Hitachi Energy India Ltd
NSE:POWERINDIA
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Hitachi Energy India Ltd
Earnings Call Analysis
Q2-2025 Analysis
Hitachi Energy India Ltd
In the latest earnings call for Hitachi Energy India Limited, the company reported impressive financial results for the second quarter of FY '25. The firm achieved revenues of INR 1,553 crores, reflecting a robust year-on-year growth of 26.5%, while also increasing revenues by 17.1% quarter-on-quarter. This growth was primarily attributed to favorable operational factors and effective order execution【4:0†source】.
Hitachi Energy's profitability also saw remarkable improvement. The profit before tax soared to INR 70.6 crores, marking a staggering increase of 118% year-on-year, whereas the profit after tax reached INR 52.3 crores, up by 111% year-on-year【4:2†source】. This translates into a profit growth that is nearly fourfold compared to the previous quarter, indicating a strong financial turnaround.
The operational EBITDA stood at INR 126.3 crores, resulting in an operational EBITDA margin of 8.1%. This margin reflects continuous efforts to enhance operational efficiency and improve cost management. Additionally, the management reiterated its commitment to improving these margins, setting a target of achieving double-digit margins by the end of the fiscal year【4:1†source】.
One of the most promising highlights from the call was the record order backlog, which reached INR 8,910 crores, providing a revenue visibility estimated to last about 26 months. This backlog is a result of an 11.7% year-on-year increase in orders, totaling INR 1,952 crores【4:0†source】【4:2†source】. The company's strategy emphasizes leveraging this backlog to further boost revenues and improve margins in the upcoming quarters.
Management underscored their long-term sustainability goals within the company, aimed to meet targets by 2030. The focus is on cementing their leadership in core segments, including renewables, transmission, and utilities. The earnings report also highlighted a significant contribution from high-growth sectors such as renewable energy, where order inflow grew by 135% year-on-year【4:1†source】【4:19†source】.
To sustain growth and enhance capabilities, Hitachi Energy will continue to invest in workforce upskilling and technology improvements. They are working on strengthening operational infrastructure, which includes expanding facilities for transformers and interruptors. This commitment to investing in the workforce aims to prepare the company to meet current and future energy needs【4:1†source】【4:18†source】.
Despite positive operational metrics, cash flow revealed some challenges. The company experienced negative operational cash flow as working capital requirements increased due to higher project-related payouts. This resulted in short-term borrowings rising by approximately INR 45 crores【4:2†source】【4:12†source】. However, management attributes this to timing issues rather than fundamental operational inefficiencies.
Looking ahead, the company sees significant opportunities arising from the accelerating energy transition in India, as well as in areas such as high-speed rail. Management indicated that they are actively bidding on several major projects within this domain and expect increased order activity in the latter half of the fiscal year【4:1†source】【4:11†source】.
Overall, Hitachi Energy showcased a robust performance with substantial revenue and profit growth, while addressing necessary operational improvements. The record order backlog and their commitment to sustainability and operational efficiency present a favorable outlook for future growth. The guidance to achieve double-digit margins adds to the positive sentiment for investors looking for potential in the energy sector【4:0†source】【4:3†source】.
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Ladies and gentlemen, good evening, and welcome to Hitachi Energy India Limited's Q2 FY '25 Analyst Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. N. Venu, MD and CEO, Hitachi Energy India Limited. Thank you.
And over to you, sir.
Thank you very much. Good evening, ladies and gentlemen. Thank you very much for joining us for the analyst conference call. I hope you're all doing well.
And today, we announced our results for the second quarter of financial year '24, '25. And over the next 20, 25 minutes, I will take you through our performance during the period ending September 30, 2024. And for your convenience, I will read out the slide numbers. We have just uploaded the slide deck on the website, so I will refer the slide numbers for the easy of -- reference, for those of you who are attending on phone.
And today with me in the room, I have our CFO, Ajay Singh; and Poovanna Ammatanda, General Counsel and Company Secretary; and Manashwi Banerjee, Head of Communications and Investor Relations.
So during the quarter, we have focused on improving our overall operational efficiency, which has helped us in achieving a sustainable flow of order intake, pushing the order backlog to a record high for the second quarter of FY '24, '25. A growing urgency to accelerate energy transition in India and globally has significantly boosted investments in the energy sector. We expect this momentum to continue in the coming quarters, creating more opportunities in the energy segment, especially in the renewable space, for our portfolio.
So I'm moving to the Slide #3. At Hitachi Energy India Limited, people have been always in the center of our strategy. They have been its core strength, and they have been powering for the last 75 years. We are committed to delivering meaningful employee experiences, and their safety and well-being are paramount to us. During this quarter, we implemented key initiatives to strengthen safety practices across our offices and factories. It helped us to achieve 100% on-time closure of high-risk hazard situations. There has been continuous effort towards reiterating the importance of reporting safety incidents at working sites. Furthermore, we refreshed our health, safety and environment policy to ensure positive health, well-being and safe working conditions.
We organized multiple awareness training sessions and health camps across our offices, facilities, project sites for the well-being of our employees. To mention a few: We have sessions on health precautions during monsoon, lifestyle diseases, mental health, yoga and manual handling ergonomics. Also we had multiple health camps for diabetes and more on pulmonary health and held a blood donation camp as well.
Moving to the Slide #4. We at Hitachi Energy place sustainability at the heart of the company's purpose of advancing a sustainability energy future for all. In line with this purpose, we -- Hitachi Energy is committed to drive business in a sustainable way. Our sustainability plan focused on 4 key areas, planet, people, peace and partnerships, with a specific target for respective heads to be achieved by 2030. As the numbers come in, I'm happy to inform you that we closed FY '24 with achieved targets of reducing CO2 emissions and waste by 88% and 97%, respectively. We also reduced freshwater usage by 18% vis-a-vis the target of 25%.
Diversity is an integral part of our work culture. And we have set ourselves female diversity target of 8% to 10% by 2025. It is noteworthy to mention that we're almost touching 8% mark of our given target. Our constant endeavors toward sustainability has been recognized, as we are conferred with the prestigious BusinessWorld's India's Most Sustainable Companies award.
Moving to the next slide, Slide #5. In keeping with the rapidly evolving environment and technologies, we are globally realigning our sustainability 2030 program to be more measurable and impactful. Changes are aimed to maximizing its positive impact across the value chain; and through co-creation of environment, social and economic value. To maximize the positive outcomes, now the focus on 3 key strands of planet, people and principles, which cover all earlier post-sustainability pillars.
Under the people strand, we are supporting a safe, inclusive, equitable and just energy transition by focusing on 3 areas: health and safety; diversity, equity and inclusion; and human rights and social contributions. Under the planet strand, the focus is to accelerate the clean energy transition, with a particular focus on 3 areas. That is climate; circular economy; and biodiversity, ecosystem. The principles strand emphasizes on taking responsibility of the company's governance and employee behavior and are focusing on the following areas. That is ethics, integrity, sustainability of supply chain and behaviors and values.
The core idea is to move beyond the realm of our products and services offering and deliver for a greater good of the society.
Moving from our license to operate, what we call that is safety and sustainability. Then we'll go next slide. That is Slide #6, is our business performance. As you can see here, the quarter ending September 30, orders totaled around 1,952 crores, up 11.7% year-on-year, where renewable led the change from studies across utilities, power quality and substation projects. Expansion, upgrade and improved efficiency also resulted in orders from existing power plants. Key large orders of transformers and power quality solutions from industry, transportation, utilities and data centers include 400kV central transmission utility for a petroleum product company in Dahej; and transformer orders from a national transmission utility; and an Ebos solar projects in Fatehgarh and Bhopalgarh, respectively; and LOT transformer for our locomotive engine factories. And there are several other data center and software-related thing with that.
Revenue for the quarter is INR 1,553.8 crores, showcasing a strong revenue growth of 26.5% year-on-year on the back of favorable mix and good order execution during the quarter. Profit before tax for the quarter was INR 70 crores, up by 118% year-on-year. And profit after tax, INR 52.3 crores, up by 111.4% year-on-year, whereas quarter-on-quarter growth was up by 369% and 402%, respectively.
Operational EBITDA for the quarter stood at 126.3 crores, resulting in a margin of 8.1%, reiterating our continuous efforts towards improving margins and enhancing overall operational efficiency.
At the end of the quarter, the order backlog stood at a record high of INR 8,910 crores, providing revenue visibility for the coming several quarters. Our continuous efforts toward enhancing overall operational efficiency has helped us in improving our overall performance, including margins.
Move to the next slide, Slide #7, where you see that, as a pioneering technology leader, we are committed to the energy security of the country. So various projects undertaken by us. During the quarter, we have commissioned several projects, and here I will highlight a few of them. We commissioned 400 kV 600-megawatt substation at Jaisalmer, Rajasthan, which include design engineering, manufacture and testing. We also completed supply, installation, testing and commissioning of a 110 kV transformer base for an industrial plant in Trichy; and also commissioned 220 kV, 130 kV (sic) [ 132 kV ], 33 kV substation for intrastate transmission projects in Madhya Pradesh. The scope of work includes design engineering, supply, installation and testing of the substations in that.
Moving to the Slide #8. We also continued to invest in our capacities and capabilities. This included starting expansion work of our transformers and interrupter facilities in Maneja to strengthen our operational infrastructure. For our teams, we had our -- this year also, we have celebrated our 75-year celebrations for both internal stakeholder as well as external stakeholder. For our internal stakeholders, we had our first family fiesta, engaging the families of our employees to visit and celebrate our workplaces, our factories, our project sites. Also we organized energy run in Bangalore for our employees, customers and partners, which saw a huge participation, almost 2,000-plus running enthusiasts. Both events are part of our efforts to commemorate our 75-year celebrations -- 75 years of our existing in this country.
In parallel, engagements with our customers continued. For example, from organizing an extensive 5-day training program for our Mumbai HVDC project customer team, which was attended by [ 40 ] participants from the customers side to hosting a senior delegation from Delhi Metro Rail Corporation, who are providing an extensive tool to our factory, showcasing our comprehensive product manufacturing and quality assurance process for dry and traction transformer factory at Savli. These are all just a couple of examples for various capabilities-building exercise with our stakeholders, both internal and external stakeholders.
Moving to the Slide #9. The company has adhered to a principle of collaboration and co-creation with those most familiar with the challenges. Hitachi Energy works closely with our customers, partners to foster a sustainable energy future for present and future generations. As part of this ongoing effort, we conducted our multicity flagship customer event series called Energy and Digital World with the sessions in Jamshedpur and Pune, respectively. On the similar lines, we launched a new initiative called Technology Colloquium, technologies for energy transition and sustainable grid, for engineering students across India.
So this new platform. We reached out to engineering students to talk about one of the most important and urgent issues of our time, the energy transition and net zero targets. The platform facilitates meaningful conversation and exchanges of ideas on energy transition among young minds, subject-matter experts and Hitachi Energy leaders. The first segment of the tech colloquium was kicked off from BVM College in Gujarat then moved to IIT Delhi and culminated in NIT at Warangal. Engagement with key industry bodies and platforms were also leveraged through sharing leadership views and opinions on topics like innovation to net zero, to making India a global manufacturing hub at CII India Innovation Summit, Innoverge CII Annual Karnataka Energy Transition Conference or Economic Times' Energy Leadership Summit, just to give examples of that.
Moving to slide number -- next slide, #10, Energy and Digital World 75. And thank you for some of you attending to this event on the second day of Energy and Digital World. We at Hitachi Energy are proud to be part of various nation-building projects over the last 75 years. In culmination of this milestone, the company organized 2-day experiential technology symposium called Energy and Digital World 75. Mr. Amitabh Kant, G20 Sherpa, joined us as the chief guest for EDW 75. During the inauguration of the mega event, he emphasized on the need for collective action towards the bigger energy goal and spoke about how India is an exemplar with its strides in the road to net zero.
He also lauded Hitachi Energy's for its contribution towards achieving the goal. The event encapsulates technologies and discussions toward advancing energy transition for India's net zero journey, which was attended by over 2,000 customers, policymakers, academia, think tank, regulators, supply chain professionals, et cetera. Over 30 nationalities were also present -- and over 25 technology sessions by global industry experts, product launches and many more.
The experiential exhibition was the main attraction of the event, spread over 1,000 square meter, showcasing our state-of-the-art technologies and products and giving a chance to our customers and partners to have a feel and look of our product portfolio which are crucial for solving customers' challenges. During the 2-day event, we also had a closed-door meeting with several CXOs of various companies. And many of you also joined us and were provided a deep dive into technologies enabling the future energy systems.
Moving to Slide 11. I think, this slide, you know better than me. The Indian growth saga continues, as the country is in the right track for a $5 trillion economy in the coming years. According to the government reports, India's GDP is growing. Growth was 8.2% for FY '24 vis-a-vis 7% for FY '23. India's IIP growth for July, August were at 5% year-on-year basis. And IIP index for the industry stood at 149.6 during August 2024.
The ongoing effort from government to boost the renewable sector has a good result, as we witnessed a 50% year-on-year growth in FDI for FY '24 with INR 31,600 crores vis-a-vis INR 20,700 crores in FY '23. Furthermore, green hydrogen market are expected to attract investments of INR 10.6 lakh crore as country gears up to produce 5 million ton of hydrogen by 2030. Also, the Indian data center market is estimated to reach INR 85,000 crores by 2027. With India's ambitious plan to increase power transmission capacity by 35% by 2032, expect an investment of INR 9.15 lakh crore in state and central network.
Indian railway, as part of its CapEx plan, have allocated INR 2.62 lakh crore budget for expansion of rail network. Also, concerted efforts were made to reduce distribution losses through upgradation and modernization of discoms.
Moving to the Slide #2 (sic) [ #12 ]. As you can see here, the strong growth in the transmission industry, data centers and renewables -- to provide more color: This quarter, data center segment emerged as a high-growth segment with a year-on-year growth of 346%, followed by renewable which is up by 135% year-on-year. And industries and transmission segment saw year-on-year growth of 78% and 34%, respectively, whereas railways and metro, due to the -- we saw a year-on-year decline of 11% in rail and metro segment, but electrification of railways and growing metro networks across the country will push these segments in the near future.
On the right-hand side of the slide, you see that order mix. Product took the lead in the segment, whereas utilities and direct end users are cleaner winners for sectors and channels, respectively.
Moving to the Slide 13, which are our growth levers, service and exports. The growing urgency to accelerate energy transition across the globe. There has been a constant endeavor at Hitachi Energy to enable many pathways to energy transition across geographies and segments. For quarter 2, the service portfolio witnessed a substantial growth, with contribution of 12% to the total order received, stemming primarily from industries, renewable and transportation, including restoration and service of service-level agreements.
To mention a few key orders: We received a transformer service CoreSense order from a steel major; GCB and GIS unique spare requirement and transformer repair in renewable and railway sectors; surveys and commissioning of various systems in Rajasthan solar and the restoration of 220 kV GIS at Gorai substation of a private T&D company.
On the right-hand side of the slide, you see that exports accounted for 22% of total orders booked in Q2 FY '25, the significant share from a high-voltage products and grid integration orders from European and African market. Some of the key orders include C&P system in Yanbu, 145 kV GIS for REE Red Electrica, 330 kV AIS package for Azerbaijan and 145 kV GIS for Electran data center. So just to name a few in that.
I'll now hand over to our CFO, Ajay Singh, to take you through our financial performance in the next 2 slides. I'm moving to Slide #4...
14.
Slide #14.
Thank you, Venu. And good evening, everyone. I hope you are all doing well at your end.
Well, our focused and proactive approach has helped us to maintain the order growth momentum carried from the last quarter. During the quarter, the company booked orders worth INR 1,952 crores, which is 11.7% growth Y-on-Y. Revenue, if you see, INR 1,553 crores, which is up by 26.5% Y-on-Y and 17.1% quarter-on-quarter, which is on the back of a favorable mix and the good order execution during the quarter. Profit before tax for the quarter was INR 70.6 crores and profit after tax was INR 52.3 crore, both up by 118% and 111% Y-on-Y, respectively, whereas both PBT and PAT quarter-on-quarter grew by 3 and 4x, respectively.
If you see, the operational EBITDA for the second quarter, yes, it is INR 126.3 crore, resulting in a operational EBITDA margin of 8.1% and which -- basically see this is [indiscernible] our continuous efforts towards improving margins and enhancing the overall operational efficiency.
Even, when you see the H1. The 6 months columns also clearly demonstrate the growth trend across parameters from orders till the operational EBITDA. We closed this particular quarter with a -- I'll say, one of the highest-ever order backlog, INR 8,910 crores, which is providing a visibility of approximately 26 months for the execution.
If I move to the next slide, where I would like to share an update on how the numbers fared during the last 3 months. So let me take a moment and walk through a little bit specific details in this particular slide. If you see the table, it is a clear picture how the relentless pursuit for improving the bottom line and the progressive margin basically recovery that we are able to see.
You can see Y-on-Y revenue improvement of 26.5%. That is INR 1,553 crores in this quarter, as we discussed, because of the relentless operational efforts. The material cost, if you see, is 61.7%, compared to the last quarter, 62.8%. Personnel expenses, from the percentage terms, if you see, it is lower than the last quarter, 8.8%. Operational expenses are also in-line, 20.9%, compared to the previous quarter, 23.6%. And then there is exchange rate and variance that is 1.5%. Depreciation is consistent. Interest cost is slightly higher in this particular quarter compared to the previous quarter. So overall if you see, we are well progressing in the direction and our efforts is to ensure that, going forward in the coming quarters, we continue this particular trend.
With this, I hand over to Venu.
Thank you, Ajay.
And if I'm -- go to the last slide before we open out for the Q&A, our priorities for the remaining fiscal year. We remain steadfast to our bigger goal of 2030 strategy. Our singular focus of cementing our leadership in core segments continues. Our core segments are our renewable, our transmission, our utilities, our industry, our data center, our rail, et cetera continues with the strengthening of our capabilities for growth. Not only it's called trinity of service, export and digital, along with harnessing maximum potential from the high-growth segments I just described, those things. Keep continue our focused approach toward improving the overall operational efficiency to further boost productivity and keep raising quality level.
On the business front, consolidated effort will be made to leverage the large order backlog for revenue accretion and also margin improvements. To capture the maximum business potential arising out of the energy transition, we will continue to invest towards increasing our existing capabilities through up- and cross-skilling of our existing human resources to address the energy needs of today and of coming time.
Safety will always be paramount for us, as it being entrenched in our DNA of our organization. We will continue to approach every day as a day 1 in terms of implementing safety work culture across our functions. And last but not the least is invest in capacities for future growth capacities, our manufacturing capacities for our workforce.
With that, I close my presentation and open the channel for questions. Thank you.
[Operator Instructions] We'll take our first question from the line of Subhadip Mitra from Nuvama.
Firstly, congratulations on a good set of operational numbers.
Thank you, Subhadip. Thank you.
So given that we are seeing good operational performance both in terms of top line and margin recovery and you have maintained that you would be looking at double-digit margins by end of the year, would you have any change to that guidance or any further clarity in terms of range of margins that we can look at, let's say, over the next 1 year or so?
Thank you very much for your questions. No. At this point in time, no more change in our thing, so what we said previously stays.
Understood. Secondly, in terms of the large HVDC order potential. And we have, I think, one which is where the L1 has already been announced and probably 2 more which are coming up. Are you already part of these -- some of these orders? Would you already be L1 in some of these bids?
I think, as you know, there are 3 HVDC tenders which are -- come for bidding. And as you rightly said, 1 of the HVDC tender has been LOI received by our customer, PGCIL. That's what we have also read from the public information. And we are bidding, as we speak, so we are bidding to our customers.
So the equipment-related tendering is currently on. That's what you're saying.
No. The HVDC is related thing. The PGCIL has won the entire transmission system, right, the transmission system, which includes HVDC terminals. That's our scope -- and the transmission lines, et cetera, including land and development, all those things. The whole transmission system, what I understand, is the one they received the LOI or something like that. So our portion, we are bidding it to our customers, which includes PGCIL.
Right. So just trying to understand: That's for this particular [indiscernible] transmission line which PGCIL has won. Would you be supplying the equipment for this piece, or is that something that's yet undecided?
No. It is still -- that's what I'm saying. We are still -- that is under bidding. We are bidding it to our customers. That's what I said.
Okay, understood, understood. And for the rest of the 2 lines, any timelines, in your opinion, by when we can see the equipment ordering, on the other 2 HVDC?
I think our view is that at least 1 or 2, at least; if not 2, at least 1. For sure, it will get finalized in this financial year, 1 of these 2.
We'll take the next question from the line of Mohit Kumar from ICICI Securities.
Congratulations on a great set of numbers, sir. Good to see improvement in gross margin, EBITDA margin. Sir, my question is on the HVDC Leh-Ladakh. What is the status? I think the bids are supposed to be submitted in October. Has any update?
So Leh-Ladakh, I think the bid is submitted -- not submitted yet. So there will be again, discussions are going on what will be suitability, et cetera, all those things, kind of things, not submitted answer to that.
Understood. Sir, my second question is other expenses. I think, last quarter, it was high. Again, this quarter, it had persisted, right? I think you had mentioned last quarter there are some one-offs. Is it fair to assume that these -- there are some more one-offs again in this quarter and which will go away in the next fiscal year?
Maybe, Ajay...
Yes. So if you see, in the current quarter, the other expenses, as I told from the percentage terms, it is -- come down rather, which is the 20.9%, right? So I don't see that there is any other one-off in this particular other expenses. So fairly, it will be more or less consistent in this particular range.
So then there's no one-offs which then go away in the next fiscal year. This is the trajectory, right, we should assume...
Yes. This is -- it will hover around this particular range, depending upon how we progress. Wherever some expenses which are variable in nature, that will vary depending upon the growth.
Understood. Well, my last question is, sir, are the conversation on orders of high-speed rail is -- still going?
Yes, it's still ongoing. It's not concluded. It's still ongoing.
We'll take our next question from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a decent quarter, sir...
Sorry. Can you use a handset mode, please? Your line is not very clear.
Is it better now?
Yes.
Sir Venu, congratulations on a decent quarter. So I think, initially in the call, you said that you are bidding for the client, so I mean, have you entered exclusivity with the client? Or it's again an open bid and where other peers are also giving their bids. Or it's just that you're already being finalized and just some commercial negotiations are going on before the project -- LOI gets issued.
It is open bidding.
It's open bidding, so all the participants are there, Okay.
Yes, yes, yes...
And second question is on other expenses again. So if I compare with some of your peers: So they report about 11%. So I understand royalty will come on top of it, 5% to 6%, but still, if it goes to 16%, 17%, but still there is almost 500 -- 400 to 500 basis point difference, so why is such a big difference? And is it because we are running again the parallel IT costs because we have our own ERP now operational? So I think, last time -- I think, Ajay said that we're still operating on dual IT systems, so what will be the contribution of shared IT with ABB? And when do you expect it to go away from our books? And what could be the savings from that?
Okay, Ajay...
Yes. So thank you for the question. So as I explained earlier also, if you see the other expenses in percentage terms, we are consistent. That is how we'll say it, so -- yes. And if you talk specifically about this particular quarter on the value terms -- if you talk about the value terms, whatever the major incremental value in there, that is because, if you see in this particular quarter, we have increased our revenues. So the production-related expenses is increased, but overall if you see on the percentage terms, we are consistent.
Coming back to the IT costs with ABB: So again, if you see, we have told earlier also that, when we embarked into a new company, we have taken support in the form of TSA agreement with ABB because, at that particular point of time, we had to -- we did not have our infrastructure, so to say, but as we speak today, we are basically at the end of that transition service agreement. We have already set up our own infrastructure. And we believe that the IT cost that we factored in this particular is -- it will be in the same range. So that is the overall setup. So our overall agreement, the TSA agreement -- finally last leg of agreement. We'll be coming out of that either by the end of this particular -- let's say, December, next quarter.
How much will be that cost in absolute terms? I mean, is it significant? Or -- so how do you quantify that?
As I discussed, it will be hovering around anything at 3% -- 2.7% to 3% range, overall IT cost that we are also -- today, we are hovering around. And going forward also will be around the same range.
So no savings as such from this dissociation after...
Yes, savings will happen out of -- because we implemented the new [ railway ] system, right? So we'll also get into a lot of other savings, including the productivities and those other things also part of that.
I think we have discussed earlier in the last quarter that we had implemented a new ERP system, S/4HANA. And there, with the -- just now, we have implemented in the previous quarter, so we expect to have efficiency out of it. We can leverage efficiency out of that, and that will come with time. It will take 1 or 2 quarters, 3 quarters to derive efficiency out of those any implementations, Parikshit.
Okay. And just the last question, sir, on this battery storage. So now the battery costs have reduced significantly on the storage side. So any plans, do you think any opportunity for us to play out in the near term? So how do you see the pathway towards introducing the battery storage for the Indian?
Thank you, Parikshit. I think absolutely. As I said, we will see how our 2030 strategies also -- this is exactly on edge of the grid where we have a play there. That is energy storage. So we have a complete portfolio that's energy storage. And we do containerize, modularize, which is scalable, battery energy storage, supply. In addition to that, the tenure we add other things. In addition to that, Hitachi Energy, globally, they acquired a company called eks. So eks is a company with Hitachi Energy, globally, they acquired. And that company has specialized in the battery energy storage applications. They've done a grid-scale battery several countries in there, so we will be also leveraging that, offering that solutions and our products to our customers. So we are discussing with the customers as the market is getting mature.
[Operator Instructions] The next question is from the line of Dhavan Shah from AlfAccurate Advisors.
Sir, my question is on the renewable side of the portfolio. If I look at the order inflow growth for the first quarter, that was also more than 100%, around 500% in the first quarter. The same is around 135% in the second quarter, so can you help us to understand, what is the scope of work in the renewal side of the portfolio? And out of the current order backlog of roughly INR 9,000-odd crores, how much of renewable constitutes to the overall backlog side?
So the renewable. Our scope lies everything from the end terminal of the -- from the inverter. We don't do the civil. We don't do the structural. We don't do the panels, okay? So if you'll take a best of the things, all -- we do that, whether you're talking about the grid connection of the renewable power, whether you are talking about transformers required, everything. Then you are talking about automation and also the system studies. System studies is a big thing. So all those things right from the planning stage through the building phase, until maintenance phase is what -- we do that, except the civil, structural and the modules...
Okay. And how much does it constitute to the overall backlog, renewal portfolio?
No, we don't separate the backlog by renewable and nonrenewable, so that, we have not given, so far. And we'd not like to give you also now on that.
Got it. And just last thing is we are hearing some issues in the supply chain for the [indiscernible] sheet for the transformer. Sir, any issues...
Which one?
Corrugated sheet for the transformers. So are we facing any issues in terms of supply chain for our portfolio?
No, not -- I don't think. Corrugated steel, no. Or you might be talking about our -- this electrical steel, you mean.
Yes.
The CRGO.
Yes, correct, correct.
Okay. So electrical steel, as you know, we are -- Hitachi Energy globally. I'm talking about globally. We are one of the largest consumer of CRGO globally because, by far, we have largest capacity thing. So we have a definite frame agreement with many global suppliers, and that way, we are able to secure supply, so far. We don't see -- we have not faced any problems, so far.
Okay. And we are not expecting any delays in terms of the requirements of those raw material also in the future quarters, right?
In the -- yes, we can't tell forever, sure, but in the near term...
In the near term...
There are more robust frame agreements globally. We do see that we have robust supply chains in place. Of course, the prices are fluctuating. Prices are varying, but barring that, we are able to secure the supply.
Okay. And pricing-wise, I think -- are we protected in terms of the end pricing? Because the pricing has also been moved up. So how are we safe in terms of the overall contract pricing?
Most of our contracts, more than 60% of our contracts, do have price escalation formulas.
We'll take our next question from the line of [ Vinod C ] from PhillipCapital.
Am I audible?
Yes, yes.
So I had a question on your cash flows. So if I look at your operating profit have doubled from September last year to this year, but I think the entire cash flow is getting eaten up by working capital with a big jump of 365 crores on your [indiscernible]. Then that has also resulted in, I think, a 120 crores of short-term borrowing, so can you throw more light on what's happening operationally...
So thank you for the question. So you see -- you are right. Operational cash flow for this quarter, we are on the negative side. And our borrowings, also compared to the previous quarter, is increased by roughly 45 crores. So if you see -- and what I've said, this is a timing issue. In this particular quarter, I'll say the collections were good, but the payouts were also very good, in the sense it's on the higher side. And why so? Because -- you are aware that we are running a large HVDC project for which in this particular quarter the payouts were a little bit on the higher side. So that is -- it's just a timing issue between the receipts and payments. Otherwise, we -- I don't see there'll be any major challenge in this particular aspect.
[Operator Instructions] We have a question from the line of [ Heet Mehta ] from ValueQuest.
Sir, congratulations for a good set of numbers for the quarter. Sir, my question was more on the CRGO prices and its movement at [indiscernible] how it is affecting our realizations in terms of who we'll be supplying together, the industries or the utilities?
So first of all, as I said, CRGO has 2 dimensions that, first of all, it's -- it has demand, huge demand, in the large power -- or overall power -- overall transformer industry worldwide. So naturally, the demand is very high. As I said previously, Hitachi Energy is one of the largest buyers of CRGO globally. And by -- we have a very robust supply chain frame agreements with most of the CRGO mill vendors directly. And we are able to -- first of all, we are able to secure the supplies in line with our customers' requirements. That's the big thing. Our teams globally, they are working to ensure that the commitments are met and we are able to get us update, the commitments -- in line with our commitments. That's number one.
Priority for us is the ensuring the supply chain or ensuring the supplies or factories. The number two is, yes, the prices have fluctuations globally. And supply-demand is there, so we are -- as I said, we have long-term frame agreements and which also have a lot of escalations. And most -- as I said, most of our contracts do have price escalations, so we are able to transparently pass on those price escalation. That way, we are able to mitigate the risks in that.
So again, my question was more on the side that we assume that peers or other transformer manufacturers are actually seeing the realizations go down, with consistent margins. So we would assume that it was commodity input prices that were going down instead of going up, so my question was on how our realizations are moving, like, on the higher end or on the lower end?
The realization of the -- on the products, you mean?
Yes.
We will not talk about the realization for each on the product line basis. What I can tell you is that, since the demand is high, naturally there would be tendency for going up on the margins, which is what we are looking at it, but also costs are also going up, right? We need to also balance those costs versus things. And there are unknown costs around on that, but I would say it's a -- stable, in other words.
Okay. And you are not seeing any huge fluctuations in the prices of CRGO as such, right? Right now, their prices have stabilized, more or less.
As I said, there are fluctuations, but those fluctuations are being covered with our price escalations. And as I said, we are giving a priority to ensuring the supply over the pricing. That's how we have been working and that's how our contracts have been structured with the CRGO people.
[Operator Instructions] We'll take a follow-up from the line of Parikshit Kandpal from HDFC Securities.
Sir, we have taken the related party approvals for order from the parent entities. So I just wanted to understand, how much of that has come in already in 1H and in this quarter?
Ajay, would you like to answer that?
So right now you should see we do not like to quantify at the moment, but we'll get more visibility in the coming quarters how we are faring on those particular approvals. So last time when we took the approvals, we had anticipated and we had -- we have done a bottom-up exercise where we see that, by the year-end, we'll be crossing the threshold. That is for which we have taken the approvals in advance, but maybe we'll get more clarity in the coming quarters.
But as of now nothing has been materialized from that approvals, right? Nothing has come in the first half.
No, no. Obviously it has come...
It has come...
It has come because -- it will come under -- in quarter 3, it will come.
Sir, that is what I'm asking. Sir, In 1H, how much has come in -- and in this quarter, if anything has come in this quarter out of the total order inflow of INR 1,900-odd crores, what is the contribution from related parties?
So ballpark number is at 300 crores...
300...
We are talking about -- the [ Switzerland ] we talked about, so ballpark number, the approval that we have taken is around INR 1,200 crores. And the ballpark we see till 30th September is around INR 300-plus crores roughly.
So a lot of ordering is still to happen in second half, so we'll see some more -- a larger contribution to come in from the limited entities in the second half.
Sure, sure, yes.
But at the same time, just to be sure, that whatever we take the approval, there is no guarantee that we will get everything. We take an approval in anticipation of the -- some of the projects. We are bidding together with those companies. And that's how the approval will be taken ahead of the curve, in line with the good governance practice. So whatever we take, everything will not come into that.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. N. Venu for closing comments. Over to you, sir.
Thank you. Thank you very much. Once again, ladies and gentlemen, I want to take this opportunity to wish you and your family, your loved ones a happy Dhanteras and happy Diwali. Take care and stay safe. And talk to you soon. Thank you very much.
Thank you, sir. On behalf of Hitachi Energy India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.