Hind Rectifiers Ltd (NSE: HIRECT) Q4 2025 Earnings Call dated May. 06, 2025
Corporate Participants:
Unidentified Speaker
Suramya Nevatia — Chairman and Managing Director & Chief Executive Officer
Nemani — Chief Financial Officer
Analysts:
Unidentified Participant
Jainam Jain — Analyst
Subrata Sarkar — Analyst
Prem Nunia — Analyst
Prolin Nandu — Analyst
Presentation:
operator
It.
operator
Ladies and gentlemen you have been connected to Hinds Rectifiers Ltd. Conference call please stay connected, the call will begin shortly. Participants you have been connected to Hind Rectifiers conference call please stay connected, the call will begin shortly. Thank Ladies and gentlemen, good day and welcome to Hend Rectifiers Limited earnings conference call for Q4 and FY25. 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 a guarantee of future performance and involve risks and uncertainties that are difficult to predict.
As a reminder, all participant lines will be in the 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 an operator by pressing the Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saurima Nivetia, Chairman and Managing Director and CEO of Fin Rectifiers Limited. Thank you and over to you Sir.
Suramya Nevatia — Chairman and Managing Director & Chief Executive Officer
Good morning everyone and thank you for joining us on our maiden earnings conference call to discuss the results of Q4 and FY25. It is a moment of pride for us to directly connect with the investor and analyst community and we look forward to building an open and informative channel of communication in the years ahead. We appreciate your time and interest in him electifiers. I am joined today by our CFO Mr. AK Nimani and strategic Growth Advisors, our Investor Relations Advisors. I would like to start with with an overview on our company post which I will ask Mr.
Nimani to share our financial performance Hinge Rectifiers or HIRECT as we are affectionately known was established in 1958 with technical collaboration from Westinghouse Brake and Signal of UK. We were initially formed to manufacture and assemble rectifiers and related apparatus and small semiconductors. From being a semiconductor manufacturer in the early days, we’ve evolved into a systems and solutions provider for Indian Railways and industrial sectors. Today we are at the forefront of India’s rail electrification and modernization journey designing and delivering mission critical traction and power electronics products. We operate two state of the art manufacturing plants, one in Sinhal and one in Sadpur, both of which are in Nasik and a well equipped RD center in Mandup in Mumbai.
In March 2023 we expanded capacity by commissioning a new plant at Sinar spread across 26,930 square meters. IREX are classified into broad verticals, first of which is Traction Transformers we are the market leader in locomotive traction transformers with about 45% market share. Our second offering is railway power electronics and propulsion systems. We design and develop and manufacture IGBT based converters, auxiliary converters, vehicle control units, all the spread that goes along with it and supply the propulsion system as a whole. As a package propulsion system helps supply traction power to wheels of the locomotives and on board the locomotive.
We are targeting 20% market share in the propulsion systems in the near future. Our third vertical would be electromechanical systems and panels. This includes a variety of different switchgear and locomotive panels, passenger coach panels, traction motors and H Vac systems. In addition, we cater to select industrial applications such as electrostatic precipitators which help for air pollution control, industrial rectifiers and variety of power supply solutions for industries like cement, steel, thermal power and mining. At hirect, we are not just making products, we are building platforms. Our in house R and D team based out of Bandok has 107 engineers including domain experts and PhDs currently working on 42 development.
These include both new products and strategic upgradation of our core portfolio. The focus is very clear to develop and full suite of power economic systems required for and other modes of mobility including brake system, different safety systems and signaling solutions. Many of the solutions expected to go commercialized from the first half of 2026. These products allow us to increase our share of wallet in each locomotive and move from being just a part supplier to offering more. This helps us to grow both revenue and profitability over time. We are also making sure these products beat the required standards only for Indian Railways, but also for such as Metro monorails and as well as the export market.
Giving us our core customer is of course contributing 90% of our revenue.
operator
I’m sorry to interrupt sir, could you please repeat the last words? Your voice is not clear. Hello. Sorry to interrupt sir. The voice is not clear. Could you please repeat? Hello sir, can you hear us? Ladies and gentlemen, please hold while we reconnect the management line. Thank you.
Suramya Nevatia — Chairman and Managing Director & Chief Executive Officer
It.
operator
Oh yes sir, please go ahead.
Suramya Nevatia — Chairman and Managing Director & Chief Executive Officer
The emphasis on complete network electrification supports long term opportunities in traction systems and power management solutions. Additionally, the 455 billion rupees allocated for rolling stock and the need for electrical components in EMUs, MEMUs, insects and locomotives reinforce demand for HIREX offerings. Policy support under Atmadirbar Bharat coupled with the move away from imported systems encourages domestic procurement, an area where hirex is well positioned. Being an approved vendor with a strong legacy in FY25 India produced 1400 locomotives surpassing the combined output of of US and Europe alongside 2 lakh new wagons. Reflecting sharp capacity expansion, export momentum is building with passenger coaches shipped to Mozambique, Bangladesh and Sri Lanka and locomotives sent to six countries including Myanmar and Senegal.
Critical components like propulsion parts are now exported to France, Germany, Spain and Italy. Affirming the global quality standards of Indian Railway OEMs or Hirect, which manufactures traction converters, aux power units and control panels. This global orientation opens new collaboration and supply chain opportunities. Moreover, the production plan includes 17,000 non AC coaches, a 2.5x increase in general coaches reflecting the government’s commitment to affordable transport. With railway revenues at 2.78 lakh crores and expenditures nearly matched at 2.75 lakh crores, Indian Railways is now sustainably funding its operations, creating a stable, expanding market for suppliers like Hirect. We ended the year with an order book of 893 crores, up from 534 crores in FY24 and 307 crores in FY23.
Key wins include an order of 400 crores scheduled for execution in FY26 and 73 crores and 98 crores contracts from Indian Railways. Highlighting our strong market position. This growth is underpinned by our leadership in traction transformers where we hold a 45% market share. During the year, the company continued to make strong strategic strides that not only enhance operational resilience, but also position us for sustainable margin accretive growth in the coming years. One of the key focus areas has been backward integration and in house production of critical components. This initiative is aimed at reducing dependence on external suppliers, ensuring supply chain continuity and ultimately improving gross margins.
By having better control over input quality and lead times, we are also able to respond more efficiently to customer demand. In parallel, we are steadily transitioning from being a component supplier to a more integrated systems provider. Our R and D team and product innovation efforts are central to this evolution. A strong pipeline of advanced products is underway including next generation converters and braking systems. These innovations are expected to expand our addressable market and increase our share in key accounts. On the commercial front, we’ve adopted a more selective bidding strategy, consciously moving away from low margin orders.
The focus is not firmly on projects that meet our internal return and profitability threshold. This shift is already visible in the improvement in margin profiles across the order book. Recognizing the importance of digitization, we’ve also initiated steps to modernize internal processes. A newly formed IT and AI driven subsidiary is tasked with automating critical workflows optimizing resource deployment and enabling data driven decision making across the organization. This is expected to improve responsiveness and reduce operational redundancies over time. Given our current asset base and improved asset utilization, we do not anticipate significant CAPEX requirements to support growth of around 20% to 30% in the medium term.
Our focus remains on sweating existing assets more effectively thereby delivering higher returns on capital employed. We are proud to report a robust order book of 893 crores as of March 25th with a significant contribution from the railway sector further supported by strong government initiatives. During the year our board approved the incorporation of two wholly owned subsidiaries, Coincade Studios Private Limited which is aimed at developing next generation solutions in the field of IT, AI and Web3 and other emerging technologies and Hirect FZ LLC strategically positioned to expand our presence in the power generation, transmission and distribution sectors in the Middle East.
On the technology front we have made remarkable progress successfully completed integration tests for our indigenously developed propulsion system with Indian Railways with dispatch and commissioning finalized, we have developed our first rail products according to global standards for exports to Germany and the usa. We have designed, developed and commissioned our H VAC system for LHB passenger coaches and we have delivered our 7 kilowatt battery charger for semi high speed trains. That’s another testament to our R and D and product capabilities. Lastly, our strategic focus remains on indigenous product development, innovation and execution excellence which we believe will drive sustained long term growth.
Let me now invite our CFO Mr. AK Nimani to walk you through the financial performance. Thank you Sudhmya.
Nemani — Chief Financial Officer
Let me present a summary of our financial results. Quarter 4 FY25 total income grew by 22% on y o to y basis to 185.4 cr in Q4 FY25 compared to INR 151.7 cr in Q4 FY24 EBITDA stub at INR 20.2 cr translating to EBITDA margin of 10.9% as against INR 13.9 cr and 9.1% in Q4 FY24 PAD came in INR 10 crore with a net margin of 5.4% compared to 5.1 cr and 3.4% in the same quarter last year FY25 full year performance revenue for FY25 reached to be 656.8 cross marking a 27% y2 y growth over 518.2 cr in FY24 EBITDA stood at 71.8 cr with a margin of 10.9% up from 8.7% in FY24.
PAD stood at 37.1 cr reflecting a margin of 5.7% compared to 12.5 cr and 2.4% in return. Ratios improved with ROE rising to 26.2% versus 16.6% in FY24 and return on capital employed at 25.6% versus 19.4% in FY24. Working capital based crude admits 196 days indicating continued focus on operational efficiency and improved working capital management. The full year performance was supported by number one improvement in return ratios reflecting enhanced strengthening of assets which supported stronger top line growth. Favorable operating and financial leverage has helped us to for the top line growth into the EBITDA and PAT level during the year.
We incurred a CapEx of INR Portage CCR primarily to strengthen backward integration and accelerate new product manufacturing at our Srinar and Satpur plant, an important step to enhance our manufacturing capabilities. The Board has reviewed the company Record integration facility at cnr. The initiative is intended to enhance operational efficiency by streamlining the supply chain, reducing dependency on external vendors, optimizing cost and ensuring timely delivery of the products. The expansion is expected to further strengthen the company’s business, augment its manufacturing capabilities and improve responsiveness to evolve the market demands. The estimated investment for the proposed expansion is approximately 52cr.
Further, the board have also approved acquisition of land with India for an amount of 50cr in aggregate for potential future expansion. The Board have approved the incorporation of a subsidiary to facilitate global business in expansion and explore new business opportunities in international markets. Board also considered to the and recommend final dividend of INR to rupees two per equity share that is 100% that rupees two per share for the financial year 2425. That is good from I side I due to the Mr. Somia and any question answer it is open for you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to withdraw yourself from the question queue you may press Star and two participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Pritesh Ida from Lucky Investments. Please go ahead.
Suramya Nevatia
Yes sir.
Unidentified Participant
My question is around the propulsion system and you mentioned about 20% share that you want to gain in it. Just first one to check and because I don’t Know. So there are only six pieces in the propulsion system. Do we make all of it? And the entire set which is traction motor converter, auxiliary motor converter, vehicle unit and driver display. So the whole package. Have we started approval and started supplying to the.
Suramya Nevatia
Yeah. So I’ll answer your question. The propulsion system for locomotives comprises of four different components. There is traction converter, auxiliary converter, vehicle control unit and driver display unit. Of these four, we are manufacturing all four products in house. And all four are done with our own technology. Of these four, we have supplied more than 2,000 auxiliary converters to Indian Railways through Alstom exclusively.
Unidentified Participant
Okay, so you. You haven’t supplied a composite four unit package still to railways or have you any supplied any of it?
Suramya Nevatia
We have supplied. We have supplied. It is commissioned and it is running in the field. Okay.
Unidentified Participant
So since when have we made these package of 4?
Suramya Nevatia
This is a new. This is a newly developed product for the entire system which we have dispatched I think in September and it is now.
Unidentified Participant
Okay, so you will be basically eligible to a development order if you fulfill the final conditions.
Suramya Nevatia
Correct. And that would entitle us with 20% of the tenders. Okay.
Unidentified Participant
And then when do you think you will be eligible for that 20% development order? Will it be in this year’s tendering? Next year’s tendering?
Suramya Nevatia
No, no. This happens once the Locomotive has run 50,000 km. Which could take anywhere from 45 days up to 90 days. And we expect that we will be eligible for the 20% from the next tenders onwards.
Unidentified Participant
Next tender is basically whatever gets released in the calendar year 2025. There is a chance that you might become eligible for a 30% development order. And this is a fully indigenized proportion system set, right?
Suramya Nevatia
Yes.
Unidentified Participant
And lastly, can you quantify the typical realizations of these sets? Realization per site.
Suramya Nevatia
About 1.75 to 1.8 crores. Okay.
Unidentified Participant
And lastly, I just want to finish here. What kind of players? Just like you are under a developer. You are under a trial with railways. What kind of players are doing trial in Railways? And how will the market share split up?
Suramya Nevatia
Virtually? As of today, we don’t see anybody else in the development category whose product has completed commissioning and are under field trial. They are others, if any are still behind us.
Unidentified Participant
So there is incumbents and you as a new entrant. So whatever is the incumbents today. Correct. And you are the new entrant. Is this the way I should assess?
Suramya Nevatia
Hello. Yes. Yes, we replied. Yes, that’s correct.
Unidentified Participant
Thank you very much. Thank you.
operator
Thank you. The next question Is from the line of Jainam Jain from ICIC Securities. Please go ahead.
Jainam Jain
Good morning management. Congratulations on. Great. Great set of results.
Jainam Jain
So sir, my first question is.
Jainam Jain
Are you planning to supply a proposal system for one day bar locomotives and emu? Yeah. Either of any. Specifically one.
Suramya Nevatia
So initially our target is to supply the propulsion system for locomotives. And once we obtain enough credibility then of course we will be moving towards emus memos and train sets. But the entry point is low. Okay, sir. And so whom are we planning to qualitate? All the big guys here whom we are competing with. Like Al Storm and Siemens ABB Dhel. All the big guys. Okay, sir. Sir, how was how big the market was last year? Last year was 1400 locomotives. So that’s 1400 propulsion systems. And this year will be pretty much the same. Maybe around 1500 locomotives.
So that will be 1500 propulsion systems.
Jainam Jain
And sir, how are we seeing the.
Jainam Jain
Railway tendering for propulsion system for the segments as well?
Jainam Jain
In this year.
Suramya Nevatia
Tendering is the same across all products. Doesn’t matter whether it’s propulsion or transformers or traction motors. It’s the same format of tendering which is being followed across all products. All right.
Jainam Jain
Okay, sir, that answers my question.
Suramya Nevatia
Thank you so much.
operator
Thank you. Before we take the next question we would like to remind participants that. You may press star N1 to ask a question. The next question is from the line of Subrata Sarkar from Mount Intra Finance. Please go ahead.
Subrata Sarkar
My question is on a broader aspect. Since I. I’m very new to this company. So if. Let’s say you have predicted the industry kind of a demand that will come for next to five to 10 years. So in this circumstances, like what? Like what is our opportunity? Are we thinking of adding any other vertical? Or like what is the plan to ramp up and get that opportunity? So we are in the field of our electronics, electrical equipment, electromechanical products. We are not doing pure mechanical products but all the things on the electronics side of things.
And we continue to build more and more products as we continue to grow new technologies, different variations, different applications. So as the demand keeps increasing, we will be there to cater to especially within the mobility. Is my answer clear? Yeah, but.
operator
Sorry to interrupt, sir. The current participant has been disconnected. We will move on to the next question. It’s from the line of Prem Nunia from Astute Investment Management. Please go ahead.
Prem Nunia
Hello. First of all, congratulations sir, on the great set of numbers and the first call. So what I wanted to understand was. What I understand that around April and May is the time when the new orders come in for the system and we have around an order book of around 890 crore now. So what is the pipeline of orders we see as of now? Because there must be some in the bidding stage.
Suramya Nevatia
Right? So all the big tenders start coming out in May and June and we already have a list of tenders that are coming up and we expect these tenders to be converted into orders maybe one month to 45 days once the tender has been closed. So we expect influx of new orders maybe from June, July onwards.
Prem Nunia
And there would be new propulsion system orders which we’ll be submitting in this page. And there’s a possibility you can get because I understand that you are in the field trial and it may go along for something and you are eligible for 20%. So will it be in the next tendering system?
Suramya Nevatia
Yes, actually we are trying to complete the 50,000km before the tenders start coming out. And I think we should be complete with the field trials at least the 50,000 benchmark perhaps by middle of June. And that’s when the propulsion system tenders come out. So it will be a touch and go. But then there are more vendors coming on of course after that from different production units. So if we miss out on one production unit, we will definitely be able to get the other one.
Prem Nunia
Right. And also on the orders which you have been executing on the AUX converter for Alstom. Now I understand that Alstom is also a competitor in the complete propulsion system. What kind of order, particularly from Alstom, were we getting for AUX and let’s say the services business which we do in the last year.
Suramya Nevatia
So there is absolutely no disturbance in our relationship with Alstom because they don’t make the AUX converter by themselves. And as I mentioned, we’ve supplied more than 2,000 aux converters. It’s not very easy to switch your AUX partner after having so much quantity in the field because you want uniformity with your software communication with the traction converter. So there is no change. And as from keeps winning tenders, we keep getting the orders for the Hawks and that will continue.
Prem Nunia
And just the last question on R and D, I understand There are around 107 people and there was a view that these people R and D employees met pro and you have been spending around 2,3% of sales from the last 2,3 years on R and D. Can you specify some of the major products which have been developed here? And understand you told about braking system and conversion, but can you elaborate on that.
Suramya Nevatia
Without going into specifics? I Can just give you a broad perspective. So we are developing different types of converters, different types of power, electronic equipment, some components which are backward integrated that go within the converters to stop importing them or to buy them at high cost. So there are multiple initiatives that we are taking.
Prem Nunia
Sure. And also on the new. Just a small question on the new products which is recently launched and that was the hotel converter. And can you tell me about how it is growing now? Because I guess this must be the first half when it was launched.
Suramya Nevatia
So the hotel load converter is used for passenger locomotives and it is used for providing power to all the passenger amenities. And the requirement is maybe about 150 to 200, maybe sometimes little more annually. And there’s less competition in this. I think there are maybe three or four people. So yeah, we have enough pending orders for hotel load and we are dispatching it consistently every month. And we have participated in some tenders and we expect more orders coming for hotel load.
Prem Nunia
What would be the realization per converter?
Suramya Nevatia
It’s about 1 to 1.15 crores depending on.
Prem Nunia
Thank you so much.
Suramya Nevatia
Thank you.
operator
Thank you. Ladies and gentlemen. If you wish to ask a question, you may press star and 1. The next question is from the line of Rahel from Crown Capital. Please go ahead.
Unidentified Participant
Hi sir, good morning, can you hear me?
Suramya Nevatia
Yes, please go ahead.
Unidentified Participant
Yeah, hi sir. Firstly this order book of 893crores which we closed as of March. So what is the execution timeline for this one?
Suramya Nevatia
Within 12 months.
Unidentified Participant
Within 12 months. And you just mentioned that the new tenders will be opening in May and June. So so far you have not bid for anything, right? You will be only bidding in May and June.
Suramya Nevatia
No, we have bids. The thing is, tenders come out every month. There are about 55 to 60 tenders every month that come out. These tenders are for some short supply of somebody else or maybe regional railways or some other product which they’re not able to get on time. What happens now in May and June is the bulk of the tenders come out which is now 1500 locomotives of what they’re planning to manufacture. So these are all huge tenders. So maybe it will be a tender for 850 transformers coming from Chitranjan which then matches everything else.
So 850 propulsion systems and you know that many traction motors. So these are large ones. And then after that it’s the regional requirements. And small tenders, they keep coming continuously.
Unidentified Participant
Okay, so so far like in the last month of April, there might have been some small Value tenders for which you already bid.
Suramya Nevatia
Yeah.
Suramya Nevatia
And that continues. So there are about three tenders every month, which we are. Okay.
Unidentified Participant
Now apart from this, proposed propulsion systems, which you’re betting big on is going to be really good for the company. Other than that, what will be the key growth drivers for the next two years?
Suramya Nevatia
We are doing a lot of backward integration which will help us to reduce import dependency and also reduce our cost, which will enable us to be more competitive with higher profitability and margin. And with that we will take more market share of existing products that we already have and that’s going to help us to grow. And apart from propulsion, we have a lot of other products, as I mentioned in my opening remarks, that are now coming into the field. So you start getting orders of those new products as well. Okay.
Unidentified Participant
So traction across all the product categories looks strong other than propulsion.
Suramya Nevatia
Yeah. Okay.
Unidentified Participant
And lastly, would you like to, you know, share any guidance for FY26 revenue and margins?
Suramya Nevatia
We don’t really have any guidelines as such.
Unidentified Participant
Okay. But comparatively much better than last year.
Suramya Nevatia
Yes. Yes, definitely. All right. Okay.
Unidentified Participant
Thank you. And all the best.
Suramya Nevatia
Thank you.
operator
The next question is from the line of Sujeet Bera from Bera family office. Please go ahead.
Unidentified Participant
Yeah. Good morning sir and hearty congratulations on super set of numbers. Sir, my questions are three questions. Hello, Am I audible? Yeah, please go ahead sir. My first question is like is there any plan to go for covered and some defense product also? So Kavas is not something that we are entertaining right at this moment. We have our eyes on some other signaling projects that we’re working on and we have already started making our breakthrough into defense. We have a couple of orders from HAL and we are in touch with DRDO as well to see how we can service them in the defense segments.
Suramya Nevatia
Great. So Hal, if you can quantify what kind of product or maybe on a.
Suramya Nevatia
Broader scale if you can.
Suramya Nevatia
These are just prototypes. Since we’ve just started in this domain in a. In a more decisive way. Once we have these prototypes delivered, then we will get more serial production from them. And my second question is any plan to monetize Bandit Land in near future? Not at the moment. Okay. And sir, my last question is like you have just mentioned to the previous participant that this order book of around 900 crore is executable in. So is it fair to assume that the kind of growth we are seeing, we have done 660 crore. So 30, 40% kind of growth will be there in current financial year? Is it fair to assume that.
Yes, so our statement is that we will target 30% growth conservatively. That’s what we are making as an official statement. Great. And with the kind of backward integration you are mentioning. So margin also will get boost. Margin will get the backward integration. You are doing so to improve the margin and to improve supply chain. Great, great, sir. Thank you very much, sir, for giving me the opportunity and all the best. Thank you.
operator
The next question is from the line of Proline Nandu from Edelweiss Public Alternatives. Please go ahead.
Prolin Nandu
Yeah, hi, a couple of questions from my side. First is this clarification that you mentioned on aux converters. Right. So if I understand correctly, when you in the future will bid system of converter can go into our propulsion system and we will continue to supply to oil storm. So if, even if Elstrom Winter tender, at least we will be able to supply converter. Is that understanding correct?
Suramya Nevatia
Yeah, definitely.
Prolin Nandu
Right. So then. Right, so in a way we are competing and also supplying to Alstom, right? When it comes to propulsion.
Suramya Nevatia
Yes, correct. If you see, our industry is very small. We all work with each other and we all compete with each other. I mean, we are competing with BHEL in almost every product category and yet we are working with them. We are buying things from them and they are buying things from us. So everybody is working with each other in all different formats because our industry is so small.
Prolin Nandu
Interesting. Thank you for that perspective. The second question would be, you know, if I take an example of propulsion system, now you are typically, I mean here the competition is more from the multinational, right.
Suramya Nevatia
Global leaders, so to say.
Prolin Nandu
I have a feeling that in most of your other products also, or the story is similar. So just wanted to understand, you know, from your learning from working with this multinational, what are the pluses and minuses or you know, what are the advantage disadvantage that we have and how do we bridge the gap? Right. Let’s say advantage could be that there’s a lot of focus on localization and that might be working in our favor. But to meet your standards in terms of product quality and efficacy, it takes time. So can you just help us understand, you know, is this like, is my assessment correct, that in most of other products as well, you typically end up competing with some of the multinationals.
And you know, how do we, how do we build an R and D capability or the culture within the organization to meet the standards which are very high, which are set by some of the multinationals?
Suramya Nevatia
Right. So yes, we are competing with national in almost all product segments. And we have been doing this for the last three decades. And we have our own strength. I would not say is this the strength of a domestic company versus an mnc. But this is what our strengths are. We are able to take decisions quickly. If we have to sort of maneuver some technology or some strategy. We have a very good, deeply penetrated supply chain. We are able to source vendors locally and who have good quality products. We are quite accurate in our costing and our pricing strategies and we are able to turn around from to dispatch very quickly.
So we have our own strengths and with that we are very comfortably able to compete with the big multinationals or even big local players.
Prolin Nandu
That’s very clear. Just last one from my side, you.
Suramya Nevatia
Also talked about.
Prolin Nandu
You depend on imports on for the products. Right. You just help us, I mean, take an example of any one product and help us understand what is the level of, you know, import that we use in terms of, let’s say, bill of material and what it could be right in, let’s say a couple of years time. Just to understand the opportunity for this backward integration or you know, indigenization of any component that goes into the kind of product.
Suramya Nevatia
Okay, so I can give you one example. This is a backward integration that we had done for the transformers where we were importing the aluminum tank from Switzerland and that constituted about 30, 35% of the BOM cost. And we developed the entire aluminum tank and we fabricated in house and we are using now we’re using robotics for the welding of this aluminum tank and we’re manufacturing maybe 60 in a month. And it’s because of this one single backward integration that we have 45% market share in the transformer industry today in traction transformer industry today. Now like this, of this magnitude, we have other backward integrations planned, the first of which will be rolled out in Q1 and the second one may be in Q2.
And all that impact will start coming maybe from Q3 and Q4 of this year, but more so from the next year onwards. So you will see these coming into play as we go along. Great.
Prolin Nandu
Thanks a lot and all the way.
Suramya Nevatia
Thank you.
operator
The next question is from the line of Garved Goyal from Invest Analytics Advisory. Please go ahead.
Suramya Nevatia
Hi. Am I audible? Yes, please.
Unidentified Participant
Hello.
Suramya Nevatia
Good morning sir.
Unidentified Participant
Congrats for decent numbers.
Suramya Nevatia
My first question is on the order books side only. Like you mentioned, this order book is.
Unidentified Participant
Having a execution period of around 12 months. So I want to understand what is the kind of order intro are we expecting based on whatever tenders we have applied or are going to apply in FY? 26.
Suramya Nevatia
I’m not sure how do we answer that. So the tenders that are coming out now, see, we have our own strategy and we know what we are expecting. As I mentioned earlier, we are very fixated on having a 30% growth year on year. With that strategy in mind, we will participate in the tenders. We don’t know what the other competitors have in their strategy, but we will take it as it goes. I mean we cannot really say that. Okay, I will get maybe the 1500 crores from the senders, but I mean we’ll see what we can do.
But we have our targets and that’s what we are going to try to achieve.
Unidentified Participant
Got it. Secondly, on the margins front, if you see like last two years, over the last two years we have been able to improve our margin profile and reason you have given because of some network integration and you are able to gain the market share as well. So how do you see, see this margin profile to shape up over the next two to three years? Like we are entering into newer areas of network integration and at the same time the scale will also kick in.
Suramya Nevatia
Right.
Unidentified Participant
So considering all these factors and also considering that you mentioned other players are also behind us for the category in which we are already a leader. So considering the kind of competition we might face over the years, what kind of margins do you think the kind of sustainable margins we can get over the next two to three years.
Suramya Nevatia
So we are, we have an ambitious plan that we would like to have at least our EBITDA, maybe in the range of mid teens to late teens. That’s what we are working towards. It will not happen immediately, but that’s what we keep working towards in the next few years and that’s what we would like to reach. And it’s not just backward integration, it’s also value engineering and technology advancement that we’re doing. I think I mentioned in the opening remarks, we’re working on new versions of hotel load converter, new versions of AUX converter, new versions of propulsion system.
Already we started working on that. That will help us to further substantially reduce cost. Either by localizing the vendors which we are today importing, we might be able to get those vendors in India or by value engineering in such a way where if we are using let’s say 50 numbers of one component, can we reduce that from 50 to maybe 35, thereby reducing the cost without compromising on the quality. So there are a lot of different avenues that we are working on to keep improving the margin, keep reducing the cost, also keep improving the Quality of the product.
Unidentified Participant
Understood, sir. And so lastly on the debt side, debt equity is higher than 1 and our interest force is rising over the next over the last two years. So how do you think from here onwards? Like we are also looking for the some capex on the backward integration side. So how will it get funded and how do you think? Like are we going for more elevated levels of debt over the years?
Nemani
Our interest cost as a percentage is continuously coming down.
Suramya Nevatia
Okay.
Nemani
It was basically I can say above the 6 percentage few years back. Now it has come around 2% which we have to target to reduce it further. Debt will be always costlier than.
Suramya Nevatia
Sorry. Equity will be always costlier than the debt.
Nemani
All that. So I can say we have still the compatible ratios. So for the in a normal course of business and normal expansion don’t plan to raise any equity in the market at the end.
Unidentified Participant
You’re saying that further expansion will be debt funded only, right?
Suramya Nevatia
Yeah.
Nemani
No.
Suramya Nevatia
Yeah.
Nemani
It will be debt plus internal services.
Unidentified Participant
Got it.
Unidentified Participant
Got it.
Unidentified Participant
Thank you.
Unidentified Participant
All the best for the future. Thank you.
Suramya Nevatia
Thank you.
operator
Thank you. The next question is from the line of Manish Goel from Thinkwise wealth managers. Please go ahead.
Suramya Nevatia
Yeah.
Unidentified Participant
Thank you very much and congratulations on very good setup from Visa. Sir, just wanted to get a perspective on the order book growth. What we have seen in last 2, 3 years from roughly 300 crores to almost 900 crores.
Unidentified Participant
So would like to get a perspective.
Nemani
Like what is driving it? Number one, is it due to increasing requirement from the railways in terms of locomotives, how has it increased in last two, three years? Second is probably have we gained market share. And third is how much is it also driven by increasing addressable market and how should we look going forward?
Suramya Nevatia
Sir, thank you very much. So there are three reasons for our growth in sending orders. First is yes, of course Indian Railways has increased the market size. I think three years back maybe it was, I don’t know maybe 900 locomotives or 800 locomotives. I’m not exactly sure. And today they have reached 1500. So yes, there is definitely an increase in that. Second, we have increased our contribution within the products that we have three, four years back we had maybe one or two products that we were in approved source. Today we are an approved source of almost all products.
And thirdly we have increased our product offering to the railways. And with that we are able to further increase our order in it’s the number of products. So would it be possible to give.
Nemani
A perspective that maybe three years back what was your addressable market within Indian Railways and that addressable market has grown to how much now and how should it grow further?
Suramya Nevatia
Sir, three years back we had say two approved products. Maybe transfer without the backend integration.
Nemani
Sir, sorry, we can’t hear you clearly. Sorry, not able to hear you.
Suramya Nevatia
Yeah, can you hear me now? Hello, can you hear me now?
Nemani
Yeah, it’s getting muffled, sir.
Unidentified Participant
Sorry.
Nemani
Hello.
Suramya Nevatia
Steve?
Nemani
No, can’t hear you sir.
operator
Sorry sir, just come closer to the mic and speak, can you?
Suramya Nevatia
I’m actually right in front of the mic. Is it still not clear?
Nemani
Now it’s ready.
operator
Yeah, now it is clear.
Suramya Nevatia
Yeah. So I was saying three years ago or years back we had maybe two docs that we were source. One was the transformer of panels and time. Also the requirement was lesser. I believe it was. I don’t exactly. But because we did not have any competitive advantage we were all sort of in the same boat as our competitors. And it became sort of a pricing war. Whoever reduces the price more orders but the costing was just not matching that price. But we had no option so we had to operate like that. But today we have a lot more competitive advantage and we are able to take these strategic decisions while tendering and that helps us to get more orders at better prices.
Hope that answers the question.
Nemani
Okay, fine, probably I’ll take offline. Thank you so much sir. Thanks sir.
operator
Thank you. The next question is from the line of Rohit Ori from Progressive shares. Please go ahead.
Unidentified Participant
Hi Suram and team. Good to see the company grow from 120 odd cross to 650 currently. I have a couple of questions. The first one being on the new developments. Can you take us through the developments which probably must have happened for H VAC motors or in case of the electrical electromechanical solution for aviations.
Suramya Nevatia
Okay, so we have done the H Vac system for locomotives which we have more than a few hundred running in the field today. And using that credentials you’re able to do the H VAC systems for LHP coaches. We are building credentials here and once we have it here then we can approach different segments like Vande Bharat and Metro for the H Vac systems. Regarding traction motors we are now an approved source which we were developmental until a few months back and now we have approval status and using these we can now target to approach other applications for traction motors.
Same as H Vac maybe emu’s memoir and and beyond. So that’s what we are we are.
Unidentified Participant
Looking at and anything on the electromechanical solutions for aviation. So would you like to share Something on that. Any approvals or anything that has come.
Suramya Nevatia
Through, we are just feet in. We have as I mentioned earlier, it’s a new domain for us. Whereas railways is something we’ve been in for because we really know how it works. We are still exploring. But I would like to mention that we have a lot of certifications and credentials here. Whether it’s drdo, isro, all these different defense agencies. In fact for all the Scorpion submarines that the government has made at NASDAQ dock, the battery chargers have been given by us. So we have a lot of legacy credentials. And we’re now trying to see how we can use these approvals and credentials for HA certifications within defense.
Unidentified Participant
Is it possible. Okay. Is it possible to share the blended capacity utilization that we have currently. Yeah, there seem to be some network issue. I was asking about the blended capacity utilization that we have currently.
Suramya Nevatia
Can you repeat your. To hear you.
Unidentified Participant
The blended capacity utilization that we have currently.
operator
Hello sir, can you hear us?
Suramya Nevatia
We are able to.
operator
Sir, I couldn’t hear you.
Unidentified Participant
Could you please?
Suramya Nevatia
Requirement as the customer by doing minor capex investments and some expansions we can cater to.
operator
Mr. Rohit, does that answer your question?
Unidentified Participant
Yes, a lot of muffled voice but.
Suramya Nevatia
Then I get the sense that.
Unidentified Participant
Okay, the next question is that while you also say that you’re trying to sweat the assets but you also want to go for a potential 50 crore kind of an expansion. So what is the rationale behind that?
Suramya Nevatia
That is for new products. Completely something new that we are doing. And because our existing plants are all full with existing products and we don’t have any more land bank available so in case we get an exciting project and we have some in pipeline, where do we manufacture that? So it’s just better to have some land available for us to start construction and take on projects.
Unidentified Participant
And by when do you think that you’ll be able to finish the construction and the commercialization of the new products that you’re working on?
Suramya Nevatia
Initially we will do it in our existing premises. So we actually have each plant or each line that we have is very product specific. And the new ones that we are working towards we’ll do the prototyping and maybe the initial production from the existing factory. But when we want to take that to serial production, we will need space. Okay. That’s what we are looking for. And yeah, so let’s see. Let’s at least get the land first and then we’ll decide when to construct it and what to construct.
Unidentified Participant
Last question from my side. We had some association with Grz Switzerland and we were trying to work on some green hydrogen kind of technology. Is that project still on or are you going to take some time for venture?
Suramya Nevatia
That relationship is going on with grz. We are working for hydrogen storage solutions with them.
Unidentified Participant
Okay.
Suramya Nevatia
And we are bidding across all different NTPC projects and it’s all ongoing but it’s going to take some time to start commercializing on that.
Unidentified Participant
And in what proportion of the revenue do you expect in the next three years.
Suramya Nevatia
From this, this initiative from Hydrogen? Yes. We have not taken the revenue from hydrogen into our targets. Whatever comes from that resolve added more.
Unidentified Participant
Okay. So Ramya, thanks for answering my questions. Yeah, thank you. Thank you.
Suramya Nevatia
Thank you.
operator
Thank you. The next question is from the line of Mahesh Atal. Please go ahead.
Unidentified Participant
Yeah, hi. So just wanted to know this professional system, what kind of margins are we looking from the entire set? Suppose if we supply a entire set to locomotive and what kind of margins you are looking at? That’s my first question. And second question would be on the replaceable demand. So what about the locomotives that are running? So once we get an approval as a development vendor, do we also have the replacement orders? Because what kind of life does this propulsion system have individually? Because there are four units.
Suramya Nevatia
Right.
Unidentified Participant
If you can elaborate on that.
Suramya Nevatia
Okay, sure. So firstly I cannot give away product wise margins. So that is something that I cannot share today. Secondly, there is no replacement as such of propulsion system. There is a warranty period of three to five years after which there is amc. And there is a rule by Indian Railways, you cannot scrap a locomotive or you cannot sort of convert it until it has run I think 25 years or something like that. But yeah, there will be AMC continuously. There will be spare parts being delivered. So that will continue.
Unidentified Participant
So this AMC could be like what percentage of the, you know, the realization amount, if you have any idea on.
Suramya Nevatia
That.
Unidentified Participant
The relation amount is somewhere around 1.8 crores. What I understand what could be the AMC on that?
Suramya Nevatia
It will be some between 3% to 5% or something like that.
Unidentified Participant
And this has to be done by the development, I mean the vendor itself, right?
Suramya Nevatia
Yes.
Unidentified Participant
Okay.
Suramya Nevatia
All right.
Unidentified Participant
My second question would be on the look, see we have, we as a company are having so many products. So one is propulsion system that you have come up which I mean, you know could be, you know, adding decent top line. Now when I say that what kind of products are you looking at in this financial year, in the next financial year which could be like, you know, revenue boosting products for you. So if you could actually Throw some light on what we could look at from product side.
Suramya Nevatia
So all the products that we have in our portfolio today are category A items. When you look at railways, I mean in terms of the electrical segment, so transformers, traction motors, propulsion systems, different types of converters, brake systems, these are all category A products. And all of these will be giving boost to our revenue. Top line or bottom line. All of it.
Unidentified Participant
Talking about a new product like proportionality is under development.
Suramya Nevatia
Right.
Unidentified Participant
So anything that is under development which could add significant to our revenues maybe in the next couple of years down the line.
Suramya Nevatia
Propulsion systems of course contribute. And then we have converters. We have different new converters that we have. We have battery chargers of different ratings in different applications. So there are a variety of different products. And we have the H Vac division that that is now under development for passenger coach. All of these will significantly attribute to our growth.
Unidentified Participant
And one last question.
operator
Sorry to interrupt.
Unidentified Participant
Mr. Mahesh, just one question. If I could squeeze in, it will be very fast. I remember you talking about, you know, your margins going to double digit which you are delivered. So what kind of, you know, numbers? Let’s say take three or five years down the line. I would like you to give a light on what kind of margins you want to take it to after having all these propulsion systems and all this into account. Next five years maybe.
Suramya Nevatia
Yeah, I mentioned this earlier as well. I would like the margins to be at mid to late teens. That’s what we keep working towards.
Unidentified Participant
Seeing that to be a happening thing in next five years.
Suramya Nevatia
Yes, definitely.
Unidentified Participant
All right. Thank you. All the best.
operator
Thank you. The next question is from the line of Naman from Navesha Investments. Please go ahead.
Unidentified Participant
Good morning sir. Thank you so much for the opportunity. Firstly, I wanted to understand what is the percentage cost of the propulsion. Total cost of the locomotive.
Suramya Nevatia
And so cost of a Locomotive is about 9 crores to 11 crores depending on what locomotive it is. And propulsion system is 1.7 to 1.8 crores. Okay.
Unidentified Participant
And on the secondly on the order book side, if you can tell us that if you bid around 2000-2500 crore of order then you are able to get how much percentage of order means the current order. You have around 890 crore. So you have bid for how much percentage order. So what’s your success ratio? Just wanted to know that.
Suramya Nevatia
That depends on whether you’re L1 or L2 or L3. It depends what your strategy is at the point of the tender. Are you looking at taking more quantity? Are you looking at Taking less quantity, how are you positioned? So there are multiple factors that we consider when we quote for a tender. It is very difficult to quantify how many, how much worth of tenders we have quoted. So that’s not something that we keep track of.
Unidentified Participant
Okay, okay, understood. And lastly, on the competitive side. So I wanted to understand how it’s hard to get an approval from the railways and how big is the process it used to take. Means if any new player want to enter into the railway side, even though it’s a very small industry. But if any new player want to enter into that industry, so how big it will take to get an approval. So just wanted to move on that side.
Suramya Nevatia
It all depends on what kind of quality and technology you have. Because railways is very serious today about having good quality products. Delivery on time, proper costing. So if you have all of these things, you can get approval, that’s fine.
Unidentified Participant
But means how much time it used to take means for you how much it take your time to get approval from the railway. Initially you started with the industrial system, then improve railway. Then how you get approval from the railway.
Suramya Nevatia
Just wanted to know that the delay is not from railway side, the delay is from manufacturer side. How long do companies take to build the technology and to build the product? Railways is a few weeks or maybe few months. It’s not a problem from their side. And it’s about us, how much we can keep perfecting and improving the technology that we are offering. If there are failures, then it will not get approved. So you have to build a good product.
operator
Thank you, Mr. Naman. Due to time constraint, we’ll take this as the last question. It’s from the line of Kush from Beanstalk Advisors. Please go ahead.
Unidentified Participant
Thank you for the opportunity and first of all, congratulations for great performance, not just this quarter, but since several quarters now.
Suramya Nevatia
I just have one question.
Unidentified Participant
Since a large portion of manufacturing is now shifted to Nashik, are there any plans to monetize the Bandit plant?
Suramya Nevatia
No, not at the moment.
Unidentified Participant
Okay, thank you very much.
Suramya Nevatia
Thank you.
operator
Thank you. Ladies and gentlemen. This was the last question for today’s conference call. I now hand the conference over to Mr. Nivetia for his closing comments.
Suramya Nevatia
Thank you everyone for joining the call today. FY25 has been a landmark year for hind rectifiers marked by strong revenue growth, meaningful margin expansion and strategic realignment. We have built deep competencies in railway power systems and we continue to establish ourselves as a full fledged power electronic systems company in the mobility space. I once again like to thank everyone for joining the call today. In case of any further queries, please reach out to us, our two strategic growth advisors, our investor relations advisors. Thank you all.
operator
Thank you. On behalf of Hind Rectifiers Ltd. That concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.