Techno Electric & Engineering : Conference Call FY22 Q4

"Techno Electric & Engineering Ltd. Q4 FY22 Earnings Call

hosted by Asian Markets Securities Limited"

May 31, 2022

MANAGEMENT: MR. P.P. GUPTA - MANAGING DIRECTOR, TECHNO

ELECTRIC & ENGINEERING LIMITED.

MODERATOR: MR. KAMLESH KOTAK - ASIAN MARKETS SECURITIES LIMITED.

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Techno Electric & Engineering Limited

May 31, 2022

Moderator:Ladies and gentlemen, good day and welcome to the Q4 FY'22 Earnings Conference Call of Techno Electric & Engineering Limited hosted by Asian Markets Securities Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involves risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, etc., whether expressed or implied. Participants are requested to exercise caution, while referring to such statement and remarks. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal and operator by pressing '*' then '0' on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kamlesh Kotak from Asian Markets Securities. Thank you and over to you, sir.

Kamlesh Kotak: Thanks, Steven. Good afternoon, everyone. On behalf of Asian Markets, we welcome you all to the 4Q & FY'22 Earnings Conference Call of Techno Electrical & Engineering Company Limited.

We have with us today, Mr. P.P. Gupta ji -- Managing Director and the Senior Management Team representing the company.

I request shri Gupta ji to take us through an overview of the quarterly and yearly results for the financial year FY'21-22, and then we shall begin the Q&A session. Over to you, Gupta ji. Thank you.

1. Gupta:Yes. A very good afternoon to each one of you to discuss our financial results for the last Q4 ending 31st March and our financial results for the year-ending March '22.

Anything said on this call, which reflects our outlook for the future or that could be construed as a forward-looking statement must be reviewed in conjunction with the risks that industry faces and which in turn is applicable to the company too.

Let me quickly highlight our performance for the Q4 financial year '22. The total revenue stands at Rs.307.5 crores, up by 43% year-on-year and the revenue for EPC stands at Rs.304 crores against Rs.212 crores last year, up by 43.32% year-on-year. EBITDA margin for the EPC division is at 13.13% compared to 15.12% last year.

Revenue from wind segment is at Rs.3.5 crores. EBITDA of the company stands at Rs.39.20 crores compared to Rs.18.96 crores in the same year, same period last year. Operating profit in the EPC segment for the quarter these that Rs.39.58 crores compared to Rs.31.72 crores last year.

We experienced some pressure in the EBITDA margins due to prevailing inflation and high commodity prices cycle and also higher overseas rate.

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Techno Electric & Engineering Limited

May 31, 2022

The other income is at Rs.3.08 crores. Profit before tax was at Rs.31 crores nearly against Rs.53 crores last quarter. PAT for the quarter is Rs.37.2 crores compared to Rs.13 crores last year, that is up by around 200%. EPS is at Rs.3.39.

For the whole year, if we look on, revenue is at Rs.1,074 crores compared to Rs.889 crores, up by 21%. Revenue from EPC is at around Rs.990 crores compared to Rs.790 crores, up by 25%. EBITDA margin is at 15.58% compared to 18% last year.

Revenue from wind segment is at Rs.85.63 crores compared to Rs.64.15 crores last year. But considering the adjustment for the one-time revenue of Rs.36 crores because of the tariff order, the turnover in the books was around Rs.100 crores.

EBITDA for the company stood at Rs.222 crores, up by 3%. As stated earlier, the same is also influenced by the one-time wind segment income of Rs.35 crores.

The operating profit for the EPC segment is at Rs.153.5 crores compared to Rs.143 crores last year, up by 7%.

EBITDA for wind segment is at Rs.68.96 crores.

The other income is at Rs.150 crores compared to Rs.84 crores which includes profit out of the sale of JV company of Rs.110 crores. Similarly, other income for the previous year too included a profit from the sale of a transmission asset in Haryana for Rs.45 crores.

The profit before tax is at Rs.324 crores compared to Rs.250 crores last year, up by 30% and profit After Tax stands at Rs.260 crores compared to Rs.200 crores last year, up by 30%. EPS is at Rs.23 and Rs.23.7 roughly.

The current investment revenue including cash and cash equivalents is at around Rs.1,200 crores, that is more than Rs.100 per share.

We have received various orders totaling Rs.800 crores in the current year up to March '22. We were L1 in two HGD orders worth Rs.1,600 crores in Rajasthan and also various transmission orders of Rs.445 crores stands as confirmed order as of now.

Unexecuted order book as on 31st March 2022 is Rs.1,500 crores. This gives the visibility of order book as of today of more than Rs.3,500 crores. We are further L1 in the business the extent of about Rs.1,000 crores.

This is first time we are able to achieve an order backlog of around Rs.4,000 crores after almost five years. This will help in doubling the top line in next three years and more.

As committed in last quarter, we have been able to tide over the difficult times, I would say, had shown growth in this year. So, this I would like to classify that this is a recovery year by and

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Techno Electric & Engineering Limited

May 31, 2022

large and going forward '22-23, we look upon as a growth year stabilizing growth year. But major growth will happen in the second half of the coming year.

We expect large business growth in FGD segment, AMI segment, data centres. In the coming years, we see strong power sector reforms as power and industry coverage.

Additionally, there is a significant focus and stress on efficiencies, stability, reliability, power supply, cost of power, improvement on the financial health of the discoms. But presently it continues to be a challenge.

The focus will continue to be on renewable power and related transmission infrastructure and energy storage infrastructure. The transmission infrastructure for renewable power is required to be 500 GW as committed in Glasgow Convention by our Hon'ble PM and additionally 25 to 30 GW of energy storage solutions at grid level, are being proposed to be doing over the next five years.

The FGD segment continue to be strong and focus in this year and in the near future. As per notification of government of India, all coal-fired thermal power stations aggregating more than 200 GW, need to limit their sulphur emission SOx, NOx both as notified by pollution department by December '24. There is a considerable progress with CPSU and now we see more progress with these SEBs also. In coming years, we definitely expect more business from SEBs, CPSU and private sector. We have recently received two orders Rs.1,600 crores which were L1 last year, and we are again L1 in order with DVC of Rs. 700 crores which got the letter after last year. This level of business will continue for next three to four years as 80 GW is yet to be ordered out.

In the transmission segment we see a status quo in the transmission because the sector is primarily lifted to now renewable power evacuation. The TBCB bidding of 66 GW out of 174 GW this is in progress.

We are happy to state that we had already received two orders in last month or two from Adani for whatever concession they won at Khavda as well as that Kadur. And we also plan to bid NTPC packages to the extent of Rs.1,500 crores in partnerships.

The allocation for strengthening power system has been doubled to 29.8 billion in union budget of the current year. We see good interest from large investors, InvIT funds to participate in above bids which by making the company a significant partner. This will enhance our access to capital at best, will also enable us to be competitive in bidding.

The PMDB programs and metering, AMI segment is progressing steadily. This segment will see a lot more interest in the coming years. The main aim of government is to improve efficiency and sustain losses so that the health of these costs could be improved.

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Techno Electric & Engineering Limited

May 31, 2022

We are keen to work as EPC in this segment more than as DPR-14 player because we are afraid at the moment that working with discoms as counterparty is relatively high as experienced by us as a genco.

We have been reading in the media and strongly believe that amendment to electricity act, tariff policy and elimination of cross-subsidy, etc., are in the pipeline and they may happen soon. We do believe that the sector is at a critical juncture and definitely every sector in India in crisis, good thing starts happening. So, we should expect some good news there also.

Wind Segment: We have received our payments up to June '22 and we have also been favored by Madras High Court order to claim our all outstanding interest dues by the end of June '22 and we are hopeful of getting these payments now.

The Data Centre I would say that as already stated the COVID has impacted our life in multiple ways, but one positive outcome is the growth in the digital space. With the growth of digital space backed by IT policies and on data privatization, it is expected that the third-party data centre in the industry are likely to be around five GW by 2030 and two GW by three years from the existing 500 MW capacity.

Till date, most of the data centres are located in Mumbai and Chennai, and we are also in Chennai very close to EDEL, Adani, EQNext, Sify, are already in the process of setting up our data centre at Siruseri. This further validates our choice of the location as a first mover.

We are in an advanced stage of setting up of this data centre of 40 MW of grid load, and 24 to 25 MW of IT load and scalable hyper density for which construction work has already started at site. And all statutory clearance for the project have been received. We are hopeful of getting first phase ready by June '23. We will also captively consume wind energy on these data centres so that it's a grid data centre to align with the policy of major hyperscale customers because of their ESG commitments.

With CAPEX of Rs.1,200 crores and Rs.40 crores per MW of IT load, the 65% is almost in the domain of the Techno Electric, which is largely on the corrector of electromechanical work, energy storage ones, stead by energy solutions, which is in-house capability of the company, as we'll be able to leverage the expertise.

We have been further favored by allocation of that investment at Kolkata in a place called Silicon Valley along with TCS and Reliance to set up a data centre. We are also eyeing to have a 250 MW capacity by 2030 as already committed.

With this, now I open the forum for any further details, clarifications.

Moderator:Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead.

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