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

Ladies and gentlemen, good day, and welcome to Genus Power Infrastructures Limited Q4 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about 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 risks 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. Jitendra Agarwal, Joint Managing Director of Genus Power Infrastructures Limited. Thank you, and over to you, sir.

Good evening, ladies and gentlemen. A very warm welcome. Today, Mr. Kailash Agarwal is unable to join us due to some medical exigency. So he's busy in Delhi. With me in the call is our SGA, our Investor Relations adviser. The results and investor presentation are already uploaded on the stock exchange and company website. I hope everybody has a chance to look at it. Since July 2023, our company has consistently achieved remarkable success by securing a series of [ prestigious ] orders. The orders exceeding INR 16,000 crores net of taxes are for the installation of more than 1.82 crore in smart prepaid meters. This is the trust and confidence demonstrated by our clients is a strong testament to our dependability of our cutting-edge smart metering solutions. Our total order book, including all SPVs and GIC platform has surpassed INR 21,000 crores as on date, indicating a promising outlook for future revenue growth. It is important to understand that the start of these orders typically requires a minimum of 6 to 9 months from the time the order is received. This is due to extensive formalities that must be completed before starting these projects. Thus we expect a revenue surge starting from financial year '25 driven by the execution of our good order book. Operating profit margins are also expected to improve as operating leverage kicks in along with the realization of economies of scale and continued cost management efforts. All these orders are generally have an execution cycle of 24 to 27 months. It provides a good visibility in the coming years. Coming to quarterly results. Revenue stood at INR 420.1 crores, up by 108% as against quarter 4 financial year '23 revenue of INR 202.3 crores. The robust order execution and ongoing expansion of the smart metering business is driving the group. EBITDA stood at INR 65.4 crores, up by 104% as against quarter 4 financial year '23. We have noticed the significant rise in employee costs and other expenses due to our ongoing efforts to expand our workforce and enhance our systems. This is in anticipation of meeting the substantial order book we have acquired. PAT stands at INR 31.4 crores for Q4 financial year '24 , an increase of 151% as compared to INR 12.5 crores in Q4 financial year '23. However, the company's profitability in Q4 was impacted as a result of a substantial rise in financing expenses. This was a direct consequence of the company's requirement to offer supplementary bank guarantees in order to ensure the influx of orders. According to our evaluation, we expect a significant surge in our revenue from financial year '25 onwards. This will be driven by a strong performance of our order book and a steady flow of new orders. We expect to record total revenue of about INR 2,500 crores in financial year '25. With the operating leverage kicking in, we also expect our operating margin to significantly improve. We maintained a very positive outlook regarding the substantial enhancement of our business operation in this financial year. We can now open the line for Q&A.

[Operator Instructions] Our first question is from the line of Mohit Kumar from ICICI Securities.

Congratulations on a very good set of numbers. So my first question is, what is the status of go-to-live status of the existing order book. And can you help us with revenues and margin guidance for FY '25?

Status of go-to-live is different for all the different projects. Every project is at a different stage. So it is very difficult for me to specifically tell you as a whole where are we, because we are very much within the timelines of the project. As I said earlier, most of the project takes minimum 6 to 9 months to come on to the ground. In almost every project what we have secured currently, they're already on the ground. And most of the projects, the work has also started. So every project is in a different stage currently. And as I told earlier also that guideline for this financial year, what we have given is INR 2,500 crores.

And for the margin guidance, sir?

15% to 16% EBITDA.

Understood, sir. The second question is, can you please help us with the opportunity size upcoming where the tenders are yet to be opened. And the related question is, will GIC help to bid for more than INR 3 billion work order of contract value?

So there is no restriction from GIC, that we cannot bid more than this value. So that was the minimum criteria we built out between us, but that is not the limit. The projects which are upcoming, although there are a lot of tenders which are in the -- which are under the different states, different status. Few are already open where we are L1 through -- we have quoted the title will be known in 3 months; soon, it will be quoted in the next couple of months. So even in this financial year, we expect a good incoming of order flow.

Is it possible to quantify the L1 status, sir? L1?

Currently, we have L1 in projects -- but exact number, if I have to -- will be around INR 11,000 crores.

Understood, sir. My last question, sir, what are the execution challenges? And I assume that given that you're ramping up, we do need to hire people, right, to build those capabilities to execute this large order book. Can you just elaborate on it, what we are doing to ensure that we are on time and we have been within the cost?

So the good thing is we are doing what we understand it very well. So this is a metering business, which we understand. And this is not the first time yes, the scale has been much larger than what we have done it in the past. But the good part is we understand what we are doing. And we are building, of course, as I said earlier, also, there's a lot of cost that has increased in terms of manpower, in terms of building the capability in the field in-house headquarters. So a lot of investment has happened in the last 12 to 24 months, which is visible in our salary expenses also. So currently, as such, we are not seeing any unrealistic challenge in the field, which is a very good sign. Almost 11 million, 12 million smart meters are installed in the country. In country, in general, the acceptance by the public by the utilities is very, very good. Rather what we initially thought there will be some challenges, but we're working in Assam. We are working in Bihar. These are the 2 states where we are working very extensively. If you see the economic status of these 2 states, we are one of them in the lower side, still the acceptance has been very, very good. This is a very clear indication that acceptance of the smart meter is good. In general unrealistic challenges are not visible in the field. So I'm expecting a very good run rate picking up from this financial year onwards.

The next question is from the line of Darshil Pandya from Finterest Capital.

Congratulations on this great set of numbers and we really would like to congratulate the management for delivering on the commitments. Sir, number one question would be on the tax guidance. You guided last year -- last quarter about 25% is the new tax regime. But since even this quarter, we have seen more than 25% of the rate. So what is the tax guidance? And what is happening in this, if you can just quantify?

So since Mr. Kailash Agarwal is not on the call and I'm generally not very equipped to answer you on this. We'll make a note of this question and make sure SGA will come back to you with the reply.

Okay. No worries on that. And sir, would it be a great question, if I could ask you, what is the rationale behind incorporating so many companies? We have been seeing Genus Power incorporating a lot of subsidiaries. What is the rationale behind it?

So this is how the bidding is to be done. If you see the SBD, this is how the bidding needs to be done, that you have to create every -- it has to be a separate SPV. That is the only reason. And there's no other rationale behind it.

Okay. Just for the bidding prospect, we are doing this.

For the bidding prospect, yes. So this is how we have planned this. Different companies can have only 1 SPV and they can bid in the that SPV all the projects. We have taken the route of different SPVs for different projects. That is the only reason behind it. But once you execute -- start executing the order every SPVs has to be separate. So we're doing it during the bid itself in most of the cases.

And sir, what will be the debt cost for this financial year and debt position as on it?

So again, I would like this question to be answered later on my Mr. Kailash Agarwal.

Okay. Okay. And sir, any guidance for FY '26 or FY '27?

So I'm very positive on FY, '25. FY '26 also will be definitely much better than '25, but I don't want to spell any numbers so early. But yes, maybe 3, 4 months or 6 months down the line, we'll give you a guidance on it also. But it will definitely much better than what we will do this year.

The next question is from the line of Pratik Jain from Solidarity Investment Managers.

Sir, can you help me with the number, what is the system-wide meters installed in India and as of today and what is the target? What is your expectation that it can get installed by the next year? That's my first question, sir.

So currently, I can't give you an exact number, but roughly what I understand from the market intelligence almost 11 million meters are installed, smart meters are installed in India over the period of, I would say, 6, 7 years when the journey started, which has picked up, primarily in the last 2 years only. In this financial year, I personally believe that at least 60 million to 70 million smart meters will be installed.

Got it. And sir, the government had set a target of 25 -- installing 25 crore smart meters. What is your realistic assumption that by when it can happen?

My realistic assumption will be it will happen in next 4 to 5 years.

Got it. And sir, one more question on the smart meter side. We have been hearing that the smart meters are being currently imported from China. Can you help me understand what percent of smart meters installed in India are imported from China? And what is the cost difference there?

Currently, not a single meter is being imported from China. As far as I understand this industry, if I have to put any percentage in the historical data, maybe 0.05%.

The next question is from the line of Aksh Vashishth from Future Generali India Life Insurance.

Congratulations on a good set of numbers. So my first question to you is, so our other expenses this quarter have gone up about -- by about INR 30-odd crores sequentially. So I just wanted to understand what will be the trajectory going forward?

So all these expenses are -- during my commentary also I made it very clear that a lot of investment is happening in building up the projects. So initial investments are generally very high, in terms of manpower, people, offices, other expenses. So a lot of expenses are happened initially. There is lot many projects are going to start in next 2 to 3 quarters. So these expenses will continue. And once we'll start getting the revenue, they will get compensated.

Can we assume that the current run rate of about INR 75 crores, INR 80-odd crores, which we have of other expenses which you have done this quarter, is going to roughly remain in the same range. It's not going to increase incrementally going forward from here?

I would say, yes to a very large extent. Yes.

Okay. And my second question is that, so we have done an EBITDA margin of around 13-odd percent this quarter. But if I see the segmental reporting, the EBIT margin in the metering business is roughly around 16-odd percent. So just wanted to understand what has been a drag on the consol number? So I'm not able to figure out the math behind it.

So as you see there's a lot of investment happening on the ground for the projects. Currently, there is -- where you see there is a metering business. And then there are projects being handled simultaneously. So a lot of these things will become common once you will see projects happening continuously in future.

Okay. Okay. And my last question is, which major states -- if you can help us guide, which major states are left, which are expected to place order in the near term?

So I think the major states which are still not went into the smart meters are Tamil Nadu, Karnataka, Rajasthan, Haryana, Punjab, these are the major states, which are still not -- some have already come out with the tenders or some have already on the process of -- but they have not started the journey. So these are the major states, which has not started the journey.

The next question is from the line of Chandresh Malpani from Niveshaay Investment Advisors.

Congratulations on this good set of execution. Sir, my first question pertains to the execution on ground level. What I understand is that Genus sells to its platform the majority of its meters. So trying to understand what is the execution on ground because of our receivables as that March ending is like close to INR 580 crores, which is more than this quarter's sales, so trying to understand if this -- if the platform is able to execute and receive receivables on their side. So how is it happening on ground?

So the receivable consists of the meters that we supply to the electricity boards, which we have been doing in the past, and platform has to do nothing. All the EPC contract on back-to-back basis are given back to the Genus Power. So there is no execution which has to happen, which has to be done by the platform. Everything has to be done by Genus Power only. So execution on ground level, as I said earlier also, it takes its own time and so many systems being built, integration with the current billing system, integration with the HES, MDM, which is there on the ground. So there is lot of work which happens in first 6 to 9 months. So meters are being signed. They are installed. Then the SAT happens. When SAT happens, all this takes a fair amount of time. So you will see when you are seeing the outstanding. One is the historical outstanding, which is for the meter being supplied to different state utilities, which has been historical path. And some meters which are being installed in the field, but not build yet because of the system integration. So as you can see, the outstanding is almost similar, the way it used to be in the earlier years.

But sir, out of this total outstanding, how much is the utility base? Like, what we understand is that Genus has transacted in this way that it will only be a sole supplier of meter. So whenever the meters are being supplied, it will book the revenue to the HPV and HPV will pay Genus in, say, 45 to 60 days. So is my understanding right, sir?

This is absolutely right. But if Genus will supply the meter, Genus will install the meter. Once the SAT is done, then platform will pay back to Genus. For Genus, it is like a CapEx business, that is, supply the meter and platform will pay us. We have to install them also. We have to system integrate also. And we have to -- once the operation go live happens, platform pays the money to Genus.

Okay. Okay. Got it, sir. And sir, secondly, on this opportunity side trying to understand like government has tendered out some 25 crore meters. But recently, we also see that there is a concept of net meter -- net metering getting traction. So this will open up another opportunity? Or how should we see this -- the opportunity size basically for our industry?

Every smart meter is capable of doing the net metering. But the only thing is because net metering is started where these both are not clubbed. So initially, what I believe is next 2 years, there will be some duplication also that will happen that a lot of places smart meters will be installed afterward, but net meters will be sold this year or next year itself. So some duplication will happen. We cannot do the job of a smart meter, but a smart meter can do the job of a net meter.

Okay. Got it. And sir, lastly, again, on the execution challenges, we see that some states like Gujarat are facing protest from the customers complaining about the higher billings when smart meters are installed. So -- and they've also taken a step back and say that, firstly, it will be deployed in the government offices and then the execution at the customer level will start. So do we see any challenges on execution in your view on this, sir?

So this is absolutely a normal situation. I'm not finding it crazily abnormal. If you go back to the history, when electronic meters were installed in the initial days of 2002, '03, '04, there were some agitation in some pockets of the country. You are seeing agitation in the pocket of Gujarat. There are not even 20,000, 25,000 meters installed. But we have not seen any agitation in Assam, where more than 2 million meters are already installed. We are not seeing any agitation in Bihar. There are almost 4.5 million meters installed. We're not seeing any agitation in U.P. There almost 2.5 million meters are installed. So it is in some pockets sometimes. Somebody has created an issue. And sometimes, electricity boards also take a little linear view, okay, we will do it like this so that they take care of the consumer the -- problem is mellowed down. So these are very normal I'm not finding anything obnoxious in whatever is happening in [ Gujarat ].

The next question is from the line of Akash from Dalal & Broacha.

Sir, congrats on the good set of numbers.

Thank you.

My question is, if I were to segregate my INR 21,000 crore order book as of today. So how would you split it how much would be for supply? How much would be for installation? And how much would be for maintenance, just a broad breakup?

So this INR 21,000 crores is approximated order book of the whole company. And this in fact, you can remove around INR 1,500 crores to INR 2,000 crores of our supply orders from the different customers, utilities, supply tenders, what we've been from that -- our existing business, what we used to do earlier, around INR 19,000 crores, and I'm giving a very approximate numbers, don't hold me to that, I can't give absolute number.

Yes, yes, broad figure, sir.

Broad figure I'm giving you. The INR 19,000 crores is from the platform. So this INR 19,000 crores will go to the platform and almost 75% will come back to Genus. But this INR 19, 000 crores includes of all the SPVs, [ a bit more orders ], everything. So currently, everything is in Genus. And then it will move to the platform. Then platform will again give EPC contracts to Genus back. It will be almost 75% to 80%.

So out of that INR 19,000 crores, how much will we get for supply? And how much will we get for -- so maintenance will be taken care of by the SPV itself, the platform itself, right?

Maintenance will be taken care. Again, everything will be done by Genus. So you can broadly break it like this. Out of this INR 19,000 crores, 80% will come to Genus, Okay? And from this 80% if you form -- let's make this 80% at 100%. So then 50% of that 100% would be supply, around 20% will be installation and around 30% will be O&M, operation and maintenance. This is broadly you can break it. Somewhere it can be 45-25-30, somewhere it can be 40-30-30. So it will depend on the project to project.

Yes, this is a broad breakup. So that 50% on supply and 20% on installation. So 70% of that money, we should be able to book it as soon as we have delivered the meters, right?

We have delivered, installed, integration and operation goal anyways happened.

Correct, correct. So that 70% out of that...

I would say 60%.

Okay. 60%. Okay. So 60%, we should be able to book in the next 2 to 3 years, am I right?

Yes, to a very large extent.

Sorry?

Yes. For the order books, it happens like that.

So my understanding is right, right?

I can't hear you. [Technical Difficulty]

Sorry to interrupt. Akash, there is a lot of disturbance coming from your line. So if you are using speaker mode, can you use the handset, please?

Hello?

Yes, yes. I can hear you.

Hello, is it better now?

Much better, sir.

Sir, I'm just trying to sum it up whatever you explained to me. So the INR 19,000 crores -- out of the INR 19,000 crores, around 80% will come back to Genus from the platform.

Around 75% to 80%, again, depending on...

Yes, around 60% will be for supply and installation. So that amount we should ideally be able to book in the next 2 to 3 years when we'll be installing the maximum number of meters, right?

Yes, right.

The next question is from the line of Ashwani Sharma from Emkay Global Financial Services.

Congrats for a great set of numbers. So my first question is on the opportunity on the outer platform. How is the inquiry pipeline, if you can give us some sense?

So we have a good inquiry from almost all the major AMISP players. We are supplying meters to IntelliSmart. We are supplying meters to Adani. So very good big pipeline.

Any number you would like to put, sir?

Currently, from different AMI SPVs, we have an order book of more than INR 1,000 crores.

Okay. Okay. So the way the things have started moving in the smart meters, in the power space, how do you see opportunity in the smart meters in the gas space your comments, yes?

Well, we are already doing gas meters. So gas meters is more like a conventional meter what we used to see in the electricity. Cannot see lot of gas meters converting to smart. Most of the gas meters currently are, I would say, conventional electricity meter types only. But you will have already taken a few city gas distribution companies have taken a decision that we want to go with the prepaid gas meters, but they are very few of them. Prepaid gas meters have a good opportunity, but more like a conventional electricity meter.

Is there a price difference or anything -- any technology difference in this?

So because of the cost only, most of the city gas distribution companies currently are going with the conventional gas meters.

Okay. Sir, the second -- the other question a bit on a long-term basis. So over the next 4, 5 years, what is our aspiration as far as revenue is concerned? I understand in FY '25, you might have INR 2,500 crores of top line, which you're guiding for and some growth in FY '26 as well. But over the next 4, 5 years, what are -- what is our aspirations to as far as revenue is concerned?