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

Ladies and gentlemen, good day, and welcome to GE T&D India Limited Fourth Quarter Ended 31st March 2021 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 India Limited. Thank you, and over to you, sir.

Thank you, Lizan. Ladies and gentlemen, good afternoon. I wish everyone 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 year and fourth quarter of the financial year ended as on 31st March 2021. 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; further, we have Mr. Sushil Kumar, who is our CFO; we have Mr. Nagesh Tilwani, who is heading our Products division; we have Mr. Sandeep Zanzaria, who is our Commercial leader; especially, we have invited Mr. Amaresh Singh, who is our HR leader; Mr. Mariasundaram Antony, who is our Project Business leader; we also have with us on call 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 4 p.m. I hope you would have received the investor analyst presentation, and the same has been uploaded on our website as well. I hope you would have read the disclaimer as for Slide #2. I will now request Mr. Pitamber Shivnani to begin this conference call highlighting key events of the quarter. Thereafter, Mr. Amaresh Singh will give an update on health and safety, followed by Mr. Manoj Prasad Singh, who will be updating us on CSR; then Mr. Maria and Mr. Nagesh Tilwani, updating us on operations and factories; thereafter, Sandeep Zanzaria will take you to the market. Lastly, Mr. Sushil Kumar will give an insight on financials. So we are attempting to give a wider look into our presentation, but we will be very crisp with your support. I now invite Mr. Shivnani to begin the conference with his opening remarks. Over to Mr. Shivnani.

Thank you, Suneel. Ladies and gentlemen, good afternoon. Thanks for joining the call. We hope you and your loved ones are safe and healthy. Last few months have been really tough for all of us. For us, this time was marked not only by challenges due to COVID but also how people of our company came together to fight it. We continue to operate our plants and sites in accordance with the advisory issued from time to time by Central, State and Local governments, while strictly following prescribed safety protocols. I'm enormously proud of all our employees for the commitment and grit they have shown even during the toughest times of the pandemic. Allow me to give you a quick update on current state of operations. Our plants in South India, Padappai, Pallavaram and Hosur, were shut down for 9 days in May due to lockdown in Tamil Nadu, but as of now, they have started operating. Our transformer plant in Vadodara is fully operational. In Noida corporate office, we have work from home. And as far as our project sites are concerned, out of 73 sites are operational, but the attendance is 50% to 75%. We did face severe challenges in supply chain and logistics due to lockdowns, which has now started to improve gradually with unlocking situation. Safety and health of our employees is of paramount importance for us. We always stay a step ahead to ensure the wellbeing of our employees, and this is reflected by countless initiatives that the company has taken in the past few months to ensure that our employees get all the support in this time of need. I have invited our Head of HR, Amaresh Singh, in today's call to talk more on this. Like every sector, Power sector also faced enormous challenges, but despite of all unprecedented hurdles, the company has been able to sustain the market pressure. I'm proud to share the meaningful progress the company made in fourth quarter as well as financial year 2021. Our sales revenue for fourth quarter financial year 2021 was INR 9 billion, up by 36.2% compared to INR 6.6 billion in quarter ended March 2020. Our operating profit was INR 579 million, significantly better than the operating loss of INR 2,189 million reported in the corresponding quarter last year. For the full financial year 2021, our sales revenue was INR 34.5 billion, up by 9% compared to INR 31.6 billion in year ended March. And our operating profit for full financial year 2021 was at INR 1,452 million, that is 4.2% against the significantly better operating. Last year, we made a loss of INR 2,339 million in March '20. Thanks to the magnificent performance by our teams, we were able to reduce our net debt by INR 2.7 billion in financial year 2021. This result is backed by the strong execution and numerous cost savings actions taken by our operation teams, and Sushil will take you through the financial results in detail. Due to COVID, the order remained under pressure. And my colleague will -- Sandeep will talk about highlights of the order bookings. However, in the last quarter of financial year 2021 in power transformer, we could book orders worth USD 32 million for 765 kV, transformer and shunt reactors from POWERGRID. And with that, we had 80% market share in 765 kV transformers and shunt reactors. On operational side, in year 2021, we continued to demonstrate our operational excellence by commissioning 28 AIS and GIS substations across the nation. We commissioned Sterlite Power at Kumarghat, P.K. Bari, Surajmani Nagar substation in Northeastern region Part 2. As far as service is concerned, throughout the duration of nationwide lockdown, our service team ensured that all our long-term maintenance sites Delhi and Chennai International Airports were operational and provided greater than 99.5% power availability to the customers. All our plants continue to adopt several lean principles, resulting in significant reduction of manufacturing lead times, efficient utilization of space and reduced cycle times leading to overall cost effectiveness. With a persistent focus on decarbonization and round-the-clock power, we believe that Indian energy landscape will continue to undergo a significant positive transformation. As a leader in innovation of modern grid solutions, we'll continue to work closely with governments and our customers to implement solutions that will help India accelerate in its energy transition journey. With its proven delivery capabilities backed by the 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 great infrastructure. To drive sustainable, profitable and incremental revenues in this emerging market, we continue to focus on acquiring profitable orders which Sandeep will cover, and we remain committed to delivering the projects timely and highlights -- high quality by continuous strengthening our delivery capabilities. Our order book remains healthy at INR 4,600 crores, which is equivalent to 1.5 years of company's revenue. With that, I will turn to my colleague, Amaresh, to talk about COVID-related initiatives taken by the company. Over to you, Amaresh.

Thanks, Pitamber. Good afternoon, ladies and gentlemen. COVID-19 Wave 2 impacted the country in a very serious way, and it did not spare our company too. Our company employees were impacted by the COVID Wave 2. But we addressed the issues very holistically. And we tested each and every factor of the support. I request to go on Slide 6, please. We launched a GE India Employee Fundraising Program for financial support to our employees. We did hospital tie-ups at all the major cities in India. We launched vaccination drives in all our locations for the employees, and this was free for all the employees, and even the family members were also invited for the vaccination drives. We contributed to the hospitals by donating ventilators. We had launched teleconsultation with our internal doctors. So for all our employees, from morning 8 to evening 8, our company doctors were available online to help them with any consultation on COVID. And we had also partnered with Practo India for a 24/7 consultation. We formed the employee resource group, which worked continuously 24/7 to support any employee on beds, oxygens, tests for COVID. And this was a very selfless driven growth, which supported all the needs we have. We also launched ambulance services. We partnered with Stan Ambulance Services for ambulance across India, if employee needed them. Slide #7, please. We also partnered with a company One MG to supply medicine to employees whosoever needed at their home or at the place they want. We also supported all the project sites and new office locations with O2 concentrators. And if the employee had the need, they could get the O2 concentrators at their home. We launched employee open hours for staying connected with them and gave them information about the COVID, and we had company doctors, who gave the right information, the employee needed. For health and wellness of employees, we had an Employee Assistance Program launched. To take care of the family members, who were impacted by the COVID, we launched a caregiver relief where employees can take 10 working days of leave to support their family members if they are impacted by COVID, and this leave was to support the family over and above the current leave policy. For financial assistance for employees, we also launched a salary advanced policy. The employee could take 6 months of salary in advance and pay back in 12 equaling installments. For the family of deceased employees, we over and above -- we have a term life insurance policy for all employees. Over and above time, company agreed to add 25% of the term insurance coverage as a support to the family of deceased employees. We also extended our medical insurance till the end of the policy period and will fund the portability of the medical insurance for 1 more -- additional 1 year to support the family of deceased employee. We also made a tie-ups with doctors for home care. Thank you so much.

Thanks, Amaresh. And good afternoon, all. Well the company also support society in the extraordinary times. I'm at Slide 8 of the presentation. Over the years, the company has undertaken several CSR initiatives focused on strengthening underprivileged sections of the community. Through interventions in sectors, such as health care, access to clean drinking water, infrastructure development in schools and hospitals, support for persons with physical disabilities and women empowerment. During these unprecedented extraordinary times...

Sorry to interrupt sir. Sir, your voice is breaking up.

Is this better now?

A little better, sir.

During this unprecedented extraordinary times of COVID pandemic, the company continuing from its earlier COVID emergency response programs of providing portable testing units, ICU beds with ventilators, vaccination support setup, hospitals and frontline workers kits. Recently also extended its support to Holy Family Hospital through Odeon Care under its CSR initiative providing 2 ventilators for ICU for COVID patients. We at GE pray for health and safety of all and hope these difficult times will also pass by. Thank you, and I now hand over to Maria for operations update.

Thank you, Manoj. Good afternoon, ladies and gentlemen. I would like to really take you through the operations update and as we play a very important role, I think, the -- in terms of the energy transition, which is happening in the country. And we actually -- as Mr. Pitamber mentioned, we had actually commissioned a good number of, I think, substations and evacuation infrastructure across the country. And what I would like to -- I am on Slide #9 now, and I would like to walk you through some of the key commissioning which we did in the Q4 of fiscal year 2021. And this evacuation infrastructure solutions, we believe, will play a very important role in terms of the energy transition in terms of really providing the critical infrastructure, which is needed for our customers. And our commissioning milestones were completed across different parts of the country, starting from startup our Daily Distribution Limited where we commissioned the 66 to 11 kV GIS substation. And then if I go to the east side of the country, we commission substations in West Bengal, in Tarapur, where we energized 2 x 132 kV AIS substation day extension. And then we also actually did commissioning in Assam as well as in Firozabad and Ramagundam and in Firozabad for our PGCIL project, our customer POWERGRID Corporation of India Limited. And then for our customer NTPC, we actually commissioned 16 days of 400 kV GIS along with GIV for the 2 x 800-megawatt thermal power plant in Ramagundam in Telengana District -- Telangana State. And then we also actually, as mentioned before, we played an important role in terms of providing the evacuation infrastructure in Northeast in P.K. Bari, Surajmani Nagar, Kumarghat and as for in terms of providing 400 kV, 132 kV AIS extension, the extension as well as bay for their substations in P.K. Bari. And then for our refinery customers like BPCL, we actually commissioned 220 kV GIS in Kochi -- in BPCL Kochi as well as for our state utility in Kerala, we actually energized their 110 kV GIS bay in Palakkad. So overall, we feel very good in terms of being able to provide the critical evacuation infrastructure with our products and technology and solutions to our customers. And with that, I will hand it over to my colleague, Nagesh, for walking you through the factory update.

[indiscernible] facility with the asset...

Sorry to interrupt, Mr. Nagesh Tilwani, we are not able to hear you. Mr. Nagesh Tilwani?

Hello? Hello?

Yes, sir, please proceed.

Yes. I'll just give an update on today on the plant what we have outside of -- outskirts of Chennai, GE T&D Padappai factory where we produce high-voltage switchgear, both for air insulated switchgear, air insulated switchgear and the gas utility substations. This is one of the flagship product -- project for the GE T&D, where we are making products up to 800 kV. And we are the first one to produce the GIS for the 765 kV application fully designed, manufactured and assembled in country. So that's the uniqueness of the plant. We are also doing an exports to around 40-plus countries, Make for India and Made in India for the rest of the world, but for the circuit breakers and the drives covering 40 different countries across the world. We are also deploying a lot of lean initiatives in terms of process efficiency, the lead time reductions. We have a state-of-the-art lean manufacturing facility, where we are having a moving lines to produce our drives, which is for the breakthrough operations and as well as we have clean room facilities with high-end controls in terms of humidity, which is necessary for the manufacturing applications. As Mr. Pitamber said, the decarbonization is our focus area. So we are also migrating. There is an industrialization plan, which will happen in years to come from SF6 gas to more environmental-friendly G tube solution, which is a patented technology of GE. With this, I hand over to Sandeep for the commercial update.

Thanks, Nagesh, and good afternoon, friends. Hope everyone is safe in your immediate and extended family. The market in 2021 was down by about 30% due to the COVID impact. We saw TBCB projects and renewable capacity addition also getting delayed. The projects, which were -- TBCB projects, which were actually tendered out by the government in Q1 finally got decided in Q4. So that was the kind of impact what we saw in the market, something due to COVID and something due to do change in the policy scenarios also, which were happening during the year. But going forward, now we are seeing a good pipeline of the projects coming up, both in the TBCB space and the state. The empowered committee, if you would have seen, has cleared a lot of projects for the green energy corridors to come on TBCB, and this will create a sustainable pipeline minimum at least the identified projects for the next 2 years. Due to these challenges what we have had, we saw that there was a drop of about 25% in the order intake for the company for 2021 as compared to the last year of 2019 by '20. In the last quarter, of course, we could achieve close to about 94% of what we did a year ago, and this was primarily driven by orders, which were coming from POWERGRID for the transformer and the reactor packages. As Pitamber has said that we have a very good share of 765 kV. And going forward also, the projects which are being cleared, many of the projects are coming from 765 kV. This year, we have seen that going forward in this year, there are multiple projects of TBCB, which were stuck, which are now getting -- which are now expected to get finalized in the next 9 months, and some states are also going for direct packages and TBCB packages. So that's a positive on the market side, which is happening. With this, I hand over to my colleague, Sushil.

Thanks, Sandeep. Good afternoon, ladies and gentlemen. Moving to Page 12 on financials. Last financial year 2021 was significantly impacted due to COVID-related disruptions where first quarter had a complete nationwide lockdown. But over the rest of the quarters, the company and its management and employees did bounce back significantly and made a significant progress on the operations. And as you see on the financial page on most of the financial KPIs, the company performed better than the last year. So on quarter 4 numbers, the revenue was higher than the last year at 36%. EBITDA at 5% around INR 45 crores is significantly better than last year where we were actually into the loss situation. Similarly, on a full financial year basis, our revenue of INR 3,452 crores was about 9% higher than last year with a significant improvement in EBITDA at INR 145 crores or around 4.2% and corresponding improvement in the profit before tax and profit after tax. Another important area where we made significant progress as per our earlier communication to the investor community is the improvement in cash flow and net debt position. So end of 31st March 2021, the net debt position was at INR 161 crore. This was INR 270 crore better than the last year where we had about INR 430 crore of debt. This significant improvement of INR 270 crores of cash generation is 2x the profit plus depreciation for the year. So again, most of the financial indicators the company has performed well. And we expect that management team and us will continue this journey going forward. Moving to the Page 13. We wanted to give an update on the GEOD business sales. So as a background, the company had Global Engineering Operating Division, providing the services of -- engineering services to the other group companies. But at the global level, the GE created Global Engineering Operating Center, which is called GEOC at GE India Industrial Private Limited to support the global technological development to meet the challenges of the global energy transition and respond to their challenging market needs. So considering that the GEOD business was noncore representing less than 3% of the total revenues and lack of long-term commitment, exclusivity, et cetera, the Board approved the sale of GEOD business to GIPL at INR 873 million, and this consideration was derived based on the independent valuation from M/s. Ernst & Young Merchant Banking Services LLP. This proposal was put to shareholders for approval as this was a related party transaction. However, as a part of the postal ballot outcome, there were 217 votes in favor of the sale, representing about 80 -- 48% of the shares. However, 31 investors or shareholders voted against with about 52% of number of shares. So accordingly, this sale proposal was not carried out and the business transfer agreement was terminated. Post this in the month of April and as we notified to the stock exchange also, the company was notified that with effect from 30th of June, it will not be getting any new contracts from the global entities and the purchase order issues in relation to these services will either terminate on their due date or will be terminated by notice by the specified parties. This has an impact on the company with about 190 employees and about INR 10 crores of assets becoming redundant. As the current status to mitigate the restructuring cost of the impacted employees and FX, the GETDL Board has advised the management to explore potential solutions to minimize adverse impact on the company and the management team is exploring all avenues to mitigate this cost and find the best solution for the company. With that, now we'll open up for the questions. Thank you.

[Operator Instructions] The first question is from the line of Subhadip Mitra from JM Financial.

So I have 2 questions. Firstly, as you mentioned in your opening remarks that we are seeing TBCB projects moving ahead. And my understanding is that we've already seen projects worth about INR 7,000 crores being awarded and probably a similar pipeline coming up ahead. So in your opinion, what would be the overall basket, addressable basket from GE T&D perspective out of these TBCB projects, which are coming up? And historically, what kind of market share would you have had in these? That's my first question.

So thanks, Subhadip. So I think probably what we are seeing, of course, we know that there are delays, which keep on happening. But I think looking at whatever you said, the similar size, yes, we also expect, but that includes transmission lines, et cetera. So our estimate would be that it would be close to in the range of about INR 2,500 crores for the company's scope, for GE T&D scope, which is going to get finalized in this coming year for TBCB projects. It is very difficult to project the market share because one of the most important aspects is that in TBCB who wins because, for example, it's -- like if you really look at the last quarter, except for the MP state TBCB, everything, 100% of the market share was won by POWERGRID. So it depends upon that who wins these TBCB projects going forward, will have a significant impact. Because one thing I can say that with private developers and, of course, the part of PGCIL, GE T&D had a very good market share in terms of developing the TBCB projects, for example, for developers like Sterlite, et cetera, we had a market share of close to about 80%. So it also depends upon who is winning because there are few new players also on the developer side, who are entering into this space.

Understood. So just a point of clarification here that when you're mentioning INR 2,500 crores, this would include the TBCB projects which got finalized in 4Q FY '21 as well as what is expected to come in FY '20. Am I right on that?

No, no. The one which got finalized in Q4, that was basically most of them was won by POWERGRID. So that has already been awarded by POWERGRID in the last quarter itself. So that is excluded.

Okay. Understood. Understood. Okay. My second question is with regard to your expectation on the EBITDA margins. So clearly, we've seen an improving trend over there. But by when would you target going back to, let's say, your peak margins, let's say, in the range of about 7%, 8% odd. Any thoughts on that?

So Subhadip, first, we don't give the forward-looking statement. I only want to say that you have seen the last year, despite COVID disruptions, the company really bounced back and made a significant improvement. And as I said in my opening remarks, the management team will continue this effort. Nonetheless, we have a few risks and few opportunities to manage. Meaning this financial year '21, '22, this already has the impact of Wave 2 in quarter 1. And people are even talking about Wave 3 as an uncertainty for the rest of the financial year. So that remains one of the biggest risks. In addition, since the pipeline was weak in the last year, so order booking has come down. So the ability to execute faster, so the company is ready, but the backlog has reduced. So these are some of the risks that I want to highlight on '21, '22 revenue and EBITDA margin. However, at the same time, last year was where we were actually able to prove that the team is fully committed and the company has the ability to execute revenue as per the timelines of the project and also take a lot of actions to improve the cost and improve the margins. So we'll continue that journey to maintain strong discipline and costs, strong discipline on execution and strong focus on continued generation of cash. But I would, for the time being, not call out any target or any number for the EBITDA margin.

We'll move on to the next question. That is from the line of Renu Baid from IIFL.

I have 2, 3 questions. So my first question is on the order backlog. Despite having weakness in terms of new inflows, you're still sitting with INR 4,600 crores of order book. And if we understand right, a good share of the recent order inflows also are coming on a short-term execution cycle. So would it be fair to assume that a good share as in almost 80%, 90% plus of this order backlog should be executable in the next 12 months? Or are we seeing a further delay in the time lines of projects, which are sitting in the backlog? If you can throw some insights on this.

So we don't see any projects, which are delayed right now. One of the projects, which was not moving in the backlog was related to Essel project, which is now handed over to Adani and has become operational now. But at the same time, lot depends on the ability of the developer or the customer to act. And it again is dependent on the Wave 3 that people are talking about and uncertainty around that. So we'll not lay out in number, but again, 80%, 90% of the backlog is very high, because 80% or 90% of backlog is around INR 3,800 crores. That is a very high number for the time being. Effort is to reach back to this financial year performance in terms of revenue. But that will also depend on a lot of uncertainties that I talked about. Again, not these are in the market or environment-related uncertainties, the company will try to bounce back as we did in the last year.

So these uncertainties such as mentioning, are they COVID related or also because of commodity inflation that customers are wanting to delay certain projects?

No, at present, we have not seen delay of the projects from the customer side. Mostly the uncertainties in execution I talked about are related to COVID, especially because we have the Q1 experience already with us, where as Pitamber explained some of the factors that are locked out for a few days. There are supply chain disruptions, which are slowly coming to progress. So given the lack of activity in Q1 again and uncertainty on Wave 3, 80%, 90% of the backlog execution is a very challenging task. So we will try our best, but these uncertainties plus the projects plan of the customer are 2 factors where we are dependent upon.

Got it. My second question is on the commodity cost and margin front. If you understand a good share of these POWERGRID orders, which have been awarded in the fourth quarter, there was almost 6 months of gap in terms of the price bid submission in the project award. And broadly, they considered of winners calls by industry participants. So would it be -- as in what would be your view and outlook in terms of the share of orders where we might run against the commodity cost and the view in terms of both for Essel as well as the recently secured orders in terms of margin outlook? And do you think there would be any requirement for us to create any upfront provisions given the gap-up in terms of cost structures or they are very well covered up?

So commodity price-related impact is not only for us but across the industry. And as Sandeep mentioned that a lot of award for the TBCB projects happen from POWERGRID to the other players also. So you're right that there will be impact across the industry, and we are not, let's say, fully immune to that. At the same time, we have our teams working on to mitigate this impact, first, by way of renegotiating prices customers wherever possible, renegotiating the cost with suppliers. But besides the commodity price, there are other venues where we can improve from the project margins to offset the impact of commodity. For instance, the teams always work on the product cost optimization, lean, work on the productivity, reducing the cost of quality, et cetera. So these are all avenues where we'll try to offset the impact or headwind coming from the commodity price increase. At the same time, as per the accounting principals, whatever had to be provided till 31st of March has been fully provided. Any impact that comes in the subsequent quarter will be taken at the respective quarter.

And just to add, Sushil, Renu, as far as Essel, specific question, it has been taken care actually.

Okay. So all the cost -- okay. Got it. And lastly, if you can, Sushil can also highlight broadly in terms of the backlog today, what is the mix between the fixed price and the variable price contracts? And overall, how do we -- as in what is the status on the HVDC project, which was in pipeline? That's it.

Renu, unfortunately, I don't have that split right now of the backlog between fixed and variable price. I request Sandeep to answer the second question on the upcoming HVDC projects.

Yes. So Renu, so you would have seen that there was a news article which claimed that even the government has appointed committee headed by Mr. R . P. Singh to monitor the progress of the HVDC project. So yes, we are in the discussions with the developer for the project, but I think probably the finalization is still maybe about 2 months away. So the active discussions are going on with the concerned parties, but the finalization is still away by a month or 2 months.

[Operator Instructions] The next question is from the line of Amit Nahar from Edelweiss.

This is Amit Nahar from Edelweiss. I just have 1 question. I just want to understand, broadly, if we see the global scheme of plan, what is the mandate that we have for global markets? If you can spend some time helping us understand how does the parent see GE T&D India in the global scheme of things in terms of key mandates? And where are we ranked in the global manufacturing portfolio for the GE clearly, globally?

So I think we are ranked very well because if you see Indian factories, we have large 4 factories. That is AIS, GIS on HV side. Then we have Hosur factory. Then we have Grid Automation, and we have transformers. So we are ranked globally very well in terms of local footprint for production and also on export side.

We have about, I think, more than 85% of the products delivered in India or executed in India, manufactured and sourced in India. In addition, as Pitamber mentioned, we do export to the other group companies, or the third-party customers outside Indian geography. And that is supported in many cases by the other group entities to execute those projects. Our effort is also to increase export progressively with the help of the other group companies and win together.

Okay. Very helpful. Sir, I just wanted to understand whether it's Hosur or Padappai or Pallavaram, 3 to 4 locations that we have, including Baroda. I mean if you take next 3 to 4 years, the Indian landscape is pretty much broadly understood by us in terms of what kind of growth can we see. But the challenge is, the scale in export market can be very different, especially for GE T&D when we compare with other peers like Siemens, AB Power, et cetera. I just wanted to understand the delta for GE T&D seem to be very high in terms of increments. So can I say 25%, 30% or maybe around that of our revenues 5 years down the line can come from export? Is there a possibility?

Yes, that possibility is there, but time will tell us how we perform on that front, actually. But these factories are largely made for domestic. But we -- as Sushil pointed out, we are doing at present around 15% of export actually.

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

So a couple of years back, as you had highlighted the size of India market, the related India market for GE T&D was about INR 20,000 crores to INR 21,000 crores per annum. What is that size of market in FY '21? And how are you seeing that size of the market shaping up for FY '22 and '23?

Yes, Sandeep.

So Bhavin, basically, what when we we're tracking the market for about 2021, what we saw the market got to churn close to about somewhere around INR 14,000 crores to INR 15,000 crores. But we expect in '23, '24, again, the market to go back to the levels of INR 20,000 crores, INR 21,000 crores or slightly more dependent upon the HVDCs, which are going to come up. Because if you really look at the empowered committee meeting, there is a HVDC, which has now been proposed between Rajasthan to UP. So that's again, for example, 800 kV, 6,000 megawatts. So that materializes that it still is going to bring close to about INR 6,000 crores to INR 7,000 crores. And then we have Leh-Ladakh, which the government is talking. So it will also depend upon what kind of HVDC capacity additions do come in. But in another 2 years' time, do you expect the market to bounce back to the number of INR 20,000 crores, INR 2,000 crores again.

Sure. That's helpful. Secondly, if you could help us in terms of the competitive landscape that we have seen over the last 5, 6 years. We've seen multiple transformer companies actually shutting operations. So if you could give us a perspective, the size of the manufacturing, which was there? And what kind of capacities that have gone out? And secondly, we also saw government imposing nontariff barriers on the Chinese. So how has the competitive landscape shaped up over the last couple of years? And how are you seeing it going forward?

So Bhavin, in this case, I would say that it is definitely positive for the company because if I really look at the transformer, which is specifically told, so probably like, for example, we have shut down -- many Cromptons are shut down, the Kalwa plant, Enco has gone out and then Chinese going out. So definitely earlier when there was quite an overcapacity in the transformer market, today, we are seeing the balance between the requirement and the capacity getting restored to a great extent. Still there is slight overcapacity, but the delta between the overcapacity, which was earlier there and now has reduced. So that is good. We are seeing slightly firming up of the transformer prices due to this as well, which is good for the company, especially in short delivery times -- if somebody is looking forward for a transformer, then definitely the premiums are going slightly better than the market price. So that's also a positive thing. For GIS, et cetera, definitely Chinese have gone out, but still there is an overcapacity in the market. But especially the Chinese going out, there is slight improvement in the market prices, whether it is transformers, whether it is GIS, so that's a positive indication for the industry.

Sure, that's helpful. The last question. In the order book that we have, would we be able to see a better contribution level on the margins front than we have seen historically? Or given the commodity challenges, the underlying pressure could continue?

So I would say that -- I will -- probably this question, I would break it into 2 parts. So one would be that, for example, then the POWERGRID has, for example, the TBCB packages there, people have put in the bid in the third quarter, et cetera, and it got finalized in the fourth quarter. Definitely, there was a time when the material price movement started, for example, in the third quarter itself and the bid they are putting prior to that. So once that has got decided, the price pressure because of commodity increase is still there. But going forward, now the people have understood, and we expect that a slight correction in prices will happen going forward.

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

My follow-up question would be, a, on the g3 side of the portfolio, Nagesh did mention that Padappai would also be able to -- at a later date will be able to cater to the g3 kind of offering. So are we starting to step up investments in terms of design engineering and the portfolio realignment for the green gas for GIS, sir?

Yes. Renu, this is Nagesh. So there is a global programs running for migrating all our product range to GQ. This is largely driven from the organization like or the Green Records, Paris Records and things like that, where the migration is happening from SF6 to a more cleaner environmental friendly gas. So we are working on that. And the center of excellence as of now is more European-centric, largely because of investment and the technologies around that. But for sure, going forward, probably 2 years down the line, we will -- we are also thinking of a portfolio migrating from to SF6 to GQ. But largely in the European space, we have installation for 145 kV. We have done some installation for 400 kV as well on the projects.

Right. So the way today, we are supporting on the GIS through the circuit breaker portfolio, for the new -- the renewed portfolio on the green energy side also, GE T&D India will be able to capture or continue to capture that part of the market, if it is not in national exports part of the portfolio?

That's the vision. We are anyway -- as Sushil said, we are also targeting few new geographies for selling GIS from India. And as the migrate -- market will move from SF6 to the more cleaner environment, we will be ready to serve that market as well, India as well as exports for GQ.

Got it. Right. And 1 last question. In terms of overall exports, as in you did mentioned that exports are 15% percentage of our revenue. But broadly, if I look in terms of the revenue growth, they have been steady at that 14%, 15% of mix. So what is actually impacting this growth? As in will the recovery in the international market, both investments in Africa, Middle East or SAARC countries help to step up this portfolio or somewhere we are getting brought down because of the increased compete pressures and lower, I would say, ordering pipeline in the international market? So what is really keeping this segment from growing at a relatively faster pace?

So miss, I'll take this question. In fact, that 15% was used differently wherein I said that out of the business, we do in India, we source 85% from India and rest 15% is actually the imports that we do from outside India. So just to predominately say that we are most localized and kind of very localized company catering to all product lines. So that was not a number related to exports. I'll give you the correct number of exports. For the financial year 2021, the total revenue, our exports were at around 22% of the total revenue, whereas for the last financial year, it was 18%. So exports have grown during the financial year.

Got it. And broadly, can -- as in we also shared some outlook in terms of what is the outlook on the export market, both SAARC countries as well as, Middle East, Africa, which have been the key exporting market for GE T&D?

So Renu, for SAARC countries, yes, definitely, when we really look at that, Nepal has a lot of potential for growth. Bangladesh also has a lot of potential, but Bangladesh mostly accepts products from Europe, et cetera. So there, we have the -- we participate but it is mostly products are coming from Europe. But Nepal has a good potential. SriLanka is mostly up till 132 kV network, so not much of a traction there. So just an update there. But in the export market, definitely, we are working with the other geographies as well. And for example, Africa is one area where we are really working and the Southeast Asia. So as the markets are picking up there -- because they also had the impact of COVID and reduction in CapEx and things like that. So as soon as the markets are going to pick up, we would be there to take that opportunity.

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

Sir, when I look at our working capital...

Sorry to interrupt, Mr. Sivaram, sir, we are not able to hear you. Can you speak a bit louder?

Am I audible now?

Much better. Thank you.

Yes.

Yes. Sir, when I look at your working capital, your cash from operations have increased largely because your payables have reduced while your receivables and other current asset existence has increased. So what has led this large increase in payable funds. What can be the trend if you want to look at it? Because this was one of the major factor for our cash flow from operations.

Yes. So Renjith, our working capital improved by about INR 220 crores during the last financial year. Out of which, you're looking at the number of trade payable, which has actually grown in line with the increase in revenue. So our payables increased from INR 995 crores to about INR 1,100 crores. However, in terms of days to pay, that remained around 160 days in both the financial year. At the same time, with the increase in revenue, we have not let our other investments in working capital in the form of receivable and inventories to go up. But management has put in a lot of focus to rather collect the past dues and improve the inventory situation, which is reflected in the financials. So I say this improvement is not fully actually related trade payable. This is also coming from a stringent control and the discipline on managing the receivable in inventories also.

Sir, when I look at your cash flow statement, your payables have increased to INR 23 crores where we have include trade receivables have actually increased by INR 31 crores and other assets have increased by INR 48 crores. It means a large portion of your INR 330 crores cash from operation of that INR 23 crores is because of your increase in trade payables. I'm looking at the cash flow statement which you referred to.

But Sushil, the receivables, in fact, have gone down?

Yes. I'm sure it is increased by INR 31 crores. The ones you gave to the exchanges. And your payables have increased by INR 123 crores. So most -- bulk of your cash flows have come from this payable increase and your inventories have decreased by INR 70 crores.

Mr. Renjith, I'll put it differently. The 10% increase in revenue, receivables should have gone up much higher, say, to the extent of INR 150 crores. But while the payable have gone up, we have maintained a stringent control on the processes and terms and conditions with the customer, and we have not let our receivables increase in line with revenue.

Yes. Is there anything particular to be concerned with this high payables or when do you see that?

There is nothing to be concerned in the payable number because as I explained, the days to pay are around 160 days in both the financial years. So increase in payable is in line with the increase in revenue. Nothing specific there to highlight.

Okay. And in the exceptional last quarter, you had taken some gains. And this quarter, you have taken some loss. So what is cash impact because of this? Was this provision a noncash and loss, the gain was the cash? How do you read that?

Yes. So during the financial year, we had around INR 45 crore gain from the sale of one of the property. And this INR 45 crore was realized in cash. At the same time, during the financial year, we made a provision of about INR 42 crores in respect of some property-related litigations, and this is a noncash charge for the financial year.

So net-net, there is a INR 45 crore cash inflow, while we have taken a INR 42 crore of noncash provision?

Yes.

Okay. And sir, regarding our pipeline for the next year, if you want to look at the major orders, like last time you -- some of the key, I think, you have explained is Agra and this Leh-Ladakh HVDC and Rajasthan HVDC. So apart from this, which will be the major -- is there any of like Green Energy Corridor? Is there any major announcement expected or what is the CapEx regarding that? And because...

There are a lot of TBCB packages going to come for 2021, '22.

Okay. Because this year, we have seen a large drop in the order intake. So is that something to be worried about in the growth front?

No, we are optimistic -- sorry, Sandeep, continue. Sorry.

No, no. Please, please Pitamber, please go ahead, sorry.

So we are quite optimistic because we feel the market is going to recover in '21, '22. And looking at the opportunities, which we have from Green Energy Corridor, we will be able to recoup actually.

Okay. And lastly on the other expenditure. So now we have come to a yearly aware expenditure of around in the INR 320 crore range. And compared to some INR 674 crore range, which we used to have. So how much of this pertained INR 366 crores for FY '21 compared to INR 672 crore in FY '20. So if a sharp 40% reduction in other expenditure. So how do you see this going forward? You think that cash flow is going down, what have been the major reform for this reduction?

So last year, we had significant amount of bad debt expense, and that is reflected as around INR 80 crores in the cash flow statement. This expense has reduced significantly. At the same time, we have taken onetime charge of readjustment of the warranty provision that was seen in INR 130 crore or something in the last year. So those are the 2 major components, which were significant items in the last year expenditure. This year, while these 2 significant items do not exist at the same time, as we have been communicating quarter-on-quarter, we have maintained a very strong discipline to control costs because of the COVID and the disturbance in the operations. So that has really resulted in a significant saving in the other expenses. Now for the full financial year 2021, we had about INR 366 crores of other expenses. Average comes to around INR 92 crores. With inflation and let's say a few other increase in expenditure because of higher travel as compared to last year, et cetera, on a conservative side, I'll put a number of INR 100 crores per quarter or approximately INR 400 crores, which is more sustainable.

Ladies and gentlemen, we'll be taking the last question that is from the line of Jonas Bhutta from PhillipCapital.

Congratulations on the great turnaround. My 2 questions were. First, as far as the large HVDC projects that you just spoke about, within Rajasthan, UP, Leh-Ladakh, based on our own indications, at least Leh-Ladakh, there was a viability issue in terms of the kind of costing that we were looking at, and that was going to delay the project for quite some time. And as far as the Rajasthan, UP project, just wanted to get your view whether these both now are tangible opportunities and can be awarded over the next 12 to 18 months? That's the first question.

So thank you for the question, and I'll answer the Rajasthan one first here. So it has been cleared by the Empowered Committee because they have said that, okay, there is 1 AC scheme and there could be a hybrid of AC plus DC scheme. So the preference is over the hybrid of AC and DC scheme. So we are not very sure about 12 months, but I think, 18 to 24 months pipeline looks to be okay for an award for such a project. But at times, we have seen the government of India pushing very strongly also. So conceptualizing such a large project, et cetera, takes slight time, but we have seen in India, there are many 800 kV 6,000 megawatt projects executed as well, like, for example, Champa-Kurukshetra, Raigarh-Pugalur, NER-Agra. So It's possible to do it in 12 to 18 months' time and not 12 but I think 18 months' time should be a realistic thing. Leh-Ladakh, yes, there are various options being talked about by the ministry. But the growth of renewables, what we are talking about in the country, I think one of the large pillars is going to come with the investment on the Leh-Ladakh side. So yes, we continue to remain optimistic on that project as well.

Sure. Sir, if I can ask a follow-up on the Rajasthan, UP because the project cost that is estimated is almost INR 26,000 crores. And what you earlier mentioned is INR 10,000 crores to INR 12,000 crores is the scope for GE T&D within that, right?

Yes, because that would also -- so then in the project sense you talk about land, financing, transmission line, return on equity, OpEx cost, everything is included. But when we talk about, we talk only the CapEx part of the, for example, the converter stations only. So that comes slightly in the range of about INR 8,000 crores, INR 10,000 crores.

INR 8,000 crores to INR 10,000 crores. Okay. Sir, my second question was pertaining to the business that -- the arrangement that we have with the parent entity and now we have almost 5% of our workforce, which doesn't have any commensurate revenue attached to it. So do you believe that, that will be a drag on our margins at least for the FY '22 before we are able to redeploy these -- this workforce or have an alternate method to that? And along with the commodity cost pressures, both of these will build up some bit of pressure on margins in FY '22? Is that a fair assumption?

So on the GEOD business, as I said, it's premature to share the impact because as I commented upfront, all venues are being explored given the impact on employees, investors and also the assets of the company. So we will have to first 0 green, which is the best solution, which actually fits in further best interest of the company. And whenever the decision is taken, due communication will be made to the stock exchange and the investors. On the commodity side, we mentioned that it is not just a headwind for us but across the industry. And the company and the management team is working on many venues to offset this, which includes first as a mitigation to the commodity risk as a first step and then to take other initiatives to offset this impact. And the other initiatives include the productivity, efficiency improvement, looking at the other cost-saving measures and so on.

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

Yes. Thank you, Lizan, and thank you, everyone, for your participation. With this, we conclude today's conference call. And in case if you have any other questions, then please feel free to contact me or our Communication Leader, Mr. Anshul Madaan. Thank you, again.

Thank you. Thank you.

Thank you.

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.