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

Ladies and gentlemen, good day, and welcome to GE T&D India Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Tanvi Gupta from GE T&D India Limited. Thank you, and over to you, ma'am.

Thanks, Seema. Good evening, everyone. We welcome you to the GE T&D India Limited Earnings Call for the First Quarter of Financial Year ending 2023-2024. I'm Tanvi Gupta from GE T&D Financial and Investor Relationship team. We're delighted to have you all here on this call. During the call, we'll discuss about the company's financial performance, including operational highlights, share the key updates, and we'll address the questions if you have any. Before we begin, I would like to highlight a few important notes for today's call. Firstly, as we just have declared the results for the first quarter of the financial year '23-'24, the same results are available on our company website. Further, we have also prepared an analyst presentation for the quarter, which will be under discussion during this call. The said presentation has been e-mailed to you and is also available on our company website. Also, I would like to take a moment to remind everyone that today's discussion may contain key forward-looking statements, which are subject to risks and uncertainties. These statements are based on our current expectations and actual results may differ materially from those expressed or implied. We encourage you to refer to our public filings and disclosures for a comprehensive understanding of the factors that could impact the future performance. Now let me introduce the GE T&D India management team available on the call. During this call, we'll be joined by Mr. Sandeep Zanzaria, CEO and the Managing Director of the company. Along with him, we will be joined by Mr. Sushil Kumar, Whole-Time Director and CFO of the company; Mr. Abhishek Srivastava, Head Business Operations; Mr. Anshul Madaan, Communications Leader; and Ms. Anupriya Garg, Company Secretary of the company. [Operator Instructions] Thank you once again for joining us today. We appreciate your continued support and trust in GE T&D India Limited. Now I'll hand over the call to Sandeep for his opening remarks. Over to you, Sandeep.

Thanks, Tanvi, and good evening, ladies and gentlemen. Thank you for joining the call. We sincerely hope that you and your families are in good health and safe. Today, we are connecting from our Pallavaram plant, which is basically Chennai, where we manufacture cutting-edge products to monitor, control and safeguard the power grids and its assets. We had also invited our Board of Directors to join us in the Chennai plant for the Board meeting and finalize the results of the last quarter and took the opportunity to showcase our world-class manufacturing facilities in Pallavaram and Padappai, which manufactures our HVF products in this visit. Before we dive into the details of our Q1 performance, I'm delighted to announce the release of our annual report for the financial year '22-'23. The report highlights our accomplishments over the past year and provides valuable insights into the market outlook. We encourage you to explore the report and learn more about GE T&D. A copy of this report is readily available on our website. Additionally, we are excited about our upcoming Annual General Meeting scheduled on 21 August, a recording of which will be accessible on our website afterwards. Coming to the results of Q1 '23-'24, I am pleased to share that our team has achieved a commendable results with significant growth in order and improved margins. The improvement can be attributed to our unwavering focus on execution and our ability to capitalize on opportunities in the driving Indian power market. In Q1 '23-'24, our order book amounting to INR 10 billion, a significant increase of 68% compared to INR 6 billion in Q1 '22-'23. This demonstrates a strong demand for our products and services in the market. Our sales for Q1 '23-'24 reached INR 7.2 billion showing a remarkable increase of 21% year-on-year growth compared to INR 5.9 billion. This impressive performance highlights the effectiveness of our strategies and robust operations Further, our profit before tax and exceptional items stood at INR 386 million, showcasing a positive growth trend compared to the profit before tax and exceptional items at INR 103 million in Q1 FY '22-'23. We have achieved improvement in our financial position by reducing the debt by INR 560 million in this quarter. Our debt at the end of the quarter stands at INR 1,170 million as compared to INR 1,730 million, a reduction of INR 560 million. This indicates our dedication in maintaining a healthy balance sheet and improving our financial stability. The order backlog for Q1 FY '23-'24 stands strong at INR 39.4 billion. I'll now hand over to Abhishek for the execution comments.

Hi, good evening. So I will share with you all the key operational highlights for our company. So in the quarter, we had made some good progress in terms of execution and commissioned some critical substations, which are going to strengthen the transmission network of our country. One of the key contributions was commissioning of 400 kV GIS substation for our customer ReNew in Koppal-Narendra. So this particular substation is going to help in enabling evacuation of renewable power and strengthening the grid connectivity of the state of Karnataka. After that, another key contribution or achievement that we could make was 765 kV GIS bays at Doosan, which -- at Jawaharpur for Doosan, which is for evacuation of the power from thermal power plant, which is being set up by Doosan, and that is going to help in terms of strengthening the power network for the state of Uttar Pradesh. After that, another key milestone that was reached was commissioning of 765 kV and 400 kV substation for Adani at -- as a part of the scheme, which is known as WKTL, Warora Kurnool Transmission Limited. So that was one of key challenging projects for us, which we were able to successfully commission in the quarter. After that, another key milestone that was achieved was commissioning of 220 kV GIS for the HPPTCL at Gumma and that helps in strengthening the transmission network for the state of Himachal Pradesh. And another area where we have contributed was in terms of commissioning the substation for Karnataka -- Kerala State Electricity Board (KSEB) at Shoranur, 110 kV GIS has been commissioned and that helps in strengthening the electricity network of the state of Kerala. So with this, I hand over the mic to Sushil for financial updates.

Thanks, Abhishek. Good evening, everyone. I move to Page 5 on the presentation and talking about the order intake for quarter 1. As Sandeep mentioned that we achieved an order booking of INR 10,066 million during the quarter, which represented a 68% growth versus last year. During the quarter, we booked some of the key orders, which included the supply of 765 kV GIS and 400 kV GIS with Bus Duct for Power Grid for Raigarh and Kotra project, supply of 12 number of 765 kV shunt reactor for a private company, private transmission company in India. Supply of 400 kV and 220 kV GIS for Karnataka Power Transmission Corporation at Dommasandra and Mylsandra from a private transmission company and few more. So these are the major projects that we won during the quarter, which added up to the order booking of INR 10,066 million for the quarter. Moving to the next page on the financials, Page 6. We achieved a revenue of INR 7,176 million. This represented 21% increase year-on-year versus the last year quarter 1 number. We have an improved performance also on the profitability side, where our EBITDA stood at INR 628 million, representing 8.7% of revenue. This was 3.5 percentage points higher than the last year. And similarly, we had a significant improvement on the profit before tax and exceptional items, which stood at INR 386 million, again, a significant improvement versus last year. In fact, if you see the last column on the page, for the entire financial year, 2022-'23, we achieved a profit before tax and exceptional item of INR 381 million. So the quarter profitability is higher than the entire -- last year's profitability, which is a significant progress, and similar improvement in the profit after tax. Sandeep talked about net debt improvement. We generated INR 560 million of cash flow during the quarter, which helped us to bring our net debt to a low level of around INR 1,170 million. So to summarize, improvement across all key financial KPIs during the quarter. Moving to the next page, Page 7. We have shown the breakup of orders in terms of export orders and the domestic orders. So out of INR 10,066 million, about 22% of the orders were from the export market and about 78% of the orders were from the domestic market. However, on the revenue side, out of INR 7,178 million of revenue, 70% of the revenue was from the domestic market and 30% revenue came from the execution of export orders. Order backlog, INR 39,403 million, of which 72% orders are from the private companies or private customers, 11% orders from the state utility and 17% from the private -- central and public sector enterprises. Also in this presentation, we have included some of the key related party approvals for which the information or the resolutions have been given in the AGM notice to the shareholders. We thought it's important to have a page to explain the nature of these transactions so that shareholders may ask any questions if they have to seek clarification. These resolutions are resolution #4, 5, 6, 7 and 8. The first 3 resolutions, as we have summarized on the Page 8 of the presentation, are related to GE India Industrial Private Limited. This is a repeat approval, meaning every year, we take approval for the transaction with GE India Industrial Private Limited because this -- the overall transaction with this entity exceeds the [indiscernible]. Most of these transactions are related to the inter-corporate borrowing. In this resolution, we are seeking an approval of borrowing at any point of time up to INR 5,000 million. An inter-corporate deposits of upto INR 1,500 million. There is a reduction versus the approval that we have got last year. Last year, we sought approval of INR 7,000 million of borrowing. But as we have improved our cash performance, our borrowings are lower. So hence, we have reduced the requirement of inter-corporate borrowing as well. In addition to these inter-corporate borrowing and deposits, there are potential of having the sale and purchase transactions to the extent of INR 1,000 million. Other services, which include common services, recharge, et cetera, to the extent of INR 1,350 million and INR 150 million for sharing the common facilities and lease agreements. So these 3 resolutions, which are repeat in nature with GE India Industrial Private Limited are proposed for the approval of the shareholders. The next resolution, Resolution 7 is for the Grid Solutions SAS. This is a French organization where we have many transactions. We do buy components from this entity for our factories. We do sell finished products and components to this entity on a regular basis. However, due to an increased global market situation and having order pipeline at Grid Solutions SAS, we believe that there is an opportunity where GE T&D India can have more export orders from this entity across many geographies. And hence, we are seeking the shareholder approval, which will help us in growing our export order book and improving the execution and profitability for the company. So INR 4,400 million of sale purchase orders with Grid Solutions SAS and about INR 1,600 million order -- transaction approval for the sale and purchase of other services. Now the last resolution is with respect to Grid Solutions U.K. Limited. We have also sought a similar resolution in 2021. As the shareholders will know that Grid Solutions U.K. -- U.K. Grid Solutions Limited is a technology partner or they are the ones who basically lead the technology on the HVDC front. They are leading many discussions with many customers for booking the large HVDC projects globally, and we are in discussion with U.K. Grid Solutions Limited to see if there is a potential of booking part of the scope of that project through products and services from Grid India, which is GE T&D India Limited. So accordingly, we have proposed for an approval of INR 11,500 million for sale and purchase of goods and INR 500 million for sales and purchase of services. So these are the 5 resolution and we seek shareholder support in the upcoming AGM. In case you have any questions, please ask during the meeting. With that, we'll open up for the questions. Thank you.

[Operator Instructions] We take the first question from the line of Mohit Kumar from ICICI Securities.

Congratulations on a good set of numbers. Sir, first question is on the transmission order inflow. Are you seeing a larger traction inquiry for various power transmission equipment we provide, given the fact that there is a large transmission -- large bidding pipeline is building up? Is that a fair assessment?

Yes. So thanks, Mohit. Yes, we see a very large pipeline getting built up because of the evacuation of renewable capacities. So if I'm not mistaken, we have about, I think, about 28 to 30 projects of tariff-based competitive bidding, which has been bidded out by REC-PFC. Also, if you look at the serial pipeline of the projects which have got approved, I think it gives a good amount of confidence for the future of transmission at least for the next 4 to 5 years.

Understood, sir. My second question is on the annual report. I think you have spoken at length about the reform development saving scheme, RDSS, What is the opportunity? What are the offering we have for this particular digital opportunity? And any color on the opportunity size? And any color on the fact that the -- a lot of bids are coming up? Can you please comment on the same?

So RDSS -- because RDSS will require a lot of control centers to be built in with the distribution company. So we are very strongly present in this market for ADMS. And in fact, we've bid one order under this scheme as well. So yes, and I would still not comment on the market size too much because most of the states are evolving in terms of their requirement. Somewhere where they are only looking for like a very optimized kind of a solution. There, we have a very low -- less amount of plate, like in a project of about maybe INR 200 crores, we have a play of about INR 30 crores, INR 35 crores. But in certain projects where a higher amount of ADMS and other applications are required, we may have a play, which might go to about 30%, 40% of the project cycle as well. So many of the states are still working on what kind of requirements they want to have -- so it's probably difficult to comment at this point of time in market phase. But yes, I would say that it's going to be a good market at least for next 2 years.

Are you operating like SCADA solution, is that the right understanding?

Yes. So basically, ADMS is a type of SCADA solution, but normally in other parallels we call SCADA more or less associated with the substation, but when it is for a larger scheme of things, for example, for a circle or for a district, then it is called more or less like a control center with ADMS, so advanced distribution management system.

Understood, sir. My last question, in the annual report, we're talking about wide area monitoring system, which is awarded to GE T&D in 2014 and expecting WAMS for similar size to be launched soon. Has it been launched? And what are the size of the last wide area monitoring system project?

So that was, I think, as you said, 2014 and probably this price benchmarks are not relevant. But yes, the discussion has started, and maybe we expect another large project. But that is -- we are not expecting that project to come in this year, but maybe next year.

We take the next question from the line of Subhadip Mitra from Nuvama Wealth and Investments Limited.

My first question is with regard to the healthy order inflow that we have seen and your commentary on the fact that within the work flow related CapEx is now picking up. Would you have any targeted number in terms of order inflow for, let's say, the current year or the next year or any targeted market share?

So definitely, our expectation or our confidence level is better than last year. But I will still say that we would be more confident of the numbers maybe a quarter later than where we are today. But I can tell you that, as I said, when Mohit had asked the question with the kind of -- pipeline, our confidence level is much higher this year.

Understood. Would there be any annual market size that you're looking at in terms of what could be your addressable TAM?

So Subhadip, what we have seen is that in the market size, especially in the first quarter, what has happened and this is my experience for the last 3 to 4 years, there are various TBCB projects, they can shift the market size by, say, a few hundreds of millions of dollars in a year because sometimes it gets struck up in the decision-making because of some geographical reason because of some non-related reasons, but I am still expecting that excluding HVDC, the market size will be more than 3 billion this year, USD 3 billion for us.

This is excluding HVDC?

Excluding HVDC. Yes.

Okay, understood. Secondly, with regards to the margins, I mean, congratulations on a great margin recovery. So can we assume that this would be the new normal in terms of margins possibly the older projects, which are of lower margin profile has already been executed?

So Subhadip, this quarter, we have a gross profit of 31.7%. Overall, I'd say that, yes, the confidence level is higher, but let's not evaluate on a quarterly basis. And I think more on a yearly basis, we should be better than the last year.

Understood. Some of your peers, et cetera, have been talking about double-digit margins, et cetera, would you have the target, let's say, said over the next couple of years, would we be shooting for some of those kinds of margins, let's say, the FY '25?

Definitely, I think, Subhadip, it's a good news that if our competitors are speaking about double-digit margins, then why not, we'll also attempt.

[Operator Instructions] We take the next question from the line of Umesh Raut from PhillipCapital.

Congratulations for the healthy quarter. My first question is basically regarding this IE integration CapEx is planned at about INR 2,40,000 crores over the course of next 7, 8 years. So out of that, how much of would be related to, say, 765 kV beyond or in between 400 kV beyond and less than that?

So I think if I really look at about the 765 and 400 kV put together, probably that will contribute maybe about like 75% or maybe slightly more than that.

Got it. And is it fair to assume that your market share relatively would be higher in case of 765 and also in case of 400 kV?

So we are primarily a transmission company. We don't operate into like 33 and 11 kV. But yes, what we are saying is right that -- over the year, we have built a much stronger product portfolio and our presence in 765 and 400 kV.

Got it. Also because you were the first in terms of localizing technology related to higher voltage level products. So is it also fair to assume -- assuming a fairly stabilized raw material prices going forward, your gross margins would be kind of touching closer to 34%, 35% more of, say, longer term?

We always aim for the higher gross margins. Last year, when we talked the order booking margin between the range of 27% to 29%, an aim to improve in the execution. First quarter result has been good. We are around 31.7% margin. And aim is always that we try to improve the margin. We'll not be giving guidance on the margin front. But yes, the entire management team works on improvement beyond the order booking stage.

Got it. Understood. That's hurting to know. My second question is more on the data center side where you are mentioning a higher demand for extra voltage products from data center. So how much big potential opportunities there from data center for you? What could be the addressable size out of say total CapEx for data center?

So Umesh, I'll say that the overall market data center is not -- I would not say that it's a substantial market. The primary reason is that when we look at individual each TBCB project of 765 kV that is huge in volume. And data center today in India are getting built for lower capacity. So most of the data centers are at 220 kV level. So the market -- if you look at the overall market size, yes, they are not so big. But definitely, because -- this gets us -- allows us to get connected with global companies and where we have a global relationship, so it always remains as a focus market for us. So we are more targeting the data center and trying to push our products of GIS, transformers, control automation and a few places also on turnkey basis.

Got it. Third question is more of towards resolution number that you mentioned in your opening remark, that there is a potential opportunity to work out in a global tremwork of HVDC market. So can you please quantify how large this could be? And this particular INR 1,150 crores kind of a resolution, which is now under process, whether those are upcoming orders or potential orders for you?

Just a second. So this is not -- so this is basically total we are talking about is more than INR 1,000 crores. But there is discussion ongoing with our global teams that it is not like nothing concluded and things like that.

So maybe I'll try to add a few things. So with U.K. Grid Solutions, as I said, we also have a regular business, which is sale and purchase of components and finished goods. So generally, that volume is in the range of INR 100 crores to INR 150 crores on an average. So the large other opportunity from the HVDC segment is expected to be in the range of INR 700 crores to INR 1,000 crores. There can be multiple opportunities so that's the volume that we see, and we are in discussions with the global counterparts to see if part of those orders can be booked in the GE T&D India for the export business.

Got it. And would it fair to assume that profitability would be kind of closer to what it is currently?

So that will also depend upon the profitability at which they will be able to close the deals with the end customers.

Got it, sir. Sir, last question is more of on the industrial side. You have booked one order from Hindalco during the quarter. But how is ordering outlook for industrial space, whether it is some metal or refining or cement kind of industry?

So on the metal space, yes, I think there's a lot of investment which what's happening is happening. So a lot of expansion plans are being seen. So -- we are also targeting a few orders in this quarter from the metal space. Refineries, of course, whatever upgradation was happening has happened. So at least in the near future, I'm not seeing any big opportunities coming out of the refinery segment. But definitely, as Sushil has showed you also in the order intake and in the order backlog, the share of private customers is increasing. So our focus towards private customer remains very strong, which includes the industrial segment as well.

We'll take the next question from the line of Bhavin Vithlani from SBI Mutal Funds.

Congratulations, Sandeep, on the new role and good start.

Thank you, Bhavin.

So the question is, first, if you could just give us a color about utilization at our various facilities and from a past interaction, we understand our AIS and GIS specialties were underloaded.

So Bhavin, I think one of the things what we have seen is that we have converted our lines into more lead and also kind of a flexible lines. So probably, for example -- not probably, but for example, earlier, we had few dedicated lines for different voltages, but now those have been converted. So I would say that yes, in maybe one of the plants, and that is because of some stress on one of the markets where we used to export the utilization was I would say slightly lower, but I would put it that in other plants, the utilization has been much better this year. Difficult to give a number because the utilization also depends upon the voltage and number of equipments to be made. So it's a combination of a lot of things which define a utilization. But I think the results speak about that things are now looking up.

Okay. Could you talk about the pricing because what we understand from talking to the industry experts that on an average, the pricing of the transformers or [indiscernible] roughly 35%, 40% higher than what it used to be pre-COVID levels?

So Bhavin, yes, you are right. They are higher, definitely. But there is a big component of the cost increase as well. So for example, if you look at the prices of oil, foreign exchange, copper, everything has contributed to increase in cost. And the good part is that the manufacturer we have been able to pass on this increase in cost to the customers. So yes, there have been increase in market prices, but they have been passed on to the customers rather than getting absorbed into the margins.

Sure. The other question is on the lead times given the INR 75,000 crores of the pipeline that you spoke about. What's the kind of lead time that one should expect if we are getting a [indiscernible] currently and how do you see given that we have seen like roughly 50% of the industry which used to be Chinese in the last cycle, which are -- wbich seems now they're gone. How should one thing about profitability...

So I would say here, Bhavin, is that, yes, definitely that's good for the industry. But at one point of time, as you said that there was an underloading situation. The first and foremost is, yes, it's going to improve the utilization of the existing manufacturers. That is one thing. And the second aspect I would also say is the utilization also actually depends upon the requirement of the customers and also other market conditions as well. For example, when we talk about transformers, even the new projects which are coming for TBCB, so earlier it used to come with a timeline of about 15 months to -- like 12 months to 15 months. Now that is also, I think, getting increased to 21 to 24 months. I think on that side also, the regulators or the EPC companies are also understanding the pressure which is there -- and so accordingly, the deliveries are also getting adjusted from the factories. Of course, if you are looking for a transformer today, say, in 6 months or 8 months timeline, it is difficult -- why it is difficult that it is not only your own manufacturing capacity, but we are also to a great extent, dependent upon the component sourcing as well, where globally, the sourcing times have increased. So whether it is electronics or whether it is a few high-voltage items as well. So it's a combination. But if you look at switchgear, I think for switchgear, the lead times are not that great. If somebody wants in a few months, it is possible to do it.

Great. Just last question from my side. Sir, one of your peers hosted an Analyst Day and a plant visit, they spoke about increased localization in HVDC like that, increasing on the valve side. And even on the GIS side where they are saying that the forgings and some of the plastics are being localized here. And over time, one should see better cycle time and profitability. Is GE also kind of looking at some of these increased localization initiatives and which will eventually improve our profitability and return ratios?

So Bhavin, for example, on the GIS side, I will say that we were the first company to have put up a GIS plant in the country. And since the time we have put up the plant, there is a constant exercise which has been conducted by our team to do the localization. And then we identify component by component, and then we do a rigorous process of testing and then qualify the local suppliers. So today, comfortably, we meet the Make in India requirement, which is there from our factory. But just to give you the confidence, the localization effort is an ongoing exercise, which keeps on happening in the plant. And we keep on working to improve both the cost and also to ensure that the components are available in the country for us to derisk in terms of the lead times, in terms of the cost, in terms of other aspects as well.

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

Congrats, Sandeep, for a new role. Hello?

Hi. Thank you, Renu. I think it's quite delayed -- quite late now.

Yes. Yes. That's more of a formal congratulations.

Thank you.

Yes. So Sandeep, my first question is when we look at the export part of the business, some of the larger EPC companies are commentaries on the pipeline from Middle East, LatAm and some of the other markets have been very, very strong. So how are you looking at your export pipeline, both direct exports as well as business which comes through EPC contractors looking like for the next 9 to 12 months? And how does the pricing of the equipment today compare in these markets versus the domestic pricing that you have seen?

So, Renu, one thing, for example, when we talk about GE, we have a presence in all the markets. But of course, there are certain markets allocated in terms of product basis and in terms of project basis. And also, we have to see that in certain markets, whether the products of India are qualified or not, for example, when you look at [ NAT ] and all, so there, the Indian products are not so qualified, but they prefer to buy European products. But definitely, today, the share of export is increasing and also with the global demand increasing in Europe and U.S. and other parts, I think -- not I think, but we are getting a lot of traction happening from those markets also. And there also, we are engaging with our local teams or we are also engaging with the -- we are also engaging directly with every customers for qualification of our product. So that's a constant area of focus for us, and you would have seen Sushil has presented the related project transaction for approval, where we have requested for a higher amount as compared to last year. So that also shows our confidence to increase the export. That is one thing. And definitely, the export pricing is much better than domestic pricing, so there's no doubt about that.

Okay. And on the same line, if you look at, especially Europe has, in the last 2 years, seen a significant spurt in the HVDC orders and creating shortages of supplies, has that situation relatively eased because in -- directly or indirectly, it will also impact the supplies of these components to the Indian subcontinent as and when the orders emerge. So how is a bit of situation in that region for HVDC products?

It has not eased and looking into the pipelines of various utilities where I don't think that it is going to ease in next 5 to 7 years. This is what is today's forecast. I don't know what happens tomorrow. But today, the generation companies, they have a quite robust forecast for putting offshore wind projects, et cetera, not only in Europe but in U.S. as well. So that's going to drive the demand in a big way for HVDC project globally.

And in your view, will this also have an indirect impact on the pricing when we see domestic projects going up for bidding later this year?

100%.

Got it. Second, can you just share some update on some of the loss making of the older projects like SL. And overall, what has been the share of these old legacy loss-making or low-margin orders in the backlog today?

So I'll just -- first part, I will answer and then second part, Sushil will answer. So I think in one of the highlights which Abhishek presented, we have commissioned the part of the SL project in the last quarter. So at least that's the confidence what we can -- that our part we are -- part of the project we have already commissioned and rest I think Sushil can...

So SL project is fully commissioned, and that's not in the backlog. On rest of the backlog, around 20%, 25% projects are with the low margin, the legacy old projects where we had the commodity price impact. We expect that in the next 3 to 4 quarters, they will phase out sequentially. And most of the new orders starting say April '22 onwards is at a healthy margin.

Sure. And on the commercial closure of the SL have all the price escalations or pass-through whatever was expected, is it secured or something else could be expected on the solution of this project results in last year?

See, whatever was there -- contract is definitely -- we don't have a outstanding or like past due with the customer today.

Got it. And lastly, while this entire new vertical of [ Anova ] has been created at the group level, what is the thought process of bringing any strategic investor? Or how is the group looking at this separate vertical in terms of focus and growth strategy?

So Renu, this is basically being dealt at global corporate level, there where we are not involved in any fashion. So we are not -- we don't have any idea to answer this question.

We take the next question from the line of Mohit Kumar from ICICI Securities.

Yes. Thanks for the opportunity once again. Sir, my first question is what are the capabilities you would like to build over the next 3 years? And are there any significant gaps in your suite of products, which can cater to the transmission opportunities available in this country?

So I think I would say, Mohit, that yes, definitely, we have good capability across board. For example, we have transformers, circuit breakers, GIS, instrument transformers, automation, digital complete platform. But yes, in some pockets, we definitely have some uncompetitive issues, maybe a legacy product and things like that. But that's a constant exercise which we keep on doing based on market feedback and all to bring new generation of products to -- for the R&D to be pushed to develop products which are more competitive or maybe which can give a better commercial advantage to the customer even if it is priced a bit higher. So this is a constant exercise what we keep on doing. But just to give you a sense that most of the -- not most, but I would say 95% of the product what is manufactured by GE Grid Solution globally is manufactured by GE India as well -- GE T&D India as well.

So how do we compare with the rest of the GE factories, when the GE -- looking at the entire portfolio, how do you compare ourselves on cost competitiveness across the world?

When I compare myself to other GE factories, definitely in terms of cost, we have a good advantage. This is all what I can say.

Sir, my third question is, what your localization level in HVDC, GIS and STATCOM?

What is the?

Your localization percentage in HVDC, GIS and STATCOM ballpark numbers?

So GIS will be like I would put it as -- it will depend upon range to range, but it will be like more than 70%, something like that, it would be in the range of about 70%. And then there is an ongoing exercise to even improve it as well. For HVDC just to give you that we were the first to manufacture 800 kV HVDC transformer. We were the first manufacturer in India to have manufactured 800 kV HVDC transformer from Vadodara. And for CKL2 we had supplied our valves also from India. So decent amount, STATCOM, we have not done any project in India, so STATCOM, but it is similar to HVDC except for a few different components. So there also, again, transformers, et cetera, can be manufactured in our Vadodara plant. But for the other IGBTs, et cetera, we still need to see about the localization part.

My last question is how are you trying to avoid the -- how are you trying to avoid the legacy issues, which cropped up in the past and which had our margins?

So there is a -- so 2, 3 things, I will say here, one, we have been repeatedly saying, -- so first would be selectivity. So we thoroughly analyze that what kind of project with what composition of product we have to go after. That is one thing. Second, what are the commercial terms and conditions because that also plays an important role, including the cash flow. And third, instead of running after market share and revenue, we are today focused more on profitability. So these 3 focus is very religiously practiced by the commercial team in all the new orders what we are getting.

[Operator Instructions] We take the next question from the line of Mr. Umesh Raut from PhillipCapital.

Sir, I have one question related to employee cost. So I think we have done significant cost rationalization around employee cost in fiscal year '23, and now also in first quarter, there is a decline in employee cost on a year-on-year basis. So do you see this is more of a sustainable now?

Yes, it is. There will be a slight increase that we continue -- which is because of the annual inflation and so on, but we continue to optimize by lean and other improvement initiatives. And let's say, the last year number, which is INR 3,500 million of employee costs, this year number should be lower than that.

Got it, sir. And any ForEx loss or gain that was there during the quarter?

Yes. So most of the other income, as we see in the quarter is related to the ForEx gain. However, I'll add that half of this almost 40%, 50% of this is actually the realized gain.

[Operator Instructions] We take the next question from the line of Bhavin Vithlani from SBI Mutal Funds.

So Sandeep, one feedback that we've been getting from speaking to the peers is about on the HVDC side, with respect to the gap in the technology specifically in the HVDC like the technology in which Leh-Ladakh is going to be built. That's one. And second is on the STATCOM side that GE completely lacks the STATCOM technology. So they might kind of miss out on that. So if you could throw light on this 2, please?

So 2 things here, I think Bhavin, one is that if you would have been following GE Grid solution -- or maybe on LinkedIn or in fact, if you would have seen the global results as well. So this year, GE has taken -- this year means from January till now, GE has taken close to, I think, about 12 to 13 HVDC contracts globally. So this is just to give you that we are not looking at any gap in the HVDC technology. Of course, Leh-Ladakh is a different strategic project, which will require a lot of other aspects apart from HVDC to execute that. So that is the decision what we have to take. That is one thing. About STATCOM also, this is one thing I can say is that, for example, there is a recent STATCOM, which was connected with the English tunnel, which has been commissioned. There are other global STATCOM projects also and large STATCOM projects also globally, which we have commissioned. I would not put it that we have a technology gap, but then we are focused in STATCOM market selectively. So we have not taken any order in India till now, but it doesn't mean that it is not our target to take the order in future as well.

Great. So just a follow-up here, wouldn't you need the tight testing and on that could perhaps act as where the orders from STATCOM...

Tight testing of what?

So the tight testing of the Indian facilities for the STATCOM given the localization content requirement.

So that is what I'm saying that, for example, STATCOM will have some 2, 3 important components. So for example, when I look at transformers, so transformers, we manufacturer in India day in and day out. So there we -- whenever the transformer goes out, it goes through a process of tight test and the STATCOM transformers are much simpler to make than a HVDC transformer in terms of complexity. So it's not a big concern to supply STATCOM transformers from Vadodara.

Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Ms. Tanvi Gupta for closing comments.

Thanks Seema. Thank you all for joining us today for the GE T&D India Limited earnings call. We hope the insights provided by all our speakers have been informative and valuable to you. We value the trust and support of all our investors and analysts and ensure to remain committed to maintain transparent communication and fortune strong relationships. If you have any further questions or require any additional information, please do not hesitate to reach out to me or [Audio Gap] mail ID is available on our company website. Once again, thank you for participating in today's call. We look forward to your continued support as we embark on our exciting journey ahead. Thank you. Thanks, everyone.

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