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

Ladies and gentlemen, good day, and welcome to GE T&D India Limited Third Quarter ended 31st December 2020 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Suneel Mishra. Head of Investor Relations, GE T&D limited. Thank you, and over to you, sir.

Thank you, Lisanne. Ladies and gentlemen, good afternoon. I wish every one of you are safe. 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 third quarter and 9 months of the current financial year ended on December 31, 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; we have Mr. Sushil Kumar, CFO; Mr. Nagesh Tilwani, who is our Whole-Time Director; Mr. Sandeep Zanzaria, who is the Commercial Leader. We also have with us Mr. Mariasundaram Antony, who has been replaced Mr. Shailesh Mishra as Project Business Leader. Mr. Maria is a 21-year GE veteran, and prior to GE, he worked with BHEL and TVS. So we welcome onboard Mr. Maria on this call. We also have with us Mr. Manoj Prasad Singh, Company Secretary; and Mr. Anshul Madaan, Communications Leader. Please note that this conference call is scheduled up to 3:30 p.m. I hope you would have received the investor analyst presentation, and the same has been uploaded at our website. I hope you have also read the disclaimer as per Slide #2. I would now request Mr. Pitamber Shivnani to begin this conference call highlighting key events of the quarter. Thereafter, Mr. Maria and Mr. Sandeep Zanzaria will give us an update on operations and market, respectively, followed by Mr. Sushil Kumar, who will be mainly speaking on financials. I now invite Mr. Shivnani to begin the conference with his opening remarks, beginning with initial pages of the presentation. Over to Mr. Shivnani.

Thank you, Suneel. Ladies and gentlemen, good afternoon. Thanks for joining the call. We hope you are doing well and are also keeping your family and loved ones healthy and safe. Likewise, safety and health of our employees and also our contract employees is also of paramount importance to us. We always step -- stay a step ahead to ensure the well-being of our employees, and this is reflected by the countless initiative that we continue to take quarter-on-quarter besides keeping a never-ending vigil during the day-to-day operation at our plants on sites. Today, I would like to start with profoundly thanking our employees who have been serving on the fore -- frontline since the beginning of the pandemic base, right from ensuring timely fulfillment of customer commitment to ensuring round-the-clock support for utilities for maintaining the power equipment. Our team never rested for even a single day during the COVID times. And I'm happy to share that all our plants and sites are fully operational now. I'm proud of a meaningful progress the company made in quarter 3 of financial year 2021. We have gathered good momentum and intend to build on it. But before we update you on quarter 3 results, I would like to share with you on a couple of announcements. First is about the appointment of Mahesh Palashikar on the Board as a Chairman. Mahesh will assume the role of GE T&D Chairman effective 1st March and succeed Vishal Wanchoo, who resigned from the Board upon assuming new responsibility with another company after retiring from GE. Mahesh is President of GE South Asia and Chairman of GE Power India Limited. The Board also co-opted Emanuel Bertolini on the Board of Company as Director with effect from 1st March or the date of allotment of Director Identification Number, whichever comes later. Emanuel is a Global Chief Commercial Officer of GE's Grid Solutions business. Nagesh Tilwani, who is a Whole-Time Director, has resigned from the Board in view of the increased responsibilities within the GE Group. We are delighted to have both these gentlemen join GE T&D Board. They bring wealth of experience and deep knowledge from leading diverse set of business. I would also like to express my sincere gratitude to Vishal Wanchoo and Nagesh Tilwani. Their able leadership and wise council has always been highly appreciated by all the members of the Board. Coming back to quarter 3 results, as I mentioned earlier, we made good progress in all financial KPIs during the third quarter. We significantly improved our cash performance and profitability despite the still difficult macro environment. Though the order -- though the growth in orders remained pressured, primarily because of prevailing market conditions due to pandemic, but the good news is that we were able to secure a deal with Nepal Electricity Authority for upgradation of 3 400 kv GIS substations in Nepal, which have a delivery time line of 36 months. The 3 substations that GE T&D will upgrade our critical part of Nepal South Asia subregional economic cooperation, power transmission and distribution project, which is backed by funding from ABB and Nepal government. Thanks to the magnificent performance by our teams, we were able to reduce our net debt by INR 268 crores in quarter 3, which reduced from INR 443 crores to INR 175 crores. Our sales during the quarter went up by 10% year-on-year to around INR 1,034 crores. Our operating profit, profit before interest, exceptional items and tax for the quarter stood at INR 64 crore against the operating loss of INR 31 crore in quarter ended December '19. This result is backed by the strong execution and numerous cost-saving actions taken by our operation team. India is making great strides towards renewable energy generation and has committed to more than double its non-fossil fuel target to 450 gigawatts by 2030. As a recent report released by the Institute of Energy Economics & Financial Analysis, this increased focus on renewable energy sector is set to bring investment to the tune of around $500 billion in India's renewable sector. Out of this $500 billion, $150 billion investment is estimated for expanding and modernizing transmission and distribution. This will open a steady stream of evacuation opportunities for grid industry, primarily driven by increased green energy capacity, expansion of central and state utilities, growth in industrial sector and restructuring of aging assets. We are also expecting a growth of opportunities in our neighboring countries like Nepal, Bhutan and Sri Lanka, as they are strengthening their power infrastructure. In fact, a new development strategy recently unveiled by the Bangladesh government as a part of 2021 to '25 development plan is targeting aggressively efforts and immediately providing required policy support to enhance energy generation from renewables. This reflects the growing seriousness of adopting green energy in South Asia region to decarbonize our plant, and India is showing the way. With its proven delivery capabilities backed by world-class technology and strong manufacturing footprints in India, GE T&D is strongly positioned to collaborate with leading EPCs and utilities to strengthen the region's grid infrastructure. To drive sustainable profitability and incremental revenues in this emerging market, our belief is selectively acquiring profitable business remains undeterred. We remain committed on delivering the projects timely and with the high-quality by continuously strengthening our delivery capabilities. We leverage the first 3 quarters of financial year 2021 to drive lean initiatives across our organizations to improve our operations, cash collection, supply chain recovery, all of which helped us to deliver a better quarter in terms of profitability. Going ahead, we will continue to drive these optimizations and improvements wherever required. Cash over revenue remains our mantra. Now growth in order is also our mantra. I am confident that with these efforts, we will help us to perform better. Our order book remains healthy with backlog of INR 4,900 crore, which is equivalent to roughly 1.5 years of company's revenue. With that, I will turn it over to Maria to talk on operational highlights for Q3.

Thank you, Pitamber. Good afternoon, ladies and gentlemen. It is my pleasure to really update you on the operations front, which GE T&D did with our customers as well as internally. In terms of delivering for our customers, we continued on the momentum which we created on the 2 quarters of 2021, and in the third quarter, we had actually implemented energized commission projects, creating evacuation infrastructure solution for our customers across the length and breadth of the country. To taking some of the projects, which we have listed down here, we did actually commission the project, 400 kV, 132 kv 3 days of air-insulated switchgear in Tripura which is in Surajmaninagar. And then we also did on something definitely big projects on the south with our KSEB customers in Kaloor as well as in Brahmapuram. And then on the west side, we actually provided evacuation infrastructure for our customer, Azure Power in Bikaner and on the east side, we also commissioned projects in Dhamteri in Chhattisgarh which is the 400 kV, 220 kV, 33 kV, 315 MVA substation there. So we continue to really make impact in terms of creating infrastructure, evacuation infrastructure for our customers across the length and breadth of the country and the momentum continues. And in talking about the internal operations, we continue to provide spotlight for all our factories in terms of every quarter. And in Q3 of 2021, our spotlight was in our Hosur plant, where we actually manufacture world-class air-insulated switchgears up to 1,200 kV voltage levels. And this is one of the first manufacturing unit in the world to have designed and manufactured and supplied 1,200 kv capacitive volt, CV voltage, CV transformer. And what we really did there was to really provide, I think, our MD and CEO, Pitamber, did a Gemba Walk, spent time with the team to really, I think, drive the message around safety as well as quality, delivery and cost. And we continue to do that with all our factories and actually really thank the team, which has really stood up during a tough time in terms of COVID and then provided the support for our whole business, overall business and for our customers. With that, I will give the mic to Mr. Sandeep.

Yes. Hi, thanks, Maria, and good afternoon, everybody. So the market due to COVID scenario remains muted for the quarter and of course, for the 9 months as well. The TBCB projects, which we were earlier expecting, will happen in the last quarter, which is like September through December. We moved them up. Of course, now the 5 packages have been finalized, but they have got finalized in this quarter. So of course, the market was a little down in terms of the finalization. State and city boards have not yet picked up till now, but now we are seeing some traction at least happening in many of the states with new tenders being planned and few tenders have already been floated. So for the quarter, we have booked an order for the company for about INR 695 crores. And the total order intake for the 9 months stood at INR 1,677 crores. The major orders for the quarter were 20 what has already been talked about by Pitamber. So this is basically 3 substations of 400 kV GIS in Nepal. And if you remember in the quarter before this, we had taken one more order of 400 kV GIS in Nepal from power grid for the Arun 3 hydro project, which is being done. So with these 2 projects, we will have a very strong base in Nepal. We also took an order for 400 and 220 kV GIS supplies from Techno Electric for the stabilized TBCB projects. So most of the stabilized projects, which have been done under TBCB, the base has been built by GE T&D only. So that's a understood step into reinforcing our base and of course, our relationship with Techno Electric. We have also secured a main and a backup control center for remote operations of various transmission fluctuations of HP. Of course, a large part of HP transmission system, which includes 400 kv GIS to 245 kv GIS and 120 kV GIS has been built by GE. So with this, we will be reinforcing our presence into HP, and this project was also funded by ABB. And of course, we have supplied in the past few reactors from Lalitpur power generation company. And when they again required the reactors for the additional lines that we put in, so of course they turned to their reliable partners of GE T&D. So thanks, and now I hand over to Sushil.

Thanks, Sandeep. So moving to the last page on the financials, first talking about quarter 3 financial performance. During the quarter, we registered a revenue of INR 1,034 crores. This was 10% higher than the corresponding quarter in the last year. And our earnings before interest, ex and depreciation was at INR 57 crores. This was significantly better than last year where we had actually a INR 25 crore loss at this level. And in terms of percentage, we improved from negative 2.7% to positive 5.6% of EBITDA. So this was supported by the increase in revenue as well as control over the cost that Pitamber mentioned in his communication. In addition to the EBITDA, we had INR 23 crore of other income. I'll actually call it as an operational other income because this comes from the reversal of provisions for warranty or reversal of some of the tax provision, which are the operational items in nature. And in addition to the INR 23 crore of other income, we had INR 26 crore of exceptional gain from the sale of one of the residential guest house property and net of the litigation matter of one other property. So adding these 2 elements, we registered a profit before tax of INR 75 crore versus a loss of INR 50 crore in the last year. And moving to the 9-month financials. Our revenue was 2% higher than the last year and the revenue for the 9-month period is about INR 2,550 crores. Again, on the same line, continuing the cost control in making operational improvement in the project, the EBITDA was higher at 3.9%, about INR 100 crore of EBITDA compared to about 1% EBITDA in the last year. And including the other income and exceptional gains of this year, on a 9-month basis, we had a profit before tax of INR 62 crores against a loss of INR 121 crore in the last year. Last year, INR 121 crore loss, as highlighted in the presentation, also included a INR 53 crore of exceptional impairment of one of the factories -- factories plant machinery. I would like to highlight that the current financial year performance of 9 months also includes the quarter 1 and quarter 2, which were impacted by lockdown and lack of activity. So we have to absorb cost for that period also in this financial year. Now other than the P&L performance, as Pitamber highlighted and in line with our earlier communication of cash over revenue and targeting a debt-free situation for our company, we improved our debt position significantly. And we came down by about INR 270 crores in the quarter. So end of September, we had a net debt of INR 440 crore. And end of December, our net debt came to INR 175 crore. In addition to this position, as you had seen in the postal ballot that has been communicated and announcement made to the stock exchange, we are in agreement with another GE Company to sell the loan core activity of [indiscernible]. And that had also helped us to realize further INR 87 crores from the sale of this non-core activity and will help the reduction of debt further. So that was on the financial performance of P&L and cash. With that, we'll open up for the questions. Thank you.

[Operator Instructions] First question is from the line of Renjith Sivaram from ICICI Securities.

Congrats on a good performance for this...

Sorry to interrupt Mr. Sivaram. Sir, we're not able to hear you clearly.

Is it audible now?

Much better.

So sir, just wanted to congratulate on good set of performance. Overall, looking at the order input which we had this quarter, so do you expect this momentum to continue? And how are we placed in terms of anyone for the order intake in the next quarter? And you can give some more outlook regarding the FY '22 what are the large orders in the pipeline? We have been hearing about Green Energy Corridor. So what is the status of that?

So Renjith, it's Sandeep here. So basically, we have presently L1 and about INR 300 crores of packages, out of which primarily we have 3 large packages of transformers and reactors of Green Energy Corridor, which we will be getting the orders from Power Grid or maybe 2 orders we have already received 2 days back, and 1 order we will be receiving, I think, by first week of March. So we are presently [indiscernible] [ we are positioned well ] and the orders we have received for the quarter is close to about INR 300 crore.

And in terms of the outlook, which are the major states are ordering...

Sorry to interrupt, Mr. Sivaram. Sir, we are not able to hear you clearly.

Sir, regarding the outlook, like what are the major tenders in the offering and which are the major states that are currently very active in terms of ordering? So how do you see the overall outlook?

Renjith, presently, the traction what we are seeing in a few states, like, for example, Orissa is there, Delhi is there, then Rajasthan is there, Gujarat is there and Karnataka is there. So there are a few states -- West Bengal is there. So a few states where we are seeing a good traction. There are tenders, which have started coming. So that's a good sign. And I think with that, we see further activity building up in other states as well. But yes, in these states, the tendering activity has already started. I think going forward, we expect seeing more states like UP and Himachal also to catch up only as well as Northeast, and then Power Grid is also expected to come up with few tenders of Northeast, et cetera. So I think -- not I think, but we are expecting the commercial activity to now pick up. So the lull which was there in last year due to COVID scenario, we expect a turnaround starting next quarter. At present there are tenders, which have come in, but bid will be put in and then the price will be open. So the activity will start from next quarter, I think, the order placement activities.

Okay. Any status on that HVDC order, which was expected -- which comes under the Green Energy Corridor, what is the status there? Is there any progress in terms of that?

No. So as of today, the -- what we understand is that the Ministry of Power is working on finalizing the whole scheme, but still not -- the tenders have not been planned and they have not been escalated. So at least, for example, for this year, nothing is there, but we may expect these tenders to come some time in next year.

Okay. And sir, lastly, on the revenue and the order units breakup in terms of central utility, state and private, which you generally give if you can throw some quantitative details regarding the central, state and private of order book and revenue.

So as the breakup of order book, about 80% of the order book is from the private and the rest, 20% is from the central and state utility.

The next question is from the line of Renu Baid from IIFL.

Congratulations for the decent performance. My first question is to understand, first, on the ordering side. What could be the broad opportunity from these neighboring countries? Because Nepal has been a good market for us in the last 2 quarters when domestic market was weak. So if you look at all the neighboring countries, what would be the addressable opportunity for the next 12, 15 months for GE T&D on this side?

Renu, Sandeep here. So basically, in Nepal, there are multiple projects, which have been planned. So there are projects, which have been planned with Millennium Corporation U.S. grant. So that's quite a large project in terms of substations and transmission lines. And apart from that, there is a project pipeline in Bangladesh as well. So there is a good amount of pipeline, I would say, close to about more than -- for us, it would be close towards more -- somewhere between about INR 500 crores to INR 700 crores coming from these 2 countries in next 12 to 15 months. Only thing is that there are certain approvals, which have to be given by the Nepal Parliament, what we understand for the grant projects, but because of the political uncertainty, that is slightly getting pushed. So otherwise, the projects have been conceived and the fundings have been kind of tied up, but then the procedural part is still to be completed.

Got it. Second, if we look at the broad as an order inflows have been modestly have INR 4,900 crores of backlog at the end of 9 months. And even if execution is modest, the way it is in the last 2 quarters and the fourth quarter, can one expect that given the short-cycle nature of the new order flows which are coming, especially in the Green Energy Corridor segment, the overall revenue book should be now back to close to FY '19 levels, which was closer to INR 4,000 crore level? Would that be a right assumption? Or you think that the execution time lines of new projects are not on the same page?

So for the execution time lines, I agree that with the renewable projects, the execution time lines are shrinking, like, for example, earlier a 400 kV substation used to be like 24 to 30 months, but today the clients are demanding somewhere between 15 to 18 months. So definitely, the execution timelines are shrinking. And so accordingly, the product time lines are also shrinking. So when EPC is getting an order for 15 months, so he's expecting the products to be delivered in 6 to 8 months. So that is the scenario in the market. And maybe for 1 -- excluding one product line, we are totally geared up to deliver these kind of requirements.

Sure. You said we don't anticipate any production bottlenecks or capacity bottlenecks for transformers in the active portfolio.

I don't think there is any bottleneck on transformers and reactor. We have enough capacity available in the factory.

Got it. So third question is to Sushil here. If you look at the overall other expenses trend in the last couple of quarters, we have very well continued less than INR 100 crores on a quarterly basis. And this quarter, a, are there any one -- any exceptional item in the other expense and write-backs or ForEx gains because of which the number has been slightly lower sequentially? And from a medium-term perspective, from 12 to 15 months, should one broadly expect other expenses now to remain in this INR 100 crores, sub INR 100 crore range with a similar execution run rate of INR 1,000 crores on a quarterly basis?

So did -- the other expenses do not include any reversals, as I mentioned in my opening remarks, reversals of operational items like warranty or tax flows or any such reversals are a part of the INR 23 crore other income.

Other income, right.

However, operationally, as a management, you will consider that as a part of operational items because whenever there is a corresponding charge that forms a part of other expense. And then all of us as well as the investors classify that as a part of the operational performance of the company. And then I'm not giving any forward-looking numbers. Yes, there will be some pockets where there'll be increased because of the increased activity. There may be need to travel and so on. But as you have seen in the last few quarters, our effort is to contain costs and offset from where we can save. And Pitamber talked about lean, so that lean concept goes on, not only in the cost of production, but across the organization. So it's not just other expenses, it's even the optimization of organization, trend, cost of production, every way we are targeting to maintain the cost or improve the cost, so that we deliver better performances.

Got it. And one last question, if I can add. What is the update on the SL project. We have heard the project has started to move now. So what is the revenue execution time line that we have in the mind? And are there any likely revision in the project cost estimates or the order value from the new customers or the developer for us?

We are in discussions with Adani on this, and we have still not zeroed down on many things. So as soon as we zero down, we will get the letter of intent from them.

Okay. But mostly, the execution should begin somewhere in FY '22 for us, first half?

Yes, yes, yes.

In terms of operational movement, as mentioned in the notes to the accounts, till last quarter, all of us were awaiting the CERC approval for the project to be transferred from the promoters or the existing company to the new promoter, which is Adani. So that approval has come and the traction -- there is a traction on the project. And before moving to the next question, I would like to make a small correction to the earlier question that Renjith had asked. So I'll give the revised numbers for the order backlog that we have, about 65% of the backlog is from the private segment, about 20% from the state and 15% from the central utilities. A small correction to that, Renjith.

We'll move on to the next question that is from the line of Bhavin Vithlani from SBI Mutual Fund.

And a good performance on the balance sheet front. My first question is on the announcement that has been made on the Engineering division. Would appreciate if you could give the thought process of the management regarding the same.

Yes. So this Engineering division, as clarified in the stock exchange announcement that we made, this division serves to the internal other GE grid entities across Europe and other territories. And generally, they provide the services on man-hour basis. And in fact, we had 2 specific teams within the company, one serving for the internal P&D core projects for Indian customers and the rest providing capital services to the global entities. Now globally, the grid solution company at the GE Grid Paris level, they have a plan to expand the COE that they already have in the other entity in India. And the purpose of that is to optimize on scale, have common tools and processes and make much more efficient electricity services in place for the global engineering activity that the business made. And as a result, because this was a noncore activity for GE T&D, and the main purpose of this entity is to serve the customers with high-voltage equipment in setting up the substation, it was decided to exit from this activity and realize the value, which will then help us to reduce the debt of the company also.

Sure. So this is actually not in line what we see in the other entity, which is listed entity GE power, where in the earnings call, they clearly mentioned that the opportunity for the global engineering services will be part of that listed entity. So we're a little surprised right why is it taken out private and that, too, at such a cheap valuation. And moreover, why are the minority investors not being given an opportunity to participate in that?

So I will not be able to comment on the strategy of the other listed entity. In terms of valuation, it's a fair valuation done by the renowned professionals who are renowned in the industry. It's a fair valuation done as per the profitability of this division and accordingly this price has been arrived at. So the minority shareholders will gain in terms of the value that comes to the company. And accordingly, this will also help us to reduce the best of the existing company. In addition, this business, if I have to add a bit more about the rationale, there is no specific commitment or long-term commitment that we had from the global counterpart. So the business had its own risk because this is noncore. We didn't have exactly the kind of competency that the customer may expect in a long term. So as a result, looking at the overall situation and the immediate benefit that comes at a fair valuation by a professional company, the decision was taken to realize the value, which is at the fair value.

Sure. Maybe we could take this off-line. Just a bookkeeping question. If you could help us with a few balance sheet details on the debtors, inventory and payables and our day sales also could be helpful. How they have changed over the last quarter?

So I'll say that most of the improvement on the balance sheet has come or the debt reduction has happened because of better performance on the working capital. So we have been able to improve our receivables versus the payables that we had. So with the pickup of the activity, the payrolls have increased, but they reduced the amount of receivables by about INR 100 crore, and we also optimized on the inventory, which resulted into the improvement of cash flow of about INR 250 crores. Now in terms of days of sales of working capital, at present we have working capital of about INR 680 crore, and this represents about 80 days of revenue.

We'll move on to the next question. That is from the line of Ashwani Kumar, an individual investor.

My question was that with intervention of more of renewables, there are 2 types of opportunities, one which will be for making new grids, which are required to transport from states where these renewable assets are being set up to states where the electricity is being transported, that's one -- is being transferred. That's one. And second is on the grid upgradation program. Because grids within the state -- the state grids and the central grids, would they require any further investment? And is that back ended? Or do you see that happening in the next 2 or 3 years? I just wanted to have your thought process on the same.

So Ashwani, it's Sandeep here. So basically, when you have the power which is flowing, for example, from the states where the power is getting generated to the states where power is getting consumed, so where the power is getting consumed, definitely there is an upgradation which is required in those states as well where the power is getting consumed. Because once power will come up, then you need to have the infrastructure to receive that power. And once that power comes into state, when you could transmit, if it's at 765 kV, then you've to shut down to 400 and then from 400 you've to shut down to 220 kv and all. So obviously, whatever power is getting added, you need to build that infrastructure, that is one. Second, yes, I agree that many of the assets, which are quite old now, so that will eventually be coming for refurbishment or renovation modernization. And in fact, we have seen in many of these states -- selectively, we are seeing this activity happening. But primarily, it is more happening on the generation side rather than on the substation side. And so -- does it answer your question?

Yes. My question was basically you gave a number of -- Mr. Pitamber gave a number of $150 billion, which is a longer-term number for 475 reaching those levels of renewable capacity. So before that, whatever we have set up and whatever we do, let's say, we do 100,000 megawatts additional renewable capacity, so do we need to invest more in transmission in the next 2 or 3 years because this will not take 4, 5 years or 6 years to build like a thermal power capacity. So does it require a very front-ended kind of investment rather than as you explained, rather than 36 months, it could be 18 months. So do we -- yes, are we seeing an investment in transmission required for incremental renewable capacity, which will be coming up in the system now?

No. But if you see the present TBCB packages, which we expect in the calendar year because of renewable energy, evacuation itself will amount somewhere around USD 250 million to USD 270 million, actually.

Yes. Yes.

I think actually, I think, one of the aspects what we have said is that, so whenever there is a new renewable project, which is announced -- so normally, the time lines, which is, therefore, the project is close to about 21 months from the execution, so once the tariffs are given by the government. And primarily, your transmission system also takes around that much time to build. So once the projects are there, when the government announces the project and -- so the process is when the government announces the project and when a developer wins it, and then he decides to put in a project in one particular geography, then he will go there and sign LTSAs with the government that okay, I'm going to put, for example, 500-megawatt capacity here in this and I would like to have a connectivity with this substation, which is the nearest substation. So then the government will define a time line. And based on that, the investment and the transmission comes. So when Pitamber is saying that it will be 450 gigawatt, of course, 450 gigawatt, the target is to reach up till 2030.

'30.

'30. Transmission, yes, it's going to be an incremental, but if today, for example, we are at 95 gigawatts and if you have to reach 450 -- 450 gigawatts by 2030. So that will be requiring close to about 40, 50 gigawatts in a year. And today, our capacity addition is like 15 -- 10 to 15 gigawatt in a year. So that would require a good amount of transmission investment as well.

So the only thing was that, is it going to be quite front ended, let's say, if you do 50 gigawatts of investment in renewables in the next 2 years, the equivalent transmission infrastructure, which you require within the state or the longer one. Is it required in the same year, in the same time frame? Do you see that happening in 2, 3 years? Or is it back ended? That is what I was trying to...

No, no. This is -- it is front-ended because eventually what happens is that once the power will come, then you will require the transmission system to operate that power. So that is not back ended.

We'll move on to the next question, that is from the line of Jonas Bhutta from PhillipCapital.

And congratulations on a great set of numbers. Just some bit of bookkeeping questions from my side. So if you can highlight what has been the exports. We had about INR 350 crores at the end of the first half. What is that now at the end of 9 months? And added to that, with this engineering business sort of going out, I would presume that there was largely exports. So that INR 80 crores from next year will be nonrecurring, right? So to that extent, we'll have to adjust exports next year. Is that understanding correct? That's the first question.

Yes. So that understanding is correct. On a 9-month basis, our order that we booked, so within those orders about 51% of the orders are from export side and about 49% balance is from the domestic [ part ].

And then the revenues, sir.

Revenues. About 25% revenue is export and balance 75% of revenue is on the domestic side.

Okay. The other part was, if you can quantify the reversal that's sitting in the other income this quarter?

So out of the...

Last time, we did call out the various LDs and the warranty provisions that we took net were part of the other expenses. So just wanted to see how much of that is actually being written back now.

So during the quarter, we had an other income of about INR 23 crores. Of this, about INR 12 crore is coming from the warranty provision reversals. And about INR 6 crore to INR 7 crore is coming from the tax provision reversals, and the balance is mostly on account of ForEx and bad debt recoveries.

Got it. And my last question was, sir, this arithmetically seems that your order book being reduced by about INR 150 crores because we had an order book of roughly INR 5,350 crores at the end of Q2, and now we are saying it is INR 4,900 crores. If I add that INR 700 crores of orders and net of the INR 1,000 crores of revenue, I get somewhere close to 5-0-5-0 as the order book. So if you can clarify whether what 3% of the order book -- opening order book was knocked out.

So we have a revenue of INR 1,030 crore approximately, and the order book is about INR 700 crore, which means that the backlog reduction should be in the range of INR 330 crore. In the beginning of the quarter, we had a backlog of close to INR 5,300 crore and reducing INR 330 crore from that will take us in the range of INR 4,900 crore to INR 4,950 crore. So not sure, how we've gone...

So there's no reduction in bad debt. That is all that I wanted to ask.

There is about INR 40 crore to INR 50 crore of small value orders, which got canceled or adjusted for the price, let's say, the export orders price being adjusted due to ForEx. But other than that, mostly it's on account of higher execution. As I explained, it's mostly the delta between the new orders of INR 700 crore and the revenue of INR 1,030 crore.

Got it. And lastly, sir, if I can squeeze in one more. This INR 1,030 crore revenue that you've executed, was some bit of this pent-up as in some of could have been missed from the first half, an adequate bunched up and it would -- and I'm just trying to understand whether this run rate would be replicable in the fourth quarter or this is, in a way, not during the year because of the weak 1H that we had?

So definitely because there was a lockdown in the first quarter, we had many social distancing and other government restrictions in the second quarter. So it includes a lot of catching up also for the previous 2 quarters. Nonetheless, we'll not be giving any forward-looking statement, but at the same time, as Pitamber mentioned, and Sandeep talked about the short-cycle projects, the effort is to execute on time, improve the first part yield, make on-time delivery better, so that we execute revenue faster and as per the customer requirements in the future quarters.

The next question is from the line of Rahul Kapur from Goldstone Capital.

If I look at the company's performance, at the operational level. And I'm not talking about this quarter, but over 8, 10 quarters, the company had been reporting EBITDA margins of sub 10%. Even if one were to reverse bad debts written off, I mean given the stature of the company, I think this is -- this just reflects that there is little pricing power. Do you see any changes in the marketplace, which gives you the confidence that pricing power for the company and for the sector would come back and you could report margins of excess of at least 12%, 14%?

So Rahul, I think transmission is comparatively quite a competitive space in India, and especially with, of course, now there is some embargo on the company from the neighboring countries, et cetera. But otherwise at some point of time, I would say, in terms of manufacturing, there is an overcapacity in the country. And of course, with COVID situations, et cetera, even the price was also not -- the price is also not going up in the market. So it's not that we are into [indiscernible] market, it is more that we are in the buyer's market. And most of our customers being either the state government or companies like Power Grid, et cetera, so I think it's a very -- it's quite a competitive scenario.

You see that changing with the kind of capacities, which are coming up on the renewable side, do you see the overall environment and plus probably maybe you can throw more light on it, with restrictions on import from China, do you see margins for your company moving up at least to 12%, 14% because operating at 5%, 6% is extremely low margins?

No. But if you see even with the bordering countries going out, the -- even demand supply gap is still huge, actually. The demand is less and supply is more even without neighboring countries' factories in India. Competition is quite -- I'll say competition is quite stiff in spite of that.

Okay. Okay. Gross margins this quarter were about 24%, 25%, which almost are at the lower end of what I see over the past couple of years. Do you see the margin improving in the current quarter? Or with raw material prices, the copper prices moving up, it could be even lower in the current -- on the ongoing scenario?

So the quarter margin had impact of the mix. I mean the execution of low margin projects as well as the prolongation of some of the project sites, which then increases the cost. And the last being some impact of the commodity price increase. So given the significant quantum of commodity price increase, this remains one of the headwind for the short term. And with the recent budget announcement and government stepping in, hopefully the prices will improve and company is also having its own strategy to mitigate this impact for the future quarter.

Okay. One last point. This is just a suggestion from an accounting point of view that whatever provisions or whatever write-offs you take off in a quarter, if you can just mention it by way of note. Otherwise, one has to wait for end of the 6 months because September or March you see the cash flow statement and understand what kind of write-offs and exceptional items were there. So whether it's provisioning or write-back, both if it could be mentioned by way of, that will be very helpful in understanding the performance.

We'll consider this suggestion. However, I would like to clarify that the exceptional items have been given in detail in the notes to the financials. Other income as per Ind AS does not necessarily require a disclosure, but we'll consider this suggestion and try to have more visibility around this.

Yes. This note of net write-offs or write-backs of bad debts. So that will be very helpful.

Sure. we'll consider that.

The next question is from the line of Renjith Sivaram from ICICI Securities.

Yes. Sir, just if you can throw some clarity on your exports for the 9 months, what percentage of our revenues were from exports? And what is our outlook regarding the export opportunity that we have?

So Renjith, I'll maybe explain again because I mentioned in one of the previous answer to the previous question that for the 9-month period, our export was about 25% of the revenues and the domestic turnover was about 75%. And I'll ask Sandeep to explain now about the export opportunities that we foresee.

So I think -- thanks, Sushil so basically, as I said that, of course, from the neighboring countries, we are seeing, for example, Nepal, Bangladesh, also as the activity would be picking up in the other geographies of Africa, et cetera, as our factories are supplying products there and Middle East, so yes, we are looking at a stable market there as well. And also, we are trying to expand our presence in Sri Lanka as well where we have the National Load Dispatch Center, which has been built by your company. So I think there, we are also trying to expand our profile by adding more product supply to that geography. So we are also constantly focusing on export because, of course, what we have seen in the COVID as the state and city boards had actually reduced. So yes, definitely, there has been added focus on the export market as well.

Okay. And sir, there is this commodity prices, which are currently going up. So what percentage of our order book is fixed in nature? And do you see margin getting impacted? Because of this, what is the overall status on that?

Renjith, I don't have the exact number of the firm price orders versus variable price orders as of now. But as I mentioned in the earlier question, definitely, it's a headwind, not only for us but across the industry. But with the recent government announcement, we hope there will be correction in the prices also. And we are internally having the different strategies to mitigate this impact in some shape and form. So we are working towards mitigation. It will be difficult to quantify the backlog into firm price and variable as of now.

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Suneel Mishra for his closing comments.

Yes. Thank you, Lisanne. So thank you, everyone, for your participation. With this, we conclude today's conference call. In case you have any other questions, then please free to contact me or Mr. Anshul Madaan, who is our Communications Leader, and the e-mail ID is available at our website. So thanks again.

Thank you. Ladies and gentlemen, on behalf of GE T&D India Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.