GE Vernova T&D India Limited (522275) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to GE T&D India Limited Earnings Conference Call for the Fourth Quarter and Year Ended 31st March '20. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Suneel Mishra, Head of Investor Relations. Thank you, and over to you, sir.

Thank you, Janice. Ladies and gentlemen, good afternoon. Myself Suneel Mishra, and I manage Investor Relations for the company. So welcome to today's conference call with the GE T&D India Limited management team. As we know, this conference call has been organized to present and discuss financial results for the fourth quarter and year ended 31st March 2020. Now let me first introduce my management team available on this call. We have with us, Mr. Pitamber Shivnani, Managing Director and Chief Executive Officer, GE T&D India Limited. Further, we have available on call Mr. Sushil Kumar, who is our CFO; Mr. Nagesh Tilwani, who is the Whole-Time Director; Mr. Sandeep Zanzaria, who is our Commercial Leader; Mr. Shailesh Mishra, who is our Operations Leader. We have with us Mr. Manoj Prasad Singh, Company Secretary; and Mr. Anshul Madaan, who is our Communications Leader. Please note that this conference call is scheduled up to 5:00 p.m. I hope you would have received the investor analyst presentation and read the disclaimer on Slide #2. I would now request Mr. Pitamber Shivnani to begin this conference call, highlighting the events of the quarter. Thereafter, Mr. Shailesh Mishra will be presenting slide on operations and execution. Then he will be taken over by Mr. Sandeep Zanzaria, who will give us an update on order and market, followed by Mr. Sushil Kumar, who will be speaking on financials. So I now invite Mr. Shivnani to begin. Over to Mr. Shivnani.

Thank you, Sunil. Ladies and gentlemen, good afternoon. Thanks for joining the call. I would like to start this call by giving you a brief overview on last quarter and then would request other speakers present here to go through the details. As we all will agree that COVID-19 pandemic has impacted our business substantially. With the announcement of lockdown on 22nd March, the company temporarily closed its manufacturing facilities, except for essential maintenance and services as reported to stock exchange on 23rd March. The offices, including sales offices, were also closed and the employees were asked to work from home. In view of the lockdown during the latter part of March, the sales for the quarter were significantly impacted. This has negative impact on the performance of the company for quarter 2. Allow me to give you a quick update on our current state of operations post lockdown, Unlock 2.0 the operations returning gradually to normal at our manufacturing plant and project site except Pallavaram plant in Chennai for grid automation, which was operational till 19th June. But it is closed as of now till 5th July because of the new lockdown that was announced in Chennai. We are closely working with local administration to get the work to strength back to normal numbers while focusing on safety of our work pool. We are gradually reopening the corporate office at Noida. We are following Central, State and GE guidelines to ensure healthy -- health and safety of all stakeholders. Even though we have serious issues due to COVID, the company continues to have a healthy order backlog of INR 59 billion. Once the factories are operational and sites become fully operational, we will be able to come back to normalcy. Taking into consideration COVID impact in the interest of the company, the customers and stakeholders, we have realigned our priorities and have outlined our clear action items for the future quarters. Increasing commercial intensity continues to be our prime focus, ensuring that we are winning share in market with margin levels that we are satisfied with. Operational excellence and execution will remain key to achieve incremental revenues and profit margin. There continues to be a huge focus on lean within the company. Our plants have already adopted the lean concept. And you will get to know more about this soon through our communication channel. We have taken various measures and in order to drive improvement in working capital, drive cost efficiency and accelerate cash collection during the pandemic. To conclude, I say that we are -- we strongly believe that Indian energy landscape is currently undergoing a significant positive transformation. As a leader in the innovation and modern grid solutions we will continue to work closely with governments and our customers to implement solutions that will help accelerate in the energy transition journey. If you go to Slide #3 of the executive summary -- Slide #4 of the executive summary, I've already talked about the nationwide lockdown, gradual restart, order decisions are delayed in quarter 1 of 2021, focus on operational excellence also I talked, cost-saving actions I talked and also I mentioned about INR 59 billion backlog on orders. Now I will hand over to my colleague, Shailesh Mishra, who is Head of our Project Business. Over to you, Shailesh.

Thank you, Pitamber, and good afternoon, everybody, to the participants who are there on the call. Quarter 4 had been operationally significantly challenging for us because the COVID situation was setting up and global supply chain was getting impacted, which were impacting some of the equipments to be shipped to various sites. In spite of all those challenges, we definitely be, as a team, the operation team, came up to the speed. And if you see the number of projects which we have commissioned during this period and many of them were also commissioned during the peak of COVID situation in the country because the lockdown was impacted -- the total country lockdown was implemented sometime on 28th of March. But prior to that also, there had been restrictions. But the operations team definitely came up to the speed, we commissioned Versova, Bombay, TATA Power substation, which was very important for them from the power distribution point of view and they really wanted this substation to be charged. We had to ship a transformer in a very shorter period and commission that. In Bombay, specifically, the situation was bad at that point of time. The third substation of Gurgaon Palwal project, which was at Sohna Road which was also commissioned during the same period. With this, we completed the entire Gurgaon Palwal scheme which was a big project for us, including 3 substations, Kadarpur, Sohna Road, Palwal. Then we also during this period, commissioned Chhattisgarh Dhamtari 400 kV substation, which was a AIS substation, and this was also equally important for their 400 -- this is second 400 kV substation which is being done by Chhattisgarh as a state. The first one was also done by us in Jabalpur and this is the second one. We commissioned this also during that period. In WBSEB, we commissioned a project which is at the Salt Lake Stadium, which is giving power supply to the Salt Lake Stadium and in and around areas. We also did one solar project EBoP for solar project in MLP, which is for the power evacuation through PGCIL. And then one project in Balipara, which is again a PGCIL project in Northeast part of the country where the transformer was to be commissioned. And all these substations -- actually, if you look at the operational performance or activities, there is a whole bandwidth of customers. So there are POWERGRID projects which we completed, there are projects we completed for State Electricity Boards, there are projects which we completed for industry like Tata Power and for TBCB customers like Sterlite. So these have been a satisfying operational thing for us from that point of view at least. And I think I now hand over it to Sandeep for commercial things.

Thank you, Shailesh. Basically not an active -- not a very, very active quarter from [Technical Difficulty]

Sir, this is the conference operator. I'm so sorry to interrupt. Sir, may I please request you to speak closer to the phone so that the audio is much audible.

So you want the speaker to come nearer to the phone right?

Sir, yes. This is fine.

Is it now okay?

Yes. Yes, please go ahead, sir. Please go ahead.

So we could secure some major orders from -- so the first one is the 400 kV AIS substation from Khurja which is Tehri Hydro Corporation. And then continuing our success in Himachal where we have kind of more than 60%, 70% of installed base, where we got another augmentation project from Kangoo, from HPPTCL, which is the state transmission utility. Then Saurya Urja which is a joint venture company with Government of Rajasthan. So we are building a 220 kv substation for the evacuation of the solar project. So that's quite a prestigious order. And then from Adani Transmission we got the 400 kV series reactor project at Mahendragarh, which is very close to their -- which is very close to their HVDC substation in Haryana. So the challenging market environment continues. And if you really look at the order intake situation for the Q4 '19/'20, then we did a number of about INR 655 crores against INR 972 crores. So there was a lot of slowdown in the commercial activities which started happening, which was -- which we saw the impact that many of the bids submission got deferred and the decision making also got deferred in the last March, et cetera. For example, there was an expected order of about $15 million -- $16 million, about INR 110 crores from Nepal -- from the -- for a project of Nepal which got shifted. So there's some impact which is there. And for the year, we have landed at a number of about INR 3,000 crores against INR 3,700 crores. So the total L1 position which got delayed due to COVID situation was close to about INR 170 crores. So for the sales, I hand over to Sushil.

Thanks, Sandeep. Moving on to the financial section on Page 8 and starting with revenue. So we had a challenging quarter and the financial year 2020. For the quarter 4, we had a revenue of INR 664 crore. This was impacted largely by the ramp down of the HVDC, which is reflected in the chart to the extent of INR 40 crore and the decline in the revenue for the quarter because of the lockdown. That amount was roughly INR 160 crores. Similarly, on the full year basis, the HVDC, the lockdown and some of the customer project delays, all these factors contributed to the decline in revenue from INR 40 crores to INR 100 crores roughly in the last financial year to INR 3,158 crore of revenue in the current financial year. Moving on to the Page 9. For the quarter and for the financial year, our profit before tax was negative. For the quarter, we have reported loss of INR 234 crore compared to a INR 40 crore profit in the last year same quarter. And on a full financial year basis compared to the profit before tax of INR 334 crore, we had reported INR 355 crore of loss. Of this, INR 53 crore was exceptional impairment item for the -- one of the factory-related assets, which was reported in the Q2 of the financial year. And rest of the loss can be largely attributable to lower revenue, COVID-related disruption and reassessment of the warranty process in the current quarter. Moving on to the last slide, Page 10. So as a summary, quarter 4, revenue were down to INR 664 crore, operating profit was negative 2,000 -- sorry, INR 218 crore and the loss before tax of INR 234 crore. On a financial year basis, we ended up INR 3,200 crore approximately for revenue, operating loss of INR 235 crore and a loss before tax of INR 302 crore. I would like to highlight the net borrowing position where we ended up to the borrowing of around INR 430 crore in the financial year ending March 2020 compared to a INR 20 crore of borrowing as of end of March '19. This was largely because of the working capital increases that we saw in the first half of this current financial year. With that, we'll open to the questions.

[Operator Instructions] We take the first question from the line of Renu Baid from IIFL.

At the onset, I'd like to congratulate Mr. Shivnani for joining the Board. So my first question is to you, Mr. Shivnani. Now that you've taken the charge...

Thank you.

Yes. Sir broadly, I understand the macros are very uncertain, but in your view what would be the low-hanging fruits or your priorities first in the next 6 months to 1 year where you think you can operationally help the business improve and strengthen its positioning overall? So if you can highlight some of your priorities after taking charge. And then I have a few questions for Sushil and the team.

Yes. So the first and the foremost priority is to strengthen the order backlog further. We are at INR 58 billion order intake, which is quite -- we are in a quite good position. But we will have to continue booking more orders and capture the market share but profitable orders. And my mantra is very clear, revenue up -- cash over revenue. So because liquidity is a real problem in the market, so we want to go for secured terms of payment. That is my priority #1.

Okay. Anything particular in terms of the operational elements with respect to the quality issues because you have been extremely strong on the operations side?

Yes. Madam, basically, we are looking into each and every piece of the quality because we are heavy on the production side. So there, we have already strengthened in last 6 months some of the quality aspects and we will continue that effort on quality and also lean concept because with lean concept, we will have the highest productivity also.

Sure. For the following questions, A, first to Mr. Sushil on to financials. Last year, we've continued to see gross margins being under pressure. So there was certain reassessment of warranty obligation for SL in the previous quarters and you mentioned there was some reassessment further in 4Q. So apart from the INR 52 crores of which we had earlier, what was the incremental dips in the fourth quarter? The other expenses shot up pretty sharply in the fourth quarter. If you can highlight the reasons, it would be helpful.

Yes. So Ms. Baid, your question is on gross margin as well as other expenses?

Yes, sir.

The SL related provisions, as we have been disclosing in the notes to the account, is not considered in the past because that project is something that we believe will revise because -- and maybe Pitamber can explain more on the developments with respect to the CERT and changing of the ownership from the existing promoter to the new group. We had certain slippages in the earlier quarter which were more related to the prolongation of the project cost and some of the LD-related charges that we had taken in Q3 and which was disclosed in the quarter 3 numbers. Having said that, our GP for the full year comes to roughly around 28%. Because this quarter is a bit exceptional in nature, so we'd like to probably more rationalize on a full year basis. This includes one element of COVID because we could not -- we had to take some of the expenses related to COVID in this quarter because of the cost for those particular projects and also some of the margin slippages that happened over the last few quarters and the current quarter. So having eliminating those margin slippages which have been explained in the earlier calls, our gross margin on a normal scenario comes to around 31% to 31.5%. The other expenses, the second question that you have raised, it's already explained in the notes to the financial that we have reassessed the need of warranty and related settlement issues for all the business areas in the current quarter. And on a best estimated, the charge was taken in the current quarter and the financial year.

Will it be possible for you to quantify the total provisions during the year for warranty obligations?

It's already given in the notes to the financial. If you look at the changes in the provisions that are highlighted in the balance sheet that we have enclosed along with the financials, that's largely coming from the change in the warranty reassessment. But to be very specific, the net warranty charge is roughly about INR 132 crore.

Sure. And my last question would be directed on the marketing side. Now as in -- the imports on the T&D side were relatively lower coming in from China foreign competition. But are you actually now seeing customers talking more in terms of locally manufactured or higher domestic content products not only for POWERGRID but also for states? And in your view, what could be the implication of this in the near- to medium-term competitive outlook and pricing?

So Renu, yes, we are seeing -- the customers are discussing about the Make In India aspect which is there. And not only in the state and POWERGRID, but it is also in TBCB space as well. But the real impact we will be able to make an assessment only when we see these things actually moving on ground. We are anticipating some of the feed grids which in POWERGRID which were actually put in under the normal global competitive bidding, we are expecting some large bids to be canceled and to be quoted under domestic competitors bidding. So the first impact we are seeing, but the overall impact on these numbers because still the states have not come up with any such policy. We have not seen any concrete feedback from any of the states on this aspect. So till the time we don't see it coming from the state, the exact impact it is difficult to assess and come out.

We take the next question from the line of Renjith Sivaram from ICICI Securities.

Sir, if we look at our order book and the next year, how much of this order book do you think that can be executable given the COVID scenario for next year?

Can you repeat the question?

We have an order book of close to INR 5,800 crore. How much of this will be executable for you or you think that can be executable over the next year?

See, Mr. Sivaram, this is Sushil. If you look at our past performance, the company has capacity to even go up to INR 4,000 crores. But some of -- if you talk particularly about the financial year, it depends on how the COVID-related developments happen. It's very difficult to call out the number in that scenario. As Pitamber already explained that there was practically 2 months of lockdown and gradual improvement of activity, which is now at a very reasonable level. So depending on that, we would like to expand and execute as much as possible in the coming months and quarters. But overall, we can say that based on the current year revenue, we can easily execute more than like INR 3,000 crores of revenue based on our past performance. We need to take into consideration the 2 months of lockdown also. So we're not laying out a number, but company has potential to execute as much as possible depending on how the customer projects move and how the government's permission allow us to perform.

So what percent -- all our project sites are currently acting or if you can give you a percentage to that?

No, no. This is Shailesh here. See we have, as of now, almost 75 sites which are operational, which are already closed. And most of them, I think, 73 have reopened after we shutdown after the COVID situation. Only 1 or 2 sites where still we are not able to kind of really move the manpower. Otherwise, all our sites are open. However, we have not gone up to the full speed of execution because there are issues related to -- still some states have quarantine-related aspects because people have to be quarantined once they enter into that state. And second, also there is a bit of an impact on the migrant labors because the labors have gone back to their hometown and bringing them back to sites or maybe say finding an alternative is little challenging. So operationally, we are active on all sites. But as a percentage of operations, I would say to the extent of 60% capacity we are operating on those sites.

And is there any more warranty obligation or any kind of this one-off spending or if everything done and dusted with?

Yes. As disclosed in the notes to financials, this is on a best estimate basis, whatever information and assumptions are available as of now following the guidance as per the accounting standard.

Okay. And our -- if you look at our receivables in the receivable days, it has increased. So where do you see this receivable. If it continues to be a challenge or you are seeing more liquidation of receivables in the recent time?

So last quarter, we ended up at about INR 100 crore of outflow. When I say last quarter, I mean, January to March quarter, whereas the previous quarter, which was September to December quarter, we had INR 100 crore of cash -- net cash generation. So on a 6-month basis, we are kind of breakeven. And last quarter, we could generate a reasonable positive cash flow barring this lockdown which happened in the last 10 days, where our substantial amount of money, which was more than INR 120 crores to INR 150 crores got stuck because there was a sudden lockdown. So our performance in terms of cash is stable in the last 6 months per se. And in the current quarter, we have seen that the customers have adopted to the new systems and the realizations have started to happen in a better fashion. So our endeavor, as Pitamber said, his priority, cash is the #1 priority and we are working hard to improve the cash situation and liquidate our receivable and retentions as much as possible.

So when I look at your last year receivables, it's around 219 days. So how much do we see this coming down for FY '21?

Again, as I side, it's very difficult to call out a number due to COVID scenario, but our effort is to liquidate most of the money that we can collect from the customer, whether it is lying in retention or receivable. You are comparing the days sales outstanding because the revenues have come down and corresponding receivable reduction is not at par with the reduction in revenue. Our effort is to liquidate and generate net positive cash flow. But you will have to keep in mind that there was a lockdown for a few months where the delays have happened and we don't know how the continuing impact happened on the customer or the payment process. But as of now, as I said, the current quarter was very motivating where customers have adopted to the new procedures, has started paying us better than the sudden lockdown impact that we saw in the March quarter.

And in terms of our fixed costs and employees, is there any rationalization plan?

So we have taken a hard look at all our cost elements and that's the effort which will continue for the rest of the year. We have been able to save some of the elements from the fixed cost, and we'll continue to work in that direction. It's very difficult to quantify a number at this stage. But yes, we are making a progress and improvement out there.

Okay. And sir, lastly, the order book mix in terms of central utility, state and private, which you generally give?

Yes. So out of the backlog that we have, about 40% is roughly private, around 30% to 35% is the State Electricity Board and rest 25% is split between the central utilities and PSUs plus export orders.

We take the next question from the line of Jonas Bhutta from PhillipCapital.

I had 3 basic questions. First, drawing from Renu's earlier question on trying to identify the bridge between the other expenses in the fourth quarter last year to the current quarter, which has gone up by almost INR 150 crores. You mentioned that warranty obligation was INR 132 crores. So was that comment particular to the fourth quarter or for the full year, sir?

So it's largely the amount of impact in the full year as well as the fourth quarter. I don't have the exact split between the year and the quarter, but roughly, the numbers are similar in nature in the range of about INR 130 crore.

So is it safe to assume that out of the INR 150 crores delta, there's some in the other expenses, INR 130-odd crores is just warranty?

Yes.

And we also see bad debts written off, which are part of the cash flows of almost INR 80 crores, INR 60 crores of which has come in the fourth quarter. Is that a [ right understanding ]?

Fourth quarter, we roughly had about INR 35 crore to INR 40 crore of bad debt provision, which is also falling a part of the other expenses. Half of it is due to the adoption of the COVID-related guidance note and the accounting practices where the expected credit loss models had to be aligned given the new COVID scenario. And the balance half is a specific few customers where we had seen a delay in payment and had to be provided of during the quarter.

And until the 9 months, you had some INR 25 crores of LD provisions. What is the year-end number?

I don't have the specific number, but roughly, the LD charge for the year will be INR 30 crore to INR 35 crore, but I need to be double -- I need to double check that piece.

Sure. Sir, coming to my second question on -- that is on the pipeline of projects. What we've seen so far is that REC-PFC have almost announced 20-plus thousand megawatts kind of tenders. Are you seeing that same amount of vibrancy amongst your clients indicating that this is a near-term opportunity? Or this is going to be spread over maybe 1 or 2 years? And the second was in Bangladesh because that's one -- another area where we've seen a significantly large pipeline of projects but not much movement in the last 12 months. So if somebody in your marketing team can help us understand what's actually happening in Bangladesh and whether that is, if at all, a tangible opportunity for the company?

So -- yes. So basically, yes, you are right that the REC-PFC project what you have said is the same what we are also seeing in the market through our customers, the developer's community which is like POWERGRID, the [ Adani ] and Sterlite and other developer as well. So only thing is that due to COVID situation, the projects have been shifting by a month, were revised, due date is like July. But definitely, looking into the very stringent time line for the execution, we expect these projects to get awarded to the developers sometime with the -- sometime by this -- earliest could be September or the realistic time lines could be between October to December could be a realistic time line for award of these projects. Few of the projects out of these which is related to the southern region, we are seeing some shift which is happening. So that plan might get shifted by maybe 6 to 8 months, something like that. But that's something which is [ far ]. On Bangladesh, yes, we are seeing 3 projects, specifically, last year, there was a big pipeline. Presently also, there are 2, 3, some large projects which are there. But looking into the competitive situation which is there, we have seen most of the Bangladesh business is being cornered by the Chinese companies. So the main bidders, which are there, the main lowest bidder which are emerging are Chinese companies in collaboration with or maybe in partnership with some Bangladesh local companies. But definitely, there is a product market for us which is available from there because the various product and the automation, et cetera, is going from either the multinational companies or the Indian companies only. So definitely, there's a product market but not the substation market because most of the orders are with China.

And given that EXIM fund -- Indian EXIM Bank is also funding almost $2 billion there despite -- so those orders are also going to the Chinese, sir?

No, no those opportunities -- so one thing also is there in Bangladesh, the time line for decision-making is pretty long. So it takes practically about a year's time when the tender is floated to the decision-making is when it happens. So the EXIM-funded projects have just come in. So that's going to take some more time. I'm talking about the TBCB which had taken the loan of KMW and World Bank-funded projects, I was mostly talking about this. EXIM Bank-funded projects of India would definitely be coming to the Indian companies only.

Okay. And sir, lastly, if you can comment on what would be the sustainable gross margins? Because you did mention that adjusted for these COVID-related ebbs and margin slippages. The normalized GPN this year was about 31-some-odd percent. Should we assume more or less the same GPN in the order book? Or that is likely to improve now that most of your low-margin orders -- you've provided for the same?

See, in terms of GP, we -- that's roughly the order booking margin, 30%, 31%. At the same time, we had seen some prolongation of projects in the past. Definitely, there is a pricing pressure in the market as Sandeep has been talking in the few other calls. As a strategy, what we do whatever order we book, we generally try to then work on the sourcing saving, negotiations and productivity to improve from the level of margin that we have booked in the order. But at present, the normalized margin which comes at the order bookings should be in the range of 30% to 31%.

We take the next question from the line of Viral Shah from Prabhudas Lilladher.

Yes, yes. So a couple of questions while most of them have been answered. So one, in terms of order book, have we seen any cancellation or slow-moving orders or deferment of orders? And what will be that percentage be from clients?

So I would not say that any of the orders have got canceled for us. That is not what we have seen. Definitely, there is a slow pace which is happening for decision of the order making because of the COVID situation. Even at the customer side, the people are not able to attend offices, et cetera. So they are shifting -- we are seeing a shift in the decision-making time for the orders. So there is a slow movement in that process, but the good part of it is that we are not seeing any cancelation of the project. And one of our orders, what we have booked in our backlog has got canceled.

And in terms of some things there has been a slow moving and deferment, so any kind of price acceleration or that variation in prices which comes then whether that has also been accepted by customers because the situation is not in our hands, right? COVID is something which is no one would have guessed it. And so most of the suppliers are understanding it, and they are -- is the -- are you looking at for price hike as well or no?

So when and -- sorry, Sushil, go ahead.

Yes. So on the orders side, some of the orders are firm price in the nature and some of the orders have the variable price component. The COVID-related impact is of 2 types in nature. One is the delay in the project time line, which is largely covered by the force majeure event, so meaning we -- that we should get the time extension to execute these projects. At the same time, there was some cost overrun that we saw in the quarter because of the lockdown situation where the minimum expenses had to be incurred at the site. We will continue to push our customers to get paid for that. However, that discussion will take time. Whatever on the best estimate basis we could think of will not be reimbursed has been provided in the financials for the quarter ending March '20.

Fair enough, sir. Sir, that was very helpful. And secondly, sir, we had made -- mentioned that there were some supply side issues as well. So has that issues been resolved in the month of June or they are still continuing the process?

Supply side issue you're mentioning?

Yes, sir. We had mentioned in our call in your opening remarks that one of your team members had mentioned that there were some global supply side issues and that is the reason why the execution was also a bit delayed. So obviously month of April was a lockdown and partially we had company fluctuation from the month of May. So has those issues been resolved or still the issue continues in terms of supply side?

Yes, so the issues are resolved, and there are a lot of improvements on supply side actually. But we have not reached 100% supply for our factory. So there are lot of improvements. And almost we are getting supply from our all suppliers, but the speed is not at 100%.

Okay. So could you quantify that number? So what would be that number be in May? And what would that number be in June? So that quantification -- a rough estimate also would have been something which you could be comfortable.

It is extremely difficult at this point of time to quantify it.

Fair enough, sir. And lastly, if I may, squeeze one. So any suppliers which is -- would have been importing from China or our exposure for China in terms of imports? Could you quantify that in terms of numbers or percentage, that would be great.

Other organizations...

We are evaluating it at present about Chinese suppliers and how we can basically develop more supplies in India at present.

Great, sir. But what would be our ratio for FY '20 be in terms of percentage, a rough percentage of supply, whatever we have been for -- that coming from China basically? A rough number would have been -- some guidance to that would have been great.

So roughly, we have about 20% of our import from the China, but some of them are also from the group companies, not from the third-party suppliers.

Our next question is from the line of Bhavin Vithlani from SBI Mutual Funds.

My first question is the closure of the factory Naini would have taken out what part of our fixed cost?

So during the year, post closure of the factory, we have spent close to -- our fixed cost to that extent is roughly INR 20 crore.

Okay. Sure. And second thing is -- yes, sure. And if one looks at our fixed cost structure, and I'm looking at FY '19, as I have the annual report, it's about roughly INR 700-odd crores, INR 400 crores could be the employee cost. And when we speak to our peers, they're targeting anywhere between 15% to 20% shave off from the fixed cost due to various measures. Any color on that would be helpful.

So out of INR 700 crore, I think you are including the depreciation also out there. I think the cash charge is roughly in the range of INR 600 crore. As we mentioned earlier in the call, we are taking a hard look at every single cost line item. We have been able to optimize on some of the costs. We'll not be able to lay out a number right now on the call, but our effort will be to reduce the cost as much as possible.

Understand. The second question is on the -- I mean, if one looks at fiscal year '17, '18 and '19, on an average, we have done revenues of INR 4,200 crores. And as your presentation mentioned, ex of HVDC, we had done INR 4,000 crores. I mean if one leaves fiscal year '21 as an exceptional year, could we believe that and looking at the order of pipeline that you have, can we come to that INR 4,000 crores revenue number in fiscal '22 if the business we anticipate pans out?

INR 4,200 crore had always the element of HVDCs impairing. Now given the current -- and we are in the long-cycle business. So the order decision award and then execution takes the longer time. So FY '22 revenues depend on the size of the market that get realized in the FY '21, and we'll have to see for that. As I said earlier in the call, our capacity is there. We can definitely ramp up and increase to the higher level of revenue. With the backlog of, say, INR 5,900 crore, if the customer projects do not delay and if everything becomes normal back to the pre-COVID level, definitely we should have improvement from the current execution level of INR 3,200 crore and we [Audio Gap]. We can say that we can also improve if the projects do not delay and the book-to-bill orders are available from that level to a higher level, but difficult to reach immediately in '22 for INR 4,000 crore without HVDCs in place.

Understand. So could you speak on the export. What was the revenues from export in fiscal year '20? And how are you seeing the export market opportunity? You spoke about Bangladesh, but anything that we could expect as an outsourcing or exports with the help of the group company -- with the help of the parent?

I'll answer the first question of the level of export in our revenue and then let Sandeep answer on the market realization from the exertion [Audio Gap] is that -- be in the range of 17% to 18%.

So thanks, Sushil. And Bhavin, so basically, what we are looking for is that we're talking to the parent company for utilizing the factory more and more for the export opportunities. And of course, it's very difficult to give a number as of today because of the COVID situation. So a lot of markets and also there is a lot of different scenario which is occurring into different regions. But yes, in a -- I would say, in a medium term, we expect more allocation of markets and exports to grow better and more improve from the Indian factory.

Sir, can it be like 30% of the revenues, if -- I mean, over a medium term, as you highlighted?

Sir, number would be difficult to pitch in now.

I understand. Just last one question. On the receivables front had -- and Mr. Shivnani spoke about cash over revenue. What is the level that you guys are targeting on the receivable side of the business and also on the working capital side? We have seen improvement in the past, but any number that you could share would be very helpful.

In the earlier calls, we talked about becoming debt-free by financial year '20-'21, which means that we were aiming from September '19 to March '21 aim, like 18 months window to realize about INR 400 crore of cash. The quarter for September to December, the first quarter was good, where we realized INR 100 crore. But because of sudden lockdown, as I said, that we had an outflow of INR 100 crore. So which means that in 6 months, we have neither improved or nor deteriorated our working capital or the borrowing position from the levels where we started to focus hard on cash in addition to the earlier efforts that we were doing. Going forward, we -- though the aim remains the same, but because of COVID, there'll be a deferment to this target. Definitely, the financial year '20-'21 becomes difficult to achieve. But effort is always to generate breakeven or positive cash every quarter. That's the minimum that we'll look for and effort is to increase -- reduce the receivable and retentions as much as possible by better execution and by streamlining or strengthening the payment terms that Pitamber talked in the beginning of the call. And to put in short, the aim remains same. We'll work towards that, but the time line may get delayed because of the current situation. And not only -- and to achieve that, it's not only just receivable that we are focusing on, just to add on, we're also focusing on inventory optimization, the payables and each and every item that lies in the working capital.

We take the next question from the line of Abhishek Puri from Axis Capital.

Just wanted to check couple of things. First, on the IL&FS provision, that has not been fully done yet. Any reason why?

So ILFS, we have provided about INR 19.5 crore roughly out of the INR 25 crore of the assets that we had through the PF investments. Some of the bonds are secured. So in the absence of any particular market-related information and the earlier communication that came from the team which was managing the ILFS, the media information that was available, we took an estimate that 25% of the money could be realized. However, based on the update of the information, we'll consider that in the next quarter. And the primary assumption was that because the part of the debts are the secure debts and they have charge on that debt.

So this will still be charged off in the coming quarters?

No. I'm saying based on the information that was given...

So this can be realized.

We are left with about INR 5 crore of provision. Based on the information available in the public domain, the assets of ILFS have value in the market and the committee which has taken over the assets are in the process of disposing off. The money will -- is expected to be given to the secured creditor first. And some of the investments that we have made are secured in nature. So we'll have to...

Which is up to [ 55% ]? That is what we have not provided, right?

Yes, yes, yes. That's what we have not provided because we assume or believe based on the available information, that the money is realizable, but we'll have to see the more outcome of the realization of asset and more information that is available in the market. These investments are due few years from now. And we hope by that time, there'll be a realization of the assets of ILFS and allocation of the realization proceed to the secured creditors.

All right, sir. And my second question is on the gross margins of the company. So past few quarters, we are at about 24%, 25% as against 34% -- 33%, 34% that we had been reporting earlier. So could you -- although you gave some details for other expenses and warranty provisions that have been done, are there any one-offs here? Or is it just related to project delays and that we have seen these 2 quarters seeing abnormal level of gross margins and from next quarter, we'll be able to get back to 31% -- 30%, 31% level?

So as I explained earlier in the call, we are running at a -- on full year basis, the gross margin of around 28%. This has 2 components, about 1%, 1.5% impact because of COVID and the Naini factory related expenses. And then we had about couple of percentage points the margin reduction because of the project prolongation. So if these 2 elements are excluded, the normal book-to-bill and execution margin, if no margin slippage happens is roughly in the range of 30% to 31%.

And that can be assumed if the projects do not get further prolonged, that can be expected to happen in the next year as well, in FY '21 as well?

Yes. So our effort is always to improve. While we don't lay out a number here because lot depends on how the projects move because of the COVID situation, and how the commodity price moves, our effort -- first effort is always to deliver at the as sold or as booked margin.

Right. And my last question is on Pitamber has run a very successful business at ADB. One of the most profitable P&D businesses, high ROC, high cash. What are the kind of practices that have been brought about or cultural changes that have been brought about here that can assure the investors that similar warranty provisions, project delays do not happen and we are able to get to a better working capital and cash generation as well as in terms of what new products are being planned along with global parent to be brought into India? I mean GE supplies large part of locos, but you do not have any electricals to be supplied there or any orders -- confirmed orders from the group company. So just wanting to understand any direction or strategic change that the company has taken.

Pitamber?

So I'm in discussion with the headquarters, and we are going to have a detailed discussion in coming months to come how we are going to pick forward our journey in India on export as well as bringing in new products, and you correctly said related to railway business.

Okay. And in terms of working capital, any business practices that have changed? Are we not bidding for any of the state projects? What are we doing differently this time?

We will clearly go for -- I will not say state projects or central projects. We will go on collectivity basis, and cash will remain priority #1 for me.

Right, sir. Sir, if you can provide the breakup between projects, products and services for the current year or quarter. Or current year should be good enough. That would be last question.

Yes. So around 48% to 50% of the revenue is from the product sales and the balance is from the project sale during the current financial year. It's almost equally split.

And services? Is there any part success?

Yes. So I included services in the project sales. So that will be roughly about 5% of this. So around 48% to 50% of products, 45% projects and 5% services.

We take the next question from the line of Jigar Shroff from Financial Research.

I think, sir, you mentioned for FY '20 we had a warranty reinvestment of INR 132 crores, bad debts of about INR 80 crores and LD provision for INR 35 crore. What was -- what is LD provision for, if I may ask, please?

The liquidated damages cost is a contractual provision where there is a penalty on the delay in execution.

And sir, this warranty, I mean, any outlook on -- I mean if it's a one-off for FY '21 or...

No, as I said, it's a provision based on the best estimate basis considering the past historical trends and the related estimates that we have made. Warranty are generally for a period of 1 year, immediately next 1 year to 3 to 4 years, depending on the different nature of products.

I see. I see. And sir, anything -- on your earlier calls, we did talk about the HVDC opportunity at Bangladesh and Ladakh, any outlook on that, sir?

So basically, the Bangladesh opportunity did not go through formally based on the agreement between India and Bangladesh. It's practically because of the cost of the project and things like that, there was a rethinking or -- by Bangladesh TBCB and eventually, the project was dropped. But this project of Leh-Ladakh is definitely moving. But because of COVID situation, et cetera, it is still not moving at a desired pace. So we expect maybe minimum at least 1 more year for it to see -- to come on ground and have some concrete movement forward.

Sir, what would be the size, sir, I mean, of this in the sense, opportunity?

What will we be?

I mean, as part of the execution, I mean, the size of this project, sir?

That will depend upon the total volume, but if it is going to be at 7.5 gigawatts, that is going to be like $2 billion opportunity, gleaming $2 billion.

And our share would?

That would be we're planning about 3 blocks of 2.5 gigawatt each. So that will depend upon what share we gain.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Suneel Mishra for his closing comments.

Yes. Thank you, Janice. Thank you, everyone, for your participation. We conclude today's conference call. In case you have any other questions, then please feel free to contact me or Mr. Anshul Madaan, who is our Communications Leader. Thanks again.

Thank you.

Thank you. On behalf of GE T&D India Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.