Ladies and gentlemen, good day and welcome to the analyst call for ABB Power Products and Systems India Limited Q3 results. At this moment, all participants are in listen-only mode. A question and answer session will conduct towards the end of the call. At any time during the call, you may click on the audio question tab below the media player and join the queue to ask questions. Please join the queue early in the call to ensure we address as many queries as possible. Please note that this conference is being recorded. I now hand the conference over to Mr. Venu Nuguri, Managing Director and CEO, ABB Power Products and Systems India Limited. Thank you, and over to you, sir.
Good evening, everyone. What about the presentation?
No.
Good evening, everyone. Thank you for joining us for the call today, and I hope all is well at your end and you continue to take all necessary precautions to keep yourself safe and your family members safe. I'm going to refer to the slide numbers we already uploaded in the stock exchange, just for your information. Okay. If you are able to see the slides, also good. As our country appears to be slowly getting back on track, and we see active COVID-19 caseloads are coming down day by day, and more and more people getting vaccinated. You probably have seen yesterday, we have reached a very important milestone of 1 billion doses of vaccine. That shows that the vaccination rate is really improving across the country.
While the vaccination is improving, we also see green shoots of economic recovery are also starting to become more visible now with core industries such as electricity, steel, cement, natural gas, fertilizers starting to improve. With demand and economic activity picking up, business confidence also surged. We also see that business travel is also going up. We share the same optimism like all of you are feeling, and we are feeling much better about the state of economy as well as business than we were at the start of the year. Let me refer to the slide number four. We retain our focus on keeping our people safe and healthy. As they say, prevention is better than the cure. There is no better way to prevent than by spreading awareness.
We have continued conducting regular training sessions, consultation to our people, partners, and also our employees' families to combat the spread of the COVID-19 virus, reduce HSE hazards at workplace or sites, as well as prevent any ailment arising out of a new normal. We arranged special sessions to impart awareness ranging from life-saving rules to proper ergonomics and posture. That's to ensure our people don't neglect basic health while adjusting to new way of life. Our work is underpinned by safety, integrity, and quality, which are our licenses to operate, and it continues to reverberate with our customers as well as through our high service standards. We are glad to be recognized by leading industry players, such as Tata, for our values and commitment to safety, showing us that we are on the right track. Moving to the next slide five.
As you all may be aware, global of critical material. On top of this, there are shortages ranging from microchips to coal, hindering firms in unleashing their full revenue potential since these are base elements for our industries and for our revenue-related things. In this scenario, while we have seen a steady rise in our orders, our revenue has been impacted. Even though we have had a meaningful order wins, we had about INR 64 crore worth of revenue impacted due to pandemic-induced delays stopping us from tasting a full recovery. Yet we managed a credible performance in sync with market realities. As you can see, we have more green in both year-over-year as well as quarter-over-quarter. Long-term fundamentals appear solid.
Demand in the September quarter was driven by rail, data centers, and utilities, helping us further strengthen our position in growth segments of the future or what we call high-growth segments. A principal chunk of our orders pertain to renewable energy with solar and hydro projects generating significant demand for our high voltage and grid integration products. Transformers drew strong interest from rail and metro companies alongside top utilities to cater to rising power demand. We put unwavering efforts at stabilizing our supply chains and improving efficiencies. At the same time, we made solid headway towards our sustainability goals in this quarter. This year, as you recall, some of you, we have announced our 2030 Carbon Neutral Strategy, and we have set ourselves with the short-term, medium-term, long-term targets to advance the energy transition underway in India, as well as around the world.
We have committed, as part of our short-term targets, 100% renewable energy consumption by all over our factories, offices, and project site by March 2022. I'm happy to share that as of today, we have achieved 100% fossil- free electricity at one of our factories, and we are very much on the way to reach our target by March 2022 in the remaining part of our factories, et cetera. In addition to that, we have completed all energy audits and SF6 management plans, among other measures required to implement the transition to 100% fossil- free operations in all of our other factories as well. We strive to champion the urgency and pace of change needed to reach net zero. Achieving the promise of carbon- neutral future means integrating large scale renewable energy, overcoming complexity and capacity issues, and cutting waste.
In that direction, as part of a global initiative within the company to reward excellent environmental strategies and overall performance of manufacturing units. I'm happy to inform that one of our manufacturing factory located in Maneja, called Common Apparatus Unit , ranked the highest among 33 global units for waste recycling, LED lighting, solar power generation, and its use. In addition to making notable headway in decarbonizing our operations during the quarter, we proactively constituted an environmental, social, and governance, ESG, committee of directors to track our performance and increase shareholders' value. In today's board meeting, this has been decided, and as you know, our company, our technology, and our portfolio shall enable carbon- neutral future for our customers.
We are taking a leading role in not only announcing the 2030 carbon strategy, but also taking the leading role in announcing the committee of directors at the board level to track the performance of the ESG. Sustainability is at the heart of our purpose. At Hitachi Energy, Hitachi Energy, sustainability is at the heart of our purpose. We are energized and motivated by the shared goal of accelerating a carbon- neutral future for this generation, for the generations to come. Moving to the slide number 7. Resolute in our vision and goals. Within our control, we have ensured a well-rounded performance. Besides making headway in segment that will advance the energy transition, we have ensured inclusive skill development under various programs and initiatives.
Be it supporting young women in engineering colleges through financial aid and career opportunities or advancing diversity and inclusion at workplace under our Diversity 360 program. Collaboration internally and externally is a key for us to co-create solutions that benefit society. Collaboration is also extremely important during this changing energy transitions. If we look at the whole picture of social, environmental, and economic value in our growth, we have continued to add our voice and thought leadership on key issues at prominent forums to lead the narrative on energy transition and transformation. Moving to the slide number eight. We believe that electricity will soon become the backbone of the entire energy system. It is, as we can see, crucial to the sustainable development of societies and industries. It needs investments in the evolution of our power grids, as well as in brainpower.
Education is a fundamental driver of the change we are seeking. Since the start of our standalone operations, we have been investing in academia and building solid underpinnings for the sustainable energy future. In the same fashion, in the quarter under review, we partnered with Premier Institute IIT Roorkee on smart and sustainable campus energy ecosystem. The project includes the setting up of an integrated energy and digital platform, embedding intelligent and futuristic energy transport and waste management systems that can minimize harm to the planet. Our smart electric grid lab at National Institute of Technology, Warangal was inaugurated by the Honorable Education Minister, Mr. Dharmendra Pradhan. Our aim is to create the right educational framework and facilitate to ensure talent that can facilitate reliable and clean power for all.
We have made some progress there to drive sustainable development, which takes me to the economic environment in the coming September quarter. Moving to the slide number 9, I think here, most of this you know better than me. Just to tell you from our perspective, India appears to be on a recovery path. We see across the industries. The country is projected to be in the fastest growing major economies in the current financial year. The Indian government expects double-digit growth in the financial year 2022, and the growth rate is expected to sustain for the next decade or so. COVID-19 cases are coming down. Core sector output is going up. This is a good news. However, we have many risks for which we must remain watchful. Vaccination rate is going up, but yet to be fully vaccinated.
While the risk of infections around the festive season remains, we need to be cautious on that. Speaking of the operating environment for business, the aftermath of the first and second COVID-19 wave has resulted in a soaring demand, while supply lines are being stretched thin with the traffic congestion at ports. Fuel prices and record high and core inflation, which exclude food and fuel, likely indicates impending inflationary pressure. While electricity demand is expected to grow between 8%-8.5% in the financial year 2022, risk of power crisis emanating from coal shortages may dampen supply. The good part is that the government has assured that there will not be any shortfall on the coal. That's a very good news on that. While we have a great opportunities in the pipeline, but we cannot be wholly sanguine yet. Moving to the next slide number 10.
In the third quarter, all the headwinds I've discussed notwithstanding, we remain the partner of choice for our products, services, and software solutions. Transport and industries alone drove about of the order book handled predominantly through direct sales. We continue to make headway in our key focus areas such as renewable integration, metro and rail and all essential drivers of our business growth and also in line with our Vision 2025. We catered to about cumulative 1 GW of worth of cumulative renewable orders during this quarter, alongside pegging 150% jump in our performance in railway and metros, and 5% increase in the industries compared to the last year. We see slowly in some industries start investing in the CapEx. Our contribution to power quality, however, left much for wanting, we aim to increase our share there in the months ahead of months in the coming.
Moving to the next slide 11. Exports remained healthy, contributing more than 80% to the order book in this quarter. Cumulatively, if you take nine months, our exports are in the same range as we have been talking about, between 20%-25%. Exports cumulatively nine months, we are around 22%. Among others, orders for the exports in this quarter, we received breakthrough high voltage orders from key utilities in South and Latin America, Eastern Africa, as well as an order for our power system studies from an FMCG company in South Asia. Our services portfolio continued to deliver as we received a first-of-its-kind automation order from Haryana state utility , booked our biggest online dissolved gas analysis order from coastal Gujarat.
Our first RelCare remote asset management order in the renewable energy sphere in Asia for a 750 MW solar photovoltaic plant in Rajasthan, the grid automation and cybersecurity orders for power stations, metals and petrochemical companies, in addition to several others. Our consultancy business attracted companies in power, aviation, textile, manufacturing, and specialty intermediates for synthetic studies . Customers' trust remained rock solid despite difficult market conditions. Moving to slide 12. Our three-pronged strategy, that is protecting our people, preserving business continuity, and preparing for the new norm put in place at the peak of the pandemic, continue to support us in working uncertain market conditions. Even amidst commodity market and supply lines turbulences, we delivered a credible and sustained performance. As of September 30, 2021, our order backlog stood at INR 4,896.5 crore, which will unlock the revenue stream in the coming months and quarters.
Our profit before tax was INR 47.2 crore, while net profit was over 614% year-on-year at 34.3%. Operational EBITDA stood at INR 55.6 crore in the September quarter with EBITDA margin at 6.5%. Higher inventory buildup in our factories, mainly for our high-growth products due to the supply line crunch, deferment of revenue and high input cost impacted our cash flow. We had to borrow incrementally during this quarter. Easing of port congestion, stability in commodity markets, input costs are likely to bring relief and improve our short-term liquidity positions. Moving to the slide number 13. Our priorities ahead, as been also telling you in the previous quarters. I often say we are invested in India for the long term. While we aim to introduce new products, to capture a bigger share of the market, our goal is to localize our portfolio, build indigenous capabilities.
We'll continue to make in India for India, for the rest of the world. Our key focus will remain protecting our people, along with them, building our capabilities in high-growth segment such as rail, data center, renewable, HVDC and smart grid, et cetera. The Indian government has set ambitious target in each of these segments which I talked about. We will concentrate on accelerating our growth through service, digital solutions and exports, leveraging our strong local footprint. We have comprehensive portfolio of future ready and state-of-the-art products, software, services, systems to cater to them. Commitment to lowering the carbon footprint of our operations, product localization, digitalization of the grid will be part of our yardstick to measure our success. Nothing is complete without our people. Their safety, their growth, and their upskilling will remain in focus for us.
In this energy transition, it's crucial that we take on the challenge of accelerating the pace of change. We see ourselves playing a leading role through our digital and energy platform as the partner of choice to our customers, for the industry, to advance a sustainable energy future for all. Moving to my last slide. It's very important slide, as you see that you may already be aware that we are already using a Hitachi Energy slides. You may already aware that globally, our promoter company, Hitachi Energy, went live on October 13, 2021. That means they have changed the name globally from Hitachi ABB Power Grids to Hitachi Energy Ltd. globally. In India, we are in the process of securing approval from the Ministry of Corporate Affairs for a change in the local company name to align with the global entity.
As you know that our shareholders have already approved the name change, and while I would hold sharing more information on that until the change actually happens, I can say that I and my entire team are very excited to start this new chapter in our history. Our new purpose of Hitachi Energy is advancing energy future for all. We are advancing the world's energy system to be more sustainable and secure. As a pioneering technology leader, we collaborate with customers and partners to enable a sustainable energy future for today's generation and those to come. With that, thank you, ladies and gentlemen. I would now like to open the channel for your questions. Thank you.
Thank you very much. We will now begin the question and answer session. The operator will announce your name when it's your turn to ask a question. Please unmute your microphone while proceeding with your question. We will wait for a moment while the question queue assembles. Our first question is from the line of Abineet Kulkarni. Please proceed with the question. Abineet Kulkarni, your line is unmuted. Please proceed with your question. Abineet, it seems you have muted your microphone. Request you to please unmute your line and proceed. There seems to be no response from the line of Abineet Kulkarni. We will proceed with our next question, which is from the line of Saurabh Shah.
Hi, can you hear me?
Yes, sir. Please proceed with your question.
Saurabh, a couple of questions on the financial slide. This is slide number 11. In terms of now, slowly, hopefully if COVID-19 doesn't come back in a meaningful form which affects our operations, what kind of revenue lines do you see for the next three months? Or, how should we look at a normalized kind of number if for the revenue from INR 850 crore? Last year it was INR 950 crore. Do you see this trajectory kind of going up sharply, or you expect this to be similar in the next two or three quarters? How are you seeing the order execution timeline, minus, of course, any COVID-19 supplies?
Okay, Saurabh, thank you for your question. As you know, being a listed company, we don't give any forward-looking statement. I'd like to give you a little bit of pointers so that you understand. I think with the COVID, as you rightly said, hopefully it's behind us and we don't see big waves as we have seen previously. We expect the revenue to come back to pre-COVID level, slightly better than the pre-COVID level.
Okay. With the order intake going up, especially on a quarter-on-quarter basis, do you expect that to accelerate? I'm not talking about within the next couple of quarters. Just given the way we had announced the demerger and the focus, are you seeing a slightly higher uptake in the revenue growth rate at all, or you still think it would be in the INR 1,000 crore range only?
No. As you can see, in our nine months cumulative, we'll be already seeing a uptake in our revenue. If you really look at the nine months year-on-year, there's already 11.5% increase in the revenue. Right? That is considering the COVID situation. Definitely we would look at that uptake in that.
Which segments do you see the highest growth coming from? Not necessarily reflected yet in the order book.
Yeah
In terms of new tenders being put out, where do you see the most relevant growth for the business in the next two or three years?
I think the next growth segments are very clearly, we have been articulating. One is that the rail segment is definitely a big growth. One is that cross-country, one is that India's railways ambition of net zero by 2030. That is accelerating 100% electrification of the rail. That is a definitely a growth area. In addition to that, we see also the cross-country electrification, and we see a regional rail. Also we see some of the 10 metros, our systems, SCADA systems . That is a definitely a growth area for us. The one more big area where we are happy to see is that the high-speed rails. Those are very big projects, and that will really see a huge amount of growth in the rail. That's one segment.
The renewable will continue to have the growth. As you know, Government of India's target is to have 450 GW by 2030. Even if you take a factor, we need to do at least two to three times more than what we have been adding the renewable, right? That is a huge amount of opportunities and growth for us. The data centers. Third one is the data center, is also high-growth segment with the data privacy laws coming in. This has a quite a high-growth things. In addition to the other traditional things, as and when the industry CapEx starts, we will see those things are also coming up in that.
Thank you, sir. Just given, as you mentioned, these three growth segments and this COVID kind of headwinds going away. What kind of margin profile do you see? Year-on-year, again, we see a slight dip in the margins. From 7.2% to 6.5% in terms of operational EBITDA. How do you see that going forward? Do you expect to see, because new kind of orders, renewables, you mentioned data centers and all that, where it sounds like they are certainly much more private sector-oriented. Do you see better margins going forward on a sustainable basis?
Yeah. Again, we don't give a forward-looking statement. We have been always saying that we have a clear strategy and plans in place to bring this operational EBITDA to a double-digit range over a period of time in a sustainable manner.
What would be your kind of I know it's not a statement of when it would happen, but what would be a target? Would this be in the next year, two years? How do you see that?
Yeah. Next two, three years.
Two, three years. Okay. Thank you so much.
Yeah.
Thank you. Our next question is from the line of Kunal Sheth. Please proceed with the question.
Yeah. Hi, sir. Thank you for the opportunity. Am I audible, sir?
Yes, Kunal. Go ahead, Kunal. Go ahead.
Yeah. Sir, I just wanted to understand what can be the growth rates in each of our end markets if I were to think from a five-year perspective. Therefore, how should we think about ABB Power's growth rate in that time period? What I'm trying to understand is that as we understand, apart from data center, the metros, the renewables are anywhere between 5%-10% kind of growth market, if I understand correctly. I would love to hear your thoughts on this one, and what should be the multiplier at which ABB Power can grow over this market?
Yeah. Again, we will give you a bit of pointers for you to make an assessment. We are very consistently saying that our strategy is to grow higher than the market. Okay? If the market is growing X% and we are growing higher than the market, we want to grow higher than the market because we are taking a lot of actions, proactive actions, and that's the reason in that. There are some segments are growing a high single-digit right now, and we see they are slowly moving close to double-digit things as the economy is going up and also the headwinds coming out of the COVID will slowly recede. All these factors put together, these segments will start moving towards single-digit to slowly coming to the double-digit side in time. That is what is our assessment.
We also see energy transition is a big thing coming in addition to the thing what we talked about. Energy transition enable a lot of investments in the grids, in the power systems. Just to quote one recently released report on the International Energy Agency, who released a report on India specific. As per them, to take care of these kind of challenges and the growth elements, India need to add the power system to the size of Europe in addition to the existing system. That's the kind of the growth levers we are seeing in view of the decarbonizing energy transitions, interconnections, HVDC, et cetera. That's why, I've been also telling you, maybe we are the very few companies, we never stopped investing even during the COVID.
As we are talking, our investments are going in various factories, close to INR 200 crore-INR 250 crore worth of investments are happening. Expanding localization, expanding our portfolio, not only for the local market, but also for the exports.
Got you. Sir, would it be possible to put a size to each of our end markets? A very rough number?
No, we have not been giving those sizes, Kunal.
Sure. No problem, sir. Sir, my second question is pertaining to ABB India and Hitachi Energy. If you can help us refresh the difference in end markets that we are catering to. Especially, I want to understand from a context of spaces where there are inner applications for both LV and HV, where both can participate. Do we collaborate or how does that relationship work?
Again, Hitachi Energy Ltd., our end customers are very clearly defined. We are utilities, industries, infrastructure, transport and also the new segments such as data centers, mobilities and renewable integrations, et cetera, like that. Our portfolio, whole of our company portfolio, lies on four businesses. That is high voltage, and the next one is the transformers, and the third one is a grid integration. Grid integration, we mean the substation, the HVDC, the power quality, and then e-mobility is part of our grid integration. Then we have the grid automation, where we talk about substation automation, then SCADA, enterprise software, asset performance. That's all of us in that. There are some areas. This is our portfolio and end markets very clearly defined. There are areas where, take for example, a data center.
When the data center customer approaches us with both the high voltage and electrification. We do coordinate, wherever possible, collaborate with utilities. There is no compulsion on us that we have to only go with some X or Y on that. While there is anti-competition from ABB to us, but there is no reverse, where the anti-competition clause is there with us. We are free to offer our things. Having said that, we will try to, wherever possible, to collaborate and co-create these kind of things.
If I understood it rightly, there are certain products which are overlap in terms of where both you and ABB India are present. Our understanding was that the portfolios are clearly defined and bifurcated into different end markets, as in LV, HV.
There are no products are overlapping between us and our previous company, Kunal. All the products are clearly distinctly different. What you're talking about applications, take, for example, data center.
Right.
What our previous company can do and what we can do, there may be some overlapping here. Other than that, the products are very clearly defined and segregated.
Got you. Sure. Thank you so much, sir, and best of luck for the future quarters.
Thank you.
Thank you. Our next question is from the line of Renu Baid. Please go with the question.
Hello, am I audible, sir?
Yes.
Yeah. Sir, good evening. I have few questions. My first question is on the performance. If we remember right, in 2Q, we had almost INR 200 crore of slippages in revenue due to COVID-19 second wave. In the second quarter, we were expecting relative improvement in the pace of execution. However, again, because of supply chain challenges, INR 64 crore short of expectations because of these constraints. Effectively, as in, are we somewhere looking at execution pace slowing down for us for external matters? We're also seeing customer readiness to accept these deliveries being paused. By when should we expect revenues coming back to close to the INR 1,000 crore level in terms of the overall trajectory? If you could help us give some more insights on this.
I think as you talked about, Renu, it's a kind of different set of challenges in this quarter, and that's the reason we did miss it. From a customer side, I don't see any of those limiting factors, because I see many of the customers are in fact asking us to accelerate the pace of executions, et cetera, in that. There could be a single digit percentage of the customers not lifting, because we also have a strict cash over revenue policy. That even though if customer is billing ready, our materials are ready, until customer pays, we will not be in a position to ship it. That always has a single digit percentage thing in there.
Having said that, we do believe that the customers looking at taking the material, we are cautiously optimistic to come back to the pre-COVID level, what you're talking about, in this quarter onwards.
At least do you see the headwinds on execution and because of these external reasons easing out from 3Q, 4Q onwards as we are already in the second half of the fiscal year? Or they might continue for some more time?
Headwinds, especially on the ports, et cetera, I don't think it will go away overnight or on the next couple of months or things like that. What we have also taken action is that better planning, better booking of the ships well in advance. Taking extra actions to book those kind of things. Those actions, in our view, should mitigate those problems.
Got it. Secondly, with this transition to Hitachi Energy, how far are we now with respect to complete control coming in the hands of Hitachi? If you can share some view in terms of by when are we expecting the closure of this overlap of tech and IT charges which we have with ABB. Also, by when do you think should be the remaining 20% acquisition of the stake happen in the JV by Hitachi globally? Yeah.
Yeah. You asked three questions, Renu. Let me just on the transitions to Hitachi Energy. As I told you, I shown you my last slide. Globally, we have done on 13th of October. We have completed When I say completed means our name globally has changed from Hitachi ABB Power Grids to Hitachi Energy Ltd. That is what is the accord. There is no change of our strategy. There's no change of our line of business. There's no change of our way in which we serve our customers, et cetera. It will continue to be run by our.
No, not from the business perspective, but just from a three-year transition of that from a JV structure.
Yeah. It's coming back.
Hitachi portfolio. Yeah.
That is one. Second, when it comes to India, I also told you it is under process, so we will slowly come back. Second, the Hitachi ABB Power Grids joint venture, which was supposed to be from three-year period. That is, it started last year, 2020 July, and it will go up to 2023 June. Until that, the remaining 19.8% stake, which ABB was holding it, they will retain with that. Please note, this minority stake is only at the group level, at the global level.
Group level. Yeah.
That is for three-year period, and it will stay there. The third is the IT cost you're talking about. As you know, we have already explained last time, right now we are under the TSA exit cost with ABB is providing the IT services support. At the same time, parallelly, we are building our own state-of-the-art, world-class REIWA system globally. Those things will continue until 2023, June.
Okay. Until 2023, till the JV structure exists?
Yeah.
Got it.
Sorry?
Lastly, I just clarified those overlap of the cost will continue until this JV structure of 80/20 continues with ABB, right?
Correct.
Yeah. Lastly, on the business side, two things. A. You mentioned the transport industry now are almost 50% of the orders that we have. How large have they now scaled up in terms of revenues? We were expecting that these portfolios from a long term will slowly be 50% or higher. Broadly, is this mix broadly look sustainable for us in revenue terms as well? Secondly, on power quality, where you highlighted compared to some of the other focus areas, power quality witnessed some decline. Is this more because of the timing of the opportunity coming in the end market with the customer and delay in revenues? Or probably we have seen increased competitive pressures or probably loss of some orders to the competition?
No, power quality in our view is purely a timing perspective. That's one. Your first question was, these industries growth is sustainable. We were saying, especially on the transport and industries. I was also telling you in the beginning to another colleague, that one of the high-growth segments where we are looking at is transport, and we will see a multi-year growth with so many drivers I talked about in that. Basis which, and also slowly the industries are making a small CapExes. With that, we should be in a position to see this, if not at least 50%, but very high visibility of this.
Got it. Thank you, and all the best, sir.
Thank you.
Thank you. Our next question is from the line of Umesh Rawat. Please go ahead.
Thank you so much for the opportunity. Good evening, sir.
Good evening.
Sir, my first question is related to the gross margin for the quarter, which is at around 41%, which has increased on a year-on-year basis despite raw material prices has went up significantly. Any particular reason why gross margin has improved year-on-year despite the commodity variations going against us?
Okay. Our CFO, Ajay, you're in the call?
Yeah. Thank you, Umesh, for the question. Let me give a color to this. In the current quarter, if you see compared to the earlier quarters, our gross margin improvement has mainly come because of the product mix. It is the product mix that is helping us for the gross margin improvement. Compared to the earlier quarter, if you see, our exports and service has improved compared to earlier. That is also contributing for the gross margin improvement. Largely, if you see, it is on account of the product mix.
Got it, sir. Sir, going forward.
Just to add to our CFO, we are showing this slide nine continuously, how our strategy is to go towards more products, services, and software and those kind of things. You can see that our product services has much more bigger share of wallet than the projects. That's also our strategy to move towards high-growth segments and also towards good margin segments.
Got it, sir. Sir, going forward, do you see structurally our gross margins remaining about 40% say, and/or be consistently improving because we are targeting higher share of revenues from exports as well as from services?
Yeah, I don't want to put a target on the gross margin. As I told you, we have taken a target ourselves to come to operational EBITDA double-digit margins. That is what is our endeavor to do that. We will do all that. We will also do operational improvement. We will also look at the gross margin improvement, adding more value-added digital service, et cetera.
Okay. Sir, my second question is, if you can share some light on the competitive intensity, especially since last three, four quarters, because one of the domestic player is coming back aggressively in the market into the power products and systems. How you're seeing the competitive intensity right now?
I think, when it comes to competition, we have seen all these players before also. We will also see players after that. Our view is that the competition is good for the sector, good for our customers. What we also always ask for is a level playing field in that. We have very clear strategy to bring the differentiation in front of our customers, differentiation in terms of the technology, differentiation in terms of the digitalization, differentiation in terms of decarbonizing efforts of the customers. All these thing would give us a due respect and due share in the market, and that's what we will look at it. Always competition will be there. It was there also previously.
Okay. Sir, my third question is about the, in the previous con calls, you have mentioned the HVDC pipelines, in the near term, considering three, four projects which are under discussion.
Yeah.
Just wanted your view on the timeline. Second on the high-speed rail project between Ahmedabad to Mumbai, where initial package ordering has been done and now some tendering work is expected to start. You have mentioned previously in the con calls that there will be a synergy in between Hitachi and the funding agencies because of the same parentage or same country, that is Japan. Basically, just wanted to know your view on the ordering from the HSR opportunity and which particular products you are expecting orders to come in for HSR?
Let me answer your first question. I think first question on the HVDC is a very important question. We have been telling very clearly that energy transition is quite big. The HVDC technology is extremely important technology in making a grid more flexible, make robust, and enabling the penetration of the renewable even more in that. Basis which we also said that we believe at least one HVDC project to come for bidding in the market for one per year, at least for the next three to four years. This is what we have been telling, and we are consistent in that. We see that while we're talking, one project is under bidding, and there are other couple of projects are under various stages of approval to come for a bidding. That's exactly where it is.
Basis which we are taking a lot of actions here to localize some of the equipment and bring the more skills and improve our efficiencies, et cetera, to take care of those things whenever it is available for us. That's number one. Number two is on the high-speed rail. We are part of Hitachi's ownership. We do qualify for this, where the Japanese fund is there as a STEP component, as part of wherever our portfolio comes. That's called the STEP component. We do qualify for the STEP component of those projects. We are working with our companies in Japan on this HSR, basically the high-speed rail project, Ahmedabad to Mumbai. Right now, as you know, the civil has been awarded, and then the work is going on.
This electrical and the balance of system, SCADA, and the things like that will come maybe in the next year or something like that. Done.
Yeah. Thank you. Mr. Rawat, I request you to join the queue for any follow-ups. Also, participants are requested to limit your question to two per participant. If time permits, you may join the queue for any follow-up. We have the next question from the line of Jitu Panjabi. Please proceed with your question.
Thank you so much for this presentation. I've got a few pointed questions at a high level, right?
Yeah.
I heard you say that you expect to grow faster than industry. I would love to understand how you articulate your competitive advantage, a source of competitive advantage to do that. Two, when you sit down with the Japanese Hitachi bosses over there, how would they calibrate success for this company in India, and how would you personally calibrate success in your eyes as well? What would be the most difficult part of the journey to get there?
Yeah. Very good questions. On the competition side, our competitive advantage, which you talked about, I think we are continuously, as I told you, we are continuously investing. Investing in the localizing of the footprint, investing to bring the Sorry, let me just take a water.
Sure.
Investing in the localization of the footprint. Investing also to bring our products, which so far we are using complete imported products to localize it. Third one is we are also improving the skill sets of our people because the shift in the energy transition is making the total portfolio totally different, digital, artificial intelligence-based, and so on and so forth in that. That's the reason we are saying that we are able to now take care of the competition with this kind of multiple actions already in place. Both localizing it and then improving our broadening our portfolio. In addition to that, exports also one of our key strategy, we said. Exports is over a period of time will go to 20%-25%. I'm happy to tell you that within the nine months period, we already reached 22% of exports in that.
That is how our overall competitive advantage in that. How do you see the success from our shareholders' standpoint or our majority shareholder, global shareholder? It's very important for us to know that how do we increase our shareholder value, and how do we increase our customers, how do we improve our customers' processes, efficiencies? How do we decarbonize it? How do we ensure that we bring more diversity? All this thing is part of our KPIs, which is also part of our global shareholders who will see the success of that. Sustainability I talked about is a key important element, right? We are a technology provider decarbonizing the whole of energy system. We have to set ourself as the benchmark. That's the reason we announced that by 2030 we want to be carbon- neutral in our operations.
In that, the first step is by end of this fiscal year, all our factories, project sites, offices will be powered through 100% fossil-free . These are the things we are setting ourself as a target so that we are able to walk the talk on this and able to set ourself as a benchmark on that. We also started a committee of the independent director, sorry, committee of the board of directors on the ESG. All these things are quite important in the decarbonizing efforts of the energy systems in that. The success is stakeholders' value and taking care of our customers' things and our people.
I think the one part is what in this journey will be the most difficult part that hinders you from getting there? What will be the biggest challenge to overcome to get there?
The biggest challenge is that we always have these kind of uncertainties. Like we have seen the COVID wave one, wave two . We see the sudden logjams of ports, et cetera. These are the uncertainties we have to face, so we got to be more resilient, able to take care of those kind of things.
Okay. Superb wishes. Thank you very much.
Thank you. Thank you. Operator.
Thank you. Take the next question from the line of Priyank Chheda.
One last question.
Yes. This will be the last question, sir. Priyank Chheda, you may please-
Yeah.
Proceed with the question.
Yeah. Am I audible?
Yes, please.
Yes, sir.
Yeah, sure. Thank you, sir, for the opportunity. I understand you have been elaborating every quarter as to how the synergies between Hitachi Energy India and.
Hitachi global parent has been improving. If you can help us understand more and break into how the business prospect has changed, and particularly, if you can highlight on how the business share on the Lumada platform has been going and the progress on that.
Yeah. Is there any crosstalk? Okay.
Sorry. Please proceed.
We have been saying that we started these synergies only after we became part of the Hitachi ownership, because until that it was antitrust, we were not supposed to exchange and share the information. We started doing that, and the low-hanging fruits are this high-speed rail and those kind of things. We are working very closely with them and seeing the movement on the ground is going very well. We also said that their IoT platform, Hitachi has invested very heavily on the IoT platform, a very respected IoT platform globally. We would like to leverage that IoT platform in offering our enterprise software suites on IoT platform. We've been also discussing and doing some pilots here and there, and making progress in that. We have very clear milestones on that. We are on track as far as those synergies are concerned.
Thank you.
Sure.
Ladies and gentlemen, that would be our last question for today. I would now like to hand the conference over to Mr. Venu Nuguri, Managing Director and CEO, Hitachi Energy India Limited, for closing comments. Thank you, and over to you, sir.
Thank you. Thank you, operator. Once again, ladies and gentlemen, a very big thank you for your patience and taking time from your busy schedule and attending to this conference call. Please reach out to us if you need anything. We are happy to provide and engage with you, and I am really looking forward to this upcoming investors call. Hopefully, we will see each other face-to-face. Until that, please take care, stay safe, and also take this opportunity to wish you all a very happy festival season, Diwali, and et cetera. Thank you.
Thank you, sir. Ladies and gentlemen, on behalf of ABB Power Products and Systems India Limited, that concludes today's session. Thank you for your participation. You may now exit the meeting. Thank you.