Schneider Electric Infrastructure Limited analyst Q&A

Thank you very much. We will now begin the question -and-answer session. The first question is from the line of Raj Rishi from DCPL.

Yes, Mr. Raj, thank you for asking this. See, what's been happening in India, which perhaps I see myself personally for last about 3 years or so. There is a lot of growing tangible sensitivity around being more sustainable in our operations, which is what India industry and other stakeholders are looking for. If you ask me, as a matter of fact, they are now -- that BRSR is something which is being mandated and there is a growing. I would say, sense, which is emerging around how can we be more efficient, sustainable in our operations. And India offers a very varied landscape if you really ask me. There are a lot of industries which got established when this was not at the radar at all. And now people are getting sensitive around this as to how do we electrify the processes which we have. And when I state this, this can go to any sort of industry. This can go to metal industry. This can go to any fertilizer industry in terms of how do we save on carbon footprint. And this, of course, and I'm pretty certain that going forward, this is going to be very much applicable and very much relevant for a country like ours.

Okay. And in the previous con call, I had asked you about like the estimate is that trillions of dollars would be required for meeting certain targets, etcetera, and Schneider is right at the centre of that particular aspect. So any comments on like where do you stand and especially the listed entity, like you have a lot of entities, Schneider has a lot of entities in India. So is there any duplication of business, conflict of interest between the listed entity and some unlisted entity of Schneider? These are the 2 questions.

So Raj ji, I'll take the second question first. There is no conflict of interest between various operational entities in India of Schneider. And number two, if you ask me as to what is the budget, which people might take for being more sustainable, this is -- I would not be in a position to answer you because you see what's been happening is there are people who are taking -- today is an evolution phase, I would say. People are trying to try out pilots, trying to gauge the basic -- basic concept of sustainability is, first and foremost, you should be -- I mean, sensitive about this. Draw as to where do you stand, which we typically call as where we are today. Form up a road map as to where we want to be and then try to drive it, make it happen and finally to sustain it. Now your piece typically comes when you have already drawn up a road map where you really don't need to see as to how much investment is required, which I would, at this point in time, for a national average point of view, I will not be able to say. But what I can only add here is, there are people who -- most of the stakeholders, most of the industry, most of the relevant people are trying to see as to how much they can do in their own ways to drive this in their respective set of operations. But the number point of view, I will not be able to throw up and share any numbers with you because I'm not aware about this at this moment of time.

I do not know, which specific one you're talking about, but if you're talking about type test validity, that is the one which actually -- it will actually give -- it will have a positive impact if you are asking about that one, not only for Schneider, but the entire set of people who actually are operating in this field. So it is more -- the government is trying to get -- or rather there is a draft if that's what you are referring to, where as to how do we -- what should be the period of the validity of the type test on a certain equipment, if that is the one.

The next question is from the line of Mohit Kumar from ICICI Securities.

My first question is, sir, how do you approach a client for -- because Schneider provides -- Schneider has so many products, right? For example, let's say, a data centre guy, right? He needs a host of products, and we as a -- we provide certain products and then there's cooling product, then there are some other low -voltage products. So how does Schneider approaches the client? How does the sales happen? How do you collaborate with these other entities of Schneider?

Thanks, Mr. Mohit, and thank you for asking this. Wonderful question. You are absolutely right. And that is what we also believe that we should give and full Schneider portfolio to have what we call as one SE experience by the customer. Now absolutely on the dot, which you are saying. If someone -- if you were the one who actually had to put a data centre, our teams, we would have approached you and would have told you as to what is going to be the power system distribution along with cooling equipment, right from the time when you receive power from the grid at, say, 132 kV by putting a transformer and going to the right end, which is you're absolutely right on the LV distribution piece, fully engineered, fully optimized and fully laded with software so that the maintenance part, the energy consumption part is very well taken. So if you ask me, is the transformer is the main receiving equipment, if you come to data centre building, you talk about the power distribution, you talk about chillers, you talk about HVAC, you talk about other fans, you talk about LV busways, you talk about LV switchboards and you can -- so it's a full comprehensive solution, which is along with it, you talk about DMS system, you talk about UPS, you talk about everything. So Schneider as a group actually can offer multi -- many multi solutions and offers, which actually can cater to a data centre developer, hyperscalers. So that's what we do.

Understood. My second question is on the -- I see a lot of 11 -kilovolt ring -- you have won in this quarter. Is this related to the way the RDSS has -- RDSS, a reform development scheme of the government of India is panning out? And are you very optimistic that this kind of orders will only increase in the next 12 to 18 months?

I'm sorry, Mr. Mohit, I was not -- you are not very much audible to me. Can you repeat it? I'm so sorry.

Yes. In fact, that stays as the mainstay, Mr. Mohit, of our business. Now one of the major drivers is this RDSS scheme perhaps which you are referring to, which talks about INR300,000 crore lakhs of investment in India. And that certainly gives us impetus to people like us. And where the play of -- if you recall, the scheme is essentially around 2 things. One is how do we strengthen the already existing network? How do you augment the network? And when I say augmentation, it also means how do you digitalize the network so that it becomes more efficient. And eventually, the AT&C losses, which are standing at 15.4% goes down to about 12% at the India level. Now this certainly does, if the question is, does it give us some extra amount of business or continued business? The answer is, yes. Now what it typically also depends is which state is investing, which is sort of, I would say, affected by the political situation of the state. And at times, there is a deferment of certain projects or certain elements, which do happen. But overall, if you really ask me, the answer to your question is yes, this scheme helps us out.

The next question is from the line of Aditya Deorah from Divisha Investments.

Sir, in our parent's commentary, it was mentioned that the energy part of the business for India grew double digit, while the industrial automation was down year -on-year for the India unit. So is it similar for us? Or is there a variance for our operations?

Aditya ji, thank you. And it is quite similar. See, industrial automation may be slightly different, and it is a bit low, I would say, because when the such announcement is done or things are declared, it is declared for the entire automation, industrial automation space. Now this company of yours typically do what is around the substation automation. We are not into discrete selling of automation components. Now for us, it is always business as usual. It hasn't seen a dip, or it hasn't changed from the normal energy management perspective. But I think the statement, which you are referring to, it comes from a larger domain, which encompasses everything and all aspects of industrial automation, even including discrete component supply of industrial automation products. But for this company, it is virtually the same, the normal one, which happens.

Okay. And sir, for last few years, if we see the sales CAGR that we are doing, it's around 20%. So my query comes with respect to the Calcutta factory. So would we see a leg up in the sales growth once the factory is established? Or should we model the 20% CAGR that we are seeing, or we have been seeing for the last 3 years going ahead?

Aditya ji, I'm very positive about it, but I'm not in a position to give you some insight as to how the future numbers will going to look like. Calcutta is going to have a positive impact on us. But how will it impact the run rate of 20%, not in an actual situation to tell you as of now.

Perfect. Sir, just one more request. Our parent would have its India Investor Day, I'm sure you know about it on December 7 or the first week of December. If you can accommodate some of the India analysts or investors, it would be great. And if it's not possible, then at least the text that you would be sharing with the global investors, if it could be shared with the Indian investors, it would be great on your part.

Noted Aditya ji. We'll do whatever is...

The next question is from the line of Nemish Sundar from Elara Capital.

Congratulations on a good set of numbers. Sir, just continuing of the last participant's question on the Kolkata factory, like could you let us know the status of the factory? Like is it on track to be commissioned? I think you said, by April of the next year. So is that on track?

Nemish ji, first of all, thank you. And second is, it's almost on track. It is actually coming up sometime around the first quarter of next year. That will happen. And it will perhaps start maybe in the last quarter of this year, and we will sort of conclude the other -- installation of other furnaces by Q1 next year. That's the plan, so it's overall on track.

Okay. Fine. That's great to know. And my second question is, sir, I just wanted to understand like I think we have been adding some channel partners recently instead of directly taking orders from DISCOM. So as of now how is the split in H1 in terms of channel partners' contribution versus the direct orders contribution? If you could just highlight something on that?

I think we may get back to you, Suparna has this fine detail. But otherwise, it actually typically is -- see, there are 2 ways to measure it, Mr. Nemish. One way is how many assets are we supplying through channel versus how many assets do we supply direct. That is one way of looking at it and which is the most important and relevant way instead of getting into the volume in rupee crores. Now because finally, your company is actually trying to see as to how do we penetrate and saturate this market with our products. And therefore, we have decided to actually -- and there's a very, I would say, back -end work, which goes in terms of identifying and slotting, which one will be served through a partner, and which one will be served directly. Now if you typically ask me the number in this half year, I may not be absolutely correct. Suparna -- under control of Suparna, it would be typically, I would say, maybe 2:1, 2 in favour of license partner. That's what we have done in H1 in terms of number of assets.

The next question is from the line of Viraj from Jupiter Financial.

Congratulations for the good numbers. Sir, my question is, how do you see the business environment going forward from here? What's your sense on the industry?

Raj ji, first of all, thank you for having faith in us. Now we see India is at a right point in time, at the right cusp, if you ask me. It's actually, they are -- the business and the segments, which were there since last about 7, 10 years, they continue to be there. What we additionally see is the new emerging landscape. Now this new emerging landscape will hit us maybe in coming years, may not be exactly the way we feel they will come, but plus/minus 1 or 2 years here and there, it will certainly come. And these are multipole. These are solar, the EV, the storage, the data centres , these are the elements, which were non-existent if you really ask me in 2015, '17. But now what existed in '15, '17, '18, '19 around COVID, that stays, and we are seeing these additional revenues, which actually will drive India future. Now what I -- what is very difficult to ask is whether the EV story will happen by the time it has been projected for 2030, 30% penetration? The answer, I don't know. But what I certainly know, if not in 2030, it will happen in 2032. So the business high level is good. India is bullish. We are bullish. We are trying to see as to how do we leverage these evolving business opportunities by the right solutions by driving the right thought leadership, talking about what is good for India with customers and other stakeholders is something, which is very relevant. So we are doing 2 things, if you ask me, Mr. Raj. One, trying to adapt ourselves, trying to see as to how can we really be there on the right time for those customers who are exploring these new technologies. Second, we are also trying to help advocate these new technologies with the right policymakers who are trying to derive right policy charters in India for these emerging landscapes. So these are the 2 things which we are trying to do. I do not know whether I've answered you, Mr. Raj, but this is how India is on high level, good.

Sir, my second question is, does Schneider has played battery storage -- or did Schneider has its play on the battery storage in India?

Yes, we do have. We do have -- battery storage is a complex affair, as Mr. Raj, you may know. We have solutions, which we call as behind the meter and front of the meter. And we are developing -- battery storage is not great. What we are trying to be is talking about what different approach we bring to battery storage. That is something, which we are discussing, we are talking about, and we are sort of -- we are going to have a decent play in that in time soon.

And sir, my last question is on the breakup of sales and order book, which is for Suparna ma'am.

Yes, please.

Yes. Ma'am, can you give me a breakup of your order book and sales?

In terms of the specifically systems transactions, etcetera?

And intergroup orders.

And also?

IG, intergroup orders.

This is order book breakup or the sales breakup?

This is the sales breakup.

Okay. And the order book breakup would be now?

Just a minute. Okay. So the order intake is: equipment is at 47%, projects at 13%, transaction 23%, and services 17%.

And intergroup?

Intergroup, we do not capture orders as such, but it is -- the indicated number is close to INR125 crores.

The next question is from the line of Rohit Maheshwari: from Tata AIG.

Congratulations for a good set of numbers. Sir, my first question is, can you give some sense from the first half of the total order, how much will be from the private versus public? And because of H1 FY '25, there was election year. So like do you see the H2 better than H1, like in terms of order pipeline?

Rohit ji, thank you for asking this. I would not have a right split, but typically, we are exposed to about 40%, plus/minus 5% here and there, with government. And just one thing I wanted to call out because our -- being a project business, we come into play essentially a few days or a few months later than the project is financially closed. What I mean by this is most of the jobs that you see are done through large contractors. So the processes is tendered by government when it talks specifically about 35%, 40%, where I say, end used by government is won by a contractor and then contractor places -- he designs, he actually engineers the solution, which is required as per the government requirement and then it comes to us and then we supply. So if you hear something happening now, probably by the time it comes on our table is maybe about 9 months to 15 months away. That's one. Two, H2 is always better. H2 is always better historically for any company, and we are no different because there is a lot of impetus on actually capitalizing it. And there's a reason why people and the users or the buyers or the end use trying to expedite their timeline so that they receive the equipment in March. And that's the reason why H2 typically, we have always seen a shape better than H1. So -- and I'm seeing this year will perhaps be no different. We'll be somewhat doing something similar.

Okay. Like when we see that for an example, quarter 3 FY '25 is a good robust quarter for government ordering. For us, it should be reflected in quarter 4. So like if my understanding is correct, so this is the right way to understand?

Not -- because there is no such rocket science, we can't have a numerical formula in trying to give you. But very typically, this -- any quarter, is somewhat similar in behaviour. It gets impacted a bit by some things happening at, I would say, political level. But otherwise, typically, it follows the same cyclical order as any quarter perhaps in the previous years I've seen. So when you ask me that if Q3 is what the kind people say whether the Q4 will drive those orders, it is very difficult to predict, Mr. Rohit, as of now.

Okay. Sir, second is, can you give a sense, like, for example, today in India, if a data centre requires close to like between INR50 crores to INR60-odd crores for 1 megawatt, what will be the TAM for us in that INR60 crores, INR70 crores type of cost for us?

What would be what, Mr. Rohit?

Yes. Currently, in India, if you see the data centre cost for setting up 1 megawatt is close to INR60 to -- like it's between INR50 crores to INR 70 crores. So I would just want to understand that what is our, Schneider, addressable TAM in that INR 60 crores to INR 70 crores?

Yes. Rohit ji, I wish I had that calculator. But see, it is -- it, again, cannot have a straight answer. I'll try to explain you in 1 minute because when you say this data centre, it requires 3 things: one is the land itself; second, power and water. Now it really depends as to how their distribution is? What is their incoming power level at which the feeder is being taken? How they are distributing it? Whether they are going to keep 11 kV distribution, 33 kV distribution within the data centre building? So typically, it actually is a combination of all. There are times where our number per megawatt of industrial load is actually -- is a bit different, depends on what configuration a hyperscaler is trying to put up the data centre at. But -- and it's varying because if I tell you INR 10 crores per this one, I would be actually wrong because it really depends on a specific configuration. So it's very difficult to give you a ballpark number in terms of how much business potential will a data centre throw up per megawatt of IT load. Very difficult. So -- but what I'm saying is, with all the hyperscalers, with all the colo developers, we actually are -- we are connected. We are supplying various equipment from this company. So I mean, data centre does offer a very positive thing going forward for us.

Okay. Just one last question, if I can ask, is like can you -- because to get a sense, can we get like what is the order bidding or order pipeline as of now stands so that we can get a sense that like what type -- like how is the -- how can the growth materialize over the next 6, 8 months or like maybe 1, 2 years? So can you give that sense?

We are positive, Mr. Rohit. We are trying to build up the right order book. When I say right, we are trying to see as to which are the projects, which are sort of -- which are beneficial to the company, we are exploring and venturing into that area. Now the good part is that we do see a lot of projects in the country, which allows us to be a bit choosy, I would say. And we are picking up. And my sense is that this journey of growth is sustainable for companies like us. And we are counting on the evolving India and the type of investment, which India sees in 5 to 10 years from now. So it actually is like this.

Yes, perhaps to add and give you confidence on how we are in terms of pipeline opportunities. One good indicator for this is the order backlog. What I mentioned that we are at INR 1,389 crores, we are up by more than 14% as compared to last year. So our order booking tracking actually gives us the confidence for future sales, etcetera. So that is one thing, which you can bank upon.

The next question is from the line of Manish Goyal: from Thinqwise Wealth Managers.

Congratulations on very good numbers on both P&L and balance sheet, and it was quite commendable to see very strong cash flow generation in the quarter and cash position improving significantly, ma'am. Special congratulations to Suparna ma'am. I just want to know like probably, is there anything specific, which would have led to a jump in our cash flow, and can we expect it to be sustainable going forward? That was my first question. My second question is on -- if you can give us a perspective, how is exports doing for us? What is the outlook? And what is the current revenue share? If you can provide some perspective, are we probably looking at some of the products? Like I believe definitely, once vacuum interrupters factory comes up, definitely, that will help. But beyond that, how is exports doing for us and what are the prospects? And my third question is on capacity utilization for our core products, transformers and switchgears. And are we also looking at increasing capacities in these products? And what is the capex plan? And my -- sorry, my fourth question is on services business. So we definitely, as per the revenue -- as the order inflow breakup shows that services intake seems to be quite strong at ranging between 17% to 19% for last few quarters. But somehow probably the revenue share continues to be 11% to 13%. So if you can help me improve -- provide perspective on that as well.

Okay. I'll take the part of your fourth question, and then I will request Udai to add on. So for export, we have been -- out of our total sales, we have been 14% of that approximately contributes -- comes from the exports. Regarding the better cash flow, there has been a lot of focus in terms of having better payment terms for the last, say, 1 year as we are evolving to improve our cash position. Our -- a lot of impetus on getting on-time collections. If the collections are a little delayed, we are practically camping at customer sites to get those collections, and inventory management has been better. Our payables management have been better. So all put together and not forgetting the cash, which is coming from the good profitability that we have. So all these things are contributing for a better cash flow. I hope that suffices your answer. With respect to maybe capacity utilization, Udai, you can comment and also on the services part.

Manish ji, I'll be quick because we are almost at top of hour. In fact, we have exceeded by 2 minutes. And we are ramping up our capacities as we see our needs going forward in the plants, number one. Number two, the services piece is cyclic. And the focus stays on services for the business because that is where we differentiate ourselves in terms of giving a value-add services to our clients. One quarter here and there doesn't matter. But overall, our objective and alignment is to drive more and more services fees purely propelled by a new offer, which we have lost, which is EcoCare, I'm sure Mr. Manish, you may be aware.

Yes, yes.

So these two things. And if there are any further details, I think perhaps we will connect with you later. And my summation is that maybe perhaps we have crossed the time, so we might perhaps like to connect...

I just want to clarify the revenue breakup provided by Ms. Banerjee was for the quarter 2 or half 1?

I'm sorry, can you please repeat your question?

No, I'm asking that revenue breakup what you provided, 70%, 19% and 11%, was it for quarter 2? Or was it for first half, ma'am?

This is all for quarter 2.

I now hand the conference over to Mr. Harshit Kapadia for closing comments.

Yes. Thank you, Steve. We would like to thank Schneider Electric management for giving us an opportunity to host this call. We would also like to thank all investors and analysts for joining for this call. Any closing remarks, Udai sir, that you want to share with investors?

I would like to thank you for joining us, for having confidence in the management. Just wanted to assure that we are trying to be at the right places at the right time with the right offers, right teams. And thanks again for joining and see you next time, maybe another about 90 days away. And I wish a lot of festivities, a very Happy New Year, a very Happy Christmas going forward to all of you and your families. Thank you so much.

And thanks to Harshit and team Elara for your support.

Thank you.

Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.