Genus Power Infrastructures Limited (530343) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. A very warm welcome to Q1 FY '22 earnings call of Genus Power. With me is Mr. Jitendra Agarwal, Joint Managing Director of the company; and SGA, our Investor Relations Advisor. The results and investor presentations are uploaded on the stock exchange and company website. I hope everybody has had a chance to look at it. The company has recorded a sales of INR 130 crores for this quarter as compared to INR 84 crores in Q1 FY '21. Our growth was severely hampered due to delay in inspection, subsequent delay in dispatches to SEBs on account of COVID-19, which is affecting all of us, and leading to have great disruptions and big disruptions. We expect a healthy volume offtake in coming months with the business environment now getting normalized with increased relaxations in lockdown being granted by various state governments. For Q1 FY '22, EBITDA profit stood at INR 5 crores as compared to loss of INR 1.7 crores in last quarter, that is quarter 1 FY '21. The operating margins are also lower on account of higher employee expenses and steeper raw material prices. We are very hopeful that this will be normalized in the second half of this financial year. Profit after tax stood almost negligible at INR 0.1 crores as against a net loss of INR 3.4 crores in Q1 FY '21. Cash PAT stood at INR 4.5 crores against almost negligible INR 0.2 crores in Q1 FY '21. Our current order book stood at INR 978 crores, which gives a visibility of growth over next 2, 3 quarters. You will see that from last quarter, it has grown by a little bit, but still it has grown. The most significant development for the smart metering industry was obviously the approval of the INR 3.3 trillion (sic) [ INR 3.03 trillion ] power distribution companies reform scheme namely reform-based, result-linked power distribution sector scheme. In this revamped distribution sector, about half of the total funds of the scheme, that is about INR 1.5 trillion, are to be deployed for installation of smart meters. I hope that [Audio Gap]

The line for the management is disconnected. Kindly stay on line until I reconnect them. [Technical Difficulty] Ladies and gentlemen, we have the management line reconnected to the call. Thank you, and over to you, sir.

Sorry, ladies and gentlemen, I don't know how it got disconnected. So I was talking about the new significant development that has happened in smart metering and the government -- central government has come with the scheme. So all of you or most of you must have gone through the scheme or must have seen the scheme. So it's always better for us to make you understand you ask the questions and we clarify on that. I welcome question and answers.

[Operator Instructions] The first question is from the line of [ Nisha Savla from Arya Securities ].

Sir, my first question is, I wanted to know how much growth in revenue can we expect in FY '22? And can you also provide a ballpark figure of revenue, which we expect to achieve in FY '23?

Hello?

Yes, sir. Can you hear me?

This is Jitendra Agarwal, this side. For 2022, the ballpark figure would be anywhere around INR 700 crores to INR 800 crores. INR 800 crores is quite achievable.

And sir, for FY '23?

And for FY '23, the way the company and the way the business is picking up, because I expect a lot of growth will come by the end of this year because the scheme has been now approved, and it has been done in the right way, I'm very hopeful that for next financial year, it can be anywhere from INR 1,300 crores to INR 1,500 crores.

Okay, sir. And sir, how has been the DISCOMS and state government responded to the passage of reforms-based and results-linked power distribution sector scheme? Are there any political interventions, especially from states ruled by opposition parties?

No, no, there is absolutely nothing like that. If you see, this scheme is very, very helpful for the state utility boards. So they were looking at this very, very closely. This scheme has not been only given by the central government. The beauty of this scheme is it has been worked very closely by the central government and the state utilities in building this scheme and building this whole process, how this work will be done. So earlier when we used to talk about these schemes maybe 3 years back, the central government had in their mind one size fit everyone. But this is not the case. In the last 2 years, central government, along with the PSUs, state utilities and along with the companies like us, has worked very closely to bring this scheme. So with the open arms, most of the states have welcomed this scheme.

Okay. So sir, the passage of the revamped distribution scheme, when can we expect substantial order inflow on account of the same?

So if you understand the scheme currently, initially, this scheme has been floated for almost 1.5, 2 years. A lot of amendments have happened over the period of time with consultation along with the industry and the utilities. If you see that this time, 2 good things what central government has understood and they have bought in the scheme a one size doesn't fit all. Initially, the government was ahead with their mind that only this is the way you have to do, every state has to buy this kind of a smart meter or this kind of process they have to follow. They have completely changed it this time. They have given a bigger picture, broader expect that this is the SBD you will have to use and every state can modify it according to their customization, so which is highly welcomed by the state utilities. Second thing, the incentives, which was given earlier, was only a once particular amount, okay, we will give you INR 900 or INR 1,400 for a smart meter. But this time, they have also added that if you reduce your losses and use this money and install meters by December 2023 for the 500 AMRUT cities, then further, you will get an incentive of INR 500 and INR 800. So this is how the scheme has been made more lucrative by the central government. Plus state government doesn't have to pay anything upfront from their pocket. Everything has to be invested by the AMISP, the service provider. So that is why I'm more than hopeful that this scheme will gain major momentum by the end of this calendar year. The reason I say by the end of this calendar year, because by 31st October, the state utilities has to apply to the central government with their complete conditions. This is how we want to use this scheme and this is our plan of action. So a lot of action will happen by the end of this calendar year.

Okay, sir. That was helpful. And sir, just one question that what were our receivable days in FY -- Q1 FY '22? With the implementation of this new scheme, can we expect improvement in our working capital cycle in FY '23?

The working capital cycle is definitely going to improve in the next financial year because the whole model of the business is changing, where a lot of investment will be done by the service provider. That solely improves our working capital cycle. And with this scheme implementation, the revenues and the position of state utilities also improves dramatically. This is what we are expecting, and this is what we have seen in 2.5 million smart meters which have been installed in last 2, 3 years. It is visible that, yes, with installation of these meters, the financial position of the state utilities is changing to a very good side. It will surely improve the health of state utilities, which in turn will improve the health of our working capital.

The next question is from the line of [ Suraj Navandar ] from Prithvi Finmart.

So what is our current working capital cycle?

This is almost -- it is almost 200 days. It is absolutely the same. There is no -- because of corona, it was -- it got deteriorated a little in last financial year, but it is improving. But right now, we feel that this financial year, it will be around 200 days.

So what is your targeted or -- what is your target working capital cycle after everything that's gone on?

Earlier calls also, I have many times told that there won't be a significant improvement. We can't see it from 200 to 150 days or 140 days. There will be improvement of 10%, say it can come up to 180 days or 175 days.

Okay. And sir, with the given sort of tailwinds that our industry is seeing now, can we expect some improvements in the margins, not from the Q1 or FY '20, I'm saying historical level, sir. What would be our margins FY '23?

I have given earlier also the guidance that it will be around 16% to 17%. These are 2 -- 1 or 2 quarters which are exceptionally bad because of -- but '22, surely we'll be doing not so bad, what we are doing bad in first quarter or what we'll be doing in second quarter. There will be a huge improvement in '22. And '23, it will be surely for 16%, 17%, what guidance we have given earlier.

Okay. And sir, how has been Q2 quarters, whatever, like 1 month -- July 1 month has been for us?

Q2, the things have started improving, but Q2 also, as earlier guidance was given, that Q2 also will be not so good, what earlier expected.

The next question is from the line of Mohit Khanna from Future Generali India Life Insurance.

I just had a question regarding the market opportunity. So just wanted to have a sense that government has already said that Phase I, they would be having -- targeting 10 crore meters by December '23, if my memory serves me right. So in that scenario, what is the total market opportunity for you? Because -- and because I just wanted to see that if you guys are going to maintain your 27% market share, how -- what could be the scalability of the business from here on?

So opportunity definitely on paper, it looks very, very large. It is going to be the reality also. Government is very ambitious when they say December '23. But the good part along with the ambition, they've given financial incentives to the state utilities to achieve these ambitions. And they've very clearly told -- the government made it very clear that this has to be done in the mission mode. And there's a huge motivation behind this. So I'm pretty hopeful -- it is very difficult to say currently that all 10 crores will be installed by December '23. It is an ambitious target. But yes, if the whole covers even 70%, 80% or even 50% of the same is done, this is humongous opportunity for our industry.

Okay. In that case, sir, what would be your average ASP of the smart meter from your end?

Average -- if you see the complete solution -- end-to-end solution, right, it is -- it depends on the different specifications and the number of years of maintenance to be done. But generally, it ranges anywhere from INR 5,000 to INR 8,000.

Okay. And the state governments will be...

That will give you a ballpark idea of the size of the opportunity.

This is per meter, that it will boil down to, right? So my point...

[indiscernible]

Yes. Okay. So my point is now INR 5,000 to INR 8,000, at what price would state government will calculate their incentives because -- there is the formula already decided by the center or there's still work in progress?

Government has already decided the formula that there are 2 categories they have created. One is the normal discounts and one is the discounts which are in the special category like all Northeast states, Himachal, [ Utta ], all the hilly areas, all the union territories, all the very high loss areas. So government has given 2 categories, normal category and special category. So in the normal category, you get INR 900 per point as a grant, plus if you are able to install these meters by the end of December '23, you further get an incentive of INR 450. So INR 1,350 is the straight away you get a grant from the central government for which you have to just achieve what has been said. And by using these smart meters, they will significantly reduce the AT&C losses. And there will be no CapEx then from the state utilities' pocket because the whole money has been invested by the AMISP, the service provider. So as such, if you see from the eyes of the Chairman of a DISCOM, it is -- there cannot be anything better than this, where you have to install meters, reduce your losses, improve your billing cycle and not a single penny to be spent from the pocket. So it is absolutely fantastic in that sense. It is -- actually, it is INR 1,350 for normal category of states and almost INR 2,000 for the special category states. So it makes sense for them.

Okay. So finally, the money -- the -- per each installation of the meter, money will not be paid by the consumer. Consumer will not pay any additional money, right?

Neither the consumer will pay the money nor the utilities. Utilities will pay as a rental per meter per month basis.

That they will charge the consumer.

No, they will not charge from the consumer. That will be out -- given from the pocket of the utilities. But the amount of savings they will do, it is absolutely -- for them, it's a no-brainer.

And what is the entity that you just named, who will put up all the CapEx, AISMP?

AMISP, Advanced Metering Infrastructure Service Provider. Even Genus will play that role. So Genus will play both the roles where they will be -- they will themselves do AMISP and they will supply to AMISP as a manufacturer.

So now -- so that is the point, sir, if you are going to play that role of capital expenditures in the scheme, then what gives you confidence that your working capital cycle would improve? Because state -- ultimately, the money has to be paid by the state electricity boards only. They are just not paying upfront. But over a period of time, they will pay.

That is basically they are not paying us. It will be a rental model. The money will be coming on monthly rental model from 6 to 8 years, depending on tender to tender. So it might be even 8 to 10 years. So basically, the only rental is to come. There won't be any upfront payment. Any CapEx has to be done by us, and that will be coming back in the form of rentals. And that is secured by sovereign guarantees and escrow accounts.

And with the LCs.

And with the LCs.

So that is absolutely...

Okay. Okay. So that becomes a secure debtor for you?

Yes, absolutely secured debtors and there won't be any issues of -- so basically, we are doing CapEx. So there won't be any working capital or any that type of things involved in this.

Understood Yes. Okay. Okay. Understood. In that scenario, in the scheme, have you been provided any sort of cushion in terms of financing cost coming down? I mean can you guys also apply or AMISP guys can also apply for a lower interest rate pricing scheme?

Basically, that depends on the rating of the company. Genus is already A+ rated company. So certainly...

Okay. So there's no special provision for companies to put out -- to get lower financing, right?

But once your money is secured by so many things, banks always consider that for a reduction in rates and all.

Fair enough. So bill discounting can always take place?

Yes.

[Operator Instructions] The next question is from the line of [ Sagar ] from PricewaterhouseCoopers.

We've seen so many schemes being introduced by the government with respect to reforms on the power side. What makes you hopeful and confident that this scheme will help resolve the issues, especially with respect to the DISCOM side?

So one thing to start with, I want to reply this one, whatever the scheme government has come over the years, it has definitely improved the situation. We are seeing a very bad situation currently. Just imagine a situation where no schemes would have been there. So the situation would have been much more worse. So saying all the schemes are of no use is very difficult to comment on. And the reason I'm very confident that this scheme will be -- there is a clear cut incentive to the state utilities. There's absolutely nothing to lose in this scheme itself, where almost -- if you see the overall scheme, almost 20% of the money of the smart meter is paid by the central government as grant. So it is not a loan. And 80% of the remaining money will be paid -- will be financed practically by the AMISP. So there's not a single penny immediate outflow from the pocket of the state government, which has always been the concern to all these utilities because they're always cash strapped. And then the beauty is save and pay. And if you see examples of this 2.5 million, 3 million smart meters installed in India, and that too in the national capital of Delhi, where the losses were absolutely below 10%, even there, the payback of these smart meters is not even more than 3.5, 4 years, which is what Tata Power has given that white paper multiple times to everyone, see the benefits of smart meters. So I am more than confident that this scheme will fly and fly very high.

So sir, if I look at the opportunity unfolding in front of us over the next 3 years, what number of smart meters can potentially -- what kind of orders that potentially can accrue?

So as I told, the -- given the idea that next financial year, we expect INR 1,300 crores to INR 1,500 crores as our top line, but it can be -- it is very difficult because if you see -- if you do mathematics, then these numbers can be very high. But at the end of the day, you are always in a vulnerable society, always in a volatile world. So everything cannot be mathematics only.

Sir, my last question to you. Considering the scheme, do you see pressure on realization and margins?

So definitely, there is a pressure on margins in the coming state of affairs because it's been almost 1.5 years where the industry has seen difficult times. But with this opportunity unfolding and the amount of -- number of meters going to be bought in the next 2 calendar years, the margins will be very well maintained, what used to be 1.5 years back or it can be even better.

Got it. Any number to it in terms of margins?

So our Vice Chairman gave that idea in the con call itself that we will be able to maintain 16%, 17% in the next financial year.

The next question is from the line of Amish Kanani from JM Financial Services.

Sir, if you can update us with the tender pipeline. You said last quarter that maybe INR 3,000 crores were already floated and about INR 7,000 crores likely to be floated. If you can give us some update there, what's happening there? Is it in line with our expectation? Or it's getting delayed...

Sorry to interrupt, Mr. Kanani, but there is a disturbance coming from your line, sir.

Understand that you are asking for the tender pipeline. This is our opportunity pipeline.

Yes, sir. Yes, sir.

So as I gave the number last time, so it currently stands almost on the same number because nothing majorly has changed in terms of finalization of tenders. So currently also, the live tenders are more than INR 10,000 crores. To be very precise, estimated value of these tenders is INR 10,200 crores. Out of this, these tenders cover all categories; smart meters, smart meter on CapEx, conventional meter and smart meter on OpEx. So it can -- and to be participated, it has both -- and I said, INR 10,200 crores. Out of this INR 10,200 crores, there is a -- they are 2, to be participated and with [Audio Gap]

The line for the management is disconnected. Kindly stay on line until I reconnect them. [Technical Difficulty] Ladies and gentlemen, we have the management line reconnected to the call. Thank you, and over to you, sir.

Hello? So I was speaking on the current to be participated and already participated tenders. So if I have to number them, already INR 3,000 crores tenders have been participated in the last 2 to 3 months, which will get decided in the next 3 to 4 months, and almost INR 7,000 crores tenders will be participated in the next couple of months. So INR 10,000 crores tenders are live as on date.

Okay. And sir, if you can give us some sense of once we win the mandate, what is the typical execution time line? We have given some order book in our presentation, if you can give us some sense of...

Currently, the order book, what we have around INR 980 crores. Out of the INR 980 crores, only INR 175 crores is the FMS work, which will happen over the next 5 to 7 years. The rest, all -- rest, I would say -- the remaining INR 800 crores has to be executed in the next 9 to 12 months.

Okay. So -- and assuming that our win rate remains the same, this INR 10,000 crore pipeline would mean additional order book in the current year, which will then be executed over, SAY, next 12 months, which could be, say, from Q3 to -- Q3 of this year to Q2 of next year, right?

I would say from Q4 of -- because these tenders are still in the pipeline, by the time they get decided and then it takes 3 to 4 months for the -- starting the execution. Electronic components lead time may further increase globally. So these -- the results of these tenders will start coming from -- I would -- very practically, if you ask me, from quarter 1 next financial year.

Okay. So when we are talking about a revenue estimate of INR 1,300 crores to INR 1,500 crores, we're assuming the win rate of these tenders and then execution not the same and stuff like that. And as what you said, there could be an upside. And once this scheme is, as you said, will be starting to see traction by end of this calendar year. Do you see the tender coming in early part of next year and the same time line will apply or...

Since this scheme, there are 2 parts to it. One is more or less the AMISP document has been done by the utilities. Other is they have to apply to the central government for the grant. So this will happen parallelly. It's not that you get a grant, then only you come out with the tender. So as I -- currently, we are talking to each other. The INR 6,000 crores OpEx tender will be part of this AMISP only. So they're not waiting for the approval from -- they've given time line until 31st October, we have to apply. Whomsoever is serious about this 10 crore meters by December 2023, and we all understand the way government works. Generally, they don't achieve every time line, but [Foreign Language] this is what I can say.

Okay. And sir, one further understanding just to appreciate this better. How do you think of this AMISP, whatever that acronym is, that agency which is going to fund this upfront, how do you think that will be funded? And you said our company also will have a role. So I'm assuming here that whoever wins will have some role in terms of funding. But if you can give us some sense of how the banks will kind of fund this structure? Will there be a tripartite agreement sort of a thing? Or will it be an LC discounting sort of a thing? And -- who will provide the funds upfront? And presuming our banking system will apply because of the sovereign guarantee, but -- if you can give us some flavor there, that would be helpful.

There can be different ways on that. So basically different people can have different ideas on that. Like EESL, if we are talking about the government agency, they are getting a lot of funds from investors and a lot of investors are coming and investing in EESL for these metering businesses and all. Many companies with bigger companies, they have a big pool of funds. So they are directly coming from the participation and all, IPCL and all. So basically, they have their difference. If we talk about Genus Power, Genus Power can go for a debt also because we are on a very strong balance sheet. Our debt equity is almost 0. We are a net debt-free company. So basically there -- then we can have some LCs also. So there can be a different -- many different models of getting the funds and all. So everybody who will be participating in the tenders, Genus will act as a supplier of the meters also and participating directly for the OpEx model also. So where we are directly supplying meters, how the people are getting their funds is none of our business. But Genus, there are -- mainly we can rely on the debt and -- being a very strong balance sheet.

Okay. Maybe we'll get to know as the quarter progresses.

The next question is from the line of [ Rajiv Rupani ], an individual investor.

Yes, sir. Am I audible?

Yes, yes, please.

Yes, sir. So now sir, currently, our market share in normal meters is 27% and in smart meters is about 70%. So this new order which is going to come to us, the total 250 million smart meters, which is going to be installed in over the next 5 years. What do you think will be the market share of Genus in the smart meter?

So this 70% is just because very small numbers are there. So that is not a guiding factor. We have been maintaining market share in electricity metering from 25% to 30% over the last 10, 15 years. We hope and we will give it our best to maintain that, which is not easy when the size increases so much. But definitely, we will aim for our leadership position on this. It is very difficult to give a number currently that -- yes, as a company, as a Board, as the top management of the company, we are motivated enough, committed enough, focused enough to maintain our market share.

Okay. And my second question is, sir, now the current tenders, which are of about INR 10,000 crores, on last con call, which is on 31st May, you had guided us that INR 1,200 crores has been decided, INR 2,900 crores will be decided and another INR 7,200 crores will be decided in the next 30 to 45 days. And just now in the con call, you said it will be decided in the next 2 months. So is there a delay in this...

Yes. Almost every tender has been delayed. There are 2 reasons behind it. Reason number one, this scheme now has made it more clear. Earlier, most of these tenders were coming where there was ambiguity of the specifications. Plus there was a lot of murmuring that central government has given the SBD and we have to follow the T2T. And now it has been made very, very clear that yes, one size doesn't fit all. There can be customization done by the state utilities. That is a major change that has come up. So a lot of changes will happen in these tenders. So that is the reason I'm saying these tenders, which are already to be participated or will be participated, will be happening by the end of this calendar year only.

Okay. And my last question is, now, sir, our current capacity is to produce about 10 million meters. And you have said that you can increase it to 15 million to 20 million meters. Am I correct?

Yes, absolutely. It can be doubled in 4 to 6 months. It's not difficult the way the plant and building and everything has been planned. So our business is a very yo-yo business. There have been -- because of this business being a very yo-yo business and not very heavy on CapEx, a good company plans its manufacturing capability in such a way that it can easily undertake 200% of the average. So that is the reason I can very confidently say this company producing 20 million meters. We just need to put up our effort for 4 to 6 months, and we can do it easily.

So I have a follow-up question. Now once this 250 million smart meters, which are to be installed over the next 5 years, once these get awarded, so our current capacity will last us how long? And when do you think we need to add new capacity?

So we were -- we are closely watching how the market is unfolding. We have been talking about these numbers for the last 3, 4 years. So we have to be prudent enough in looking at the market, understanding it, and using our capabilities accordingly. We cannot invest money on CapEx or at a small CapEx for planning it when you try and see the market unfolding. The beauty of our business is that it takes minimum 3 to 6 months from the tender to the first supply. So that is a good enough time for us to increase our capacities when we truly are able to see that visibility.

The next question is from the line of [ Ashit Kothi ], an individual investor. [Foreign Language] [Operator Instructions] The next question is from the line of [ Nikhil Jain from Galaxy International ].

Just wanted to ask, why is management considering to become, let's say, an AMI service provider, right? So that is different from our current business model. Does it give us some...

Sir, I can't hear you properly. Can you -- there is some disturbance in your line. Hello?

Sorry, if there has been any disturbance. I hope you are able to hear me now better?

Yes, this is better. Yes.

Yes. So I was asking the question, sir, that why is the management actually considering to become an AMI service provider where we are financing the meters and taking the risk on ourselves in terms of arranging the money? So does that give us any significant advantage or is the business being very lucrative, right? So that's what I wanted to know.

No, basically, we are not becoming only the meters -- we cannot -- when there is an opportunity, we have to be looking for both sides. We won't be only a meter CapEx doing company. We will be supplying for sure. We will be supplying to other companies also. But we have to be in the business also in other ways. So we have to face the competition in both ways. It cannot be like that or we cannot remain as a meter supplier. But there, you don't get a chance for FMS, which is mainly a good margin-driven business. And you last for almost 7 to 8 years in that business. And basically, your money is secured. The worst part, generally, dealing with a DISCOM is your money. But here, your money is absolutely safe. You are with a sovereign guarantee. You are with escrow account and everything. So basically, there is no harm in competing in both areas.

Okay. Just a related question. So the FMS part of the business that we have, today, it's roughly around 10%, and we expect it to be around 10% or with our venture into the AMISP kind of a thing, will that part of the business increase?

No, that will surely increase.

The next question is from the line of Urvija from Isha Securities. The next question is from the line of Nilesh Jethani from Envision Capital.

So first question was around the INR 6,000 per unit assumption. So this is installation plus the meter cost? Or it is meter cost which is INR 6,000 assumed?

No, no. It is an end-to-end solution cost where it has meter, box, installation and FMS for 5 years. It's a ballpark figure, yes.

Understood. And -- so basically the -- so I believe the business model is where now we would be receiving the money for the meters installed in the next 5 to 8 years?

Yes. So generally, the 2 type of tenders which are being -- getting floated. And generally the central government is advising a minimum 8 years of period. So we will have a lot of tenders which will have 8 to 10 years of complete execution cycle.

Okay. So sir, out of the near-term target, which is around 100 million to be installed by CY '23 end, so according to your sense, what will be the breakup between the rental model and direct EPC work?

So this -- out of these 100 million meters, almost 75% will be this new model only, OpEx.

Sorry, sir, I missed you, 75?

75% of these meters, I estimate, is going to be on the OpEx model, where the AMISP is going to invest on the meters, not the state government.

Okay. Understood. Understood. And I believe in the recent tendering, the approximate cost of the meters came out to be around INR 2,500 to INR 2,800. So going forward, the rate is assumed to be in that range or you assume further decline in the cost of smart meters?

We're saying this practically for the last 10 years, meters is like a shirt. It is very difficult to define the price of a shirt. So meter is a very custom-built product. It ranges anywhere -- if you talk of simple smart meter, and normal smart meter anyways ranges around INR 2,400 to even INR 4,000, INR 5,000. It is very custom built. There is no way to define that this is the ballpark figure of a particular product.

Understood. Understood. And sir, on the commentary on the last call. So last call, we said that FY '21 saw tenders worth around INR 4,000 crores. And out of this, only INR 1,200 crores are awarded. So balance 2,800 -- sorry, INR 1,200 crores are awarded, and balance INR 2,800 crores is yet to be awarded. Plus last 2 year's average was INR 7,200 crores worth of tenders. So this year, probably what we see, INR 2,800 crores balance figure of last year plus broadly this year's target of around INR 3,000 crores to INR 4,000 crores new tenders. So INR 6,800 crores to INR 7,000 crores can be approximate size of opportunity for FY '22, we can assume?

By the end of this financial year, even I am assuming that these tenders will get decided. In the last year tenders, many have been further postponed. There have been a couple of tenders, which have been finally defected by the utilities. No, we are not going ahead with this tender, we'll come out with new tenders according to the new scheme. So you will see a lot of changes. Exactly taking this number [indiscernible]. So INR 7,000 crores, INR 8,000 crores of tenders will get decided by the end of this financial year is my expectation also.

Understood. And sir, the last on the operating margin level. So with the current rise in the commodity prices, so current orders what we have in hand, can we expect margins to decline further going ahead?

No. Basically, if you see, in this quarter itself, we are hit by almost 4% to 5% in raw material and commodity prices and all. And so whatever are the old orders, it will be there for coming say -- but from third quarter or fourth quarter, the new orders will also start executing. We will start executing the new orders where we have already taken care of these commodity prices and all.

Understood. So one last thing. So earlier when we were discussing about a number of players, so it was more than 15, 18 players in that segment. But now with the change in the model where it is more like an annuity business where the installation guy or the company would have to wait for 5 years to receive the entire amount, of course, we'll have some incentive of INR 1,300 if we complete by CY '23. But with the change in the model, do you see the competitive intensity to lower in the sector?

No, competitive intensity will remain the same, but we will have to play our game correctly, which we have been doing over the last more than a decade. And I'm confident that we will be able to sustain our position [Audio Gap]

So the lines of the management are disconnected. Kindly stay on line until I reconnect them. [Technical Difficulty] Ladies and gentlemen, we have the management line reconnected to the call. Thank you, and over to you, sir.

I'm sorry to everyone for getting this line disconnected. So I'm on the landline. Still it is getting disconnected again and again. So as I was -- can you -- so I think I completed my statement. So next question, please.

Okay, sir. So basically, I was asking on the competitive intensity. So what kind of competition you assume going forward when we have a tender?

I'm expecting the same kind of competition, what it used to be currently. So most of the companies -- all good companies are now moving from conventional meters to smart meters, so competition intensity is going to be the same.

But with the amount of investment required from the company or say, for example, from Genus also, so we expect our market share to go down because now we would have a lot of upfront amount to be paid from our side and wait for the amount to come from the DISCOM or the nodal agency at a later period. So we expect our market share to go down in that sense?

Please understand that Genus will play both the roles. In few tenders, we will play the role of AMISP, where we will take the tender on a rental basis, which needs to be served for 8 to 10 years. And parallelly, we will also become the suppliers to this AMISP, which is currently also we are doing. Currently, we are a supplier to EESL, we are the AMISP. We are suppliers to IPCL, we're the AMISP. And at the same time, we are -- ourselves are doing an end-to-end energy projects in Tamil Nadu, in Rajasthan, where it is not completely on OpEx. It is CapEx plus OpEx model. So we are already undertaking that. And in future, complete OpEx model will also be undertaken by Genus. So Genus will play its role all across. Second part, Genus is one company which is not only focusing on meters. We are focusing technically also on the end-to-end solution. And currently, we are the only company which is -- which has its own meters, own [ HCF ] and does their own FMS. So our game is very clear that we will provide end-to-end solution to the end consumer, to the utility. We are not going to be only a hardware player. We're shortly going to be -- we've already started becoming a software player also. So equal value will be created by doing that end-to-end solution.

Understood. The reason for asking that question was the size of opportunity being quoted in the media of INR 1.5 trillion. So just in case the -- most of the orders come from rental route, are the retail company in position to have that kind of amount being invested in the next 3 to 5 years? That is the reason I was asking that question.

Very frankly speaking, the industry is more than geared up to do this. If this really happens, let's say, this INR 1.5 trillion are spent on this distribution reform in the next 5 years, the face of the electricity system in India will change. It will change far, far better than what -- where we are today. And the industry is more than capable of handling this kind of numbers.

The next question is from the line of [ Rajiv Rupani ], an individual investor.

Yes, sir, I have a follow-up question. So once this new smart meter order is awarded to us, so I wanted to understand that out of our current capacity of 10 million meters, I mean, will we shift to making -- most of it will be used for -- utilized for making smart meters?

Yes, yes. In our case, because we are one company, most of our products are designed in-house. Nothing we take from outside. We have a complete backward and forward integration done. So for us to changing these lines -- if you see, historically also when 2 years back, we started manufacturing smart meters for EESL. Our current lines were converted to smart metering lines. And when EESL and all the testing laboratories visited our lines, they were like [ zapped ] that what have been created in such a short time. So don't worry on that. These same lines can be used for the smart meter because everything is done in-house, so we know when to change, where to change and how to change.

And one last question on gas meters. Sir, last con call, you had updated us that in 2, 3 months, certification will be received by us. So can you give some more information about the gas metering opportunity?

On the gas metering opportunity, more or less, the testing has been completed, and we are very hopeful that in the next 30 to 45 days, we will have that -- all the certifications required. And currently also, we are participating in gas metering opportunity. We have done some 12,000, 14,000 numbers also in the last 6 to 8 months. And gas metering opportunity is also going to be a fairly good opportunity in the next 6 to 8 years. The government is envisaging sending 4.5 crores connections on the [indiscernible] Hello?

Yes, sir, I can hear you.

Yes. Some disturbance. So on the gas meter also, we are fully focused. We've already developed the product. The testing will be completed. Testing is already more or less completed. We'll -- should get the certificate in the next 30 to 45 days.

The next question is from the line of Vijay Bhayani from Samyag Finance.

Can you tell us about the time line for the proposed demerger and the restructuring of the group companies, please? I don't know if this question was answered earlier, but just in case.

Basically, we are just waiting for the SEBI's approval, Vijayji. And that is taking too much of time. It's almost because of corona and all. We were expecting in 2 months and now it's almost 4 months. So nothing is in our hand. Once it comes, then we will file in NCLT. And then it's a process of almost 4, 5 months. So we are very hopeful...

[indiscernible] by end of 2021?

Yes, yes, for sure. This year's balance sheet will reflect the demerge numbers. We are very hopeful on that. We are expecting this SEBI approval by mid of this month, August month. And then another 4, 5 months or 6 months. So we are very hopeful that by end of this financial year -- the next balance sheet will be with the demerge numbers.

The next question is from the line of [ Ashit Kothi ], an individual investor.

Sir, what I just wanted to understand from whatever conversation I heard just now that when we are going to be acting as a providing capital. So what will be our capital requirements as a capital expenditure and what ratio we intend to make it? 60-40, 50-50?

So basically, that has to be seen once the things will be maturing, what type of -- what -- exactly what numbers we are getting from supply of meters and how much you want to enter in doing the end-to-end solutions and all. So basically, we -- right now, we are looking for 1/3 of business through end-to-end solutions and remaining business from direct supply. And we should see that we will be doing a business of around INR 1,500 crores, say, next year or INR 1,300 crores to INR 1,500 crores, so we are targeting a business of INR 500 crores with end-to-end solutions and all. So -- and -- when we say INR 500 crores business, that doesn't mean the -- if we get a business of INR 500 crores, that doesn't mean it's a meter supply only. Meter supply is only 40% of that. And then it is the installation and 7 to 8 years FMS also involved in that. It's not like that if I have picked up business of INR 500 crores, I will be needing INR 500 crores immediately within a year's time or 6 months' time.

Requirement -- my fund requirement would be 20% of that?

Yes, 35% to 40% of the total tender I have won.

All right. That was one. And second, apart from gas meter, are we also planning to go in for -- or looking at water meters also?

As a company, we have made our vision very clear that we are what we are. We have redefined ourselves. We are a measurement communication and analysis company where we provide end-to-end solution to a utility. And worldwide utilities have always been energy, water and gas. So energy, we are already there, gas we have already ventured in. And water, you will see Genus playing a good role from next financial year. We are already on the journey of -- we have started the journey of working on the water meters.

Okay. Because that's going to be one of the biggest market as far as India is concerned.

Let's hope so.

Okay. And how are we cash availability-wise for the next 2 quarters -- next 1 to 2 quarters? Because...

Sorry to interrupt, [ Mr. Kothi ], there is a disturbance coming from your line, sir.

Sorry, next 1 or 2 quarters, what will be your cash requirements and are we prepared for that?

It's a normal cash requirement will be there. We are okay with our working capital and all, being a net debt -- zero-debt company. So we don't have any cash issues and we are a cash positive company.

This was basically from the point of your current situation?

Yes. I'm talking about the current situation only. Last quarter was even worser than the quarters, we are expecting, will be certainly better than the quarter we have faced last year. So even that time also, company never faced any cash concerns or any cash issues. So fortunately, we are very okay that we won't be facing any cash issues for the company.

Right. So we might end up with maybe a marginal cash loss or something in the current quarter -- second quarter, by any chance if situation does not improve much. But that would not pose any issue to us?

No, we are not even in cash loss in first quarter also. There is no cash losses in first quarter also.

But that's a marginal profit, right?

This is the margin. But if you add depreciation also, the cash profit is INR 4 crores or INR 5 crores. So basically there is no -- yes. And company is sitting on a cash of INR 200 crores. So that also won't be any challenge.

And our cost of funding currently at what rate, sir?

Around 7.75%.

Pretty comfortable, I suppose?

Yes.

Thank you. I would now like to hand the conference over to the management for closing comments.

Thank you all for joining the conference. And we, as a management of Genus Power, surely assure you that the things will be improving in from third quarter and it will be a very good number in financial -- coming financial in '23 -- '22, '23. Thanks a lot. Thank you very much.