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

Ladies and gentlemen, good day, and welcome to Analyst Conference Call of Genus Power Infrastructures Limited to discuss the business update on the deal that the company has made and entered with GIC to set up a platform to fund smart metering projects. This conference call is being hosted to discuss the GIC partnership, and the company will retain from discussing anything on business performance or financials for Q1 FY '24. This conference call may contain certain forward-looking statements of the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kailash Agarwal, Vice Chairman of Genus Power Infrastructures Limited. Thank you, and over to you, sir.

Good afternoon, all. Good afternoon, dear friends. A very warm welcome to all of you. Along with me on this conference call is Mr. Jitendra Agarwal, who is the Joint Managing Director of the company; and our Investor Relations Advisors, SGA. As disclosed to the stock exchanges, we are pleased to announce that we have signed definitive agreements with Gem View Investment Pte Limited, an affiliate of GIC Singapore, for setting up a platform for undertaking advanced metering infrastructure service provider, AMISP concessions. In this platform, GIC will hold 74% stake, while Genus will hold 26% stake. Both GIC and Genus Power as partners have committed to an initial pipeline with a capital outlay of approximately USD 2 billion. Genus Power would be the exclusive supplier to the platform, I say exclusive supplier to the platform for smart meters and other associated services. In addition to this, another affiliate of GIC, Chiswick Investment Pte Limited will also make an investment of up to INR 519 crores by way of a preferential allotment of warrants at INR 112.88 per share warrant. This will constitute 15% of the issued and paid-up share capital of Genus on a fully diluted basis. The above-mentioned transactions are subject to the approval of Genus shareholders and fulfillment of customary closing conditions to the satisfaction of GIC affiliates. Broadly, we can say the platform will add as an AMISP that will be the prime bidder for various smart metering projects awarded by the state electricity boards on [ DBFOT ], design, build, finance, operate, transfer basis. For all the AMISP projects won by the platform, it will have an exclusive arrangement with Genus Power as technical partner of our supply -- for the supply, installation and technology provider of smart meters. Approximately 60% of the project value won by the platform is likely to occur to Genus Power and remaining 40% to the platform. Genus Power and GIC will fund the platform in accordance with their shareholding. The initial investment cap for Genus Power is USD 211 million for a 26% stake in the platform, which will have an initial outlay of USD 2 billion, which constitutes a mix of funding via both equity and debt. The target installation for this platform is 30 million meters in the next 3 to 4 years. The supply of smart meters to the platform will happen at competitive arm length pricing policy as Genus Power and the platform are 2 separate companies. As Genus Power, we will now play the role of smart meter supplier to the [ AMISP ] platform, the receivable cycle is also expected to witness a sharp decrease. The [ AMISP ] projects after they are awarded take about 6 to 9 months to ramp up and pick up pace on ground, so the revenue will start flowing from the fourth quarter of financial year '24. We expect to record a total top line of about INR 1,200 crores to INR 1,400 crores in this fiscal year and expect a multi-fold jump in revenue in financial year '25. Addition to this, we have received a letter of award of INR 2,207.53 crore for appointment of advanced metering infrastructure service provider, including the design of AMI system with supply, installation and commissioning of 27.69 lakhs smart prepaid meters, feeder meter, DT meter level energy accounting and FMS of these 27.69 lakh meters, which was informed to the exchanges 2 days, 3 days back. Post this order inflow, our total order book stands at an excess of INR 6,000 crores. So having this platform and 6,000 order book, we see a very good coming years on that. And now I welcome the questions and answers.

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital Advisors.

Sorry, I'm Mohit Kumar, from ICICI Securities. Sir, my 2 questions, sir. First of all, congratulations on a very, very good set of -- on the deal. So my first question is, can you give us a broad sense of investment required for the current AMISP order book? And how much of the AMISP order book will get transferred to the [ SPV ]?

So basically, Mohit, all the orders, except the order of Bihar -- South Bihar we won a year back, will not be transferred. Otherwise, all other orders will be executed through this platform only. The total order book is INR 6,000 crores. Out of that, I think INR 1,000 crores is that Bihar order. And whatever the other AMISP orders are there in the company will be executed through the platform only.

Understood, sir. Second question, sir, you said that we have to invest around $211 million, right, which is translates into INR 1,600 crore. Is there any time line to bring your investments in the [ SPV ]?

So it will be around 3 to 4 years, as we said -- as I said earlier also that there will be a total capital outlay of $2 billion. So when I say $2 billion, the order book size -- order size of platform SPV will be around $3.5 billion around, say, because we are talking about 30 million meters, 3 crore meters. So per point, if you say broadly 9,000 to 10,000, including the taxes and all, so total order to the platform will be of around INR 30,000 crores. Out of that, when we say 60% will come to the -- and 60% capital outlay is needed, so it is approximately, it comes to $2 billion and all. So total capital outlay of the platform will be $2 billion. Out of that, it will be equity and debt also, so some equity and some debt. So equity from Genus will be -- is a commitment of $211 million, and that will go in next, say, 3 to 4 years. As a total, we had a total 30 million meters or 3 crore meters, we have to do in 3 to 4 years, so the total equity outlay will be also in 3 to 4 years. So remaining equity in the same proportion of 74% will be coming from GIC. And whatever is the balance will come through debt.

The last question was on clarification. So sir, on the current order book, when you say AMISP, does it include the O&M part also? Is it only supply part of the...

It includes all order, full order, O&M and everything.

[Operator Instructions] The next question is from the line of Ajay Upadhyay from [indiscernible].

Kailash bhai and Jitendra bhai, really positive developments and all the best. Okay. I'm a little curious about knowing the 60% that you are saying, which will come to Genus, does it -- is it including the 24% of the platform...

No, no. Platform will be a separate entity. That will be a 26% of investment in that. That is separate, totally separate.

Okay. So the 26% is not part of that 60% that you're talking here?

So 60% is the business that platform will give to Genus Power for supplying of meters, for installation of meters, for O&M and everything, because rest 40% comes to the financing and 10 years management and all.

Based on the current businesses that you've got, say, INR 6,000 crores, so 60% of that will come to you?

Yes. Yes. You can see like that, yes.

And how will the billing come about? Like what will Genus' billing be -- you will be billing which company?

We will be billing to the platform only, the SPVs of the platform, because it will be not a direct platform. Platform has to make SPVs because every tender there is -- we have to make SPV like this INR 6,000 crores order also. We have different SPV form. So all those SPVs will come under platform now. So we will be billing to those SPVs. So whatever the money will come into the Genus or whatever the agreement will happen, but it will be with the SPVs only. Platform will be owning those SPVs. So in SPVs, the money will be coming from the platform and then SPV will be paying money to the Genus part. So billing will be in that.

And the platform then in turn has to bill somebody...

The platform is just putting the money. That platform is not doing any business. So basically, a platform is formed, where 26% is Genus, 74% is GIC. That platform will be investing money in different SPVs. The business Genus will get from those SPVs, so Genus will be billing to those SPVs, getting money from those SPVs and those SPVs will be billing to utilities.

The SPVs are currently 100% owned by Genus, right?

Yes, correct.

So what is the -- suppose you execute INR 6,000 crores worth of business, what is the revenue, which accrues to Genus, a listed company?

So that will be around 60%. That will be around 60% of the -- broadly 60%, you can say. It might go [indiscernible], sometimes might come to 65%. Broadly, we can say 60%, yes. 60% revenue will be come into the listed company.

SPV would be billing INR 6,000 then...

Yes, yes, yes.

But SPV is 100% subsidiary, so that will again come back into Genus.

So basically, right now, whatever orders we have got, so that model, there will be restructuring that, where there should be no consolidation in Genus balance sheet because all the investments and everything will be coming from the platform. And Genus Power will be acting as a sole supplier to that SPV and all. So we are already in discussions with our auditors and all, whether a consolidation will be required or not. So if any consolidation will be required, then you are right.

Being 100% subsidiary, you have to consolidate. There's no option.

Absolutely. You are absolutely right. But because the 100% business is being done, [ routed ] through that, we are already in discussion [ SRB ], our auditors and all. So whatever they suggest, we have to go like that only.

Okay. The [ INR 3,600 ] is definitely coming in the next 2 years for Genus and maybe more. And this does not include any of the other meter supplies to other people, like Tata Power and [ Techno Electric ] and others.

Yes, yes, yes.

And would you be using companies like [ Techno Electric ] for your execution on the ground? You subcontracted to them and say, okay, you guys handled it because after some time, you will be possibly having to run into issues of managing such large geographies and size of orders.

JK, you can answer it better, please.

Hello?

Yes. Yes, JK.

JK, we cannot hear you.

Hello?

Yes, yes, now you are audible, yes.

Am I audible? No, we are not planning anything right now like this. We are very -- currently, we are focusing on developing our own systems, processes and our own deals, which is very well placed on...

Basically, I'm giving you an idea because maybe if you are, say, INR 15,000 crores worth of orders, you will possibly run into bandwidth issues and managerial issues. So you could look at some of these, maybe they are competitors, but they could facilitate actual order execution.

It's a good idea, and definitely keep it -- we'll keep it open. We're always open for the good ideas.

That's [indiscernible] I had in mind. And many others will be because managing that size of order on the ground is -- can be really tricky for non-EPC companies. And there have been many companies which have run into major hurdles on the ground. So there is a need for derisking at that stage, especially when you run into orders beyond INR 6,000 crores, INR 10,000 crores, which you will, because the execution has to be done in a very short span.

That is, again, a 3, 4 years' time. So it's not a very large span also, but it's not a very small also. And you are absolutely right, we have to build our capabilities for all these things. There is no doubt in that.

Sorry to interrupt you, Mr. Ajay, I request you to join the queue again for a follow-up question. [Operator Instructions] Next question is from the line of Rahul Modi from Nippon Asset Management.

Congratulations for a great deal. Sir, just a couple of questions. Sir, just getting some [ numbers ] correct. Now you said INR 1,000 crore is from Bihar, and the total is INR 6,000 crore. So any -- so INR 5,000 crores is the balance. So anything which is an only supply order in the order book which should also get excluded, so the net transfer would be anywhere INR 4,000 crores, INR 4,500 crores. Is that correct?

I'll answer that Kailash ji. Exact what we'll get transferred is INR 2,200 crores plus INR 2,400 crores, exactly INR 4,600 crores.

Okay. INR 2,200 crores plus INR 2,400 crores. Out of INR 6,000 crores, INR 4,600 crores gets [ transferred ].

Yes.

Right. Perfect. And sir, now obviously, when you're targeting 3 crore meters of -- do you look to expand the capacity, which was [indiscernible]. I'm saying we are a fungible capacity right now, so do you look to increase the capacity -- manufacturing capacity?

Currently, we are comfortable with that because we -- as I said earlier, we are already comfortably producing 10 to 11 million meters annually, and the way we have planned it, whenever we need it, we need maximum 3 to 5 months to explain the capacity.

Right. That's useful. And I think, lastly, just wanted to understand in the AMISP format, sir, what is the typical threshold of IRRs that we are looking at? And if you could just explain how the cash flows come in from the various DISCOM through the escrow mechanism in terms of year 1 to year 10 for the year 1 to year 12. If you can explain that, that would be very helpful.

Rahul ji, we cannot talk anything on IRRs because already we are participating in tenders, so that would be difficult to comment anything on that. And regarding cash flows, it's a bigger subject. To tell you in this conference call, it is not possible. That can be told to you separately, and you can have a discussion separately on that.

Next question is from the line of Devrath Jhunjhunwala from Nepean Capital.

I have 2 questions specifically, one on supply chain issues and second on renewable energy. The first is, is there any plan to handle certain supply chain constraints, for example, semiconductor issues into -- importing into India and other imports that may be subject to tensions? And my second question is, what is the proportion of renewable energy sources or renewable energy transmission that the smart meters will participate in? Or is this completely agnostic to the type of energy produced?

JK, you answer this. Hello?

Hello?

Yes, sir, one moment. Jitendra, sir?

Sorry, was my question heard?

Yes, sir, your question was heard. Sir, Jitendra sir's line is dropped. We will reconnect. Just give me a moment. Participants, thank you for your patience. We have line from Mr. Jitendra reconnected. Devrath, may I request you to repeat your question once again, please?

Sure. Sure. Gentleman, I have 2 questions. One about supply chain issues. Second about renewable energy. On supply chain point, is there any plan to -- as you've already mentioned [indiscernible] production capacity to produce these 30 million meters. So is there any plan to address the supply chain constraints, for example, semiconductors or any other materials that you may need? And secondly, in the platform and the order books that you have currently, is there any proportion that is going to be focused on renewable energy? Or is it agnostic through energy that is produced and, therefore, could be both renewable and nonrenewable sources?

For the question number one, we are closely working with our vendors. The semiconductor issues are more or less over. We are already almost at the levels of pre-COVID, so I don't see any issues coming up due to the supply chain management and especially for the semiconductor reasons. So we don't see any problems coming up the next 3 to 4 months, max. And for your second question, this platform is going to focus only on the AMISP projects, very specifically.

Next question is from the line of Srijan Sinha from Future Generali.

First of all, congratulations on bringing a [ marquee ] investor to your platform. Sir, I'm not clear on the 60% of the revenue flowing through Genus. So this is -- so you intend to implement about 3 crore meters, right? Ballpark the total cost would be about INR 10,000 per meter, which means INR 30,000 crores of potential order book for the platform.

Correct.

So 60% of that INR 30,000 crores flows through Genus? Or it is just the INR 15,000 crores, which is the upfront capital...

No, no, 60% of that INR 30,000 crores will...

Okay. So potential revenue pool is about INR 18,000 crores.

INR 18,000 crores. So that's why we are seeing a total capital outlay of $2 billion because out of that 18 months -- after 6 months from every project, the cash flow starts coming to the platform also. So the total capital outlay of platform will be [indiscernible] at $2 billion.

Okay. So which means the total revenue potential for the next 3 to 4 years is about INR 18,000 crores...

INR 18,000 crore for the Genus and the outlay of the capital will be around INR 16,000 crores.

Okay. And this INR 18,000 crores includes the meter manufacturing plus O&M and installation as well?

Yes, yes.

Okay. Sir, my second question is, I mean, as investors, you're always worried about the extended payment cycles in the AMISP that would have stressed our balance sheet. Now that has been taken care of. Now can you help us understand a bit about the payment terms with the platform? How soon do you get your money back from the platform? And what would be the typical working capital cycle like?

So basically, once we have completed whatever the requirements from the utility is there, so once we have completed that, there will be a payment terms of 30 to 45 days different -- depending on tender to tender from the platforms. Exactly -- it will be a different EPC contract for every contract or every EPC, there will be a separate contract with the platform that will be signed from time to time. Whenever the EPC -- whenever the contract comes or the concession comes, there will be an EPC contract signed between the platform and the Genus. And in that, there will be a variance from 30 to 45 days for payment terms and all.

So simplistically, the day you manufacture your meter and you ship it, you get your payments back in 45 days, is what you're trying to...

No, no. Basically, once I ship the meter, they install the meter, then I get a certificate from the utility for that and then it starts.

Okay. Fair enough. Now this becomes a very asset-light model for Genus, the listed entity. All the leverage goes into the platform, right, where -- which becomes an associate for a company for us. So what would be the peak debt that you are looking at for the listed entity?

So basically, right now, we -- in this particular financial year, we are just -- we have taken a loan of DFC, which we have already announced of [ $50 million ], and that is going for the Bihar project, which I was telling that it is not a part of the platform. So basically, that is taken for that project only. And I think -- I don't think there will be further any raise in that -- for at least in this financial year. And there might be some raising in coming years, but that will also not be too much, not to a very high levels because already, we have come in an asset-light model, and our working capital cycle will also reduce to a good number. So I don't think there will be a big debt required by the company. And again, that this -- the warrants, the money of warrant is also coming to the company.

Yes, about INR 500-odd crores. So $211 million that you have to pay, a ballpark about INR 1,500 crore to INR 1,600 crore. The INR 500 crores is taken care of by the warrant money that comes in, right. Rest INR 1,000 crore you intend to raise debt to fund that INR 1,000 crores investment? Or would it be done through internal accruals...

No, no, basically, it can be through internal accruals also, and company is already sitting on bonds or treasuries of almost INR 250 crores to INR 300 crores, so that is a cash surplus with the company. Then there will be internal accruals also in the next 3 years or 4 years. And then if required, few hundred crores, we can go for the debt also.

Okay. And sir, one more question is on, do we intend to bid separately as well or the entire bidding will be done through platform only?

It will be through platform only. Platform doesn't want to bid for any particular thing. We can bid it directly.

Okay. Fair enough. Sir, my final question is there are 2 other L1 status that we have. One is, I think in UP and other is in Himachal Pradesh. How soon do you think that will transform into your order book? And will that also be part of the platform?

Srijan, that we will talk later. This is purely for GIC things and all. This can be discussed later.

[Operator Instructions] The next question is from the line of Nikhil Abhyankar ICICI Securities.

Can you give us the breakup of the order book in terms of supply and O&M?

So basically, the total order book, 60% is the supply, installation and other thing, then 40% is O&M.

And sir, what is the duration of these O&M contracts? How long do we have to serve them?

Normally, 100 months.

100 months. Okay. And sir, this question has been asked earlier as well. So any changes in terms of guidance for FY '25 because all these order inflows will start coming in. And you have also mentioned that most of the orders will take around 6 to 9 months to mature, and we've got a large order in terms of L1. So all these L1 orders will start getting executed in FY '25. So can we expect a large increase in revenues for FY '25?

In my initial remarks, I've already told that '24, we are looking at a number of around INR 1,200 crores to INR 1,400 crores. It will be a multi-fold jump for '25 for sure. But right now, exact number, I don't want to give. We'll try to give a next conference.

Sure. And sir, you also mentioned that to increase the capacity, you might need somewhere around 5 to 6 months. So what kind of CapEx will we need? And what kind of capacity expansion will we take up, if at all, we do?

So for a 10 million meter expansion, we will be needing around INR 50 crores.

Next question is from the line of Tushar Sarda from Athena Investment Group.

Congratulations, sir, on the tie up with GIC. I wanted to understand, will you be supplying meters for other AMISP winners or you will supply exclusive only to this platform?

JK, you please answer this.

No, we will supply to other AMISP players also.

We can supply to anybody, any AMISP. There is no restriction on that.

And how is the competitive intensity in the AMISP business? Who are the other players and what market share are you targeting?

Okay. The competition intensity is -- I won't say it's very high, but it is good enough. And there are some large corporates like Adani, Montecarlo, NCC, GMR, they're active in the market.

And tenders are only for AMISP, right. There are no separate tenders for smart meters. Is that understanding right?

Complete package is AMISP.

Okay. Okay. Thank you, sir, and all the best, and we look forward to your guidance for FY '25.

Next question is from the line of Jayesh Gandhi from Harshad Gandhi.

So my question is, we will not be giving any IRR percentage on bidding for a particular tender. For example, if we are readily getting 12%, so what percent will now be coming to Genus listed and the platform?

So that's very difficult to give. I can only say that Genus, as told earlier also, is giving a guidance of healthy EBITDA numbers. And whatever we have achieved before COVID like 15%, 16% of EBITDA levels, we will -- we are looking at these type of numbers in Genus, the listed entity.

So the platform basically is now just a financing entity, if I am reading it correctly, right.

So basically, exactly you cannot say that because only 60% of the revenue is coming here, remaining revenue is going there. So all finance will be [ arranged ] from the platform. You cannot say that it is only a financing company. So it is taking a business. It is doing a business. It will be a proper business in the platform through the SPVs.

Okay. And to the earlier caller's question, see, if you are entertaining other guys also who are bidding for this AMISP to our platform, so manufacturing in those cases will go to Genus or it will go to some other, I mean...

No, no. We are not entertaining anybody from the platform. The meter supplier to other AMISP will be directly through Genus, the listed company. Platform has nothing to do with others. It is -- it will participate exclusively and exclusive business will come to Genus. If Genus wants to supply to whether AMISP, the meters, they can, they are allowed to supply.

Okay. And when you said that you will probably receive the payments from the platform between say, 35 to 45 days, so that would be kind of like working capital, which we can see?

So basically, it's nothing of working capital. Whatever we have supplied to the platform or to the SPVs, they will pay us for that. Whatever the services we have provided, they will be paying us for that.

Okay. So why I'm saying is because your [ debtor ] days are like closer to like 200 days plus in the last so many -- I mean 4, 5 years. So will that come down? 35, 45 days...

Yes, surely, it will come down. Surely, it will come down. Yes, it will come down, surely.

And that will be 35 to 45 days?

Exact numbers, it's difficult to give. The working capital cycle will reduce, for sure.

[Operator Instructions] Next question is from the line of Chandresh Malpani from Niveshaay Investments.

So basically, now in this model as we are moving from O&M to just supply of meters, so what is your outlook on margins front? Do you want to revisit your guidance?

Yes. We don't want to revisit. We have -- in last question only, I've given our guidance on the margins and all.

So 15% kind of margins you have guided.

EBITDA levels. EBITDA levels.

Yes. Yes. Okay. Sir, and secondly, what are the current tenders like government or what have been awarded by the on total levels actually?

So basically, this is for a GIC conference. That can be answered in this conference call, please. So let us stick to this transaction that has happened yesterday in this conference.