GE T&D India Limited (GET&D) Q2 FY23 Earnings Concall Transcript

GE T&D India Limited (NSE:GET&D) Q2 2023 Earnings Conference Call dated Nov. 09, 2022

Corporate Participants:

Suneel Mishra — Head of Investor Relations

Pitamber Shivnani — Managing Director & Chief Executive Officer

Mariasundaram Antony — Project Business Leader

Sandeep Zanzaria — Commercial Leader

Sushil Kumar — Chief Financial Officer/Whole-Time Director

Analysts:

Parikshit Kandpal — HDFC Securities — Analyst

Ashwani Sharma — ICICI Securities — Analyst

Charanjit Singh — DSP Mutual Fund — Analyst

Aniket Mittal — SBI Mutual Fund — Analyst

Amit Anwani — Prabhudas Lilladher — Analyst

Bhavin Vithlani — SBI Mutual — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the GE T&D India Limited Conference Call for the Second Quarter Ended 30th September, 2022.

[Operator Instructions]

I now hand the conference over to Mr. Suneel Mishra, Head of Investor Relations at GE T&D India Limited. Thank you, and over to you, sir.

Suneel Mishra — Head of Investor Relations

Thank you, Roshalini. Good day and welcome to this conference call that has been organized to present and discuss audited financial results for the second quarter ended as of 30th September, ’22. Now, let me introduce GE T&D management team available on this call. We have with us, Mr. Pitamber Shivnani, who is the Managing Director and Chief Executive Officer. We have Mr. Sushil Kumar, CFO cum Whole-Time Director; Mr. Sandeep Zanzaria, who is our Commercial Leader. We have Mr. Mariasundaram Antony, who is our Project Business Leader. We also have with us Ms. Bhumika Chandra, who is the Company Secretary. And we have with us Mr. Anshul Madaan, who is our Communications Leader. Please note that this conference call is scheduled up to 5:00 PM. I hope you would have received the investor/analyst presentation and the same has been uploaded at our website. I hope you would have also read out the disclaimer as per Slide number 2. So, Mr. Shivnani will begin this conference call, highlighting key events of the quarter, then Mr. Maria updating us on operations followed by Mr. Sandeep Zanzaria, who will take us through order book and the T&D grid market. Then Mr. Sushil Kumar will give his insights on the financials.

I would now request Mr. Shivnani to begin the conference with his opening words. So, over to Mr. Shivnani.

Pitamber Shivnani — Managing Director & Chief Executive Officer

Thank you, Suneel. Ladies and gentlemen, good evening. Thanks for joining the call. We hope you and your families are healthy and safe. I would like to start this call by giving you a brief overview about the last quarter, and then would request my other colleagues present in the call to go through the details.

First of all, thanks to the diligence of our execution teams and consistent efforts towards lean initiatives, we have been able to deliver a profitable second quarter of financial year 2022-2023. We have reported a net profit of INR2.8 crores compared to a loss of INR7.7 crores in the corresponding quarter of the last financial year. Our overall sales in the second quarter were at INR700 crores compared to INR850 crores in the corresponding quarter of last financial year, and we received the orders for around INR490 crores. The orders were down in the second quarter due to the few major decisions regarding TBCB contracts getting deferred to Q3 and Q4. However, we have a good pipeline in the next quarter, and Sandeep will cover more about this in his address.

As we move into the last two quarters of the financial year, we continue to focus on reducing cost to drive profitability. We have seen some stability in commodity prices and inflation. However, we continue to monitor these variables closely and are well placed to adjust our procurement strategy accordingly. As per the report released this Monday from Arthur D. Little, a renowned international management consulting firm, India will lead additional strategic investment of over $300 billion to achieve its clean energy capacity target of 500 gigawatt by 2030. The findings of the report further reinforce the continuous growth of the Indian power sector in the coming years. The clean energy acceleration, along with the government focus in introducing policy reforms in the power sector will boost the transmission industry overall. Our strategy of picking new orders remains unchanged. Our priority will be to pick orders that will help us grow profitably, keeping in mind the long-term sustainability of the company.

With that, I will request Mariasundaram to provide further insights on the operation during the quarter. Over to you, Maria.

Mariasundaram Antony — Project Business Leader

Thank you. Thank you, Pitamber. Good evening, ladies and gentlemen. It is my pleasure to share with you the operational update of GE T&D India Limited. In this quarter — last quarter, Q2 of fiscal year ’22-’23, we actually continued to commission key milestones, actually key milestones for our customers across the region, and it involved commissioning of major equipment at different substations. And I would like to call out some of those key milestones executed in some of our key substations in the region in the last quarter.

I think we commissioned ICT in — 100 MVA ICT in HP, Himachal Pradesh for the Himachal Pradesh Transmission Company. And we also commissioned, I think, 200 MVA ICT for MSETCL in Pimpalgaon Substation in Maharashtra. And then, I would say, we actually covered a lot of commissioning milestones, I think completed a lot of commissioning milestones in Bhutan, a different substation for Bhutan Power Corporation in Samcholing, where we commissioned the transformers as well as in Damji, where we also commissioned a transformer there. And then, Dagapela, where we commissioned the second 40 MVA, 220 and 33 kV transformer, along with the 33 kV GIS. So, this was the significant completion which we did in Bhutan. And then apart from that, we have been — we commissioned around three 400 kV GIS bays for Doosan Jawaharpur power plant, which is getting built by Doosan for the UP — Uttar Pradesh State Corporation, I think, and we actually commissioned the three bays out of the 15 400 kV bays, which we have planned to do there. And then, in addition to that, in Orissa, in Hinjilicut substation, we commissioned the transformer along with the five bays of 132 kV GIS and nine bays of 33 kV GIS. And then, finally, in Jharkhand in Latehar substation for PGCIL, we commissioned the two 220 kV AIS bays. So we continue to kind of implement our technologies covering our transformers, GIS, AIS in the substations for the region. So, we’ll continue the momentum as we move into the last two quarters of this year.

Thank you. And I will now hand it over to Sandeep Zanzaria to give the commercial update.

Sandeep Zanzaria — Commercial Leader

Thanks Maria, and good afternoon everyone. So if you look for H1 results, in terms of order, we are down by about 2% against INR1,110 crores of H1 performance for 2021-2022. We were close to about INR1,090 crores of H1 performance for 2022-2023. But if we look the comparison on quarter-on-quarter, it was down by about 23%, which is INR490 crores versus INR630 crores. This quarter has been primarily got impacted, as Pitamber said, by shifting of a lot of TBCB projects, so the complete Rajasthan party [Indecipherable] has been shifted and even the Kalpataru are also now getting delayed.

Operator

Sorry to interrupt. May I request you to please move the phone a little closer to you sir, so we can hear you better.

Sandeep Zanzaria — Commercial Leader

Alright. So, now is it okay?

Operator

Yes sir. Please go ahead.

Sandeep Zanzaria — Commercial Leader

So the Kalpataru is also getting delayed due to certain approvals and further issues in that area. But we are now seeing that probably in Q3 and Q4 a large number of decisions will be taken by us. If you really look at the details of the orders which are there, so much of the orders are centered around our GIS product and — as well as the automation and the maintenance contracts. So, another aspect would be is that we are the lowest — we are in a good way close to about INR500 crores, which we have carried over from the last quarter, which the orders could not come due to the present legal issues. So that would be a carryover which will lead to the GIS.

So, I hand it over to Sushil for further update.

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

Thanks, Sandeep. Good evening, everyone. We move to take this on financials. As Pitamber mentioned, during the quarter 2 we generated a revenue of INR700 crores, which was 17% lower than the last year’s revenue of INR851 crores. However, at the same time, due to operational execution improvement versus last year and reduction in expenses, we have been able to generate an EBITDA of around INR34 crores, which represents 4.8% of revenue compared to an EBITDA of INR20 crores, representing 2.4% of income in the last year. The EBITDA includes other income because most of the elements in the other income are operational in nature. Similarly, on a first half basis, we generated a revenue of around INR1,300 crores, which was lower than the revenue of INR1,500 crores — approximately INR1,500 crores generated in the last year, by about 13%. However, we see a similar improvement in the EBITDA. In the first half of this year, we generated an EBITDA of approximately INR65 crores, representing 5% of revenue versus INR21 crores, representing 1.5% of revenue in the last year. During the first half this year, our debt has increased from INR0.8 billion in the beginning of the year to about INR3.6 billion at the end of September. This is mainly because of increase in the working capital and we are taking actions to recover this in the second half of the year.

Moving to Page number 7, which gives the breakup of orders, revenue, and orders in hand. For about INR490 crores of orders we did in quarter 2, 40% of the order is from the export market and 60% of orders were from the domestic market. On a first half basis, out of INR1,085 crores of orders, 34% of orders from the export market and balance 66% from the domestic market. On the revenue side, out of INR700 crores of order revenue in quarter 2, 31% was from the export segment and 69% from the domestic market. Similarly on H1, revenue of INR490 crores, 32% revenue came from the export market and 68% revenue from the domestic market. The breakup of the backlog in hand of approximately INR3,450 crores is also given on the page. 62% of the backlog is from the private customers, 20% of the backlog from state utilities and the balance 18% from the central utilities and PSUs.

So with that, we’ll now open up for the questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions]

Our first question is from the line of Parikshit Kandpal from HDFC Securities.

Parikshit Kandpal — HDFC Securities — Analyst

Congratulations team for holding a INR5 crores of growth on profitability. Sir, my first question is, the increase in debt, you mentioned and working capital…

Operator

Sorry to interrupt. Parikshit, if you’re on a speaker phone, please switch to your handset while you’re asking your question. Thank you.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. So my first question was on the debt level, which has gone up. Our scale of operations has come down, even order intake has been lower in the first half and even the revenues. So any particular reason, are we seeing any elongation in the working capital cycle. So can you please elaborate on this increasing working capital debt?

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

Yes. The changes in the working capital are given in the cash flow statement. So we had about INR250-odd crore increase in the working capital. Most of it is in the inventory side, because we have prepared inventory for the orders — or in the manufacturing process for the orders, which are in execution for quarter 2, sorry second half of the year. And then the rest of the increase is in the trade payable cycle and provisions on liabilities. As I said in the beginning of the call, that we are making continuous effort to increase the cash collection cycle to improve it and reduce our working capital and reduce the debt. We expect that from now till the end of the year, there will be an improvement from the current level of working capital, and we should be able to improve. So it’s mainly the inventory and payment of trade payables, which has led to the increase in the first half of this year.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. Sir, my second question is on the overall market size. I think we had been telling historically that the market for us is about — India piece is about — close to about INR18,000 crores to INR20,000 crores. So for this year, how do we see this, given the backdrop of weaker inflows, which has increased in the first half. So how big is the total market size for us?

Sandeep Zanzaria — Commercial Leader

So Parikshit, Sandeep here. So we are still anticipating to remain like about INR18,000 crores, primarily because the markets have not, I would say, they’ve got deferred and not moved out. Like for example, I was just saying that the Rajasthan TBCB packages, Kalawad TBCB packages, all those packages have got deferred primarily due to GIB issues and due to other clearance and survey issues, etc. But those generation projects have already started coming up for this tendering for generation projects has happened. So eventually, the transmission still are going to come. So it’s delayed, but it has not — the market has not vanished.

Parikshit Kandpal — HDFC Securities — Analyst

Sir, my other question is on the product. So to address this market. So are there any product gaps and after the GE Vernova which has happened, so do you think we can introduce more products on the HVDC side, and the transmission side. So can the addressable market for us can go beyond INR18,000 crores by introduction of new products, if you can touch upon that any new products are being planned to be introduced in India?

Sandeep Zanzaria — Commercial Leader

So I think one thing is there that, for example, whatever HVDC projects are now are coming. So we have already executed a similar project in India for the Champa-Kurukshetra. So the upcoming project is exactly similar like it’s 800 kV plus minus INR6,000 volt, which we have already executed. So on the HVDC front, we are not lacking anything on the pathology side. In fact, the transformers, etc., were all manufactured in India only. We were the first manufacturers in India to supply the 800 kV DC transformer. That is the one thing. Second thing on Vernova side, it is basically a restructuring, which is happening at the global level, not exactly a restructuring that has been within the company. But our product portfolio in that case is — it doesn’t impact is in any way. Only thing is, what’s happening is that, the Google team and the Indian team keeps on working, depending upon the need, we noticed only new products can be introduced or if there is a requirement of GE products, which are, what we constantly keep on monitoring and the products which are required for the market, then they are brought in and launched.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And sir, just a last question. On the current levels of capacity utilization, if you can talk about it and the export opportunity, can we reach out to more countries, so any plans over there to increase distribution in the exports market beyond Bhutan or some other countries?

Sandeep Zanzaria — Commercial Leader

So it’s not that we are only exporting to, like, for example, Bhutan and all. There is a huge amount of exports, which is happening to Southeast Asia, to Africa, to Latin America, even to few countries in Europe as well. So it is not that — for example, when Maria was talking about, he was mostly talking about from the project perspective, which we were doing in Bhutan, but the product wise, if you look at our circuit breakers, our GIS, our automation. In fact, our transformers also we are exporting it to many continents which are there. And there is a constant endeavor also to add newer countries that is one thing and second also to increase the market share in the existing countries where we generate more value from the existing countries wherever we are supplying today.

Parikshit Kandpal — HDFC Securities — Analyst

And sir, capacity utilization, the last thing.

Sandeep Zanzaria — Commercial Leader

The capacity is actually quite a flexible thing, Parikshit, because we have, like, for example, when you talk about the transformer factory. So probably when 400 kV is hit out, then we will be manufacturing less number of units and in 220 kV the number of units will become more, so it’s kind of a flexible, I would say. But I would still put it as that you still have in [Indecipherable] to product launch, we still have a sufficient capacity to take about 20%, 25% more orders here.

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

So let’s pick up this in another term. In 2019, 2018 those year, we had a revenue of about INR4,200 crores to INR4,300 crores. So it means that the organization has capacity to execute that kind of revenues and go beyond also, the only thing is we require addition of new people we want. But obviously given the COVID channel that we created in the last couple of years and the issues on margin and customer liquidity in the past, these are selective for the last couple of years. And as the market picks up, we will try to improve our order executions and we should be able to increase the value if the orders of power shedding are not the right choice. So we have capacity to do beyond depending on market situation.

Operator

[Operator Instructions]

The next question is from the line of Ashwani Sharma from ICICI Securities.

Ashwani Sharma — ICICI Securities — Analyst

Thanks for the opportunity. A couple of questions from my side. First is, sir, the order inflow that you said that has been deferred. Is it possible to quantify these orders which got deferred in the quarter?

Sandeep Zanzaria — Commercial Leader

So, close to about INR400 crores, INR500 crores, which is a combination of something coming from export market and also from industry. So we’ll not be able to give further details in terms of customers, etc., but that’s the open position that we are having.

Ashwani Sharma — ICICI Securities — Analyst

So INR500 crores, which got deferred? That’s what you are saying?

Sandeep Zanzaria — Commercial Leader

Yes.

Ashwani Sharma — ICICI Securities — Analyst

Alright. And one clarification on the previous participant’s question on INR18,000 crore, this — and this addressable opportunity, this is the only for domestic market, right?

Sandeep Zanzaria — Commercial Leader

Yes.

Ashwani Sharma — ICICI Securities — Analyst

Alright. So my second question is on the margins. If you look at Q2 margins, we have barely reached at a breakeven at EBITDA levels. So where do you see margin given the fact that now the commodity prices are also kind of softening. How do you see this FY ’23 ending our incomes or margins, sir?

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

Ashwani, as for the question that as for the past practice and not, because in the year-end guidance for any particular number, however, there is still clarification on the existing margin levels. During the quarter, we generated a gross margin of 25.2%, this is lower. And there is one specific element, which I want to highlight. We booked a charge of about INR12 crores in this number related to foreign currency variation. However, there is a corresponding offset, I think you can offset within the other income. That is the reason we are calling other income as an operational item, because as per the accounting guidance, one leg sits in the gross profit and the other is sitting in the other income. If we eliminate that item or true up for the gross margin levels, for the quarter, we did generate, you can count a gross profit of 27%. This is the lower end of the range of 27% to 30% that we have, 27% to 29% that we have communicated in the past. They are on a H1 basis, the actual gross profit number is 29.5%, but eliminating this INR12 crore forex adjustment, the H1 gross profit is 30.5%, which is the higher end of the range we have been communicating. So I think this is within the range that we have communicated in the past, 30% of gross margin in the H1. As we also mentioned in the past, the order booking margin is only 27% to 29% or 30% in that range. And during the execution, we try to improve by another 2 percentage point, 3 percentage point to the generate better profit. Last year or 18 months, this has not — this was difficult and not feasible because of significant variation in the commodity prices and sure as an operational item as we communicated in the past. But our intend going forward is that we’ll try to improve on this margins by these initiatives.

Ashwani Sharma — ICICI Securities — Analyst

And sir, lastly, on the — if you can update on the Leh-Ladakh project, sir? What is the status?

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

So Leh-Ladakh project is going to take time because the project is going for some studies because of environmental issues and other things. So after the studies are completed, then the specifications will be drawn, probably. So it looked slightly longer. I don’t expect that we’re going to take minimum more than a year to materialize.

Ashwani Sharma — ICICI Securities — Analyst

Can we expect some positive news in the second half of the next year?

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

We are expecting at least one or two to get finalized next year.

Operator

[Operator Instructions]

Our next question is from the line of Charanjit Singh from DSP Mutual Fund.

Charanjit Singh — DSP Mutual Fund — Analyst

Sir, if I look at the current order backlog also, there’s a 50% contribution from the private sector. And if you can touch upon going forward, how is the outlook for the private sector and these projects, the execution of the current order backlog, what’s the kind of time frame which we are looking at?

Sandeep Zanzaria — Commercial Leader

So the time frame that we’re looking is — I believe, I would put it as about 18 months’ time frame. And there the private sector contribution is more and more increasing, because the investment is happening on the generation side, if you look at in solar, that’s happening in the private sector and in fact in transmission sector also if you see, there are a number of private transmission floors, we are now winning the bids for the TBCB project. So that’s why the share of private sector is now increasing. Earlier, before the TBCB regime, it used to be dominated by the government sector.

Charanjit Singh — DSP Mutual Fund — Analyst

Okay. Sir, but from the industry’s perspective, are you seeing any kind of a traction there, from the maybe cement, steel plant, is there any kind of a demand coming from the core industry for the power transmission equipment?

Sandeep Zanzaria — Commercial Leader

Yes. So we are seeing a big uptick in this request. So of course cement and all, it is mostly the lower voltages requirement, which is there. The cement plant expansions typically need more investment on 33 kV and below. But if you really look at the steel plants and also we are seeing at other metal sectors also. So we expect in time to come from aluminum as well, some demand we have seen coming from copper, and also steel, but wherein the primary investments that we are seeing for expansion of capacities which is there.

Charanjit Singh — DSP Mutual Fund — Analyst

Okay. And sir, in the initial remarks, you also talked about automation in terms of the orders picking up. So if you can give more color, what is the kind of quantum of these automation orders? And how does the competition stack up or maybe from our market share perspective how it has been? And can it expand from the existing market share, mainly on the automation side, sir?

Sandeep Zanzaria — Commercial Leader

So on the automation side, I can say that the digitalization of the grid is definitely helping a lot. That is one aspect of it. And we are continuously even Q2 various asset as well, even the digitization of the maintenance part of it, because that’s going to help them and us both in terms of providing the latest global technologies and also then it will give them a better predictability and also the analytics will help them in reducing the downtime for those industries. That is the first thing. Second thing on the competition side, of course, we are, I would say, equally setting as compared to our competitors. I want to comment much on the market share part of it, but I can only say that now the projects which are coming, whether it is industry or whether it is, for example, the TBCB and the transmission side, the weightage of automation is slightly increasing. There are a few tenders which have come out with — on the subscription side and the pure digital technology. So that’s why the share of automation in the power sector is slightly better, and we are totally developed to deliver that kind of solutions in the country.

Charanjit Singh — DSP Mutual Fund — Analyst

Okay, sir. And sir, just lastly from my side. There’s also a talk about more capex picking up on the distribution side in terms of metering and distribution capex picking up. Any thoughts there in terms of whether GE T&D can participate in that opportunity or we are developing the products which can cater to that market?

Sandeep Zanzaria — Commercial Leader

So we are not in the neutral side, but definitely, there is a scheme of RDFS, which is coming. And GE is one of the leading players when we talk about DMS, the Distribution Management System. So I think once the RDFS is starting, they are going to come in, they will be very strongly positioned to grow in that area. So we have a quite advanced solution in terms of providing the distribution platforms in terms of the management system. And if you really look at, we are moving very closely with, in fact Tatas and all, and their distribution systems are lower. Our platforms are already implemented and we are opening in the recent times.

Charanjit Singh — DSP Mutual Fund — Analyst

Okay. So would this also require, we setting up any new capacities and from the core business, current capacities perspective, what is the kind of utilization level? And how do we see the capex for us shaping up going forward?

Sandeep Zanzaria — Commercial Leader

So these projects which we’re talking about on the distribution side, of course, we are there mostly on the software side. So it’s going to require more resources in terms of manpower, etc., in integration and testing all those things, but it is not going to require any additional manufacturing capacity and all.

Mariasundaram Antony — Project Business Leader

So I will say additional things, that as far as the manufacturing capacity is concerned, whether it is GIS, AIS, control and rely panel transformers, we have enough manufacturing capacity available in our 4 large factories in India actually.

Operator

[Operator Instructions]

Our next question is from the line of Parikshit Kandpal from HDFC Securities.

Parikshit Kandpal — HDFC Securities — Analyst

Just one question. On the exports market, if you can quantify like how big is the opportunity for us, the mid opportunity there, so if you can quantify that?

Sandeep Zanzaria — Commercial Leader

So the export market, when we are talking about, it is mostly — today we are concentrating mostly on product export. So it’s difficult to quantify because it also depends upon the transmission plans of those individual countries and the realization. But at a consistent level, we have been doing close to about 30% — 30% to 35% of our order intake is coming from the export market.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. But that is on a lower base, if the ordering improves, will domestic become a larger part of that, the expectation will come down, right? Because earlier —

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

We have done INR370 crores of exports in floors.

Sandeep Zanzaria — Commercial Leader

The only thing is that, I think going forward, because more and more we are seeing that the renewable capacity globally is getting added. So the renewable is actually driving the transmission market today because we are — we have a generation capacity, which is the conventional part. And then on top of that, when we are adding the renewable capacity. So there is demand and the drive is there. Of course, we are looking at the US and all, the US, etc., of course the demand has been — the demand which is now coming from Europe — Europe and US has been phenomenal for the transmission too. The only thing is that we are expecting now that similar thing to get replicated into other geographies even like what we are seeing today, today we have a kind of a 400 gigawatt of installed capacity and if suppose — not suppose, but by 2030 the 500 gigawatts of renewable capacity. In the next 8 years, we have to add practically an identical generation capacity to what is existing. So that’s going to drive the demand in a big fashion. This same thing is going to get replicated into many geographies. And I think that’s going to drive up the demand in the export market as well. The only thing is that, some geographies have slightly delayed plans of renewables, some geographies are very advanced on the plans of renewables. So that’s how the shift is going to happen between the demand of the export market.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. So, basically you are saying that the renewable gave infrastructure on the transmission side a pick up. So do you see a very big pipeline building up over the next few years as the renewable energy picks up, right?

Sandeep Zanzaria — Commercial Leader

Definitely, it’s going to happen. No doubt of it. I think maybe in the next 10 years is going to be a big — next 10 to 15 years is going to be a big time for the renewable generation companies and is going to impact — positively impact the transmission industry.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And sir, within the domestic market, how are your relationships with the players who are basically on the EPC side and they sometimes take support bid from us by bidding for some of these packages on the EPC side, the tower package and then they give an entire complete solution, including transformers and the entire transmission ecosystem. So how is the business development activities there? How is the relationships there, likes of Kalapatru or KEC, so if you can also highlight that?

Sandeep Zanzaria — Commercial Leader

So I would say that we have a good relationship with all the EPC companies, which are there. Which — in fact, in the presentation, if you look, there are a number of order which are there from Kalpataru, KEC as well, this has been listed in the order pipeline — or not pipeline, but orders as they are acquired in the last quarter. Of course, we are one of the leading OEMs and we have like decades of relationship with all the EPC companies which we have told.

Parikshit Kandpal — HDFC Securities — Analyst

Okay. And just lastly, sir, is average order of INR500 crore. So is it like typically you carry these kind of L1 or like every quarter or it’s like one-off, like a bit L1 there and then a lot of orders there?

Sandeep Zanzaria — Commercial Leader

No, so we don’t carry this volume of — something we would always be carrying, but not of this volume. Alright. So, is it a government order, again, a private order? I mean, is it like — can you give some — It’s a combination of both. Alright. Sure, sir. All the best.

Operator

[Operator Instructions]

Our next question is from the line of Aniket Mittal from SBI Mutual Fund.

Aniket Mittal — SBI Mutual Fund — Analyst

Yes, a few questions from my side. Firstly, if you could just talk about the competition intensity right now that is there in the market. And the reason I ask this is, because when I look at some of the competitors, the order inflow for them has the healthy, but we’ve not been able to grab that amount of order inflow. So just wanted to understand the reason for this and how do you look at the competition right now in the market?

Mariasundaram Antony — Project Business Leader

So Aniket two things here. Yes, I know — but first is that, yes, we have been selecting — selected in terms of our bidding strategy, definitely in the market. So we look forward for the surety of payment, the price levels and everything. And for example, this quarter in fact I was saying that some of the orders which were expected where we were L1 has got shifted to the next quarter in Q3. So I think it’s a combination of both things, our selectivity and also the shift in the orders. But I would only say that as the quarters are progressing, the competitive intensity is, I will not say to a great extent, but slightly coming down, that is one and we are seeing an uptick in the price also which is happening.

Aniket Mittal — SBI Mutual Fund — Analyst

Okay. The second question was just to understand a bit on the order book. So in this current order book, are there any projects that are slow moving because of certain contracts that we would have run in Rajasthan, which are now really getting to GIB issue, just wanted to understand any slow moving orders here?

Mariasundaram Antony — Project Business Leader

So presently, we don’t have any contracts which have got stuck up for GIB issues. In fact, there are projects which have stuck-up for GIB issues. But there, we are a product supplier so the EPCs or the end clients are accepting our products. So we don’t have a challenge on the our factory because of any GIB issue.

Aniket Mittal — SBI Mutual Fund — Analyst

Because in one of your remarks, you mentioned that a few INR500 crores of orders have got in deferred, so which — where will these orders fall in place?

Sandeep Zanzaria — Commercial Leader

No, so basically, sometimes what happens is that, we were not the L1 and then the decision making process on the customer was the approval of their management everything takes a bit longer time, and that’s how the order will not come by end of September, but might come in October or something like that. So that’s how it got deferred. But it has nothing to do — these orders which are there with INR500 crores they will return, but there is nothing of a GIB or any of the environmental issues associated with that.

Aniket Mittal — SBI Mutual Fund — Analyst

The next question is on the working capital front. I think you’ve mentioned that there’s been a INR250 crore drag and you plan to improve this going forward. If you could just highlight what sort of working capital deals you are currently at? And where do you think you’ll get into for FY ’23 and going forward?

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

So talking about the increase in working capital for about INR250-odd crores, one major increase, as I mentioned, was inventory, and these inventories are created for the revenues of H2. At the same time, we have an outlook in the supply channel due to reduction in the volume. But the corresponding offset is that there is smaller offset in the receivables. Where a few payments end of September, which were operationally stuck for a limited period, and we hope to realize that in H2 as well. So the endeavor is always to recover a large chunk of this INR250 crore outflow, which is just the timing of the requirement of the projects and achievements, to recover that most of it in the H2. In terms of number of days of working capital, just — let me just check, if I have that data readily available. Maybe give me a few minutes, and then we’ll answer that in a few minutes.

Aniket Mittal — SBI Mutual Fund — Analyst

Sir, and just maybe one last question, which was on the gross margin front. So like you mentioned a few, just for the foreign currency variation, you still have that 27% mark. How would you look at the gross margins going forward based on the current order book that you have, would we remain in that 27% to 29% mark?

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

Yes. So, see we have a long cycled season business. And many a time the projects which are under execution specifically have changed the margin level of the quarter significantly. So in our business, we will continuously communicate, but let’s look at the gross margin for a longer period. For the quarter, eliminating the forex impact, it is 27%. However, if you take H1, eliminating the forex impact, the gross margin is 30.5%, which is at the higher end of the range from 27% to 30%, which we have talked about. Our endeavor is to first at least maintain this and try to improve further in execution. However that is dependent on many factors, including the commodity price reduction as well. Your earlier question on the working capital. At present we have the working capital at around 80 days of revenue.

Aniket Mittal — SBI Mutual Fund — Analyst

What is it that you are looking to bring this down, sir, because you mentioned in your comments that by the next 6 months or so this will likely come down.

Sushil Kumar — Chief Financial Officer/Whole-Time Drector

We’ll try to recover at least half of this I guess. [indistinguishable] sectors, including receivables, reduction of inventory, at least half year planning to recover a lot of this financial year. Half of the outflow, I mean, INR250 crore out flow, minimum INR140 crore of recovery, we are targeting internally.

Operator

[Operator Instructions]

We have a question from the line of Amit Anwani from Prabhudas Lilladher.

Amit Anwani — Prabhudas Lilladher — Analyst

Sir, my question is with respect to the INR18,000 crore prospect, which you have mentioned. If you could just throw some color, which kind of product 400 kV HVDC, any breakup you would have factored in? Also with respect to central, state or anything — anymore color on this INR18,000 crore prospect here?

Sandeep Zanzaria — Commercial Leader

So it’s basically a combination of projects and products which is there, normally this will be comprising of power grid project, this will be comprising the TBCB projects, this will be comprising of state utility models, which is a combined part of industry and on the street also there are a lot of opportunities there, direct products like, for example, transformers and control rely panels and breakers and other items as well. So this is primarily consisting of this whole thing. If I would try to quantify about the split between 400, 765, 220, and 132, but I readily don’t have it available with me, but I think close to about 50% will be coming from 400 kV and balance other verticals will be contributing the balance 50% of the overall lending. This year, out of this, about close to about INR2,000 crores will be getting contributed from HVDC. But next year, we expect it to be a higher volume for HVDC next year.

Amit Anwani — Prabhudas Lilladher — Analyst

Alright. The question — next question is on the top line. So you had mentioned about the prospect, because of the 500 gigawatt opportunity, which is there till 2030. And you mentioned about some report mentioning some great opportunity for the sector in coming quarter and years. How we can position GE T&D with respect to growth prospects in the next, let’s say, 3 to 5 years in this? Any assessment here, sir?

Sandeep Zanzaria — Commercial Leader

So already — for example, all of our factors, which are there are delivering the latest technology, which is — which is there, for example, we are one of the key players in GIS, who has a complete product portfolio from 765 kV till 66 kV GIS frames. And if I look at whether it is automation, whether it is circuit breakers, instrument transformers, transformers, we have a presence, and I would say a complete portfolio, which is available. Also on the digital side or on the high capacity side, when I see, so we have this portfolio of HVDC, FAS, STATCOM, so all such technologies are available. And I think you are just — but on the other side, also, I would like to point out very clearly is that we would be selective in the market in terms of HVDC order. Looking at two aspects. One is the proven capacity of the customers that is one thing, so that payment security is must. And second also, it needs to be a profitable growth rather than just a blind growth with new profitability coming.

Amit Anwani — Prabhudas Lilladher — Analyst

Okay. But sir, can we expect some growth in 3 to 5 years in the top line?

Sandeep Zanzaria — Commercial Leader

I would not like to put a number to it, but yes, we expect a growth from the present volume.

Operator

[Operator Instructions]

Our next question is from the line of Bhavin Vithlani from SBI Mutual.

Bhavin Vithlani — SBI Mutual — Analyst

Pardon me if this question is repeated, I joined in late. So this question is on the competitive landscape and market share. If I look at the results, which have been announced, so where Hitachi has shown a 32% growth in the new orders. CG Power has shown a 58% growth in the orders for their Power T&D division. Whereas when I look at GE T&D, there is a drop of greater than 20%. So as an outsider, it seems like there is a significant loss in the market share. And Hitachi also we understand there was an HVDC, but that was in the first quarter. So if you could just help us understand about the market share. And is this — if you can help us understand read it, that will be very useful.

Sandeep Zanzaria — Commercial Leader

Hi, Bhavin, Sandeep here. Basically one of the things that happened was that there are a few others, which were, I would say, negotiated that we were L1, but close to about INR500 crores. The final ordering has got shifted to this quarter. So that was one of the major impacts because of this, you see a drop in the numbers.

Bhavin Vithlani — SBI Mutual — Analyst

Okay. So one has to add INR500 crores to the current INR500 crores of orders that we have booked. So it will be more or less like INR1,000 crores kind of a number.

Sandeep Zanzaria — Commercial Leader

Not exactly, because we always carry every quarter we would be having this phenomena where we carry certain amount which we are L1, but it doesn’t get decided into that, but it’s not in the tune of INR500 crores. So there is always this phenomena, but not to this extreme.

Bhavin Vithlani — SBI Mutual — Analyst

Understand. So what would be that normalized that L1 that you would be seeing every quarter? Just to understand and do a more a like-for-like comparison?

Sandeep Zanzaria — Commercial Leader

So normally, it’s somewhere between INR150 crores to INR200 crores is what we kind of — it also depends upon quarter-to-quarter, but there are times when the times when we carry somewhere between INR150 crores to INR200 crores to the next quarter. But this time we saw a slight customer processes, the value of bookings was close to about INR500 crores.

Bhavin Vithlani — SBI Mutual — Analyst

I understand. Sir, second question, again, a slightly related question. Power Grid in its analyst meet mentioned about INR24,000 crores of project held up due to the Great Indian Bustard, which can be cleared only once the verdict comes in. If you could give some color on what’s the kind of projects which have been held up alongside, if you can also help us understand about the competitive landscape, because some of your peers have started announcing capacity expansion. So what’s the kind of capacity utilization that we have. So there are a few questions in this.

Sandeep Zanzaria — Commercial Leader

So more than GIB issue, I think there are two types of charges which are there, one, which is already available and which are stuck up. So I just explained that it’s a two years journey, that — in that, we have a few orders, but for us, those products have not got stuck up because the customers are accepting the products and they will be storing somewhere and will be using that. So that is one aspect of it. Second, yes, I agree that because of the GIB issue, the upcoming pipeline of Rajasthan, have got stuck up totally, because in the last quarter itself we were expecting that the decision should come on — the whole pipeline should move, but it is still stuck up and now it is still not moved, but we expect that in the next two to three months, that whole pipeline is worth close to about to INR5,000 crore to INR7,000 crore should be used for the GIB issues which is stuck up, and it is not only the transmission projects, which was stuck up, it is also the generation projects which was stuck up, there also we have a lot of product opportunities, whether it will be circuit breakers or automation or transformers and etc. So that is a major aspect of it. Regarding the, for example, the capacities which are there, I think today, we have sufficient capacity I would say, in the factories. And only thing is probably, for example, we require some fewer resources and etc., to be added, but that can be added at any point of time, because the only thing we can do, which will show you are depending upon the uptick in the market which is there. But what I’ve been saying is that, for example, this a host of pipeline of projects have been available with us for last about since 2020, and there has been constant shift which is happening. So whatever projects got announced in ’22 got shifted to ’21 — from ’21 it is now shifted to ’22, ’23. And we are also now seeing a few projects at Kalawad and Rajasthan again shifting, but there are new projects for next year. For example, there is a host of about INR30,000 crore project, INR30,000 crore is not for us, but for the complete transmission space with include lines, etc., everything has more recently been announced by the government in the new transmission committee. So the visibility of pipeline is there, but there is a constant shift of pipeline, which is constantly happening. So that is something the — it is making the unpredictability path a bit higher.

Bhavin Vithlani — SBI Mutual — Analyst

I understand, sir. Alongside I mean an extension of this — I mean, historically, we’ve been talking about states deferring on the ordering. Are you seeing any reversal in the deferral? And are we seeing any states? And if you could name some of the states where we are seeing a positive traction?

Sandeep Zanzaria — Commercial Leader

So there is not much of a traction in states. There are a three opportunities which have come up, but those are going to be deferred because of budget issues, etc. So one was, for example, GTL, we are seeing some opportunities in Odisha, something coming up in Gujarat, but it’s — I will say it is still not something, earlier we used to see that state seems to contribute close to that 40 % of the minimum market of transmission. But today, we don’t see anything of that value coming from any of those states.

Bhavin Vithlani — SBI Mutual — Analyst

Sure. Yes, these are my questions. And best wishes from our side.

Operator

Thank you very much. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Sunil Kumar, I’m sorry, Mr. Suneel Mishra for closing comments. Please go ahead, sir.

Suneel Mishra — Head of Investor Relations

Yes. Thank you Rochelle, and thank you everyone, for your participation. With this, we conclude today’s conference call. In case you have any other questions, then please feel free to contact me or Mr. Anshul Madaan. Thank you again.

Operator

[Operator Closing Remarks]

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