Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Techno Electric & Engineering Co Ltd (BOM:542141, Financial) reported a 7.5% year-on-year increase in total revenue for Q4 FY24, reaching INR 482.67 crores.
- The company's EBITDA for Q4 FY24 increased by 52% year-on-year to INR 58.84 crores.
- Profit before tax for Q4 FY24 rose by 58% year-on-year to INR 83.5 crores.
- The company announced a dividend of INR 7 per share, amounting to 350% on the face value of the share.
- Techno Electric & Engineering Co Ltd (BOM:542141) has a strong balance sheet with cash and cash equivalents of INR 1,500 crores.
Negative Points
- The 40-megawatt data center in Chennai is still in the implementation stage and is not yet revenue-accretive.
- There have been delays in land acquisition for some projects, impacting the timely execution and revenue recognition.
- The company faces challenges in scaling its workforce and infrastructure to meet the growing opportunities in the power sector.
- The smart metering business is capital-intensive, requiring significant upfront investment before revenue generation.
- The company plans to raise INR 1,250 crores through QIP, which may dilute existing shareholders' equity.
Q & A Highlights
Q: Congratulations on the company's performance. Given the conservative image of Techno Electric, how well is the company prepared to capture future opportunities, and what are the aspirations for the next four to five years?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) The company is evolving and transforming itself. We have set up an office in Delhi and are recruiting extensively in IT, data centers, transmission, and smart metering. We aim to achieve INR10,000 crores by 2030, doubling year on year. The company is focused on IT-layered power solutions, which are more rewarding than pure commodity solutions in the power sector.
Q: With INR1,500 crores of cash and plans to raise INR1,250 crores through QIP, how does the company plan to use this cash, and what kind of IRR are you looking at?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) We aim to build assets out of our own funds and monetize them when they are revenue-accretive. This strategy has previously resulted in significant capital gains. We expect an IRR of 18-20% on these investments.
Q: What are the manpower requirements to achieve the company's growth objectives, and what are the biggest challenges?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) The challenge is to stay ahead of learning requirements. We are recruiting leadership teams for different verticals and have onboarded experts in data centers and renewable energy. We are also expanding our office space and focusing on IT-layered power solutions.
Q: What is the current order book and L1 position, and can you break it down by segment?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) The total order book is INR9,200 crores, with an L1 position of INR1,050 crores. Transmission accounts for INR5,000 crores, FGD for INR1,300 crores, distribution (excluding smart meters) for INR400 crores, smart meters for INR3,000-3,500 crores, and data centers are expected to contribute at least INR1,000 crores over the next four years.
Q: Can you elaborate on the RailTel data center project and its potential impact?
A: (Ankit Saraiya, Whole-time Director) We have won a project to establish 102 edge data centers across India in partnership with RailTel. This will make us the largest DC operator in terms of the number of data centers. The total investment is estimated at INR1,000 crores, and we plan to fund the initial projects internally. The project will be executed over five years, with 20 locations each year.
Q: What is the status of the Chennai data center project, and are there any plans for partnerships?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) The first phase of the Chennai data center, with a capacity of 6 megawatts, will be completed by September. We have spent INR300 crores so far. We are open to both operating it ourselves and partnering with others. The full 24-megawatt capacity is expected to be operational by March 2026.
Q: How does the company plan to manage the cash-intensive nature of the smart meter business?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) The deployment of meters is phased over 27 months, with revenue accretion starting from the seventh month. We can also monetize the meters progressively or completely as SPVs. The direct debit facility ensures timely payments.
Q: What is the company's dividend policy, and how does it align with the QIP plans?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) We have a dividend payout policy of 25% of the bottom line. Paying dividends rewards investors and maintains fiscal discipline. The QIP will provide value accretion to the stock while dividends provide cash returns to investors.
Q: What are the company's revenue and EPS guidance for FY25 and FY26?
A: (Padam Gupta, Managing Director, Executive Chairman of the Board) For FY25, we expect a top line of INR2,500 crores and an EPS of INR35. For FY26, we expect a top line of INR3,500 crores and an EPS of INR50.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
