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 2021 for FY '21-'22. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [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, Inba. Good day to all of you. Hope you are safe and healthy. So welcome to today's conference call with the GE T&D India Limited management team here. As we know, this conference call has been organized to present and discuss financial results for the third quarter of the financial year ended on 31st March [ 2022 ]. 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 the CFO and Whole-Time Director. We have Mr. Sandeep Zanzaria, who is the Commercial Leader. We have with us Mr. Mariasundaram Antony, who is our Projects Business Leader. And we have Mr. Deepak Pandey today, who is the business leader responsible for digital grid. We have also with us Mr. Anshul Madaan, who is our Communications Leader. Please note that this conference call is scheduled up to 5 p.m. I hope you would have received the investor analyst presentation, and the same has been uploaded on our website. I hope you have also read with the disclaimer on Slide #2. I would now request Mr. Pitamber Shivnani to begin this conference call highlighting key events of the quarter, then Mr. Maria updating us on operations. Thereafter, Mr. Deepak Pandey will give us some digital grid business scenario and the related opportunities. Further, Mr. Sandeep Zanzaria will take you to overall grid market. Lastly, Mr. Sushil Kumar will give us his insights on financials. I now invite Mr. Shivnani to begin the conference with an opening remarks. Over to Mr. Shivnani.

Thank you, Suneel. Ladies and gentlemen, good evening. Thanks for joining the call. We hope you and your families are healthy and safe. I would like to start this call by giving you a brief overview about the last quarter and then would request other speakers present in the call to go through the details. During the third quarter of financial year 2021-'22, we successfully navigated a dynamic environment, delivering a solid free cash flow. However, the top line results were pressurized due to challenges around the operating environment including continued supply chain disruptions, commodity inflation and market pressure continue to remain tough. We remain focused on our portfolio, significantly reduced debt in the third quarter and strengthened our operating performance through lean and decentralization. Orders were pressured due to market dynamics and commercial selectivity. However, we are fully aware about the importance of growing orders, and we are working on innovative ways to address the market challenges more effectively. Sandeep will talk about the orders in detail. As mentioned earlier, Q3 has been a challenging quarter as everyone was put to test by the commodity inflation and continuing supply chain disruption. And hence, the same has impacted our financials as well. Sushil will cover the financials in detail shortly. India is home to one of the world's largest renewable energy programs with a target of 175 gigawatt of installed renewable capacity by 2022 and a vision to increase renewable capacity by 500 gigawatt by 2030. Government commitment is clearly reflecting in the increased budget allocation in financial year 2023 to Renewable Energy Development Agency and Solar Energy Corporation of India, which has been increased collectively by 143%, as announced yesterday. I firmly believe that grid will play a critical role in solving the trilemma of affordable, reliable and sustainable energy to meet increasing energy demand and support the country with our customers in achieving their net zero ambition. We are confident about where we stand today and where we are headed with. With respect to the order book, our current market backlog stands at around INR 38 billion. With that, I request Maria to provide further insight on operations during the quarter. Over to you, Maria. Thank you.

Thank you, Pitamber. Good evening to everybody in the call. I would like to give a brief update on our operations covering the key commissioning which we did during the last quarter. And we actually continue to play an important role in terms of creating the grid of the future for the country and the region. And some of the key commissioning which we did during the quarter, which was majority of them, significant part of them were air insulated, AIS substations. And if you really see, I think we commissioned our substation AIS, substation 220 kV AIS, substation DVC Parulia in West Bengal. We also commissioned important substation in Avaada -- for Avaada in Bikaner in Rajasthan, which will involve commissioning of 400 kV AIS substation along with 115 MVA transformers. In the same region, I think in Rajasthan, in Khetri, we actually commissioned 760 kV AIS substation for Adani -- Adani(BKTL). And then we also down south, we actually, for our customer -- refinery customer, HPCL Vizag, we commissioned their AIS Bay, which is an extension bay which is part of the APTRANSCO's Kalpakka substation. And then on the Eastern side of the country, in Jharkhand, for JUSNL, in Meral, we actually commissioned their 132 kV and 33 kV AIS substations along with 50 MVA transformer. So definitely, I think we continue to play an important role in commissioning the substations, which play an important role for the evacuation infrastructure for the country. 2021 overall, we completed 40 stations. Throughout the year, in a time when we had the COVID second wave also, we continue to support in terms of improving the evacuation infrastructure in the country. With that, I would hand over to Deepak Pandey to give an update on digital grid.

Thanks, Maria. Please refer to Slide 5, which speaks about digital initiatives of decarbonization and digitalization by GE T&D India Limited. We would like to highlight that more than 50% of India power flow is on GE's digital technology. Currently, we have around 100-plus control center and data center across India monitoring and controlling various parameters and the stability of grid and improving the reliability of the power systems. We are present in both transmission as well as in distribution landscape. In transmission, GE T&D is managing power grid's transmission assets wide NTAMC project, which is the slide of -- the picture of which is present on the second picture on the left-hand side of the presentation. GE is also managing the National Load Dispatch Center of neighboring countries of Sri Lanka and Bangladesh. GE's wide area monitoring system technology is working at a national level to prevent future blackouts, the blackout which happened in 2012. This technology was developed by GE. And it is one of the mature and the largest implementation across the world to stabilize grid. GE is also working on managing renewable challenges because renewable power has its own challenges due to fluctuations of solar and wind. Currently, we have implemented our technology in the state of Rajasthan, which is reaching around 40% of renewable component based on the total installed capacity. So this technology is already implemented as -- and is in final commissioning stages. On the distribution landscape, we are present in both private as well as the government distribution utility, where our digital technologies for distribution management has been implemented in Tata Power Delhi, which is improving reliability and serviceability of customers. There are a couple of prestigious projects which are underway, right from Jammu and Kashmir to KESCO in Kanpur and Tata Power Orissa, the 3 DISCOMs which have been privatized, as well as in Nepal. GE Digital business is geared up for the new RDSS scheme which was announced by the Honorable Finance Minister last year, and the rollout has started this year, in which the modernization component is worth around INR 17,000 crores with an outlay of 5 years. So we look forward for good opportunity in distribution landscape with this scheme. So I now hand over to Mr. Sandeep Zanzaria for the next slides on order intake.

Thank you, Deepak, and good afternoon, everyone. So I would say that in terms of order intake, it was comparatively a muted quarter primarily because, of course, there is a lot of action that we are having on the renewable front. But still the projects are getting identified and the TBCB bidding is going on. But it is, I would say, slightly delayed for the decision-making towards the equipment manufacturers or the EPC players. So if you really look at the last quarter, it was primarily only 3, 4 projects in TBCB space which got the [indiscernible], which was primarily [indiscernible] Koppal and Osmanabad for the developers. And of course, out of that, we have already won the project of Koppal in the last quarter through Renew Power. So I would say that I think going forward, the pipeline looks to be much better than what we have seen in the last 9 months. We see there are a lot of reverse auctions now for the projects which were envisaged by the government earlier. The reverse auctions are now happening, for example, Narela, Khavda. And of course, with there is a big pipeline of projects which have not been identified about 20 gigawatts for evacuation of renewable. So this is going to create a very good sustainable pipeline at least for the next 2 quarters, the quarter in which we are and next quarter. At least 2 quarters, we will have a good sustainable pipeline for decision-making. We are seeing a tremendous pressure because of the reverse auction happening on the developer side, which is, again, coming on the EPC and the product side as well. But still, the good part is that the market has picked up. That is one thing. States, we are seeing that still not too much of a traction on the state side, very limited opportunities coming in the state sector. But another positive thing which is happening is that even the industrial CapEx is now picking up, so we are seeing that in the metal side, the large producers of metals, they have now started talking and coming up with projects, which also requires enhancement of their great capabilities. Of course, you really look, we are about 4% down since last year for the 9 months what we did in terms of order intake. And the main successes were again Koppal. [indiscernible] of course, we had got some retrofit of our own installed base of 400 kV GIS. And then we have done some restoration and some work for [indiscernible]. And then there are multiple orders of export as well. So I now hand over to Sushil.

Thanks, Sandeep. Good afternoon, everyone. Moving to Page 7 on the financial performance. During the quarter, revenue was INR 9.1 billion compared to INR 10.3 billion in the same quarter last year. So this is 11.6% lower than the last year. On a 9-month basis, our revenues were INR 24 billion compared to INR 25.4 billion on a 9-month basis in the last financial year. So we had a 5.7% lower revenue in the current period. As Pitamber mentioned, due to continued impact of commodity prices, input cost and the supply chain disruption, our profitability for the quarter was muted. EBITDA level, we posted INR 292 million of EBITDA compared to INR 575 million EBITDA in the last financial year quarter 3. On a 9-month basis, we had an EBITDA of INR 505 million compared to INR 1,006 million EBITDA on a 9-month period. Entire reduction in the EBITDA can be directly set to be the result of the increase in commodity price, resulting into an increase in the input cost for the company, which again had an impact on the profit before tax. So we had almost a breakeven profitability during the quarter compared to INR 754 million of profit before tax in the same quarter last year. Out of INR 754 million in the last year quarter 3, we had an exceptional gain of INR 259 million on account of sale of one of the property. Excluding that, the profitability was in the range of around INR 450 million in the last year. So the entire thing of around INR 450 million on operational performance in the quarter is predominantly, as I said, linked to the commodity price impact and increase in the input cost. During the quarter and on a 9-month basis, we had a strong improvement in the cash flow. We generated about INR 136 crores or INR 1,360 million of cash flow during the 9-month period, which helped us in reduction of debt from INR 161 crores, net debt, end of March 2021, to around INR 24 crores at the end of December. So good performance of cash by making a strong improvement in the working capital. Moving to the Page 8, we have shared the information about the split of orders with the new and the backlog. Talking about order booking, we had INR 5.1 billion of orders during quarter 3, of which INR 4 billion was from domestic market and about INR 1 billion in orders from the export market. On a 9-month basis, out of total INR 16.1 billion of orders, INR 10 billion was from domestic market and about INR 5.7 billion from export market. On the revenue side, out of INR 9.1 billion of revenue, INR 6.5 billion comes from the domestic projects and about INR 2.6 billion from the export projects, which represents about 29% of the total revenue for the quarter. And on a 9-month basis, out of total INR 24 billion of revenue, approximately INR 18 billion or 75% of the total revenue is from the domestic project, and the rest is from the export projects. As Pitamber mentioned in the beginning, we have INR 38 billion of backlog. 63% of the backlog is from the private customers and 20% of the backlog from the state utilities, and rest is from the center utility. Moving to Page 9 as an update on the GEOD business. So the company has made a disclosure of the revised valuation in the [indiscernible]. Subsequently, on 12th of January, we had a call with the investors on the update related to the GEOD business. Subsequent to that, the company Board of Directors on 24th of January approved the sale of GEOD business to GE India Industrial Private Limited with the corresponding assets, manpower and liabilities on a slump sale basis. This is subject to the shareholders' approval. The total consideration is INR 1,406 million subject to the adjustments on the completion date as per the terms of the business transfer agreement. The business transfer agreement has been signed on 31st of January. A postal ballot notice has been issued and the investors can look into and look into the document of valuation of the business transfer agreement if they want to get into the details of the valuation before deciding with the voting for this particular slump sale. So the postal ballot notice was announced in, I think, beginning of February, and it will be open until 5th of March. And we request all the investors to go through this and vote accordingly for making a rightful decision for this business. So with that update, we will now move to the question-and-answer session.

[Operator Instructions] Our first question is from the line of Renu Baid from IIFL.

Question on the gross margin side, which is clearly seeing significant pressures, so can you help us understand that while in the quarter, as we see sequentially there has been growth in export revenues, this gap up in terms of gross margins, is it on the recent [indiscernible] export orders or these would be largely the domestic fixed price projects where we have been sitting with gaps and under recoveries due to commodity inflation? And what percentage of the backlog is still sitting with these kind of low-margin orders? Or do you think most of the commodity [indiscernible] are already done in this quarter? And thereafter for the next 2 quarters, should we at least expect the gross margins to come back to normalized or they could continue to remain under pressure? That's the first question.

So we made -- the last financial year, we had a gross margin of approximately in the range of 26% to 27%, and that's the margin that company generally expect at the time of quarterly meeting. And as we said, have been communicating last couple of quarters, and you all are aware of the volatile situation in terms of the commodity prices and increased supply chain disruptions, this quarter specifically, we had to take an impact of all that in few projects, which are, of course, in the nature of firm prices versus the customer. And the supplier -- supply side costs have gone up because of change in the commodity prices plus the demand and supply situation. Having said that, you're right, most of the impact is on the domestic side of the business, not to direct sent on the export side of the business. As a process, we continue to make efforts to finalize the rate for the input prices to the best interest of the company. But as and when the rates or legislations complete, we take the impact on the quarter. So as of now, everything that we have been able to finalize and are able to conclude have been considered. But as Pitamber mentioned, the situation remains dynamic. I mean the supply chain disruption still continue to impact. There has been a sudden change in the demand and supply situation of certain commodities leading to the increase in the cost price. So if any further inflation happens, that will have the impact on the further quarters. As of now, whatever the company could finalize or anticipate has been provided.

So broadly, if the commodity price even if they remain stable at the current level for the next 2 quarters while we will be completing some of the previously secured fixed price projects -- domestic projects, should we expect the gross margins to come back to that 20%, 24% -- whatever, those levels or they will be closer to what we have seen in the last quarter, close to the 18%, 20% odd levels? So basically, should we expect the next 2 quarters improvement in gross margins in the current commodity price scenario? Or probably the headwinds will continue in the near term?

As I said that we work on the long-term projects. And the way the long-term projects are -- let's say, the cost things are done, we take the cost to complete for the entire project as a method of accounting. And as a result, any foreseen loss in the future is embedded into the profitability of the project, and equivalent accounting impacts are taken in the quarter. So with your question with regard to the stabilization of commodity prices, if that happens, then, of course, we'll not see further impact in the quarter. But if the demand and supply situation continue or we have further increase in the commodity prices, then it may impact the subsequent quarter.

So basically, can you help us understand what was the quantum of cost to complete provisions that we have booked in the current quarter probably under the which has depressed the gross margins or it would be -- are you -- I mean whatever?

See broadly, let's say, if we compare the 18% gross margin in the quarter and the 26%, 27% in the past, so there's a delta of 8%. And more or less, entire 8% can be attributable to the commodity and the input price impact. There will be some other factors which will all square off or net off, but this was one significant impact which is getting charged to the P&L in the current quarter.

Got it. The second question is on inflows. Pretty good to see the inflow or breakup the way you've shared in the presentation. But if you see domestic inflows in this particular quarter was barely INR 100 crores. So coming to the domestic environment, have you seen competitive intensity from some of the other domestic peers who are now back in the market with aggression? Are they distorting the price levels and making the commercials less viable for GE? Or how do we look at the orders into pipeline improving given the fact that Sandeep had mentioned that our inflow pipeline is looking to improve. So should we now start to look in some momentum to improve or cost competitive pressures in the domestic market could continue to put us on the sideline?

I'll request Sandeep to answer. But just a small clarification, out of INR 5 billion in orders, 80% of the orders from domestic market and 20% from the export market. So INR 1 billion was from export.

Okay. Probably, my bad ....

Sandeep, please?

So basically, Renu, one thing is there that because of the muted market for last about 9 months, especially in the substation space, I think there is a lot of capacity which is available in the market and not only on the product manufacturing but also in terms of EPC, which is therefore, the price pressure will continue. There is no doubt about that. And as I said that, in fact, now in TBCB projects, we are seeing, for example, in Rajgarh, there are 10 developers who have participated. And the developers -- the way the developers are now putting the pressure in terms of winning those bids, the pressure of price is now getting transmitted from those developers to the EPC players and accordingly to the product manufacturer. So the price pressure will definitely remain, but the good thing will be, but at least when you have a bad market and then price pressure, compared to that, if you have a better market and price pressure, so I would always choose the second option. And probably going forward, we will see the second option which will be coming into play, where we will have a better market but price pressures will continue to remain.

That should improve gross offset. And lastly, if you can help us understand, Pitamber did mention the company is looking at innovative ways to face the current market challenges. So if you can help us understand what are the innovative ways of either on the commercial side or the order flow side in terms of opportunities where you're looking to ramp up the business portfolio size and scale.

I think by innovative new ways, I think what Pitamber meant was that, of course, how do you address into the market, so maybe a different commercial strategy. So that could be 1 thing which we are looking forward to. And second, for example, Deepak explained that there is a lot of digital play which is expected to happen in terms of government coming up there being a lot of automation investment in the distribution side. So that's also going to create a good amount of market for the company to play in that space.

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

Just continuing on the previous participant's question on the gross margins. In the previous earnings call, second quarter, it was highlighted that 28% to 30% is a sustainable gross margin that one can expect. Do you see that in the next quarter or 2 that now looks like slightly difficult given the underlying situation on the competitive side is playing out?

Bhavin, if the question is on the order side, we will answer in 2 pieces. One on the commercial side with Sandeep will answer. Second is on the execution side with the margins that we have or the backlog we have in hand. So on the backlog we have in hand, wherever the commodity prices impact our loan have been booked in the P&L, generally, in the last call, we said average 26%, 27%. But as an ended what we do that after booking the order at those levels, we try to expand the margin by a couple of percentage points. But given its significant and sudden change in the market dynamics, that increase, of course, is not feasible. But on the other side, we have a significant hit of the commodity prices because of the order backlog -- a significant part of the order backlog being on the firm prices. There, we have tried, we have requested to the customer to ask for the compensation for the significant change in the market dynamics. However, we have not been successful. So as discussed in the earlier question, if the commodity prices stay at the current level or the input prices do not change further because of the demand and supply situation, we should [indiscernible] to the level of 24%, 26% in the next couple of quarters. And then our endeavor will be to first sustain this level of 26%, 27% and try if we can improve further. And I request Sandeep to also answer the dynamics on the order booking side.

Sure. Bhavin, I think on the order side or on the commercial side, as I said, I explained it to Renu. I think for certain products, we will see some pressure which will be coming. And for some products, we will see they will be on a much better side. So for example, when I take the example of transformer reactors, today the demand is quite high, and the installed capacities probably would be just equal or slightly lower than the expected demand. And today, with the renewable project, the expectation of commissioning is also much faster, so delivery cycles are also much faster. So in those spaces, we will definitely have a better price realization that is there. But of course, in such high capital-intensive transformer reactors, you don't get such high level of gross margins as well. I think with China going out of the market that we Make in India restrictions, I think that is also helping GIS and grid automation. But on that side, what we had seen was that the market was muted. But now once the market will pick up, and we will see some large projects now coming up in renewable evacuations in [indiscernible], et cetera, or the other places in Rajasthan and Gujarat. I think in those sides also, there should be a better price realization which will come. But on the EPC side and for the air insulated breaker side, the pressure on the margins will continue to remain. I hope I have been able to answer your question.

Sure. Yes. Yes, that helps. The other question is on the beginning of the financial year, you have taken a special approval for the related party where you were expecting the HVDC projects. Any update on that will be useful.

So Bhavin, the update on HVDC project is that the Adanis have actually -- are moving ahead. But we have seen that there is some news which has come that Tata Power has [indiscernible], et cetera. So that is still ongoing, and we expect that the decision on that project to come up probably in the next quarter.

Okay. Sure. And any update on the other HVDC projects now that power grid has been -- given the Leh, Ladakh on...

The Leh, Ladakh project has been awarded to Power Grid on the RTM basis. And Power Grid has just started the initial discussions with the participants. But probably looking into Leh, Ladakh, et cetera, that will -- the size of the project and the complexity of the project, that will take, I think in my assessment is minimum 3 quarters for it to get decided.

Any color on how large could be the addressable opportunity for GE T&D in that INR 27,000 crore project because there is some amount of storage also?

So I will only put it that way that my assessment on the overall project would be close to about more than $1 billion. But then it will also depend that how we decide to approach the market such as the consortiums, et cetera, then we'll have to see. And then there will be certain offshore scope which will also be required in terms of [indiscernible], controls, et cetera. So the overall opportunity will be more than $1 billion, but how much will it be actually coming for GE T&D, it is really difficult to be forecasted.

Sure. And just last question from my side. Could you just talk about the export opportunity because we are seeing some amount of export to [indiscernible] but they are small and largely from the SAARC. So on a slightly longer-term basis, maybe a year or 2, how do you see the exports panning out? Because in the previous earnings call, it was highlighted there are a few projects where -- sorry, a few products where there could be sole-source space from India.

I will not put it as sole source from India, but I think we have got certain further allocations of the countries from there. And also not only the allocation, but of course, it also requires the acceptability of the end customers also from -- that they are ready to buy from the Indian factories. So that's a constant exercise I would put it, as Bhavin, that looking into the cost structure of India, globally that exercise that the local people who are based there, they keep on trying to push for the acceptability of Indian factories. And wherever we get it, we will use the local factories, from the Indian factories.

Sure. So not just putting a percentage of sales, but can we expect that maybe the export would be to the tune of a couple of hundred million dollars in a couple of years given the effort that you are taking, would that be like an outlandish number or probably in achieving number according to you?

So I would not put a number as of today, Bhavin.

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

If you can also highlight, while we have highlighted some of our digital capabilities and offerings on the grid automation side, how are we seeing the project prospect list in the domestic market and the neighboring countries with higher grid integration coming into the picture over the next 2 years? So how should we look at the order opportunities and prospects for the next 2 years for this segment of the market?

So, Renu, I think we have an infrastructure today in the country. Out of that, there is a certain part of the infrastructure which is quite -- I would say, quite aged as well. So of course, in some areas, we are seeing that the customers are really working towards improving that or going for the refurbishment of those aged infrastructure which is there. But when we really look at the overall -- for example, the overall portfolio level, what's happening actually is that in the transmission side, whatever new projects are coming, the grid automation is coming with that. But we expect a major investment to come, as Deepak had said, on the distribution side. But till the time it doesn't come up because once you have to lay the ADMS systems and things like that, even the field equipments used to become smarter so that these signals, et cetera, get captured, and the load data centers or the ADMS centers, et cetera. So what's happening till the time those investments don't come in, we will not see an explosion in the opportunities of grid automation. It will remain as a consistent market.

Right. Because if you look at the state level, grid is significantly underinvested on the technology side. And now with distribution reforms around the corner state signing up to invest to reduce losses and improve efficiencies, that should actually technically be a significantly large opportunity for us over the next 2 to 4 years.

So I think that's what I said, Renu, that till the time that investment doesn't come, we will not see an explosion in the opportunity of grid automation. The market will remain consistent. But once we see that type of CapEx coming into the grid automation side or we putting the ADMS into various, for example, cities and circles, et cetera, then we have the grid automation market we expect a phenomenal growth.

And just one small question. While the market outlook is now improving in terms of prospects, et cetera, overall inflows that's still being so far as YTD. So any thoughts from the group as well as from the company or ways to look to reduce the overall cost structure of the business and make it slightly more lean to adjust for these kind of cyclicalities in terms of the business opportunities and the size of the growth? So anything that we're doing to further cut down the fixed cost or you think the opportunities could be limited on that side?

Yes, we are taking actions to reduce the fixed cost. And as well as, as we have talked in the earlier presentations, there are actions for improved -- taking lean manufacturing actions to improve the product cost as well.

Okay. Any particular initiatives which you would like to highlight?

Yes, not at present until the time they are decided, but all opportunities are being explored to reduce the cost.

[Operator Instructions] Our next question is from the line of [ Dilip Jain ] from [ Ayush Capital ].

My first question, am I audible?

Yes.

For the Adani Mumbai HVDC project which you just discussed, I believe the total project is about INR 7,000 crores to INR 8,000 crores. So how much of this opportunity will GE -- will our company address? And when we have bidded for that, do we have a raw material escalation clause in our bidding? My second question, sir, is there was a reversal of INR 59 crores excess provisioning that has significantly lowered other expenses in the results just announced. Any more room to further lower other expenses going forward in this head or in other heads in terms of going leaner like we discussed? And sir, my last question is, we have discussed a lot about the gross margin problem that we are facing. What percentage of our current order book is without raw material escalation clause at present?

So I will -- first, I will answer for the Adani part, and then probably Sushil will take over. Sandeep here. So one way is that out of INR 7,000 crores, because we are actively discussing it with Adani, it will be very difficult for us in an open call to explain on the commercial strategy and the numbers, et cetera. So probably, we will not be able to answer that question in the call, that what will be the scope for GE T&D and what would be the value and [indiscernible] by the escalation of material, et cetera, because that's part of the discussion which is sensible in nature. So I hope you understand that. So Sushil, I think for balance things.

Yes. So on the other expenses on an average, on a full year basis, we have about INR 400 crores of other expenses, which means average INR 100 crores per quarter. And that's the trend we have been communicating in last couple of quarter calls as well. Yes, there are actions which we have [indiscernible] to reduce the overall structure cost. And also at present, we are taking actions, as you see, on the reduction of debt. So if the debt reduction happens, that also helps us in bringing down the financing cost. In addition, the major component and the problem that we saw in the quarter is related to gross margin. So lean manufacturing and cost out of the product is 1 of the significant actions that the company is planning to take. On the third question, I do not have immediately the breakup of the fixed price and variable price contracts. Probably we can share that in the next update.

Okay. Going back to my first question, sir, of the INR 8,000 crores project, like how much can we address? I'm not asking the details of the quote that you have put in. But how much of that -- like is half the project addressable by GE or like 1/4 or the entire? That's what I wanted to know.

So okay, I understand your question. So basically, when then the project cost is considered, when that considered, even the cost of land, the cost of subscription transmission line, cable, financing cost, other overhead expenses, so our scope for that would be less than 50% of the overall contract price.

Less than 50%. Okay. Okay. And in the second question, sir, for the other expenses, is there a quantum that you could put going forward? Because this is excellent what you have done. You have reversed INR 60 crores of excess provisioning. It took care of a lot of the hit that we got on the gross margin side. Is there any quantum, like any ballpark quantum that you could put to how much more we could go leaner on the other expenses?

As I said, at present it is difficult because those actions are in progress. So giving a direction without action being finalize will not be the right communication. So give us some time. We are taking actions to reduce the cost consistently, and we will probably give more update as and when things firm up in nature.

Okay. So we could definitely expect positives ...

[indiscernible] But on one piece, I can say, yes, you can see the cash and debt position. Last couple of years, we started a communication on the improvement and focus on the cash generation. At that point of time, the debt was in the range of INR 500 crores [indiscernible] being debt free. In this quarter, we are, say, around INR 24 crores net debt, which has helped us to bring down the cost to the extent of INR 25 crores to INR 30 crores, if I'm remembering all the numbers correctly, in a financial year. So we had about INR 75 crores to INR 80 crores of financing costs 2 years ago, which has now come down to less than INR 50 crores or in that range. So that is a continuous effort that we are making. Having said that, yes, there are very few -- this is a long cycle project. There will be a couple of quarters where the working capital will increase depending on the projects, lean and so on. And we'll try to bring it down further. So directionally, we are taking action, which is helping us in reducing cost of financing and becoming or moving towards debt-free. There have been actions in the last year from the other expense where we have communicated that we saved a significant part of the other expenses which is already baked in the numbers. Give us some time for rest of the improvement being made.

Sure, sure, sure. And for the last part of the question, sir, the future orders that we will be taking, will -- do we have the pricing power to take orders, which are ultimately going to be more profitable than the current situation? I mean, my whole idea of asking you was that.

So that is the endeavor, that selectivity and trying to ensure that we take the orders with better terms and conditions and better margin.

Okay. Sir, do we see the order book moving towards the private entities more? So I believe currently 63% is private entities. Do we see that moving to, say, 80% over the next 2 years?

So I think today with TBCB, what we are seeing that most of the bids are being won by the private entities only. For example, the Sterlites and the Renews and Adanis of the world. So automatically, the whole market is shifting towards the private sector. And now with government also coming at that, for states also, they are encouraging the local governments to go for TBCB. Even the state market to a great extent will shift towards the private sector, or in case of [indiscernible] power grid. So this is the reason that the ratio of private would be more in the coming times.

Okay. Should this help us going forward to maintain our gross margins? I mean this very -- of trend that you have been talking about from government to private to us. Should that help us get back to 26%, 28% in the next, say, 3 or 4 quarters on gross margin level?

That will depend upon -- that will also depend upon the competitive pressure, which -- so it's something which is very difficult to predict at this point of time.

Okay. Okay. So I believe with the kind of work we do, we just have Hitachi as one of our biggest rivals, right? Or do you feel the field is getting more competitive as we proceed day by day?

Because we have multiple competition scenarios that, for example, Hitachi is there, when we have Siemens also as competition, we have Toshiba also as competition. So we have other manufacturers also where there is competition. For example, in few spaces like transformers, we have other players also on the EPC side. Then we have L&T, KEC, Kalpataru, [ Techno ], also as competition. So...

Okay. Okay. So any ways in which we differentiate us from the rivals? Because I've heard that GE's technology is probably the best in the world.

So I would say that the only place what we differentiate is that we have practically the complete bouquet of products available with us. That is definitely [indiscernible] factors what we have. But otherwise, technology-wise, the acceptability of technology which is there, is that everybody is manufacturing today in India, the technology is acceptable.

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

In the budget speech there was mention about excluding the exemption, specifically, there was a mention about high-voltage power transmission and a few products. Any -- could you help us with this -- would it help us in terms of our competitive firms, some of the imports that were there from like Chinese, et cetera?

I'm not able to capture your question, Bhavin. But ultimately what we see is that because of the various regulations of the government which has come in, already the products which were directly -- finished products which were directly coming from the neighboring countries or the land-sharing border countries are already not acceptable into the grid. So we don't see any change at least happening on that area. Bhavin, I'm I audible?

Sir, it looks like his line is disconnected. In the meanwhile, we'll take our next question. That's from the line of [ Laksh Jain ], an individual investor.

Am I audible?

Yes, yes.

Our current order book is of INR 3,800 crore approximately. And our yearly revenue in the worst of times of taking FY '21, it is INR 3,500 crores. In the media report, it says that INR 3,800 crores of order book provides a revenue visibility of 18 to 24 months. Why has there been so much increase in the duration for meeting this order book?

Generally, there are orders which are both during the year and also executed during the year, specifically also on the export side. So that is the reason there this INR 38 billion order provides us a base level for a couple of years. And then we will more order and execute for the couple of years.

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the floor back to Mr. Suneel Mishra for closing comments. Over to you, sir.

Yes. Thank you, Inba, and thank you, everyone, for your participation. We conclude today's conference call of GE T&D India Limited. In case if you have any other questions, then please feel free to contact me or Mr. Anshul Madaan on the e-mail ID. So thanks once again. With this, we close.

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