial segment to be growing. In fact, in the last 3 years, we have seen at least 2 good years of growth, which was well over 20% growths, what were happening. In the current scenario, if you see the Consumer & Industrial segment comprises of various types of different products. So while we have seen the cable and wire do a good double-digit growth, the Switchgears also have been fairly good, but the Lighting segment has been a little dull, I would say. There has been -- in fact, we have not seen any growth in that. It's been on the negative side. And that is mainly because of an industry-wide phenomenon where the unit prices have come down.
Now there has been a change in technology with the industry moving to a different technology on -- in the LEDs, where the bulbs, the batten or all most of the consumer luminar, the prices have come down. So while the selling prices have come down, even the costs have come down. So more or less, the margins are stable. But when we look at that, despite even if there is a volume growth, which we expect to happen even in the Q2, the figures will not look very exciting because the per unit values will come down. So I think, in LEDs we have seen this happen. And if you see in the last 7 to 10 years, at least twice, we have seen these value erosion happening. So it's one of the time when the value erosion is happening. And we would feel that maybe even by this Diwali, by the festive season, the prices would stabilize. So that is how the whole thing is structured.
On a long-term basis, or even on a short term, we would see definitely the overall Consumer & Industrial segment to grow. The infrastructure spending by the government is good, luckily our approvals to various projects, our compliances to all the specifications is very strong, and we would see the Switchgear, Cable and also the Lighting to grow in the near future.
The next question is from the line of Koushik Mohan from Ashika Institutional Equities.
Sir, my question is basically -- I think I'm audible, right? Yes. My question is basically on understanding the cash cycle because dealing with the government, the cash flows will be like towards north and south. So how about our receivables and how are we in control with it?
Yes. We have 2 types of businesses and the Metering & Systems has been traditionally supplies going to the utilities. And that is where the database are normally 5 to 6 months. In fact, sometimes even going ahead of that. Whereas the Consumer & Industrial supplies to the -- it's a B2C segment and whether supplies are to the trade market where we have seen a constant improvement in the debtor receivable cycle.
Now coming back to the metering part, as we see the scenario is similar for the last couple of months -- a couple of years, even probably a decade or more. Now there's a new scenario coming in, where the supplies of smart meter is going to be through the AMISP. This is where we would see certain changes happening because our supplies to the AMISP would be on a fixed date letter of credit. And this, we believe, as the share of smart meters increases in the supplies, this is where we see a positive working capital cycle emerging out for that.
So that, in effect, maybe in the next 12 months could be drastic change to our debtor days going forward. Whereas in the Consumer & Industrial part, we have the penetration of channel financing going up. Our internal targets are also to have almost the entire trade covered by channel financing. There could be certain months of slowdown happening or the cash flow being a little tight in the trade market. But generally, if you see, the payments are much better there.
And as I said earlier, with the festive season coming in, we are seeing certain uptick in demand. And I think that should result in a better cash flow as well. But the metering, I believe will see a change, and these are supplies to the AMISP and this should see a positive change in the coming quarters. So maybe not immediately, but as over the 30%, 40% of smart meters are getting delivered on to the AMISPs, where we would start seeing some good results coming on the cash flow cycles.
Got it, sir. Sir, my second question is on the debt. So we have some borrowings on our balance sheet. Do we expect anything to be repaid on the short-term borrowings that we have it?
No, not immediately. Our -- in fact, if you see last year, we had a growth in revenue of 25% with the 0 borrowing -- additional borrowing. So internally, we are conscious of that, and we even for this year, on the regular business of the consumer, industrial or even the regular meters, we do anticipate a good growth this year without any additional borrowing. That's how we look at it.
But when we look at the smart meters, definitely, the smart meter, the order book, generally, which was always around INR 300 crores or INR 400 crores. Today, the order book of the company is over INR 2,000 crores. And even despite the strong execution, what is going to improve on a quarter-to-quarter basis, we will still find the order book go up as we go forward. So for those 2 -- for us to prepare for those orders to begin the supplies and start the working capital cycle, short-term borrowings would be required. So maybe on an interim basis, the short-term borrowings would go up, but maybe by the fourth quarter, by the time the complete cycle starts kicking in for the smart meters, that is when we will see the -- maybe the borrowings leveling out. That is how we look at it.
But in terms for CapEx or in terms for any other general growth, we don't require any additional funds. That we would do it through our internal resources.
And then last and final question. Sir, what is the price for 1 smart meter that we sell it?
Sorry, can you be a little louder, please?
Okay. I think I hope -- 1 second sir, just give me 1 second. Sir, am I audible now?
Yes.
Yes. Can I understand 1 single smart meter price per unit cost or unit price and the cost that we have it for 1 unit production?
No, it may vary depending on the services. But generally, as a thumb rule, the industry talks about almost INR 3,000 to INR 3,500 per meter. Depending on the specs, depending on certain services, it may even go up to INR 5,000 or INR 5,500. But it really depends.
Got it. So in the total order book, what we have got, right, so can we assume that INR 2,000 crores [ plus ] the order divided by INR 3,500 and on average, that the number of units that we have gotten out of. Is my assumptions right?
No. No, I would not -- I don't think you can apply that because the order book currently what we have, we have almost, I think, about 82% is on the metering side. So there are orders of Lighting, Switchgears and even Cables in this. That is one. Second, within the meters also, more -- over 75% are smart meters. So there are still regular meter orders coming in from the state utilities. And we believe that still, it may take another maybe 12 months or a little beyond until the regular meter share goes down and the smart meter rollout happens. So why on a -- while the rollout of smart meters is happening, still utilities are going for the regular meters just to fill in the gaps, which could be -- which could come in or the demands which would come in while the rollout is taking shape. So that is how. So you cannot frankly, just divide the whole thing on a single quantity and do that.
The next question is from the line of [ Tushar Sarda ] from Athena Investments.
I want to know what is the order on smart meters that we have as on date, just smart meters on the total order book?
Roughly -- I would say it should be around INR 1,300 crores or INR 1,400 crores, somewhere there, yes.
So out of the awarded orders, what is our market share?
Sorry? [ Tushar Ji ], we couldn't hear you. Can you be a little louder, please?
Out of the awarded orders, what is our market share, whatever tenders have been awarded so far, what is our market share in the smart meter?
Frankly, we've not calculated on them, but if you see purely the smart meter supplies because many of the orders, what you see or hear in the market are actually the AMISP orders. And AMISP orders, apart from the smart meter, also covers the infrastructure cost, the installation costs and the financing costs. So that itself is a large portion. So purely, if you look at the smart meter value within the AMISP order. So I think we are clearly maintaining a good share. As I said earlier, almost 20% to 25% regularly has been a market share for across a couple of maybe 10, 15 years, we have been maintaining that kind of a market share. And I would say currently also based on the orders, what are going on, we have a fairly good share. Again, I'm clarifying, this is on the supply -- purely on the supply of smart meters.
Yes, yes. I understand that. So I believe out of around INR 8,000, INR 9,000 price on AMISP, smart meter is around INR 3,000, INR 3,500. But since we don't get access to the data, I thought you will have the data readily available, whatever has been awarded and what percent of the market share...
I will just say, as per industry figures, which are again unconfirmed, but I think only about 1 crore of meters are currently installed. So we are talking about right now, the installation is only about 4% out of the 25 crore meters. And still, it's a little early stage. But from the early orders which have gone by, I think as a company, as HPL Electric, we are maintaining our market share. And even in the inquiries and the large AMISP orders which have gone to certain big players, we again anticipate good orders coming in to HPL.
So, how many AMISP have you tied up with. I think, one is Tata Power. Any other AMISPs that you've tied up with?
Most of them rather. So because I would believe that there are over 20 to 25 AMISPs, which are currently approved, because one requires a pre-approval. Of course, out of that, even we are one of the AMISPs approved. And -- but if you look at -- because this approval process requires the pretesting and pre -- before the approval comes through. So most -- I think most of the majority of them have done their approvals based on HPL Electric meters. And even the government has specified more than 1 meter manufacturer to be tied up for the AMISPs. So definitely, I think in terms of opportunity and in terms of approvals, HPL is definitely one of the front-runner for the suppliers.
And what is your target for smart meter order this year?
No, our target or...
Your target. How much HPL would win in terms of order?
I think -- very difficult to specify the number. But you are seeing it in the last 6 months, our order book has really jumped up and so has our execution. So obviously, when these orders are coming in, typically, an AMISP requires 6 to 9 months to actually get started, 6 months is for sure, because a lot of preparation needs to be done. So even our suppliers will get routed based on the demand and the schedules which are there.
So it will take some time. But in terms of orders, which will come in, I think we expect a lot of large orders coming in. That is for sure. And probably our -- despite the execution, the order book will probably -- even in my last call, I did say that it will probably double up. And I think it should really go up. There's no doubt on that. We're well qualified -- we are well...
Pricing pressure, right, from AMISP on the meter supplier? Because I believe there are now plenty of meter suppliers for the AMISPs. So there's no pricing pressure.
So obviously, in a business, there are -- everyone has been...
No. Normal competition will be there. I'm just saying there is no intense pressure from the AMISP, right? There -- I mean, let me put it this way. AMISPs are winning orders at fair price and therefore, they will not pressurize you, right? Unless...
Look, everybody is in business and everybody looks at competitive pricing, despite maybe a fewer number of sellers or buyers whatever is there. But I think it's fairly competitive and the teams are working today to make sure that the right technology is there at the right price. So definitely, in any kind of business, despite the volumes, there will be certain pressures on the pricing and to make things happen. So because everything is competitively bid, whether it's an AMISP or even if it's a meter supplier, so those things will always remain.
Okay. And my last question. If you can guide on -- I don't know the exact number, but approximately what kind of revenue path the company could have this year and over next 3, 4 years?
I think what we look at, at least, say it, maybe a good -- maybe a 40% jump in the revenue for the metering part, maybe even going up to INR 850 crores is something that we look at from a INR 600 crores last year. This is on the metering side.
On the Consumer & Industrial, we do see, again, a growth, probably a healthy double-digit growth, but despite the Lighting price erosion, which I talked about in my earlier answer. So that would happen. So somewhere anywhere between INR 1,500 crores plus is something that we look at to happen this year. Next year and -- or rather than next 2 years, is again going to be very good. The Consumer & Industrial will see a steady growth. Our exports are seeing a good steady growth again. So these are things which will grow on its own pace based on that.
But in terms of meters, we could again see a good jump, probably a bigger jump to next year and probably the year after. So next 2 years, definitely, the meter can go up. So maybe, just a guess. Right now, I'm not forecasting on that. But maybe from an INR 850 crores, it could be even going up INR 1,100 cores, INR 1,200 crores.
So as a company, the last 2, 3 years from an INR 850 crores, we have come up to INR 1,250 crores in just 2 years. And I think even going ahead, we would probably look at the INR 2,000 crores maybe in the next 2 years. That is how we -- so from a growth perspective, with both these verticals and our preparedness and even the market scenario, what we talk about, I think that seems to be pretty much in place here. So for us to even focus becomes much more better.
Okay. And how would your return ratios...
[ Mr. Sarda ], I'm so sorry to interrupt, may I request you please rejoin the queue.
The next question is from Milind Karmarkar from Dalal & Broacha.
I had 2 questions. One is, of course, that since there is a lot of growth in -- or opportunity, let me say, in the smart meter segment. Over the next 3 years, so if I look at the P&L account in '26, will a significant portion come from smart metering and the other -- so will the turnover be significantly skewed towards smart metering is what I wanted to know?
Yes, sure. The use and the implementation of smart meters is picking up. So let's say, if you have to look at 2026, I would say probably in the metering segment, it would be nearly 100% smart meters. So that is for sure. And -- but when you look at our other business also, for us as HPL, the -- in the next 2 to 3 years, we would see definitely the metering revenue to rise. And by that time, even probably a lot of related services and related businesses on smart meters would also kick in. And there are a lot of future business models which can also be implemented. So metering for sure is set to grow in the next 3 years in a very big way. I think we just discussed that in the previous answers as well. Even consumer and industrial, because these are more steady businesses, but with a lot of infrastructure spending, with a lot of now private spending also picking up and with the expansion of our own network, I would say that also should be set to grow in a big way.
So when we look at that, definitely, meter would be somewhere maybe around contributing 60% something of the overall revenue of the company, and the other would be around 40% or maybe it could be 55%, 45%, something like that. But yes, at 2, 3 years, the meter would be more dominant because of the surge in orders and a huge requirement driven by the government under the RDSS.
Okay. My second question would be where the previous participants left, which was on return ratios. Do you see -- or let me ask you the other way around, what is -- what would be your targeted ROCE over the next 3 years?
Our ROCE has improved. Earlier, it was just about, I think, 5%. And it's about, I think, 9%, about 8.5%, 9%. So we are quite conscious on this, but definitely, we would see this to go up, maybe a number I cannot just give it, but maybe even in end of this year, we expect it to hit the double digit. But our aim would be maybe looking at it in the 15% or somewhere. But I think more than that, let me just -- while next time we do, we will probably try to figure out and give out next time a specific target for that. But 1 thing is there, we are looking at a better utilization of our resources and other things. And we would see an improvement in that, which we are already seeing in the last 3 years in numbers.
The next question is from the line of [ Mukesh Aster ] from [ Moonshoot Ventures ].
Sir, recently, we have won an order with West Bengal on TOTEX mode. So from our understanding, we shall be making only a single-digit margin on this?
No. I think the margins would be better than a direct AMISP project for sure. So probably I don't have a figure right away, nor probably we would disclose that. But definitely, the margins where the supply plus the installation and other aspects, the complete integrated system is involved, the margins are definitely higher, much, much higher than the regular business.
Okay, higher than the regular business?
Exactly. Yes.
Okay. And sir, my second question is, is there any performance guarantee you provide to AMISP for meter failure and performance? And what has been the failure rate of meter installed until today?
The smart meters are just starting. But if I can give you some historical update, we are in business for over 25 years, since '96, for the meters, for the electronic meters. And so every time there are performance guarantees given for 5 years until now, and we have so many years been giving that. So in terms of failure rate coming in, it's normally a very minor percentage, which is normally built in and provisioned in the books.
So we would see maybe a similar kind of rates, but 1 thing just to clarify that in -- under the views, the smart meters that are being currently manufactured, the technologies have changed. They are definitely the high end of technologies. Even our own manufacturing, even the use of components and the designing has now change drastically to make sure that the meters are much more better, they last longer. And so a lot of things have undergone change only in the last 1 year or 2 years for the smart meters.
So in terms of warranties or even these kind of costs, I don't see any -- in fact, because of the new technologies we have put in and even the longer life components that are being used, maybe the cost marginally goes up. But I think these things have been done by our team and our R&D team is working continuously to make sure that these meters actually last the 10-year period. So I think a lot of -- lot and lot of work has gone on this.
To answer your -- the beginning part of your question regarding the performance guarantees. Yes, with these high-value, long-term orders, the requirements for bank guarantees and other even the big bond guarantees have really gone up. That's why if you see in our results, in the first quarter, the finance cost has gone up. And main reason for the finance cost is actually the non-fund, the bank guarantee or the bank charges going up drastically. So -- but these are required because initially, when we are accepting the orders or even when we are bidding for huge orders, the bank guarantee requirements go up.
But I think in the regular business, as the revenues start going up, these would be more evened out or they would become more proportionate to that.
So sir, I'll consider we are giving a performance guarantee of 5 years and failure rate is around 8% to 10%?
Can you repeat...
Historically, sir. Not on smart meters. Historically.
Can you repeat it, please?
Sir, historically, I am asking, we are giving performance guarantee of 5 years of a meter and the failure rate is around 8% to 10%?
No, no, no. No, the failure rates are very much lower. Very minimal.
Very minimal. Okay. 1%, 2%.
The performance guarantee is 5 years, and they're not related because these are just for the -- these are as per compliance of the tender, and [ back ] guarantees are given and then post [indiscernible], then they are given back and then they are closed and canceled.
Yes, yes. Okay. And sir, my last question is we have received an order of from West Bengal on this mode, AMISP, is around INR 417 crores. How much the revenue converted in our books of this total amount? How much percentage revenue we can look?
No, it will -- this is an order received. So it will start -- the revenues -- the commercial revenues will take -- probably it will start only from somewhere in January. So what we are trying to do is that just during Durga Puja, maybe certain testings and some meters would be installed, more symbolically, but customary that will start. But that will take time until the entire revenue comes in. It will take time. The supply period itself is over 2 years.
Yes, sir. But I'm simply asking how much is convertible to our revenue. It's 70%, 80% or whole amount, INR 417 crores after 2 years?
So eventually, the whole thing would get converted to the revenue. 100% would be converted. Yes, but it depends on the schedule of the utility and the end customer on how they want it and our supplies are all as per schedules. So that would depend, but eventually, the entire order book with whatever the time lag in the schedules are there, would get converted to the revenues.
The next question is from the line of Hemant, an Individual Investor.
Sir, basically 2 questions from my side. Like you mentioned in your earlier comments that the order book currently stands at INR 2,000 plus -- I mean, INR 2,000 crores plus, right? So maybe if you can specify the exact amount, and what kind of order book are you targeting by FY '24? And what will be the time line for execution of the same?
Yes. So then -- so if you see the breakup of the orders, so maybe we are around INR 2,100 crores something. The exact -- the almost 82% of these are meters. So bulk of it is meters and because there the metering typically have long term and even in the new scenario, we would find much more longer-term orders coming in, in meters.
The other B2C business does not have long tendencies, but certain visibility of maybe 2 months, 6 months, certain based on more B2B orders come in during that time. And most of these are to be supplied, let's say, in a 2-year period. But in the new orders of smart meters, the -- before the supply starts, there could be a 3-month or a 6-month gap to start off. So roughly, you can say 2.5 years will be a time when these all the meter orders would be supplied.
The regular meters, the regular electronic meter, which is still about, let's say, over 20% of the volumes, but that is shrinking down, that is supplied in the next 6 to 8 months. So that is continuously that is happening. But as more and more orders are coming in, that will be all the smart meter orders.
So you mean to, sir, say that 2.5 years is a general tenure for smart meters, right?
Yes.
And what kind of order book are we targeting for FY '24?
I think it depends -- very, very difficult to quantify, but I think we should definitely get huge orders going forward. There's no doubt in that. [indiscernible] would be to -- it would be difficult, but we would probably double up from where we are right now. That's something what we aspire for. But eventually, the market is open and it is competitive. So one has to see what we can get.
Sir, the [ INR 2,100 crores ] of the current order book is as of 30th June?
No, I think we -- it is on 4th of July.
After that, we have received 1 more order of INR 417 crores from West Bengal State Electricity Board, right?
No -- no, the order -- we signed an agreement. The order we have given in our listing also, that the order -- the LOI was received. And -- but at that time, we just -- we did not disclose that this was an AMISP. Only after the agreement was signed, which was done, I think, somewhere in last week when we declared that. But that order was already included in that. We have given it in the listing also.
The next question is from the line of [ Ankur Agrawal ] from RC Wealth Solutions.
Smart meter [Foreign Language]
Yes. The export potential is definitely there. There are many countries right now where -- which are going for smart meters or which are already in smart meters. But looking at the share volume, what the Indian government and the Indian market is going for the smart meter, I would say the -- this is probably the world's biggest rollout of smart meters. And so for us, I think our focus at least in the immediate 2 years is going to be mainly the Indian market. But our sense is very clear that once we go through the cycle of implementing and doing this maybe in the 2 to 3 years, the kind of capacity and the competence what we will build up will make us very strong for the global market.
And when a lot of other countries who are trailing behind in the metering, when they take up the smart meters, so that will give a very big advantage to the Indian manufacturers to look at the export market and then grow in a very big way. So this is just the trend what we see. But right now, our focus is mainly on the domestic market and because of the sheer size and the volumes and the ask what they have right now. But, yes, many countries are doing the smart metering internationally as well.
Sir, [Foreign Language]
No, it's probably maybe technically not I won't be able to answer this, but I think many of them are on the -- frankly, it doesn't depend. It's -- I think the earlier ones were more on the 2G or 3G. So I think it can be on both of them. As the network changes from a 4G to 5G, they would be compliant. Yes.
[Foreign Language]
Yes, I think -- near foreseeable future, I think that has been factored in. But today -- in today's time, things are changing very fast. But roughly, when I think, this is just my thinking, but that once these all meters are -- the entire Indian consumer changes to the electronic meters, definitely, in the 8 to 10 years, there will be a new set of technology, which could be very different and faster, and maybe even cheaper. I think those types of things will definitely come in the future, and I'm sure our company, which is working in core technologies, can also really exploit those, but that's a very long term and something still future, to speak.
Sir, [Foreign Language]
[Foreign Language] When you look at the -- when we look at the order book, so we are -- a lot of orders, what you see in the news are from the AMISPs. And so that is covering the smart meters, but also the IT infrastructure, the communication network, the installation, even the meter reading and most importantly, the financing for 10 years. So [Foreign Language] on the -- only on the supply of smart meters, I think then you will come to know the actual position. So -- so many of the orders of AMISPs what you're seeing, they will eventually have to give the meter orders to somebody, and that is where we play a very strong and lead role to supply to them. In fact, many of them are already preapproved to take HPL meters, obviously, on competitive terms.
So all AMISP [Foreign Language]. They are already service provider?
No. I think other than 2, FCL and 1 more, I don't think anybody else is currently actively doing any meters. So they are all bound to buy from somebody or the other. So -- so when you compare the orders of AMISP to a smart meter supplier, that is a disconnect. You're not comparing one-on-one. [Foreign Language]
[Foreign Language]
[Foreign Language] But after maybe 2 years, [Foreign Language], but it may be certain part of capacity -- it can be done on a very [Foreign Language] without much of CapEx. And as I said earlier also, with better utilization of our resources with more automation, what we are already putting in, that will itself give us a better productivity. So with the same assets, with the same manpower and resources, we can have a better output coming in. So [Foreign Language] because as -- when we continuously make it, there are better ways in an industry where we can enhance that. So [Foreign Language] and -- as volumes pick up. But to answer your question, immediately in the next 1 to 2 years, we don't see any CapEx or anything. Small improvements are always taking place.
The next question is from the line of [ Preethi Kumar ], an Individual Investor.
I had -- yes, this is Preethi. I'm an individual investor. I have 2 questions. What additional business does HPL actually anticipate from the RDSS scheme for the remainder of FY '24 and the following year on [indiscernible]?
Yes. In -- yes, most of the smart meter orders, what are there currently other than the one which we have taken as the AMISP, are all under the RDSS scheme. So going forward in the next 7 to 8 months of this year, we do anticipate most of the orders, which we will get finalized on HPL, will be under the RDSS scheme. Now apart from smart meters, we are also supplying switchgear to RDSS because that is also a back-end requirement, what comes in. And so that part is also picking up. We are also now getting into supplying cables and wires to the RDSS. These are obviously through the B2C, the contractors and other things. So that business is also picking up.
So overall, as a scheme, I think -- and as HPL, we do see a lot of requirements coming in, and we are well aligned to make sure that our products are well going in these schemes.
Right. My second question is -- what is the capacity utilization across your 4 segments? Is it upcoming tenders and expansion? Is there a need to boost your current capacity?
No, not immediately. Across all our -- both the product divisions and all the 4 product areas, we don't see any major capacity utilization issues right now. Obviously, as the meter sales are going up, our capacity utilizations are increasing. Similarly, for Wire & Cable, also the capacity utilizations have gone up. But still, we have a big upside right now for us to grow. So earlier also, we have said that even maybe up to INR 1,800 crores or INR 2,000 crores the company can broadly increase its sales across all product areas without going in for any major CapEx.
The next question is from the line [indiscernible] from[ Svan Investment ].
So I'm slightly new to the industry and the company. So just wanted some basic understanding on how different is the RDSS and the AMISP scale?
RDSS and?
The AMISP that you recently won an order in?
No, the RDSS scheme is the broader scheme, that is given by the government. And in the RDSS scheme, there is a policy which is the DB foot, like that. So that is just a mechanism of how the thing would flow out. Within the RDSS scheme, there is a provision for the AMISP to be there because from a product supply, like meters was until now, last 25 years, basically a product supplier, where we were supplying to the utilities and they were installing it.
Right now, we are talking about a complete system being in place which will also do the collection of data, collection of all the billing information, doing the billing. So once you are shifting to the system, the system integrator who would be more ongoing during the period of collection of the data and there -- that is what it is. So AMISP is basically a person or an entity what the RDSS -- they have provided for that. So between a meter manufacturer and a utility, there is an AMISP, which is there, who would do multiple functions, including supply of meters to the utility.
And secondly, sir, so this is largely, you will get orders from the state government, the respective state governments. So central government has no role to play in this scheme, right?
So central government has a role to play because the entire scheme of RDSS has been designed by the central government, plus there are incentives to the state government for going for the prepaid smart meters. So per meter, they get an incentive, I think it's probably INR 900 or something. But every meter, which the -- which is getting ordered and installed, the incentive comes from the central government if it is done under the RDSS scheme. So Center definitely has a role to play. And the broader vision, obviously, being that the [ TMC ] losses will come down once this happens and the manual intervention of the -- collecting the -- with the meter readers being there or even the losses happening due to the meter reading and even the billing process, that will get reduced, the time lag gets reduced. So it's a huge amount of benefit what will happen. And I believe that -- this will make the entire electrical distribution segment very robust, which can definitely help the overall industry and the housing and other main activities to the flourish.
My next question is what we understand is, historically, that there used to be a lot of pressure on your working capital because we used to supply the meters, but whereas the release of payments from the utilities would not happen in time. So a lot of money would get stuck in your working capital book. So how is it different in the current RDSS scheme?
As per the RDSS, the basic funding will happen by the AMISP. So I think, he gets 10% from the utility when the whole system is set up and 90% is basically in 96 installments. So broadly, this is the scheme. It may vary somewhere or the other. But overall, in the 8 years, they would get the payments. So basic funding right now is happening from the AMISP end. For us, as a meter supplier to the AMISP, it becomes very good that we supply material to them against bank LCs on a fixed date. So in effect, once -- as the share of smart meter picks up, we will definitely see a change in the working capital cycle. That should happen. And probably from Q4 this year or next year, this change will start looking evident.
So if I assume INR 2,000 crore order book -- this is just for the understanding. So if I assume a INR 2,000 crore order book of a smart meter under the RDSS scheme, 10% is something that you would get upfront and the balance...
No, the AMISP would get the 10%. So he's anywhere funding it. Now for us, when we are supplying to an AMISP, it is based on the order what we get irrespective of how he gets it funded. So our...
Sorry. I'm saying, if you get a INR 500 crore order from an AMISP, when do you get your money, like a INR 500 crore order book?
That depends on when we -- how we are supplying. So it's purely on supply terms.
Okay, it's purely on supply. So once you supply INR 250 crores, you get INR 250 crores?
Yes, exactly. So that would happen based on that. So let's say, this INR 500 crore order comes, and these INR 500 crores are to be supplied in 2 years or 2.5 years. So as and when we are supplying, as and when, I guess, they are getting installed. So with -- against bank LC, we would get our payments. So maybe some could negotiate with the terms or -- because these are still with private players and they are pretty large players for that. So there could be some variation in that, but broadly, the payment would come in through the bank LCs and they would be paid to us. So how the AMISP is getting it funded and other things is, that is their purview. We are not -- we are just a supplier to them.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Thank you, and over to you all.
Yes. So thank you all for joining us today, and for your presence alongside us in our growth journey. So we look forward to capitalizing on this inflection point in our journey as we see the domestic and the global market momentum in adopting the smart meters towards a more sustainable future. So if you have any questions, please reach out through Dickenson and we'll be happy to answer them. Thank you, and have a good afternoon.
Thank you very much. On behalf of Elara Securities Private Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.