HPL Electric & Power Limited (HPL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HPL Electric & Power Private Limited Q2 and H1 FY '22 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshit Kapadia from Elara Securities Private Limited. Thank you, and over to you, sir.

Thank you, [ Lizben ]. A very good evening to everyone. On behalf of Elara Securities, we welcome you all for the Q2 FY '22 and H1 FY '22 conference call of HPL Electric & Power Limited. I take this opportunity to welcome the management of HPL Electric & Power that presented by Mr. Rishi Seth, Managing Director and Mr. Gautam Seth, Joint Managing Director. We will begin the call with a brief overview by the management, followed by a Q&A session. I will now hand over the call to Gautam Seth for his opening remarks. Over to you, sir.

Thank you, Harshit. Good evening, everyone, and thank you for joining us in this call of HPL Electric to discuss the financial and operating performance for the second quarter and 6 months ended financial year 2022. I hope all of you and your family are safe. The company experienced robust growth in both the metering and the consumer and trade segment with phase-wise opening of the economy post the COVID-19 pandemic. To give you an update on Q2 FY '22 performance, the company's revenue grew by 22% year-on-year to INR 280 crores during Q2 FY '22. We have experienced secular traction across segments during Q2, following phase-wise opening of the economy, coupled with the government's aggressive COVID-19 vaccination drive, lifting consumer sentiments. EBITDA during the quarter stood at INR 32.4 crore. The EBITDA margin contracted by 341 basis points year-on-year to 11.6%, impacted by increasing raw material prices, led by rise in metal prices and industrial plastics, coupled with global chip shortages. Our cash profit stood at INR 16.8 crore during Q2 FY '22. Discussing our segment-wise performance, the metering business gained momentum with a rise in inspection and inquiries with the opening of the economy during the second quarter. The metering segment revenue grew by 22% year-on-year to INR 114 crores. We believe this momentum will continue during the H2 FY '22 with the government's impetus for installing 25 crore smart meters across the nation, of which, more specifically, 10 crore smart meters are expected to be installed by December 2023. I'm delighted to share with you that HPL Electric has an order book of over INR 250 crores for smart meters, which are likely to be executed in the coming quarters. The consumer and trade segment surged by 20% year-on-year to INR 175 crores, backed by positive consumer sentiment during the festive season in Q2 FY '22. The switchgear and wire and cable segment grew by 53% year-on-year to INR 64.4 crores and INR 35.3 crores, respectively. The non-meter, the consumer and B2C segment, enjoys a 63% revenue share of the company's top line in the second quarter. The company's in-house R&D capabilities have been making multiple contribution to the business and specifically to the exports. With a lower base, HPL's exports grew by 51% year-on-year to INR 23 crores in H1 FY '22 with a healthy order book, despite of COVID-19 restrictions in several countries. The company foresees huge opportunities in the export market. At present, HPL Electric has a strong order book of INR 859 crores, ensuring revenue visibility for the coming quarters. The smart meter industry is the sunrise industry thanks to the government's trust was allocating INR 225 billion for the installation of 25 crore smart prepaid meters across India under the INR 3 lakh crore power distribution scheme. Additionally, the recent Electricity Bill 2021 aims to relicense power distribution, facilitating a level playing field for private players, thereby empowering consumers to select and opt for the service provider. The company is continuously evaluating and bidding for metering tenders in the pipeline. As you are aware, HPL Electric has recently backed smart meter orders worth INR 179 crore from the largest private utility in an Eastern India state. Currently, HPL Electric's smart meter order book stands at over 50% of the total metering orders. The company is well positioned to take a notable market share in the smart metering space as the industry transitions from the conventional meters. HPL Electric continues to maintain a comfortable leverage and liquidity profile. The company has adequate capacity for fueling its medium-term growth plans and will continue to have a low CapEx stand. HPL Electric is in a sweet spot for capitalizing on the smart meters opportunity. The consumer business is expected to maintain its growth momentum, owing to the diverse product portfolio, latest technology-enabled R&D centers and strong distribution base. On that positive note, I would request the operator to open the floor for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Monika Arora from Sharegiants Wealth Advisors.

Sir, do you see the EBITDA margins in the range of like 14% to 15% in the medium-term range, like in the quarters to come?

Yes. So initially -- if you look at the current EBITDA levels, they have been a little suppressed because of the fluctuation in the raw material prices. So, that's why you find in the last quarter, most of the EBITDA -- the EBIT margins have been depressed. So right now this is the volatility in industrial plastics. In fact, across the board, if you look at all the input costs, specifically the commodities, then even the electronics, the ICs, everything has been fixing [Technical Difficulty] on the input costs going up as well as from the supply chain. So as long as that is continuing. And on a short term, looking at the next 3 to 4 months, I would say that is -- I see the challenges remaining right now. Although our teams are -- a lot of efforts to ensure the supplies are coming in to keep the [Technical Difficulty] the raw material prices as low. But still, I don't see the EBITDA coming back immediately in the near term. But in the long term, yes, we would see the margin improvements happening, especially on the meters because as more and more smart meters are coming in, with -- as you know, the smart meters are apart from the meters, they are also -- it's a solution. So with that, we would see a margin expansion coming in, even other products as the volumes are going up, which we have been seeing in most of the consumer products. So the EBITDA level should come back. One more thing I'd like to add is that in the non-utility business, we have been able to pass on the impact of the raw material prices, but with a lag, to some extent. So it does take some time because the channels are involved and we need to ensure, and we also have to see the competitive scenario while we are passing on. But to some extent, they have already been passed on. And if the prices remain at these levels, they will get definitely passed on. So in the near term, maybe the EBITDA may remain suppressed to some extent. But in a longer term, we would find the EBITDA margins to come back to those levels.

Sure. And like how is the traction within the export business?

Yes exports, we have been seeing a good traction. In fact, since the first lockdown, we have seen certain good movements coming in despite the travel restrictions and the COVID restrictions in many countries. But on the whole, the numbers have been so far quite encouraging. Although the [ leap ] is slow, but we are seeing a continuous growth quarter-on-quarter. Even right now, our order book is also good. And the inquiries what are right now remaining are also pretty strong. So at least, like what we said in the last call as well, that at least for the end of this year and even probably next year, we do see a good incremental sale coming in through the export. Now you must realize that most of the -- we have been relatively newer to exports, but the way our R&D has been working and the kind of products what we have, so they are all international standard compliant. So that has really helped us to have a quick penetration into the various export markets.

Okay. That's great. And we have seen that -- that our company is always being a low CapEx company. So how do you see your next capacity expansion plans to grow further?

So, If you look at it near-term of, let's say, 2 to 3 years, we do not see much of CapEx. In fact, I would say the CapEx has already been done, so keeping in mind the smart video opportunities and the various other product ranges what we have. So right now, we are at a stage where we feel our top line needs to increase, and our capacity utilization needs to be done in a better way. So we have been seeing it. Only the 2 quarter disruptions, what we have seen -- in fact, in the Q1 this year and the last year, that there have been lockdowns. But otherwise, we have been seeing a better traction from the market. Right now, post -- in the second quarter and even as we entered the third quarter, we are seeing a good traction from the market. The demand seems to be good. So our -- the short-term aim is to have a better utilization on our existing assets. And so therefore, we don't look at any CapEx immediately, other than the maintenance CapEx, which is going on.

Okay. And just an extension -- so one last question from my side. This is an extension to the previous question. We are seeing that our debt levels are already at a very comfortable level. But I just wanted to know that do you have any plans to reduce your debt further in the near term?

Immediately, I don't see much reduction. Though, if you compare with September 2020 last year, if you compare a year back, our net debt is down by almost INR 19 crores. Right now, at this -- assuming that the debts remain the same, we would see a jump in the turnover. I think that is where we would see that. And our debt-equity ratio is at 0.77, which is well below 1 and which is at a comfortable level. However, we are constantly working to improve our working capital cycle. So all the -- that efforts are always on. And wherever possible, we are looking to have a leaner working capital, and thereby, we can reduce the debt. But looking at the strong order book, what we have, of INR 859 crores and which has a very strong revenue visibility over the next 2 to 3 quarters, so our aim right now is to work on execution of those orders, and that will be the primary aim. So as a ratio, the -- when you look at the -- based on the revenue and the other things, we would definitely see a much better improvement in terms of the overall ratios.

[Operator Instructions] The next question is from the line of [ Kritika Ghosh ], an individual investor.

Sir, my first question is regarding the price hike. So did HPL undertake any price hikes or any products to mitigate the rising raw material prices? And my second question is which factors led to the higher other expenses for Q2? Those are my 2 questions.

Yes. Kritika, if you look at the price hike, the meters, of course, they are going to the state utility. So they are with a fixed price. So there, we have not been able to take the price hikes of what were required. However, the new tenders in what we have participated in the last -- let's say, in the last 2 quarters, they have already been -- they have taken the price increase into -- as a factor. So the future orders, what we expect will have the price hikes taken into consideration. But when you look at the other products, which are the switchgear, lighting and the wire and cables, whatever is going to the trade. So there, we have been able to pass on a certain part of the hikes to the trade -- to the channel. So as we go forward, as I said in the earlier of my answer also that in these parts, the price gets passed on only with a lag. So we have been able to do that. And as we -- if the prices remain so, we do hope that even in the future, we would be able to pass on the hikes -- other expenses -- to the rate. As regard to other expenses, when we look at it, almost, you can say, over 90% of the other expenses are directly -- they are relating to the factory or the marketing expenses. So they cover either the power and fuel or the freight expenses or the repair maintenance testing. So these are directly in proportion to the business volume of what is there. And also, there are certain advertising and the dealer incentives and others. So most of the other expenses, what we see are today directly in proportion to the business of what is happening. So that's why we do see an increase, but that is quite proportionate to the increase in the net revenue. So that is how it is. Post the lockdowns, we have -- as a company, we have become conscious on our overheads. And in fact, since the last 1 year, we have done a lot of internal projects, whereby we have been able to reduce quite permanently a lot of overheads, just to bring out a much more efficient and a leaner organization.

And -- sorry. Yes, what is the current market share in the smart meter segment, like how much can we scale up further in the coming years?

There is no official -- yes, so there is no official figures on this. But the smart meter opportunity has just started. So probably, it will be difficult to determine the exact market share. But broadly, if you look at the last 5, 7 years of the regular meter market, HPL Electric has been enjoying anywhere between 22%, 25% of the market share. And so while we look at the smart meter opportunity, we are hopeful of maintaining or even growing the market share as we go forward. So of course, it depends on a lot of factors, but our preparedness in terms of the product, in terms of certification, the R&D testing, all the work on the back end is fully ready. And in fact, as I said, we are already sitting on orders of over INR 250 crores of smart meters. So as the industry is shifting from the conventional meters to the smart metering, definitely, we are very well positioned in terms of grabbing the market share, and that is what we hope to do. But right now, there's no official figure to that. But it's -- as I said, it's too early. And -- but as the market moves up in the next 12 to 18 months, definitely, I think we are well positioned, and we hope to grab much larger share.

[Operator Instructions] The next question is from the line of [ Kamaljeet ], an investor.

Sir, there are a couple of questions. So right now, what is the plant utilization for the quarter?

Yes. Currently, we can say we are around 70% as a broad figure. Of course, there are multiple products and multiple factories. So our utilization on -- broadly, they may differ in this. But if we have to give a single figure, they could be around 70% to 75%. Of the utilization. So we have seen this. If you recall -- if you go back to the first quarter, we had -- our utilization was somewhere between 30% to 40%. That was, of course, due to the lockdowns and the pandemic, but right now, the second quarter, we have seen a healthy growth in terms of sales and also in terms of the plant utilization. Now one thing if you'll see, the supply chain, especially for the electronics and there has been a chip shortage overall in the metering industry, it's a global chip shortage. So that has, to some extent, affected us. Although, our teams have been really working overtime to make sure the supply chains are not disrupted. But if that -- once that improves, definitely our -- the capacity utilization would go up quite significantly, especially in the meters because right now, we have clear orders, and the only -- a part which may disrupt the supply is the chip shortage. So something we are working on already. So right now, it's not something very significant. But yes, I would say it is challenging. So it does -- that is something which can help us to better utilize the plant.

Okay. And sir, what is our sales to R&D expenditure in the sense of percentage?

Sorry, I couldn't hear that. Can you repeat the question, please?

Okay. So what is our sales to R&D expenditure, the cost, R&D, research and development cost to the sales?

Yes. So it's -- yes, so I'll just check. Just a moment. So it's about a little more than -- it's about 1.5%, you can say. So we have a full-fledged R&D center in Gurugram. In fact, we opened it last year post lockdown. And there, we have over 100 engineers working on the smart metering, communication technologies, embedded softwares. Then also, we have people working on the mechanical side for the switchgears, for the company's wiring technologies, lighting technologies. And moreover, also on various applications. So definitely, that is something which is -- that investment is continuous what the company is committed to. And that is what we are seeing the results coming in with us completing a lot of -- we've just completed another smart city lighting. So there are a lot of work which is going on. But I think that about 1.5% to 2% is something what the company is constantly spending on the top line on the R&D efforts.

Okay, sir. Sir, in your annual report, you have mentioned that you -- the company is fifth largest in LED lighting manufacturer. That is the report of 2016. So what is the status as of now?

We have -- of course, we have grown incrementally thereafter. But of course, the industry has also grown. Right now, because we did check-up, there are no credible reports which are published right now on the LED industry. So I'm sure somebody probably will do that. But this was the last available report which we had on the industry. But I would say we have -- but probably it's the same or like this. But the capability what we have is that we are very well backward integrated in our manufacturing. So in LEDs, there have been various business models where people are just doing trading or other things. But we have been like from an R&D and then doing the complete backward integration manufacturing. So we have done a lot of investment, and that is what makes our product very reliable and top in technology. So our focus definitely is on the lighting part, and we are seeing the distribution penetration also happening in the market with the lighting sales overall picking up.

Okay, sir. And sir, like for chip dependency, how much it is in-sourced within India and outsourced [indiscernible] will be the ratio of the -- like you are taking raw material within India and outside? And how you are tackling that [ total supply ] chain management? Or are you thinking any other sort of chip manufacturer or just only the [indiscernible] dependency.

No. I think I partly understood your question, but I'll just put that part that the chip sourcing is done all globally because India does not have any IC manufacturing in this. And that is true also for a lot of electronic items, which are all being used overall in the electronic industry in India. But due to these shortages, we have also our teams, our R&D teams have also been even redesigning a lot of products. Based on that, we have found lot of alternate sources, which are all acceptable. So a lot of efforts have happened to do this. And all the suppliers and these are all done globally. So our teams are really in touch with suppliers all from outside India to do this. Also, despite the huge shortage, we have also still been able to do certain committed bookings, and we have been able to -- try to ensure that the impact on the sales is least. So that's what, as I said earlier also, that it's a challenging thing, though the shortage is not so significant right now. But yes, we do hope that maybe in the next 3 to 6 months, the overall supply part would become much better and with a very strong order book and also the inquiry base, which is very strong right now. So we can exploit those opportunities. So we have been looking at those major suppliers, various models because each time, if one has to change a component, the circuits need to be redrawn. But luckily, we have the capabilities in-house to do that. So we have been doing it. Everything to make sure that the challenges of the supply disruption are met with properly without making an impact.

Okay. And sir, in last call, we discussed about the PLI whether company participating in the PLI scheme or not?

No. We have not participated in the PLI scheme because that is mainly for the components and -- for the LED components. Yes. So we are -- regarding that, as I said last time also that we have been -- we've already done a lot of CapEx. And right now, our -- we are in the phase where we need to exploit those CapEx. So we are at that stage. However, there are a lot of other incentives today are being offered by the government. So in any case, in the future -- in the near future, if you look at something we -- there are always a lot of incentives and options available at the state level. Regarding the -- regarding metering, right now, it's not -- but if any PLI or something comes up on the metering side, on the smart mixing side, that is something which -- looking at the enormous volumes of what the government is talking about. So we would definitely consider such a scheme in future.

Okay. And sir, the last one, any patent recently filed in last 6 months or 1 year or you're working on IoT devices or smart metering mechanisms? So whether the patent will be with the HPL or the partner -- telecom partner.

No. I think these are some things which probably we cannot discuss or disclose on these calls. But what I can say is that there are a lot of softwares, lot of communication modules and protocols, which are very proprietary to HPL Electric, and we use them. Of course, there could be partners in certain smaller things, but the entire solution, the entire software and everything is our own proprietary software. So that is it, yes.

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

With regards to smart metering, what I understood that it's not just the meters which has been provided, you would be offering it as a solution. So how much the meter per sale, the cost would be and how much the solution and where the margins are most? Meters or the solution?

Yes. Yes, the exact -- the exact...

I mean, say, if the total solution cost is, let's say, INR 2,000, for example. From one individual user point of view, I am just saying, out of that INR 2,000, how much would be solution and how much would be the hardware, that is the meters?

Yes, sure. So, I got your question. So that would -- the exact percentage, of course, would depend upon the specific requirement by utility, the kind of meters and also the kind of solution and the communication network and other things what they require. But as a ballpark figure, one can easily say that the meter would cost anywhere between 60% to 70% and the balance, either 30% to 40% could be the communication, the software and the other related services, the FMS what would accrue with that. So it really would depend upon this, but this is a broader ratio that would happen.

And since you -- there would be a fixed price contract, you would not have any cost escalation close into it, right, sir?

No. Yes, no. So there is no cost escalation. But in -- where the other services are there and -- so we are aware on the period of -- through which these services are to be provided. So accordingly, when one is quoting, one is quoting based on the inflationary trends and other things are -- these are taken into account, while the solutions are being quoted, yes. So that is how the industry works, and that's, I guess, how we are working on as well.

Now coming back to an earlier participant who had asked about industry utilization, if I were to talk about metering, switchgears, lighting, wires and cables, all 4 categories, what is our installed capacity and what is our capacity utilization on a half yearly or a quarterly basis?

It would be a little difficult to spell out each one, but I will take the quarterly one...

Because all the 4 are different products or different categories.

Yes, I will just come to that. If you look at the first quarter because that was disrupted, so that will -- may not be the right reference to talk about. But I would say, right now, we have seen almost the entire capacity utilization ranges anywhere between 60% to 70%. I would say the switchgears in the last quarter because we have seen a good amount of growth and that probably could be on a higher side of 70%, 75%, the same with wire and cable. The lighting and the meters were probably around 60%, 65%. So these are broad figures, of course, more specifically, I could have the IR give out the details later.

But sir, our switchgears numbers -- revenues have fallen, even wire and cable also has fallen, right?

No. Last quarter, there is a -- year-on-year, there is a growth of 53% in both switchgear as well as wires, yes. So there is a...

What I can see in the presentation, net...

Yes, I'll just clarify. On the Page #13 of the -- I don't have it in front of me, but...

Yes, a #13.

There's a small error, which we have asked our IR to take care of it. But that's a -- I'm sorry about it. But if you go on the next page, you will get the thing. So actually, the growth in switchgear is that from INR 42 crores, it has grown to INR 64 crores. So there's a misprint in that. In fact, you have to reverse the first 2 lines to have the correct picture.

Okay.

In fact, the switchgear, from INR 42 crores, it's gone up to INR 64 crores. So wire and cable from INR 23 crores has gone up to INR 35 crores. So there is a 53% growth in this. In meter, there is a growth of 22%. Lighting, we have seen a degrowth of 4%. But that is only because of certain projects getting pushed back as schedule going in. But if you look at the consumer lighting, there is a growth of 25% in the last quarter, if you compare year-on-year. So all round, if you look at our each of the products, in the trade segment and as well as the meter and the utilities, there has been a good growth.

Okay. In smart metering, sir, how is it that you are going to take care of the working capital requirement because it is -- I suppose, the payment is an issue?

So the payments from utilities are normally around 6 months. That is how it is. Currently, the way -- of course, different models are emerging on the smart meter side, where either the payment would be upfront or more on a -- either on an OpEx or a CapEx model or there could be -- there's also a model through which the payments would be deferred. But those, of course, are -- it would also require a financing model, which the company is currently working on also. And there are a couple of intermediaries which are emerging to take the financing of their books. So overall, the way the smart meter scenario is emerging, there is a strong possibility that we could see a better working capital cycle coming forward. Of course the -- as -- because we would see the procurements from these -- the new model starting somewhere in April next year. But once that comes into -- for being -- so there -- it would -- there would be a couple of system integrators who would emerge. So our supplies as a vendor to them for smart meters would be on -- could be on LC or could be on a much more firm payment basis. So that may impact positively the working capital. But I think maybe another quarter, more details would emerge. And as we see the scenario going, we would see an improvement. But right now, if you look at the way the utilities are paying, anywhere between -- I think it's about 180 days to 200 days is somewhere where we have the payment cycle.

We have an installed capacity of 11 million meters, right? That is 1.1 crore meters?

Yes, yes.

And all of that is smart meter or is it into different categories?

No, it is both. But gradually, as the industry is shifting from the conventional meters, electronic meters to the smart meters, our capacities are also getting changed accordingly. So if you look at our order book right now, more than 50% or almost 60% of the order book is currently of smart meters. But if you go back even 2 quarters before, it was only about one-third. So generally, as the order book is picking up, the share of smart features is becoming much more higher. And even if you look at the tenders in what we have participated and the new tenders which are coming out, I would say the majority share is all of smart meters. So the industry is in a transition stage. And as the industry changes, so will our capacity utilization and our adoption. But that -- the way we can adapt a regular line for a smart meter line is not a very -- we have those capabilities. So it's just a few adjustments, which can be done. So not a big CapEx, which needs to be done.

So in this smart metering, specifically, sir, how much orders we have on ahead and how much we have already participated in tenders and out of those tenders, how much is expected in next 2 quarters?

I can say -- as I said, our pending orders are over INR 250 crores right now only of the smart meters. But currently, the inquiries which are there -- the tenders which are there, they could range. Of course, we cannot say anything, but it could be anywhere over INR 5,000 crores when the tenders are out. Most of these are already of smart meters. Now, we cannot predict for sure what will be our share in that. But somewhere that -- if you go in the past, historical -- this thing, we have been doing over 20% to 25% market share. So we are hopeful of retaining that and growing that as we go forward.

So does that mean that we have bid for all the INR 5,000 crores of tenders?

Yes. We -- some we have bid or some we are in the process of bidding. It's -- of course, it takes time. Each tender, by the time it comes out and we quote and when things happen, it is couple of months. So definitely, we are looking at that. But one thing for sure that if you look at the inquiry base, which is currently floating in the -- from all the utilities, it is quite on a higher side. And this is in line with what the government is also talking about of almost 10 crores meters to be installed by December 2023. So I think the utilities, whether they are the central or the same utility, we are all working in line with the overall guidance given by the government.

And we are majorly into electric meters, I mean, say, for electricity or we are also into gas meters and water meters and others?

No, right now, we are focused on the electricity meters.

We have a capability to add water and gas meters?

Yes, we have done a complete -- a lot of work for development and even up to certain prototyping, we have done that. But as we see the market and the opportunity emerge, we can adapt ourselves and come into that market as well.

We'll move on to the next question that is from the line of Harshit Kapadia from Elara Securities.

Sir, I have also a couple of questions. So, first for starting, in this quarter, it was a very strong number for you. Now would you attribute this growth largely to us returning to pre-COVID levels in terms of demand or...

So Harshit, your voice is not clear. Can you just -- yes, sorry, your voice is not clear. Can you repeat that, please?

Sure. Sorry. Yes, sir. Is this okay, sir?

Yes, now it's okay.

Yes. So basically, just wanted to assess on the demand side, sir, if you can highlight. So, was this 26% growth, which we have reported for the quarter, has there any pent-up demand in this? Or is it more of -- now we are back to the normal pre-COVID levels in terms of growth?

I would say it can be a mix of it. But if you see last year, the second quarter and the third quarter could have been more attributable to the pent-up demand. But this year, when we are seeing, we are seeing an all-round growth across all product segments and across all geographies. So when we look at the -- this, there could be, I would say, it's some way, at least a medium-term or a long-term demand, which is emerging out. And this is despite the increase in the cost because eventually, the cost of raw materials are getting passed on. And eventually, they are -- the end consumer is getting burdened by those additional costs. But still, despite that, we are seeing the demand being quite constant, in fact, going up on a quarter-to-quarter basis. So, I would say it's a mix of both, the pent-up and as well as the regular demand.

Okay. So continuing with that, sir, do you also expect, since we are almost 1.5 months from the -- 1.5 months into the quarter, has October also been seeing a strong demand? Or was it much softer than your expectation, if you can give a sense on that, sir? The reason I ask this question is because the second half is expected to have a higher base. So are we going to see growth in the second half of the year or do you expect that to be flat [indiscernible].

So we are seeing a -- we would see a growth coming in the second half, but more specifically, as you asked on October, so October has been a good month, in fact, a strong month from a demand-side and sales side from -- for all the nonutility products. Of course, you have to keep into account that, that was the only month just before. So lighting this [ 3 ] would surge in value -- volume terms. So overall, the trend in October has continued what we ended up in September. So overall, the direction seems to be positive, yes. So we -- across all the products, whether it's metering, switchgear, lighting, wire and cable, we would expect an all-round growth in the second quarter, in fact, a strong growth compared on a year-on-year basis as well.

Okay. That is very good to here. And sir, secondly, on your meter segment, as you have also highlighted in the PPT that you will be executing a very large order of [ INR 375 crores ]. That's not just your meter, but your other businesses as well. So how much -- in what time frame this INR 380 crores order will be executed? And because of this, you are expecting a strong growth in H2? Or excluding this also, the demand continues to remain high?

Yes. So this order of this -- the housing project, that is starting in -- from December onwards. Of course, it got delayed because of the second lockdown. But from now, I think, in the next maybe 9 months or 12 months, that is where this order should be executed. So it's a complete -- we are supplying into the project. So just because of the COVID, it has got delayed, but now we are seeing the momentum pick up. So our supplies will commence from December, and thereafter, we expect regular monthly supplies to go on.

Understood. Sir, and a follow-up on this is, will they have any impact on margin because of this housing order? Do you expect some kind of a softness in margins or margins will continue to remain in the 14% to 15% level, which we have been making, sir?

As I said earlier, what we -- in the Q2, we witnessed a strong demand. We have seen good order flow. We have seen good sales. But what came down was the margins and mainly attributable to the increase in the raw material and input costs. So that is where the -- that has happened. So right now, and if you look at the scenario, whether -- if you look at any kind of industrial plastics, whether they are nylons, ABS, PBT or polycarbonate or any kind of metal, whether it's aluminum, steel or copper, everything has been fluctuating or going up. So it has been a time of high volatility. And we are currently seeing this in this quarter as well. So we do hope that the global situation would become better and the metals and the other things would soften out. But until that doesn't happen, it may be difficult for us to give a guidance on that kind of EBITDA. Although, our teams are always making efforts to make sure that the impact of these costs are minimum, and we are able to maintain the margins. But on a short term, it sometimes may be difficult. We have -- as we saw in the Q2, we are passing on the cost to the consumer until the margins will come back to that.

Sir, does it mean that in Q3, you will continue to take price hike?

Yes. Like we have already -- we have seen some price hike already happen in the wire and cable segment because of that. But again, maybe in the Q4, we will look at, again, probably in the switchgear and the other trade products. We would see -- even in the metering products, we would see the hike probably coming in, in the beginning of Q4.

Understood. And sir, final question on the metering side, sir, as you had mentioned, the order pipeline was close to INR 5,000 crores, and that was largely coming from state utilities. So has ESL is now not going to tender out on the central side, and it will all be given to state utility? Or how -- is there a change in the structure of ordering? Just wanted to get a sense, sir.

No. The state utilities are the owners of the discounts. So -- and the EESL and IntelliSmart are also one of the AMI service providers. So the model would continue in which the state would like to give it to EESL, okay? But the tender will be -- the procurement will be only through tenders. It will not be through nomination.

Okay, sir. But the final tender to the company, like you or your competitors, will come from ESL, not from state discount, right?

No, no, no. It is not like that. Right now, what we are talking about, the order -- the tender pipeline, it is primarily from the state discounts directly to us. We are directly bidding in the tender.

Okay, not through ESL. But anything which ESL is doing, which can help increase the momentum of INR 5,000 crores to maybe INR 10,000 crores because the number of target of government is quite huge from that perspective?

You are right. So because the target of the government is very huge. So various modalities are being worked out so that the deployment of smart meters can be speeded up. So, direct orders is one of the key points in which utilities take the benefit of direct supply from the meter manufacturer. And it is also through players like EESL, in which government of India will be doing the funding. And it is also going to be through the EPC contractor and system integrators. So all the 3 modes are going to be open, so that the deployment of smart meters can be speeded up.

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Harshit Kapadia for his closing comments.

Thank you. We would like to thank the management of HPL Electric & Power for giving us an opportunity to host this call. We also would like to thank all investors and analysts for joining for this call. Any closing remarks you would want to make, Gautam sir or Rishi sir?

So I'd like to thank everyone for joining on this call. And HPL Electric, as a company, we have seen good traction in the metering and the consumer segment and expect this momentum to be sustained for the coming quarters as the consumer sentiment in both the businesses is set to improve. And we're also -- we have a strong team. We are backed by a robust product portfolio and we are confident of simultaneously creating value for our esteemed stakeholders. So I look forward to interact with all of you in the future. In case of any queries, you may reach out to the Dickenson World or us directly. I wish you all a great evening. Stay safe. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.