HPL Electric & Power Limited (NSE: HPL) Q1 2026 Earnings Call dated Aug. 20, 2025
Corporate Participants:
Unidentified Speaker
Shankhini Saha — Associate Director of Investor Relations
Gautam Seth — Joint Managing Director and Chief Financial Officer
Analysts:
Unidentified Participant
Presentation:
Shankhini Saha — Associate Director of Investor Relations
Director of Investor Relations from Dickinson and I’ll be moderating our call today. Joining us from the HPL management team is Mr. Gautam Seth, Joint Managing Director and CFO. Please note that this conference is being recorded and that some statements in this call may be forward looking based on current expectations and subject to risks that could cause results to differ materially. You can download HPL’s investor presentation and press release from the links in the community chat or from the company website or the nse. So we’ll get started. I’ll hand over the conference to Gautam to begin with some opening remarks.
Over to you Gautam.
Gautam Seth — Joint Managing Director and Chief Financial Officer
Yeah, thank you Shankani. Good afternoon everyone and thank you for joining us. Let me start with the metering and systems a key pillar of our business with high potential for growth. In Q1 revenues were a bit lower as a few dispatch clearances got delayed with execution slowdown mainly due to the monsoons. These are timing issues, not structural ones and we expect things to pick up immediately in Q2 and also in H2 of FY26 as these projects move forward. There is a this is a long business cycle so it’s not something to look at only quarter on quarter basis, but on a longer basis the the bigger picture for metering is steady.
Our smart metering order book stands at rupees 3000 crores backed by government’s push on RDSs with major AMISP orders lined up for us. This gives us a long term visibility and a clear path for high growth momentum in the metering segment as FY26 unfolds. On the consumer and industrial side, the quarter was good. Revenues grew 16% year on year. EBIT was up 23% and margins crossed 11%. Wire and cables grew well at 35% and switchgear demand remains steady. This segment is supported by the distribution network. We have built more than 900 dealers and 85,000 retailers across the country.
With its shorter working capital cycle, this part of business helps strengthen cash flows and adds more stability to earnings. At the consolidated level, revenues were down slightly by 2.5% but profitability improved. Gross margins expanded by 230 basis points, EBITDA margin by 85 basis points and PAT was up 8.5% to 18.5 crores. This shows our product mix is moving towards higher margin products and that scale benefits are beginning to show. Looking ahead, both sides of the business have an important role to play. Consumer and industrial is becoming a key earnings driver while metering and system provides long term visibility and opportunity for exponential growth.
Alongside this, our investments in R and D across smart meters, automation and energy efficient products keeps both verticals competitive. All in all, HPL is steadily moving from being just a product manufacturer to becoming a wider electrical company with a sustainable foundation for quality growth. With this, let’s open up for the questions.
Questions and Answers:
Shankhini Saha
Thank you, Gautam. We’ll now begin with the question and answer session. As a reminder, please raise your hand to join the question queue. Here’s a quick reminder on how to raise your hand. If you’re on desktop or laptop, look for the Reactions button at the bottom of your zoom window. Click on it, then select Raise Hand from the options. Your name will appear in the queue and I’ll call on you in order. If you’re on mobile or tablet, tap on the More button at the bottom right of your screen, then select Raise Hand from the menu.
Our first question will be from the line of Viraj Mahadevia Viraj. Your line is unmuted. You can go ahead and ask your question.
Unidentified Participant
Hi Gautam, A bit disappointed by the Q1 results. While I think the three year Runway, three to five year Runway of the company remains intact. Can you give us a sense if some of these inspections that were held up have happened now and have they started shipping in Q2 and as a result are you expected to see things coming back on track, Q2 onwards?
Gautam Seth
Yeah, hi, yes, we, we did see certain delays in lifting of materials from the AMISPs which were, we believe mainly because of the monsoon delays and in the execution and also probably more on them gearing up because on. More on because eventually now the pace has been picking up and I think it is with the government also now almost monitoring on a weekly basis and pushing the amisps pretty hard to, you know, you know, ramp up the execution part. So I think a lot of push is happening from the government also. But you know, when we look at India as a country, the whole area as a, you know, it’s a massive execution which is happening on the field level.
So I think those certain challenges are coming which are probably coming up and which are being addressed. So we have seen certain challenges with what our AMI sps have been facing. So they are beyond our direct control. Coming to your question, yes, certain, like we had certain material, even pre or even post inspected materials with us. So some things are picked up. We’ve had a decent, I would say a good July. So hopefully within Q2 itself we should be well back on track. But you know, just to reiterate this that this is you know a very strong medium to long term business.
You know I would say at least a 5, 7, 10 year is a very strong, you know forecast when you look at the overall metering industry and I’ll put some numbers on it because if you see right now as per government about 3 crore meters have been installed and right now out of even if you look at 22 and a half crores of sanction meters, 25 is what the government started off about three, four years back. By the time we reach the, you know the, the last part of their installations probably you know these requirements will go well above 30 crores here.
So we are actually only 10% of where we need to be. So it’s a pretty strong medium and long term story which is there. And HPL is well aligned to that. So we have started. So although we were also expecting that had these inspected materials also moved out we would have had fairly decent numbers and much better this thing. But I think that will happen in Q2 and the H2 also seems to be much better. But yes, one has to recognize that the challenges because as more and more installations are happening the AMISP will be facing a lot of challenges which I think the government together has been addressing them because on the other side are the utilities.
Then there are field issues and other things which are always there. But I think in like in any business this part is I think getting addressed. But from our side we are well equipped to even handle let’s say even double the business if that delivery schedules are there.
Unidentified Participant
Understood. Gautam, one of your competitors has talked about a very strong order book coming of about 45,000 crores in the next six to nine months and a large Chennai discom order I think of about 3 crore meters. Can you comment on that and what are your views? And because you know recent order wins have been probably a little slower than what you saw six, nine months ago.
Gautam Seth
No. So you are talking about the orders to the AMISPs.
Unidentified Participant
Potentially. Potentially
Gautam Seth
yeah. So even as per government if you see their official website they are still talking about only 17 crore orders given to the AMISP. So there are still even if you have to reach 25. So they are still talking about 8 crore more meters to be given out to the AMISP. So yes, I think that pipeline is still there and then the orders from the AMISPs to the meter manufacturers which is more important for a company like us focused on the supply. So I think there also again a huge amount of pendencies are there.
Unidentified Participant
So understood. And for your existing.
Gautam Seth
No doubt.
Unidentified Participant
Yeah, understood. Sorry, last question. For your existing order book of 3000 odd crores which is largely smart meters, when do these deliveries start? King up. So forget incremental orders just for the existing order book. Can we expect meaningful deliveries to start happening in H2 going into FY27?
Gautam Seth
Yeah Viraj, you know, I think you know, you know when as we stand now like earlier let’s say this conversation had we had about a year back or two years back. @ that time there were many issues. Like two years back when I remember in one of the meetings when the government and let’s say all the stakeholders were there the biggest question was whether the meter manufacturers would be able to supply such a quantity. You know that was the initial thing. Today I can easily say that from the industry point of view I think the delivery of 25 and even 30 crore meters is no issue.
I think the industry is well, well equipped to manage that. You know similarly at those point there were a lot of clarity coming in from the government on the policy on adoption of smart meters and by the states and other things. Today as we stand the point now remains on execution and execution by the amisp. So now just to put that orders are firm with us, we have the manufacturing capacity. Even others similarly have it. As the execution speed on the ground level picks up, the business will pick up. That is how it is. So at least from many factors which were probably affecting the long term business.
Now it boils down to execution which was obviously expected. So it’s not. The execution is going to take time, there’s no doubt in that. But yes it will. It is picking up the execution. What they are doing currently in the first quarter and the second quarter is well above the figures what they were doing last year. So I would say I don’t see any reason why the execution will not pick up. But then there are some factors maybe like the, maybe the monsoons or maybe certain other factors could come up in individual states. But overall the, the pace is picking up and the government, I’m aware of that, that the government on a weekly basis they are reviewing, they are pushing up their each and every AMISP for faster installations.
So I think it is more dependent on the pace. But yes we are fully ready and I’m sure I see this going up in Q2 for sure between Q1 and Q2 also we should expect a growth and going forward also this will pick up here.
Unidentified Participant
Okay, great. All the best. Thank you.
Gautam Seth
Yeah, thank you.
Shankhini Saha
Thanks for your questions. Viraj, next line of Questions will be from Samarth Sarogi. Samarth, your line is unmuted. You can go ahead and ask your question. Okay, we’ll move on with the next question. So our next line of questions will be from the line of Sahil Patani. Sahil, your line is unmuted. You can go ahead and ask your question.
Unidentified Participant
Thanks for the opportunity. So Gautam wanted to understand that you mentioned there were some, you know, delays in picking up. So, but, but you know if I, if I look at one of your peers, they kind of said that the ramp up was really good in, in this quarter. So just trying to understand was it like why was it specific to us that you know there were, there were these delays. Why, why did the other players not. Not face these issues in this quarter?
Gautam Seth
No. So yeah. Hi Sahil. Yeah, so I cannot comment on what others faced it. But yeah we definitely face this. And not from one or two. But I think most of the AMISPs, what you know, whom we have been supplying. Second our business like we do not have a dedicated platform or an AMISP where we are supplying them. So you know we are dependent upon the pace and the execution of independent ami sps. So I think it’s just. But again you know we also don’t feel it as a long term trend. It is more of a one off thing which already as I said earlier in the earlier question also that the pace is picking up and I think that should go.
But yes, we definitely face certain pickup delays. So now we, we are aware, yes, it’s due to stocking at the, you know, the AMISP and already which they have been having stocks. It’s obviously monsoon delays are there. I’m sure those of the people who are sitting in Mumbai and Maharashtra, they know, you know it’s already, it’s difficult to move out so let alone go and install the meters. So these type of things are always there. But I think that should pick up. But I cannot comment on an individual company on what, whether they faced it or no, I won’t be able to comment on that.
Unidentified Participant
Understood. Understood. Gautam. I think thanks for that clarification. And then as you said the pace has been picking up. You’ve been kind of seen there in Q2 so you’re expecting like on a sequential basis. I think the year would end well like Q2, Q3, Q4. Like I think they kind of get it gets better from here.
Gautam Seth
Yes, definitely. I think I would say that. Yeah. Because the way we are seeing Q2 going, I think that should Be much better than the Q1 and the H2. The second part is always better. Last year we have seen it. So I don’t see any reason why there should be a delay. And in fact, you know, the AMISPs have been gearing up their infrastructure for installations and that typically involves having more manpower and because the Smart Meter installation is very different to a normal meter installation because this is a system which is getting installed. So you need a better trained, skilled manpower on the, on the ground level.
And I think that is being ramped up already by most of the amisps. So I think we should see an incremental effect going forward here.
Unidentified Participant
Okay. And just finally, last question. In terms of the order book and order book pipeline, like how is that looking? Are there fresh orders that you’re expecting? Are there like, you know, the other like tenders that are supposed to be floated now over the next few months or in FY26? Like how is that broadly that pipeline looking? Like,
Gautam Seth
yeah. So when we see right now as we stand, we are talking to certain couple of new AMI sps who have never bought from HPL earlier. So we are expecting business from them. With the existing AMISPs we again have certain delivery schedules or let’s say the negotiations for the newer circles, what they have. So that is also going on the tenders. What we were talking about in the earlier question of Viraj that was that there are a lot of tenders which the utilities would be finalizing on the amisp. So again that gives us a big opportunity because being a leading player in Smart Meter, we would expect those orders to eventually come down to meter manufacturers like us.
So overall, yes, there are there we have also Even in the Q1 we have gotten orders, but now looking at the overall 3000 crores, so let’s say an order of little, let’s say even a 50, 100, 200 crores is still a smaller order, you know, when you see a material, from a material point of view. So I think everything is not getting reported, but there are inquiries and orders coming in. Yes. So I think based on that we are still hopeful, as I said in my opening remarks also, that this business needs to be judged at least on a medium and a long term basis.
The numbers are there. The execution capability of us supplying the Smart Meter is very strong. So maybe going forward also we may see one or two quarters maybe on different reasons the executions of AMISPs could go down, but overall the numbers are set to pick up for sure.
Unidentified Participant
Got it. Okay, thank you. Gautam I think that’s all for me.
Gautam Seth
Yeah. Thank you.
Shankhini Saha
Thanks for your question. Sahil. We have now a question submitted by Pratik Toshniwal. So Gautam, the question is which are the most important geographies in terms of our customer base of installations? Also is there an approval process for a new meter manufacturer? What prevents a new player from establishing themselves in the smart meter business?
Gautam Seth
Yeah, so I’ll take the second part of the question first. I would say nothing stops a new manufacturer from coming in. It’s an open market. We have seen couple of new players who have come in into the market. So it’s an open competitive market. And now the customers are private, you know, AMI SP players. So they are well equipped to evaluate and take the meters from anybody whom they want. So I think obviously they must be having a process of evaluating them. So which probably because we’ve been very much into the business earlier so we have done these things couple of years back.
So I think there I will not be able to comment on that. But it’s an open market for them for sure. Like that. And as regard. Sorry, can you just repeat the first part please?
Shankhini Saha
Sure. So it’s what are the most important geographies in terms of our customer base of installations?
Gautam Seth
So we are now supplying to I think most of the active amisps we are supplying. So there of course there are like the bigger ones are working in various geographies and you know, different states, different circles within the state. So we are in a way supplying to them most of them rather. And now the couple of ones who have come in a little later or new ones we are also getting approval over there. So all independent AMISPs eventually we will be supplying. So I probably cannot comment on the specific geographies but, but we, we are present with them and wherever they are present, I guess we, we are going to be present here.
Shankhini Saha
Thanks for that Gautam. Our next line of questions will be from the line of. Ritesh Gandhish. Your line is unmuted. You can go ahead and ask your question. Hi Ritesh, your line is unmuted. You can go ahead and ask your question. Looks like we’ll move on to the next. So our next line of question will be from the line of. Or we’ll rather do a submitted question. So Gautam, the question is our company had an order book of 3500 plus crore as of 22nd of May 2025. They executed around 204 crore sales in smart meters.
So as per our presentation our Order book as on 13th August was 3000 plus crore. So are we expecting delivery of around 250 plus crore already executed in Q2 in Q2 till 13th of August 2025?
Gautam Seth
No. So like I won’t, I won’t give a specific financial guideline guidance on the second quarter but definitely we are, we’ve had a good July as I said and we do hope that we would have a good growth sequentially from the first quarter to the second quarter and the mainly pickup will be on the pickup from the AMISPs and we expect their execution to pick up from now on. So generally always the first, the first half is a little slower and the second half picks up. So that guidance I would say remains. But within the between first and second quarter itself we should see a good amount of growth coming in.
But on an exact number I probably will not be able to say it now because these are dependent on their picking up. You know ultimately there are inspections happening then once the inspection clearances are there then we get a clearance for dispatch. So unfortunately even in the first quarter certain materials which probably now have left but even the inspected materials could not leave. So I think this is part of the business. It’s so I think something can get pushed back from one month to the other one based on the process.
Shankhini Saha
So on state level orders, which states are looking most promising for hpl where are we seeing the bulk of recent wins?
Gautam Seth
Yeah, so we as I said earlier also so we are not seeing the like you know we, we would monitor it based on the, the amisp. And so so you know they are, as I said earlier, they are spread into various states and into various circles. So so probably we are not tracking them on a statewise basis. But yes, when the, the AMISPs do the statewide tracking. So let’s say if Tamil Nadu is coming out with their, let’s say 3 crore meters or something like that, then it’s for the various AMISPs to code the tenders and that too on various circles within that.
So they would do it and our role comes in once the, the orders are you know, received by the various AMISPs because that is when our role would begin to, to you know, approach and then take the orders from them. But we are approved by most of them or pre approved by most of them. So that gives us a big opportunity going ahead.
Shankhini Saha
So this is a question from Radesh. I think he’s referring to the meters segment. I understand that this is a 5 to 6 year huge growth opportunity but post that numbers could materially go down. So from a terminal value perspective, what is the longer dated plan beyond smart meter opportunity in the next five to six years?
Gautam Seth
Yeah, so I would answer that like of course, you know, if you look at consumer and industrial, that’s got a, you know, a long term perspective for sure. Similarly for meters. So when the way we look at it, we are probably in our active second or third year of the metering part and in the next couple of years, let’s say in the five, seven years going ahead, we should see most of these 25 crore meters getting installed. And I would say this is phase one of it. Eventually post the 10 year closure which would happen once these are installed, all these meters would again come up for the, for a replacement.
Yeah, and we have seen this earlier in the last 25 years of being in metering at that time, every five years we would see the meter happen. So every year there would be certain churning happening and within 5, 7 years the meters would eventually get replaced here. That is how it, the, the whole process works. So eventually there will be newer technology, there’ll be much faster ways of communication and then accordingly as required once the, the timings are over, let’s say about nine, ten years are over, all these meters would eventually come back into it.
So I, I think it’s a very long term perspective what, what would happen. So it’s not something that once these are installed, it’s the end of the story. I think it’s the beginning, you know, only it’s a beginning on a new platform, on a new technology which has endless growth potentials here. So that would happen. Plus the company is also looking at international markets. We’ve already started certain focus on metering for international markets. So it would take time. I think by the time we start seeing some results because we need to do certifications, some we have, but certain certifications and country specific certifications need to happen.
There are certain other compliances to be done. So maybe in two years time we should start seeing certain international business, maybe few countries to be focused on where the metering business would start in a larger way. So that opportunity definitely remains because with the Indian experience what HPL would have, you know, dealing in crores of meters, installing it in India, you know, making sure that they are working properly. So I think that these, with that experience we can probably enter any global market and perform well over there. So that’s a big opportunity not only for HPL but for the entire industry as such.
Shankhini Saha
Thanks Gautam. This question is on the consumer and industrial segment. So the CNI segment has grown 16% and wires and cable specifically 35%. So can you tell us what the CNI business is looking like in the next three years time? Can you share more on how we see growth in this segment?
Gautam Seth
Yeah, so there is a in CNI in fact if you see in the last two years also barring lighting there has been a good growth like the wire and cable last two years has done 25% growth annually. So that has somehow we’ve seen almost two and a half years of growth in the wire and cable segment. We are upbeat on that. So next two, three years also that will be good and we are expanding the product range and the product portfolio in that. So that is happening. Switchgear has been a steady business. The domestic part has been growing much better than the industrial part.
But I think again in this year also by second third quarter the industrial part also will pick up. So overall with now lighting Also the last 2, 3/4 the price falls have fairly stabilized. I would say though for competitive reasons the pricing can always, you know, keep falling or reducing. But generally the, the price erosion, what happened earlier that has kind of reduced much more and now we are seeing a single digit growth. Even our last quarter we registered the, in the Q1 we registered a 7% growth on lighting year on year. So I think that growth is coming back.
So overall normally I don’t put a number but just to put it let’s say in the next three years maybe by FY28 we should be a thousand crore plus in the consumer and industrial and I think that would make it a much more serious business. What is happening? Our focus on expanding the channel remains into that. Three years back we put a target in the team that we need to reach 100,000 retailers and I think by end of FY26 because we are 85,000 plus we should reach a hundred thousand hopefully. So that is the channels are expanding, the new areas are going in.
Even our spend on the the Marcom the the brand is also increasing. So overall I think this part of business will grow steadily right from switch gears, wire and cable for sure. And then we have fans which have been added so they that also by next year we are expecting certain substantial revenue should start flowing in and with lighting improving because lighting used to be in the past our main growth driver. But then when the price erosion happened definitely the sales values had come down although there were slight volume growths. So overall I think we are upbeat on this one.
Shankhini Saha
Thanks Gautam this is a question on metering again. So are we in a position to provide smart meters to industries like aerospace, defense or shipbuilding, railways etc considering bulk of government capex are focusing on these sectors?
Gautam Seth
Yeah, so you have to understand that you know the metering, you know, if it is a tariff meter application then those are, you know serviced by the AMISPs and eventually by the utilities. So they’re you know, in our regular channel what we are supplying, those can be done. But we are, you know, apart from the single phase meter, what generally we talk about on smart meter, we’re also doing the three phase, the three phase smart meter. We are doing the LTCT metering and the, the grid metering as well. So we are there in all the segments and but privately if you see there are a lot of builders who, who, who take our products which are for internal metering and not for the tariff meters.
So that is how the business works. So we cater to anywhere where power is measured. So be it in a defense or a regular requirements, what could be there so we can supply. But normally that is in the scope of the utility through the AMISPs.
Shankhini Saha
Thanks Gautam. Another question on the CNI segment we’ve seen a margin expansion of about 11.3% in this segment which is encouraging. So what’s really driving this and can we sustain these levels?
Gautam Seth
Yes, we have seen slight improvement in the margins. The commodities have been fairly good, especially if you look at wire and cable segment, although copper is slightly volatile. But whatever volatility happens in copper, whether it’s an increase or decrease that eventually gets passed on to the consumer. So at least the, the risk part is very less on us because and, and the industry is structured like that. So so there the margins are pretty much maintained and the pass on is of course with a time lag. But broadly they are, you know, the any negative does not come on the company regarding the switch gears.
Again the commodities have been fairly good. What we have been working across in most of our factories is also on you know, reducing the cost of materials and that is mainly a lot of design element goes into that trying to redesign certain components to get a better and a cheaper materials so where we can save. Also the centralized procurements are constantly working to make sure that the rates are bought down and luckily our volumes across like if you see metering, if you see wire and cables, the volumes have really gone up pretty well. You know as a company we have doubled our turnover in four years.
So definitely the volume increase have been there and so that Gives us a better leverage to negotiate with our vendors and get in the. So that we are able to improve our margins. So I think yes, margins are sustainable. In fact we are, we would pursue to enhance the margins even going forward. The product mix in our, you know, product portfolio makes a big difference because it’s a very wide product. When we talk about consumer and industrial, so there are four segments and then within those segments also there are huge ranges of products. So definitely in.
And the, the margins, the gross contributions on different products lay differently, you know, so, so those I think also affect that. So we are continuously, we are monitoring that we work. Our teams are also focused on higher margin products. We, we look at launching a lot of products. The new launches are typically into the premium segment so that we are able to get a better realizations. So I think the, the efforts are there which are. The multiple efforts are there which are definitely getting paid off.
Shankhini Saha
Thanks Gautam. Our next question is on metering. So can you provide the volume number for smart meter business in terms of sales volume and if one has to translate the order book into number of meters then how much would that be?
Gautam Seth
Yeah, so, so Shankar, we have not been giving the, the, the quantities into that. Yes, we have a, we have a capacity now of 1 million meters per month. So, so that’s a huge capacity what we have. But right now for competitive reasons and with so much of business on the floor right now which needs to be taken. So we would not be giving out the, the quantitative details. I’ve said this in the last call also but overall, yes, I think over this year also we should find a good growth. Last year we did a good number.
So I think again but probably we will not be able to give this on this call. Yeah
Shankhini Saha
sure. A follow up question on that is when do we book revenue on X work? So when meters are actually installed and go live status is achieved?
Gautam Seth
No, so we are supplying the meters. So once our revenue gets booked when we supply the meters, when we bill and supply the meters to the amisp. So it is irrespective of when they would install that that is their, their lookout. But our revenue gets booked the, the moment a supply is made.
Shankhini Saha
So another question on the CNI segment, Gautam, are we looking to expand the wire and cables business to the African market? How big can this opportunity be and when can we expect to see results?
Gautam Seth
Yeah, so we have, we have been supplying wires and cables to the African market but I think on a more focused way our, you know we are expanding our range now going into the, you know, the LT power cable, you know and as we have the broader range those are more, you know I think that will give us a bigger benefit going into the African market in a bigger way. The domestic house wiring and the flexible cable which is our, our main business right now. Those you normally find certain local manufacturers. So but we have our.
Within the export market our acceptability of wire and cables has picked up pretty much into SAK areas. We have even been supplying in Middle east and in African market. But I think yes the opportunity is much more bigger and we are looking to exploit that. Similarly when we look at lighting also our lighting business on overseas market again is a big opportunity which now we have started putting a big focus on that and with because in lighting I think after China, India is you know pretty much a global manufacturer now. So those that part we are again looking to exploit along with the wire and cable.
Shankhini Saha
Thanks for that answer, Gautam. We’ll take some follow up questions from Viraj Mahadevia. Viraj, you can go ahead and ask your follow up questions.
Unidentified Participant
Hi Gautam, regarding the life beyond smart metering, can you comment a little bit on smart switch gears which will be the next piece of evolution in making the grid intelligent and also on the relays where I recollect you had a partnership with the Chinese company for technology transfers.
Gautam Seth
Yeah. So on smart switch gears, if you see a lot of work has been going on, we have enhanced our R D team. In fact last month we opened a new R D center at our Kundali factory where we have the switchgear division. So a lot of work is going on in that. We already have certain products in our industrial products which can be, which can be communicated, you know, through the laptop you can get in a lot of data and it’s a two way communication again. So I think a lot of work has been going on.
So we also believe that like smart metering, the smart switch gears would be the next thing and we are already investing certain part on the R and D for that already. The, the hardware, the switch gears are all available with us but those need to be redesigned. Obviously the new technologies need to be there. A lot of electronics comes into it. So in all the, you know, whether you look at the material side, whether it’s a tooling, whether it is the mechanical side or electronic side. HPL already has a capability in all of this. So basically it is combining a lot of our existing resources.
Understanding the. So we have a new senior people in the R D for switchgears So I think we should be ready along with the various global players who are coming, coming in India with this type of a thing. And when the opportunity really goes much bigger, we should be a part of that for sure. Regarding the relays or the other components for like the smart metering. Yes, it’s a. We are very much committed that we need to go on a backward integration into each and every critical component which is there. So our value addition in India is already very large ahead of what even the government has mandated.
So we are definitely looking at it. There’s a lot of work which is happening and I think in some time as we see more work on the ground level, we definitely will be communicating that.
Unidentified Participant
Understood. Just a follow up question. So in the evolution of the grid, does a smart meter come first and then naturally you have to install a smart switch gear after that and is it a one for one opportunity in terms of volume and size just because you’ve installed, I don’t know, 25 crore smart meters, is the next thing that you have to install an equivalent or certain ratio of smart switch gear as well over time?
Gautam Seth
No, it is. No, it’s look, you have to look at it in a broader way. So there is, to answer your question, no, there is no necessity as such because things are already working. But if you see electricity was working even in 1960s on 70s. So we all got our electricity in the houses and the factories and other things. Only now the systems are changing. So it’s not something specific to India. It is something what we are seeing globally it is happening. The grids are getting smarter, the meterings are getting smarter. There are less human intervention, there are more data exchanges, the communications are better, smarter, faster.
So I think one has to go with the trend. You know, that is how it is. So obviously the process of that electricity coming to a home will always remain. But how it is done and when the next and each of the installations, what you see right from a transformer which is there, or you know, even the lines which are there. Even now you see the cabling system also getting changed. All are going to the underground cable, the overhead lines are getting replaced. So it is part of the overall. When you look at the transmission and distribution segment, that is where we come into the picture.
The entire things are changing. So when the next replacement comes, definitely the smarter products are going to be put into the next replacements and that will make things much more effective. So much of manpower, it will help in better maintenances. You know exactly where the problem is, what the Problems are even in. Now if you look at even the panels, what they install in let’s say any hospital or probably the buildings we are sitting in, even through the heat sensors, through the things the maintenance person knows where the problem could occur, you know. So I think those type of things, even preventive maintenances can be taken up.
So that is what it is and that is how it’s going to come. And that again leads to that the next smart meter. Let’s say when, take a scenario in the next seven years when all these, let’s say 2530 crore smart meters are working and there is a communication grid which is actually doing it, then the earlier meters which are installed, the technologies are going to change. Obviously in seven, 10 years there will be newer technologies, much more better, maybe smaller, compact, probably. We cannot think of what is going to come in. But definitely there will be new technologies coming in.
Yeah. And that those are going to eventually replace the existing ones. Only the next time the installations will be easier because the mapping of all the 2530 crore customers will already be there. So this is only a changing of the meter rather than the whole process getting done. So understood there has to be a pain when the installation has to really happen and people have to be mad because now they’re going to come on the like, let’s say on the data grid, you know, of all the people. And since smart meters has so much of benefits where even an individual person, you know, on the app you can see how your home consumption is happening.
Everything is so transparent. So I think people will get used to it the way we have got used to mobile. So now imagining going back into an era where the data of the mobiles are not available, it becomes difficult. So I think a similar moment is going to happen in the smart meter as well. So this understood only there will be a one gen, first generation, second, third generation of smart metering coming in. Yeah.
Unidentified Participant
Okay, okay. And lastly, can you comment on any progress you’re making on getting impaneled with utilities and export markets? You know, because that’s also a journey. So hopefully you can be ready for that. Yeah, export supply in the next few years.
Gautam Seth
Yes, I, I think I took it up in the last couple of questions back that we have in fact we just strengthened our manpower and we are now moving into the better IEC compliant meters. So this require requires certain general certifications as per standards which are acceptable by various utilities in international markets. And then there are certain country specific requirements which have to be there. So broadly we have the technology only Thing the certification and compliances need to be done and then we will definitely we are aware of because already requirements are coming in but right now we are not doing it.
But yes, maybe in the next two years you should start seeing that happen and when that happens with the experience what we have in the Indian market that will definitely make us stronger in the international markets because you know the Indian market the, the conditions are pretty tough, you know and if one can make a meter which survives 10 years and if you you know see in our factory in the last two, three years we’ve come onto a. Not only a campaign but a full process we have laid out for a zero defect meter. Yeah.
Or zero defect products. So a lot of work has gone into it and we can actually stand and claim that our meter actually works for 10 years. You know. So I think that would make it a high grade international quality meter which can go into any. Even the, the first world markets. You know. So I think with that kind of a thing when we enter into it. So maybe in next two, three years you should hear something good on the international part as well.
Unidentified Participant
Great. Thank you. All the very best.
Gautam Seth
Yeah. Thank you.
Shankhini Saha
For your questions. Viraj. We got another submitted question. Gautam. So this is on the metering side. So given a lot of the industry is increasing capacity and not very hard to do. Are you seeing any sort of increase in competitive intensity and pressure on pricing in the tenders? Are most tenders based on L1?
Gautam Seth
Yeah. So yeah. So first thing I like the way you said not very hard to do but I think you need to, you know, I think you know it’s not you know the getting into the design manufacture of smart metering is a very, very specialized work. You know and I, I think our, I don’t know about others but are you know our really the 30 year active experience comes into really churning out a product which is a zero defect product and which can go into any AMISP and utility. Now just coming to your question. Yes, it’s an open market.
Definitely there will be competition but like, but when we look at it and why people the a. It’s very important for an AMISP in his entire project working where he’s dependent on the ONM but for the next seven to eight years but with very strong predefined SLA breaches. So I think the quality of the meter really makes the difference here in the entire thing and the AMISP’s revenues over the next 10 years are dependent on the quality of the meter and the, the overall Metering system being up and running. So I think that is where we gain onto that.
So, so I think we, we see that as an opportunity. There are newer players coming in but how well they will perform or let’s say the. The two, three players who are there. I think our experience of last 30 years definitely will gives us a good edge over others and the strengthening what we have done of the R D and the capacity including we’ve recently opened a new electronic area in our Gurgaon factory about two months back that was on the social media of at our handle then we will strengthen most of the areas now.
So we are well geared up to that. So there will be good players coming in, there will be competition is there. But that is. Then every area is competitive. Yes, but since we also have the visibility of the business for next two and a half years. So we also are working on ensuring that the pricing, the costs are coming down, you know. So I think that also gives us an edge to maintain. Even if the pricing were to come lower in future offtakes, the the cost will also come down maybe more than proportionately. So that can help us to even enhance the margins.
Shankhini Saha
Thanks for that Gautam. So on the metering segment again, what is the warranty like on our meters and when. What is the life cycle of our meters with the amisp and when does the replacement market begin? After installation.
Gautam Seth
So right now I think the replacement market will eventually come into in a longer time. Right now, you know, as I said earlier, we are probably in just about only 10% installed. So still 90% needs to be installed and then that number is also going to grow up. So I think right now the huge lineup is there, the specifications, what the government framed under this, that every meter or every AMISP has to give a 10 year warranty. So like I said earlier, while we were doing business for the last three decades, we had to really re engineer the product in a way that the product and all the critical components are made in such a way that they will perform to the optimum level for the 10 year period.
And I think the current supplies, what we are giving are already into that level. So it has taken a lot of re engineering work though we were three decades old in the metering business. But we had to re engineer the product to make it compatible for the 10 year period. So I think that warranty we stand by and we don’t see a big cost accruing on that period, just a normal business expense. What has been happening over the last three decades. So I think that effort, that cost definitely goes into the business. What is there which will hopefully help us to get the performance of the metering will help us to get the future orders then.
Shankhini Saha
Thanks Gautam. So another question on the metering side. So on state level orders, which states are looking most promising for hpl? Are we seeing that there’s a bulk of recent wins from a particular geography?
Gautam Seth
No, I think I already answered that a little while before but I’ll just repeat it that we. The. The state level business is monitored more at the AMISP levels. Our, our focus is that because you know we get the. Once the state level orders come into the AMISP different circles it can be different people who are doing it. That is when the opportunity for us to supply to them. And Today the bigger AMISPs are probably working in five to seven states into multiple circles within the same states. So so that is how it is. So we don’t have a geography focus.
What we were having for last couple of decades because we were supplying directly to the utilities but now that changes into now more of a key account AMISP working.
Shankhini Saha
Thanks Gautam. This is a question we’ve gotten on working capital. So working capital has historically been stretched in the metering business. So now with the consumer and industrial contributing 47% of revenue, can we see tangible improvements now in cash flow and roce.
Gautam Seth
Sorry, I just missed the last part of it.
Shankhini Saha
Sure, I’ll repeat it. So working capital has historically been stretched in the metering business with consumer and industrial now contributing 47% of revenue. Can we see tangible improvements in cash flow and roce.
Gautam Seth
Yeah, so we are, you know, you know if you look at our working capital cycle that has been improving since the last I would say one to two years. Even if you see in the last year only the, the debtor period in the last 12 months has come down by 28 days or even the net working capital is down by about 60, 60 crores overall in the last 12 months. So certain improvements are happening though the sales are going up for two primary reasons. One, the payments from the AMI sps are much better defined and unlike what earlier was happening in the utilities.
So that contributes to that. Yes, the consumer and industrial part definitely has a much better working capital. But as I said earlier, although that part of the business will grow but the metering business will grow to a much larger extent. So whether it is 40% or 45%, the definitely a good proportion of consumer and industrial helps. But the bigger business of metering also is seeing a Much better net working capital. And as we go ahead, I think that should improve here sometime by next year again we expect a further improvement in that.
Shankhini Saha
So Gautam, on the R D front, can you give us more color on what some of our ongoing R and D is in smart meters and automation? And even on the CNI side, are we really investing in building the current portfolio in the consumer and industrial segment?
Gautam Seth
Yes, I think, you know, with our experience in smart metering where our R and D was very strong, we had over 100 engineers only working on the metering, on the communication and other parts in the smart metering. Now we have strengthened, as I said earlier also we have opened a new R and D center last month in our Kundali factory for the switch gears and lighting. Now in fact all our factories, even whether it’s wire and cable and even our domestic switchgear, we have R D personnel appointed in each of them. So R D has now become a key focus for HPL because we’ve always been focused on technology, part of IT and all our two major verticals, what are there all have a huge potential of growth.
But without R and D I think the kind of the growth what we can expect or even to maintain the margins would become difficult. So definitely we are focusing. There are a lot of projects, I think each and every product vertical and teams have various projects which are there. They could be. Some of them are more of cost savings. Certain are coming into new product categories or product within the same categories. And also some on international business. Like our MCB is internationally certified now even in fact even our laboratory is internationally certified. So in a way there are a lot of things we have now NABL laboratories, we’ve got the recent one in the wire and cable factory.
So these are like third party laboratories. So most of our factories now have the NABL laboratories. So a lot of work and investment is happening on the R and D certification. Similarly, automation also like the meter automation has really taken off well. Where we have almost automated and semi automated lines where the meter productions are happening. All the smart meters are productions are happening through that now. So that is much better, efficient, less manpower required. And plus the data, what we are having while we are doing the manufacturing gets captured. So it helps us to evaluate the performance in the future and for us also to track the after sales service which is extended, you know, by up to next eight, nine or ten years, what is there.
So a lot of work is happening in MCB’s also we’ve put done a lot of automation work on this thing. We are getting certain new equipments. Hopefully by end of Q3 we should be having a real big automated line in place. So that also will help us to reduce a lot of manpower and bring in much more better accuracy. So I think a lot of work going on in that regard.
Shankhini Saha
Thanks for that very in depth answer Gautam. It’s very meaningful. So I think the last question we’ll take before your closing remarks is do we have any plans to reduce debt and borrowing.
Gautam Seth
Now? So our if you see our debt equity ratio is comfortable at 0.69. So I think that is there including our interest costs have come down. In fact our borrowing, if you see the last 12 months and on today that has also come down. So overall I think it’s a conscious decision. If you see last four years our turnover has doubled and probably the debt has gone up marginally only. So I think the next two, three years also we should see a much more similar impact happening and with the cost coming down because we have had two rating upgrades.
So that has also helped us to bring down the borrowing costs here.
Shankhini Saha
Yeah, thanks Gautam. That concludes our Q and A session. I see there are some questions still left but for paucity of time we’ll address them at a later discussion. You can also send them to me in writing our email IDs at the last page of the investor deck and we’ll make sure they answer to your satisfaction. So Gautam, I’ll hand over to you now for some closing remarks.
Gautam Seth
Yeah, so. So thank you for the Q and A and thank you for joining us today. So before we close let me re emphasize our confidence in the metering business. While this quarter saw some delays, but those are certain short term timing issues. Fundamentally the business remains intact. In fact it still remains the biggest growth driver for us and we have an order book of over 3000 crores that should help us again. And this is a long term business cycle that gives us a steady visibility and growth momentum going forward. So we appreciate your interest in HPL and look forward to updating you on our growth journey in the coming quarters.
So thank you very much and have a pleasant day ahead. Thank you.
Shankhini Saha
Thanks Gautam. On behalf of hpl, thank you for your time and attendance for today’s earnings call. You’ll receive a feedback survey after this call. Kindly take a few minutes to complete it. For any other further questions, please feel free to reach out to Dickinson and we’ll make sure your questions are answered. So thank you for your time today. Gautam. And thank you for everybody’s participation in today’s call. Thank you and have a pleasant evening. You may now disconnect your lines.
Gautam Seth
Thank you.