Ladies and gentlemen, good day and welcome to Hitachi Energy India Limited Q4 Analyst call. At this moment, all participants are in listen only mode. A question and answer session will be conducted 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. N. Venu, Managing Director and CEO, Hitachi Energy India Limited. Thank you and over to you, sir.
Thank you, Aman. Good evening. Good evening, everyone, and thank you for joining us for the call. I hope all is well at your end, and hope all of you are keeping safe during these unprecedented times and taking all necessary precautions to keep yourself and your family safe. We have just uploaded the presentation where I'm going to refer in the BSE website. I'm also now sharing, if you are able to see that. I'll also refer the slide number for ease of convenience for all of you. Moving to the Slide 3. The October to December quarter we are talking about is, as you know, typically in India marked by a festive mood in the country.
The nation was also trying for normalcy after a bleak first half of the year. In this period, we also witnessed significant orders from leading power players toward solar renewables, solar and wind renewable projects, and in grid strengthening, as well as toward electrification of Indian Railways. We were awarded a project to set up a central command unit called the Remote Operations and Nerve Center for India's largest private transmission company to monitor and control their power substations in Rajasthan. Further, we hope to convert around close to INR 200 crore worth of delayed orders, where Hitachi Energy India was the lowest in the coming time. Concurrently, we were facing challenges that you all will be aware of. Globally, commodity prices have been reaching record highs and shortage of semiconductors has been challenging supply timelines.
Gridlocked ports have been delaying shipments of critical materials. With this backdrop, we managed a credible performance in this quarter, October to December quarter, staying resilient amidst tough market realities. We put unwavering efforts at stabilizing our supply chains, building stronger process, and improving efficiencies in that. As you can see from the slide, we have more green arrows. Moving to the Slide 4. Safety as always remains our primary license to operate. To ensure a culture where people take a priority ownership of their and their colleagues' health and safety, we continued our efforts towards spreading awareness and building capabilities at our offices, factories, and project sites where we operate.
We have been conducting regular training sessions and consultations for our people and partners to combat the spread of COVID-19 virus, prevent ailments arising out of the new normal, and reduce HSE hazards at workplaces and worksites. As more people return to workplace, we partnered with various agencies to provide defensive riding training and conclude helmet distribution to ensure road safety to all of employees at all of our locations. Our uncompromising safety standards and consciousness were not only appreciated by customers, but also garnered leading industry recognition, which is, you know, a Golden Peacock Award we have received in this quarter for exemplary efforts toward ensuring a safe workplace at our locations. Moving to the Slide 6 . COVID-19.
COVID-19, lending our support to augmenting public welfare and healthcare amenities is a natural extension of keeping people safe. After all, we are only as safe as our homes, neighbors and communities. As the government cast a wider net on vaccination, we conducted inoculation drives for employees, children and dependents. Applying the learning from waves one and two of the pandemic, we swiftly activated our crisis team, strengthened partnership with medical services, and reinforced the use of PPE to tide through wave three. While we are glad that Omicron did not cast as dark a shadow, we continue to exercise caution and keep our people at the heart of what we do.
As you can see, 99% of all of our employees have already got two doses of vaccination, and we continue to have the strategies around testing, tracing, treatment, and vaccinating to ensure that our employees are safe and business continuity is maintained. Moving to the next slide seven. It was no doubt a milestone quarter for us. We transitioned into our new identity, Hitachi Energy, from ABB Power Products and Systems India Limited. We were joined by key leaders from the government, industry, utilities in the inaugural celebrations, which of course, were measured to ensure utmost health and safety compliance. This was also a first, physical event with our stakeholders, government, customers in the last two years, which was well-received by all our stakeholders.
With a new identity, Hitachi Energy India, we will be able to effectively position our pioneering technologies and services to existing and future customers, expanding beyond the grid, opening up a breadth of opportunities in areas such as sustainable mobility and smart life, and contributing further economic, environmental, and social value. We look to advancing a sustainable energy future for all. Moving to the next slide number 8. In the first half of 2021, we had released our 2030 carbon neutral goals, and we had set ourselves short-term, medium-term, long-term, targets to advance the energy transition underway in India, and we are committed to 100% fossil-free electricity in our own operation by March 2022. If you recall, in one of the conference call, I was also talking about this.
I'm happy to share that we achieved 100% fossil-free electricity in our own operations, offices, and factories by December 2021 itself. We also implemented rooftop solar for a green electrification of a project site office. Designed by our engineers, this plug-and-play solution will negate the carbon footprint of almost close to 4,000 liters of diesel per year. As we strive to achieve our goals, we constituted an environmental, social, and governance committee, ESG committee, of directors to track our performance and provide an outside-in approach to help us with an urgency also reflected in the government's commitment on climate action at COP 26.
As our company's portfolio, which provides a mission-critical technology to our customers in enabling carbon neutral, we thought we would be taking a leadership position and walking the talk, especially in ensuring that our own operations and our own footprint will be a carbon neutral going forward. Moving to the next Slide 9. We accord the shared goal of accelerating a carbon-neutral future across our business actions. From leading the conversation on key issues such as electric mobility at prominent forums to co-creating solutions that benefit society, we continue to deliver social, economic, and environmental value. Besides commissioning nation-building projects such as the Kanpur Metro, we also work with the local authorities to ensure that social infrastructure was robust enough to cater to local needs.
We collaborated with customers to address the needs of an evolving energy landscape, such as evaluating reliable integration of renewable in the energy mix of many private utilities and upskilling the human capital to manage an increasingly digital grid. Example of that is, as you can see in this, we have signed an MOU partnership with the Tata distribution companies to shape the future talent using our technology, our portfolio, and our footprint. Moving to the next slide. Expanding value through digitalization. Digitalization is steadily percolating through the grid in our own operations as well as that of our customers in industries and in T&D utilities.
In the three months of the quarter, October to December period, we conducted over 150 remote factory acceptance test, a process that customers can virtually test the products such as transformer, high voltage, GIS or automation before signing off for delivery, a tool essentially in a world with a travel restriction. We have started this process since day one, and we continue to engage with our customers with this remote factory acceptance test. With the steel major, we entered into a digital partnership agreement facilitating a combination of asset management software with our expertise, enabling equipment and O&M managers to reliably and cost-effectively optimize system performance and protect the crucial assets. RelCare.
The third example on the digitalization is, as I was telling you, before, we have received an order for setting up a remote operations and nerve center, RONC, or a central command unit to monitor power substations in Rajasthan. The state is a leader in solar energy and aims to add 30 gigawatts worth of capacity by 2024-2025, which will introduce more intermittency into the grid. The RONC will offer real time monitoring, control, and protection of mission-critical power assets via intelligent electronic devices. It will help the power operators take timely, even preemptive actions to maximize product efficiency and prevent costly disruptions. These are just examples to show how our foray into digitalization of the entire value chain, not only from our own operations, but also our customer assets. Moving to the next slide, eleven.
In the October-December quarter, with the launch of IdentiQ, we added another milestone product in our digital portfolio, principally a digital twin for HVDC and power quality. It is best described as an umbrella solution for all relevant site information and analytics for high voltage sites, which are critical for ensuring grid reliability and stability. This game-changing digital solution uses an identical digital replica which models accurately the behavior of the respective power asset solutions or process for HVDC and power quality, providing clear visualization and remote access on any device for the complete life cycle. Moving to the next Slide 12. I think, this slide, you are all familiar about the macro level, and maybe more than me. Let me just give you my perspective on this.
The last time when we met or when we had our conference call, India appeared to be on a recovery path, and then the Omicron wave brought with it a set of uncertainties, delays in decisions and strain on supply chains and also travel restrictions, et cetera. However, India continues to be one of the fastest growing major economies in the current financial year at 9.2% year-on-year GDP growth and 8%-8.5% in the next financial year. This growth rate is expected to sustain the next couple of years. The PMI index for services is back to pre-COVID levels. A similar growth trend is reflected in various core sectors contributing to IIP. While this is a positive sign, we have to view escalating fuel, commodities, and freight prices in balance.
You all know that a global semiconductor shortage is another headwind that continues to influence operations across geographies, and we will see how the situation unfolds along with uncertainty related to COVID-19. Moving to the next slide. Notwithstanding the headwinds I talked about just now, we remain the partner of choice for our products, services, software. Utilities drove about 60% of the order book in this quarter through product orders for grid strengthening and power quality, products and automation for monitoring and integration of renewable. We won major orders from leading power players towards solar and wind projects, as well as toward Indian Railways electrification and metro rail, in line with our key focus areas for business growth and our Vision 2025 focus areas. On a year-on-year basis, orders from data centers declined due to high base.
Yet with the proposed reclassification in the recent budget of data center as harmonized infrastructure, coupled with the rising demand, we are confident that the sector will normalize in the coming quarters. Products led our order book, especially through the direct sales, indicating our shifting center of gravity towards more technology-driven solutions and our end customers' evolving preference towards that. Moving to the next Slide 14. Exports, as we have been talking almost every quarter, continue to lift orders, contributing approximately 25% to the order book in the December quarter, with an increased contribution from our feeder factories.
As you recall, our strategy of exports is to take from 20%-25% over a period of time, and I'm happy to report to you that we already reached 25% in this quarter, and on an annualized base, we have reached almost 23%. Solid demand came from key utilities in South Asia and South America for our high voltage products and grid integration projects. Despite current logistical logjams and increasing freight costs, export orders clocked a third consecutive quarter of year-on-year growth, solidifying our progress towards the goal of 20%-25% range of order book. Traditional retrofitting, diagnosis, spares and extensions from utilities, steel majors and metro customers continue to contribute to our service portfolio order book. Some of these orders were secured through synergies with Hitachi as well.
In addition, we received remote and on-site service and maintenance orders from a steel major and other heavy industries for their electrical devices. Our consultancy business continued to draw demand for renewable studies from India and around the world, and system studies for petrochemicals, mining and automobile industry houses. From existing installed base to the newly diversifying, we saw immense trust from our customers to be their partner of choice even during turbulent market conditions. Moving from exports and service to profit and loss statement in the next slide. We were able to reliably deliver on their faith through these challenging times by sticking to our three-pronged strategy put in place at the peak of the pandemic. That is protecting our people, preserving business continuity, and preparing for the new norm. Even amid this commodity market and supply line tribulations, we delivered a credible and sustainable performance.
As of December 31, 2021, our order backlog stood at INR 4,733 crore, which is expected to unlock revenue streams in the coming months. Recovering to pre-pandemic level, revenue was INR 1,137 crore, up 9% year-on-year. Profit before tax, after accounting for a one-time reimbursement of reorganization expenses, was INR 83.4 crore, up 10.3% year-on-year. Supply chain disruptions emanating from port delays weighed on process timelines. This, coupled with increased commodity and freight cost, slowed our march towards target margin corridor. Operational EBITDA stood at INR 89.5 crore December quarter, with EBITDA margin of 7.9%. Moving to the next Slide 16.
You have seen all this Union Budget, and I'm sure all of you are aware about it. Let me also just give a snapshot from our perspective, looking into this Union Budget 2022. Basically, it set a broad vision for the Indian economy for the next couple of years. Through four pillars of development, you all know that it's PM Gati Shakti, inclusive development, climate action, and energy transition. It's a budget, in our view, is a budget for a change, budget for a growth, and also for the future. It definitely touched on all levers to multiply growth and opportunity using public funding as a linchpin to attract private sector spending. It's a climate responsive budget. There is a lot of focus in energy transition where we operate.
An additional INR 19,500 crore for PLI manufacturing high efficiency solar modules and allocation of INR 1,400 crore for 123 MW hydro and 27 MW solar projects in FY 2023. Issuing of sovereign green bonds in public sector projects to reduce carbon footprint initiative in the economy, and steps to trigger adoption of electric mobility, including policies on battery swapping, charging interoperability, and large scale charging stations. Also the 400 Vande Bharat trains with higher efficiency for passengers will be developed in the next three years, and interconnected standardized urban transport metro. In all of our view, all these things are the, play areas for our company to be actively participating in going forward in that. Coming to my last slide, priorities.
It's crucial that we take on the challenge of accelerating the pace of change to reap the benefits of this energy transition. We are seeing this energy transition happening in every part of this world and including in India. We see ourselves playing a leading role through our digital and energy platforms as a partner of choice for our customers and for the industry. Our key focus will remain protecting our people, preparing ourselves to tackle the vagaries of the pandemic-induced new norm, shaping an agile supply chain, being selective in our contracts, and revisiting long-term agreements with customers and suppliers as the price trajectory of commodities and freight remain uncertain. You all know that this kind of elevated commodity prices are.
We have not seen these kind of things in the last several years. This is unprecedented, changes taking place, especially on the commodities, freight, and port logjams. As I often say, we are invested in India for the long term. We will continue to build indigenous capabilities in high growth segments such as rail, data center, transmission, renewable, automation, HVDC, power quality, et cetera, that are also pillars in the government's forward-looking budget. Leverage the same for expanding our export base to Make in India for India and for the world. To do so sustainably, we will invest in ourselves towards reaching net zero in our own operations, as well as developing a diverse talent pool that is equipped to nurture the rapidly evolving energy landscape.
As a pioneering technology leader, we'll continue to collaborate with the customers and partners to advancing a sustainable energy future for today's generation and those to come in that. We would like to grow the organization to be more sustainable, flexible, and secure. With that, I really want to thank you, all of you, for your attention. 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. To ask a question, please click on the Audio Question tab below the media player. Click on Okay on the popup to mute your webcast and proceed with the Q&A session. The operator will announce your name when it is your turn to ask a question. Please unmute your microphone while proceeding with the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Renu Baid from IIFL Securities. Please go ahead.
Hello, am I audible?
Yes, please. Hello, Renu. How are you?
Yeah. I'm good, sir. Hope you're keeping well.
Yes, thank you.
Sure. The current quarter results were definitely not as good as they were expected. My first question is hitting at the core of Q3 results, trying to understand the gross margin weakness. You did highlight raw material price pressures and fixed price contracts. If you could provide some more input in terms of what was the impact of cost inflation on the operating margins and to what extent was it led by change or adverse mix. Aligned with this, what percentage of the backlog that we have today is sitting on fixed price contracts, which could have a potential impact on margins, as we move towards CY 2023 or next fiscal in terms of orders.
Yeah.
That's it.
Thank you. Thank you for that. First of all, let me just give you an overview of that. I t is not one particular challenge we have been facing. We have been facing an increase in commodity prices, on top of that, semiconductor shortage, and on top of that, this freight cost. Now, some of the freight costs, especially on export, as our exports are where the cost increases in excess of 50% to even 100%. Revenue growth is fueled by a higher project execution and also product delivery, but the margin has been impacted due to execution mix, as well as rising commodity prices, freight and logistics cost increase in that.
We roughly estimate in the range of 1%-1.5% contributing these costs, like rising commodity prices, freight costs, et cetera, like that. That's answer to your first question. The second question is , in our order backlog, if you take, we have 60% of our order backlog having variable contracts, that is variable prices. We have the price variation clauses, et cetera. Remaining, 30%-35% of our backlog, we have the fixed contract. We must be mindful about here, because when you're talking about the variable, it's a normal variable, but this is unprecedented, right? You don't get our contracts covered with the freight charges.
You don't get our contracts covered with these kind of things. Normally, covered with a normal, price escalation of major commodities like copper, CR-GO, aluminum, et cetera, like that.
This is where I have the question, because if you look at the freight expenses, et cetera, they will be largely housed under other expenses, which is higher but still manageable at that INR 198 crore. Material cost per se or RM to sales, if we see, has significantly spiked to 68.5%. Which means that typically where we were making almost close to 40% gross margins, our gross margins contracted sharply to just 31%. Which was the reason why ex of freight or all these expenses which sit in other expenses, on the core raw mat, we seem to have taken a very sharp impact, which is almost 10 percentage points.
Yeah. That's also.
That kind of impact. Yeah.
Yeah. That's also due to our project mix of execution in that particular quarter.
Exactly. If you can help us, as in what percentage was largely because of fixed price contracts and commodity increase, and what percentage of gross margin compression was led by mix changes?
Yeah.
Do you have that kind of number?
No, I don't think I have it readily because we have the things at a you know annualized basis. I don't have it in this particular quarter.
No issues. Broadly, as we move forward, at least for the next six to nine months, while some of these inflationary impacts are likely to continue, do we expect gross margins to improve back from, say, March quarter, or probably the impact will remain for a couple of more quarters, in the similar 30%-35% range?
Yeah. Renu, as you know, knowing our company well, we normally don't give any long-term view on that. We also don't give anything forward-looking statements. What I can tell you is that the unprecedented changes, unprecedented things what is happening will, in our view, continue for some more time, right? The question is that how long is. We are also looking at all the options. You know, we have the management, the company is taking all the actions to, you know, go back to the customers, renegotiate with the contracts, and we'll be more selective, and we are also looking at more exports. All those actions are also doing.
How much we are going to mitigate and what kind of mix we will bring in, so that is all, you know, makes the difference.
Got it.
Thank you.
Secondly, can you also help us understand, now that we have moved to Hitachi Energy as a brand name and the entity as well, so the royalty and trademark fee which you were paying to ABB, does that continue in the same context or probably that 4% or 4.4% kind of range of revenues? Or does that also undergo change with the change in the marketing brand name which we have undergone?
Yeah. As you know, we have been taking also. When talking about the royalty, our core technology, when we are part of the ABB, is also moved to our new company, right? Hitachi Energy, the R&D spend, the technology. Those things, you know, if you really want to. For example, I've shown you the new product which we have launched in the last quarter, that EconiQ. All those things needs the investments, right? We need to continue to provide because the energy transition is a very big thing taking place in that. We really need to make sure that our product, our offerings has to be up to date and ensuring that we are bringing the, differentiation to our customers by investing in that. Those things will continue to be there.
Thank you. Ms. Ved, I request you to rejoin the queue for any follow-up. Our next question is from Parimal Mithani from Credential Investments. Please go ahead.
Hello. Thanks for the opportunity.
Thank you. Hello.
Hello.
Yeah.
Yes, sir. Thanks for the opportunity. Sir.
Yes, sir.
In terms of your order book, since the government has announced the CapEx side, how do you see going forward in terms of opportunity side, if you can highlight for us? B ecause we are aware of, right, just a year of it going higher. How do you see that from that point?
Sorry, your voice was breaking. Can you please repeat that?
First, in terms of this budget announcement in terms of CapEx on the infrastructure side, you already highlighted in your presentation.
Yeah.
If you can throw us light in terms of the opportunity side for Hitachi Energy, it's specific.
Uh.
to the entire thing. The addressable market, basically. Secondly, in terms of the order book, sir. From my understanding, we just have sort of a lot of orders with us in terms of order book. So how do you try to get there?
Sorry, your last question, I couldn't hear you.
I said in terms of order book. Just order book, sir. It's
Okay, let me answer the first question. If the line is clear, then you can come back. The first question on the budget. As you know, the budget, especially the government, the focus is to, you know. It's a CapEx led budget, where the government has increased the CapEx by 35% compared to the previous year, right? All these things, especially the areas where the government is focusing on that, play areas for Hitachi Energy. Take for example, the renewable penetration or the renewable thing . We have quite a big addressable market in the renewable, whether it is solar or wind.
We have the grid connection, we have the balance subsystem, we have the automation of the renewable in that. Same is the case with the wind. When it comes to the data centers, as you know, data center and the grid level energy storage included in harmonized list of infrastructure, which will facilitate easy credit availability to these things. We have a very good robust offering. Right from the grid connections to the automation and then electrification of that. That's also another big markets in that. We have been telling you, the rail segment is one of the core segments.
We are supplying our portfolio to the fixed installations as well as the rolling stock. For every Shatabdi, every third Shatabdi you touch, you know, it will be powered through our transformer. Every three second freight loco is powered through our transformers in that. We have quite a big belief there. The whole budget, if you see here, the focus is on the sunrise sector, especially sunrise sector is the focus. Hitachi Energy portfolio is exactly in that. What we are saying is that, we are enabling sustainable energy future for all. Our portfolio, whether it is, grid integration or grid automation or high voltage and concept, it goes into entire sectors of that.
When it comes to the second question, if I understood you correctly, our order backlog is around INR 4,700 crores, which has a you know a visibility of you know very good number of quarters going forward in realizing the revenue from the order backlog.
Okay. Thank you. Thanks for the opportunity.
Yeah.
Thank you. Before we move to the next question, I'd like to remind the participants to limit their question to two per participant. If time permits, you may join the queue for any follow-up. Also, to ask a question, please click on the Audio Question tab below the media player. Click on Okay on the popup to mute your webcast and proceed with the Q&A session. We have our next question from the line of Rahul Paliwal from Shefa Family Office. Please go ahead.
Am I audible?
Yeah.
Thanks for the opportunity. At Shifa Family we have been following Hitachi Energy since its inception or demerger. We have this question about the narrative which is being said in terms of our capabilities, new age businesses which we are covering, digital opportunities and parentage legacy. That's somehow not matching with the numbers and order book and in fact with the margins so far. We need your comments on the same, sir.
Yeah, Rahul, thank you for your question. As you know, we have carved out from ABB, and then we become part of the Hitachi Energy in 2020 onwards. We have to also navigate the pandemic. At the same time we are also, you know, working ever since we become part of Hitachi globally. That is mid of July first 2020, right? That's where we are looking at more synergies on that. T he synergies on the digital capabilities merging on that. These are the things, you know, it won't happen overnight. T his will take long time. It needs a lot of things, proof of sites, lot of things.
Lots of places we need to do the pilot studies, et cetera, and that. That's where if you have seen my presentation on the digital capabilities, I just gave you a couple of examples to that. In this quarter we won these digital orders, whether it is a remote operation nerve center or RelCare for industrial houses. This will take enormous amount of time, proof of concept, pilot projects, running on that. These things will start. Once it'll start, in the digital thing, then it'll keep on repeating in that. Yeah, in our view, this is the most challenging times we are facing. On one side is the dealing with the pandemic, other side dealing with the high inflation, you know, elevated commodity prices and the port challenges.
Despite that, we believe that, we have delivered a kind of resilience in our performance in the difficult environment in that. That is my comment, Rahul.
Rahul.
Sorry?
Rahul.
Yeah, Rahul.
Am I audible?
Yes, you are audible.
Hello. Okay. We have this capabilities in terms of e-mobility, like flash technology. I think in India, the kind of initiative being taken in the EV side, I think they're ready for this kind of products, because I think that these EV stations are being now freed of any kind of regulations. E-mobility side, then your IdentiQ, EconiQ side, semiconductor power, semiconductor side, carbon trading opportunities, energy storage solutions and data center side. What are the key initiatives being planned in next couple of years so that we can get the advantage of scale in terms of exponential growth?
Yeah.
That's my simple question.
Yeah. I n case of e-mobility, the whole segment is at a nascent stage in India, right? It is, started to grow up. We have announced last year itself a pilot project together with IIT Madras and Ashok Leyland to run our pilot, flash charging technology in IIT Madras. It took a long time due to the COVID-19 and other delay, but now the pilot is getting ready. We are hopeful to run this pilot in the next six weeks or so in IIT Madras. That is where we are working on that localizing of those kind of things. How do we ensure that this technology is fully indigenized locally and build the local capability?
That is where it takes time to do that. We have a clear plans that, play a very I would say active role in our share of the e-mobility going forward. Where e-mobility is that, we create a complete the charging network, our Grid-eMotion Flash and Grid-eMotion fleet technologies, where we can create a mass charging technologies like a depot charging or airport charging so on and so forth, for not only the buses but also four-wheeler. That plans is very, very in on. The second one is data center. We have been already telling you the data center is one of our focus areas. We have taking a major share of data center orders being finalized. If I
We are in every minimum one out of three data centers we are covering at this point in time. You name it whether it is, you know, global data centers or the local centers. When it comes to the energy storage is also another key area. All these things are very nascent stages. They are coming here. We are working behind closed doors to look at, you know, what is the technology we have to bring in. Here the technology need to be affordable here. We are bringing it to see that we localize it, we customize it, we bring it to the price point, which is sellable in Indian market.
All those things are actions, and they're all very clear growth dimensions. We are at it.
Thank you.
Thank you. Mr. Paliwal, I request you to join the queue for any follow-up. We have our next question from the line of Priyank Chheda from Standard Chartered Bank. Please go ahead.
Please go ahead.
Yeah. Hi, thank you for the opportunity. My question is with respect to the order inflows. Broadly, the order inflows has remained in a very flat range of INR 900 crore-INR 1,000 crore quarterly. Given the tailwind and the priorities of 2020 to 2023 that we have, what can be the size of order inflows, one should expect? Particularly also on, if you can, guide us on the HVDC order that we were expecting to come and we had one order under bidding. What can be the size of that order, and by when we can expect the outcome of that?
Okay. When it comes to top line, as you know, we don't give any guidance or forward-looking statements, but what we can definitely give you, which we have been continuously saying that we are taking several initiatives, and with those initiatives we will be in a position to grow faster than the market. Even though last quarter we have grown around 13% compared to the previous quarter. If you really look at the market is not growing at that. If you take an annualized year, one year, so we have almost close to double-digit growth in the orders. A slightly lower 9% or so. The market is not growing that kind. If you really take the whole of the market at that. There may be some segments are growing higher, some segments are growing lower.
If you really look at the whole market, the market is growing in the last year in the range of 4%-5%, whereas we are growing almost double in that. That is the strategy we have adapted. We want to grow higher than the market, faster than the market, as we are taking several actions upfront, so we would like to maintain the same thing. We are adding more products. We are also expanding our factories, and we are also now looking at exports more intensely because we are taking the exports upfront. Those things will continue to be there in that. When it comes to the HVDC project, as you're talking about, maybe you're talking about the Leh project.
I think this is, I think the bid for one is, we are talking about the Leh project, which is almost a 5 GW capacity. What we understand now is that the government of India has asked the PGCIL to execute this project. This is quite a big project, close to, you know, anywhere between INR 11,000 crore plus cost of project and in a very complex environment. This is the opportunity, you know, all of us, we are especially our company is looking at it. This also needs a lot of local manufacturing, and that's where we are gearing up, setting up our factories to see that, we bring more and more local content for this project to offer in that.
Thank you. Mr. Chheda, the line is open with you for any follow-up. Our next question is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund. Please go ahead.
Yeah. Hi, sir. Good evening. Thanks for taking my question. Sir, just wanted to check with you like this, now, if you look at Mumbai Metro, the propulsion system is supplied by Hitachi Energy, and the traction transformers for that is done by Hitachi design. So is it supplied by our factory, the traction transformers for those Mumbai Metro?
Yeah.
Just wanted to understand. Going forward, like, for this high-speed rail and other large projects, Hitachi can play a major role.
Yeah.
Does that open up a huge opportunity for us as a company?
Yeah. Just to clarify to you that in a propulsion system we don't manufacture. Okay? Our range of products for the railway segment is traction transformers and track side transformers and, fixed installation, SCADA and automations in that. As I told you, rail segment is one of the biggest growth segment for us, and we continue to grow in the rail since several quarters. When it comes to the high-speed rail, it is also one of our focus project. We have a huge opportunity in the high-speed rail going forward in that. That is the one project where we are looking synergies with the Hitachi. As now we are part of the Hitachi, so we are also qualified for that step component to leverage as part of that.
As a follow-up to that, it is as per Hitachi design. In that case, whom do we pay the royalty for and what will be the amount? Because now it's more of a Hitachi company, right? And what is the range of royalty now, which is that reduced? If you can throw some clarity on that.
Okay. Our company, which is Hitachi Energy in India, is our parent company is Hitachi Energy. Hitachi Energy headquartered in Zurich. Okay? Hitachi Energy is part of Hitachi's thing. The royalties we continue to pay it to Hitachi Energy. Hitachi Energy, Zurich. Okay? Our product are technology-based, and that's what I was explaining, which require our Hitachi group technology for, you know, bringing out the new products, new systems, for which we need to pay royalty and technology fees. Because resultant technology holder is the global company, and accordingly, the royalty is paid to the global company, that is Hitachi Energy, Limited in Zurich. Currently, royalty paid is approximately around 4.1% of our revenues.
We believe that with so many changes taking place, so much of, you know, new products we have to come, especially on the sustainability of, EconiQ brands and those kind of things, we continue to pay these kind of royalties, which is very, important for us to be the leadership position in this particular portfolio and technology.
Thank you. Our next question is from the line of Raj Rishi from DCPL. Please go ahead.
Yeah. Hi.
Hello.
Am I audible?
Yes, yes.
Yes, Mr. Raj Rishi.
Yes, please go ahead.
Yeah. Any plans for taking advantage of the PLI scheme? Do you qualify for any of the schemes which have been announced?
No. We are looking at the electric vehicle charging equipment. We are actively looking at it in that qualify for the PLI scheme in some states, and we are actively looking at it.
Like you have number of entities in India which are Hitachi entities, one of which is the listed entity, right?
Yeah.
How do you segregate the?
Yes.
How do you segregate the business? Is it, like, Hitachi Energy, like, so that duplication, that kind of stuff doesn't happen?
No.
Technology. Yeah. Tell me.
Business-related entity is only one entity. That is Hitachi Energy India Limited.
Okay.
We do have another entity, which is Hitachi Energy Technology Services, where we'll be housing our back-end offices, engineering center and also R&D and those kind of things in that.
All the digital offerings, anything concerning business will be in the listed entity.
Mr. Rishi, you're not audible.
Yeah. Am I audible now? Hello. Am I audible now?
Yeah. Yeah, now we are.
Yeah. I understand, sir, that all the business will come in the listed entity, right?
Yeah.
Including all the digital and everything.
Correct. Correct.
Okay. Thank you.
That's okay.
Thank you. Our next question is from the line of Sujit Sen from ASK. Please go ahead.
Is the understanding the 2% royalty that we were paying to ABB is over? Is that understanding correct?
Purna, can you explain this?
We have been paying royalty to ABB for the trademark until June 2020. Effective July 2020 until 2021. Sorry, July 2021 to June 2022, it's a royalty-free tenure, given that we have incurred several expenses towards the merger.
No, still not clear. Till when do we pay royalty to ABB 2% per annum? When does it stop?
This year, that is up to June 2022, there is no royalty to be paid, so we will need to negotiate it further for the future years.
That payment will come down, but we still have to pay?
Correct.
Till when?
That's something that we will need to.
Okay. The other way to put this is how long we can use ABB brand under the agreement in 2020?
Yes.
Okay. ABB brand, as per the agreement, we can use, you know, the joint venture period globally is for 3 years. From three years, another five years is what we can use the ABB brand. That means total 8 years from day one, that is July 1, 2020 onwards. eight years we can use ABB brand products. That means in our products, the transformer we ship or the switchgear we ship, it will have a ABB brand in that.
Got that. Which also means that for these eight years we cannot compete with ABB in their lines of businesses. For example, in Lumada, we can practically offer our solutions not just in, high voltage, they can be even in low and medium voltage, but till then we cannot offer, right? In India.
Again, as you know, the non-compete is only one direction, whereas we can offer in every part. Non-compete is not both ways, it's only one way, right? We don't have any non-competition. We continue to supply our products to all the segments where we are operating in.
My question is, can Lumada enter into spaces where ABB Ability is offering solutions eventually eight years out?
Absolutely.
That is two thousand and twenty-eight.
Clear answer, yes.
Today or after 2028?
Yeah. No. Sorry?
From last year.
Yeah. From last year onwards, we continue to offer. There's no issue there.
Great. One last question, shareholding. This shareholding of 75% in this listed entity.
Mm-hmm.
By Hitachi Energy Ltd., is this fully owned by Hitachi Ltd., or is this entity 80-20 between Hitachi and ABB?
Yeah. No. The entity in Zurich called Hitachi Energy Ltd., and that is holding 75%. 70% in our company in India. Yeah. Poovanna, can you clarify?
This is Poovanna here. Just to clarify further, that entity is further held by ABB and Hitachi Limited in the ratio of 19.9% and 81.1% respectively.
Okay? Thank you.
Thank you.
Our next question is from Varun Basrur from Julius Baer. Please go ahead.
Good evening, sir. I hope I'm audible.
Yes, please.
In the earlier earnings call, there was a commitment to take the operational EBITDA to a double-digit range over a period of time. I understand factoring in the earlier commentary on inflationary pressures that the next two or three quarters might be a little bit difficult. If you could just solidify, you know, by when this can be achieved, this double-digit EBITDA, and how it would be achieved. Also, what kind of investments are needed to, you know, achieve the growth in the top line?
Thank you. Thank you for your question again. As you know, in this quarter, that is, October-November quarter, our EBITDA percentage is 9.8%. 9 EBITDA. Okay? This is what we said. If you take a 12-month period, our EBITDA is 9.1%. We are almost come very close to what we talked about in that. Okay? That's one. We are also despite the challenges we are facing headwinds in the commodities, rise in commodity prices or, freight and logistics expenses, et cetera. Coming back to the second question, we are investing, you know, we are setting up greenfield factories in Bangalore. We are setting up a greenfield factory in Chennai. We are expanding our factories in Baroda.
These are the investments will take us into more localizing our equipment, bringing a more footprint, adding Make in India to take the, you know, the tailwinds being provided by this budget, et cetera. Those things we are investing it and over a period of time with our combination of our levers, that is focused on high growth segments, which I talked about renewables, data centers, mobility and HVDC, automation, et cetera, one side. The second one is exports, and the third one is the service. All these things put us to take us through the double-digit. We're already very close to the double-digit EBITDA margin. Then we are in the right directions to go there, where we would like to.
If I could just come back. I'm sorry. This quarter, if I add back the other income, the operational EBITDA was INR 77 crore, which is just a shade under 7%.
We are talking about EBITDA .
Right.
Operational EBITDA is INR 111.7 crores.
Um-
Hundred and eleven point seven crores.
How have we achieved that? The EBITDA is 62 if you take the other income of 15, the total becomes 77
Ajay, why don't you clarify this, Ajay?
Thank you. Thank you for the question. If you see for the current quarter, our operational EBITDA is INR 89.5, that is 7.9%, and operational EBITDA is INR 111.7, that is 9.8%. That is how we are placed.
Okay. I think for my part, we'll take this. Can I take this offline?
Yeah, sure. Sure. No issues.
Thank you.
Thank you. Ladies and gentlemen, due to paucity of time, that would be our last question for today. I now 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, Aman. Once again, ladies and gentlemen, a very big thank you for all of you actively participating in the analyst call. We are happy to provide if you need any further clarification or anything, happy to engage with you. I'm really hoping that you know, in the coming quarters we would like to host a physical one-on-one, physical. Sorry, not one-on-one, physical investors call or take you some, take you in one of our locations. I'm really hoping that the COVID-19 would help us so that we will see each other. But until then, please reach out anytime, anything you need to. We are happy to engage with you. Take care and stay safe. Thank you.
Thank you, sir. Ladies and gentlemen, on behalf of Hitachi Energy India Limited, that concludes today's session. Thank you for your participation. You may now exit the meeting. Thank you.