Good day, ladies and gentlemen, and welcome to the Q1 2021 analyst conference call for Hitachi ABB Power Grids, listed on the stock exchange as ABB Power Products and Systems India Limited. As a reminder, all participant lines will be in 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. I now hand the conference over to Mr. N. Venu, Managing Director and CEO, India, Head of South Asia region at Hitachi ABB Power Grids. Thank you, and over to you, sir.
Thank you, Steven. Good evening, ladies and gentlemen. Thank you for joining us for the call. I hope all is well at your end. It is a difficult time for every one of us. Given the widely spreading second wave of infections and the ongoing health crisis in the country, we have to stay cautious. We cannot lower the guards, nor we can make guesses about recovery. What we can do is leverage the learning from the previous year to march on and stay resilient. We are tougher than the crisis, and we will remain resolute and persevering to build back better. We have uploaded the presentation in the stock exchange. I'm sure all of you have it, and we are also sharing on this. I will be referring the slide numbers as I'm going to talk to you. Right now, slide number three.
In this unprecedented crisis, protecting our people is our main goal. We are mobilizing all of our resources across India to help affected employees and their families with beds, oxygen, testing, et cetera. We are setting up teams of doctors and paramedics, arranging PPEs for frontline workers, and increasing the frequency of awareness sessions for our workforce and their families. We are also in talks with NGOs to expand existing healthcare facilities to handle more patients as part of our CSR activities. We have continued voluntary mass testing of employees to identify asymptomatic carriers and will be initiating the vaccination drive for all our employees at our various locations, in association with hospitals and healthcare centers. I'm very happy to inform you that as of now, more than 85% of eligible employees in our company have already got vaccinated.
More than 85% of employees over 45 years old who were eligible previously on that. Since we support essential services, as we are in the business of providing mission critical technology services to our customers and our offering is manufacturing led, we cannot switch 100% to remote work. However, we are ensuring COVID-19 appropriate behavior across our factories, across our project sites to limit the spread of infections. Safety, as you all know, is our license to operate. We have also achieved 12 million safe incident-free man-hours or five years in terms of the number of years in one of our businesses, that is grids and power quality solutions or the substation business across 135 project sites. Moving to the next slide. Despite the unparalleled crisis, we have achieved a stable top line in the first three months of the year 2021.
That is from January to March 2021. We booked orders worth INR 848 crores driven by industries and Indian Railways. We were also the preferred partner for supplying the transformer for the Indian Railways and Bangalore Metro. Monthly, INR 135 crore of orders where we are L1 were deferred by our customers. Driven by the extensive use of remote management and digital solutions, our revenue increased 26% year-on-year, reaching INR 1,023.8 crores. This was coupled with diverse product mix, ensured resilience in performance in the challenging market conditions. Profit before tax, there were no exceptional items this quarter, was INR 63.7 crores, driven by an unwavering focus on operational excellence and strategic cost out measures that strengthened our cash position. Profit after tax at INR 39.4 crores at the close of the quarter was up 34.9% year-on-year. Moving to the next slide number five.
We utilized all levers to drive industry dialogue and transition to economic recovery and clean energy. We hosted segment specific virtual customer engagement conferences under our flagship Energy and Digital World banner. In this year, with participation over 600 customers. We won a key industry order to ensure reliable power asset performance were chosen by a cybersecurity audit by large city distribution companies. We also commissioned a project for Tata Power in Mumbai with a transformer using ester fluid instead of mineral oil, upholding environment-friendly power generation and reducing fire risk. On top of this, we set up the state-of-the-art remote monitoring and reliability service center, Power X, to strengthen our digital capabilities. As you recall, our strategy of 2025, where we would like to provide more digital product, system services. In line with our strategy, we are investing in these kind of capabilities.
The center will offer our customers an advanced maintenance platform to improve their power assets' overall reliability and uptime. We also partnered with Sikshana Foundation under our corporate social responsibility program to launch the Women in Engineering program. This initiative will facilitate education for girls aspiring for a career in engineering. Women are often underrepresented in the academic and professional spheres of engineering. With Sikshana and our employee volunteers, we will advance inclusive talent development for a better and brighter tomorrow. Moving on to the next very important information on the slide six. Now more than ever, pioneering technologies are needed to enable a future carbon neutral energy system. We have committed ourselves to help our customers accelerate their energy transition.
In April this year, we had the global launch of EconiQ, a portfolio of products, services, and solutions that will contribute towards a carbon neutral future and accelerate the green energy transition. As the first big step towards EconiQ, high voltage portfolio contains no SF6. It has been proven to reduce more than 50% of carbon footprint throughout the total life cycle. Through sustainability-oriented design, EconiQ will further evolve beyond the high voltage products to a portfolio of products, services, and solutions across Hitachi ABB Power Grids to deliver superior environmental performance compared to conventional solutions. While we initiated all this, it has clearly not been easy. Moving to the slide number eight, and this I'm sure you all know better than me. We are all dealing with the second wave of COVID-19, in a certain way.
The daily number of cases continues to rise, it has already touched 400,000 cases. We are facing supply chain disruptions, again, due to lockdown and curfews, and also due to the non-availability of some of the essential things like oxygen for industrial use, et cetera. As a result, industry growth is affected. We all know that during times of uncertainty and volatility, investment is held back. We are also seeing that while power demand is solid, generation is coming under greater and greater load. Business activity is flat. Inflation, in contrast, is rising. The pandemic has delayed the recovery process, but we are optimistic that it will not dent the long-term story of this country. Hopefully, we will soon overcome the ongoing health crisis. The shortage of vaccination and healthcare facilities and the rate of infection will plateau.
We could anticipate the beginning of the respite we are longing for. We could start moving towards normalcy in a day-to-day life and in business. Moving to slide number nine. In the first three months of this year, COVID-19 headwinds notwithstanding, we remained the partner of choice for our products. We were also entrusted with some highly challenging projects, not just within the country, but also outside of this country. The majority of orders came from industries and the transport segment through direct engagement or the EPC route. Areas such as power quality, renewable integration, e-mobility, data center, are essential drivers of our business growth and form part of our near-term vision.
For these, the government's ambition of 24 by seven power for all, higher penetration of renewables, push for 100% rail electrification by 2023, 30% EV penetration by 2030, and vision of Digital India with more and more data centers provide the tracks for Hitachi ABB Power Grids journey. We have continued to make progress in each of these to varying degrees, even during the second wave of the pandemic. Be it through ensuring renewable power utilization for key industry players, increasing electrification for transport, ensuring quality power for data centers, or bringing Indian Railways closer to its data center or closer to its carbon neutral ambition. Moving to the next slide. Orders driven by, as I told you, industry and railways Sequentially grown over 2.9%, and compared to the last year, we are down. As you know, last year we had a big order of IOCL.
While I'm happy to share that we are very good resilient on the growth of the base orders. These orders came from renewables, railways, data centers in domestic and export markets. As you can see, the revenues also came close to the pre-pandemic level. While I'm talking about, as you know, the current quarter, we see the disruptions across the value chain, and that remain a risk for the coming quarters. Moving to the next slide, on the slide number 11. Services and exports, as you know, are the key cornerstone of our strategy. In the first quarter, services and export orders continued to be in the range bound of 15%-20% each to our total orders, while exports are in the higher band of 15%-20%, and the services are in the lower band of the 15%-20%.
These were chosen for automation solutions for solar integration by state utility in Western India, for enabling business continuity through GIS substation service for leading industry players, for transformer repair, and for cybersecurity audit by large city distribution company in one of the metros. Services for cybersecurity is a key element of our future growth strategy. By March, we had achieved the IEC 62443 certification, reaffirming our commitment to deliver products and systems that meet the highest cybersecurity standards. In continued efforts to provide cutting-edge technology, we also conducted power system studies and virtual instructor-led training for top power generation and transmission companies. Export demand for our products, systems, services came from Africa, South and Southeast Asia, Latin America, the United Kingdom, and many other regions. Moving to the next slide. As of 31st March, our order backlog was INR 4,777 crore, indicating future revenue stream.
Profit before tax, as mentioned earlier, is INR 63.7 crores, while profit after tax is INR 39.4 crores. Operational EBITDA, which is another key parameter for all of us in the quarter January to March quarter was 75.9 crores, up 34.1%, improving the EBITDA margin. Solid cash collections and other measures ensured we are debt free. We also maintain our AAA stable rating from the rating agency CRISIL. Moving to the next slide. This is also another important slide. We are investing in India for the long term. While we aim to introduce more products to capture a bigger share of the market, our aim is to localize our portfolio to build indigenous capabilities. We will continue to Make in India for India and the rest of the world.
We made investments in portfolio expansion in our factory in Savli in the GIS space, in feeder factory module assembly, and the traction transformer line expansion, among other things. We have also been expanding our factory for power quality products to integrate Sorry. As the products integrate all presently fragmented operations under one group to serve an ever-growing power quality market, both domestically and overseas. In addition to this, as I've already mentioned to you, the launch of our remote monitoring and maintenance center in Bangalore cover it. For us, these investments will bring operational efficiency, improve our market competitiveness. They will also generate additional value and margins for Hitachi ABB Power Grids going forward. Moving to the next slide number 14.
In the near term, we do anticipate disruptions across the supply chain emanating from the second wave, but our primary focus at this point is protecting our people, our employees, our partners, our communities to together navigate this maelstrom of the COVID-19 pandemic. Sectors such as transmission, rail, metro, and renewable are expected to contribute to bring us new opportunities, enabling us to further strengthen our leading market position. We will continue to focus on high growth segments and aggregate growth through services and digital solutions and exports. We have a comprehensive portfolio of future-ready and state-of-the-art products, software, and services to cater to them. Continuous quality improvement, commitment to lowering the carbon footprint of our operations, product localization, digitalization of the grid will be part of our yardsticks to measure our success. Nothing is complete without people.
Hence, we relentlessly work towards their safety through testing and vaccination, among other things, their growth and their upskilling as we are in the-Transformation of energy revolution, which is extremely important of upskilling of talent, That's where you see we are taking a lot of actions in the direction. We will also strive for building diversity in our various functions and balance the mix of competencies across the businesses for the future ready. Ladies and gentlemen, moving on to my last slide. You would have probably now heard me saying that the carbon neutral future is electric. We believe that our future world must be more sustainable world. There should be an accelerated shift from fossil-based power production towards renewable power generation. You already seen the target set by the Government of India that 450 gigawatt of renewable by 2030.
In addition to that, growing electrification of transportation, industry, and building. Last, a rising sustainable energy carrier, for example, green hydrogen. We see that electricity will soon form the backbone of the entire energy system. Road to decarbonization everywhere is built on much more electrification. It is the most reliable route to achieve carbon neutrality. In this energy transition, we see ourselves, that is Hitachi ABB Power Grids, playing a leading role through our digital and energy platforms. We aim to equip customers and partners with intelligent solutions for a sustainable energy future and contribute to the sustainable development goals. Ladies and gentlemen, thank you very much for listening to me. 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. Anyone who wishes to ask a question may press star one on their touchtone telephone. If you wish to remove yourself from the question queue, may press star 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 Sudhir Bera from Right Time Consultancy. Please go ahead.
Yeah. Good afternoon, sir.
Good afternoon.
Sir, in spite of our focus on the high growth area like renewables, rapid transport, data center, and also we are now leveraging the Hitachi expertise, still we are not able to build a significant order book. Example, our order book on Q1 2017 was INR 847 crore, 847. Q1 2021, we have a order book of INR 849 crore. Why we are not able to build this significant order book in spite of our focus on the high growth area? Also, we are leveraging the Hitachi expertise. My second question, when we will reach the double-digit EBITDA margin? These are the two question, and thanks for the opportunity.
Thank you, Sudhir. I think very interesting questions, and thanks for your time. I fully agree with you, while our focus is on high growth segments, but we also need to consider the market situation we are in, right? We are into the situation of the COVID. As you see since last year, it's going up and down in various parts of the country and also various parts of the world. You need to understand that, compared to the last sequential quarter, this quarter we have improved the order book by around 2.8% quarter on quarter in spite of the challenging situation we are into it. Nonetheless, we take your point, but you need to understand how the market is moving it. Take for example of renewable. Last year, renewable, as against target of 14 gigawatt, they did less than five gigawatt of that.
Okay, it's quite a lot of challenges in terms of execution for everybody, in terms of all these things we need to factor while the focus remains the same, but the COVID factor is definitely an issue on that. The second question is about your double-digit margin and that. As you know, our focus, our Strategy 2025 is always, we want to grow ahead in the market. If the market is growing X, then we want to grow ahead in the market. Right now on the margin standpoint, we are a single-digit margin, our aim is to move towards the double-digit margin progressively. Thank you.
sir, will that affect the current year's growth projection because of lower orders and COVID situation?
We are in line with our strategy, and I think we are able to navigate the COVID situation, but come close to our strategy.
Thank you, sir.
Thank you. The next question is from the line of Renu Baid from IIFL. Please go ahead.
Yeah. Hi. Good evening, sir. I have two to three questions. My first question is a bookkeeping question to understand the reason for sharp jumps in the other expenses. Sequentially, if you look, other expenses are almost at same levels. Last quarter, if you remember, there was INR 70 crore cost overrun, which was provisioned for. Can you help us understand the reason for increase in these other expenses? Any FX impact or any other takeaways here?
Thank you, Renu. I think maybe Ajay, our CFO, can answer that question.
Thank you, Renu. Thanks for the question. As we discussed, the other expenses, mainly the increase is coming on the freight and forwarding expenses that we have incurred in this particular quarter. Also on the IS cost. As you know that we are spending on the IS cost. The IS, we are working on the new ERP system that is going to come shortly. This is which we are coming away from the ABB system. As of now, our IS infrastructure, basically, we are using the ABB's IS infrastructure. We are running a transitional service agreement on this particular phase. Going forward, we plan within the three years, we'll come out of this IS charges that we incur from ABB. We are in a transition phase.
In a transition phase, while we build up our own infrastructure IS related, that is why initially we will be incurring a cost but gradually, in the coming periods, we'll be out of that. To summarize, major is coming from the freight and forwarding, and basically on the IS related expenses.
Because these expenses were there in the previous quarter as well. Is there a substantial jump in the infrastructure building investment that we are incurring? Will it be possible to quantify? The reason I'm trying to ask is last quarter, we had a INR 70 crore cost overrun related provision because of which other expenses were to INR 40 crore. This time, on a similar kind of revenue base, we have a similar expenditure base and which is without the cost overrun element. I'm just trying to understand that the ERP or the IT expenses which were there on a sequential basis. Have we seen a INR 30 crore, INR 40 crore kind of jump on a quarterly basis for those investments?
No. Not INR 30 crore-INR 40 crore jump, because then we have to look into the other elements of I have given you a broad explanation because there are other elements as well that basically there is an increase in the insurance cost, there is increase in the freight cost, and as I talked about the IT, and also since the revenues are on the higher side, basis which we have a increase on the IT. These are the major things that has come.
Basically, no one-off elements or non-recurring items in your view and this should be the broad run rate, at least on this kind of revenue base that you're looking at.
Correct. That is what we're talking about. These are the major four, five heads that we have incurred the cost.
Sure. My second question was to Renu to understand a bit more in detail, how should we look at the addressable markets for ABB Power products solutions, especially in the industrial automation space, as in last quarter we discussed as Lumada offering strengthening the industrial automation footprint. Which type of industries are we focusing on? Are these discrete or process automation side of the business? How is Hitachi ABB Power Grids placed versus ABB India's as in the ABB Ability solutions or Siemens MindSphere solutions here, given that those companies have customized process solution offerings as well as products for these core sectors. How is our portfolio positioned versus some of the other automation peers in the market?
Yeah. As you know, our portfolio is primarily on the energy side. Energy right from the generation, transmission, distribution, and the consumption side. We basically looking at wherever the energy intense industries, whether it is a processing industry, steel, aluminum, and so on and so forth, and also data centers, and that's where we come into picture. The whole idea is that we will deploy our technologies with the products, services, everything. In addition to that, we will also run on the Lumada IoT platform, which is our new one as Hitachi has been investing on this thing. All of our software solution, whether it is SCADA, whether it is the workforce management and is asset management, we will be running on that.
Just for your information, we have received an order in the last quarter from Bangalore Metro in addition to providing our power technology. This will be first time deploying a workforce management as part of our SCADA solutions there. These are the things where we will be deploying heavily on going forward in integrated industries and infrastructures there, including industries.
specifically from
Ms. Baid, sorry to interrupt, but for any follow-up, may we request you to rejoin the queue, please. The next question is from the line of Renjit Sivaram from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Congrats on good set of numbers. Hello, can you hear me?
Yes, we can hear you.
Yeah. As a follow-up of that other expenditures, specifically in the IT expenditures, like recently there was a deal with HCLTech by our parent. Will that help us in reducing the overall IT cost going forward now that we are gradually coming out of the ABB related deal? Yeah.
As you probably would have seen the announcement from HCLTech standpoint. You know that we are building up the organization globally as a standalone company. As part of that, we are also creating our own infrastructure so that we can de-link from ABB. As of now, ABB is providing certain transactional basis on the ERP, IT related to that. The deal what you're talking about is that. But yes.
We will be building up our own standard standalone IT infrastructure and also on the ERP. There will be cost in between, but over a period of time, then the cost will come back to the normal way it should be.
Okay. Sir, in the EV charging space, do we have any products for these two-wheelers and three-wheelers market, and what could be the opportunity size here if we had something?
As you know, EV market is one of our growth segment. You also know that EV market right now, India is at a nascent stage. We have the product for the four-wheelers at this point in time for both fast charging technology as well as the free charging technology. We also tied up with Tata Steel Limited under a pilot. In a couple of months from now, the pilot will be running in IIT campus. While we are having this portfolio, we are also looking at the portfolio of the rest of the four-wheeler. Please do understand, when we're talking about the charging equipment here, we are talking about the charging, not only charger just. We are talking about the charging equipment, which includes the grid resilience in that.
What will be the broad opportunity size, if you have to put a number to it?
As I said, the market is in a very nascent stage of the market. Just imagine 2 million buses on the road. How long it will take and how it will convert, anybody's guess. As you know, government is having as part of the same contract. There are number of buses being converted into an electric mode. That's exactly we are working on that.
Thank you.
Thank you. Before we take the next question, a reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, we would request you to rejoin the queue, please. The next question is from the line of Harshit Patel from Equirus Securities. Please go ahead.
Hi, sir. Thank you very much for the opportunity.
Thank you.
Sir, my first question would be on, if you remember, in July 2020, the government of India had banned the Chinese imports in the high voltage and medium voltage power transmission and distribution equipment. From all the new tender onwards, the Chinese imports were not allowed. Sir, how this situation is helpful to us? I mean, how it has benefited us? Have we gained any market share in some of the new tenders? If you could give some outlook on it will be very helpful.
Yeah. Thank you for that. As you know, the government has come out with that particular circular on the border countries. You know that when it comes to Hitachi ABB Power Grids, we have been manufacturing here for the last six decades. Most of our equipment is meeting the requirements of the local content. We are actually, with the government's renewed push for Make in India and Self-Reliant India, the clause giving preference to supplier meeting a local content requirement of 50% is now applicable in all the government contracts. We also seen some limited advancement of this for sure. What we also noticed is that the private industry players, in our view, may also give preference to Indian suppliers. We are seeing private players also now ask for the local content.
With the above, in our view, we may stand to gain in certain parts of our portfolio, while we are still in the process of indigenizing some other product ranges. Changes like these only spur forward our long term view of building India as a manufacturing and export hub.
Sure, sir. Sir, my follow-up question on that would be, sir, you have previously mentioned that we have more than 80% localization as far as-
Yeah
finished products are concerned. sir, what would be our blended localization, even including the component? I believe there would be some component that we would be importing as of now. Including everything, what would be our blended localization level as of now, and when can you expect we could reach 90%- 95% kind of a number? How many years ahead would it be?
If you really look at our whole Hitachi ABB Power Grids, we are in excess of 80% is completely localized. If you take the whole thing, in excess of 80%. We do couple of components, we import it, and we do have, as part of our supply chain process, we do also have a multiple country sourcing there. Wherever we need that any particular border countries is not applicable, then we always engage our supply chain process to get the equipment imported from the countries of our suitability.
Thank you. The next question is from the line of Jonas Bhutta from PhillipCapital. Please go ahead.
Good evening, sir. Congrats on delivering a decent set of numbers. Two quick questions. One, from the recent annual report, we just gathered that APPSIL derived almost INR 1,150 crore, that is about 35% of sales from ABB India in CY 2020, against INR 450 crore in CY 2019. That's a massive jump. About 35% of your sales came from ABB India. Was that for a particular project? Do you expect this level of dependency on ABB India going forward? This is about almost 35%, one-third of your sales. In addition to the same questions, our IT and management fees in the related party is almost INR 220 crore, which is almost doubled YoY in CY 2020 over CY 2019.
While you did mention that you are in a transition period where you are moving from the erstwhile ABB ERP to your own, can you at least give us a glide path as to how long will this INR 220 crore or equivalent amount be charged over the next two to three years? Do you expect this number to sort of sustain here or increase? My second question is on export strategy. Maybe I'll come back to that once you answer this question.
Yeah. Thank you. Maybe, I think, let me answer your first question and Ajay will come in there.
Yeah.
I hope you would have seen some of our annual report from the related party transactions, right?
Yes, sir.
As you know, when we have done as part of the demerger NCLT. When we've done the demerger, many of our existing contracts were not novated. Many of our contracts will continue to be in the name of ABB. However, by order of the NCLT, then we have become standalone company in that. The arrangement between us and ABB is that all the novated contracts, we will continue to run through the revenue under ABB's name as a related party, but there will not be any margin or anything which goes to ABB. That's the reason you are seeing a huge thing, which is INR 1,135 crores, is basically all the Hitachi ABB Power Grids. The name of that contract was not novated still to our APPSIL, but still remains under ABB. That's the reason we are seeing that.
It is not there is any dependency between ABB and us. Ajay, maybe you can comment on that.
Venu, I think you have spelled out. Basically, we are doing related party transactions with ABB India, and the only thing that we are using ABB is for the pass-through transactions. Probably, if you are referring to the annual report, then if you compare from the prior period, that number will be for nine months because if you see that the numbers are for nine months, whereas in December, the numbers will be for 12 months. That could be one delta you are seeing. Otherwise, we are using ABB only for taking the pass-through transactions for the customer orders which are yet to be novated. As we speak, we are already quite ahead on the novation piece. Coming to the IT part, that second question-
Yeah. Probably we can add that we are right now in more than 90% of our contracts got novated in our name now.
Correct.
Go ahead.
Yeah. Coming to the IT again, the earlier expense cannot be compared because those are nine months expenses. As we explained that we are developing our own IT infrastructure, and presently we are having a transitional service agreement with ABB, and we see that this agreement will continue to have for the next three years. That is the time period that we see at the moment. Going forward, we'll see how we are placed.
The CY 2020 numbers, sir, can be assumed, right? The INR 220 crore run rate can be assumed going forward.
Yeah, 220 can be assumed. As I told you, we are also working on the ERP projects that is going to come, basically to harmonize our system end-to-end processes. That also. That is what initially we are spending more, and the benefits will come maybe after two to three years down the line. That is what we are indicating.
Got it. My second question was more strategy related because you did highlight that growing exports is one of the key growth areas for the company. Just wanted to get your understanding on exports today account for almost 18% of sales. Under the new management of Hitachi ABB, is there a change in mandate where you've come up with a number that you want to take this exports to, 25%-30% of sales? Is there a mandate change into how exports were first nominated onto India under ABB, and is that changing under Hitachi ABB? Any such thing. There was also talk about Hitachi ultimately helping us in getting project level finances for our clients and thereby pushing exports. Any roadmap if you can share on how you plan to grow exports, that will be great. That's all.
Sure. We have a very clear strategy as we are articulating it. The exports right now in the range of 15%-20%, and we have a plan to take to 20%-25%. You would have seen my CapEx slide, which I have put it as part of our CapEx. We are also expanding the capacity, for example, which is from almost we are doubling our capacity from the existing level. Basically, all these things focus not only for the domestic market, but the export market in that. That's where right now we are in the range of 15%-20%, but we are aspiring to move from 15%-20% to 20%-25% over a period of time.
Thank you. The next question is from the line of Subhadip Mitra from JM Financial. Please go ahead.
Good afternoon. Thank you for the opportunity. Sir, in the beginning of your presentation, you did mention that your key focus areas in terms of future growth remain, I think, T&D, renewables, hydro, network, et cetera. If it was possible for you to paint us a picture that over the next two to three years scenarioHow do you see the market size of each of these segments panning out, and when do you think it will come to fruition?
Yeah. Thank you for your question. I think we don't give the market size sector-wise, but we believe that the rail is going to be First, let me start with the rail, I come to the transmission. Rail will definitely have a huge amount of opportunity, not only the 100% electrification of the remaining 27,000 circuit kilometers by 2030. That will, any case, will have opportunities. In addition to that, what we see is regional high-speed rail. Regional high-speed rail is also a focused area, that's the one thing. We also see in the next two, three years, the project of the bullet train, that is Mumbai to Ahmedabad, is taking shape. As you probably would have seen, the civil part of that has been already awarded. That's a quite a big project we see the opportunity.
These are all the rail and also the metro projects. The next one is on the renewable. As you know, with the 450 GW of targets set by the government, even if you take the factor of that, is a huge opportunity in that. We have been adding, in the last four, five years, 8 GW- 9 GW . To reach that, we have to do at least, even if you take a factor two, 4x , we have to do. That's been a big opportunity for us, both on the grid side, on the generation standpoint, on the digitalization of that particular thing there. What we also see is, next one is on the data center. Data center is, with the amount of data privacy laws, is a very big opportunity in India. As we speak, there's a lot of data centers are setting up.
As you know, every megawatt, anywhere between INR 30 crore- INR 40 crore of CapEx per MW of the data center in there. High-scale data centers need lot of grid connection, grid stability, resilience. You would have seen our last analyst call, where we have the complete portfolio of that particular market in that. In addition to that, I think we also look at limited, very select greenfield investment in the industry, especially in the core industrial segment. As and when that happens, so that's also another opportunity because more and more these things need to, both on the energy standpoint and the digital standpoint. Both of them have to go hand in hand, where we can bring the opportunities together from the energy platform as well as on the digital platform side. Thank you.
Thank you. The next question is from the line of Sumit Jain from ASK Investment Managers. Please go ahead.
Thank you for the opportunity. Two quick questions. What is the size of Hitachi's business, which is unlisted, and current areas of operation? As per the contours of the current deal between ABB India and Hitachi ABB, after eight years, can you then enter into LV, MV products which you right now cannot? When you talk about energy storage, which you've spoken about in your previous presentations, what exactly that opportunity is? Thank you.
Yeah. Thank you. I think, as you know, we are a separate independent company, standalone global company, continue to be headquartered in Switzerland, and then we have our own listed company in India, and we have a separate board. We cannot comment on the Hitachi because that's a separate legal entity, and since it's not a listed, so publicly not available, so we will not be able to comment on that. That's number one. Can I know your second question, please? Can you please repeat that?
After eight years of this agreement.
Yeah
which is where there is no compete, can you enter into LV and MV products, which you right now cannot?
Let me just clarify. I think that's a very good question. We always are non-compete only from one side, not other side. Okay? Otherwise it will never be approved by the antitrust team. At this point in time, we do not have any non-compete clause on us. That means, if we want, we can do medium voltage, we can do low voltage. The compete clause is only on ABB, not on the Hitachi ABB Power Grids. Having said that, our strategy remains on the energy standpoint. Our strategy, as you know, we want to be a partner of choice, enabling our customer stronger, smarter and greener grid standpoint. That's where we would like to focus on that. We remain that focus, and that's exactly what we are looking at.
It is not about competing on the low voltage or medium voltage, which was, in any case, not part of our strategy.
Energy storage, when you mention, what exactly would you like to highlight in terms of the opportunity? Is it related with EV sales, et cetera?
I think it is related with that. As you know, the more and more renewable energy, especially the solar, and with so much of penetration, definitely the grid needs to be more of a storage, right? The inertia of the system standpoint, et cetera, it needs more of a battery energy storage systems or any other form of the storage system in there. That's where the energy storage comes in. In that we have a quite a good offerings on the microgrids, our energy storage, and we have the battery management as part of our portfolio. We have a good connections for the grid-scale energy storage plants. This is another big opportunity in India for the energy storage opportunity. Thank you.
Thank you. The next question is from the line of Alok Ranjan from L&T Investment Management. Please go ahead.
Hi. Thank you, sir, for the opportunity.
Welcome.
Sir, you have highlighted in your presentation that this quarter we have got around INR 18 crore of order, especially in the data center, and you have highlighted annual report as one of the emerging growth areas. Could you give more sense on the opportunity size that is available, say, for a data center of size of 50 MW, what kind of opportunity that comes to our company? How is the competitive aspect there? Second question is on Grid Automation. Could you give some sense on which states are more active on this Grid Automation? How is the intensity of the automation differs between the discoms which is operated by the private player compared to the one which is operated by the state agency? That's all my questions, sir.
Okay. Thank you. I think your first question on the data centers. Data center, with the data privacy laws kicking in, there are quite a lot of opportunities on the data centers, and data center as a business. Many players have been setting up of the projects here. We have got one order from one of the largest conglomerate in India who's venturing into the data center opportunities. We also see similar to that, the big tech companies are also setting up the opportunities. They're all hyperscale data centers. Talking about 50 MW- 100 MW of data centers. 100 MW of the energy consumption of the data centers in that. For opportunity standpoint as well, we have a project delivery connection. That is the one thing which is basically substation, automation, grid compensation, and also the reliability maintenance of these things.
Data center is extremely important there. Reliability of the power is extremely essential. We bring a lot of automation solution to the data centers in addition to our traditional power technology. Reliability care, thereafter, we also can talk about using our power system model. We can also look at energy savings. Energy is one of the biggest cost element in the data center. We can also look at minimization of the energy cost. Those kind of things are opportunities for our company in that. Second question of yours is especially on the Grid Automation. Grid Automation business consists basically, it starts from the traditional control relay panel, substation automation, and then you're talking about the communication standpoint and then enterprise software and battery energy storage is also part of the Grid Automation portfolio.
We see this is a very robust and we need these kind of automation solutions in almost in every part of the value chain of the energy. In addition to that, we have the SCADA networks for the metros. We have a SCADA network for the transmission substation. We have distribution automation for the discoms. These are the opportunities will go into the various things in that. Last question about private versus state agencies. For sure, private utilities they are far ahead in terms of the automation, digitalizing the automation. Yeah, there are also couple of government utilities are also catching now. I think private utilities are far ahead in digitalizing the automation.
Thank you. The next question is from the line of Manish Goel from Enam Holdings. Please go ahead.
Yeah. Thank you so much. I have two questions. One on the annual report mentions about that for growth of exports, we have identified five products for global sourcing. Would like to know what's the potential size and what kind of revenue contribution can be expected. What are these products, if you can provide some insights? That is number one question. Number two question is on clarify on is there any overlap between ABB and Hitachi ABB in the areas of data centers and EV space? On EV, we provide charging solutions, but we don't make chargers. How would be the go-to-market strategy? Do we go along with ABB and provide the entire solutions, or how would it be going forward, number one, on EV.
Number two, on data centers, even ABB is having a presence. So is it that they would be providing the inside the data center, low voltage and medium voltage, and we would be focusing more on the outside? How would we approach the market? Thank you.
Yeah. The first question was in the annual report on the exports, right?
Yeah. Five products we have mentioned.
Yeah, correct.
have been identified for global sourcing.
Got it. As you know, I've been also telling you, our export strategy is very consistent, and we are making the progress in line with our strategy. Our exports presently in the range of 15%-20%, and we are making a lot of actions and taking initiatives to move from 15%-20% to 20%-25% over a period of time. That's the reason we are investing it, as you can see from our CapEx, and also the local footprint. That's exactly what we are doing in that. As part of the export, so we have a strategy. One is that some of the products we manufacture only here and no other plant in our Hitachi ABB Power Grids. For example, a 66kV circuit breaker is a global feeder factory. We sell that circuit breaker any part of the world from here.
That's the one strategy in that. There are also feeder component strategy. The third one is, we also sell directly to the customer using the existing Hitachi ABB Power Grids sales network. We have a multi-channel approach in that to bring our exports in that. Moving to your second question on the overlap. Let me come to the overlap. Before that, let me talk about the EV space. Let me clarify to you. EV, we do have the chargers, but we don't make only chargers. We make chargers and charging systems. We do it for a large scale application. For example, a mass rapid transit system, like in buses. Where in a bus depots, where those kind of things where you need a resilient charging system and also the chargers in that.
That's where our fast charging technology, for example, which is part of the Hitachi ABB Power Grids, this technology will enable bus to get a boost of charge in less than 20 sec. This is a high power. The bus doesn't need wait for hours together to get charged. We have the technology. We can get the charge to 20 sec. And keep moving in, and thereafter again, we do it, and when you come back to the depot, you get the full charge kind of thing.
Yeah.
Chargers and charging systems are part of the thing. Our go-to-market strategy is very clear. As you know, I told you also we tied up with Ashok Leyland. We are setting up right now a pilot, and we are going to run this particular bus using this technology, using our chargers in IIT Madras in two months from now in that. That very clearly we have that. The last question of our data centers. See, as I told you, Hitachi ABB Power Grids, data center is one of our biggest growth segment. We do the complete electrical, right from the grid connection to the last pin. We do not have the products like low voltage and medium voltage part of our thing. That is there with ABB in that.
We do grid connection, we do all the transformers required in the data centers, we do all the power system models in that, and we do the automations everything in that. That is how we are working with the data center. Power quality for the data center is another very important thing. Power quality for the data center is extremely important.
Sure
complete offerings for the data centers.
You mentioned about INR 30 crore-INR 35 crore per megawatt. Is it your addressable market or a minimum investment in a data center?
No, that's a CapEx for the data center, not our-
What would be your addressable market, sir? Roughly out of that INR 30 crore-INR 35 crore.
In any place, these kind of things, between the 10%-15%, depending on the specifications, slightly higher too. That will be the addressable market.
Thank you.
Okay.
Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. N. Venu for closing comments. Over to you, sir.
Thank you once again, taking your time, and listening to us. I really appreciate very much. I really want to thank you once again and want to wish you a very good health. Please take care of yourself, your families, your colleagues. Stay safe. We all need to collectively navigate this particular wave two, which is right now in its full force in all parts of the country. Thank you once again.
Thank you. Ladies and gentlemen, on behalf of Hitachi ABB Power Grids, that concludes this conference. We thank you all for joining us. You may now disconnect your lines.