Supreme Power Equipment Limited ($SUPREMEPWR)

Ladies and gentlemen, good day, and welcome to the H2 FY '26 Results Conference Call of Supreme Power Equipment Limited, hosted by Kirin Advisors Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. [ Pat Acharya ] from Kirin Advisors. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. On behalf of Kirin Advisors, I welcome you all to the conference call of Supreme Power Equipment Limited. From the management team, we have Mr. Vee Rajmohan, Chairman and Managing Director of the company. With that, I now hand over the call to Mr. Vee Rajmohan for his opening remarks. Over to you, sir.

Good afternoon, ladies and gentlemen. Thank you for joining us today for Supreme Power Equipment Limited's earnings conference call of H2 and FY '26. I am absolutely delighted to report that FY '26 has been a truly exceptional year for us. This past year marks the beginning of a transformative phase of our company as we successfully expanded into the high-voltage large power transformer manufacturing segment, supported by a significant capacity expansion and enhanced transformer portfolio and strong industry demand. Supreme Power is well positioned in delivering sustainable long-term growth. The Supreme Power -- over 3 decades of transformer manufacturing excellence, Supreme power equipment brings over 3 decades of deep engineering and manufacturing expertise to the power sector. We are a dedicated transformer manufacturing company, producing a wide range of power distribution and windmill transformers catering to power generation, transmission, distribution and renewable energy application. Today, Supreme Power is a prospered manufacturing partner to major state electricity utilities and leading EPC corporations, uniquely positioned to capitalize on the rapidly growing opportunity across India's electrical infrastructure sector. The broad macroeconomic landscape for power sector remains highly favorable creating significant long-term demand for transformer manufacturers. India's peak power demand recently touched an all-time high of approximately 256 gigawatt driven by rapid industrialization, infrastructure development and raising commercial consumption. At the same time, India is witnessing accelerated investment in renewable energy, transmission infrastructure, AI-driven data centers, and grid modernization projects. These developments are substantially increased demand for high-capacity and energy-efficient transformers across generation, transmission and distribution network, further strengthening the sector outlook. The Central Electricity authority has outlined aggressive plan for grid expansion and transformation capacity addition while also promoting adoption of advanced and eco-friendly transformer technologies. This industry trend positions us favorable to capitalize on growing opportunities emerging across India's power infrastructure ecosystem. Operationally, FY '26 was definitely defined by flawless execution and a significant leap in our production capacity capability. We officially commenced commercial production at our new state-of-art manufacturing facility in Kannur, Chennai. This milestone expanded our annual manufacturing capacity from 2,500 to an impressive 9,000 MVA. The new facility also enable us to manufacture larger power transformer up to 200 MVA and 220 kV voltage class rating. Significantly, strengthening our participation in utility, transmission, industrial and data center projects, while unlocking an estimated revenue potential of INR 500 crores to INR 550 crores at optimal utilization. During the year, we secured multiple transformer orders aggregating INR 264.27 crores from prominent Karnataka-based EPC players. We also received multiple distribution transformer orders worth INR 159.94 crores from Tamilnadu Power Distribution Corporation and [indiscernible] INR 57 crores power transformer order from Kerala State Electricity Board. As of May 27, our total order book stands at a robust INR 588.17 crores providing strong revenue visibility for the coming quarters. Coming to financial performance, the FY '26 witnessed healthy growth across key financial parameters. For the full year FY '26, total income reached INR 182.1 crores, registering a strong year-to-year growth of 21.78%. EBITDA stood at INR 33.29 crores, reflecting the year-to-year growth of [ 14.52% ], while Profit after tax increased by 9.89% year-to-year to INR 20.44 crores. Earnings per share for the year stood at [ 8.15 ]. Our second [ half ] FY '26 performance further demonstrated the strength of our operational scale-up and execution capabilities. Total income stood at INR 506.75 crores, recording a strong half [indiscernible] growth of 41.66%. The EBITDA came in at INR 19.01 crores, up by 33.18% [indiscernible] while PAT reached INR 11.03 crores with an EPS of 4.40. While industry-wide input cost inflation applied mild pressure on manufacturing margin across the sector. We successfully mitigated these headwinds through an improved high-voltage product mix and proactive sourcing [ settled ] strategy. Furthermore, we significantly improved our working capital efficiency with the receivable days reducing sharply to just 94 days, reflecting strong collection discipline and healthy cash flow management. In summary, the FY '26 has demonstrated Supreme Power's manufacturing strength, execution capabilities and ability to scale efficiently in a rapidly growing power infrastructure market. With a significantly expanded manufacturing base, a strong order pipeline and favorable industrial tailwinds, we remain confident about sustaining our growth momentum in the years ahead. Before we move to the Q&A session, I would like to take a moment to express my sincere gratitude to all our investors for their continued trust and confidence in Supreme Power Equipment Limited. Your support remains a key pillar of our growth journey. We also extend our appreciation to all our valued clients, vendors for their continued partnership and test in our capabilities, which motivates us to constantly deliver and improve. I would like to acknowledge the unwavering efforts of our finance team, bankers and extend my appreciation to the entire Supreme Power Equipment Limited family from our employees on the ground to our senior leadership team. Our commitment, their commitment, discipline, collective contribution have been instrumental in delivering this strong performance. Thank you once again for your continued support. With that, I'll now open the floor for the question-and-answer session. Thank you.

[Operator Instructions] Our first question comes from the line of Paras Chheda with Purpleone Vertex Venture LLP.

Congratulations, sir, first of all, for a very strong set of results and the continued effort in bringing the new capacity online. Sir, my first question that we've indicated previously and now that the overall revenue potential from the expanded capacity is about INR 500 crores, INR 550 crores now. Now for FY '27, sir, what revenue range do we expect? And what percentage of this INR 588 crores order book is expected to be executed during FY '27? That is the first question.

Yes. We have fixed a target to achieve between INR 275 crore to INR 300 crores.

Okay. For FY '27?

Yes, for FY '27.

And sir, for FY '28, what do you expect broadly?

Another INR 100 crores will be added.

Another INR 100 crores here on that?

Yes, on that.

Okay, sir. And now that we can manufacture up to 200 MVA transformers and 220 kV transformers, so what kind of PAT margin can we expect once the new facility reach steady state utilization [indiscernible]?

Yes. We believe the same type of margins will be maintained because since there is a 1% or 2% more margin on larger board transformers, and we -- that has been made in way by the [indiscernible] because we deploy more skilled people, more human resources. So for that -- so this margin will be maintained [indiscernible].

Sir, typically, we say about 10% to 12% PAT margin, and that's what we should call it?

Yes.

Okay. sir, out of this INR 588 crore order book, how much order book is related to this higher capacity power transformer versus this traditional distribution transformer?

And -- there is distribution transformer hold of 20%, power transformer holding 72% and innovative duty at something around [ 7% to 8% ].

Understood, sir. And just last [indiscernible] I mean we were planning probably for maybe another leg of capacity expansion and the decision was to [indiscernible] a quarter or two. Are we close to that? Any thoughts further on that one, sir?

So you are asking about further expansion?

Yes, further capacity expense.

Yes. So we are just thinking now to go for a further expansion and in this year, I think we believe we will go for an expansion for our [ tank ] making factory. So it is a 1 acre facility. So it is under planning. So this will complete in this financial year.

And this should help us with margins?

Yes. This will help us in margin. because we are buying most of the tanks from outside that will vary from 5% to 8% from our turnover. So we thought it will give -- and nowadays that getting tanks are also getting difficult. So we thought we can start a tank factory. So this is a immediate plan.

And sir, just on in the last [indiscernible] because of the geopolitical turmoil, the commodity prices are quite volatile and [indiscernible] also. Now are we [indiscernible] able to pass the extra cost on -- is there a pass-through clause kind of a thing where we are not impacted by [indiscernible]?

Partially other -- most of the supplies have been passed on that because the delivery is beyond 3, 4 months, automatically, the price variation plus will be applied. And the deliveries [indiscernible] so in that case, what we will -- once we got the purchase order immediately, we place our [ pass through ] to our vendors. So even though there is...

Back-to-back?

Yes, back-to-back. And even though there was a margin pressure is there, because of sudden increase in raw material, like transformer oil and other key raw materials. So that is the impact when compared to last year, there was a dip in margin for 1% or 1.5%.

[Operator Instructions] Our next question comes from the line of [ Mukesh Panjwani ] with WC Securities.

Sir, my question has already been answered.

Our next question comes from the line of [ Jayesh ] [indiscernible] with Centra Insight LLP.

Sir, a couple of questions. Firstly, sir, on the [indiscernible], what is the procurement cost that we have to incur, right, for [indiscernible]?

That varies from, [ quantity to quality ]. The grade was -- it will vary. So it starts from on INR 80 to INR 200 to INR 250 per kg, it will go up.

Sir, what is the contract that -- I mean like are we entering into a contract to purchase [indiscernible] market where you can purchase it.

No. We generally, we don't get into contract. But before quoting for higher numbers, that is our volume, if the volume is big, then we will get the confirmation from the supplier, so -- to hold the price.

Okay, understood. And sir, regarding your tank manufacturing CapEx, so what is the amount that you are investing in that?

Yes, roughly INR 20 crores to INR 25 crores.

Okay. And sir, lastly, regarding our order book, about INR 588 crores. So what is your split between government and in a private play, private sector?

Yes, government is almost 33.63%, and nongovernment is 66.37%. In rupees, it's -- government is INR 196.79 crores. and nongovernment is INR 388.35 crores.

Sir, this INR 588 crores, what is the time line like you're expecting to execute the order?

Yes. See, on that part, so, 29%, 30% will be executed in next financial year. So this year, we have to execute INR 412 crores. Out of that, definitely, we will execute INR 275 crores to INR 300 crores this year.

For FY '27, the top line will be around INR 300-odd crores. Is the understanding right?

FY '27?

Yes.

Yes, it will be around INR 250 crores to INR 300 crores.

And with the same operating margin, right? 15% to 16%?

Yes. We are believing on that. We are expecting the same margin.

Our next question comes from the line of [ Gaurav Bhansali ] with [ Augment Enterprises].

Sir, my question is what is the optimum utilization level that you have mentioned? Like the new plant then -- like what will be the optimum utilization like we will reach?

Yes, it will take another 2 to 3 years to reach the full capacity utilization.

So [indiscernible] capacity, 90 to 100 percentage?

Yes, almost 90%.

Okay, sir. And the next question is you said we are setting up a tank making factory, so -- and [indiscernible] the margins. So how much will this help the margins, like your current guidance is 10 to 12 percentage to the tax so how much can we expect...

Yes, bigger -- yes now. See the tank portion -- sorry, the steel, the high-end portion on transformer is something around is 6% to 7%. That's all. So there may be -- and it will support the supply chain. And the other part is improving margin slightly and it will hugely support the supply chain side. So that is the idea of that.

Our next question is from the line of [indiscernible] with [ Wolford ] PMS.

Congratulations for a good set of numbers. I wanted to know how much was the contribution from our new facility in the current year?

Yes. In this -- you're talking about the new facility?

Yes. New facility. How much was the contribution?

Almost INR 170 to INR 200 from the new facility.

No. In the current year, like how much in FY '26, how much was the contribution in INR 182 crores that we did?

Yes, INR 180 crores. On that, what is the contribution you are telling?

Yes.

I think [indiscernible] from the new facility.

Okay. And is our new facility -- so how is the ramp-up going on at our new facility and going forward?

Yes. We are very quickly, we are ramping up. And all machines have been installed and we have very good space, need to clean space with that and we have a good senior team. We have acquired senior leadership team. We have [indiscernible] with the last experience of 30, 33 years experienced people we have -- the thing is now, by hand working people is a challenge, and we already [indiscernible] the people on that and output to your -- the task is to get the output from the newly appointed people. So it will take 3 to 4 months to ramp up and get required expected output.

Right, sir. So in terms of the labor challenge that we earlier spoke about...

Yes. Some we have managed. And in the last 2, 3 months, we have deployed almost 150 to 200 people. And the challenge is now getting the output, but we are getting -- we are training the people. And we are expecting this output will come in the next couple of months, 2 to 3 months, 4 months, maybe we will get the expected output.

Okay. And in terms of our higher capacity, higher voltage class transformer for 220 kV class. So how much confident are we that we'll be delivering more of those orders climbing up the value chain?

Yes. It's a very good question. As of now, we are fully booked with power transformers ranging from 75 MVA to 60, 70 MVA and this order can be executed in this full year. In the meanwhile, we got orders for 160 MVA and 220 kV class and 112 MVA with 333 kV class, so these are the two larger power transformer we have secure orders. And this to be produced and to be [indiscernible] in this year. So this will help us in the next forthcoming years. So we execute larger [indiscernible] on summer because the credentials, we are building [indiscernible] in this year. And on the 50 MVA order also we got -- that also has to be tightest -- product [indiscernible] has to be done. So these are the things which will be happening in this year. And finally, we are making a revenue of INR 200 crores to INR 300 crores -- INR 250 crores to INR 300 crores with the existing order size.

Our next question comes from the line of [indiscernible] with Financially Free.

I have two questions. Like first is on the transformer oil and other raw materials in the industry, it's rising so how we are mitigating that or what impacts you will see on that front?

Yes, this the same question as I've already have answered, again, I'll do that. See, most of the orders, which are to be supplied after 5, 6 months. We will get a price variation class, what we call as [ PVC class ]. So if is there a variation on the positive side or the negative side should be passed on to the end customer. So that type of price variation clause we are having and the deliveries below 3, 4 months for that, the pre-price variation class will not be applied. And while getting that order, we used to book our end-to-end back-to-back, we will book our raw material in concentration with our suppliers since we have a very long period of relationship more than say, 30 years, we have relationships with the vendors. So we'll be able to manage that. And that -- there is a marginal pressure or the margin pressure was there. So that is the reason there was a dip of 1% to 1.5% [ end number ] to last year.

Got it, sir. And secondly, for the new capacity, entire capacities for the power transfer or is it some component of distribution transformer as well from the new capacity?

Is that actually, the capacity is built only for a larger power transformer. Say, larger power transformer means that is above 50 MVA or 80 MVA somewhere around that. But immediately, we'll not be able to get larger power transformer orders because of our [ credentials ]. So we got orders for transformers ranging from [ 10 MVA, 60 MVA ] to 50 MVA. And we got order for 50 MVA or 160 MVA, now 220 kV class and [ 112 MVA ], 330 kV class. These transformers are expected to deliver next financial year. So in the meanwhile, we will do all the prototype and prototype test from [indiscernible] in these type of test and manufacturing will be done in this year. So that we will have a larger number of larger power transformer in the forthcoming years.

Okay. And sir, last question. I was going to the PPT. There was a mention about the DC orders and the current data center thing that is going on in India. So -- but to quantify how big, roughly, the opportunity could be for us from the DC side. Any ballpark on that?

Ye's. But DC, there is a very good opportunity in the upcoming year. And as of now, also, there is a very good demand for larger power transformers, which is more than 100 MVA and 160 MVA. And since we don't have the credentials, not only we got the credentials. We've got the purchase order from a [indiscernible] company. Now we have to do the prototype, then only we will be able to get orders from DC. So -- and there is a very huge demand which we are getting from the market. Huge demand is there for larger power transformer for next 5 years.

Our next question is from the line of [indiscernible], an Individual Investor.

Congratulation for a good set of results. So can the company profitably utilize 609,000 kilowatt capacity? Or are there any risk of underutilization?

As of now, we are aiming for a INR 270 to INR 300 crores revenue for this financial year. So for that, we have a [ full ] order book. And gradually, we have to increase the utilization. So, I think for sure, from INR 270 crores to INR 300 crores, I think we can -- we believe we can achieve that revenue.

What is the confirmed order book of [indiscernible]?

As on [ debt ], we are holding INR 585.14 crores. INR 585 crores.

And sir, what is the current utilization of the old plant and the new [indiscernible] facilities [indiscernible]?

The old facility, is something around 60% to -- sorry, 70% to 75%. And the new facility is very less. Last year, we did only INR 20 crores. But gradually, we have to increase.

The next question is from the line of [ Saurabh Gupta ] with Financially Free.

Congratulations for the great set of numbers, sir. Sir, I just have a couple of questions. First is, if you can provide the breakup of your order book that you have INR 588 crores of order book. As you have mentored from a previous participant that within 4 years of order book, you don't have pass-through plus. So I just want to know that out of INR 588 crores, how much of our order book that is to be executed in the next 4 months.

Next to 4 months. You were asking about the second -- this first quarter and the next quarter?

Yes. Almost [indiscernible].

[indiscernible] actually, totally in this year, we are planning to achieve maximum INR 300 crores from INR 275 crores to INR 300 crores. So in this first quarter, generally, in this trade, the first quarter will be -- the revenue will be less. And go up to first quarter, I think we are planning up to INR 50 crores to INR 60 crores in this first quarter. It gradually will happen.

In first quarter, it means INR 120 crores in H1? Is my understanding correct?

No, it will gradually increase. It will gradually increase. The second quarter, third quarter will be gradually increasing.

Okay. Got it. Perfect, sir. And the next question is, sir is the CapEx that you have just mentioned of INR 25 crores. So when will it go live, sir, for the tank?

No. We are expecting this will come into operation next two financial years.

Okay, sir. And sir, as I have heard from other participants and other peers in the industry, that they are facing raw material prices Q3 and Q4, majorly in Q4 because of the Iran war. So what is your take on that, sir? How is the impact to those margins affected the [indiscernible]?

Yes, there was a drop of PAT margin of 1% to 1.5%. And likely, we booked a large quantity of transformer oil in advance. And copper price also, there was a steep price. So that also we efficiently, strategically we have procured. Despite that, there was a drop of 1% to 1.5% on PAT.

Sir, I just wanted to know that this 14.6% of EBITDA margin that we have reported in H2, is it sustainable for H1 as well? Or we will see further decline and [ H1 ] in our EBITDA margin because of the price escalation?

No. For the Q1 already, we have booked most of the raw material in the month of March itself. So I think there should not be any dip unless any force majeure class applied. So this should sustain.

Our next question is a follow-up from [indiscernible] with [ Wolford ] PMS.

Sir, one thing only, just that what additional certifications or qualifications do we need in order to supply power transformers above 220 kV class?

Yes. We need to do a prototype test. Prototype. We have to make 160 MVA transformer where the voltage class of 220 kV that we have to design manufacture and it has to be tested in CPRI, Central Power Research Institute. We have to do that test and it has to be satisfied. So for that first stages, we have to procure order for that because it costs more than INR 14 crores, INR 15 crores, INR 16 crores. So we will not be able to invest and keep it for customers to buy. And in our case, generally, it will take two years or 1.5 years from this stage. But as Supreme's marketing team has done well, they got an order for 160 MVA immediately and the thing is we need to design and manufacture and test it and test [indiscernible] to pass successfully. So this is a certification that is what we call a special test type test.

Right. And how much time would it take in order to be -- for this test certification to be completed?

So we are planning to do this test end of this year, that is on December, failing which on January, we'll do the test.

Okay. Post which about 202 kV class, we can continuously supply?

Continuous way we can make. Correct.

Okay. And for our additional facility, how much of this can we do -- how much MVA can we do, higher power transformer, about 220 kV class? And how much below 220 kV class?

No, that is [indiscernible] we have the capacity to manufacture up to 200 MVA, 220 kV class up to that we can make. Only this based on the order book.

Our next question comes from the line of [indiscernible], an individual Investor.

And my first question is, in the long term, do you have any plans to grow with [indiscernible] transformer, sir, up to 275 kV in the long term, what is the trend?

No, we -- yes, we have a plan, but not in next 2 to 3 years. First, we need to make the new plant and utilized fully. So primarily, we need to plan for further [ 760 ] as of now, we don't have plan [indiscernible].

Yes. Currently, it is [indiscernible]?

Yes, 202 kV. That is by -- in Phase 2, by addition of a few testing equipment, we can go up to 330 kV.

And how is the demand, sir, like for the next few years as you already expanded the capacity to [indiscernible], do you think in maybe the next 2 or 3 years, we will [indiscernible]?

We will need to?

[indiscernible] in 3 years, sir? I mean maybe [indiscernible] is the demand [indiscernible]?

Yes. Definitely. The demand is very huge. Huge demand is there, a number of data centers are coming up. And the government is also interested in more investing in power sector and in renewable energy also, they are very much interested both the State government and the Central governmental [indiscernible] they are very much interested in renewable energy. So the demand is there. This is as per the market information.

And how much percentage of the order book is power sector [indiscernible] almost certain that is power transformers and [indiscernible]?

Yes. Distribution [indiscernible] number is 20% out of this INR 585 crores. Power transformers are holding 73% and 6% to 7% is [indiscernible] transformers.

And what is the time line for executing this current model, sir [indiscernible]?

Yes. 30% will be executed in next financial year. So that is INR 173 crores will be executed in next year. And for that, INR 412 crores, INR 400 crores to INR 420 crores will be executed this year. This is the plan. But it depends upon the payment from the customer and the raw material production [indiscernible] in sequence. So based on that, we are expecting INR 300 crores, INR 270 crores to INR 300 crores this year.

Sir, last question in December this year, we will [indiscernible] so are we in line, sir, [indiscernible]?

Yes. We are very much focused on voting on the main board. We have a plan.

Our next question is a follow-up from [ Saurabh Gupta ] with Financial free.

Sir, as you have just mentioned that the split of your order book, around 72% is power and around 30% is distribution. Sir I just wanted to know the execution time of different transformers, sir?

Yes, here, 38% to 35% will be executed next year only, next year, financial year. So around INR 400 crores we need to execute this year putting together both distribution transformer and power transformer.

No, sir. I wanted to know how much time it takes to supply distribution transformer versus power transformer.

Okay. See, again, it depends upon the size of the transformer, what is the capacity of the transformer. If you talk about 16 KVs distribution transformer and [ 500 KV ] distribution transformer this takes 4 weeks from the [indiscernible] it takes 4 weeks to [indiscernible] and if the capacity increase from 50 MVA or 100 MVA, it will take 3 to 4 months to manufacture. It is a product...

[indiscernible]

[indiscernible] 6 to 8 weeks.

Okay. Generally, this one month for distribution transport [indiscernible] around 3 to 4 months for power transformer and 2 months for inverted [indiscernible] transform. Is my understanding correct?

Yes. Correct. Again, it will vary from the size of the transformer. It depends upon the customer requirement [indiscernible] so manufacturing time is the lead time is -- what I said [indiscernible].

Okay. And how much time it takes for supply, sir, if you just provide a ballpark number?

No. Can you come again, please?

Sir, how much time it takes for supply, sir? Sir, as you said, that it takes 3 months to manufacture a power transformer and how much time it takes to reach to the clients?

Again, we have to [indiscernible] we will get some advanced 10% to 30% advance we'll get. And balance in [indiscernible] we have to get. And finally, we have to get the final payment, then we [indiscernible] despite that. So only the other side as the customer said, the [indiscernible] the other infrastructures would be ready, then only [indiscernible]. So it will take a relative time [indiscernible] to set aside.

Ladies and gentlemen, we will take that as a last question for today. I would now like to hand the conference over to Mr. [indiscernible] for closing comments. Over to you, sir.

Thank you everyone for joining the conference call of Super Power Equipment Limited. If you have any further queries, you can write us at [email protected]. Once again, thank you everyone for joining the conference.

Thank you very much. Thank you very much, everyone. Thank you.

Thank you. On behalf of Kirin Advisors Private Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.