HPL Electric & Power Ltd

NSE:HPL

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good morning. Welcome to HPL Electric & Power Limited Q1 FY '25 Earnings Conference Call hosted by JM Financial and produced by Dickenson. As a reminder, please click on the Zoom link to enter the interactive audio Q&A session [Operator Instructions] Please note that this conference is being recorded and that some statements in this call may be forward looking based on current expectations and subject to risks that could cause results to differ materially.

You can download HPL's investor presentation and press release from the Downloads box on the bottom right hand of the page.

I now hand the conference over to Mr. Nikhil Kandoi from JM Financial. Thank you. Over to you, Nikhil.

[Unknown Executive]

Good afternoon, everyone. On behalf of JM Financial Securities Limited, I welcome you all to HPL Electric & Power Limited Q1 FY '25 Earnings Conference Call. Today, we have with us senior management represented by Mr. Gautam Seth, Joint Managing Director and CFO. We will begin the call with a brief overview management, followed by a Q&A session.

Now without taking much of the time, I would like to hand over the floor to Mr. Gautam sir. Over to you, sir.

[Gautam Seth, executive]

Good afternoon, everyone. Thank you for joining us today to discuss our financial and operational performance for the quarter June 30, 2024. Starting with our top line financial performance, I'm pleased to share that our revenue from operations for Q1 FY '25 reached INR 393 crores, representing a 22.5% increase from INR 320 crores in Q1 last year. This growth was largely driven by our smart metering segment, which saw a 35% growth in revenue to INR 238 crores. This significant increase underscores our ability to capitalize on the current market opportunities and drive top line growth.



Let's dive deeper into the details of the performance. I'm delighted to report that our net revenues increased from INR 321 crores in Q1 to INR 393 crores. Our gross margin saw an improvement moving from 33% to 35.7%. This is a testament to our effective cost management and the ability to seize the market opportunities. Now looking at EBITDA, we have seen an impressive rise from INR 40 crores to INR 56.13 crores, making a 40% increase. Our EBITDA margin expanded by 180 basis points to 14.29%.



On the profitability front, our profit before tax has been doubled, growing by 113% to INR 23 crores. Profit after tax surged by an impressive INR 145 crores -- 145% to INR 17 crores with the PAT margin improving by 217 basis point to 4.33%. These numbers highlight our financial performance and the effectiveness of our strategies. With our focus on operational excellence and strategic growth initiatives, we are confident this momentum will carry us forward, driving more success in the coming quarters.



Looking at the divisional performance, our smart metering segment is leading the way, driving growth and revenue. The demand for smart meters continues to grow as the government, utility companies and consumers are prioritizing the benefit of real-time energy monitoring and management. The Consumer and Industrial segment also performed well with a year-on-year revenue growth of 6.5%, reaching INR 154 crores. Here again, we saw the LED segment stabilizing after 18 months of having certain price disruptions. With great reach and stronger B2C promotions, we expect even better performance in the coming quarters.



This diverse and balanced contribution from all segments demonstrates the robustness of our business model and underscores our strong position for future growth. We are seeing positive contributions from all our businesses showing we are on the right track and ready for more balanced growth.



Let's walk through our Q1 FY '25 performance in a little more detail and talk about our general business outlook. In summary, we are maintaining a strong and stable order book, executing current orders on a fast-track mode to ensure healthy execution of our pipeline. This ensures continued revenue visibility for both the short and the medium term.



Our smart metering segment is the primary driver of growth right now. This segment has received good traction in this quarter with strong execution cycles, good inspection and more inquiries in the pipeline. We had also extended our capacity for smart metering manufacturing, enhancing component manufacturing. Smart meters are our next game changer comprising 87% of our current order book and driving higher revenue and profitability. Our current order book is over INR 3,700 crores with the metering contributing 95%.



we have opened a new automated smart metering assembly and testing line at our Gurgaon plant, significantly boosting supply and output. The consumer and industrial segment is also performing well, particularly in switchgears and wires and cables. Our growth trajectory remains strong, supported by competitive R&D capabilities and a robust order book. We are well positioned for growth, leveraging our capacity and leading segments.

So now I request that we can go into the Q&A session.

[Operator]

Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] Our first question will be from the line of Viraj Mahadevia.

[Viraj Mahadevia, analyst]

Congratulations on the good traction you're seeing and the order book building up. Could you give us some qualitative flavor in terms of what you're seeing in the smart metering business and the traction in orders? Is the INR 10 crore orders that you've talked about in your last 2 presentations underway or at late stages. Can you give us a sense of where you are? Have these been tendered out? Have you all bid and have you all received any confirmation regarding the order?

[Gautam Seth, executive]

So if you look at broadly the numbers, and I'm going by the numbers which are in public domain. I would say almost INR 11 crore meters are already ordered out. And these are ordered out to the AMISPs. So as HPL Electric, we are a supplier to these AMISP for the smart meters. So many of these orders are getting -- yet to be given out to the meter manufacturers. So the orders which every meter manufacturer would have and what have been [ actually coming out ] by the utilities. So there will always be some gap in that.



So right now, if you broadly look at it, out of the 22 crores sanctioned meters, total is about 25 crores to be installed. About 11 crores have been given out. At HPL Electric, we are sitting on a healthy order book of over INR 3,700 crores. And I would say almost 95%, 98% of this is all meters because our other business, the Consumer and Industrial product business does not normally have a big order book.



So they are the orders -- because as it is more B2C channel related. So here, the orders are coming on a day-to-day basis. So normally, we would not have a large order book, although the business going forward is always there, and that would come on a day-to-day basis.



Coming back to metering, the order book is good. The inquiry banks are also very strong from the AMISPs. We are, in fact, actively supplying right now to all the top, I would say, 4, 5 AMISPs we are all supplying. We have recently added 2 more AMISPs into our business fold. And I would believe we are covering a large part of all independent AMISPs, which are operating in the market.



And many of them have given orders to us. And we believe that -- but they are still -- their total quantities. What they have got are far larger than the quantities they have given out. So I guess, based on the -- our delivery schedules, based on the performance, what they will see, more and more orders would be coming out.



Yes, because we are -- right now, we have understanding on much larger volumes coming out from these players. But the actual orders are still lower or rather they are holding on some orders, which eventually would come to us. So overall, the scenario is good. What we said in the last quarters, the momentum is continuing. Our focus is also apart from getting more orders is also on timely execution. And I would believe right now we are a little far ahead on our production and other things.



Our production also has undergone quite a lot of change. We have automated a large part of our production lines, more production lines are getting added, which are, again, they are semi-automated, totally it has the online testing, a lot of data gets captured. So I would say the overall scenario in the industry is good and the way the next few quarters and years look like. So definitely, the demand is going to be very high from the smart meters.

[Viraj Mahadevia, analyst]

One more quick question. The recent order you won of -- that you announced of INR 2,100 crores, was that a single order from a single AMISP? Or was it aggregated orders across multiple AMISPs for multiple projects? And also your capacities of smart metering are now up from 1.1 crore meters to how many meters?

[Gautam Seth, executive]

So it's -- right now, the -- I would say, when I say the productions are going up, our utilization levels are going up because if you recall, we've been traditionally always around 65% to 70% of our capacity. Right now, we are working on 2 things: One, capacity utilization is increasing, I would say, month-on-month basis. And even the traditional meters is now becoming very less part of our business, everything else is shifting to the smart meters.



So the percentage of smart meters is now becoming pretty large. It's already the dominant one, but it's now almost reaching maybe 95%, 90% plus -- utilization.

[Viraj Mahadevia, analyst]

Capacity ramp-up plus mix change.

[Gautam Seth, executive]

No, I'll just say -- the capacity ramp-up is done more specifically because making a smart meter is not a single process. So there are a lot of processes which are done in series and in parallel just to do that. So a lot of projects.



Like last year, we made a new electronic line capacity, then we've recently ramped up the engineering plastic capacities we put in 30 molding machines. We have a new tool room now. So a lot of work is happening. When we are talking on the automation part, the assembly testing part is now all getting automated. We have some more lines coming in, in the next 2, 3 months. So the human intervention, even during manufacturing gets reduced. A lot of it is done through the machine. The speeds are better, the accuracy is better.



So I think that is going to help us like that. So from a number, maybe that 1.1 [ shifts ] up or down right now is not so relevant. The utilization goes up. And I think the way the factories are getting designed, they can probably work 24 hours in the future. That's how we are coming out to be.

[Viraj Mahadevia, analyst]

And on the INR 2,100 crores or just [indiscernible]

[Gautam Seth, executive]

So that is largely a single order from a big AMISP. And I would say still, these are still part quantities and more to come in the future. So I think the business -- because out of the INR 25 crores as per the official website, I think still only about 1 point -- maybe 3 crores or INR 4 crores has been installed. So a long way to go. And eventually, the supply of smart meter will come into the forefront. We've been saying it always, but again, now when we look at it, the way it is happening.



For every AMISP, one big challenge or thing has to be getting the right meters to have the whole system running. So I think the opportunity is huge. So it's going to be there. But the good thing is, like always, what we do in HPL, we are well spread. We have a good customer base. With each of the customers we are getting orders and hopefully, the repeat orders based on performance. So I think it should really help us in the next 5, 7 years, yes.

[Operator]

Our next question will be from the line of Bhushan.

[Unknown Analyst]

[indiscernible] debt management and equity capital. Considering our strong financial performance, are there any plans to strengthen our equity capital base to reduce our leverage ratios further? And what are our strategy for debt management moving forward?

[Gautam Seth, executive]

So on debt -- the debt equity ratio is around 0.76. And I think broadly, it has been maintained over the last couple of quarters. So if you see the business potential is strong. We ourselves have seen a 3-year growth coming in almost from INR 850 crores going up to INR 1,050 crores, then INR 1250 crores and then INR 1,460 crores. And I think we should end up the FY '25 anywhere around INR 1,800 crores, maybe plus somewhere.



So overall, the business is good. We are also very conscious on looking at the debt and other things. But on an interim basis, while we are ramping up the production, looking at the vast opportunity, the debt, to some extent, has gone up. But overall, looking at the way the business is going to be transformed, especially the smart meter business, which is going to move with a less debtor days and which -- with much more secured and like a fixed rate payments, that will eventually bring down the requirements of working capital. So that is it.



So we are well aware of it. I think there could be opportunities in future for us also to bring down the debt. But right now, we do understand this process. We are studying and evaluating our options. But nothing has yet right now, which I can say, which would change the equity or something like that. But overall, the debt is well under control, but with a very, very strong business outlook going forward.

[Unknown Analyst]

I have one more question, actually. Are there any 5G infrastructure projects we are targeting to boost the Consumer and Industrial segment? And are there strategies sustainable or just temporary boost that might -- is allowed?

[Gautam Seth, executive]

So we don't do any projects as such, but we are a good preferred supplier to most of the -- to both the large telecom players. Also, a lot of intermediaries who are doing value addition and supplying to these telecom players, in fact, even the upcoming the third telecom players. So our couple of products have been going to them regularly. And even in the first quarter, even right now, as we talk, there are orders or productions going on, where we are supplying the 5G, the equipments or certain of our electrical or wire cables or switch gears going to the 5G infrastructure, which is coming up.



So overall, the potential has been good. Of course, not something very large or spiked up like the meters, but it's a continuous requirements, which keep coming every month, and we are supplying on that. The good thing is we are approved with almost everybody. We have a very good track record on various of our products and in multiple repeat orders, which we keep getting. So I think it's a good part of our business, and we really look to ramp up that as we go forward.

[Unknown Analyst]

One more question, please. With the recent turnaround in the Lighting segment, do you believe this growth is sustainable? And could it lead to a significant market share in the future?

[Gautam Seth, executive]

So Lighting, if you see last almost 18 months, we have been continuously seeing the price erosion happening and I think that's an industry-wide phenomena. I think we've probably discussed it in a couple of calls every time we do that. So -- and this is -- so that has been happening, and this is largely due to the change in technology, what has been happening. So now we have seen that in the first quarter, our sales have been quite stable as compared to both the quarters. So the fall which was happening in the overall sales has stopped right now after the long gap of 6 months -- but 6 quarters.



So right now, maybe at least from Q3, we anticipate that the growth will start coming in. So that means the quantities are going up. There are a couple of positive points when we look at the Lighting industry. The channel has been having lesser stocks throughout because when the depreciation of stocks were happening, the values were coming down. So naturally, the uptick was less and people were maintaining lesser stocks in anticipation that the values could go down. So that has happened.



So right now, as we look at it, the stocks are -- the channel is not so stocked up. So that's an opportunity to restock them. Second, the overall demand is there. That is what we see. And the unorganized segment has suffered quite a lot, I would believe, in the last 18 months because even the bigger organized people also suffered.



So somehow, I think there has been some disruption in the market, and I would believe the unorganized market has substantially shrunk now. So when we look at the future, the next 2 to 3 years, I would say the growth will come back in the Lighting segment. It is directly linked to all the construction, the real estate, the infra projects, what we are seeing around and even the residential segment coming up. So overall, the demand is there.



Unfortunately, with the change in technology, the rates went down. So despite having volume growth in certain quarters, the values were coming down eventually, but that seems to have stabilized. And looking at that stability, the dealers are also -- the channel is also coming back in helping out to procure more.



So I feel the Q2 would be, again, probably stable or maybe like this. But from Q3 onwards, we should start seeing better numbers and growth coming back in the market. This is -- I just hope that nothing new comes up. But otherwise, overall, the outlook seems to be good now.

[Operator]

We will now take a written question from Vijay Goel from ICICI Securities. What is our plan to increase our smart metering capacity from the current capacity of 11 million units?

[Gautam Seth, executive]

So there is -- so right now, we hope that probably by end of the year or early next year, we should reach probably the optimum capacity. But one has to understand that the capacity what we talk about is a little flexible capacity that we could work 16 hours or 24 hours in our factories, which many of our processes have already started working on 2 and 3 shifts. So right now, immediately, as and when we are seeing it. So there is not going to be any very big investment happening just raising our capacity.



But if you look at the last 2 years, constantly, we are building our capacities to take it further. So as and when the demand goes up, I think we will be well geared up for that. So right now, the electronic capacity is further enhanced, probably even beyond the number what we are looking at, even the industrial plastic part has gone up. There is a lot of tooling going on just to make sure that the feed is there properly in that. So I think it's going to be more of a continuous process. So as and when we see the future schedules rising. And so I think we can meet that.



So when we talk -- right now, the challenge, of course, execution is always a challenge. Execution is always something which requires a very deep focus and things, but it's not something the capacity constraint, I don't see that happening. So if we realize that the businesses are going to be even further increasing going forward, we have enough time to enhance the capacities here. So right now, I'm not putting a number to that, but if it were to go well above, which I think would happen somewhere in the next year in FY '26. So we are anyway going towards that and that will happen.

[Operator]

Our next question is from Anshika Chamaria from Yashwi Securities. Now that we have seen the order book having almost doubled and many more inquiries still in pipeline, what sort of revenue growth do we expect going forward? Is there any change from the previous guidance?

[Gautam Seth, executive]

So looking at the way the business is, I would -- maximum forecast for the current year because next year could be -- it's definitely going to be bigger, but how big we will probably estimate that only in the fourth quarter. But right now, when we look at it, I would say, solid growth we've had the first quarter almost 35% growth. I think that's probably a minimum what would happen in the metering. But it would -- probably the second half would be even higher growth than this because anyway, the last -- the bases are already high, if you look at the second quarter -- second half last year.



But still, in terms of absolute numbers in terms of sales, definitely, the next 3 quarters are also going to be very good in smart meters, and that will determine. But as we reach the fourth quarter, I think that would be a time when we can probably look at the next year in a bigger way. So -- but in all -- if you look at any -- all indications are very clear that the business is only going to go up probably a little more than what we had also anticipated. So that's a little positive for us.

[Operator]

And another follow-up question from Anshika. We have seen a margin expansion in this particular quarter. Do we expect this margin level to be sustainable going forward? What is the major reason behind this expansion? What is your outlook on raw material prices?

[Gautam Seth, executive]

So to answer this, the -- we would say this, the levels of 15% to 16% EBITDA margin on the metering, especially the smart meters is sustainable. And that's what -- of course, we'll strive to even better that as we go forward. But still, I would say from an academic point of view, 15% to 16% is sustainable. The main reasons are that the share of smart meters has now become very dominant within the metering segment. So that is going to contribute much more on the EBITDA expansion. And that has been contributing as we have seen in the last quarter. So that is it.



Right now, difficult to predict the movements of the raw materials or the commodities. But if you look at the last 12 months or 18 months, broadly, the commodities have been quite stable. So we have seen the metals, the engineering plastics, even the ICs or for that matter, the electronic active and passive components. So more or less, there have not been much supply constraints. The availabilities have been there and the prices have been fairly constant.



Now looking at -- when we look at the geopolitical situations across the world. So there could be some small disruptions here and there. But -- from a supply point of view -- supply chain point of view, I don't see any big thing happening and the margins should remain good.



Now one thing, just as a disclaimer that our prices are fixed for the entire order period and which extends for us being a meter manufacturer and a supplier meter -- or supplier almost for 24 months or a little beyond that. So those risks are always there. The prices could go up or down. And the geopolitical situations can always have certain of these changes happening in the raw material prices.



But broadly, the technology is good, the margins are fairly good because of the high technology. So any small disruptions or changes, I won't -- I don't think it impacts the overall margin structure.

[Operator]

We will take another written question. This question is from Manoj at Kiva Advisors. How is Q2 revenue execution looking versus Q1? Are we seeing secular improvement through the year? Do we have visibility?

[Gautam Seth, executive]

So I'll split it by replying to 2 parts. If you look at metering, though already we have orders and the execution is going on. So I would say the metering should be much better going forward within Q2 as compared to Q1. Definitely, the -- the execution is going on strongly, and that is happening. Similarly, when you look at the other products, we are from now on heading towards the festive season coming forward. So that should help in Lighting becoming a little better. The wire and cable has seen good traction since April this year. In fact, a very good traction. So that we are seeing that to continue. The switch gear, including our industrial switchgear should be again back because we did have good orders for the industrial switchgear last quarter, but then the execution schedules were more focused for this one.



So overall, I would say we've had a good first quarter. The second quarter would be something definitely a shade better than the first quarter. So that is what it is. We are just working to make sure that the margins are in place. We are able to better ourselves, no doubt, and definitely have a good growth.

[Operator]

Thank you. Our next question will be from the line of Samiak Meta.

[Unknown Analyst]

So you have mentioned that out of the INR 25 crores sanctioned meters, about 11 crore meters have been ordered out to the AMISPs. Just wanted to understand, I think you said about INR 1.5 crores were installed. So how -- what is the time line that we're looking at for the rest of the orders to get ordered out and get installed? And what percentage of this will eventually go to market leaders such as ourselves?

[Gautam Seth, executive]

So the question -- these -- the figures, what I said, are actually available on the government website. So this is -- what you're asking is a much more industry-wide question. But anyway, I'll just put my -- certain information, what I would have that.



Initially, when these orders are going to the AMISPs. So initially, it does take time for them to start the work on the ground. So just getting the contracts done, then starting the work and then ordering out meters and then getting the meters to install them, that initially takes about 3 months or 6 months. But thereafter, the things pick up.



And many of the projects which were awarded mainly last year or let's say, the first half or even the early part of second half last year are now seeing the work happening on the ground. So I would say the figures what the government is giving out, I believe they are the ones which have gone live. So there is definitely a time lag of about 2 to 3 months when the meters are getting installed and then by the time they are all made live into the system. So that is it.



But I think, overall, a lot of work is happening. Of course, a lot of work more needs to be done, but still the pace is gearing up right now. And I think by next 3 months, 6 months, a lot of things should -- you would see a lot of work happening and the figures also will start improving thereafter. And all these ordered out meters of INR 11 crores, all of them are on specific schedules given by the government. So all of them are running against time doing their planning, execution and then eventually the meter part would get executed.



Overall, of course, that is -- the AMISPs and the government needs to decide the dates, but I think it would take maybe the next 3 years or 5 years with a very strong execution for us to reach a substantial level of penetration of smart meters in the country. So this is what I can say.



But the opportunity for us as a meter manufacturer is definitely for 5 years. It would take that much time for them to actually get those meters and install them. And then thereafter then, the entire system or the bulk of the system is actually working on the smart meter grid, if I can call that.

[Operator]

Our next question is from Nikhil Kandoi from JM Financial. In India, 100% relays imported and any update on the recent MOU for magnetic relays? How big can this opportunity be?

[Gautam Seth, executive]

So this is part of our -- like a backward integration strategy. So broadly, whatever is made in India or rather, let me put it the other way, that there are a few items like the ICs or which is the semiconductors or the active and passive components, the electronic components. So these are broadly imported because nobody makes them in India, and that's true for all the electronic industry, what is working in India.



Other than that, I think we are very well backward integrated. We manufacture most of it. So now we've gone a little beyond that. Looking at local sourcing more seriously, government is already talking about make in India in a bigger way, and this aligns ourselves to that. And the relay being quite a -- it's a small but a critical component in the whole thing. So that is what we thought that to get the technology and look at making those components in-house.



So that helps us to achieve our broader purpose of backward integration, ensure quality and consistency remains in that. And plus, I'm sure we would achieve some price advantage as well when we are doing it ourselves. So that was the thought of doing it. And I think going forward, once this is done, because as you said also that these are imported -- largely imported and nobody is making it in India. So I think it can help HPL Electric in a big way and probably we can look at a larger ecosystem of supplying it so that can help the industry as well and us specifically as HPL.

[Unknown Executive]

[indiscernible] 100 bps, 100 basis point or 150 basis points. So if we start in sourcing -- we start manufacturing them?

[Gautam Seth, executive]

No, Nikhil, sorry, your voice is not clear. Just start again, please.

[Unknown Executive]

Sir, if we start manufacturing it in-house. So how can the margins shape up? Can it improve by 100 bps?

[Gautam Seth, executive]

It's too early and difficult to say that, but the first priority, obviously, is to get the quality, the consistency and the technology right. But obviously, when we make it, we would say there would be something. But meters, although relays are one critical component and even cost-wise do have certain contribution on the -- certain impactful contribution, I would say. But difficult to say whether it would be 0.5% or 1% or whatever. But right now, the thing is to have a critical component, which affects the supplies to be controlled by us, made by us, and I think that is more important. But obviously, very logically, it would contribute somewhere in the savings and the margins.

[Unknown Executive]

Sir, on similar lines, sir, how much of that -- how much percentage of the raw materials are we importing currently? And by manufacturing relays in how -- by what percentage are we increasing this in-house sourcing component in-house?

[Gautam Seth, executive]

So it's probably specific numbers I won't give out, but like for us, relays is one part. Maybe there would be maybe another 1 or 2 more items which can later be taken up. And -- but right now, the government also has certain specific targets for all meter manufacturers with respect to sourcing from India itself. And I think they changed -- the threshold limits change end of, I think, March 25 and maybe even 26%. I'm not so sure. But there are 2 years of changes what are there. And the government also anticipates that a lot of components and backward integration would happen in the meter industry, like we have seen it in LED industry because post Covid, a lot of parts started getting made in the LED industry. So similarly, the government also is anticipating.



And with meters as it is a very critical component in the overall utility, so they are very much more vocal about it and cautious that things need to be made in India and not just being sourced from some of the neighboring countries. So that is the way we look at it.



So for us also, -- we are, right now, I would say, a little ahead of what the threshold limits are because being a big player in the industry. We are constantly working to make sure that all the backward integrations are done. And everything, if you look at the electronics, the engineering plastics, anything on metal, everything we are doing in-house right now, but of course, subject to some things which need to be imported.



So relay is the first step, maybe 2, 3 other components also can be taken up alongside with these. And so that we are not dependent on the imports and the local industry as such gets developed. And I think this is what the government wants, and this is what is a leading player. We will also like that the control and the manufacturing is in India.

[Operator]

Our next question is from Mohit Madiwala from Envision Capital. Can you please give some color on the current execution as 11 crores smart meters have been awarded, but only INR 1.3 crore have been installed? Is there any delay or challenges in execution? Also by when do we have to complete the execution of our order book of INR 3,700 crores?

[Gautam Seth, executive]

So I'll start with the second part. Our orders are -- of INR 3,700 crores are normally scheduled for anywhere between 18 months to 24 months, extending up to 27 months. And right now, as we speak, I think we are already supplying to all the -- actively supplying the meters, the smart meters to most of the AMISPs. So I think the momentum is already there. In the factory, the executions are happening on a month-to-month basis. So we definitely look to see them grow like that. So but overall, 2.5 years, we should be probably done with the pending orders what we have.



Now Look, again, the overall thing, I was just saying somebody had asked on the -- in the previous questions also that right now, only about INR 1.5 crores has been done. So that just highlights the opportunity. But since a lot of meters have already been tendered out and another 4 crores to 5 crores are under negotiations right now. So the bulk of it will anyway be available with the various AMISPs. And then it is up to them, their speed and how they are procuring the meters and installing them.

[Operator]

A follow-up question from Mohit Madiwala from Envision Capital. Are we seeing new players entering the smart metering segment? What would the competitive landscape look like?

[Gautam Seth, executive]

Yes, there are -- like in any industry, there are new players which are coming, and I think, yes, they are probably getting a few orders here and there. So I think like in any industry that is -- it's an open industry and people are coming in and getting the orders. But our pitch is very clear that we have been there since '96 into electronic meters. We have seen almost 4 to 5 generations of electronic meters, and we have seen the involvement of the meter up to the smart meter coming in.



So I think we are -- we play on our own strengths. We have a very strong R&D, a large, huge capacity. We have -- even despite that, we have really enhanced ourselves and now going into a complete different kind of process to make these meters. As the warranties are for 10 years, definitely, we believe that the meter which is currently being manufactured and supply meets those standards and requirements and has a life of over 10 years.



So I think there are some advantages and inherent strengths what we have, and we are playing on that. And the market is open, as I said, people are coming in. But it's just like on the ground level, when you look at it, we are seeing it that people who have gone with certain, let's say, lesser-known brands have -- are facing certain problems in a bigger way in terms of quality or integrations or other things.



So I feel with us sticking on to our quality technology and with our strengths, I'm sure the business would come. So the lot of business is there and a lot of businesses should be coming our way definitely.

[Operator]

Our next question is from Vijay Goyal from ICIC Securities. Can you please shed more light in regards to our MOU with Guangxi Ramway for latching relays? How will it affect us in terms of execution and margins specifically?

[Gautam Seth, executive]

So as I said earlier, this is part of our like a backward integration strategy and to have more local sourcing and more control over the critical components. And so I think basically, we have everything in India, only the technology needs to be there plus -- to build up the supply chain for the raw materials for those relays. So I think we are putting in place that one. And as we come out with that, it should help us with a constant supply much better quality -- consistent quality and hopefully, definitely, the rates also would be much lesser. So that would help us.



And -- but together, when taken with some more components, it can have a good positive impact or rather it will have a positive impact on the margins as well.

[Operator]

Thank you. Our next question will be from Viraj Mahadevia.

[Viraj Mahadevia, analyst]

Apart from the modernization efforts around the smart grid and the smart metering opportunity, can you give us a sense of emerging spaces where smart meters can cater to such as data centers, solar, smart cities and even the train collision prevention system products?

[Gautam Seth, executive]

No, apart from -- no, the last you said was the railway part? Or what is that?

[Viraj Mahadevia, analyst]

Yes, the railway part.

[Gautam Seth, executive]

So I think other than that, whether it's data centers or the renewable or the solar energy, smart cities, so everywhere, I think the smart meters are being used. So for the government, how they are looking at that the smart meters have a lot of benefit, and this is -- these benefits are going to be for everyone, even for the individual homeowner as well as to the utility and the government and overall as in -- for the economy.



So I'll just elaborate a little bit, that India, as a country, we have huge AT&C losses. And one of the right now -- and government has tried various schemes methods trying to bring it down, but somehow, we have not seen much results. And this is as per government's own statements that they have not been able to make much progress on that.



Now when we look at smart meters and I think with some initial results, which are there, which are again well recorded this thing in Bihar and probably in some other states where the executions are going on, that they will see a much better cash flow happening a much better -- the AT&C losses would come down, the defaults would become much lesser, the leakages would come down.



So everything what we look at, the way in the modernization, and it's not only about metering and getting the money, it's also about the use of data. And that is going to play the critical role for the next level of smart metering and the next level of electrical systems, what would be there, which would obviously be communicable whether we are talking about switch gears -- the future switch gears or meters or any kind of other equipments that are there.



So overall, I think in the nation building, when we look at -- when we are looking at a $3 billion or $5 billion --trillion economy, having a robust electrical system is the first step, what is required. And I think the smart meters gives -- makes that happen.

[Viraj Mahadevia, analyst]

Are you seeing live orders from data center operators, solar companies, smart city initiatives, etc.?

[Gautam Seth, executive]

Solar, yes. Solar is yes. There are 2 ways. One, there are -- they -- if it's a tariff meter, then they anyway will get it either from the utility or from the AMISP. So we don't directly supply there. But yes, obviously, if you look at the use, then they will need meters and that would happen. Now there are certain meters which are use more for internal workings or like submeters which are there. So there also, we are supplying. We are supplying to so many builders, a lot of malls are using it today. A lot of condo, the residential societies where you have a single-point billing. And the RWA is actually collecting the money and then depositing it to the utility.



So there also, we have been -- people have been using us. So we've been there with a lot of big names like that. So there also, the demand will go up.



Solar, of course, yes, we have been already supplying a lot of our products, including retail. So that also is going to be a big thing as we go forward.

[Viraj Mahadevia, analyst]

Yes, I read a statistic regarding DISCOM dues have fallen by INR 75,000 crores in the last 3 years -- 2.5 years, and are now only 25% of what they used to be from FY '20 to '22. And I think this is all on the back of RDS and smart metering.

[Gautam Seth, executive]

It's my of course, personal opinion. But apart from what the savings which will come through the technology and the implementation of smart meters across the country. The government interference or even the local level interference of any government or influential person, that also will come out because these are now all private companies. It's like your telecom companies you pay the bill, nobody can help you in that. If you don't pay, they just disconnect you.

[Viraj Mahadevia, analyst]

Yes, it's a closed loop circuit.

[Gautam Seth, executive]

So that's how the meters and the electricity is going to be. So once that thing goes off, then it's a pure play, it's a professional play, people will value the electricity. I'm sure -- and even the data, the way the smart meters are that every 15 minutes, the data gets updated to the server. And if you look at it through an app, the individual house owner can see his consumption almost on a live basis. He can see the way the patterns of consumption also can be seen. So in a way, people will, of course, be paying more for electricity like you've seen like people in Maharashtra have -- people feel they are paying more, but actually they're paying the right this thing price.



But the awareness will come. And eventually, once the losses go down and overall, the system becomes better, that is when I think overall, the savings will come, and it will be good for people who are actually paying up. So at least they get uninterrupted supply of electricity, they get a much better grade, which is there. And that can help the industrialization or any kind of infrastructure projects which are coming in. That can help the overall growth for those.

[Operator]

Our next question is from the line of Nikhil Kandoi from JM Financial. Are we doing smart gas meters? And if yes, how big can be that opportunity?

[Gautam Seth, executive]

We have been evaluating the water and gas metering. And we did do certain tests, prototypes and other certain development, but nothing which is anything which right now can be seen from a commercial angle. As and when we are doing that, we would -- we can update you on that. But right now, our focus is very clear on the smart meter, the electrical smart meter. And I think the next 3 to 5 years has a very big opportunity for us as a pure supplier to the AMISPs.

[Operator]

For any remaining questions, feel free to write to Dickenson, Investor Relations Partners for HPL Electric & Power Limited or directly to HPL. I now hand the conference over to Gautam for closing comments.

[Gautam Seth, executive]

So thank you, everyone, and for being here and the tractions we have gained in the metering and even the stabilization of the LED Lighting segment, certain growth in the wire and cable and the overall advancement in the technology, these are somewhere we see ourselves going ahead in a much more brighter way, and we are confident in our ability to meet the demands of our -- of the growing order book, leveraging our capacities to deliver consistent and high-quality performance throughout the year. So we remain committed to all of you, and thank you for being here today and for your continued support here. Thank you.

[Operator]

Thank you. On behalf of JM Financial, that concludes the conference call. Thank you for joining us. You may now disconnect your lines.