Ladies and gentlemen, good day, and welcome to the Schneider Electric Infrastructure Q1 FY 2022 Earnings Conference Call hosted by Elara Securities Private Limited. As a reminder, all participants lined will be in the listen only mode. 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. Harshit Kapadia from Elara Securities Private Limited. Thank you, and over to you, sir.
Thank you, Bilal. A very good evening to everyone. On behalf of Elara Securities, we welcome you all to the Q1 FY 2022 Earnings Call of Schneider Electric Infrastructure Limited. I take this opportunity to welcome the management of Schneider Electric Infrastructure, represented by Mr. Sanjay Sudhakaran, Managing Director, Mr. Mayank Holani, Chief Financial Officer, and Mr. Vineet Jain, Head-IR. We will begin the call with a brief overview by the management, followed by via Q&A session. I'll now hand over the call to Sanjay, sir, for his opening remarks. Over to you, sir.
Thank you very much, and good evening to all of you. It's a pleasure to be with you this evening. My name is Sanjay Sudhakaran. I'm the Managing Director for Schneider Electric Infrastructure Limited. It's a pleasure for me to take you through some of the highlights of our organization, how the quarter has been, and what we feel of the economy going forward. If it's okay with all of you, I would like to go straight to Page number three of the presentation, which is a quick snapshot of the economic highlights of India during this period. You can see that we came out of a very difficult financial year, a year that was unprecedented, and we had never imagined a year to be so dramatic in terms of the pandemic and the implications that it had on the economies, lockdowns, and all of it.
We were expecting all of that to be behind us, and we were expecting that there could be a good amount of pent-up demand in the economy, which would come back to us favorably as we go into the year. Some of this partially materialized. It was also kind of dampened a little bit by the second wave of COVID, which began to hit us this quarter that went by, and some regional lockdowns and implications, and I think probably the severity of the health crisis was even much larger than the first wave. I think the economy is more resilient. Demand is coming back, and we are hoping that the impact of this lockdown will be minimal, and we will be able to recover as we go forward into the quarters in this year. That's the brief outlook that I have on the economy.
I'll go to the next slide, which is Page number four, and give you a snapshot on how we see our end markets. As you all know that we have four critical segments, power and grid, transportation, minerals, mining and metals, and oil and gas. These are the segments that we term as electro-intensive and has the most runaway for our products and services here. Power and grid continues to be resilient, I would say. There are a number of reforms that are being announced here. There is a big thrust on renewables. India is one of few countries that are well on track to execute on the Paris Agreement. Our plans of having almost 450 GW of renewable energy installed by 2030 seems to be something which the government is totally committed to. There is privatization happening.
There is a big thrust to cut losses in transmission and distribution. Introduction of smart metering and digitization projects to enable that. All these are very good lead indicators, though the sector was a little bit plagued due to the second COVID wave, and the projects were slowed down. You had certain situations where the government spending on healthcare had to be increased, and that sort of saw less funds being diverted into this particular segment, and you had a kind of sluggishness in the progress of the projects. I think this is all coming back because we're a very clear backbone that the country is dependent upon. On the transportation side, there are a number of projects that have been announced in terms of urban transportation, bullet trains, high-speed trains, and corridors, et cetera. All these are expected to close.
These projects are expected to close in terms of orders for us in the quarters going forward. We see a good traction on this segment as well. Minerals, mining, and metals, we were kind of having a feeling that the results could be mixed here. However, we see good amount of CapEx in this particular segment. We have cement capacities being ramped up, steel capacities being ramped up, a number of sustainability-driven initiatives in this particular sector, in line with the sustainability goals of the corporations being introduced, and that sort of, kind of has picked up the demand here. We see good orders here, and we see good orders going forward as well.
Oil and gas as a sector remains cyclic, and the demand is not expected to pick up in a big way during this year demand will remain muted, and there will be a shift towards renewables as we move forward. In addition to this, I think the building segment demand will remain muted because there is not much trust on return to offices. There will be a kind of a slowdown on the buildings market. However, there are certain sectors within the buildings market, like hospitals and data centers, which are expected to give us good returns, and we are continuously invested on these segments as well. I will now go on to Page number five.
That is just to articulate once again our strategy and our commitment to our long-term strategy, which is to lead by software, which is more digital, concentrate on more services and recurring revenues, increase our coverage across India through our licensee partner models, accelerate our resilient segments, and introduce greener products into the market, which is our contribution to the sustainability journey of the country. These are our key strategic priorities, and quarter after quarter, we ensure that we will remain committed to these particular initiatives. Going to slide number 6. Just to bring about a flavor of how we are going ahead and executing our strategy. Leading with software, I spoke about it as one of our key strategic priorities. We continue to stay invested here. Here is an example of an atomic R&D center in Vizag that we have just completed.
It uses our EcoStruxure for Grid platform, which is the EPAS platform, to be able to provide instant fast load shedding to the customers. We work very intricately with the customer, connecting all their medium voltage products and providing them with the relevant software interface to be able to take informed decisions. I'll go onto Page number seven. Here again, we'd like to highlight the connected product story. We have sold almost 99 AIS insulated panels to a customer in the power and grid segment, which is primarily a connected product with temperature and humidity sensors and numerical relays. Another example of how we are taking our digitization journey forward. I'll go onto the next slide, which is slide number eight, our commitment to more services.
Here is an example of how we are serving a leading government hospital chain by providing them with remote diagnostics on the electrical power train, 24 by seven monitoring, and predictive maintenance, so that they are able to, again, take informed decisions well in advance and bring down the pressure on their infrastructure as far as people intensity of maintenance goes. This also leads to lower operating costs and makes sure that the hospital invests in areas where they are supposed to invest, which is patient healthcare and experience, rather than in maintenance. Going forward to our story on increased coverage and our licensing partner program, here is an example of how our partner in Kolkata turned around a hospital for the government within eight weeks to be able to meet with the pandemic pressure that it created on the healthcare infrastructure.
Having more partners, empowered partners, licensing partner products, which are licensed by Schneider to them, helps them in making sure that we serve our customers with agility and speed. We intend to ramp this program even further going forward. I'll go to Slide number 10. Here we talk about our connected product story. In the quarter that went by, we launched three more connected products, which is the connected FDIs, the connected transformers, and we also launched the EasyPact PIX ROF, which is another connected product. I think we continue our journey towards digitization as far as new product launches are concerned as well. With this, I end the update on the strategy, and I will request Mayank Holani, CFO for Schneider Electric Infrastructure Limited, to take us through the financials of the organization. Thank you.
Thanks, Sanjay. Slide number 12. The market continues to be uncertain, and we all need to adapt with the new normal. Q1 of current year was impacted by COVID-19 and selective lockdowns during April, May, and even in some places in June. A few customer sites got closed, and many other customers and EPC contractors were facing liquidity challenges also. We continue to be cautious on order booking, and especially in terms of securing our cash and margins, maintaining the right level of margins. Our LFL group order intake for this quarter stood at around INR 2,900 million or INR 290 crores, which is up by around 16% over the same period last year. Considering current basket, we see it's a reasonable, really good growth in orders.
We have seen a strong comeback in execution, and which is rather more impacted due to the lockdowns because of the site issues and the restrictions on mobility. Still, we had a growth of about 38.6% versus last year, same quarter, and this rise has mainly come, obviously, due to the low base impact of last year, because Q1 was major mainly impacted in previous year. But still we have a growth of 38.6% from the sales part, and which has come primarily from systems and projects. Moving on to next slide on P&L. Overall, the performance in terms of our profitability is aligned with our strategy. We are focused on margins and cash, and we will continue this journey. The quarter was bad in terms of raw material price movement and the impact on commodity.
Mainly the commodities which are used in our products like copper, steel, have been impacted by the inflation, and their prices have increased significantly. We continue to monitor it closely and proactively approach with all our customers and trying to mitigate those exposures. We are working on getting the price amendments wherever they are required and possible. Still with this, our EBITDA margin improved by about 3.9 points, and that's almost at our breakeven level. Another, if we look at it in terms in perspective, this is at the margin level is at the same level as previous year. The full-year or the quarter one, quarter four of previous year, this is close to that level or even slightly better. We are in the right direction. I close here and will leave the floor open for questions and answers. Thank you.
Thank you very much. Ladies and gentlemen, we will now begin the question- and- answer session. Anyone who wishes to ask any question, please press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may please press star and two. Participants are requested to use handset while asking a question. To ask a question, you may please press star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Anuj Jain from Globe Capital Markets. Please go ahead.
Good evening, everyone. Actually, I wanted to know your view on this smart metering kind of thing, how the government push on this particular thing. Pardon me, because I joined the call a bit late, so if you would have given some light on the same idea, it would please be for me. What is your view on this smart meter thing, and how big is this opportunity, and how we are ready to grab this particular opportunity?
Okay. Thank you for asking this question. We did touch upon it briefly, in terms of the power and grid sector as I was doing my presentation. The key aspect here is the government is very, very keen on driving reforms in this particular sector of power distribution. There is a very strong mandate to cut distribution losses. One of the first areas in cutting distribution losses is to have good measurement. At the same time, the government is committed to providing consumers with good quality power and 24 by seven uptime. I think these are some of the first areas in the policy and reforms which are leading to the smart metering growth. Now, smart metering growth does not really come only with meters growth. It comes along with software growth as well.
At the end of the day, when you are installing such large number of meters with consumers, what you need is an interface that can not only measure what's going on, but it can also give you diagnostics and tell you fault protection and things like that in advance so that you can take corrective actions. Software is going to be a very key aspect of this growth as well. As you know, we are well poised in this area of software. We have done projects like smart cities of Raipur, et cetera, with advanced metering softwares, which is called the ADMS, which is the Advanced Distribution Management Systems. We have the know-how, we have the technology, and we feel that this provides us with a good runway as far as opportunities of projects as well as recurring revenues of annual maintenance contracts are concerned.
Putting a value to this opportunity is kind of difficult because this is going to be a multi-year deployment plan, and such things are not that easy to implement in a country of our size. I think as these opportunities come up, we will be able to quantify them. There are a number of such in discussions with the DISCOMs, and the specifications are being frozen, the RFPs are being created, but I think it's hard to put a number onto it right now.
Okay. Any plans of raising any capital, I mean, any plans of raising capital in near future? If you would like to touch upon that thing. Mayank, would you like to take that?
As I said, this is still there is no plan from that for next few quarters. Just as soon as something firms up, we will let you know.
Okay. Thank you, Mayank.
Thank you.
That is from my side.
Thank you very much. A reminder to participants to ask a question you may press star then one. The next question is from the line of Viraj Mithani from Jupiter Finance. Please go ahead.
Hello.
Yes, Viraj, we can hear you.
Okay. I have a couple of questions. The first question is about the raw materials. When I see this number, how do we plan to mitigate the raw material inflationary pressure in days to come? Should I continue all my questions and you answer it?
Your choice. We can take it one by one as well.
Okay.
On the raw materials, what we'd like to highlight is that we have a very strong governance system, thanks to the processes of Schneider Electric globally.
Okay.
We have been kind of getting alerts well in advance, highlighting the raw material impact. We have been taking proactive actions to price up in line with the RMI increase that we have been seeing on different commodities. We have kind of, on the future-looking contracts, we have managed to price this up and pass on these commodity increases to the market to the best of our ability. Now you can see that there is another impact of the commodity increases on the backlog. On the backlog, we have been carefully studying all our contracts. Some of our contracts do have variable pricing clauses incorporated in them in line with the IEEMA which exists in the country, and we are able to pass this on, but this is a small portion of the contracts.
The second part is of the contracts which are expiring due to the contractual obligations are expiring for the orders in the backlog due to whatever delays in site and execution and things like that. Here we are going back to the customers and renegotiating our contracts or even canceling them from our backlog in case it is not viable. We have been taking very strong actions as far as mitigating the commodity risk is concerned.
Just to add to this, what happens based on the forecast we see that from our global teams on a monthly basis, we keep revising our costing for the fresh tenders or quotes which we are doing so that our risk is covered. Also if you see, even with this kind of random inflation, the numbers you see, we need to go by the exact comparison. The last year's quarter one comparison is not the right because due to the lockdown and all the mix had changed. If you look at this quarter's mix is more or less similar to the full-year mix or even the January to March quarter mix. This material cost percentage has actually improved. It's better than the last year full-year material cost percentage and even better than the January to March quarter.
Even in spite of all this commodity inflation, we have been able to improve the margin from that side.
This employee benefit expenses because of VRS it has gone up?
That VRS thing comes into the exceptional. What happens is the employee cost last year in Q1 when this bank holiday and the lockdown time, there were certain tactical actions taken for cost savings. Now those are coming back and then also there is some impact of the salary inflation which has come and which the total takes it to much higher than the 11.2% increase which you see, which is the growth is partly offset by the savings due to the structural changes which we did in last year. The impact of whatever VRS and all we have done in the run cost, the savings are coming in this year.
Other expense I understand is exchange contracts and all which has gone up by INR 8 crores-INR 9 crores.
No. Other expenses are, there are multiple factors. There are certain expenses which are linked to the volume, like power and fuel, which is directly or not maybe 100% proportional but partly linked to the volume. Then there is Forex impact, then the travel was higher. Like last year there was almost no travel in Q1. This year still there was travel going on because business was running, so people were traveling in urgency. There are multiple factors in that.
Okay. My next question is, our competitors like ABB Power, they have been very bullish on data centers, railways, cybersecurity, and power distribution. Do we see any some traction in this industry in India or can you give some color on that?
Yeah, for sure. I think I spoke about it in my opening remarks as well. If you see the data center industry in India, we can be extremely bullish about because of the fact that there's a twin effect here. One is the fact that there's an explosion of data, primarily driven by work from home and all the digital gateways and digital ways of working and payments, et cetera, is concerned. The second is due to regulation, wherein the government has mandated that data for the country should rest within the country and should not rest on cloud elsewhere. You can see that there's a huge expansion in data center segment, and you will see the benefit of that coming into the Schneider Electric Infrastructure business also as we go along in these quarters.
Regarding railway infra, electrification, we don't have any part in that. Am I correct to think that?
No, we have. We have some good products like the Locos, which are especially used in urban transportation such as metros, et cetera, and high-speed trains. I also spoke about this as one of the segments where we are poised very well for this year in terms of the projects and the pipeline, et cetera. We expect to do very well on the transportation side in terms of urban transportation, specifically like metros and high-speed corridors and things like that.
Sir, about data centers, where do we fit in? What kind of offerings comes into it, if you can just give us some color on that as well?
Yeah, sure. I think data centers are also pretty much electro-intensive. If you see the kind of data centers that are being built in India now, the scale is increasing day by day, and you can see more and more colo investments coming into the country. You would have read about Yondr coming in with a private equity firm with India. You must have heard about companies like NTT, Yotta, and all expanding. We have certain market intelligence about Microsoft and other players also setting up large data centers in India. Data centers is also highly electro-intensive because they need to be powered. You can see that you have this entire train of medium voltage products which will go into the data centers. In addition to that, you have a software play because data centers are highly sensitive to uptime.
You need a 24/7 operation, some redundant operations, and things like that, and have to be controlled by software. There is a software play in it, which we see as a very large opportunity, and multi-year of service revenue business, which comes along with software.
That will form a part of the medium voltage offering, am I correct?
Yes. That will be the automation of the electrical network, both low voltage and medium voltage put together. We will automate the network, and that will help the customer in terms of informed decisions and predictive maintenance, et cetera.
Sir, ABB Power, for example, has this Lumada platform for electric vehicle charging. Do we have any sort of offering from our parent in this country? Does this company has any play in this EV segment in future?
Our play on the EV segment in India would be around the electrification projects right now. We have not right now embarked upon the charging equipment as such, but we are actively pursuing opportunities on the electrification and automation space. What is going to happen due to this rapid increase in EV charging is that you are going to now have many charging stations, which are in parking lots, which are on the highways, et cetera, which will use a mix of energy. They will use a mix of grid energy as well as renewable energy like solar. We will be moving away from a centralized generation and transmission of power to a more distributed network. What this will do is, it will add complexity to the grid.
As the grid becomes more complex, you will need more software like the ADMS software that I was talking about to manage the grid. This is a good example, opportunity for Schneider, as it has made a number of acquisitions recently also in this space. We talk about ETAP and things like that, which have good software offerings which will be available to our company to promote in the market for our consumers as well.
Sir, just last two questions. What are the lower hanging fruits in this sector which you can see that Schneider would see benefit coming next two years?
Of the EV charging?
EV, data centers, railway electrification, solar power distribution by the Government of India, distribution reforms by government. Where we see our traction in next coming two years in terms of, say, lower hanging fruits. Others, I guess, will take quite a little bit of a long, medium term to grow. Where do you see the traction happening in, say, next two, three years, if I have to ask you?
Like we spoke about, we see actually the traction in all areas. It is not just a single area I can name because we talked about reforms in the power and grid segment. We talked about the rapid investment in urban infrastructure on transportation. We spoke about data centers and the complexity that it brings along with software. We spoke about EV charging and the opportunities that it is. I think the entire electrification story of India ties into the twin areas of electrification and digitization going forward. Which represents a very good opportunity, I would say. It's hard to call out a particular sector to say that this is a low-hanging fruit. I think all of these we are well-poised to take advantage of. Does that answer your question? Hello, am I there? Vineet?
Yes, you're there, sir.
Yes, we can hear you.
We will move on to the next question. That is from the line of Manish Goyal from Enam Holdings. Please go ahead.
Yep. Thank you so much. Sir, just would like to carry forward on the DISCOMs side. It's been a long wait, and do you think now that from the government side, in terms of cabinet approval and other things, most of the things are done, and now the ball is in hand of, say, SEBs or the implementation partners? How do you see, when do you see that inflection point coming in and on-ground implementation improving? Also, related question is that I just want to get a sense that now, I think, we probably see a different mechanism where we will have players offering integrated solutions, and like EESL coming in and then offering solutions on basically monthly rentals and things like that. For you, who would be the ordering source? Just want to get a sense, how do you see this evolving, sir?
Yeah. This market is going to evolve, like you said, there will be people like EESL coming in, there will be some software majors who will be coming in because a lot of it would be very similar, what you call as an ERP implementation process. There would be large-ticket software players entering this market on the end-to-end digitalization. All of these could be our customers, our partners, right? It's not that we are going to do all of this alone. We are going to do this in collaboration with people, and the nature of our customers would change, the nature of our partners would change. Some of them would be our strategic partners, while some of them would be our customers. I think there's a whole lot of mix that is possible here.
Okay. There could be a possibility that we can be part of some consortium and probably look to offer the solutions?
Absolutely. That's how we are going about doing it as well.
Okay.
We stick to our core expertise, which is the software platforms. We understand the electrical network. We have the global R&D expertise and the software and the solution architects available with us. We have experience of doing these projects elsewhere. We are open to partner with anybody who has the scale to implement such a project in India. I think the landscape will change in terms of the customers.
Have we started seeing any inquiries, or you expect that it will still take some time?
No, we are seeing inquiries, and we are actively working on good prospects in this particular area.
Okay. Sir, in your initial commentary, you mentioned that we expect demand to come back and hope to recover lost ground. Would like to get some sense as to what is the intensity of the momentum like. Are we really seeing very strong momentum building up, and then we probably on a full-year basis, we should start seeing double-digit growth for us?
I would like to comment only on the end markets, okay. I would not like to comment any forward-looking statements on our performance. I would like to say that the end markets are kind of mixed, as I mentioned. It also depends upon the health situation in India, the COVID crisis in India, how it pans out in the next few quarters. We are seeing some very good demand coming back, like we spoke about the MMM, Minerals, Mining and Metals industry coming back very strongly.
The transportation sector coming back very strongly. We also feel that with all these reforms and thrusts, I think the power and grid sector should also come back strongly. We spoke about good traction on the data center side. There the expansion goes on irrespective of whatever happens on the crisis side and lockdowns, et cetera, because those projects keep getting executed because you can't stop the work on the data. I think all these things should give us reasonable confidence that the things should pan out well in the next few quarters. However, the second COVID crisis has taught us that it's hard to have a crystal ball to try and understand what goes forward. I think that's the cautious optimism that I would like to talk about.
Sure, sir. I would like to have some bookkeeping questions, if you can, in terms of the breakup of order book, order inflow, and revenue share, sir, as always we share for the quarter.
Yes, Manish.
Yeah.
Our order growth, as I told you, it is about 16%. Just to link to your question on the momentum. Even January quarter, Jan to March quarter, we had a growth of about 12% on orders.
Right.
The June quarter growth of about 16% comes on a normal base of previous year, so the order booking was not impacted in previous year, and even last year we had about 11% growth in orders.
Right.
That way we can say the orders momentum till now has been there in last two quarters, because last year in September quarter and December quarter, we had seen orders coming down.
Yeah.
We hope that this momentum continues. Now on your breakup, our orders in this quarter, about 57% is equipment.
Yeah.
7% projects, 25% transaction and 13% services.
Okay. Within order info, can you also give me what was IG part also?
Yeah. IG orders in this quarter are INR 658 million.
Okay.
While last year Q1, it was only INR 43 million.
Okay. Can you please share the order book? What is the order book and what is the break?
Yeah. Order book, our backlog as of June end-
Yeah
was about INR 817 crore, INR 8,170 million.
Right.
Versus INR 7,507 million at the end of March.
Right. The breakups are?
Breakup is, as of June end, systems 70%, transaction 19%. Equipment 53%.
Projects 17%, transaction 19%, and services 11%.
Okay. The last piece on the revenue share, IG. What is the IG?
Yeah. Revenue share of IG is 25%.
Right.
Right? Equipment is 42.
Yeah.
7% projects, 17% transactional and 9% services.
No, that does not add up. Can you please repeat? Systems and equipment is how much?
25% IG.
Yeah.
42% equipment.
Okay.
7% projects.
Okay, got it. IG is mostly systems only.
Yeah. No, in IG, services also there. IG is a mix of services and equipment, mostly.
Okay. Usually always you give the total revenue breakup in systems, transaction and services.
Okay. System you can take as 74.
Right.
IG take as 74, yeah.
Okay, wonderful. Last question, what would be our debt position as on June?
Our borrowing as on June, right?
Yeah.
As of June, actually the balance sheet is not reported as of June end.
Okay. Right. Okay. No problem. Fine. That helps. Thank you so much.
Okay.
Thank you very much. The next question is from the line of Parimal Mithani from Credential Investment.
Hello. Can you hear me?
Yes, Parimal, we can hear you.
Yeah. Thanks for the opportunity and congratulations for the listing. I just have two questions, basically. Earlier we had a lot of hurdles or headwinds to our business. Now since your call, you've been saying there are tailwinds to our business. How do you see going forward, because it's been a long wait for us to hear this comment in terms of tailwinds. How do you see Schneider going ahead in next few years in terms of your major things like microgrids, EcoStruxure? Also recently, one of your parent acquired a company called Uplight in U.S. which is in terms of clean energy software. How do you see we playing a part and role in terms of other key players in the field like ABB, Siemens and GE, which is to some extent there.
How do we see the road ahead? Can you throw a light on it?
Sure.
acquired them.
to be very honest, we do seem to have a good runway of products, technologies, and software in the pipeline with us. Like you have been saying, the wait has been long. It's always the case because we have to move. Ultimately, you can execute only as much as the market reforms. The market reforms and the segments that we are talking about are reforming, and people are seeing the benefit of digitization, and adoption of software is definitely going up. You can see those benefits coming back to us in the years as we go forward, because we have developed a very good management team capable of serving our end markets, focused on our end markets and segments very, very well. We have a good install base, and we are serving those customers as well through services and connected products and diagnostic services.
I think the stickiness, we have built the infrastructure around the stickiness aspect. We should see those benefits coming in, and I am sure we will be able to keep pace with the reforms that are happening in each of these segments. Schneider as a group is very much committed to software. You can hear about a number of acquisitions that are being made in the global space as far as softwares are concerned, and some of these softwares are very relevant and useful to us in our digitization journey for this organization as well. We will have access to those technologies going forward as well.
Sir, if you can throw light on EcoStruxure, which is, I think one of the flagship projects of software. How does it help us? It can make us understand it much better, sir.
Yeah, EcoStruxure as a platform has two parts to it. One is EcoStruxure on the edge, which is the edge control software. We spoke about some of the projects that we have executed, in my opening presentation as well, like the EPAS software, which is the grid, which manages the grid. You have ADMS software, which is the Advanced Distribution Management Systems. In addition to that, we have now acquired another company, which is ETAP, which is more into design as well as electrical networks management. That is another software that is applicable. I think, we have a complete suite of softwares like Power SCADA and things like that.
On top of that, we have diagnostic platforms of EcoStruxure, which is like the Asset Advisor, the Power Advisor, Building Advisor, and products like that, which are hosted on the cloud and provide analytics to customers to be able to take preventive action rather than corrective action. I think we are bringing this entire suite of products to our customers, saturating them with our offerings, and also providing them with life cycle maintenance for these products as well.
Is it safe to assume EcoStruxure will be the backbone for in terms of main software or which you built the entire system around? How does it work basically?
Pardon? I couldn't get your question. You mentioned-
Is it safe to assume that EcoStruxure is the base platform for you, or it's just one of the plugs in play? Like, what is the base platform for you in terms of software?
EcoStruxure is the overarching theme of our software journey. It encompasses It's built on certain principles like interoperability, open architectures, the capability to put together disparate systems and integrate with that, not locking in the customer with a particular platform, and he not being able to access and integrate any other platform to this and things like that. It's a very open architecture. It gives flexibility to the customers. It's modular in nature. EcoStruxure is the overarching theme of the software, and it's like a backbone. You have different modules that are available which serve a particular purpose. On top of that, you have analytics. EcoStruxure platform also enables analytics, which take data to the cloud, able for the customers to build a command and control center, control a large number of buildings or a large number of grids from a centralized location.
These are some of the aspects. It's got a wide suite of products within the same platform.
Okay. Is it fair for my assumption that it is the base for everything in terms of, since it's open architecture, then the customer just has to pick a product from that and he can plug into other softwares as well, right?
It's not one single platform that can be used by any customer. Okay. I don't want you to misunderstand on that. It is a overarching theme. It's a, what do you call it? An operating system, but the modules are independent and perform certain functions. It's not that you take just EcoStruxure and you will be able to do everything under the sun.
Okay. You mentioned in your opening remarks that government is committed to the renewable energy part of India and according to Paris Accord. How do you see in terms of order of inquiries going ahead from here?
We are very well engaged with all the DISCOMs, you see, on their digitization journey. We are very actively working with all the DISCOMs in the country to help them navigate this journey towards cutting losses and digitizing their networks and reducing the harmonics and things like that.
Okay. Thanks for the answers, and thank you very much for time. Thank you.
Thank you.
Thank you very much. The next question is from the line of Viraj from Jupiter Finance. Please go ahead.
Yes. I think you have disconnected. Hello?
Yes.
Yes, sir. Now I have two questions. One is this, coming back to your competitors, they are making India as a base, especially ABB Power. That's why they've been openly saying it, that the parent is committed to India because of supply chain issues, China, pandemic. Does Schneider's parent have any sort of plan for this company? That's one. Secondly, does 5G benefit us by any chance? Because more connected network would be You can give some
I didn't get the second question. I understood your first question. I didn't understand your second question.
5G coming to India, would it benefit Schneider? Would it be relevant for Schneider Electric or no?
I think I'll answer your second question first. I think 5G coming to India will benefit everybody, right? It will increase the speed of your networks. It will make things much more simpler in terms of data usage and storage on the cloud and things like that. It's going to be a huge enabler for digitization. It's not something that will benefit only one organization. It's going to benefit all the organizations that are committed to the journey of digitization.
Okay.
On your first question, you were asking about the commitments of Schneider Electric as a group in India, right? Already I would say that Schneider Electric-
Make a base in India. Like all these companies are planning to, the parent is looking to make this some Indian company as a base for the world because of the China issue, supply chain, and all the pandemic, all the other reasons being there.
Sir, I wouldn't want to go into too many details on this particular front because today we are speaking on behalf of Schneider Electric Infrastructure Limited. I would say that Schneider Electric in India as a group has a very huge base. You would have heard of some of the large ticket investments that Schneider has done in this space, including the acquisition of L&T Electrical and Automation products and the company at large. I think there have been some large ticket investments in this space that Schneider has done. Schneider has a large number of factories and a very strong exports base out of India with a large amount of investments in R&D and global R&D being done out of India. I think there's a lot of investments being done by Schneider as a group in India for the globe as well.
I think Schneider is extremely committed to the journey in India of localization, talent, moving talent into different roles across the globe, building R&D centers and manufacturing bases in India. I think there's no question about that.
Okay. Sir, what level of localization our company would be in? What would be the import content as we speak today in terms of products?
I would say that we are highly localized in India. We are localizing more and more, and we want to build more and more products within the country for the country. I think we are already highly localized in India. Our idea is we start with a platform which is available globally. We import, we sell, we look at the market readiness, and then we subsequently put in a roadmap for localization in India, which is on a gated basis. We start localizing components, and finally we localize the entire product. I think that's the journey which we have been following all through.
Can you give some numbers to that? As of today, 50%, 70% numbers.
I would say that we are almost in the ballpark around 80% localized in India.
Okay. Sir, my last question is regarding the smart meters which you spoke about in this phone call. As I understand, smart meter forms a part of Schneider's low voltage business.
Mm-hmm. That's correct.
How do we benefit from that?
As I spoke to you in the beginning that smart meter, someone asked that question, how does it benefit us? We as an organization, we understand electro-intensive markets. We are very close to utilities. What this represents to us is not just a play on the meters. The meter decisions can be taken by the customers independently, or they can award us contracts on a turnkey basis for the entire digitization, including meters. The exciting piece is the software and the services play that come with or without the meters.
Okay.
We execute projects like for Naya Raipur, we have executed, which is a smart city. We have executed these projects along with the software and the meters, et cetera. It's possible to do it with or without. The customer could take an independent decision on the meters, but he could come to us for the integration with the software and the maintenance contract going forward.
That revenue would form part of a service revenue in this case?
It would be a project execution and services revenue put together.
Do we get a fixed annual revenue or it is on the transaction basis, like more usage of meter or something like that? How is the revenue?
No, it need not be structured basis on the usage of meter. I think that would be a very complex transaction. What we would be doing is we would be providing service contracts to the customer as far as maintaining the software and the customization of the software and adaptation to his use is concerned.
In terms of like annual revenue sort of a thing, every renewal of the revenue, right? Something like that.
Yes. It's like an annual maintenance contract. Yeah.
Sir, any play for the cybersecurity product?
Yes. Cybersecurity, as you see, it's a big threat across the world. The world spends almost $1 trillion on cybersecurity issues globally. I think it's a real problem, and with digitization, you have to live with the problem of circumventing such cyberattacks. Cybersecurity is something that we pay very large attention to. We also consult with our customers and provide them the necessary inputs that are required to make their networks and their softwares cyber secure. We also spend quite a lot of money on R&D to make sure all our platforms are highly cyber secure.
Do we have a product in cybersecurity or could we?
No, it's not a product that we have in cybersecurity. Cybersecurity is engraved into our products, I would say.
Okay.
We provide the customers with the knowhow on cybersecurity.
Okay. Thank you, sir. All the best. That's it from myself.
Thank you.
Thank you very much. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Harshit Kapadia for closing comments.
Thanks, Bilal. We would like to thank the management of Schneider Electric by Mr. Sanjay Sudhakaran, Mayank Holani and Munik Jain for giving us an opportunity to do this call. Any closing remarks, sir, that you would want to give to investors and analysts?
I'm very delighted to be on this call along with all of you and the interest levels that you have shown in the various aspects that we spoke about. I think the short-term issues of COVID and all that, I think are issues that we can surmount and we can work towards it. The long-term fundamentals of the country as well as the company remain solid. Look towards continuously engaging with all of you going forward in the next quarters as well. Thank you. Good evening and good night.
Thank you.
Sure. Thank you very much. I'll speak on behalf of Elara Securities Private Limited. That concludes this conference call. Thank you for joining us, and you may now disconnect your lines.
Thank you.