Servotech Renewable Power System Limited (SERVOTECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Servotech Power Systems Limited Q3 and 9M FY '24 Earnings Conference Call, hosted by Ventura Securities Limited.[Operator Instructions] Please note that this conference is being recorded. The company is today represented by Mr. Raman Bhatia, Founder and Managing Director, and Mr. Vipin Kaushik, Finance Controller. I would now like to hand over the call to the Managing Director of the company, Mr. Raman Bhatia, for his opening remarks. Thank you, and over to you, sir.

Good evening everyone, and thank you for joining us today for this conference call. We welcome you all on our Q3 & 9 months FY '24 earnings call. While Servotech has achieved remarkable revenue and profit growth over the past 3 years, I understand that the decline in quarterly growth compared to the previous year's quarter might raise concerns. It's important to remember that sustainable growth often requires strategic consolidation phases to prepare for bigger leap forward. In Q3, we made critical investments in infrastructure expansion and key partnerships, laying the groundwork for further scalability and market leadership. These investments may have temporarily impacted short-term growth, but they position us for a significant gain in the coming years. While new government guidelines for the EV industry did lead to some project delays, we saw this as an opportune moment to make these strategic investments to stay ahead of the competition. I assure you that our commitment to delivering long-term value for our shareholders remains unwavering. We are confident that the current consolidation period will pave the way for even greater success in the future. I would like to begin with a brief overview about Servotech Power Systems Limited with a history of over 2 decades. We have evolved as a sustainable and renewable solution manufacturing company. We take pride in our role as a leader in innovation driving transformation in the sustainable energy sector with cutting-edge solar products and EV chargers. Our diverse product line reflects our commitment to eco-friendly, user-friendly and cost-effective technology, shaping power generation and electric mobility. For instance, our AC chargers, 3 kilowatt to 22 kilowatts and DC chargers ranging from 30 kilowatt to 360 kilowatts are seamlessly compatible with all major EV brands. Additionally, our solar division offers a range of products, including inverters, batteries and panel. We are in position to command a significant market share in India's EV charging domain, counting major oil marketing companies, CPOs, EV manufacturers, fleet operators and other government entities among our prominent clientele. In a bit to bolster our market presence, we have started to build our new factory to cope up market demand and that phase 1 will get operational before April 2024. The initiative aims to produce 24,000 DC EV chargers annually, propelling us closer to our objective of emerging as one of the leading manufacturer in EV charging industry. We are privileged to participate in BPCL's Edrive project and I am pleased to announce the recent achievements in securing substantial orders from BPCL for the supply of 1,800 DC chargers and around 2700 AC chargers. These orders not only showcase our firm's commitment to delivering state-of-the-art, cost-effective technology but also reaffirm our steadfast dedication to promoting sustainable energy solutions. This further cement our reputation as a reliable ally in the journey towards a more environmentally friendly future. We have a signed technical collaboration agreement with one foreign company to manufacture world-class internal components like Power Modules, PLC, and Main Control Cards in India and will start manufacturing in defined PMP timelines as per Ministry of Heavy Industry which is June 2024 and December 2024. The Indian EV industry is poised for exponential growth in the coming years, supported by strong government commitment, increasing private investments, and evolving consumer preferences. With a focus on cost reduction, infrastructure development, and technological advancements, India has the potential to become a global EV manufacturing and consumption hub. Currently, the Indian electric vehicle market is expected to grow at a CAGR of 66.52% during the 2022 to 2029 forecast period. The Indian solar industry is anticipated to grow at a CAGR of roughly 40% between 2023. Power solar vertical is working on innovative products to [indiscernible] just because the market is also propelled by supportive government policies like Pradhan Mantri Suryodaya Yojana in January 2024 for rooftop solar installations in 1 crores households. This will enable 1 crores households to obtain 300 units of free electricity every month. For that, we wish to share with you, we are happy that now Servotech is eligible to sell products in UP under subsidy scheme, and we are enrolled with the UP government under the scheme. And we are unable to provide a subsidy to the end user. Until 31st March, our goal that Servotech should get enrolled in more than 7 states like that to provide a subsidy to end user under the scheme, which will give boost in Servotech revenue. In summary, Servotech outlook is exceedingly promising as we embrace the fusion of pioneering technologies, our relentless pursuit of innovation, strategic partnerships and our steadfast dedication to sustainability. We are primed to see the multitude of growth opportunities ahead, confident in our capability and capacity to expand operations and deliver value to our stakeholders. I hand over to Vipin so that he will share with you the financial performance.

Good afternoon, everyone. We are pleased to share our financial performance. Our revenue increased by 37.8% to INR 21,750 lakhs in 9 months '24 from INR 15,850 lakhs recorded in 9 months FY '23. The driving force behind this growth was sustained success in securing orders in EV charging division. Further, the sustainable increase in the adoption and the demand for the electric vehicles along with a growing emphasis on advanced EV infrastructure, significantly contributed to the overall expansion of our revenue. In Q3 FY '24, we witnessed a delay in the release of tenders by various agencies which impacted our top line. EBITDA demonstrated remarkable growth of 64.6% to INR 1,631 lakhs in 9M FY '24 from INR 990 lakhs in 9M FY '23. This expansion in the margins, measured by 121 basis points, was driven by a greater proportion of the products with superior margins in our portfolio and increase in scale of operations. PAT for the 9M FY '24 stood at INR 834 lakhs, up from INR 501 lakhs in 9M FY '23, with the margins reached to 3.82% from 3.16% in the corresponding period. I thank you for your time, and we are happy to answer any questions you may have. Thank you and we hand over to Raman sir for any [indiscernible].

We thank all the participants for attending this session. We believe that we have [indiscernible] through our company and business model and address every arising questions there only put on the floor by the participants. We continue to see growth in our broad product portfolio and witnessed a strong momentum across our business supported by R&D and other strategic initiatives. We remain focused on bringing new products, exploring new markets and creating value for all our stakeholders and hope you have a great day ahead. Thank you once again. Thank you.

[Operator Instructions] So the first question comes from Aditya Shah, an individual investor.

Can you hear me?

Yes.

Congratulations for your 9 monthly stellar results to you and your team. I'm really happy as a shareholder for that. But my first question would be, sir, that if you compare the quarter-on-quarter performance, there was a steep decline, not just in terms of CapEx, but also in terms of revenue. Can you share two things. First, on how -- what kind of CapEx that you're actually undertaking, how will it contribute to the revenue in the near term and long term? And secondly, why the revenues were so reduced in comparison to the previous quarters?

Please allow me to speak in Hindi, if you are okay.

Please sir, please go ahead.

[Foreign Language]. So during that, we have started a new factory plant, which capacity will get double, right? [Foreign Language]

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[Foreign Language] We have already and briefed everyone that we are going to invest more than INR 300 crores in the next 3 years.

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The next question comes from Agastya Dev.

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The next question comes from Mr. Jitesh Parmar, an Individual Investor.

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[Foreign Language] I just want to communicate to you so that it should get spread to all my shareholders. Currently, we have crossed more than 1 lakh shareholders in our company. [Foreign Language]

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[Foreign Language] Don't need to assume. It is 110% confirmed. It is not the concern. It has been done already. Now more we are awaiting for the orders copy.

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70 EV.

[Operator Instructions] The next question comes from Sahil Gupta, an individual investor.

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[Foreign Language] I'm sure, and I want to commit to you personally within the next 10-15 days you will get some good news in a market about subsidiaries.

The next question comes from Pranay Gandhi from Green Portfolio.

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[Foreign Language] There are two very different contexts, and when we're talking about the total capacity, then I'm talking about both.

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Currently, we are manufacturing around 158 chargers per day per AC.

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And 500 chargers in a month for DC.

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[Foreign Language] It was predetermined around 7 years back, about the revenue and other profits. Only product line has been a little bit changed. And what we have planned for this year, we are a little bit behind our target. [Foreign Language]

The next question comes from Prerit Chaudhary from Green Portfolio.

Yes, I think you have given most of the answers. I had just 1 or 2 questions. On this lithium... Yes, sir. So on this lithium battery that we are planning to scale until 2027. So these battery would be for a solar segment, right?

We plan to come in the EV domain for the lithium battery.

Not in the EV domain?

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[Operator Instructions] There is a follow-up question comes from Sahil Gupta, an individual investor.

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[Foreign Language] We have sold out around the 6% equity to the investors. [Foreign Language]

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The last question comes from Jitesh Parmar, an Individual Investor.

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[Foreign Language] 7 years agreement after the R&D. So that we are trying to strengthen our [indiscernible].

[Foreign Language] So will see something similarly in the next 1 or 2 years?

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[Foreign Language] Australia, New Zealand, UAE, Middle East, Southeast Asia, Europe, U.K., U.S. everywhere.

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There are no further questions. Now I hand over the floor to management for closing comments.

Thank you, [indiscernible]. I think my closing remarks, I have already told everyone. We thank all the participants once again for attending this session. We believe that we have satisfactorily run for our company and business model. We continue to see growth in our broad product portfolio and witnessed a strong momentum across our business support by R&D and other strategic initiatives. We remain focused on bringing new products, exploring new markets and creating value for all our stakeholders and hope you have a great day ahead. Thank you once again. Thank you.

Thank you, sir. Members of the management, ladies and gentlemen, on behalf of Ventura Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines.