Schneider Electric Infrastructure Ltd

NSE:SCHNEIDER

Earnings Call Analysis

Schneider Electric's Q2 Bullish on Make in India

Schneider Electric Infrastructure expressed optimism in the Q2 FY '24 call, particularly about the Indian government's Make in India initiative, intending to infuse INR 30 lakh crores into various sectors over the next 5 years. One key area is the RDSS scheme with INR 2.5 lakh crores aimed at enhancing distribution infrastructure. Schneider is positioned with solutions like SCADA and ADMS to capitalize on these opportunities. Exports for the quarter have reached INR 31 crores, and the company anticipates minimal disruptions going forward.

Key Financials and Growth Metrics

The company reported total sales of INR 995.1 crores, marking a notable year-over-year increase of 25.1% in pure sales. This growth reflects the company's strong performance and increasing market presence. Profitability also saw a bullish uptick with gross margins rising by 4.2 percentage points, which was attributed to efficiencies and timing differences in employee costs. Profit after tax (PAT) for the first half of the financial year stood at 7.8%, a leap of 3.3 percentage points compared to the previous year, indicating robust financial health and earnings growth.

Order Backlog and Revenue Breakdown

The company has an impressive order backlog of around INR 1,215 crores, laying a strong foundation for sustained revenue generation in upcoming quarters. This order book is an increase of 24% year-over-year, up from INR 978 crores, which showcases the company's growing market demand and operational momentum. Revenue streams are diversified across system business (64%), transactions (23%), and services (13%), with 19% of system revenue coming from Integrated Goods (IG) consisting of approximately INR 100.2 crores. Sales are conducted through partners, with a transactional component of about 23% of total sales.

Business Model and Future Profitability

The company is focused on maintaining profitability by combining technology with the selection of projects to drive higher margins. The executive team hinted at moving towards more solution-based offerings, potentially aiming for a higher-margin trajectory. Nevertheless, executives were cautious about commenting on future profitability and CapEx initiatives explicitly; the intent is to uphold similar gross margins while keeping expenses under control.

Operational Updates and Digital Transformation

There is a strategic move in progress to enhance the company's digital revenue streams, aiming towards the previously stated target of achieving around 25% in digital revenues. Although the company does not currently have a clear split regarding digital revenue due to offering complete solutions to customers, they are trending in the right direction, integrating more AI and innovative technologies into their offerings.

Market Standing and Customer Segmentation

While there isn't a distinct monitoring of revenues between digital and traditional markets or a clear-cut breakdown of sales to public versus private sectors, given the company's business model primarily operates through Engineering, Procurement, and Construction (EPC) partners, it is estimated that approximately 20% of revenue or business is conducted with group companies. This indicates that the company's market is extensive and not limited or overly reliant on inter-company sales, providing a more comprehensive customer base and market resilience.

Infrastructure and Capital Expenditure

Capitalizing on existing infrastructure, the new plant operations will include shifting usable equipment from current facilities, supplemented with new required structures. There seems to be an ongoing strategic review of the production capacities and efficiencies, which could influence future capital expenditures. However, details on any aggressive CapEx plans to drive business were not disclosed, leaving room for speculation on how the company will balance growth opportunities with financial prudence.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Schneider Electric Infrastructure Limited Q2 FY '24 Earnings Conference Call, hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Harshit Kapadia from Elara Securities Private Limited. Thank you, and over to you, sir.

[Harshit Kapadia, analyst]

Thank you, Seema. Good afternoon, everyone. On behalf of Elara Securities, we welcome you all to the Q2 FY '24 and H1 FY '24 conference call of Schneider Electric Infrastructure Limited. I take this opportunity to welcome the management of Schneider Electric Infrastructure represented by Mr. Udai Singh, Managing Director and CEO; Ms. Suparna Bhattacharyya, Chief Financial Officer; and Mr. Mohit Agarwal, Head of Investor Relations. We will begin the call with a brief overview by management, followed by Q&A session.

I'll now hand over hand over the call to Mr. Udai Singh for his opening remarks. Over to you, sir.

[Udai Singh, executive]

Thank you, Harshit, and a very good afternoon to all ladies and gentlemen, who are on the call, and thank you for joining the call. And apologies for starting a bit late, 2 minutes late. And I'm joined -- my name is Udai. I have just taken over as your MD and CEO of Schneider Electric Infrastructure Limited. And as Harshit said, I'm joined by my able colleague, Suparna, who is leading the finance. She's a CFO and supported by Vineet. We all are here. And I would also, without wasting much of the time, I would like -- I'm sure you must have watched the deck, which we had shared last day. And I would -- right now, we would like to start from asking you and requesting to move over to Page 2, which actually gives you -- despite the fact that we are not seeing each other, but I think we can see the picture of at least the new people who have come on the Board, myself and Suparna.

And we also are trying to put some statements which we feel, which are aligned to our mission, what we want the company to be driven at, which are essentially to read out as driving profitable growth with digital and sustainable products and services of consistent quality and keeping customers at core. This Is what I feel -- strongly feel for your company. And also Suparna, who strongly believes in supporting a profitable business growth with the right balance of risk management, compliance and good governance. So this is -- I would -- this being first for both of us, we wanted to just tell you as to what we are trying to do with your company, and this is what we're trying to move on with these statements in line and these action lines.

And now I request you to go to Page #4, which actually is talking about how do we see the market and what is the outlook for us? And which is -- if you read that, which is we are sort of bullish, I would say, with the Make in India initiative of government, which is trying to infuse about INR 30 lakh crores in the next 5 years. And if you read out, there are certain columns, which we have tried to make, which are the major contributors or levers on which we will run your business.

If you read out, if I just take the first one, which is the RDSS. I think you may be aware, this is the government scheme for strengthening the existing distribution infrastructure. We see about INR 2.5 lakhs (sic) [ INR 2.5 lakh crores ] or plus that value to be getting spent in the next 4 years' time, which is actually focusing on how do we reduce the losses, how do we make the grids more efficient, how to use the smart metering, how to strengthen the existing infrastructure, take it to the last mile. And happy news is that we have all the solutions, which are -- actually, can be proposed, offered, sold in these areas.

If I talk about the basic equipment, the SCADA, the advanced distribution management systems, which are ADMS. And another advanced metering infrastructure is all we have in our portfolio, which can be handled, and we have been working right to actually make -- to leverage these investments which are being planned by government.

The other sector is, I think you must be reading out, and this is something which, again, has been talked about is the semiconductor business, which has actually now been flourishing because we are trying to see as to how to make China Plus One strategy that everyone has in mind. And MNCs actually have thought of investing about close to INR 60,000 crores in the next 4 years in this, which actually involve in -- investment around battery plants, whether they are lithium ion or whether they are the new technology, emerging technology of lithium iron phosphate or the manufacturing of the same. And we see huge potential even coming from here.

There -- a lot of people actually have been investing in these big names, which we are actually rightful connected with them as well. For example, talking about Foxconn, they declared the investment pattern of about $8 billion being spent, via people like Micron, via people like other which we have involved investment here. And we see this as something which is going to help us in trying to see and drive whatever we thought, which I mentioned in the beginning, which is a profitable growth.

Now if I speak about the green growth, if you see this something what happened at COP and whatever honorable PM has also mentioned, there's a lot of, I would say, focus and drive, which actually is happening on the ground on this. Government is trying to spend about INR 7,000 crores on green hydrogen mission. There's a clean hydrogen mission, which has been rolled out, which actually would mean typically generating about 15 to 20 gigas of the capacity addition because we want to be ready by 2030 to about 125 gigas of addition of having our ambition of 500 gigas in the country for renewables.

We are trying to see as to how the landscape is emerging where we can support with a lot of equipment what we make loaded with a lot of digitalization, a lot of software. This is something which we have been working on this. We have those skills with us, which we are trying to see as to how this will roll out in this very capital-intensive infrastructure segment.

Now the data centers, I think -- there's nothing which I will be adding, but we all know the way these days, the advent of 5G and AI actually has been trying to take the data center requirement up in the country. We -- just to give you a perspective, we had about 138 data centers when we closed '22, which we're drawing up about 640 megawatts of power. The plan is to take it to another -- add another 45, 50 data centers in coming years and the total demand should be going 1,000 megawatts plus.

And there are so many of people who actually are trying to make investments here. Amazon is the largest one, which is making and declared about close to $12 billion investment coming up, then we have STT. We have NTT, which are running to invest $1 billion and $2 billion, respectively. And they're also trying to -- beside data centers, they are working on large data centers. They are working on edge data centers in small countries. So currently all the usage of Internet, arrival of 5G, extensive artificial intelligence usage will see this segment grow. We are very rightfully connected and hopefully this is something which will aid us in trying to drive business in the coming times.

The last on the page, if you see, is the mobility. We have been seeing the way sensitivity amongst all of us is emerging as to how do we move from the fossil-driven or ICE engine vehicle to an EV vehicle, which involves a lot of investment in battery plants. And we are talking about INR 40,000 crores being invested in the battery plants, and there are so many people who have started investing.

Government is supporting by rolling out the PLI scheme around the sector, some INR 20,000 crores have been -- already been said -- declared. There are 3, 4 people who have already been identified who will do this. And we are trying to see as to how do we -- with our solutions and the expertise, which we have around these solutions, we can make some orders come to us.

Also, I would like to mention about one more very specific thing which your company has, which is the solutions, which is on the locomotives. And this is -- if you must have heard about the Vande Bharat scheme, that talks about government is planning to roll out 475 Vande Bharat equivalent trains, out of which 75 of them are expected to be running within India covering a distance of 10 lakhs to 12 lakhs is something which is the plan is, very ambitious. And there is the right offer. There's the right solution. There is the right product, which actually we can leverage this bullishness, which is around.

Now at the same time, I would also like to mention, which you can read in the table below the other relevant segments who are also investing where we typically operate and which also will give us some tailwinds in reaching as to where we are trying to do. Typically, I would like to make about the SAIL, which is a backbone of steel, which is investing and trying to make up the capacities from 18.5 metric ton to about 30 metric ton and investing money, about INR 2,500 crores.

Things around happening at food and beverage sector. This is something which is the -- by nature, they're supposed to be coming up quick because infrastructure, easy to put up. Guys like Nestle, Mars are all trying to do things here. A lot of things happening on the water side because you know the situation of water. The population which we have, the type of water which we have in India, something which is large value desalination plants are being planned in certain parts of the country, which will help us in trying to push our solutions here as well.

And metals is no far away because of the infrastructure push of government, which all of you know, and the core is aluminum and copper for making all infrastructure. All the people who are producers are actually having a very ambitious plan. And all in all, I would like to put as the market outlook is positive for us, and we are just counting on as we're trying to make sense work.

Now I will request you to move on to Slide #6, which I'm happy to share that what are the wins which your company has done. And this is -- if you see, there are a few slides around this, and this talks about our presence, I would say, in all the sectors, which you can see picture can give you somehow clue.

The first one on Slide 6 on the left side is where we have given e-buildings. This is a new developed technology where we try to bundle everything, all solutions in a metallic, I would say, cuboid, which is a large size to it, and this is being personized by all distribution companies, private as well as government health. So this talks about something which we did in -- with a leading distribution company where the solution was -- were primarily gas-insulated board and Premset, which you see, which is a design where we are trying to push our SF60 technology, something also which was there.

Now this gives us a limitation of the uptime and also we were a single OEM partner for the complete distribution solution. Then on the right, you see this -- I'm again happy that we are there where we have tried to see and put up the installed base, which has been inserted with some intelligence, which works on AI and which is actually used for monitoring of these 27 transformers, which are spread at 8 locations pan-India.

Now just to tell you as to what is this, this is something with transformer if you can perhaps relate to is something which is the heart of the entire power ecosystem. And it is extremely important and relevant for the user to have some prediction about the health of this transformer. And this solution which we have actually made, which we call as EcoStruxure Transformer Expert, which is an acronym that is ETE, help the consumer to do this. And this is something which we see the future is perhaps this where people will try to get this offer and try to say so that they can ascertain the continuity of power in their setups. This is something which we are counting as some offer which has been brought -- which will do wonders in coming times.

I would request you now to move on to the next page, Slide #7, where the left side is talking about, again, in one of the aluminum sector, the guy who actually are making these -- the white metal. And there, we have actually been in a position to supply -- the company has been able to supply a very highly digitalized panels, which actually is very sustainable, extremely safe, energy efficient, and it has got full scalability.

Now what we are additionally be possible to do by the digitalization, which has been done is we are able to do the asset monitoring, which is essentially working supply. We can monitor how has that been working and also a real-time indicator of what has been happening in the equipment which has been supplied.

Now if you talk about the right, I'm so happy that your company was the first one where we had given in the world, which hosted the full solution end-to-end automation at one of the airports in India, which will set as a reference to wherever -- in all the airports which are going to come in future for serving the growing population, I would say not growing only -- growing and getting richer population of the country in times to come. Here, the solution has been all across the layers, which are hardware, the digital hardware, the software which fits on, there's the analytics which fits on top of the software where you can bring out a meaningful data out of it.

Now I would like to go to Slide #8, which again is just in continuation of what your company has won. There is a second consecutive order which we have got from this client within 1 year, again in steel manufacturing, where we have actually supplied our equipment, again, digitalized so that they can help them to drive scalable and get connected and derive some meaningful results.

The picture on the right is the sixth win that the company has taken from one particular state utility board which has come in just 1 year. So that's something which we have done where solutions are being proposed and the utility has been happy with the experience, which they saw with us so that there's sixth repeat order which came within India.

Now, I will move on to Slide #9, which is the services, one important element, which we are trying to see and serve our customer because finally, customer is looking up to us as to how good service we do with asset base they already contain. So I'm happy to announce that we have grown year-over-year about 50% more in orders and 70% more is what we have sold. Now this has come through because we are trying to drive this through renovation, modernization, investment pattern which we are trying to drive and make people realize about the recurring services.

We are trying to see how do we make the products which are nondigital, I would say, to digital by putting sensors, by connecting it, by telling the beauty of the software, what type of savings will -- that customer will accrue. And with all that, we are seeing this acceleration, which I just mentioned, about 50% growth in orders.

Now we have done big wins, the company has done big wins. We have revamped the existing installed base of a leading power company. We have actually taken up the reliability of an existing system in a major Mumbai DISCOM. We are trying to see as to how do we help and align in Make In India initiative of different public sector companies. We have tried to see as to the reference which you saw the transformer, which I gave you of the one of the company is how do you digitalize the existing transformers, so that the reliability and -- are insured and the outages are minimized. And going forward also, we try -- we are working on this, and we will see as to how do we reach out to more and more clients, try to prove them as to what we can do for them, drive some value in their mindset and try to work together so that we can drive business.

With this, I'll pause here, and I'll give the mic to Suparna, who'll actually tell you more about the numbers. Over to you, Suparna.

[Suparna Bhattacharyya, executive]

Thank you, Udai. That was a great perspective that you leave about the business. And good afternoon, everyone. I'm happy to share the key indicators of your company and the performance in the last quarter and the last 6 months for this financial year.

So going to Slide #11, which is the orders for the year -- for the quarter., So we are at 64.7% higher above the orders of the similar period of last year at INR 492 crores. And for H1, we are at INR 938.77 crores, which is 40% above the similar period of last year. We see very good momentum in orders driven by the P&G, the Power and Grid, Mobility and other electro-sensitive segments.

Going on to the next slide. The sales indicators for the quarter and the first half of the year. We closed sales at INR 495.81 crores, which is 17.8% higher than Q2 of last year. And similarly, a good traction in the H1 orders. We are at INR 991.06 crores over last year, which we closed at INR 792.3 crores. Again, this is coming from the good momentum in sales, driven by Power & Grid, the MMM sector, Mobility and other electro-sensitive segments. You can see that we are quite aggressive in the order, and this is basically to fill our factories in the coming quarters so that we are able to give good results to you and ensure good performance overall.

Now coming to the P&L statement. So as you have the numbers with you beforehand, you can surely see a very significant improvement over the results of Q2 of last year. So if we go line by line, so our total sales is at INR 497.53 crores. And out of this, the pure sales that you see, it is at 17.8% higher than a similar period of the last year.

We have good gross margins as well. You can see an upside in that. And this has basically come from the growth in sales, the change in the sales mix and some stability in the material costs over the last periods. Then we can see that there is a small marginal improvement in the employee improvement -- sorry, increase in the employee costs. This is quite marginal, so nothing significant to explain. However, the other expenses have risen by 18%, and this is basically -- they comprise more of the sales-driven expenses.

Apart from that, the depreciation increase, you can see that has come as a result of the increase in the asset base in the organization. The interest expenses have reduced because we have optimized the loan and reduced a bit of it by generating good cash in the organization. And ultimately, you can see that the profit after tax is at 8.6% vis-à-vis last year similar period, which was at 2.1%, which is up by 6.5 points.

Going to the next slide, which is the H1 performance versus the similar period of last year. Our total sales were at INR 995.1 crores, and the pure sales increased by 25.1%. Our gross margins again increased by 4.2 points. Reasons are quite similar as shared in the Q2 results. We had some similar efficiencies in Q1 too, Q1 as well. Employee costs, it is a timing difference basically in the employee costs, as we see mostly. Other expenses again sales-driven, as I mentioned, and they have risen.

Depreciation again, mainly an impact of the higher asset base. And interest, almost similar. And at the profit after tax level, we are at 7.8% for 6 months of this financial year, which is up by 3.3 points of the last year.

So thank you all for your support. And now I pass on the call to the operator, and she can put the call open for questions.

[Operator]

[Operator Instructions] We take the first question from the line of Suraj Malu from Catamaran.

[Suraj Malu, analyst]

Sir, I have one question referring to the Page #4 of the investor presentation. So on the Power and Grid segment, it's mentioned that the implication for the listed entity is smart meters as well. So just want to understand if smart meters is a part of the listed entity or not?

[Udai Singh, executive]

It is actually a solution which is driven, which is -- it can encompass the smart metering as well. So it's the entire end-to-end solution where smart meeting can be part of the scope of the contract with the buyer [indiscernible] . And smart metering when the solution is done from us, is a part of us.

[Suraj Malu, analyst]

So it's a software solution and not the physical product of smart metering?

[Udai Singh, executive]

No, it's a smart meter as well. So you have a smart meter, then you have the connectivity, then you have the software as you are saying right. So when it is done like that, it is actually taken as a project job many at times and times to come it may happen then it will be under us.

[Operator]

We take the next question from the line of Manish Goyal from Thinqwise Wealth Managers.

[Manish Goyal, analyst]

Yes, sir. I have a couple of questions. Sir, first, on the gross margin side, like for the third quarter in row, we had seen gross margins at 36%. And congratulations for that. I would like to know how do we see going forward? Do we see maintaining these levels in future?

[Suparna Bhattacharyya, executive]

Thank you for your question. Gross margins, it should be of similar nature unless and until there is a significant change in the raw material costs, which is practically not in our control. So we will try to definitely maintain such kind of gross margins and hope to see that we do not deviate much on what we are already anticipating.

[Manish Goyal, analyst]

Okay. So basically, like the order book what we have, we have a fair degree of visibility on maintaining the margins?

[Suparna Bhattacharyya, executive]

Yes. As of now because we've most gathered a significant amount of orders to be executed during the remaining part of the year, we are in control of the margins.

[Manish Goyal, analyst]

Great, ma'am. And historically, in Q2, we always used to see within employee expense a certain element of ESOP cost involved. So is there any element in this quarter as well or in first half?

[Suparna Bhattacharyya, executive]

Yes. It has been there in the first half. And between the quarters -- between last year and this year, it is the timing difference. But it's been factored in H1.

[Manish Goyal, analyst]

Okay. So because what I see is that -- so is it in Q1 or Q2, ma'am? And what is the -- how much is the number?

[Suparna Bhattacharyya, executive]

It was in Q1.

[Manish Goyal, analyst]

And what was the amount, ma'am?

[Suparna Bhattacharyya, executive]

We cannot give that exact number because it's related to the compensation of people.

[Manish Goyal, analyst]

Sure. And ma'am, would it be possible to share the breakup in terms of -- like revenue in terms of projects in services and our transactional products? If you can please share the numbers on revenue side, order inflow side and order book side? And maybe if you can give us the order book number as well, outstanding order book.

[Suparna Bhattacharyya, executive]

So we do have an outstanding order of close to INR 1,200 crores. I'm giving you a round figure or maybe precisely, it is INR 1,215 crores, I have to say. So we are quite loaded in terms of the order executions that have to happen during the remaining part of the year. So -- and you also wanted the breakup between the different kinds of...

[Manish Goyal, analyst]

Yes. Yes.

[Suparna Bhattacharyya, executive]

So for quarter 2 of this year, our system business was 64%, transaction 23%, services 13%.

[Manish Goyal, analyst]

This is you are giving me revenue or order flow? .

[Suparna Bhattacharyya, executive]

This is the sales breakup.

[Manish Goyal, analyst]

And how much is IG of the total revenues?

[Suparna Bhattacharyya, executive]

IG is close to 19%.

[Manish Goyal, analyst]

Okay. That is included in the projects?

[Suparna Bhattacharyya, executive]

It's included in the, yes, system revenue.

[Manish Goyal, analyst]

Sure, ma'am. And if you can please share the order inflow -- if you can give me the order inflow for the IG as well as the breakup of the external inflows, please?

[Suparna Bhattacharyya, executive]

So the order breakup is equipment is 42%, projects are 17%, transaction is 22% and services 19%.

[Manish Goyal, analyst]

And the IG number, please, ma'am.

[Suparna Bhattacharyya, executive]

So IG is -- IG, I can tell you the value. So this is about INR 100.2 crores.

[Manish Goyal, analyst]

Sure, ma'am. Last question on the status for our Kolkata plant. How is it progressing? I believe we were expecting it to probably start it by the year-end. What I see from the cash flow statement is that there has been a CapEx of INR 23 crores in the first half. So maybe if you can enlighten us on the CapEx plan and the progress on the new Kolkata facility?

[Udai Singh, executive]

So we are moving on the right track in Kolkata. And things are moving as per plan, and we expect that, that should be happening and going live sometime next year.

[Operator]

The next question is from the line of Apoorva Bahadur from Goldman Sachs.

[Apoorva Bahadur, analyst]

Ma'am, you provided the breakup for revenue into systems, transactional and services. Can you also break up the system revenue into equipment and projects?

[Suparna Bhattacharyya, executive]

So equipment is 33% and projects are 12%.

[Apoorva Bahadur, analyst]

Perfect. And ma'am, the order book breakup, please?

[Suparna Bhattacharyya, executive]

Order book is equipment is 42%.

[Apoorva Bahadur, analyst]

Sorry orders or order book?

[Suparna Bhattacharyya, executive]

Orders.

[Apoorva Bahadur, analyst]

Order book. Okay.

[Suparna Bhattacharyya, executive]

Just a minute. So we have systems at 66%, transactional 17% and services at 17%.

[Apoorva Bahadur, analyst]

Perfect. That's very useful. Secondly, I also wanted to know about the RDSS scheme [indiscernible] kind of in this scheme and secondly, by when should we expect the materialization of orders here?

[Udai Singh, executive]

See, RDSS schemes involves a lot many things which we can do because RDSS I'm sure you might be aware, that is investment, which is announced by the government, which runs into INR 3,03,000 crores, supposed to be getting done by FY '26.

Now there's a dashboard with government runs, which talks about the status of all the disciplines, how much money has been infused and what is the project status, whether where they are reaching and always get to that, which will give you some idea about as to how the project has been moving and how much investment we typically would like to have from the government coming -- in coming times. But from our side, we are -- we have multiple offers and solutions which can be worked upon. Depending on how strategic they are to us, we can do the risk scheme and project.

But the status, I think, more than me the government site itself gives you the overall spend and everything, very elaborate and very illustrative dashboard, which has been made by government.

[Apoorva Bahadur, analyst]

Sorry, sir, this dashboard you're talking about is the smart metering dashboard?

[Udai Singh, executive]

No, I'm talking about the usage and the status of the RDSS scheme by itself.

[Operator]

We take our next question from the line of Raj Rishi from Dcpl.

[Unknown Analyst]

By when can you scale up your software and service-related business as a percentage of total revenue significantly?

[Udai Singh, executive]

We are working -- this is a continuous effort, which has been put, and we hopefully will try to -- there's not which will happen overnight. It involves a lot of fieldwork as you may understand, lot of concept, a lot of realization and value addition which needs to be approval. But let me assure that we have been working on this and this transformation will happen in times to come.

[Unknown Analyst]

And I believe Schneider globally had taken over a company and that particular company has a subsidiary in India, which is also into this medium voltage. So I believe in the previous call, there was some talk of merger between getting it all in the listed entity. Any comments on that?

[Udai Singh, executive]

We have no visibility around that.

[Operator]

[Operator Instructions] We take the next question from the line of Viraj Mithani from Jupiter Financial.

[Viraj Mithani, analyst]

Yes. Am I audible?

[Udai Singh, executive]

Yes, Viraj, sir, you are loud and clear.

[Viraj Mithani, analyst]

Okay. Hearty congratulations for a good set of numbers. Most of my questions are answered. I just want to know, you talked about all these new segments, airport e-mobility. Does it mean we are shifting some more products to solution-based company. That's what this transition happening there? And also, would it mean that our margins in days to come would be much higher?

[Udai Singh, executive]

Can you repeat the last part? Sorry, I missed it. Marginal?

[Viraj Mithani, analyst]

Margins in days to come would be much higher because if you can give some opportunity size on all these segments you've talked about emerging market, green growth, mobility, it will be helpful.

[Udai Singh, executive]

See, why we choose to talk about this, there's nothing that we are leaving the [indiscernible]. We are always there in that. We are trying to give a perspective as to how your company is trying to shape up with the emerging segments. And that was a good idea, which we thought that perhaps we can tell how the company has been shaping up. And we have been -- our ambition is to keep on driving profitability. And this is something which we will be between the technology and the selection of projects and things like this, which has happened in the world.

So it's not that we have coming out and we are only talking about these new emerging sectors, but as a matter of fact, we thought that it will be relevant for you all to actually understand as to what we are trying to do -- the company is trying to do. But these things which we -- have been talked about and we've spoken about every day.

[Viraj Mithani, analyst]

So we are becoming more solution-based company towards the -- probably moving towards a higher trajectory margin side. That's what is the attempt [indiscernible]

[Udai Singh, executive]

With the limited audibility, which we have today here, I think your answer to your question is yes.

[Viraj Mithani, analyst]

Okay. And sir, in airport projects you talked about, what do we do there? Do we offer some medium-voltage transformers, ring main units? Or we gave some solutions to them? What was the project?

[Udai Singh, executive]

So yes, the basic bricks are these, and then we try to evolve the solution around depending on the customer needs. Somebody is asking something which actually is the products which you mentioned, something on top of it, we do that as well. So that is what we call as a project.

[Viraj Mithani, analyst]

Okay. And sir, the projects in the government side, the money -- how are -- receivables are okay, right? There's not an issue there because a lot of problems before had happened in that phase?

[Suparna Bhattacharyya, executive]

Hello, Viraj ji.

[Viraj Mithani, analyst]

Hello, ma'am. Congratulations you too.

[Suparna Bhattacharyya, executive]

Thank you. So on the receivables side, we are doing much better, and we can see, I mean, a good cash amount which is being generated in the organization. We are working very closely with business and everybody and also customers to have the old receivables collected. And now it's a much, much smaller amount as of today with respect to the old ones. So there is -- we are seeing good efficiency in the collections as well.

[Operator]

We take the next question from the line of Aditya Deorah from Divisha Investments.

[Aditya Deorah, analyst]

Sir, in the notes to accounts, we have mentioned about an exceptional item regarding the shift of existing plants located at Salt Lake to a new place in Kolkata. So are we shifting everything to the new factory we are setting up at [indiscernible] or are we putting up a new plant in Kolkata?

[Suparna Bhattacharyya, executive]

So the new plant will definitely take some of the equipment which are usable and -- which are shiftable from the existing facility to the new one. And in addition to that, whatever is required, we will be making the new structures, et cetera.

[Aditya Deorah, analyst]

Okay. And do we plan to dismantle the unit in Salt Lake?

[Suparna Bhattacharyya, executive]

Yes.

[Aditya Deorah, analyst]

Okay. And sir -- like, ma'am, what is the percentage of our revenues right now is digital revenues? Like how much percentage of our revenue is digital revenues right now?

[Suparna Bhattacharyya, executive]

So we do not have that kind of a split with respect to digital because we often give a complete solution to the customers. So that split is not available at the moment.

[Aditya Deorah, analyst]

A few years back in one of the slides in the presentation, you had mentioned that our targeted digital revenue percentage would be somewhere around 25% from maybe around 10%, 11%, something like that. So are we moving in the correct direction or in that particular direction at this point of time? And where have we reached in the journey? This is my basic query.

[Udai Singh, executive]

Yes, we are moving in that direction itself. We are trying to see because there's more and more [indiscernible] happening with the advent of AI, which we are trying to bring in, in the system and trying to do some work to the customers which we bring. So we are moving in that direction. And that is what we are trying to do systematically and strategically as well.

[Operator]

[Operator Instructions] We take the next question from the line of Mr. Sanjay Kohli from Goldstone Capital.

[Sanjay Kohli, analyst]

Just wanted to know the breakup between sales to the public sector versus the private sector?

[Suparna Bhattacharyya, executive]

We do not have that with us because we do our business mainly through the EPCs and where it's -- they further bill it to their end customers. So we are not monitoring that kind of metric as such at the moment.

[Sanjay Kohli, analyst]

So EPC, the -- so you're not -- at the customer end, you don't -- you're not monitoring whether you're selling to the division between government and...

[Udai Singh, executive]

So let me take this. Now you -- I think perhaps what you meant was how many is the end use by Government of India? Or whether are you interested in knowing the buyer profile where -- whom we are selling?

[Sanjay Kohli, analyst]

Yes, the buyer profile, not the end use. Yes. The buyer profile, that generally your customers, the government or public sector being the government or companies to industry and businesses. Basically, your B2G versus B2B kind of breakup.

[Udai Singh, executive]

So that is there in the transactional piece, which I think Suparna just mentioned some time ago, which is -- transactional is sort of generalizing it through partners, which is typically, if you see the sales which we have done in the quarter, we just went by was typically about 23% a quarter of what we did. And if you see, we try to reach out to the end user, which is government by either direct or channelizing it. And typically, the one which is coming from utilities or whatever we do, which is the products which are being used up by utilities, most of them is government is simply about 40% if I may say so.

[Sanjay Kohli, analyst]

So 40-60, there's close to -- the INR 500 crores of sales in the quarter will be 40% to government and 60% to the private sector.

[Udai Singh, executive]

What I was telling, sir, was a high-level number because it is not [indiscernible] that we follow the same number depending on this is a project business. So typically, if you take a larger time window, then typically about 40% is coming from utilities and rest are coming from other segments.

[Operator]

[Operator Instructions] The next question is from the line of Sanjay Satapathy from Ampersand Capital.

[Sanjaya Satapathy, analyst]

Can you just clarify that how much of your order book and revenue is to the group company and to the outsider?

[Suparna Bhattacharyya, executive]

It's roughly 20%.

[Sanjaya Satapathy, analyst]

And the order book number that you gave that is INR 1,215 crores, does that include sales to group company or not?

[Suparna Bhattacharyya, executive]

No.

[Sanjaya Satapathy, analyst]

Okay. And last -- and just can -- you have given the growth in order inflow, but can you just tell me how much is this INR 1,215 crore order higher compared to the same period last year?

[Suparna Bhattacharyya, executive]

Can you please repeat your question?

[Sanjaya Satapathy, analyst]

I mean, this order backlog that you have that is of INR 1,215 crores, what was it at the same period last year? Like year-on-year growth is how much?

[Suparna Bhattacharyya, executive]

So year on year growth, Mr. Sanjaya, is 24%. Last year in the same quarter ended on 30th September, we were adding INR 978 crores of order backlog. And now what we are having is INR 1,215 crores. So it's a 24% increase to [indiscernible].

[Sanjaya Satapathy, analyst]

Understood. And sir, last question, if I can just ask that you have mentioned that your gross margin is kind of sustainable and you are getting good amount of order inflows. So can we look at much better profitability and hence, much more aggressive initiative in terms of CapEx to drive our business?

[Suparna Bhattacharyya, executive]

It's a little difficult to comment at the moment. But as I mentioned, we would try to maintain similar gross margin and keep a good control on the expenses. So that's the outlook that we have.

[Sanjaya Satapathy, analyst]

And is there any update on your -- the acquisition of your -- the switchgear business of -- related business of Schneider? .

[Suparna Bhattacharyya, executive]

There's no visibility at the moment on this.

[Operator]

The next question is from the line of Suraj Malu from Catamaran.

[Suraj Malu, analyst]

Of the government CapEx that they announced in the RDSS sector, which is roughly INR 2.5 lakh crores, what will be the relevant market for us like for the products that we offer, the medium voltage products?

[Udai Singh, executive]

It will be for -- most of the offers which we have, sir, there are jobs where people are trying to -- distribution companies are trying to revamp their existing structure or augment it or make it more reliable. So -- and then make substations for better distributions, involve something which is high-end technology, move away from the more compact solutions for driving carbon footprint. So we have actually even the ring main units or the AIS or the GIS, everyone actually can be sold depending on what sort of utility -- what are -- the plants are. Because speak about what's happening in AP, what's happening in Goa, they are different because the charter of what they're working on is different. But then the good news is that we have some things to offer at each of these DISCOMs.

[Suraj Malu, analyst]

Right. So like any number like it will be out of INR 2.5 lakh crores, like 50% will be relevant addressable market for the products or like a sense of proportion?

[Udai Singh, executive]

Difficult to comment on that from a number perspective, but I think I did mention sometime in the beginning that it's very good work done by government in terms of putting up a dashboard. This tells you as to what the projects are, what the tenders have been closed, what are they trying to do? So if somebody is trying to put up a transmission line, we have nothing to do there, things like this. So some takes up INR 230 crores, for example I think, and they say, INR 130 crores is coming up for putting up additional overhead lines. So we have no work there.

But if someone says, no, I want to go underground and then I need a distribution, which will actually help support the underground from an overhead present setup, we do make -- we have an opportunity there for supply in wing mains. So it depends, sir. it is not -- it's difficult to quantify as of now, if you ask me.

[Suraj Malu, analyst]

And just last thing, what will be the product, which is relevant for shifting from overhead to underground lining?

[Udai Singh, executive]

So when you typically do it, you actually do talk about having a separate network, which handles it. And there are a lot of people, as I mentioned. One of the drivers of RDSS is how do you make SCADA adaptability, et cetera, come up. So we are talking about smarter ring mains will speak to each other so that the outages can be curtailed and managed better. So those are the areas where we can actually help them to do what they want to do.

[Operator]

[Operator Instructions] We take the next question from the line of Mr. Manish Goyal from Thinqwise Wealth Managers.

[Manish Goyal, analyst]

Sir, so as far as the old plant is concerned at Kolkata, has it been shut down completely or it is a phase-wise movement what we are doing, sir?

[Udai Singh, executive]

So it's working. It's not been shut down, and we have a robust plan of actually moving it at what Suparna was saying some time ago. We have -- there will be -- there will be all disruptions will be planned as such.

[Manish Goyal, analyst]

Okay. Okay. Great, sir. Sir, any time line would you like to specify next year by when the new facility can start, sir?

[Udai Singh, executive]

So it's a complex infrastructure, which we are trying to make, which is going to be a state of art, and there are multiple parties who are helping us to do so. We expect that this should happen sometime next year, as I say. And as we move on, we'll keep on writing the status as to how we have been doing there.

[Manish Goyal, analyst]

And sir, how are export revenue shaping up? In Q1, we had INR 28 crore revenues. And ideally, we have seen that export revenue share has been 12% to 15% for us. So in this quarter, what is the number? And how do we see it going forward?

And related also question, sir, is, are we seeing any disruption due to geopolitical situation in Middle East and Europe, both for -- in terms of sourcing material from there or even our export sales?

[Suparna Bhattacharyya, executive]

So the export sales for this quarter is INR 31 crores. And regarding disruptions, we are not seeing much of disruptions. We have some mitigating actions also lined up. So there will be no critical bottleneck as per the current situation as of today.

[Manish Goyal, analyst]

So supply chain has been more or less normalized for the components or the semiconductors and component [indiscernible].

[Suparna Bhattacharyya, executive]

Very slight disruption is still there, but it is not really stopping our sales plan, et cetera.

[Manish Goyal, analyst]

Okay. And sir, last question, sir, on the order pipeline growth, like how are we seeing the -- you did elaborate various segments in your opening remarks, but like if you probably want to get a more handle on numbers side, like how do we see the pipeline number growing? And second related question in terms of do we see any challenges in terms of slowdown ahead of general elections next year?

[Udai Singh, executive]

Yes, you see the pipeline is supportive of what India looks. And that is not only true for us, it is true for every one. And I think your point is valid there may be some embargo on certain government decision, which will happen as we move on, going to the general election in these 5 states. So we -- and it is difficult to predict. We can anticipate there will be some deferment of closures, which might be there. But at the same time, because of our business, as I think -- I answered some time ago, it is not directly from government as well. And there are a lot of EPCs who actually keep on patronizing us and giving orders. So that will not get impacted by elections [indiscernible].

But we do see that there may be certain exposure, which we directly have with government and something which was related to get orders sometime just after Q4 and early Q1 that may -- that shifted for a while. So we are not able to quantify. We are actually gearing ourselves so that we can see and we can have a consistent order to feed the prices.

[Operator]

[Operator Instructions] We'll take the next question from the line of Mr. Akash from Dalal & Broacha Stock Broking.

[Akash Vora, analyst]

Just one question. If you could elaborate more on the exceptional item that is reflecting [indiscernible]

[Suparna Bhattacharyya, executive]

Okay. So the exceptional item is basically that we have taken some provisions to take care of the shifting of the factory from the current location in Kolkata.

[Akash Vora, analyst]

Okay. So have we reversed the provision? Or have we made additional provisions -- we have made additional, right?

[Suparna Bhattacharyya, executive]

It's the first time that we made this provision.

[Akash Vora, analyst]

Okay. Okay. And how do you expect this item to recur in the books in the coming quarters?

[Suparna Bhattacharyya, executive]

We haven't yet made any analysis on that for the coming quarters. So as and when -- based on the progress of work, et cetera, we'll take a call and then we will look into it.

[Operator]

We take the next question from the line of Mr. Viraj Mithani from Jupiter Financial.

[Viraj Mithani, analyst]

Just one question. I just want to know what level of capacity utilization we are on right now?

[Udai Singh, executive]

So we have different factors for different lines which we have, which is -- typically, we are working at an optimal level, I would say. Few 2 lines plus 2 lines minus, but on average, we are at optimal level or share more than that.

[Operator]

Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Harshit for closing comments.

[Harshit Kapadia, analyst]

Thank you, Seema. We would like to thank Schneider Electric Infrastructure management for giving us an opportunity to hold this call. We would also like to thank all investors and analysts for joining for this call. Any closing remarks, Schneider Electric team, Udai sir?

[Udai Singh, executive]

I would first like to wish a great and happy Diwali to everyone who's on the call, to them, their families and want to give an assurance that we are working and taking -- trying to take your company in the right direction, all put together. So thank you again for joining this and wishing you great success ahead.

[Suparna Bhattacharyya, executive]

So wishing everyone a very happy Diwali. And again, thanks to everyone for your confidence in the new management and your support, and we live up to your expectations and we try our best to achieve. Thank you very much.

[Operator]

Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.