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

Ladies and gentlemen, good day, and welcome to the conference call hosted by GE Vernova T&D India Limited for Quarter 4 of Financial Year 2024-'25. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Megha Gupta from GE Vernova T&D India Limited. Thank you, and over to you, Ms. Megha Gupta.

Good evening, everyone. We welcome you all to the GE Vernova T&D India Limited Earnings Call for Fourth Quarter Financial Year '24-'25. I'm Megha Gupta from Investor Relations team. During the call today, we will discuss company's financial performance, including operational highlights and will share key updates. We will have a dedicated question-and-answer session towards the end of the presentation. I would like to highlight that today's discussion may contain few 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 documents for a comprehensive understanding of the factors that could impact our future performance. Now I'll introduce GE Vernova T&D India Limited management team available on the call. During the call, we're joined by Mr. Sandeep Zanzaria, CEO and MD of the company; Mr. Sushil Kumar, Whole-Time Director and CFO of the company; Mr. Abhishek Srivastava, Head Business Operations; Ms. Kanika Arora, Communications Leader; and Ms. Shweta Mehta, Company Secretary of the company. Now I'll hand over to Mr. Sandeep Zanzaria to begin the discussion. Thank you.

Good evening, everybody, and welcome to our fourth quarter and full year FY '24-'25 earnings call. India is aiming to increase its power transmission capacity by 35% by FY '32, focusing on integrating renewable energy and securing 24/7 power supply. As India enters an era of accelerated electrification, it underscores the critical need for strategic investment in dependable base load power, a robust and smart grid infrastructure and innovative decarbonization technologies to meet its climate goal. A flexible, secure and evolved grid is key to supporting increased electrification and renewable energy integration. We are witnessing significant and consistent growth quarter-over-quarter, fueled by robust demand across our portfolio, particularly for transformers, switchgears, our advanced grid technologies, including HVDC and FACTS. Recognizing this opportunity and our role in enabling India's energy transition earlier this month, we announced the strategic investment of INR 400 million. This capital will be directed towards establishing a new manufacturing line for critical HVDC thyristors, VSC valves at our existing Pallavaram facility in Chennai and developing a new HVDC and STATCOM control facility in Noida. These expansions are designed to substantially enhance our capabilities to manufacture and test next generation equipment, vital for modern transmission systems positioning us to effectively support both India's domestic energy goals and capture export demand from other rapidly developing economies. Turning to our financial performance. We had another quarter of robust demand, significant revenue growth and EBITDA margin expansion. Our order book remained strong in Q4, and we saw a fresh order intake of INR 29.9 billion, up by 124% year-on-year compared to INR 13.3 billion in quarter ended March '24. A highlight of the quarter was our order win with Power Grid Corporation to supply over 100 extra high-voltage transformers and shunt reactors for key transmission projects in India. Our Q4 revenue stood at INR 11.5 billion versus INR 9.1 billion in Q4 FY '23-'24, up by 26% year-on-year. On a full year basis, our FY '24-'25 revenue stood at INR 42.9 billion versus INR 31.7 billion, up by 35% year-on-year. New orders outpaced revenue, doubling the order backlog at INR 126.6 billion as on March '25, against INR 62.7 billion as on March '24. Our profit before tax and exceptional items for the quarter ended March '25 was at INR 2.5 billion compared to INR 1.01 billion in the corresponding quarter in the previous financial year. From an FY '24-'25 perspective, profit before tax and exceptional items stood at INR 8 billion versus INR 2.6 billion in FY '23-'24, which is 3x increase. The cash and cash equivalent was at INR 10.5 billion as on March 31 versus INR 2.8 billion as on 31st March '24. The cash generated was INR 1.9 billion in Q4 and INR 8.3 billion during the full year FY '24-'25. This combination of favorable demand trends and disciplined execution is accelerating of our margin expansion and significantly reinforcing our confidence in the trajectory ahead. Our deeply embedded lean culture continues to be a powerful engine for operational improvement, delivering tangible gains across safety, quality, delivery and cost performance. As we transition into FY '25-'26, I'm grateful for the unwavering dedication for our entire team. Their efforts are the foundation of our optimism for future and our commitment to consistently create value for our all -- all our stakeholders. I would like to extend my sincere thanks to our valued customers, our dedicated investors and our exceptional team, all vital partners in our journey. I now invite Abhishek to provide further insights.

Thanks, Sandeep. So good evening, team. I will take you through the key operational highlights. The key commissioning that we achieved in the prior quarter. So through the efforts that our team had been putting on ground, we were able to bring to life some of the key assets for strengthening the national network -- energy network of India. So just to mention a few, on a turnkey basis, we commissioned Tata Solar Bikaner, which is the power evacuation substation for their 450-megawatt solar park that they are establishing in Bikaner, a key asset for meeting the energy deficit needs and strengthening the backup from renewable sources. Another key commissioning was for Himachal Pradesh Power Transmission Company Limited at Heiling substation, which is at a very tough terrain, in the hilly terrains of Himachal Pradesh. So this substation was commissioned successfully along with transformers and GIS 66 and 220 kV GIS. And this helps us to improve the reliability of power in the State of Himachal Pradesh. Another key turnkey project that was delivered was for ReNew Solapur. This is for their hybrid renewable park power evacuation, the 400 kV switchyard was commissioned in a record time, along with the power transformers. In addition to turnkey substations, we have also been actively partnering with other players in the market and our customers through supply of direct equipment and commissioning of the same like power transformers. We commissioned the 500 MVA transformer plus 765 kV ICTs for Doosan Jawaharpur. This is a 650-megawatt double unit power station for meeting the needs of Uttar Pradesh. Another key thermal power project was also commissioned by us in the last quarter, through our transformers, which was for Doosan at Obra. Another key transformer asset, which was put to use was through commissioning of 500 MV ICT for our customer IndiGrid and we worked through KEC at Kallam and then UPPTCL Shahupuri, another 500 MVA 3-phase transformer, which was commissioned for, again, the State of Uttar Pradesh. In addition to this, we also commissioned gas-insulated switchgears at PGCIL Raipur, the 220 kV Bays were commissioned. Then GIPC Kutch 400 kV GIS. This is for Gujarat Industrial Projects Power Company Limited, which is for again, evacuation of renewable power. And Mumbai Veritas, which is a data center project for 220 kV GIS, which has been commissioned for them. So by doing all these commissioning, we have been partnering with our customers in building the transmission network for the country, and we remain committed to that. So with this, I hand over to Sushil to take us further.

Thanks, Abhishek. Good evening, everyone. Moving to the page on order intake. So this quarter as well as the year has been a very strong period for us in terms of order booking as Sandeep mentioned in the beginning. In this quarter, we booked INR 29.9 billion of orders, which was almost 2x of what we did in the corresponding quarter in the last year, in fact, more than 2x. Many key orders that we booked were from a very diversified set of customers and in various products and project categories that we operate. As we see on the right side of the page, we secured orders of 765 kV power transformer and reactors from Power Grid. Similarly, we secured 765 kV power transformer and reactor from Sterlite. We also secured orders from Adani Group for 400 kV GIS. Again, AIS substation from Jindal Group on 400 kV site. And also we secure transformer order from Jindal Group as well. In addition to these GIS and transformer orders, we have secured orders on CRP and SAS business on the 765 KV and 400 kV substation from one of the EPCs -- from various EPCs in fact. And we also secured order on Advance Distribution Management System from Paschim Gujarat Company and Dakshin Gujarat company. These were largely on the domestic side and on the export side, we continue to maintain the momentum, and we had various wins on AIS and GIS equipment side from various markets, including Europe, South East Asia and Africa. So a very robust quarter. And if you look at the overall year performance, our order book is almost doubled from INR 58 billion last year to INR 107 billion in this year. In this INR 107 billion, as we declared in the past, there was about INR 22 billion of large export orders from the group company and about INR 8 billion of digital software-related orders from Power Grid Corporation of India. So those two are the large orders for about INR 30 billion. But excluding these two large opportunities as well, the momentum has been very strong and we were able to improve our order booking from various products from various customers from INR 58 billion last year to INR 77 billion, excluding the large orders. Moving to the financial performance. This was largely covered by Sandeep in the beginning speech. The momentum in revenue is strong. It is in line or tracking the order booking momentum. So this quarter, we have 26% increase in revenue, reaching up to INR 11.5 billion of revenue. As the revenue increased for us and we maintain control over the fixed cost, there is a significant improvement in the operating profitability, which is the EBITDA. We have INR 2.5 billion of EBITDA, representing 21.9% of revenue for the quarter. This quarter has been good in terms of overall profitability, especially on the gross margin side, mainly because we have been successful in executing the orders which were profitable, improve the mix towards a profitable order and a very strong execution demonstrated by the GE team. So all these factors have led to the improvement in the gross profit for the quarter. Similar trend on an annual basis 35% increase in revenue, reaching up to INR 42.9 billion and overall profitability -- operating profitability, which is EBITDA is INR 8.1 billion or 19.1% of revenue. So far, we have made communication about our aim to achieve mid- to high teen of EBITDA. Happy to announce that we have actually delivered a higher end of this range that we have been communicating regularly. We talked about cash performance. We generated INR 8.5 billion of cash during the year, and this has led to a cash and cash equivalent of INR 10.5 billion at the end of the financial year with us. On the last page, Page 7, we have given a regular split of orders and revenue between domestic and export markets and also given a breakup of order in hand from private, central and state utilities. So with this, we can now take up the questions from investor community.

[Operator Instructions] The first question is from the line of Umesh Raut from Nomura India.

Congratulations for the strong set of numbers again for last quarter of FY '25. My first question is pertaining to existing backlog of closer to INR 127 billion. So how much of that is executable within the course of, say, next 18 months? And how much is beyond 18 months?

So as I explained, INR 30 billion of -- in fact, INR 38 billion or INR 40 million of this INR 127 billion, largely are the projects which have a longer tenure, as we communicated earlier. These have a tenure of 3 to 5 years of execution. Excluding that, we have about INR 85 billion of order, which is executable within 1.5-year to 2-year time frame as per the contracts with the customer. Nonetheless, on top of the backlog during the execution, we -- every year, we also have the orders which you call as book-to-bill, meaning the orders are received as well as executed during the same financial year.

Got it, sir. Sir, my second question is on the HVDC project. So could you please share a time line for new projects on the HVDC side, especially for FY '26? And at the same time now, you must be also forming up budgets for FY '26. So any color on the outsourcing contracts that you can anticipate from parent side?

I think -- thanks, Umesh. For the HVDC part, you would have seen the transmission committee meeting. One of the projects had gone for the approval, but I think there was some discussion on can there be an alternate to be studied as batteries to be put as an alternative to, but I think probably let the committee work out. But we expect at least one to two projects to get decided during this year.

Okay. Is it fair to assume that Khavda, South Olpad and one package from Rajasthan is at upfront in terms of ordering time line?

Yes.

Okay. Got it. My last question is on the bookkeeping side. If I look at our other expenses for the quarter, those were at about 12.6% of sales, slightly on the higher side. So any one-off over there?

Yes, Umesh. There is about INR 150 million of provisions that we have made for certain litigation matters.

The next question is from the line of Mohit Kumar from ICICI Securities.

Good evening, sir, and thanks for the opportunity. And congratulations on a very strong set of numbers. My first question is on the strong gross margin. What explains such a strong outperformance on raw material and gross margin? Our gross margin for Q4 was 42.3% and 40%-odd in FY '25. Are there any one-offs or any large projects which we did, which explains such a high gross margin? And any color on the sustainability of this gross margin, EBITDA margin as we go forward?

Thanks, Mohit. Good evening. As I talked in the beginning, this quarter has been very strong in terms of revenue as well as profitability execution, we did deliver 42% gross margin. Various factors, which lead to such a high performance that include a better pricing. The pricing has improved in the last 2 years. And as a strategy, we are moving towards product orders and -- rather than focusing on turnkey orders that leads to a better margin profile. So mix is improving. And also, the contribution of export revenue is also increasing and generally, the exports were always better in terms of margin profile. So -- and the last point I will say that GE's team has done exceptionally well, has been executing very strong. We've been making, let's say, improvements during execution as well. So these are multiple factors leading to the gross margin -- improved gross margin for the quarter. But nonetheless, for our kind of business, quarterly gross margins can vary because of mix and various other factors. I think the right reference is to look at the gross margins for the full financial year. On a full financial year, we did deliver 40.4% of gross margin, and this is about 5%, 6% improvement versus the last financial year. And we believe that our endeavor is to sustain this kind of gross margin and EBITDA going forward.

Understood, sir. My second question is, you announced a new factory for building the HVDC components and STATCOMs. Is this factory a necessary condition to participate in the upcoming HVDC and STATCOM domestic opportunity?

No, Mohit, it is not -- it was not a condition. The condition is basically for the whole project, you need to meet the minimum criteria for Make in India. But this is going to help us in, of course, localizing, improving the competitiveness and also giving more comfort to the customer that we are more local in terms of technology as well.

Our next question comes from the line of Subhadip Mitra from Nuvama.

My question is with regard to the overall industry side. If we move beyond HVDC on the non-HVDC high-voltage piece and on exports, how do you see the overall TAM growing? Are you still looking at maybe a 20% kind of a CAGR in the non-HVDC space? And similarly on exports? Some color on that, please.

I think, yes, of course, what we are looking at the government plan of about INR 9 lakh crore up till FY '32. So that gives a lot of confidence. And also, what we see is that there's a lot of growth in terms of the energy transition story globally. So it was the -- first the Europe opened and then Australia and then now even Middle East is also opening up. So yes, definitely the TAM for the export potential is also growing.

Understood. Is there any -- I think one of the previous questions also asked about whether there is any budget for outsourced exports to the parent for this year? Any indicative number?

No. So we don't give this type of a guidance of a number that for the export what could it be.

Understood. Sir, but would it be fair to assume that it should be somewhere around that 30% kind of a mix, which is what we are seeing currently?

That is what is always our endeavor to maintain that kind of a ratio.

The next question comes from the line of Renu Baid Pugalia from IIFL Capital Services.

Many congratulations for the strong performance. My first question is I'm just understanding a bit on the order pipeline prospects. Last year, almost, as Sushil also highlighted, the INR 30 billion plus orders came from large orders, exports combined. So when we look at, a, on the existing base orders of INR 77 billion, how do we see this pie increasing in the next year, overall as a combined pile of almost INR 10,000 crores plus? Or do you think given the projects in pipeline, domestic, international, we will manage growth in inflows in fiscal '26? That's the first question.

Renu, yes, that will be -- of course, as Sushil also said that we had two large one-off projects, which was one export order, which was like INR 2,200 crores and two digital orders close to about INR 800 crores. So basically, we were looking at INR 3,000 crores. And if you really look at this last quarter also, we had some exceptional -- I will not use the word exceptional. This is actually normal, but Power Grid decided to go for a bulk buying of transformers and reactors. And of course, we were able to secure a large part of that market as well. But the endeavor will be always to grow whatever we have achieved this year on the base number and then try to see that how we can increase because at the end of the day, we need to keep the revenue also growing.

Sure. And within the order prospects for fiscal '26, how do you see -- because the last couple of years have been transformer heavy. So if you can throw some light how is the broad prospect been on the substations, and especially the GIS part. Hearing pretty big numbers on that side of the business. So do you expect the pie of the order pipeline to materially shift towards GIS or projects in fiscal '26 or it would be similar for transformers, switchgears and the rest of the other solutions like STATCOM?

So that is the plan, what we have is that also to increase the pie for switchgears, also with STATCOM and HVDC -- so control automation, AIS products. So the endeavor of the team or the focus is that not only transformer reactors, but the other parts of the business also to keep growing.

Sure. Secondly, on the pricing side, as in clearly last 18 months has been the dream run for any transformer company in India in terms of demand-supply mismatches. So stepping in '26-'27, how do we see the pricing environment and the gross margin mix that you have seen for '26 for ourselves based on the backlog and execution time line, how comfortable we are to sustain and see improvement in this?

So I would say that the pricing is stable as of now. Maybe we don't see much improvement coming there or whatever is the -- if there is an increase in raw material prices, we are able to pass on. But now the incremental growth in pricing is not so much there. But it is still not going down and we are looking at a stable pricing environment.

Stability in pricing itself is a tall task, but fabulous if you're able to maintain this, good. And lastly, what would be the mix between products and projects for fiscal '25 closing backlog?

Renu, I don't have that information readily available. Maybe we can probably share it subsequently on another call.

Our next question is from the line of Amit Mahawar from UBS.

Sandeep, I have two quick questions. First is on the export mandate. If I understand the exports, right, in the order book and in the turnover and considering the opportunity we have, which are the end markets primarily for parent maybe top 3 or top 4 which you are catering to? And do you think there is a very, very long-term demand pipeline here? That's my first question. Maybe whatever qualitative color on exports considering all the global locations of GE Vernova.

So thanks, Amit. You know earlier, as we have said in various presentations earlier, we used to focus more on Africa and Southeast Asia, but slowly, slowly we expanded to Latin America. And then we have also expanded to Europe now. Also, if you really look at for example, a large order, which we got from Korea, Algeria, so it's basically the demand which comes from some geography and then when we get engaged with the global team, we are able to capitalize on those large opportunities. So these opportunities take time to build in, but these are certain areas, certain aspects which cannot be openly discussed on calls, et cetera, because of its confidentiality. But today for any such large opportunity, Indian factories are really the strength for GE Vernova to go and take these orders. So I would put it as that the whole -- we have a very extensive geography in which we are playing and definitely, the Indian factories because of its cost competitiveness and all. So we play a very important role in the overall strategy for the electrification.

Maybe in the intake of INR 32.6 billion this year in export, if there is a number for U.S. you want to give us?

So we don't -- so U.S. is a very different technology. U.S. is basically dead-time technology, whereas India is a lifetime technology. So U.S. market is mostly catered from U.S. factories only. India is not -- from India, our exposure to U.S. market is very, very limited.

That explains it, Sandeep. The second question and last question is, if I understand last 10, 15 years of transmission equipment business in India, for GE Vernova. Do you think the current capacity you have and I understand the profitability is very, very healthy, but take a 5-year view. And do you think the demand that we are projecting in India, I mean you yourself alluded to INR 9 trillion and roughly 30% -- 40%, 50% of the equipment size, right, if I'm not wrong. Don't you think next 4 to 5 years, the growth is very, very set as an industry, and considering your mix and localization, the best time is yet to come? That's my last question.

So of course, I think, yes, the best time is yet to come. So it's going to come in 1 year, 2 year, we have to see. But we see -- we expect a very large growth and we should be an important player to deliver that growth in India's ambition for Viksit Bharat 2047.

The next question is from the line of Suraj Malu from Catamaran.

My first question is related to the previous question. Can you help understand like the export orders that we have won from U.K., France over the last 4, 5 quarters. Is the end usage in those geographies? Or can -- is there a potential that this will be supplied to the U.S.?

So it will not be supplied to the U.S. As I said that U.S. has a different technology. What we manufacture in India, the AIS, the lifetime breakers and all, so the end user is in Africa and not in U.S.

Got it, sir. And my last question is like the current order intake that you have taken, are these at -- are these in the similar gross margin levels that you have delivered recently?

So good evening, Suraj. We typically don't share the profitability on the orders that we book because it's a price sensitive and confidential information for the competition. But, yes, the endeavor of the management is to perform better. If you look at our trajectory of revenue and profitability, the focus and aim of management is very clear to maintain a good margin. In our strategy, we have always compensated cash over profit and to do a business which is risk-free and a sustainable business.

The next question is from the line of Amit Anwani from PL Capital.

My first question is on the CapEx of INR 140 crores on STATCOM and HVDC products, CapEx and all. I wanted to understand what is the current capacity utilization and with this CapEx, how much the capacity will expand? And I understand that the capacity expansion will come on stream, we have written for Chennai by 2027. Just wanted to understand, is it fair to assume that the prospects have increased because past 2, 3 quarters, you have been highlighting that we have sufficient capacity to meet growth for 1.5 year, and there might not be major CapEx requirement. Yes, that is my first question.

So Amit, I think, we have also clarified that -- in the disclosures that we were manufacturing, when we were doing the Champa-Kurukshetra project, the valves in India. But after that, because no project came for few years, we had -- in Chennai. So we had actually closed that capacity. And now because of the market growth and all, we are starting or we will be investing, and then we will be starting. So today, on the HVDC valves and control side there is no existing capacity and whatever we are adding is going to be the new capacity.

And just to add on to what Sandeep said, this CapEx announcement is in addition to INR 80 crores to INR 90 crores that we communicated earlier. So INR 80 crores to INR 90 crores is for our existing business lines to debottleneck and increase -- to take the maximum, let's say, benefit of the assets that we have and deliver more from the existing factory. So overall put together, INR 140 crores plus roughly INR 80 crores, we have now announced overall CapEx in the range of INR 240 crores to INR 250 crores.

Yes. Second question on the product versus projects. You highlighted that there will be more focus deliberately towards products by you guys. Wanted to understand, if possible, to share the product versus project for revenue. And considering the current order book you have, can we expect for the next 1, 2 years there should be more product inclination in the revenue and order book. Any sense on that would help.

Yes. So Amit, in this, I'll say that I don't have the breakup of this project versus product immediately available. But as a strategy, we have communicated since last few quarters that we want to move more towards the product side because first, the product orders are more profitable rather than a large turnkey project. The second part is they carry less risk in terms of execution. Nonetheless, having said that, it's not that we are completely out of the product -- sorry, project market. We do sell the products to the EPCs who are in turn taking the turnkey projects. So we are present in the market but indirectly. And I think the strategy of moving towards product has really helped us to streamline our operations and deliver better profitability in the last couple of years.

And lastly, if I can squeeze in. We had a large order wins of almost INR 3,000 crores and INR 11,000 crore inflows. Are there further large orders in discussion for the next 1, 2 years?

So Amit, that's an ongoing process.

[Operator Instructions] We have the next question from the line of Inderjeet Bhatia from HDFC Securities.

Congratulations on fantastic set of numbers. Two questions. One is you highlighted that there was a large INR 8 billion software order. Are there any more such orders in your order book? And do these kind of orders come at a much better margin profile than your existing product orders?

I think you know that the digital part of the grid is also growing. And so there are -- we expect many more opportunities to come in the future. As of today, we don't have any live tender ongoing, if that is the question. And as a practice, we don't disclose the segment wise margins, et cetera. So it will not be possible to disclose the margin strategy for the digital.

Fair enough. Just a clarification, I think one of the previous participant had asked about this INR 240 crore CapEx. Did I hear that right that that's a commitment for next year?

Yes. Mr. Inderjeet, these are the CapEx announcements made, as you see this INR 140 crore announcement has a longer time line to be implemented. So these are announcements may be implemented in next 1 to 2 years.

One last bookkeeping question. In the balance sheet, there is some related party -- loans given to related parties around INR 400-odd crores. Could you just throw some light on that?

We have taken shareholder approval regularly to invest surplus cash to the cash pool, which is managed by the GE Group. Any surplus which is available with the company to the limit approved by the shareholders is invested there. So the -- this investment is actually the cash pool that we have given to the cash pool leader. Just as a reminder, our entity borrowed from the cash pool for quite a number of years when we were in debt and now since we are in surplus, to make an efficient working capital management and cash management, we are investing a part of the available surplus funds to the cash pool because business, a, this gives us a rate of interest, which is as per the market terms. Plus, there's a lot of flexibility. It can be called upon any time on demand. It can be broken in terms of the liquidity requirement of the company. So all the advantages have been disclosed in the notice to shareholders, and it was duly approved as a mutual related party transaction in the past.

The next question is from the line of [ Pramod Jain, ] an individual investor.

Thank you and congratulations for the wonderful set of numbers. I just want some clarification. In the last conference call, you had spoken about that Leh-Ladakh HVDC project, which was there. Sir, can you please share some update about that?

So presently, it's with Power Grid, we don't have much of an update on that project.

Okay. Any further HVDC project which is there in the pipeline which you're bidding for and there's some -- yields might come from there?

So there is one HVDC project, which is there under bidding, which is from Khavda to South Olpad. And in addition to that, there was one HVDC project, which was proposed in the National Committee of Transmission, but then because of some alternatives have been asked to be studied. So probably that will get a little bit delayed.

The next question is from Dhavan Shah from AlfAccurate Advisors.

The HVDC side. Sir, do you have the excess capacity to cater any of the future HVDC contracts, if you get anything? That is my first question. And second is, can you do both LCC and VSC in HVDC?

Dhavan, what was your first question?

First question is do you have the excess capacity in HVDC, if you can share, if you get any contracts in future?

So HVDC has a number of products so that includes valves, controls, transformers, et cetera. So every product has a different capacity. So HVDC per se is not one single capacity. HVDC is an addition of multiple capacities which are put together.

Let's say, if Power Grid comes up with INR 20,000 crores or INR 25,000 crores of HVDC contracts, wherein the transmission opportunity, say, is roughly INR 10,000 crores to INR 12,000 crores kind of the opportunity, so do you have that kind of capacity?

Yes, we have that capacity.

Okay. And can you do both LCC and VSC?

Yes, we can do both, LCC and VSC.

The next question is from the line of [ Janam ] from [ Saltoro ] Investments.

Congratulations on a great set of results. I wanted to understand from a supply chain perspective, whether it is CRGO or any other key components that go into transformers whether it is extra high voltage or whether it is HVDC. What are the challenges that we are facing? And how are we given the kind of growth that we are having, what are our risk mitigation approaches within that? That's my first question.

No, supply chain, yes, definitely, today in this very uncertain world, supply chain is a big challenge. And with the explosion of demand globally, yes. But then we have teams who are constantly working to mitigate those challenges who very closely work with the suppliers, the transporter, the supply sales teams, et cetera. So it's a very task but we have been able to successfully negotiate and execute until now and the teams are dedicated towards that.

So are we planning to backward integrate given the kind of demand that we see for the next 5 to 6 years, do you see the supply chain to be a meaningful challenge as we scale up and look at probably integrating key components because many of our peers are doing the same. So I just wanted to get a strategic bird's-eye view as to what is our thought process.

As of today, we are not planning to backward integrate any of the component level manufacturing.

Got it. And I wanted to understand in terms of our order book, the mix has been about 34% in central utilities. And last year, if you look at it, it was about probably 27% for the central utilities. So in terms of a mix in the orders, do you see that meaningfully change? Do we see the share of private kind of inching even more towards 70% or 80%? What is the sustainable order mix -- order backlog mix that we are planning to have?

So today, a large part because earlier, what used to happen is Power Grid used to get RTM projects and all. So today, a large part of the order gets decided on TBCB route. And then it depends upon the competitiveness in TBCB route, whether the Power Grid is winning or whether private players are winning. And accordingly, then we have to choose our customers. So it's not that by design, we can say, okay, look at this should be the share of central utility and this should be the share of private sector. It depends upon whether central utility wins more or private sector wins more. We align ourselves according to that -- to the market conditions.

And just to add on, I think, it's important to see here in the chart that the share of state utility is very small, and this is one of the strategy we have communicated in the past. We are kind of neutral to central utilities or the private customer because both are good in terms of execution and working capital management.

If I can squeeze one last question. Is there -- you talked about demand opportunity now in this space. But what are a few risks overall on a macro perspective that you're seeing because everyone is increasing capacities, all our peers. So from a demand supply like realization, like you said, there is no more room for improvement. Given how the industry evolves in the next 2 to 3 years, what are the few risks that you are looking at and closely tracking?

As we said that, of course, supply chain management, yes, that's a big risk because not only about the availability, but also about the political situations which keep on developing globally as well. In addition to in -- so of course, that that's the challenge which we keep on having. And we keep on mitigating. So that's a kind of a job which you do daily, weekly, monthly, yearly, quarterly. So that is something which is there. Apart from that, what I see is that I think energy transition story globally is something which is not going to go away just like that. So I think from a demand or market perspective, we don't see that -- we don't see that there should be a challenge at least for the next 3 to 5 years or maybe 10 years. It should be a much stable market. That is what we are anticipating.

The next question is from the line of Nandini Agarwal from Globe Capital Markets Limited. As we're not receiving a response from the current participant, we will move to the next question, which will be from the line of Mahesh Patil from ICICI Securities.

My first question is on the STATCOM. How do you see the STATCOM opportunity in the medium term? And if I'm not wrong, we haven't done any STATCOM till date, right?

So yes, Mahesh, you are right. In the long term, we see that, of course, STATCOM is going to play a very important role because more and more renewables are getting added. So obviously, the need of STATCOM cannot be just ignored, and it is going to become a very integral part of the grid. Yes, we have executed multiple projects globally, but we have not won any project in India. We have done in India a few FACTS projects which were there, but we are into active discussions with various customers. So let us see.

And sir, my second question is on the royalty payment. Just wanted to know how much was the royalty payment this year? And how much was it in FY '24, if you can provide?

So royalty payment has been given in a very consistent basis in the last 5 to 7 years. There has been no change in the formula. And linked to a certain formula of revenue, et cetera. During the year, entire year, we have made a royalty payment of roughly INR 640 million.

INR 640 million? Okay. And sir, if you can, how much was this last year?

Last year was around INR 350 million.

INR 350 million. Okay. And sir, lastly, wanted to understand if we are -- how are you trying to widen your existing portfolio, can you give some color?

I think from widening the portfolio, of course, definitely, it's on two sides. One is on the customer side. More and more customers, we are trying to expand the customer horizon by including more renewable clients. And then, of course, we have a lot of new companies also entering into the TBCB market. Also widening in terms of, for example, export market. We've already talked about that we have -- in the last 2, 3 years, we have been able to enter few of the new geographies. And there are a few technologies as well, which we are waiting in India to mature, for example, SS63 and all. So once that happens, definitely we will -- we aim to be a leading player in that as well.

The next question is from the line of [ Moksh Ranka ] from Aurum Capital.

I would like to know in the HVDC, in the whole transmission industry how -- are we facing any constraints regarding transmission towers? Because I think there are very few manufacturers there. Could you provide some color there?

So [ Moksh ], we are not a transmission line company. We are basically transmission -- we do substations and HVDC terminals and things. We have zero presence in transmission line. So we will not be able to answer that.

I understand that. But since you are in the industry, I thought you would see firsthand -- you would know firsthand if you are facing any constraints.

Okay. No, no, we are not. Since we don't operate so we don't know if there is a constraint there or not.

The next question is from the line of Parikshit Kandpal from HDFC.

Congratulations on a great quarter. My question is on services part of the revenue. So what would be the contribution of service doing to ramp up that as a share of revenues?

Generally, the service revenue is sub-10% for us. But as the overall order booking has been growing, so obviously the overall share of services is also -- the volume of services is also growing.

And sir, second question is on the INR 250 crores of CapEx. So what kind of asset turns or revenues can we look at adding from there over a 2- to 3-year period on an annual basis? And what will be the reservation here for export markets, any reservations here? So how will you allocate between local demand and the global demand on this?

So Parikshit, I think you would have seen that we have out of that INR 240-odd crores, INR 140 crores is for HVDC. So for HVDC, of course, I think, looking into the demand situation and all. To first put in and then see how do we support the export market as well. Today, primarily the major driver for investment is growth in the domestic market. You would have seen that when we have put the -- all the local factories for switchgear, transformer, et cetera, they have helped us in export market as well. But today, the primary driver for this investment is domestic market.

And sir, any color on what could be the share of data centers? I mean, is it increasing in the overall mix in the order book, how do you see that shaping up as huge investment is expected in data centers?

So today, the data center market is basically -- it's like about 300-megawatt data centers, et cetera, which is at 220 kV. So you don't -- of course, we see a very large potential of data center coming in, but today, because our order intake is jumping very high, like, for example, since last year to, for example, from '24 to '25, we have grown by 100%. Obviously, the data center market, even if it has grown by like 50%, 60%, it is still not a substantial market. Today, the TBCB or the transmission part of the business is growing much, much rapidly. But we are totally connected with most of the data center companies in India. And we are executing multiple projects on data centers. So it's not that we have ignored, but I expect as the size of the data centers will become more and more like bigger data centers of 400 kV, people are talking about gigawatt data centers that will require 765 kV, so there, our market share and our overall offering in terms of value will be much higher.

Okay. And sir, lastly, on the cash, which we have on the books, so -- and then next year also, there will be cash accrual, how do you intend to deploy the capital [ employed ]?

Parikshit, we have announced INR 240 crores of CapEx out of INR 1,000 crores that we have and additionally, in note 10 of the financial statement that we circulated, the Board has recommended a dividend of INR 5 per share. And if approved by the shareholders, that will lead to an outflow of roughly INR 130 crores. So we are consciously reviewing and meaningfully deploying cash in terms of net CapEx that we need and also return to the shareholders, and we'll continue to work in this direction.

The next question is from the line of Sagar Gandhi from Invesco Mutual Fund.

Sir, my question pertains to the INR 140 crore CapEx that you've announced for HVDC. This is primarily for domestic projects. And do you also foresee that post this capacity is commissioned, your ability to bid for projects will be more competitive, which is not the case currently? If you can throw some light in this direction?

Yes, I think that was one of the most -- the objective of putting the local capacity was, of course, to feed the domestic market and then we are seeing a big growth expected in the domestic market. In addition to that, yes, obviously, when we put the capacities locally, it provides us more competitiveness. So it helps us in winning more.

We have a follow-up question from [ Janam ] from [ Saltoro ] Investment.

I just wanted to ask, one of the previous participants had asked about asset terms for the INR 240 crore CapEx that you're doing. Could you just share what kind of asset turns roughly we are looking at?

See, asset turn is difficult to give. As Sandeep explained in the earlier question that a significant part of this is for HVDC. So HVDC projects are very large contracts. So asset turn can be multiple. But obviously, for an HVDC project, this is not the entire investment. It has to be seen in entire [indiscernible]. So giving an asset turn is difficult considering that this is not a separate business line. But nonetheless, I think, you would see that the company has been very cautious in terms of investment. So obviously, the management and Board has decided this investment considering a good opportunity and a good return on investment.

Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to Ms. Megha Gupta for closing comments. Over to you, ma'am.

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