Ladies and gentlemen, good day, and welcome to the Hitachi Energy India Limited Q2 FY 2023 analyst conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Venu Nuguri, MD and CEO. Thank you, and over to you, sir.
Yeah. Thank you, operators. Good evening, ladies and gentlemen. Thank you for joining us for the call, and I hope you're all doing well, taking care of yourselves and your families. Last year around this time, if you recall, we unveiled our new identity, rebranding ourselves as Hitachi Energy. This name reflects the breadth of opportunities where we can contribute our competency, expertise and solutions portfolio and support the acceleration towards sustainable energy future and societies.
Through our first year as Hitachi Energy, we invested in capabilities to capture the evolving energy landscape, strengthening our foundation of talent, expanding our manufacturing footprint and building a brand that we all know today. As Hitachi Energy turns one, we will continue and deliver results with strategic expansion to drive for high growth segments.
We have uploaded this presentation, which I'm going to refer already in BSE and NSE. For your benefit, I'm going to refer the slide numbers. In the next 20-30- minutes, I will take you through our performance during the quarter ended just now, the quarter ended September. Let me move to the slide number three. Consistent performance and a strong order pipeline is the slide. In this quarter ending September 30, we received orders worth INR 1,278 crore, up 30.6% year-on-year. The continued order growth momentum was driven by key wins in renewable industries and rail segments. As you know that these are our high growth segments. We have been driving this continuously, consistently for last several quarters.
The revenue stood at INR 1,115 crore, up 31% year-on-year, while the PAT was up 8.3% year-on-year. Consistent focus on execution, close customer connect and various mitigation efforts are tempering the impact of tight supply chain on earnings. Some of the notable order wins during the quarter were NTPC Renewable Energy order for the transformers and the rail segment from the BLW and BNC Power, mining and data centers, and some of the industrial orders, aluminum smelter and then steel orders, etc. I would like to take a moment to talk about the order from NTPC Renewable Energy Limited to supply power transformers for their upcoming 4.75 GW renewable energy park in Gujarat.
Once it's completed, it's going to be one of the largest renewable park anywhere in the world. The solar park, as I told, we will be providing transformer manufacture at our factory in Vadodara, and this will be the largest rating of transformer used for solar power evacuation in the country so far. These orders validate how we continue to gain traction from customers in the high growth segments such as renewables, railways, data center and substation and industries.
Moving to the next slide number four. As Hitachi Energy, we have followed the three pillars, namely safety, integrity and quality, which are our licenses to operate. We have been continuously investing in our employees, including contract staff, to ensure they understand and inculcate the fundamentals and live by these principles and examples.
We continued organizing regular training sessions, you know, camps for our employees. While these have focused on physical health and safety aspects, we have been steadily increasing our focus on sustainability. This has been visible to customers who have acknowledged and appreciated our work with the reward and recognition.
While imbibing these in our operations and business process, we are also taking the message forward, promoting importance of safety and quality with our outreach efforts. During the quarter, we organized a road safety program in association with well-renowned two-wheeler company, Hero MotoCorp , and this includes specifically road safety program session with more than 2,000 participants across locations. Moving to the slide number five. As a pioneering technology leader. We collaborate with customers, partners, and stakeholders to enable a sustainable energy future.
We strive to be customer-centric, and we work to build and maintain trust for a long-term partnership with our stakeholders across the sectors. One of the orders bagged during the quarter included the first order of 100 MVA Scott transformer. This is a first for Hitachi Energy globally, and I'm proud to share that from the product design to product engineering, our engineering team in Vadodara will be driving this project from design to manufacturing and commissioning.
These projects are examples of how we are accelerating the evolution of world's energy system by collaborating with customers and bringing a new age solution to the fore. Efforts to do so with transparency and integrity were recognized for Excellence in Corporate Governance 2022 award, a reaffirmation of our confidence. We are also driving the conversation on energy transition at industry thought leadership forums, taking the message to our customers across India and also nearby countries like Nepal, Bhutan, Bangladesh, etc .
With industry leaders, we are also rallying talent equipped to tackle this transition. We are committed to supporting all of our customers, addressing the needs of industries and societies. As a part of our continued outreach to the communities around us, we supported the pediatric ICU in Mysore District Hospital under our CSR initiatives, providing infrastructure that will enable the hospital to provide care that was not possible until now. Moving to the slide number six. Hitachi Energy is making timely progress with its portfolio that is strengthening, expanding, and evolving power system.
The business is focusing on continued localization of its global portfolio, building indigenous capabilities and products, as well as creating new jobs. We are continuously evaluating the energy and demand landscape and necessary steps we must take to keep ourselves relevant to deliver cutting-edge solutions to our customers in India and around the world. In August, our greenfield manufacturing facility for high voltage power quality products was inaugurated by the Honorable Chief Minister of Karnataka, Sri Bommai.
This facility doubles the existing production capacity of advanced capacitor units, banks, and other products which are very critical for the power quality. These products find application in power utilities, industries, renewable, transportation, rail segments to improve efficiency and reduce energy waste. Along with power quality products, we also initiated the manufacturing of next generation switchgear operating mechanisms and expanded dry bushing for transformers.
These factories have low environmental impact production principles and are iterating on technologies that improve reliability and flexibility of the grid. We are participating in the country's growth story, continue to bring industry-leading experience, deep domain knowledge, and pioneering technologies that support our stakeholders with accelerating the global energy transition. Moving to the next slide number seven.
Hitachi Energy in India has placed sustainability at the heart of our purpose, focused on advancing a sustainable energy future for all. The most significant impact that we are making is accelerating the energy transition in India. As you know, last year, we adopted an ambitious target under the Sustainability 2030 program to become carbon neutral in our own operations by 2030.
After reaching our first milestone in December 2021, that is switching to 100% fossil-free electricity in our operations, we looked at innovative ways to optimize energy generation and consumption. As stated last quarter, we are targeting 60% reduction in CO2 emissions within financial year 2023, and have reduced operational carbon footprint in this quarter by 40% compared to the last year's same period.
We also implemented greenhouse gas standards and are in the process of drafting smart metering across our 18 factories and 19 sales touchpoints and other facilities. From the top leadership to location heads and business unit leaders, everyone in the organization is committed to these goals, and they have the targets on monitoring on a month-on-month and quarter-on-quarter basis. Moving to the next slide. I think this slide, you all know better than me, slide number eight.
During this quarter, inflation climbed 7.4% against the 7% inflation in the previous quarter. The rupee depreciated at a record low of 82.3 per USD dollar, the lowest in history. The threat of recession looms large on the U.S. economy and its impact on other economies, such as India, is yet to be seen fully. The shortage of semiconductors, chips, etc , continue to worry the industry. Even though supplies have improved slightly, but overall base is still a challenging shortage system. There have been a gradual improvement across indices such as index of industrial production and core industries, etc . The overall economic indicators are starting to look better, and India appears to be slowly getting back on track.
The Indian economy remains one of the fastest growing economies in the world as of now. Moving to the next slide number nine. As you see, we continue to gain traction from customers in our high growth segments, and we have been driving these high growth segments since several quarters now. These are renewable industries, transport, data centers, HVDC, etc , some of the high growth segments. The total orders with the efforts of various activities, the total orders are up by 30%, 30.6% year-on-year. Orders such as the one from NTPC Renewable Energy Limited to supply power transformers are resulting from the nation's target to have 50% electricity generation from renewable resources by 2030.
These are the commitments, and offshoot of those commitments are some of these projects getting finalized in that. Orders were heavier on products from end users and evenly split between utilities and transport, followed by industries. In the sector, transport and infra was stronger this quarter with a push towards data localization regulations and data center policies. We expect healthy growth. In railways, for example, we are looking at opportunities such as 25 KV electrification of a high density corridor and upcoming, you know, eight to 10 metro projects which are expected to be awarded in the fiscal year. Moving to the next slide number 10. With 25% of the order book, exports remain healthy.
You recall our strategy from the last more than one year to bring the exports to the 25% corridor, which we are happy to share that we almost reached our you know targeted corridor. With 25% of order book the orders from established export markets, our nearby countries such as Nepal, Bhutan, and Middle East and also the Americas. Understanding the market requirements, Hitachi Energy has been proactively augmenting its manufacturing facilities to meet changing demand. Today, more than 80% of Hitachi Energy's portfolio is locally manufactured in India, and the manufacturing base in India also caters to the global requirements of five products.
You have seen successively for last several quarters, we are, you know, opening up the new factories or expanding the new factories in these directions. Service orders remained strong from a healthy mix of base orders for retrofit and spares from utilities, including some breakthrough orders for GIS bay extension and substation automation systems. As a partner across customers' plan, build, operate life cycle, Hitachi Energy in India continued to provide technical expertise, services such as renewable studies for utilities and engineering advisory for mining industries, etc . The annual potential market for service averages around INR 2,000 crore for Hitachi Energy in India. We are leveraging our installed base to expand in exports and service. I will talk more about this in the upcoming slide. Moving to the slide number 11, our financial performance.
As you can see from the table, the company's efforts towards the mitigating the impact of macroeconomic factors have been yielding benefits by softening the impact of external challenges. We continue to face semiconductor shortages, which is a very critical thing in our grid automation business, commodity and freight prices increase and foreign Forex volatility. This was reflected in company's performance in the short term. The company booked orders worth around INR 1,278 crores, up from 30.6% in comparison to the same quarter last year. The profit before tax, INR 250.2 crores, and the profit after tax is INR 37.2 crores. I would like to bring your attention to the last column.
If you see the year-on-year comparison of the company performance between the first half of our fiscal year 2022 and the first half of the previous year, the growth has been more than 150% in the orders and an indication of a consistent growth performance and a strong order pipeline. With the large orders of HVDC Mumbai, which has been booked, our order backlog crossed INR 7,000 crore mark and provides us a revenue visibility of more than 20 months. Moving to the next slide number 12. As you all probably seen the news that Hitachi announced acquisition of remaining shares from ABB ahead of schedule, further supporting Hitachi Energy's 2030 plan.
The joint venture company was launched and began operations as Hitachi ABB Power Grids on July first, 2020, and then announced the change of company name and brand to Hitachi Energy on July first, 2021. The progress in the company has been possible, bringing together the passionate global team of 40,000 Hitachi Energy employees and 2,500 employees in Hitachi Energy in India.
This acquisition will provide opportunities for accelerating the synergies between businesses and functions, especially in R&D, IT transformation programs, common share services, and various, you know, synergy businesses such as rail, smart grids, etc . It has also helped us move forward and continue with the trusted partnership and collaboration with customers, partners, which is essential to finding the solution our world needs.
Moving to the next slide number 13, that is a very important slide to give you a little more information where we are going to have a high growth segment focus going forward in that. The growth momentum in market and economy is helping us stay cautiously optimistic about our high growth segments. We are making strong inroads, high growth segments such as solar, wind, data center and rail and HVDC. The renewable market, which has an installed capacity of solar at 60.8 GW and wind energy at 41 GW, is poised for 5x and 3x growth respectively. To meet the commitments of the governments in a 2030 scenario.
We are offering for the renewable market such as electrical balance of system and grid connected substation, evacuation substation, energy and grid management automation and various type transformer, including dry-type transformers and so on and so forth in that. To efficiently transfer clean energy across the vast geography of the country, government is discussing projects to make the national grid more flexible and secure. Over the next eight to 10 years, we anticipate HVDC connections for utility scale solar generated at Bhadla, Leh, Kargil, etc . The data center market in India is expected to add 45 data centers spanning about 13 million sq ft and more than 1,000 MW of IT capacity over the next three years. This is our growth segment, focus segment. We have a very high market share as of now in this.
We provide substation, GIS, automation, dry-type transformer solutions, data centers and also planning studies, etc . Let me dive deeper into one of the growth drivers for us, the Indian Railways. World's fourth largest railway network, you all know that, is undergoing a massive upgradation and expansion led by electrification of rail and adoption of energy efficient system.
They have already announced various sizable tenders for high density corridor of Mission Raftaar, and also the 12,000 HP horsepower, loco projects and 9,000 HP horsepower loco projects. Hitachi OEM of these particular projects. We have a large installed base in the country when it comes to service, and we have been here more than six decades, and this gives us a good market for leveraging service portfolio.
Like I mentioned before, the annual potential market for service is in the range of INR 200 crores for us and with our portfolio of digitalized classic services, advanced, services and more of, you know, 10%-15% of our orders. Similarly, for exports, with our manufacturing, expansion of our, footprint, we have been clocking a quarter of our orders from exports over the last few quarters and expect to build on this trend going forward. We believe that the company is also well positioned to support the growing electrification of transportation, industry and building segment with our purpose-driven, growth plan. Moving to my last slide number 14.
We are supporting customers across the value chain, throughout the full lifecycle, along the value chain, right from the planning stage of an asset to through the building phase of an asset until operation and maintenance phase of it. Advancing a sustainable energy future is not achieved purely by making best in class and pioneering technology products. It takes reliability and availability through their entire life cycle.
We know this because today we are trusted partner with responsibility for existing assets commissioned over 100+ years of technology leadership globally. We try to take an integrated view on the plan, build, operate and maintain phases to design and provide sustainable solutions to our customers, partners, helping to advance the world's energy transition.
As we move forward with our Hitachi Energy 2030 purpose-driven growth, we will continue to focus on strengthening our power grid core business. The core business is our transformer business, our switchgear business, our HVDC business, our grid automation business. They are our core business as we are doing. Doubling up on digital and services, as we talked about, and expanding at the edge of the energy system. It could be, you know, that.
On this note, I will close my presentation to open the floor for questions, but I want to share another positive announcement. I'm happy to announce that we are planning to organize an in-person analyst meet in our state-of-the-art, you know, facilities in Baroda, where we have an experience center, where we have an energy tech energy technology center, both in the next year. That is year beginning 2023. We shall share the details soon once we have completed our planning stage.
This will enable you to understand how the digitalization is shaping up in a very big way in this industry and how our new products, new portfolio can enable even faster acceleration of customers, you know, energy transitions in that. With that, ladies and gentlemen, I really thank you for joining us today, and I would now request the operator 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 and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants. Anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Dinesh Mahajan, an individual investor. Please go ahead.
Good evening, sir. Am I audible?
Yeah. Yes. Please go ahead.
Yeah. As per recent media reports, there have been reports of transformer shortages in the North American market, like utilities are facing transformer shortages because of increase in the electric vehicle charging infrastructure. Do you see similar trends in world over or in the Indian market? Second question is pertaining to are we into high speed rail transformer business like the bullet train business? Like, is Hitachi Energy catering to that business? Thank you.
Yeah. Thank you for your question. I think, if you really look at the North America markets, I think you, as you rightly said, you have read it in the media, same is the case. There is a huge amount of demand arising out of energy transition there. One is that, and also strengthening the grids and resilience of the grids. All those things are creating a huge amount of demand for lots of products. In addition to that, as you rightly said, the electric vehicles is also another growth segment. Some of the components which go into the multiple segments since the demand has come up at the same time.
Naturally, you know, there is always a challenge from the supply and demand standpoint in that. We expect a similar kind of trend to continue in our other countries, including India, even though we have a very robust, you know, capacity for the transformers. The question is that, you know, the ability depending upon the thing is that how fast, you know, we plan early. The early our customers plan, so we are in a better position to plan and then deliver in that. In this regard, we are engaging with our customers to make them aware about the need to plan early on, to their requirements so that, you know, they will not get into these challenges of supply and demand gaps in that.
Okay.
Yeah. The second question on the high speed, I think, you know, our Hitachi Energy portfolio goes into high speed rail, rails things, whether it is a traction transformer, whether it's a track side transformer, whether it is a Scott transformer, as I talked about, is a new transformer which we have actually designed and built for the railways in that. As you know that we are in touch with this project, high-speed rail project. And then as and when it gets materialized, you know, we will be happy to share the information, more information with you.
Okay. Thank you. Thank you.
Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Amit Anwani from Prabhudas Lilladher. Please go ahead.
Sir, my first question, sir, is on the data center. As we mentioned that there is a potential of 1,000 MW data center to build up. How much is our addressable market and kind of product which we will be supplying?
Yeah.
Out of the total CapEx. Yeah.
Yeah. As you know, first of all, thank you for your question. We have been also telling you this, you know, our portfolio goes into, you know, grid connection and then power evacuation and the strengthening of the particular things and automation, and then high voltage and then dry-type transformers, etc , and that. All these things put into depending upon the size of the, you know, data center, whether it's a hyperscale or not. It's in the range of 15%-20% is our addressable market.
Okay. Thanks, sir. With respect to exports, as you mentioned, we are targeting the range of around 25% of orders in coming year also.
Yes.
Could you elaborate more with geographies, what export mix is, kind of, will look like in next?
Yeah.
Let's say one to two year, and which kind of products we are targeting in exports?
As we have discussed, in the beginning of 2021, you know, we have kept ourself a target of reaching 25% by 2023, 25% of the total order by 2023. We are happy to tell you that we have reached that target much ahead of our own ambition in that. We have a three-pronged strategy when it comes to exports. The first one is we have some global feeder factories, such as our 66 KV circuit breaker and then COMBIFLEX, etc., where we will be supplying globally, because those five products are going to be manufactured only in India. That's number one.
The second one is we have some allocated markets for some, most of our products, and those allocated markets where we are, you know, having a strategy, go-to-market strategy. We are also deploying our sales resources. We are working with our country sales organization and then start selling those things directly to our customers. That's the second strategy.
The third one is we also have a feeder factory where we will be supplying, you know, some of the components to our factories around the world, whether it is, you know, mechanism, operating mechanism, whether it is, you know, poles, etc , like that. Combination of these three strategies will get us into 25%, which we already achieved. We will once again review it and then see where we need to go up, upper band of that.
Thank you. My last question on the margins. As you already explained in your initial remark, now, with respect to semiconductor shortage, when are we expecting this to, you know, some view on normalizing at least specific to Hitachi? And, what would be the normalized margin in the, let's say, coming quarter if things normalize? Yeah.
Yeah. The semiconductor is a global challenge. We have been continuously working with them, and they're taking a lot of mitigation actions. As you have seen, compared to last quarter and this quarter, our various mitigation actions have come into play. We have softened the impact due to that. When it comes to normalizing the supply chain, in our view, it will take at least a couple of more quarters. We have a lot of mitigation actions. For example, we are focusing on the product line, which do not depend heavily on the semiconductors, and like our COMBIFLEX, RTU, etc .
We also have a collaboration approach on stock sharing with some of our Hitachi Energy factories around the world. We are giving an early forecast to our suppliers to secure this material. We are placing the, you know, early orders in anticipation of that. This is basically an industry-wide situation with all players, in my view, facing similar challenges when it comes to semiconductors impacting their supplies impact.
Thank you.
Yeah. Thank you.
Thank you, sir.
Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi, sir. Thank you for the opportunity. Sorry if I missed your opening remark, but I just want to know what is the outlook on?
Mr. Bendre, the audio is not clear from your line, sir. There's a disturbance coming.
Hello? Am I clear now?
Yes.
No, there's a lot of echo coming.
Hello?
Yeah, go ahead.
I just wanted to know what is a sustainable margin going forward over the next two to three years? What kind of, you know, synergies we will get into? Because we are currently scaling up our business, so what could be sustainable margin over next two to three years we would like to achieve?
Yeah. I think we have clarified this, and we have also talked previously on this. We have various, you know, levers. For example, we have taken several initiatives upfront, and then, our go-to-market strategies are very solid. We have a focus on the, you know, various high growth segments. All those things are enabling us to grow higher than the market. In addition to that, we also have exports.
We have exports as well as service strategies to take us, you know, where we would like to do that. Based on this, we have also told last time that our mid-term strategy is to bring the EBITDA margin to a 10% level by 2025, is what we have said that, and we still committed to that, and we believe that that's a sustainable margin going forward.
Sure. Thank you. Sir, export side, I think we seem to be doing well. What is the outlook for that? I mean, which are the countries we are exporting to currently, and what is the outlook for that over the next two to three years?
We said, you know, we have actually in the last year, beginning of last year, we set ourselves with a goal because at that time it was under 15%-17% of our exports. We said we'll take these exports to 23% of our total order value by 2023. We have achieved at least ahead of the curve, more than one year ahead of the curve. Right now we would like to stabilize this and then we take a call on that. We have also, you know, announced opening up the new factories. All these factories would enable us to take further, you know, exposure into the exports. We want this to be stabilized first before we take a next jump on that.
Sure. Sir, the last question, just a broader question. Compared to a thermal power plant for renewables, how much the investments in T&D goes up? Is it a higher T&D required for renewable plants, solar and wind compared to thermal?
I think there has been a lot of similar questions previously also. In fact, we have also, you know, informed that, you know, when it comes to thermal, you have only point-to-point connection of T&D requirement. Like, you know, you bring power from the pithead to the load center. Since the renewable is a highly intermittent, decentralized, it needs more of, you know, T&D require grids, you know.
You need to bring, you need to evacuate and also ensure that the grid resilience is extremely important because you don't know when the sun shines, you don't know when the wind blows. In these kind of situations, how do we ensure that the grid resilience? There is also a lot of T&D equipment like a power quality, like automation.
Those equipments will go into this one. In my view, I think, it's thermal to renewable. It's not about going down on the T&D expenditure, but rather it should increase more, make the grid more resilient, enable the grids to penetrate more and more renewables going forward in that. That was the visibility. In fact, if you really look at previously I was also saying we used to have one HVDC project every five years or so. Today, the outlook is at every one HVDC project per year.
If not per year, at least per one and half to two years. You know, that kind of requirement is coming. More and more this technology is reliable. For example, we have receive- In the last quarter, we announced, that is quarter one, the HVDC project for Mumbai from Adani. This is one example for a different application to make city infeed more robust. This connection when it is ready to bring some more power to the city of Mumbai to make it is more resilient and more, you know, secure when it comes to the energy standpoint.
No, sir, I was asking from the angle is that if the more T&D required for solar and wind.
That's what I'm saying. Compared to the thermal, it's more T&D required for solar and thermals.
There will be more growth opportunity for us, in that.
Absolutely. Absolutely.
Sure. Sir, last question. What kind of, I mean, e-mobility side, what kind of opportunity we see in terms of setting up charging stations and so on?
In terms of the e-mobility, I think we have a technology, what we call as a Grid-eMotion Flash and Grid-eMotion Fleet charging. This technology enables buses to get a boost of charge in less than 20- seconds. We have been working on this. As you know that, you know, these kind of technologies, you know, if you really want to, you know, make it work in India, it needs to be, you know, affordable.
That's the reason we are right now focusing on localizing these technologies. We are also running, as we speak, we are running a pilot in IIT Madras with other reputed bus manufacturers on that. We are doing all that to make that this technology is localized, indigenized, so that we are able to reach the, you know, required, you know, price point and make this technology more affordable in this country. Thank you.
Thank you. Mr. Bendre, may we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Mohan Krishnaswamy, an Individual Investor. Please go ahead.
Yeah, thank you. Thank you for giving the opportunity. I am referring to the slide 13, which we have just shared on the service income, where we have mentioned an annual potential market of INR 2,000 crores. Now, is this with the target annual revenue which we are looking at for Hitachi Energy? Because right now we are clocking about 10%-15% of our revenues from services, which could be to the order of INR 400 crores-INR 500 crores. Is the understanding correct that we are looking at a significant increase over time, next three to five years?
Thank you, Mr. Mohan, for your question. What we are saying is that with more and more digitalizing of our networks, of the power systems, so the service potential is going to grow. Based on our installed base calculation, because all the installed base we have in our system, we estimate that, you know, the INR 2,000 crore will be annual potential in that. It won't happen overnight to reach that level in that.
Definitely it will take couple of more years. We are estimating that, you know, with so much of digitalization, so much of, you know, advanced services like, you know, your asset management, asset performance, and also workforce management, enterprise assets, all those things, and vegetation management, all those things will enable us to get you there. We are not given any target as of now when do we reach there. Right now our immediate target is to reach 10%-12%. Once we reach the 10%-12% service, then we do that. Right now we are saying that that's the kind of potential based on our install base can be achieved over a period of time.
Sure. The next question is on the Lumada offering of Hitachi, which is for the digital side. How are we leveraging that in India? Because clearly, that holds potential as well, and we are using Hitachi's trends here. Can you just throw some color on that?
As of now, we have become globally 100% owned by, you know, Hitachi once the deal completes by this December. The very purpose Hitachi has advanced this taking a balanced stake from the global organization is to bring the synergies between Hitachi and Hitachi Energy. Lumada is one of the well-known IoT platform, and we would like to leverage that platform to offer Hitachi Energy's enterprise software. Talked about asset performance, you know, enterprise performance and the workforce management and the vegetation management and all those things, you know, we will be in a position to, you know, offer in this Lumada platforms going forward. Basically you're talking about is IoT and the cloud.
As we speak, we are running a lot of pilots with the various, you know, both private customers and many of the government customers are coming on this in a very big way, and they are working, you know, what are the things we talked, what are the things they need to do that. Because with so much of renewable, it's extremely important that the entire their fleet, entire the network need to be digitalized. They need to have a more real-time basis information to take care of the, you know, required actions basis of the, you know, the generation mix, etc in that.
Perfect, sir. Thanks. Thank you very much, and all the best.
Thank you.
Thank you. The next question is from the line of Alisha Mahawala from Envision Capital. Please go ahead.
Please go on.
Hi, sir. Good evening. Thank you for taking my question. Just a clarification, what is the current royalty and technology payment that we're making to the parent?
Sorry. Yeah, I think can you just speak? I think it's a bit echo.
Am I audible now?
Yes.
I wanted to know what is the royalty and technology fee payout that we're doing to the parent?
Royalty and technology.
Oh, royalty. Ajay, can you please talk about that?
Yeah. Thank you for this question. You know, as you are aware that we are a group company and we're very much dependent upon the technical know-how of the group company. Currently the royalty that is going out payout is approx around 3.5%, that we are doing at the moment.
We need to understand that, you know, this is extremely important for us, because the whole energy systems are undergoing a tremendous transformation. This needs lot of investments from the R&D standpoint to, you know, modernize their fleet, modernize your technology, providing the best-in-class technology. For example, everyone is talking about, you know, sustainability, net zero, scenarios and carbon neutral strategies, many of our customers. In that scenario, whatever the product they buy, that also need to meet those kind of requirements.
For example, we use SF6 gas in our GIS substation or, you know, our air insulated breakers, etc., and that. You all know that SF6 is 23,000 more potent than CO2 when it comes to the greenhouse emissions thing in that. This will not be sustainable. We need a lot of investments to come out with the alternative that, and we are very happy to leverage our global technology, global scale. We already announced EconiQ portfolio, which is more sustainable than, you know, CO2 in that. These are all extremely important. While the energy transition is undergoing a tremendous transition, and these are the technologies absolutely essential for us.
Sure. Understood. Just a clarification, is there any payout that is going to ABB?
No, no.
No. There is nothing to ABB.
There's nothing, no payout goes to ABB as per the royalty and technology.
Any other-- Is any other kind of payout going to ABB?
Yes, yes. We are having, you know, a TSA that we call Technical Service Agreement on the usage of the IS, you know, infrastructure. As you know that, you know, we are operating now on a standalone basis, and the IS separation requires a lot of, you know, infrastructure and the resources and capability and skill set. That needed a bit of time. We are having a TSA agreement with ABB for which we are now using their services at the moment, and that is why those payments are going to basically ABB at the moment, mostly on the IS related support.
Is it possible to quantify what percentage of the revenue is going under this TSA agreement?
No. If you see, it is difficult to quantify because it depends upon the services that we're taking. Gradually, if you ask me, we are trying to come out of these services. Every month, every quarter, we are.
It's coming down actually.
We are coming down.
We're basically coming down.
We are adopting our technology, our infrastructure, and gradually it is coming down. As a percentage, it will be very difficult to-- We expect this to come in next six months or so. Six months, right?
Yeah.
Thank you. 2023, end, we are expecting to come down.
Okay, great. Thank you.
Thank you. The next question is from the line of Harshit Patel from Equirus Securities. Please go ahead.
Thank you very much for the opportunity, sir. Sir, we are localizing heavily in the country. On top of that, we are also introducing new products from time to time. Could you throw some light on what are our CapEx plans for the rest of the year, which is the second half of FY 2023, and for the full year FY 2024?
Yeah. I think we have been discussing this in the last two years. We have been investing here because we believe that, you know, we need to bring lot of products and to meet the local requirements, we need to locally manufacture not only for the local market, but also for the market outside of that. Because we have a huge, you know, footprint here.
We have a huge, you know, opportunity to leverage the existing talent, existing engineering base, existing manufacturing base to do that. We have been continuously upgrading both, you know, greenfield power quality facility, for example. I talked about we have doubled our capacity of existing power quality factory from 10,000 MVAR to 20,000 MVAR in Bangalore, Doddaballapur.
We also had a brownfield addition of next generation operating mechanisms on our high voltage switchgear. We also inaugurated our state-of-the-art dry bushing factory. This is the first time we are bringing this technology for 760 kV to India in that. Between facility upgrades and greenfield investments, we anticipate an annual CapEx spend rate of INR 100 crores to ensure we continue to deliver to the needs of evolving energy landscape.
Understood, sir. Secondly, on the HVDC project that we had won in the last quarter, so have we already commenced the execution, and by when you plan to complete the execution?
Which HVDC you said?
The Adani HVDC project that we won in the last quarter.
Right. Adani HVDC, you know, we have already commenced execution. As you know, these kind of projects, when you say commenced execution, means first we'll start the engineering and the load flow analysis, system study analysis will start, and then we will slowly getting into the site activities, and after that, you know, the manufacturing of the various equipment start coming to the site in there. We have around close to 36- months to complete, from the date of the booking of that. I think that is on track as of today.
Sir, could you comment on what would be the quantum of revenues that we would have booked in this particular quarter from that project?
No, we will not be able to tell you about the project, but right now that project is in a very initial phase. Engineering will not get much. Okay? Generally, the revenues will pick up after three to four quarters of that, but we will not be able to give you project-wide revenues. Yeah.
No problem. Just a little follow-up on this. Could you comment on the margins that we will make from this project, whether that will be higher than the present company level average or the lower than the present company level average?
I'm afraid I will not be able to share the project level margins on that. What I told you, our guidance for the margin for a midterm strategy up to 2025 is to reach a double-digit EBITDA level. All these things will add up to that.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. N. Venu for closing comments.
Yeah. Thank you once again for your interest and active participation. I'm really looking forward to host you physically in our state-of-the-art, world-class, you know, Hitachi Energy Experience Center in Baroda, and also our world-class factories in Baroda. I hope that, you know, we will work out a suitable date where you all of you can join us there. With that, once again, thank you. Please take care, and if you need any more information, do not hesitate to reach us, and we are happy to provide the whatever information you're looking forward. Please take care and stay safe. Thank you.
Thank you. Ladies and gentlemen, on behalf of Hitachi Energy India Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.