GE Vernova T&D India Limited (GVTD.BO) 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 2 of financial year 2025-'26. [Operator Instructions] 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.

Good evening, everyone. Welcome to the GE Vernova T&D India Limited Earnings Call for Quarter 2 of Financial Year 2025-'26. I'm Megha Gupta from Investor Relations team and I'm 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. Before we begin the call, I would like to highlight that today's discussion may contain a few forward-looking statements, which are subject to risks and uncertainties and actual results may differ materially from those expressed or implied. Now I turn the call to Mr. Sandeep Zanzaria to initiate the discussion.

Thanks, Megha. Good evening. Welcome, everyone. India's energy goals, including the ambitious target of 500 gigawatts of non-fossil fuel capacity means a fundamental redesign over transmission backbone. We expect peak power demand to climb by close to 80% by 2032 necessitating an unprecedented expansion of the grid. This outlook for the Transmission segment remains highly positive alongside strong prospects of the generation sector. The government is planning to add 36 gigawatt of hydro stroke PSP storage, 92 to 100 gigawatts of conventional capacity by 2034 and 100 gigawatts of nuclear capacity by 2047. Since transmission is generation agnostic, it will continue to be one of the more stable and growth-oriented segments in the coming years. At the heart of this expansion is the necessity of HVDC technology. It is most efficient and reliable way to transport bulk power over long distances, connecting remote renewable energy parts to consumption centers and stabilizing the national grid. There are significant opportunities emerging in HVDC, STATCOM and digital solutions. These areas will play a key role in driving overall growth. On the technology front, digitization is a major focus. Asset performance management is being positioned as a key differentiator, helping customers optimize both CapEx and OpEx strategies. With this growth in mind, we are expanding our engineering and manufacturing footprint with additional investment of INR 8 billion, focused on advanced grid technologies. This investment will expand our capabilities at Vadodara for Transformers and Reactors, will install new lines of Bushings and Air Core reactors at Hosur. We'll also expand capacity for AIS and GIS products at Hosur and Padappai. The above capacities will support domestic market as well as export. This investment of INR 8 billion is in addition to INR 1.4 billion investment announced in May this year. Now turning to our financial performance. We had a productive strong quarter of robust demand, significant revenue growth and EBITDA margin expansion. Our order book remained strong in Q2, and we saw a booking of $16.1 billion, down 66% year-on-year compared to INR 46.8 billion in quarter ended September '24. Our Q2 revenue stood at $15.4 billion, versus $11.1 billion in Q2 FY '24-'25, up by 39%. New orders outpaced revenue further expanding the order backlog to INR 131.1 billion as of September '25 versus INR 129.6 billion as of June '25, up by 1% quarter-on-quarter. Our profit before tax and exceptional items for the quarter ended was INR 4 billion compared to INR 1.9 billion in the corresponding quarter of the previous financial year, growing by more than 2.1x. The cash and cash equivalent balance was INR 15.2 billion as of September 30 versus INR 12.2 billion as of June 30, 2025. The cash generated in Q2 was INR 4.3 billion before payment of dividend. So if you see the results, it's a very strong set of numbers what we have delivered for the quarter and for the H1. Overall urbanization and rising per capita energy demand and increasing investment in industry data centers in green hydrogen are creating strong drivers for energy growth. These trends will naturally translate into higher demand for transmission infrastructure. Technology will play a crucial role in strengthening the company's position among the top transmission players in the country. It is indeed an exciting time to be part of this sector. On behalf of leadership team at GE Vernova T&D, our sincere thanks to our valued customers, our dedicated investors and our exceptional teams. I'll now request Abhishek to share the execution highlights.

Good evening, everyone. So just like previous quarters, we have been continuously and actively delivering our commitment for strengthening the transmission network of the country. In this pursuit, some key highlights that we want to share with you all for the last quarter are the 400 KV substation bays that we commissioned for THDC-Khurja. So THDC-Khurja is our thermal power plant of 1.3 gigawatts, which has been fully functional now and adding to the power supply demand of UP, the state of UP. So the plan was made fully commercially operational on 22nd of September, and we partnered with THDC in this journey for building up the capacity of electricity generation in the state of UP. Another key highlight was 300-megawatt wind power evacuation substation set up for Viviid Renewables, in the state of Karnataka. So this was for the first time we were actively working with this company, and we had completed this project in a record time of less than 12 months. And now this is fully commissioned and supplying power to the adjoining states and regions. Similarly, we have been partnering with other developers and commissioning our products, predominantly transformers like for power grids in 765 kV Dausa single phase ICT 500 MVA was commissioned, 400 kV station of Kallam, where we commissioned 3 phased shunt reactor of 63 MVAr, then PGCIL-Narela 765 kV substation where we had commissioned 110 MVAr single phased shunt reactor. Similarly, we had been partnering with other developers in terms of commissioning and supporting them through supply of GIS products. So we had commissioned successfully 220 kV GIS for Transglobal at Ganesh Nagar. Similarly 220 kV GIS for JSL at Jajpur. And then at several sites circuit breakers right from 765 kV to 145 kV had been commissioned, and we have been actively working and supporting our customers like Godrej, Elecnor, Tata projects and Adani. And we remain committed in terms of strengthening the transmission network of the country and making it more and more robust to our products and services. So I hand it over to Sushil sir to take it forward.

Thanks, Abhishek, and good evening, everyone. Turning to financial slides in the investor presentation. Overall, we had another strong quarter with strong revenue growth, a high EBITDA performance and strong cash generation. Now we have a very healthy level of cash and cash equivalent as highlighted by Sandeep. So overall, the demand remained robust, and we booked orders of INR 16.1 billion compared to INR 46.8 billion in Q2 of financial year '24-'25. So last year, in the orders of INR 46.8 billion, we had a few large orders amounting to INR 31 billion. These included the order from the export -- large order from export and a couple of large orders in our software business. Excluding these large orders, our last year order book number was close to INR 15 billion to INR 16 billion and hence, the current quarter performance in the current financial year is in line with what we achieved in the last year. In this quarter, most of the orders were booked from domestic customers, representing 83% of the orders and rest 17% of the orders were received from the export side. The orders in this quarter were received from various diverse set of customers for all categories of HV equipment in our portfolio. These included orders for transformers and reactors, GIS and AIS equipment, automation products from various utilities, TBCB players and EPCs. Our backlog remained healthy at INR 131 million with solid backlog is 3x the revenue of last financial year, that is financial year '24-'25. We are building this backlog in a very disciplined way through disciplined underwriting with 97% of the backlog from private customers, central utilities and public sector unit. The exposure to state utility remains limited to the extent of 3% of the backlog. Healthy backlog gives a strong visibility of long-term growth in our business. We had another quarter of strong execution, achieving a revenue of INR 15.3 billion, delivering a significant 39% growth year-on-year basis. In this quarter, about 32% of the revenue was generated from execution of export contracts, whereas 68% of the revenue was generated by execution of domestic contracts. Overall, in the first half of this financial year, we are achieving INR 28.6 billion of revenue, again, a growth of 39% on a year-over-year basis. We reported a strong EBITDA of 25.8% during the quarter, representing an EBITDA expansion of 70 basis points over the EBITDA that we delivered in financial year '24-'25. The significant increase in EBITDA is driven by volume, price and productivity. Deep diving a bit more about these 3 individual components. [Technical Difficulty]

Sorry to interrupt. Shall we start with Q&A. Hello? [Technical Difficulty]

So sorry for the technical glitch. It seems the main line got disconnected and we were -- you were not able to hear me. We'll just wait for a minute. [Technical Difficulty] the members were -- the investors were able to hear our conversation, but I'll maybe start again from the EBITDA point. So we delivered a strong EBITDA of 25.8% during the current year -- sorry, the current quarter, representing a 70 basis point increase over the EBITDA that we achieved in the financial year '24-'25. The significant increase in EBITDA was driven by 3 factors: volume, price and productivity. Volume is up 39% as we talk. The price is higher compared to the orders that we were booking in the past. So last couple of years, we booked orders at a significantly better price. And third element of productivity is basically our internal better performance through lean and effectively managing our operations. Overall, in the first half, we delivered an EBITDA of 27.3%. Our H1 EBITDA of INR 78 billion is almost very close to the INR 82 billion EBITDA that we generated in the entire financial year of '24-'25. Now with this strong performance in H1, we are confident that for this financial year, we should be able to deliver EBITDA in the mid-20s. In addition to strong P&L performance, we continue to generate positive cash flow. In H1, we generated entire profit after tax, which is approximately INR 5.9 billion into cash. As a result of this positive cash generation, we now have a healthy cash and cash equivalent of INR 15.2 billion with no debt. This cash balance is after returning INR 1.3 billion to shareholders in the form of dividend in quarter 2. Healthy level of cash balance supported by strong market demand gives us confidence to continue to invest in our core business. And as Sandeep mentioned earlier, today, we announced INR 8 billion of CapEx in addition to the INR 2.4 billion CapEx that was announced earlier so far, leading to the overall expansion plan of INR 10.4 billion, and all this CapEx is planned to be sourced from the internal accrual. We can now open for question and answers.

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

And congratulations for a very strong set of results. Sir, my first question is on ordering side, especially outlook for domestic orders on the base ordering cell for transformers, switchgears and circuit breakers. So how do you see second half panning up as compared to H1 considering that in H1, we have seen challenges with respect to industry for ROW issues or slower tendering. So how do you see outlook in terms of second half? And second, similarly in case of export market, considering that we have approved proposal of closer INR 3,000 crores in terms of ordering from related party, what is the exact update on that particular outlook in the subsequent second half?

So I think ordering side, Umesh you are right that -- hello, am I audible?

Request Umesh Raut can you please mute your line because there's a disturbance from your line, sir.

So I think Umesh, we have seen some softness in the divisions or basically the pipeline, which is there. But I'm expecting it to pick up because the National Committee of transmission, for example, if you see a lot of projects, which have got identified, and we expect this pipeline to be much stronger in the time to come. On the RPT side of INR 3,000 crores, as you said that at that point of time, we were bidding for -- the group entities were bidding for a large project. So the outcome of that has not yet been finalized. So that's why we have not yet received any order or any confirmation that -- so the opportunities are live still.

Got it, sir. Second question is pertaining to the CapEx announcement of INR 8 billion. So if you could quantify the CapEx in 4 heads that you have mentioned in your presentation. So how does that is divided in between transformer reactors, Air Core reactors, bushings and GIS and AIS products.

So I think those final details probably we will not be able to share. So that's why we have shared an overall number with the breakup of what all activities we will be doing in the CapEx.

Okay. Got it. And last question is on the data center side. So for a company what kind of opportunity you see in case of data center, which all products we can supply? And are we qualified for international orders with respect to data center? If yes, which all geographies where you can supply those products for data centers?

So data center mostly, for example, if you see a large data centers, which are coming they have substations which will get built from 220 kV up till 765 kV. So on the receiving of the power, we are qualified for all the products, which is there. So if, for example, there are local EPCs, which are participating, then we support them with gas-insulated switchgear, transformer automation system or at times we directly participate for the project as well. For the international market, definitely, we are qualified, but today data center market globally, of course, we know that U.S. and all is a big market. But again, U.S. market, as you know, that is a big time technology market. So there, most of the market is being fed from the U.S. factories only. Balance other places also, for example, if there's any opportunity which comes to us, we'll be targeting that along with our group companies.

Got it. And how much of addressable market we can cater to an overall data center CapEx? Any percentage number here?

You're talking about the complete data center package?

Yes, yes. So I suppose data center costs at about, say, INR 40 crores per megawatt basis, how much of that total CapEx we can address in terms of providing our products and solutions?

I don't know about that, but if you take can you go on -- I think you have 2 lines, Umesh -- so data center typically, for example, a 200-, 300-megawatt data center will have close to about INR 75 crores to INR 100 crores of opportunity pipeline from our side.

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

Congratulations on a very, very strong result. My first question is, sir, while you have done superbly in the first half. Is it possible to give some color on the margins in the current order book beyond FY '25 and the related question is, are you are you seeing same kind of pricing power, what you have done in the new orders?

I think Sandeep mentioned in the earlier call that prices are now kind of stable, neither improving nor deteriorating. And in terms of margin, I think we don't give a forward-looking guidance for multiple years. But I said earlier in the call that in this financial year, we should be able to give a little bit of -- around mid-20s.

And some color on the pricing environment, sir, how do you see -- is it similar? Or is it changing? Or is it worsening or improving compared to last year?

I would say that it's not improving, at least the prices are not going higher or -- I would say, at the same level or there is slight pressure on that, but not a substantial one.

Understood. My second question is, sir, your parent entity has bought JV stake in Prolec, right? And do you see any implications of this on our business in India and medium term in terms of our offering or [indiscernible] market?

No. So Prolec is more or less dedicated to North American market. So we don't see any impact of that happening in our territory.

I think reading the transcript, I think you're more about increasing our TAM on the data center side by providing power to rack solution. Is that -- have you heard any conversation around that?

Prolec is a transformer manufacturing joint venture. No, no Prolec has nothing to do on low voltage side.

So that was the outcome, of course, I was reading the transcript of the global industry domination they're looking to -- last question is, sir, what is driving this phase CapEx? Of course, you're doing a large CapEx compared to your current gross block. How much is export as a driver for these investments? Some color will be helpful, sir.

I think if you really look at the market scenario, which is there and the plan of the National Transmission plan, I feel and if you look at our export potential as well, I don't think that this is a fine balance of CapEx what we are doing. So that has been thought over, meticulously planned and then only we have discussed currently in the Board and then only it has been approved. Of course, going forward, we'll be -- it's very difficult to predict going forward that this is the number which is going to come from export. This is the number which is going to come from the domestic market. Also, the CapEx involves a number of multiple products like Air Core reactor, bushings, transformer reactor, may be part of AIS product, GIS product. So there's multiple products, everything will have a different ratio of export and domestic. So it's not possible to give like kind of one number for that.

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

First question is on the CapEx. So I just wanted to understand 2 things. One is your current capacity utilization. And second, with this CapEx, including [ INR 150 crores plus INR 800 crores ] what could be the possible peak revenue target you would like to achieve in upcoming years? And third, in the event of HVDC win, will you be requiring further CapEx or the current expansions would be covering any HVDC wins also?

So thank you, Amit, for asking this question. So different products have different capacity utilization, for example, transformer reactors have a pretty high capacity utilization. But AIS, GIS we still have threshold further up in terms of taking more orders and increasing the utilization factor. Of course, CapEx is also like looking into the market, we are also preparing ourselves for the future because the implementation of CapEx is also going to take 2 to 3 years. For HVDC today, definitely, we can deliver at least one HVDC order with the existing capacities what we have. But we are preparing ourselves because if we look at the HVDC pipeline, that's a pretty strong pipeline. Regarding peak revenue, peak revenue is a combination of a lot of factors, which include -- if you win an HVDC then there's a large part, which comes from third-party sources including engineering and technology part of it. So I think difficult to give a number of peak revenue, but definitely, if you look at about INR 1,500 crores of quarterly revenue, then we are looking at somewhere between INR 5,500 crores and INR 6,000 crores of annual revenue this year, which is again going to be close to about a 35% growth over last year. And if you look at our backlog as well as Sushil said, that it would take last year's order -- last year order -- the backlog and last year revenue were sitting at close to about 3x of the revenue. I think we still have a lot of headroom to increase our revenue, and that's what this additional CapEx is going to increase that headroom and let us grow further.

Sure. So second question on the margin. So very strong margins in Q1,Q2. And I can see a lot is happening on the cost optimization as you have been highlighting the operational efficiency. The other expense was only 10%. Just wanted to understand, and you have guided for some 25 kind of mid-20 EBITDA margin. So is there any scope with respect to current factories and more cost optimization. And the newer CapEx, which is coming, would we have a similar kind of advanced facilities that the expenses would be controlled, some understanding on how we are able to achieve this so far. And is there more headroom with respect to the fixed cost optimization?

Thanks, Amit. So cost optimization is a journey. I mean in GE, we adopt approximate lean, which means continuous improvement over the achievements that we have already secured. So this is something that will continue. And as you see, most of the CapEx invested into our existing facilities, INR 8 billion that we announced today is entirely for the existing facility, part of the earlier announcement was for separate new facility. So considering that we are investing in our existing locations, it is expected to give us more operating leverage because we don't plan to have additional fixed costs. And in the earlier questions Sandeep answered that we are growing at 39%, 40% of the revenue. And in future, if the further revenue comes with this CapEx plus HVDC win and so on. So of course, there will be an operating leverage from now onwards as well.

Right. So my final question on the order inflow, H1 saw roughly about INR 3,200-odd crores, and export is about INR 500-odd crores, which is obviously relatively lower since we had very strong intake in H1 last year. But then our spread for H2 is quite high. So I wanted to understand are we eyeing very strong finalizations as you highlighted that National Committee on Transmission as a very strong pipeline. Just wanted to understand some color because we had a very strong intake FY '25 and H1 indicates H2 should be very, very strong in terms of inflows to continue the momentum? And second, color on HVDC order status, South Kalamb and South Olepad the value and the nature. Are we bidding together with someone or some color if you would like to give there, that would be helpful.

I think the South Kalamb order -- South Kalamb -- South Olepad order is very much active. However, we'll not be able to give any other further details on that, neither on the value nor on the participation part of it because the bids are under evaluation. So -- and the second project, which is Barmer to South Kalamb, I think we expect the tender for the developers to come next quarter. So that's the next year order what we expect based on the finalization schedule what do we see today.

Pipeline for H2, sir, if you could.

Pipeline for H2 -- so pipeline for H2 is I think when looking at a decent pipeline, which is coming in H2 and of course, last year when we had participated and when we have delivered a very strong order number, it had -- 2 large, as Sushil had said, 2 large factors built into it or orders built into it. So one was the related party transaction order, which was close to about INR 2,200 crores and then a few digital orders put together. So excluding that, we are looking at close to, I think, about INR 7,000 crores. And we are looking at repeating that, that is the target of the team to repeat at least a similar number of order intake. That will also give us growth in the order backlog by more than like INR 1000, INR 1,500 crores.

If I can squeeze the capacity expansion. Anything in mind with respect to exports also while setting up this new CapEx, sir?

So when we are setting up the plant, of course, when we look at the market, we look both at the domestic market as well as the export market. But eventually, the capacities will go where we get the most optimized return on the CapEx.

The next question is from the line of Nitin Arora from Axis Mutual Fund.

The first question just on the pipeline part. Are you also seeing some refurbishment pipeline is also coming with respect to HPC existing lines or HVDC lines relating to system upgrade and [indiscernible]. If yes, how big is this opportunity according to you? And second, how we should think about this related party of INR 3,000 crores? You think the order finalization should happen by Q4 is what you are eyeing? Or will it happen once this CapEx gets completed? How much should we think about that? That's my first question.

So thank you, Nitin. Yes, there is a market for HVDC and HVAC refurbishment definitely. But the numbers are not that big to make a substantial impact on the -- for HVDC and all refurbishments. The customers take a pretty long time in finalizing and making a decision. And HVAC, for example, today, we see a few opportunities which are coming in pockets, but that's not a very big business today. As far as the RPT of INR 3,000 crores order intake, of course, a large part of it is dependent upon the customer decision-making process, that in any way is not linked to the CapEx because if it would have been linked to the CapEx, we would have first taken a CapEx approval and then we would have gone for the RPT approval. But that if you look at that CapEx approval -- if you look at the RPT approval, the RPT very clearly said that these deliveries are like up till 5 years. So that's a pretty long cycle what we have.

We expect the decision by Q4 in the current scenario, however, it may change depending on the customer's plan.

Okay. Got it. That's very helpful. And second, with respect to you saying that the pipeline are increasing only, opportunity increasing only. So you have already bids coming in now going ahead for Q4. Sorry for asking a short-term question. Just to understand that there is nothing which has lost out there. And lastly, when you -- we've been following you for a long now. So you have been articulating so far no pricing pressure because despite capacity catching up because opportunity size is increasing and order pipeline is increasing a lot. For example, when you said one HVDC how much capacity -- it gets booked for a transformer companies across if one HVDC gets rolled out. So how one should think going in next year, next 2 years, I know I'm asking something a little longer aspected. But do you think opportunity size will be huge enough where you see growth at least for the next 2, 3 years for the sector to remain pretty strong, and that's where it should not -- I mean, obviously, you're such a healthy margin company, 50, 100 basis points doesn't matter here and there. But generally a sense how one should look at it. So these 2 aspects -- just a short-term question on the momentum in ordering and on the pricing growth for the next year.

So Nitin I think momentum in between, there was a slight lull, but now I think we're seeing again a pickup which is happening. It's not a major one, but at least there is a pickup uptick, which is happening in the pipeline for the TBCB. Regarding, for example, when you're looking at capacities, et cetera, which is not getting added practically the capacities which are coming, for example, whatever CapEx we have also announced to like 3 years. So most of the capacities we expect to come in 2 years plus or 3 years' time. And today, a large part of the order intake, what we take, what we do is like a 24-month cycle. That is maximum, what is it, 24 to 27 months or 30 months. So what you're saying is right, we will -- we need to see the next year pipeline and because next year, there will be an additional impact of new capacities coming in like 2 years' time. But if the pipeline remains healthy and more HVDC or more TBCB gets decided, it is going to offset between the pipeline and the additional capacity.

The next question is from the line of Subhadip Mitra from Nuvama Wealth Management.

And many congratulations on an excellent set of numbers. Just wanted to understand that with an order book, which has an export mix of 35%, and we understand that we export bit tends to have superior margins. Do we see an annualized export mix in sales remaining around the 30%, 35% mark? And in the same win, can we then assume mid-20s kind of an EBITDA margin could be the new normal?

Subhadip, yes, you're right that our backlog has about 30% to 35% of export mix. And we -- on the long term, we expect that revenue execution should be also in the same proportion, where exports will be around 30% to 35% of revenue. This quarter, it was 32%. We are now doing mid-20s kind of EBIDTA. The endeavor of the management is to maintain a healthy margin. As Sandeep answered that a typical cycle is 18 to 24, 27 months. We already have a backlog for the next 2 years with us. So hopefully, we should be able to maintain the EBITDA margin above 20%. And our endeavor is also to go beyond EBITDA as a percentage and look at more EBITDA as a number. So as we grow our revenue at 39%, 40%, which is happening, and our run rate for the annual revenue exceeds the EBITDA while slightly lower than what we are delivering today, but in value terms, the EBITDA will be higher. This quarter also, if you see the EBITDA percentage is lower than the previous quarter, but EBITDA number is higher than the previous quarter. So that is the effort of the management and with the additional CapEx, the operating leverage that we earlier talked about, plus counting on the HVDC to come at some point of time, the overall EBITDA as a value will be more focused for us.

Understood. So if I understand you correctly, you are endeavoring to keep the EBITDA above the 20% mark. So probably somewhere between 20% to 25% is where you would want to keep the EBITDA number.

So I'll more focus on EBITDA as a value. I think percentage, as I said, becomes less relevant as the volumes keep growing at a higher pace. But yes, our endeavor will be to remain at a healthy margin, not giving a specific number, but will remain healthy.

Understood. Lastly, I just wanted to understand that do you see an HVDC pipeline panning out beyond the current 2 which are getting into bidding. So beyond the South Olepad project and the Barmer project, do we see maybe another 2 HVDCs coming up for next year, maybe the [indiscernible] project or the Bikaner project?