Q1 23/24

Aug 11, 2023

Quarterly report

Summary

Q1 FY24 revenue rose 39.6% YoY to INR 261 crore and EBITDA nearly doubled to INR 29 crore, while legacy orders and component shortages weighed on margins. An INR 8,200 crore-plus order book supports growth; FY24 revenue guidance is INR 1,200–1,400 crore.

Ladies and gentlemen, good day and welcome to the Genus Power Infrastructures Limited Q1 FY 2024 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. Today on the call we have with us Mr. Kailash Agarwal, Vice Chairman of Genus Power Infrastructures Limited. Mr. Jitendra Agarwal, Joint Managing Director of Genus Power Infrastructures Limited. I now hand the conference over to Mr. Jitendra Agarwal, Joint Managing Director of Genus Power Infrastructures Limited. Thank you and over to you, sir. Thank you. Good afternoon, ladies and gentlemen. A very warm welcome. I have Mr. Kailash Agarwal also with me on this call, Vice Chairman, Genus, and SGA, our investor relation provider. The results and investor presentation are uploaded on the stock exchange and company website. I hope everybody had a chance to look at it. To date, in financial year 2024, we have secured some good orders to the axis of INR 4,400 crores net of taxes. Our total order book now stands in excess of INR 8,200 crores net of taxes. The execution cycle of these current order books, all the installation work will be done in the 24 to 27 months, so it provides a very healthy visibility for our top-line growth for financial year 2024/2025. Many DISCOMs have initiated the process of online billing under RDSS, and we expect a robust order inflow to continue throughout the remaining financial year. In July 2023, we signed definitive agreement with Gem View Investment Pte Limited, an affiliate of GIC Singapore, for setting up a platform for undertaking AMISP concessions. Genus Power would be the exclusive supplier to the platform for smart meters and associated services. In May 2023, the company had signed a commitment letter with United States International Development Finance Corporation to obtain a loan up to USD 49.5 million to scale up the deployment of electronic smart meters across the country. Our working capital cycle is expected to improve going forward as are better in going forward. Most of the business will come through either the platform or AMISP. The Bihar project is on track and revenue inflow from this project has started getting traction. Assam project bill is expected to commence by Q3 FY 2024. Coming to quarterly results, the sales for Q1 FY 2024 stood at INR 261 crores, up by 39.6% as against Q1 FY 2023 revenue of INR 187 crores. Though the supply chain interruptions of semiconductors and other essential electronic components have been showing indications of improvement in comparison to the previous quarter, their lingering impact is still affecting our top-line performance due to sub-optimal capacity utilization. For Q1 FY 2024, EBITDA stood at INR 29 crores, up by 99.7% as compared to INR 14 crores in Q1 FY 2023. Our operating margins recorded a decline due to the predominance of legacy orders in first quarter, which yielded lower margins. We anticipate that the existing backlog of legacy orders to be mostly executed by Q1 financial year. Operating margins are also impacted on account of lower capacity utilization. Tax stood at INR 19 crores for Q1 FY 2024 as compared to INR 0.6 crores in last Q1 financial year. As the supply chain for semiconductors and other crucial electronic components is quickly getting resolved to normal, and as disclosed in previous conference call, we expect a record total revenue of around INR 1,200 crores in this financial year. The Indian metering industry will see strong order inflow, healthy top-line growth, higher operating margins, and an improved working capital cycle going forward. We are confident of significant improvement in our business operations from Q3 FY 2024 onwards. We can now open the line for Q&A. Thank you. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nikhil Abhyankar from ICICI Securities. Please go ahead. Good afternoon, sir, and congrats on a very good set of numbers. Sir, apart from the INR 82 billion order that you have, are we sitting on any other L1s? Yeah, we are. Elements in other states also. We are sitting on other L1s. Yeah. Sir, this INR 22 billion order that we have done, it is for which state, sir? It is from Maharashtra. Maharashtra. The recent one, yeah. Okay. And I guess Maharashtra, there have been more such orders coming in. I think the tenders have been recently floated, right? The tenders were floated almost 3, 4 months back. Most of the tenders have been decided, and we received our share of that. Still some are pending. Yeah. So, sir, I have got a number. Can you just correct if it is wrong? Total orders that are under bidding right now stand somewhere around INR 50,000 crores? A ballpark number. If you see the ballpark number with the tenders that are already quoted, is around INR 40,000 crores. Right. To be participated, again, there are tenders worth INR 28,000, INR 29,000 crores are already in the pipeline, which will be quoted in the next couple of months. Okay, and we expect to participate in all of them? Not in each one of them, but most of them. Most of them. Understood, sir. Sir, you are saying that QoQs, the margins were a bit lower because of certain legacy orders. Can you just quantify how much of these legacy orders are still remaining? In terms of value? Yeah. Around 4,000-5,000 crores orders are still pending, which will be completed in the next 2-3 quarters. That number will reduce significantly. Understood. Basically here we have to understand that in first quarter, the legacy order was almost 70%-80%. Now the number will start reducing to 20%, 25%, 30% in coming quarters. The new orders or the AMISP orders, that will start reaching to 70%-80%, and in 2-3 quarters maybe up to 100% or more. Understood. By H2, EBITDA margin will be far better than 15%. Am I right? Yeah, there is no doubt in that. Most of the things will be over, the old legacy orders and the new. Basically mix and all. The second quarter, there will be a little challenge in the margins, like this. It will be better than this quarter. But from H2 it will be absolutely fine. There won't be any issues in that. Sure, sir. I have a few more questions, but I'll get back in queue. Thank you, and all the best. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Smita Mohota from Kredent Infoedge. Please go ahead. Yes, sir. My question was, first of all, congratulations on a great set of numbers. The question was that out of the current order book of INR 8,200 crores, what percentage is your legacy orders and what percentage is the smart meters, will be first question. Second of all, what is your run rate in getting the bidding on the platform that you have bidding for till date? Those are my two questions, sir. In terms of percentage, as I said earlier, around INR 4,500 crores are the legacy orders. It's around 4% to 5% orders are the legacy orders. Most of the new orders are all AMISP smart meter orders. You can say 95% is the new orders of AMISP, which is purely totally smart meters, and 5% is old legacy orders. Understood. Sir, can you just quantify that legacy orders had what kind of margins, and smart meters would have what kind of margins? Basically now the legacy orders is hardly 5%. That would not be affecting in any way the margins of the company. As I said that in first quarter, most of the execution was of the legacy orders, and still the company made approximately EBITDA of 11%. Broadly you can say that type of margin is there in the legacy orders. What is your bidding run rate, sir? I would like to understand a bit better what you mean by bidding run rate. For example, if you have bid for 10 tenders, out of that, how many tenders have you received? I have not calculated it, so it is very difficult for me to comment on. That is what I am saying that right now we do not have that number, that exactly what percentage is our success percentage. We will let you know in next meeting or something, next con call and all. This kind of results, sir, do you think going ahead it will go on improving quarter-on-quarter or on a yearly basis? Is it sustainable? Quarter-on-quarter it will improve. No doubt about it. Yearly also it is sustainable, sir? It is sustainable absolutely. When we are saying that it will be improving on quarter-to-quarter, it will be sustainable for yearly basis and the coming years also. Okay, thank you. That is all from this side, sir. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Abhishek Varma from Fidelity International. Please go ahead. Hello, sir. Joseph, can you, sir, please provide the breakout for your order book between your own AMISP orders and where you would be providing meters to the other AMISPs, and any conventional meters order that you might be having? The breakup I won't be having offhand with me. But most of the orders are smart meter orders only, and a large number of these orders are from our own AMISP. A smaller number would be from the meter orders, which we will be supplying to different AMISPs. So roughly how would that be applied? Here, one thing I would like to clear, that basically the other AMISP orders are coming in the market. The people are getting the orders, and they are in the market to procure the orders and all, for giving the orders for the supply of meters and all. Basically, right now, the most of the numbers in 8,200 is from our own AMISP, a very small number is from meter supply to other AMISPs and all, and then the legacy and all. In coming quarters, you will see that the number of supplying meters to other AMISP also will increase in the numbers. Okay. And why is that not gaining traction currently? Why the numbers are on the lower side? Because most of the AMISPs have not decided the orders yet. It will gain a tremendous traction in next couple of months. So they have just got the order, and they are now working themselves the meters and all. So they are taking time to procure meters from the market. They have not finalized the orders in market. Okay. Sir, and how has the market share trended in overall smart meters? Because I have a sense that it's roughly around somewhere in the range of 25%-30%, what my understanding is. So if you could help with that. The only thing I can say is it will be very healthy. Right now, putting any number won't be possible for us. It will be a very healthy market share. Just confirming- We are confident of maintaining our leadership position. In last question also, we clarified that, right now we don't have the numbers exact, that what is our percentage share or what is our run rate. We can provide you. Certainly, it won't be at a level of 25%-30%, but we will be keeping a leading position. Keeping a market share of 30% in a market size of INR 4,000, INR 5,000 crore and keeping a market share of 30% in INR 200,000 or INR 300,000 crore, that is a big difference in that. In 100%, we cannot keep a market share of 25%, 30%, but we will be the leader as we will be earlier. There is no doubt in that. Okay. Got it, sir. Thanks for your responses. Thanks. Yeah. Thank you. The next question is from the line of Vihang Subrahmanyam from Karma Capital. Please go ahead. Yeah, hi. Congratulations on a good set of numbers. I missed some of your opening remarks. Could you highlight how many of the orders are already quoted, and how many more do you expect to be quoted over the next few months? As I said, around INR 43,000 crore of tenders have been quoted which are currently live. Around INR 27,000 will be quoted in next 2 to 3 months. These are the number of tenders which are already being published. Some are quoted, some will be quoted. Understood. So out of this total 70,000 crores broadly, what is the win ratio you think one can reasonably expect for us? Again, a very difficult question because all 70,000 we won't be getting. 70,000 is a very large number. But we will maintain our healthy share as AMISP. That is what I can say. Understood. Sure. I think previously you had mentioned about INR 12 billion-INR 14 billion revenue for FY 2024 and a multi-fold jump in FY 2025. Given we are Yes one quarter ahead now, would you be able to share some more specific numbers around what could be the kind of jump that we can see in FY 2025? We would like to maintain the same statement that this year we are giving a guidance of INR 1,200-INR 1,400. We will be maintaining, and we are very confident of achieving the same. We would like to maintain the same statement that we will have a multi-fold jump from next financial year. Here, I would like to add that company is sitting on an order book of INR 8,200 crores, which we have to supply next 24-27 months. We have to complete the projects. Company has already participated in lot of tenders. Company is already awarded in few of the tenders also. Company will be supplying a lot of meters to other AMISPs also. By this, you can understand that what type of jump we can achieve in financial year 2025. Right now, we are working on that. We are just making the numbers and all. That's why we don't want to give exact numbers on that for 2025. Surely, we will be giving that number in next quarter after quarter 2 and all. But it will be a multi-fold jump. That much we can say, and that you can get also from the order book, the pipeline, the other pipeline is coming. That gives a clear sense of that in how many months we have to complete the orders. Everything gives a clear sense of that. Sure. Just the last question from my side. I just recall that you mentioned right now that we can't possibly maintain market share of 30%, but what is the threshold level below which you wouldn't go down of market share? That's again a tough question. Right now, as we told you, we are working on that, how much we can execute, how much is our capacities and all. On the basis of that, we are participating in the tenders. Earlier also, we have told that for the platform we have made with GIC, we are already working on a business of INR 30,000 crores, 3 crore meter type of thing and all. If we say 3 crore meters, that's the next two years and three years, and the total is almost 30 crore meters. Almost we are talking about the and plus that. Absolutely we will not be going below that 15% or something like that, but exact numbers, we are still working on that. You mentioned that your target is to install 3 crore meters out of 10, right? Yeah, we told that. Yeah. Understood. Sure. That is it from my side. Good luck. Thank you. Thanks. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Chandresh Malpani from Nevshire Investment Advisors. Please go ahead. Hello? Yeah. Thank you for the opportunity and congratulations on such a strong order book, sir. My question is basically on the raw material side. What portion of your raw materials are domestically sourced and imported? About 60%, 65% of the raw material is domestic. Rather more than that. Okay. Coming from this question only, secondly, on the relay, that is an important part in smart meter. Do you see any challenges on securing relays? India doesn't have that much capacity, which the smart meters actually require. Your comment on that side. We are not facing any challenges recording relay. There's a lot of capacity built in India and internationally also it is available comfortably, so we are not seeing any challenge. Okay, you can source import internationally also, you are saying. We can always import the components, but a lot of capacity is being built in India, and mostly it is available in India comfortably. We are not seeing any challenge currently. Okay. Lastly, on the margin side, you said that your legacy orders are done away with. Now, since the realization on the smart meters are almost double or more than at least traditional smart meters, where do you see this number going forward? Numbers which- Yeah, margin. Your outlook on the margin, sir. Margin will be definitely getting better, because we have earlier also given a guidance that by the end of this financial year, we should be at the pre-COVID level. Okay. Thank you, sir. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Nikhil Jain from Galaxy International. Please go ahead. Yeah, thank you for the opportunity. Two questions. One, there was a significant INR 19 crore other income in these quarterly results. If you can just help us understand what was that, one. Second is related to the smart meter. We said earlier that we are allowed from the contract perspective to go ahead and supply meters to other participants. From a strategic perspective, do you foresee or think that there might be a little bit of reluctance from those other AMISP members to source meters from Genus, given that we also are a direct competitor with them? Those are two questions. First question, maybe I answer, second you please answer. First question, so basically, whatever the other income is, the company has a treasury of different bonds and all, so it is really from the fair market value treasury of the bonds and all, and the 3PG as well. Okay. On the second question, I will give you a different perspective on that. There is a thought process where we are absolutely right, a lot of people will think that, yes, they are our competitors. Does it make sense for us to procure meters from them? But the AMISP work is so large that all these AMISP providers, for them the most important is their technology partner. I am seeing a different trend currently, where these AMISP providers or the big large corporates, they think that Genus is the best tech, where Genus is the only company which is doing a AMISP end-to-end. They understand the nuances of the technology. So they will be more closer to the technology and the customer than most of the meter manufacturers who are not doing the same work. Rather I am seeing this as an advantage, where most of the large corporates are closely connecting with us, so yes we should be their preferred supplier. As such, I am not seeing any challenge where they see us as a competitor. Rather, I am seeing an advantage. They see us as a better partner in this journey. Okay. Just to follow on that, let us assume that we are targeting a market share of 20% from our AMISP. So there is a balance 80% which is available. On those balance 80% of the AMISP orders which we will not get, can we maintain our market share of, let us say, around 25% that we historically have? So that gives you another 20% for the meter side. Is that a fair or a reasonable assumption? I would, again, as we said earlier also, would not like to put any numbers on the market share. But yes, it will be very healthy and we will be a very strong player in the market for supplying technology to the AMISP provider. That is what we would like to maintain. Here I- Rather than getting into the numbers. -our capacity is also here. We would like to see our own capacity actually. Right. But you said that we can increase our capacities with a small CapEx, right? Shortly in 4-6 months in our earlier calls. Sir, we maintain the same thing. Whenever we require to increase our capacities, we will do that. So we are very confident about the outlook. And increasing capacity is not at all an issue, we again say that, but that needs a lot of execution also. So there should be capabilities of execution also. That we have to see how much we can take and how much we can execute. Right. So I have one more question, but I will come back in the queue. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is on the line of Mukesh Asar from Moonshot Ventures. Please go ahead. Hello. Good afternoon, sir. First of all, congratulations on the good set of numbers. My first question is that, recently we have won many orders on TOTEX model through AMISP. From our understanding, sir, shall we be making only single-digit margin going forward? Sorry, we could not understand your question. Can you please come again? Sir, I am saying that our Genus Power only required 60% of revenue conversion from the AMISP orders. In that, we have continued to maintain our margin going forward. Yes, we have already said that we will be improving our margin, and in this financial year we will be reaching back to our pre-COVID levels, which are 15%, 16% EBITDA and all. We have already said that here. Okay, sir. Then next question, sir. How does billing work for AMISP? Is there any performance guarantee parameter linked to cash flow dispersed from DISCOM to AMISP? There is a full RFP document which is linked to many things. It is linked to SLA also, service level agreement that we sign with the electricity board. Payments are secured through the direct debit facility. Okay. And sir, one more question is that, what is the failure rate of this meter installed till today? What is the failure rate? Yes, sir. Failure rate has been very low. These are all high-tech products and closely being monitored by the metering companies. I have not seen major problem as such. There is no problem as such. Okay. And sir, are we giving any performance guarantee to AMISP for meter failures? Sir, we have to provide performance bank guarantee to all our customers. Okay. Thank you, sir. Thank you. Thank you. Before we take the next question, we would like to remind participants that you need to press star and one to ask a question. The next question is from the line of Nikhil Abhyankar from ICICI Securities. Please go ahead. Hi, sir. Thanks for the opportunity again. Basically, of the INR 30,000 crore, 60% will come to us standalone. After that, for O&M, what will be our annual O&M revenue from all these orders once they are executed? That will be depending on monthly revenue. We will be agreeing on project to project basis. That will arise from project to project basis. But it will be for three-- Say, when we are talking about 30,000 or 3 crore meters, so after, it will be for 3 crore meters. It will be for 3 crore meters. Okay. It is for 3 crore meters, not 30,000. Do not get confused with the numbers. Yeah. For 3 crore meters, my apologies. For 3 crore meters. Okay. Also, sir, if I get my math right, once we execute INR 18,000 crores of order book in the next 2-3 years, and let us say we make an EBITDA margin of 15%, net of tax, we will be left with somewhere around INR 2,500 crores. Of which INR 1,700 crores we have to put in the SPV over the next two- Correct. 3-4 years, right? Yeah. And 26% of its annuity income, we will keep on getting after that for the next 90 months. Yes. So it is too early to ask, I know, but what will be your plans with that INR 800 crores of cash? That is too early and little to ask, number one. Let us make that 800 crores and then we will plan, number one. And number two, this 30,000 or 3 crores is just a ballpark figure. We are not saying that we will be doing. See, again, I am saying to Akshay, do not say 30,000, it is 3 crores. 3 crores I understand that. But the total figure we are giving is a ballpark figure, yeah. Okay. Sure, sir. That is all from me. Thank you. Thank you. A reminder to the participants, if you wish to ask a question, you may please press star and one. The next question is on the line of Smita Mohota from Kredent Infoedge. Please go ahead. Sorry Your voice is not clear. We are unable to hear you. Okay. Can you please- The line for the current participant has dropped off. Participants, if you wish to ask a question, you may please press star and one. The next question is on the line of Nikhil Jain from Galaxy International. Please go ahead. Thank you for the opportunity again. Just wanted to, let's say, have your thoughts on the capability building within the organization. Given all this large opportunity that is coming, which has started to materialize now. On-ground execution, obviously, and that too in different states and different part of the country, it's going to be very challenging. Just wanted to hear your thoughts on how you are preparing for that and making the organization ready for its future growth. Thank you. A very valid question, and absolutely none of the I think two good things we have got in our position. One thing is, we are doing something which we understand. Like in terms of technology, we know what we are getting up to and what we are getting into. As a project execution company, again, we know we have done projects in the past. As a company, we have done ECC projects in almost every nook and corner of the country, so we know the nuances of that also. These have been the advantages, but at the same time, as you rightly mentioned, this is the real thing, the execution. We are taking our full time and effort to focusing on it, and very confident the way we are building our capabilities and the way we are building our organization. We should be in a position to do a smooth execution and should be able to execute it to the best satisfaction of the customer. Okay. Are you hiring more people or more managerial staff, or how is it like- Yeah, absolutely. We have been hiring people for different projects at different levels all across. A lot of management bandwidth has been increased in the last few months, few years, and that will happen in the coming times also. Okay. Fair enough. Thank you. Best of luck. Thank you. Thank you. The next question is on the line of Sanjeev Naik from Naik Investments. Please go ahead. Hello. Congratulations, sir, on a very good set of numbers. My question is very simple. Is there any export opportunities available to the countries like Bangladesh, Middle East, or Africa? Thank you. We are currently also exporting our products, and since last year onwards, we are heading to that opportunity for business. Last year also, we did an export of closer to INR 100 crores, and we maintain that run rate into this year and further growth. We are maintaining our focus exposure on that scope. We have been doing that in the past, and we will continue the same in the future. Okay, sir. Thank you so much. That's it from my side. All the best for the future. Thank you. The next question is on the line of Smita Mohota from Kredent Infoedge. Please go ahead. Hello, I cannot hear. Yeah. The line for the current participant has dropped off. Participants, if you wish to ask a question, you may please press star and one. If we have nobody in the queue, can we close the call? Sure, sir. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Kailash Agarwal for his closing comments. Thank you, ladies and gentlemen. We, as a company, are in a very good position, and we can assure you that in coming times, we will be giving you more firm numbers about the guidance, about the order book, about our shares and all, because we are already working on that. Rest assured that in coming quarters, you will be getting a better picture about the company and all. Thank you. Thank you, members of the management team. Thank you, everybody. Thanks. Thank you. Ladies and gentlemen, on behalf of Genus Power Infrastructures Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you. Thank you, everybody. Take care. Bye-bye.