HPL Electric & Power Limited (NSE: HPL) Q3 2025 Earnings Call dated Feb. 20, 2025
Corporate Participants:
Gautam Seth — Joint Managing Director & CFO
Analysts:
Shankhini Saha — Moderator
Viraj Mahadevia — Analyst
Sahil Patani — Analyst
Sandeep Mathivanan — Analyst
Pranjal Mukhija — Analyst
V.P. Rajesh — Analyst
Janish Shah — Analyst
Chinmay Kabra — Analyst
Ashwini Sharma — Analyst
Presentation:
Operator
Ladies and gentlemen, good afternoon. Welcome to HPL Electric and Power Limited’s Q3 and Nine Months FY ’25 Earnings Webinar, hosted and produced by. I am Shankini Saha, Director of Investor Relations from Nickinson, and I will be moderating our call today. Joining us from the HPL management team is Mr Gautam, 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. Here are the links to download HPL’s press release and investor presentation for Q3 and nine months FY ’25 will be present in the chat shortly. I now hand the conference over to Gautam to make a few opening remarks. Over to you, Gautam.
Gautam Seth — Joint Managing Director & CFO
Thank you. Good afternoon, everyone. Thank you for joining us on our Q3 FY ’25 and nine months FY ’25 earnings webinar. It is a pleasure to connect with all of you this afternoon and share our performance updates. Even with a slower overall pace of growth of the economy, our financial results have shown momentum.
For nine months FY ’25, we have a 16% overall growth in revenue, smart meters expanded by 27%, wire and cable revenue rose by 25%, while domestic switchgear increased by 21%. PAT increased by 51% year-on-year in Q3 and by 89% over the nine-month period. EPS reached 8.81 for the nine months, a notable rise from 4.64 in the prior year. EBITDA climbed 12% in Q3 and 26% in nine months. These figures reflect our efforts to enhance both operational efficiency and market responsiveness. To meet growing demand and maintain a competitive edge, we are expanding our manufacturing facilities, focusing on smart meters, switchgear and energy-efficient electrical solutions.
During nine months FY ’25, we introduced new products, including solar lighting options to complement our advanced metering portfolio and further align with the industry needs. I’m also pleased to highlight our recent NABL accreditation under ISO IC for our laboratory, which reinforces our commitment to high-quality R&D and rigorous testing capacities for wires and cables. In Smart Metering segment, HBL Electric continues to hold a leadership position.
As of 10th Feb 2025, our order book stands at over INR3,400 crores with more than 95% linked to metering and 99% for smart meters. This demonstrates our steady involvement in India’s journey towards grid modernization. Our diversity — our diversity across both B2B and B2C market continues to drive sustained growth. We now have over 900 authorized dealers and 83,000 retailers nationwide and we aim to surpass the 100,000 outlets by June 2025. This shows our intent to improve last-mile reach and ensure better product availability for consumer and institutions alike.
Moving forward, our strategic focus will include smart meter growth with 99% of our metering orders devoted to smart meters, we remain well-positioned for India’s advanced metering needs. Enhanced manufacturing scale, we are actively investing in-production capacity for our key product lines to keep pace with the rising demand while preserving the cost-efficiency through automation. Product expansion, beyond metering, we will continue strengthening our presence in switchgear, wire and cables, fans and lighting to capitalize on emerging opportunities.
Innovation and R&D continuous investment in automation and new technologies will enable us to provide cutting-edge solutions that reflect changing customer expectations. Distribution network, we remain committed to growing our retail footprint, which will further strengthen brand visibility and revenue expansion in both urban and rural markets. We believe these priorities, along with the proven execution capabilities will allow us to positively contribute to India’s infrastructure landscape in the years ahead. So thank you for your continued trust in HPL Electric. I now open your questions as we begin the Q&A session.
Questions and Answers:
Shankhini Saha
Thank you very much, 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 you can raise your hand. For desktop or laptop users, 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 will call on you. For mobile or tablet users, tap on the more dot button at the bottom-right of your screen, then select Raise hand from the menu. We will wait momentarily for the question queue to form. Our first question will be from the line of Viraj Mahadea. Viraj, your line is unmuted. Please go-ahead and ask your question.
Viraj Mahadevia
Hi, Gautam. Congratulations on the solid results. And given that you’re likely — likely to finish FY ’25 with roughly INR1,600 crores or the top-line, do you foresee a 40% to 50% growth in top-line over FY ’26 as the higher-priced smart metering order book kicks-in for execution?
Gautam Seth
Yeah. So we — so definitely, we will be looking at a good growth maybe if it’s — you said about 40 to 50, I think, but I think it’s going to be — I would say, we’ll probably give out the guidance by the end-of-the year as we see the executions picking-up. On a short-term basis, if you look at the Q4, we are looking at a much better execution and lifting by the AMISPs. Next year, we continue to see — in fact, next two years, we will continue to see a good amount of growth. Our order book right now covers the two to 2.5 year period of what we anticipate, plus more requirements are due to come from the AMI SPs as and when we are delivering the meters. So that is it.
But yes, I would say on a more conservatively basis, maybe it could be maybe a 30% or 25% to 30%, but I think by the end-of-the next quarter, we’ll be much more clear. In the current-period, in the last, in fact, two quarters, although our manufacturing capacities are fairly good now, we are able to churn out much more. But we have seen the — based on the pace of implementation by the AMI SPs, so certain you know maybe ground level challenges are there with the AMI SPs, which are getting sorted-out. So I would assume that by the mid of next year, the pace of executions will become much faster. Like we did see certain gap even in Maharashtra, but now again, you know the executions are at I would say, a fairly good level.
So overall, you know the growth is definitely going to be there. It is going to be a high double-digit growth. So whether it is 30% or 40 something, I think we can probably give a better guidance as we reach the end-of-the 4th-quarter.
Viraj Mahadevia
Understood. Thank you. My second question is regarding your gross margin. So the number-one player does the gross margins of about 40%. You are on-track for about 35% 35.5% for this year. Do you see the gross margins trending up closer towards 40% over the next two years with higher-margin smart meters again coming in?
Gautam Seth
I think when you are comparing because our revenues are purely based on the meter supply, the smart meter supply. And I guess where you’re comparing from, that includes the margins of the AMISP business as well. And even going beyond smart meter into other services, which are there for either in the software or the installation part. So I would say right now, we have seen a margin improvement.
Last two years, our EBIT margin on the smart meter is now almost around 16%. So I would say on an EBIT margin side, the smart meter would continue to have — that is sustainable at least in the near-future. We see that as a sustainable part. The gross margin of 35% is again a product mix of meters and the consumer and industrial. And already we have seen that from a near 50%, 50%, it’s almost moved to a 65% or 60% 40 kind of a ratio. So I don’t see that change so much immediately in the near-future. So — but because we are purely a metering company, we are purely a you know, like a switchgear or even on consumer and industrial.
We are mainly a product company which is supplying this thing. So I would say the margin improvements have been there. In this particular quarter, we have seen certain the consumer and industrial part, the margins came down mainly because of the fluctuations on the commodities and with probably the wire and cable and the industrials, which we are also showing going down. So I think there little bit the margin came down, but that’s more of a temporary thing. I think that would come back-in the future. But broadly, the gross margins from moving from 35% to 40, I don’t see that happen until a change is there. When you look at the revenue of smart meter already, we are seeing those and the margins and the higher price already that has kicked-in the last two, 3/4. So a major part has happened. And I think the future because since most of the orders are currently the smart meter orders only. So the future supply is going to be smart meter and we will work on that for sure.
Viraj Mahadevia
So thank you. I have more questions. I’ll come back-in the queue.
Gautam Seth
Yeah. Thank you.
Shankhini Saha
Thanks, Viraj, for your questions. Our next question will be from the line of Sahil Patani. Sahil, your line is unmuted. Please go-ahead and ask your question.
Sahil Patani
Hi, thanks for the opportunity and congrats on a good set of numbers. I wanted to understand that usually we are H2 heavy business. So could you explain why was there a revenue decline on a quarter-on-quarter basis?
Gautam Seth
Yeah. So mainly it’s because of the pickup of the smart meters. So although the orders are there, the schedules were also there for picking it up. But we did find that certain AMISPs because of a slightly probably a little delayed executions what they were having. So certain inventory has got — did get postponed from Q3, but hopefully it should be out in the Q4 going to them. So that helped it. Otherwise, we could have easily had maybe another INR40 crore, INR50 crores plus of sales happening in the Q3. So it’s mainly because of that. But again, whenever like we’ve been supplying to most of the AMISPs. So at — whenever new areas are there or new something, so there are always some challenges at the ground level and these are very common in while the executions are happening. So I think that kind of sales will get covered up.
Sahil Patani
Okay. Got it. And you see this trickling down into Q4, like you — have you — have you been — like since we are already in the middle of February, have you seen that coming through — coming through in this quarter?
Gautam Seth
Q4 should be better, but you know when we go towards March because there are good schedules up to March as well. So hopefully, if they get picked-up in March, then it’s good because many times on year-end, every corporate is very conscious of holding inventories, you know. So I just hope that if the schedules are being met, then we, I think should have a very good quarter, no doubt on that. But sometimes if they don’t see that the execution happening, they can always postpone it till first week of April. So that can cause a certain delay. But otherwise, overall, you know, in terms of production and in terms of our supplies and even the picking-up is fairly there. So — but these are all temporary phases of what can happen. So right now, when we look at it, we are looking at a good quarter right now based on the schedules given by the AMISPs.
Sahil Patani
Got it. Okay. Thanks for that. And my second question was that in your media release, you’ve mentioned that you’re scaling up manufacturing capabilities, so you’re doing some sort of capex. So is that — is this more like through internal accruals? And can you just explain what this capex is about?
Gautam Seth
Yeah. So in the — if you see in the last two years, a major part of the capex has been on the smart meter side, and we have enhanced our — the plastic manufacturing capabilities, then the electronic a complete new setup was put in. Then so wherever selectively we require the enhancement of production that is happening. Right now, we are investing into the automated manufacturing lines and testing this thing. So we already have four lines. So if you go on our social media, you’ll probably see that I think last month we opened our fourth automatic line. Two days back, we opened the first line for our subsidiary, the Himachal Energy for the metering. So these are automated lines, they will give us better outputs with lesser manpower, the quality will be better, the production gets much more enhanced. So these are — so these kind of capex initiatives are happening and so that will continue. So other than that, I think we still — right now, as we speak also, we have a very large capacity for the smart meter. And I think looking at even the next 12 or 15 months, even the peak demand, what would arise, we can cater to that.
Sahil Patani
Got it, got it. And so is this like you are doing this through internal accruals or you’re taking on some debt just
Gautam Seth
Mainly through internal — mainly through internal accruals, yes.
Sahil Patani
Okay. Okay. Got it. And just final question that since you opened up like the fans segment not a long-time ago, what kind of response are you seeing because we obviously have so many established players in the country and you have a lot of local manufacturers and that manufacture fans. So what kind of response are you seeing there?
Gautam Seth
So we’ve currently launched in the three areas. And I think for this particular summer, up to July, we will be present in maybe about 40% of the areas in the country. Our — right now, we are — we have a fairly good range. There are two, three factors what we have in mind. One, there has been a lot of change in the fan segment based on the government regulations for BLDC compliances, the star rating and the BIS — the ISI mark coming in. So with this, there is a lot of churn in the industry. The people are getting the testing done. We believe this will help the overall quality levels to be much better and the unorganized segment will diminish. And with BLDC coming in the electronic — the use of electronic and fans will definitely increase and that has been one of our big strengths since the last two decades. So these factors really push us to get into a new technology product. So the future is going to be BLDC. It is going to be the five-star rated fans.
Second, we already have a good distribution network. So currently, looking at our consumer portfolio where we have the MCB-DBs, switches, wires, lighting and now with fans. So we have five strong product categories, which can be pushed into every retail, every if you look at an house or a commercial establishment, anything that we have a bigger product basket. So I think combining these two, seeing a change in the industry, where we feel that you know the order of the day will change, the existing old you know companies will — you know the new ones will come in, it will give opportunity for the new ones to come in. That is how we are looking at it. And this is what we did in meters also in 1996 when from electromechanical when things change to electronics, that is when we enter the industry and there was a big churn the bigger players who were there for 20, 30 years, then they went out, lot of new players came in.
So I think with the change in technology, definitely there is a new opportunity and we are known as a very good technology player as a good-quality player. So overall, I’m sure in the next two years, we will set-up a niche for ourselves. And looking at the existing spread of dealer, retailers and our manpower and offices across the country, I’m sure we will — you should be able to pick-up this line in a good manner and complement it with our existing portfolio of consumer products.
Shankhini Saha
Thanks for your questions, Sahil. You can raise your hand again to rejoin the queue for any more follow-ups. Our next question will be from the line of Sandeep. Sandeep, your line is unmuted. Please go-ahead and ask your question.
Sandeep Mathivanan
Yeah. Good afternoon. Thanks for the opportunity and congratulations on good set of. So sir, I have one question regarding smart meter tenders. So how many smart meter tenders have you built for like in value terms? And what’s the value of orders that we have done so-far? Thank you.
Gautam Seth
Yeah. So we are not directly bidding as an AMI SP for the tenders, so already, I think I’m going by the public data what is available. I think almost 12 crore meters are already given out to the AMISPs. There are a couple of again, INR6, INR7 crores which are under evaluation. As I understand from the industry, for the next three, four months, not too many tenders are coming out. Our business is dependent on the orders which these AMI SPs win and then they give it out to the meter manufacturers. So we are not directly tendering with them. But today, because of our the quality and because of our size and the advantage we bring to the AMISP, I think we are supplying to most of them.
So as and when we are supplying to the fresh new orders will be coming out from these AMISPs. So we are not directly bidding on any immediate tender and — but still a lot of — as I said earlier also, a lot of orders are there right now with the AMISPs, which they need to give out to the meter manufacturers. So definitely, we stand an advantage to gain from that business coming in. Right now, on the pending orders, we have almost INR3,400 crores of orders, 95% of these are meter orders. And out-of-the meter orders, practically almost 100% now is the smart meter orders. So it’s a huge — well over INR3,000 crores of smart meter orders we are sitting on.
Sandeep Mathivanan
Okay, sir. Thank you.
Shankhini Saha
Thanks for your question. Our next question will be from the line of Pranjal. Pranjal, your line is unmuted. Please go-ahead and ask your question.
Pranjal Mukhija
Hi, am I audible?
Shankhini Saha
Yes, please go-ahead.
Pranjal Mukhija
Yeah, thank you for giving me this opportunity and congratulations on like a good set of numbers. So sir, I have a couple of questions. So the first question is, so I know like we have a yearly capacity of 1.1 crore meters. But I just wanted to understand like what is the current monthly run-rate of production and like how do we see this scaling up in the coming months given that the on-ground execution of meters is also picking-up? So just some clarity here.
Gautam Seth
Yes, so our capacity utilizations are nearly 70% to 80% of the capacity right now and but we can — but the way the orders will be coming in, we can go up to even 100 and even some of these are flexible capacities like we could — you know wherever the constraints are, we could work even 24 hours, work on three shifts and others. So in terms of that, we are still a — we have not seen the peak right now and which hopefully by first, second-quarter, we should be seeing the peak coming in with the more AMI SP is picking — picking-up much more. So of course, the — when we talk to them, the schedules are high, they have also got a lot of orders to be executed. But again, the ground level, you know, let’s say, when they’re implementing it, there must-have — there must be certain slowdowns, things challenges they must be facing. So little bit the schedules get pushed back here.
Pranjal Mukhija
Okay. And sir, the second question was around this investments that we’ve done on this automated automatic line. So I just wanted to understand like so what is the cost per-line and like generally what is the production capacity of a line — automated line versus, let’s say, a manual line, like what is the difference?
Gautam Seth
Yeah. So I’ll just — maybe the cost I will not be able to just say it here. But these are of course expensive lines. They — like it’s — you can imagine a single row of a machine, let’s say, extending up to 120 or 150 feet, you know, from the start, you put in the materials. And by the end-of-the line, you know the entire meter gets packed and it comes out. So there are various testing in terms of components and then in middle the assemblies happen, then again, you know the final testing, so everything like it’s a single process from start to finish what happens.
So earlier, so definitely in terms of manpower, there is a good maybe a 30% plus saving on the manpower cost also. This gives us consistency, the output is much better. And so each of these lines, so as we are yet to get much more lines. So eventually the entire production will be only through these automated — semi-automated lines where certain manpower is required, of course, but also the machine does a lot of the work on testing, plus the entire data is well captured in — in the system through the software. So it gives us in future in terms of you know, looking at the warranty or in case of any query or failure, which may come up maybe even after five, seven years. So we at least go back, we have a traceability on a lot of things. And these follow the in the Industry 4.0, you know things like that. So there’s a lot of automation, IoT things built-up in this whole line. So definitely the product which comes out through this, we will be much better.
Pranjal Mukhija
And sir, like on an estimate basis like generally, I wanted to understand like what would be the production capability difference of let’s say, with an automated line versus a manual line, like I just wanted to understand.
Gautam Seth
Yeah. So one thing. Right now the production what we were achieving earlier, we achieved the same thing, but with lesser manpower, that’s what I’m saying. So like let’s say if you are looking at let’s say, 1 million meters per month. So we can do that manually. We can do that through these lines. Only thing we are using lesser resources while we do this. That is what I’m saying. So the manpower cost should come down, the workers this thing, plus with lesser manual intervention, definitely the product becomes much better. And then there is traceability and there is full accountability and data capturing happening in this process.
Pranjal Mukhija
And we are saving time as well?
Gautam Seth
Yes, definitely. I think in eight to 10 minutes, one meter starts from one end to the other end. So definitely that helps, plus it — the production areas are much more better organized now because there is no — at end of every stage, the materials used to be kept like it moves from one to another, then it moves to the next-stage. Now there is a free flow, it moves in one direction on the conveyor tests are happening and by the time it comes out, it is packed. So I think that’s the future way of manufacturing the smart meters.
Shankhini Saha
Thanks for your questions, Pranjab. You can raise your hand again to rejoin the queue to ask any more follow-ups. Our next question will be from the line of VP Rajesh. Rajesh, your line is unmuted. Please go-ahead and ask your question.
V.P. Rajesh
Hi, thanks for the opportunity. Most of my questions have been answered just on the margin side, given the commentary you have articulated on the cost-savings and on the growth side. What kind of EBITDA margin can expect over the next couple of years?
Gautam Seth
Yeah. No, as a company, we are doing about 14% EBITDA margin. Right. And internally, when you break-down the smart meter is around 16% and the other one is at 10% to 11%, the consumer and industrial. So I would say in smart meter, right now, the 15% 16% is sustainable, yes. But — but now the more the product mix changes and tilts towards smart meter, yes, the overall EBITDA will change to that part. And in Consumer and industrial, like earlier, we were like the lighting for about 1.5 years, we did face issues of the sales coming down, the unit costs coming, the prices really coming down. Now we did see some fluctuations. But overall, we also endeavor to bring the EBIT to at least in 11% or going up to even 12%, that is what our endeavor is to like this. Overall, to answer your question, I think we are around 14% if we — because compared to a lot of our peers, if you see even on the consumer side and others, our EBITDA margin is fairly good. So I would say that is a sustainable level. So I don’t see it going up drastically. Of course, meter has a much higher-margin. So if it really tilts and if, let’s say, suddenly the delivery schedules are you people really want meters, which we can of course give that will shift and increase the margins to some extent. In terms of if you look at the other costs which are there, the other expenses or — so we have been working to you know, bring down those costs, which I think even in this quarter, we have been able to keep it at a good level despite the increases in the revenue. But then there has been a lot of investment on the manpower side where we have strengthened the R&D even in the switchgear part, the meter, of course, has a very strong R&D. And so there has been certain investments in that. Now with more automations happening even in the switchgear side, even in the things, so definitely, we should get-in the next one to two years saving on the cost — on the manpower side as well.
V.P. Rajesh
Got it. Just a follow up. On the metering side, do you think the margin can go to-high teens from currently 16% that you talked about? Is that at all possible with the volumes going up and your capacity utilization increasing and using the semi-autonomous machines?
Gautam Seth
Yeah. So theoretically, what you’re saying, I would say yes is the answer because we are working on all of it, like automations we are working, we already have a visibility of the revenue. And so we are working out on the — so it becomes easy for us to plan, work-out on the — to get a better rates from the suppliers to bring down the bill of material cost. So those efforts are anyway happening. But on the other side, you have to see that the exchange rates have gone up. So some of the commodities which are there, which are like electronics is all coming from outside. India doesn’t make them or even the polycarbonate. So those — the exchange rates also have an impact on those costs. So that is one part which is there. Second is that the overall — you know the industry is competitive and we’ve been saying it for last two years also that whatever rates we are selling at, definitely the repeat orders, there will be competition, people — newer players are coming in, even the — the customers are also becoming much more wiser, they also understand they are also — so certain rate pressures and competitive pressures will also be there. So our endeavor is that even if — while probably if the rates are coming down or the exchange rates are going up, at least we should be able to maintain the same margin because of our competitive edge, what we have, we have the visibility on the revenue. So it’s like this year. But our aim is definitely to increase it even further from here. But then you have to keep in mind the macro — the scenarios also.
V.P. Rajesh
That’s very helpful. Thank you and all the best.
Shankhini Saha
Thanks for your questions, Rajesh. Our next question will be from the line of Shah Janesh. Shah, your line is unmuted. Please go-ahead and ask your questions.
Janish Shah
Yeah. Thank you, sir, for giving an opportunity. I have few questions, especially on the margin front. Basically, I think earlier con — earlier con-calls, you mentioned that the contract generally you have is a fixed-price contract and you need to execute it. A few questions around is how much is an import component you have right now and especially you need to import it from China because that’s something where the government has been very, very watchful about in the kind of a dependence, which many industries, including yours is having. So if you’re — if you can give your comments on that as to how we are going to reduce your dependence and the rupee depreciation generally can have how much impact on your cost? That is one part. Second, you mentioned about the capex, especially on the automation and capacity expansion. I think you also mentioned in earlier communication that you want to increase your capacity with cables and wires and that’s where the growth probably is much — I mean the visibility or probably the growth potential is much bigger. And if you can just share your view with that as well? Third is on the working capital side, I think you’ve alluded earlier that as the share of the smart meters or supply to AMIC increase, that will also result into a kind of a decline in the working capital. If you usually had the number of working capital days probably will come down, probably your view on that as how is this going to pan-out for next couple of years? And associated with it is your debt level, how are you going to — how are you seeing your debt level panning out for next couple of years? And my last question generally is on — right now, I think there is too much dependence on the domestic opportunity, which is equally, I mean, very large. And are you looking at export opportunities as well because over a period of time, how are you going to diversify yourself in a metering business? That would be helpful. Thank you, sir.
Gautam Seth
Yeah, sure. So I’ll answer all the five of your questions. So first thing, I’ll just clarify that we don’t import from China. So we are very well backward integrated in our smart meters. We probably do all the engineering plastic, the electronic PCBs, all — and everything probably we do in-house. Only thing you know, India as a country is — does not have electronic manufacturing. So everybody making electronics is dependent on international markets for importing the ICs and the active and passive components. So we do that and there are — and these are all from global majors — major players, many of them having their offices in Singapore or US or you know wherever. So that’s where we import our electronics from. The polycarbonate also comes from outside India because India doesn’t have the polycarbonate manufacturing other than this and these are well within the limits prescribed by the government. So they have a ratio that what should be the import and other things. And the company is already moving into — going even beyond that going into manufacturing certain components which are imported. So right now, everyone is importing them. So we are looking to get into those also. So our import dependence on the smart meter is very minimum, only need-based looking at the electronics and the polycarbonate.
Now coming to the expansion of — on the — the capex on the wire and cable, we — because this has been a segment which has been now growing for us. We have seen almost a 25% growth in the first-nine months of the current year. Last two years also has seen a growth. Here the growth is coming in from all the three major segments like the retail part, we’ve been seeing a good growth. The building segment, that part also we have been seeing a growth and the projects infrastrument and the telecom segment, which we cater to certain specialty cables are also there. So we cater to all of them. So we’ve been seeing a fairly good growth despite the commodity fluctuations and other things. But so here we have been looking to add our range with the LT power and the control cables. Of course, it’s still on the drawing board things. We may need to have a formal approval, but this is something which is a very natural progression for us and our customers also are looking to have this. So certain works are going on in this and we will update you as and when the — they are formally structured and the whole thing is confirmed. But yes, we are upbeat on the wire and cable segment. We feel that the next two to three years, we can really grow a multifold in this segment, the way we’ve been growing in the smart meter segment.
Now coming to the working capital cycle, if you see the last two quarters, in absolute numbers, the interest costs have come down. And this is — so that is one thing. In terms of our net working capital, I think since last two quarters, in the six months, there is a reduction by almost INR54 crores. The debtor number of days for the company have reduced by 30 days. Of course, it’s more due to the smart meter, you know, the supply is coming — going to the AMISPs, unlike to the utilities in the earlier one and with a fixed period payments coming in. So I think definitely there is some improvement. I would say maybe in the next two to 3/4 once the older outstanding of the utilities are over and other things, we definitely will see a much better working capital cycle coming in. The debt-equity now is at 0.69 this thing. So it’s again improved in that.
So overall, if you see the interest cost is down, of course, we’ve had a rating announcement earlier on that. And now as we go-forward, at least this is my personal, I feel that in the next 18 months, again, the overall macro-environment where the interest cost would come down, RBI is already indicating that. So that benefit would come further to what has already happened. So — but our interest costs have come down definitely. Our absolute numbers of interest rates come down. Working capital number of days, working capital, net working capital has also come down. So I think there is definitely some improvement in that part of it.
Now coming to your last question on the focus on our dependence on the domestic market for the smart meter and that we are — whether we are exploring the export market. So I think right now, the way we look at it, in terms of technology, in terms of the manufacturing capability, we have the product and the resources to go anywhere in the world and sell. So — and I think earlier also if you look at the last two decades, we have studied the international markets, we have studied the China market and the Indian market. Indian meter industry has been quite ahead of — in terms of volume, I think it is the second-largest. But in terms of technology also, it’s been pretty advanced through the other countries because of the features like anti-tamper features or other things. Now the smart meter what we have and which is spec by the government is fairly a high-technology one. I have said it many times that this rollout of smart meter is perhaps the largest in the world in exercise like this. So right now, as HPL, we — the next two years, we will be probably more focused or we will continue our focus on the domestic market because that is where the action is, huge volumes are there.
We ourselves are sitting on big orders, the execution is the key. And I would say we will not spoil our focus on that. But nevertheless, even as late as last week, because I was in Dubai where we did get inquiries. So our R&D is already working on developing meters, trying to get the — you know, the certifications done for the international market and these certifications typically take even as much as even 18 to 24 months. So certain work is underway already on that. We have explored tenders even in the neighboring countries in like Nepal or Bangladesh and other countries. So I think the future for us post the next two, three years where a lot of meters would go, it gives us a big experience. You know going-forward, definitely the export market would become much more relevant for us. And that is when a lot of countries would be going-in for the smart meter and with us having a very strong experience and the product and a tri-tested product and so that would give us an advantage going into those markets. But that’s how I would say it plays out.
Yes, international export markets are going to be very relevant. We have already started some work, but it’s still in the — it’s in the background. You will not probably see it. But hopefully, by the time we are looking to look at those markets, so we have the product and the certifications ready to go in that — going to those markets.
Shankhini Saha
Thanks, Gautam, and thanks for your question, Janish. You can keep your hand raised to ask any more follow ups and you’ll be added to the queue. Our next question will be from the line of Chinmai Kabra. your line is unmuted. Please go-ahead and ask your question.
Chinmay Kabra
Yeah. Hi, sir. So just wanted to understand that you previously mentioned that there were certain ground-level challenges that you were facing in the state of Maharashtra — Maharashtra. So just wanted to — I mean if you could just elaborate on them, what were the challenges and what were the resolutions to the same?
Gautam Seth
Yeah. So no. So these are — I think it’s picked a little out of context. It’s not — the — I think all are aware, it’s a common knowledge and it was in the news as well that the smart meter rollout was slowed down and changed in Maharashtra. So these challenges are faced by the AMISPs and not us because we are only supplying the meters to the AMISPs and they are the ones who are actually installing them. So right now, again, I think post the new government and other things, the rollouts have started resumed back. So I think that is it. So it’s — so whenever we look at these type of rollouts across the country, so certain local level challenges, this of course, may could be more concerning the government or the government policy, but even otherwise, getting people to — you know, while the changing is — the replacements are happening. So there are challenges at the ground level in terms of getting — you sometimes the datas are not correct or sometimes the requisite permissions are not happening, but these are always there in anything, but these are faced by the AMISPs, not by us directly. So we have nothing to do with them. We just supply to the based on their schedules here.
Chinmay Kabra
Understood, sir. My next question was, so just wanted to understand in terms of the raw-material sourcing. From where do we source our PCBs and do we mount the electric components of them on them at our production facilities or are they already — like is it a raw PCV that we take or is it already mounted with electrical components and that is being sourced by us?
Gautam Seth
No, we do the mounting ourselves. In fact, we do the mounting since 1996, when we started the electronic meters, we were always doing the PCB population ourselves, you know. And we just buy the Bayer PCB and the components, of course, come in from imported sources because India doesn’t make them. But we’ve always been doing this. I think now for almost 29 years.
Chinmay Kabra
Understood, sir. My last question would be, since we are a contractor to the AMISP, do we ever experience any pricing pressure from the AMISP since they have relatively multiple options in terms of whom they can approach to manufacture the smart meters or since we are just a — I mean, an EPC player on a contractor you can say. So do we ever face any pricing pressures from their end?
Gautam Seth
No, I would, you know, just rephrase the word contractor to make sure. No, I just know. No, Nachin just you know, the — if you look at the entire the smart meter, what we are talking about and the whole thing, the main technology, the heart of the entire thing is the smart meter. So I think today, despite — of course, this is my personal opinion, but despite the new players who are coming in and other things, today, the biggest challenge, I believe for the AMISP is today to get a meter, which is consistent, which actually works for 10 years and getting it from a meter manufacturer who has the experience of doing it, who has a reliability. So I think that still remains the top ask by any AMISP. So obviously, the — everybody would like a competitive pricing, maybe they compare it with newcomers. But when we look at the competition, although there might be maybe 10, 15 new players maybe coming in, I’m not sure on the number, but still, I would say it’s a very — there are very few sources right now who are still giving those meters, which actually work at that level. Now AMI SPs are subjected to SLA breaches, which are very-high. Their money is dependent upon meeting those SLA breaches. So for them to probably buy a meter for maybe INR400, INR500 lesser or buying it from a new source, frankly becomes a high-risk for them. So this is how I look at it. And that is the strength we are also playing on. So obviously, everybody will — when they are renegotiating or they’re rebuying the next lots, the pricing pressures will be there because it’s a competitive world and why not? But still, I think the — we play on our advantages and I think that will, I think really see us grow and will help us to maintain our margins in the future.
Chinmay Kabra
Yeah. Thank you, sir. Those were my questions. Thank you very much.
Shankhini Saha
Thank you. Thanks for your questions,. Our next question will be from the line of Ashwini Sharma., your line is unmuted. Please go-ahead and ask your question
Ashwini Sharma
Yeah, sir. Thanks for the opportunity.
Shankhini Saha
Ashwini, you are a little soft. Is it possible to come closer to your device, please?
Ashwini Sharma
Is it fine now?
Shankhini Saha
Not exactly. Can you move slightly closer, please? Okay, please go-ahead., Gautam, is he audible?
Gautam Seth
Yes, yes. We can go-ahead.
Shankhini Saha
Yeah, please go-ahead,.
Ashwini Sharma
Yeah. So most of my questions have been answered. Just one question. I wanted to understand what would be our strategy to improve our return ratios, especially ROE profile. Is there a strategy which is companies working on to improve our overall return ratio side yeah. That was no question.
Gautam Seth
Yeah. So yeah, I think we have seen certain improvements in the last three years on the ROCE also and EBIT on the ROE. Eventually, we — we are looking at improving our capacity utilizations. I think our — right now, if you see in the last three years, our revenues have gone up, our margins have improved, certain improvement in the balance sheet ratios are there. So we are well aware that in future, eventually to create a better shareholder value, we need to work on these type of ratios. So there is a lot of working which is going into that to make our better utilization of our assets a better way to grow. And so I think the work is happening right now. Maybe I cannot just spell out each and everything, but yes, looking at the next two years, our priority remains that on the improvement of these ratios as well.
In the near-future, in the next two years, we do see a good growth in revenue. We do see orders are already there. We are seeing you know the work is happening to improve each and every, you know the product verticals so that a better capacity utilizations are there. Cost-wise, we are very conscious of even reducing on the overall — the overhead costs like that. So somewhere, I think we should be able to as we improve the margins, as we improve our better on the same capacities, we are improving our capacity utilizations, which we have drastically seen improvement in smart meters. We have seen in the wire and cable, also in the domestic switchgear. I’m sure all our — by next year, all the divisions would be really having a much, much better capacity utilizations going-forward and that will help us to improve these ratios as well.
Ashwini Sharma
Great understood, sir. Thank you very much.
Gautam Seth
Yeah. Thank you, Ashwini.
Shankhini Saha
Thanks for your questions, Ashwini. Our next question will be a follow-up from Viraj Mahadea. Viraj, your line is unmuted. Please go-ahead and ask your follow-up question.
Viraj Mahadevia
Hi, Gotam. Just to pick-up on the point on employee costs. As you mentioned, there’s a marked a reduction in employee costs in the last two quarters, plus you’ve talked about increasing automation going forward. So can we assume the FY ’26 overall employee cost is probably the peak employee cost for the business in the next few years. So this is not going to increase meaningfully as you debottleneck or add capacities for the next two years?
Gautam Seth
No, I’ll say — look, in the last two quarters, no, our employee costs have been going up in the nine months. You know, they have not come down. I think you’re confusing it probably with the interest cost I talked about. But anyway, I’ll just put the perspective. Yeah. The costs have gone up on two things. One, the general — the production has increased, so that is happening. Second, there is certain investments in key areas on the — especially on the smart meter side, plus enhancement of the R&D facilities also covering the switchgear and other products. So that has been an investment. Typically in R&D manpower investment is for two to three years. That is the way it is. But we are confident that the increased turnover and the margin will cover those costs, but that will be a longer-term — it’s a long-term play where we see the advantages coming.
Viraj Mahadevia
Now have you done all the hiring that you wanted to?
Gautam Seth
I think most of it. Like if you look at the smart meter, know, let’s say, smart meter covering all the areas, I think more or less we have proper professionals covering all the areas. So I would say, just to put it, maybe at the peak hiring, yes, I would say we are covering on that. Of course, they argue normally on performance appraisals for increased. That’s fine. That would continue. Now, if you look at the manpower cost of the people who are actually making the meter — assembling the meter, testing the meter, that would come down. And also the cost would come down based on the semi-automated lines what we are putting up. So that will really help. And that is happening even in the switchgear part where certain automated machines have come and sometimes a single machine is replacing even 10, 20 workers. And so the payout the ROI for us to recover from these machines is just about three to four years, which is very good in a capex. So those kind of things are happening. But so I would say that is the way it is. So we are conscious of the manpower cost because that every year increases, even if you are stable in your manpower, but the automation will help. So it will help us in the manpower cost is one. Second, it gives us a consistency of manufacturing and with a lesser time. So that also understood.
Viraj Mahadevia
Understood. My second question is regarding the finance cost. You already mentioned — sorry, and I did confuse the two lines. So you already mentioned finance cost has come down in the last two quarters. Now given your improved rating-based on shrinking working capital cycle, when profitability, good order book, are you likely to see a reduced borrowing cost from your lenders?
Gautam Seth
No, we have already seen that. If you see our borrowing cost and that’s already kicked-in? Yeah, that is — yeah, that’s been — so there are two things, the way I look at it. The borrowing cost has already come down in the last one to two quarters, the — that is happening. On, let’s say, on the same borrowing, the borrowing costs are coming down. We are again now looking to — we feel the way the performance is going, maybe in future, we are working towards maybe looking at getting a better rating in future as well. So that work is also on so that we can further bring down the cost. Now coupled with this, the RBI has just also indicated even the global — the way it is that the interest cost will be coming down. And once that happens, then even we also get some benefit out of that, because last three, four years post COVID, we have only seen the macroeconomic — the interest cost going up. And so I think definitely will stand to benefit in that.
Shankhini Saha
Thanks for your follow-up questions, Viraj. We’ll be in touch if you have any more questions. Our next follow-up will be from Pranchal. Pranjal, your line is unmuted. Please go-ahead and ask your follow-up question.
Pranjal Mukhija
Hi, hi, sir. Thank you for this opportunity. So sir, I see that our company is also presenting at. So I just wanted to like understand if we are presenting any — like if we’re showcasing any new products on the energy management side some details on that?
Gautam Seth
Yeah. I didn’t mention, but I think in the next two days, we are in Lecrama and we have a I would say very well-placed product offering what we’ll be showing. You will find new products in practically every segment. So there are new products in metering, in switchgear, there are a lot of new products, lighting, solar, wire cable, fans. So everywhere there are energy-efficient products, there are new products, new solutions, a lot of them even switch gears with electronic embedded in them even with communications. So there is a lot of new products which are coming out. And instead, I would you know all the listeners who are there, anybody who is in Delhi or if you can make an effort to come around, it will be worth seeing the industry and seeing HPL Electric our product offering under a single roof. So there are a lot of them, I would say they are very exciting products and definitely, if one gets a chance, one should visit here.
Pranjal Mukhija
Great, sir. And sir, secondly, I have a small request with the management. Sir, if possible, like could the team organize a plant visit to the Gurgaon smart meter facility if possible.
Gautam Seth
No, right now, you know earlier we used to allow the visits to the — to the meter plant, but you know of late since last one year, due to competitive reasons, we are not allowing anybody outside — anybody for that matter to come in and see. It’s because you’re aware the orders are there, the next two, three years are very crucial in terms of having the competitive edge and a lot of new players are looking to come in. So little bit, I think those restrictions we have put mainly just because of a competitive reason, but if you come around, we can show you — because we have seven manufacturing units. So we can show you certain part of that and-or maybe you know, even if you are in the factory. So maybe just — it will be very restricted, but to let people go on the shop floor and the thing is strict no right now from us. So it’s a — it’s a directive we have given it across anybody. Nobody can enter even with any authorization right now. So that’s how we have kept it just purely from a competitive point-of-view.
Pranjal Mukhija
Okay, sir. Thank you.
Shankhini Saha
Thanks for your follow-up, Ranjal. Our last question for this call and last follow-up will be from the line of Shah Janesh. Janish, please ask your question. Your line is unmuted.
Janish Shah
Yeah. Thank you. Now you mentioned about I think just to get some clarity, I mean earlier on the debt side, you said the cost of debt is definitely going to come. But in terms of absolute debt level, do you see that coming down in next couple of years? That is one question. Second, I think you also alluded to the ground level execution challenges by AMISP. Given now that we are supplying to everyone, I mean most of the AMIPs and if we can get some understanding as to where our order book exposure is in terms of the states which are exposed to because I could — when we — what we hear or what we read is that even though the challenges are there, but in different geographies, the level of challenges are very different and some are still going on, some are still facing issues. So if you can get some understanding with that, that will be helpful. And the third one is on the cables and I was saying C&I business basically and consumer and industrial business. How is — I mean, you have been restructuring this business for last couple of years. We have been expanding your distribution network, product introductions have been happening. The short-term challenges are definitely there on the margins. But when we now look at the runway for this business for next couple of years, how do you see this business shaping up? Because I think there is a lot more opportunity to unlock value in this business, which gets separate under this entire smart meter story. And if you can just help us understand the value-creation part in that business? Thank you.
Gautam Seth
Sorry, I just missed out your second question. If you can just put it on, then I’ll answer all the three. The first one was on the debt. Yeah, on the second question was on a state exposure. With regard to your order book yeah, yeah. Okay. Okay. Yeah. So I’ll just give you a point-to-point this thing. So on debt, if you see, our debt from April till now in the nine months is stable, there is no increase in debt. In fact, if you look at the June levels, we have come down in our debt since the last two quarters. So going-forward, because we are seeing a good growth in smart meter in the C&I segment as well. So maybe to bring down the debt in absolute numbers may not happen, but from a ratio perspective, in terms of net working capital or let’s say, the sales going up and the debt not going up in the proportionate manner, that definitely should happen. That is the way it is. Our debt-equity, that’s why has come down to now 0.69, hopefully, it will even better further.
Now on the state-wise, we are supplying to the AMISPs. So probably I may not be able to say that, but some of these AMI SPs are operating in various geographies. Of course, the schedules and orders are all geography are specific utility-based, but probably I’ll need to refer to my team and then I can revert back on what are the challenges. But I think when you look at it, the challenges are pretty — of course, all have different challenges, but some of them are pretty common that like in terms of execution, because eventually they are interacting with the utilities and getting the change done and the transition from a normal meter to the smart meter is a very big exercise undertaken by the government. So definitely, it was anticipated that there will be ground level challenges. So state-wise, I probably cannot comment on that because I would be — we would be more looking at the way the AMISP is functioning and that was more of an internal part. But if you need any information through IR, I can then probably compile it and then have it say. Now when you look at the Consumer and Industrial segment, we are quite upbeat on that. In fact, even if you look at the last two, three years, last year also, other than lighting, the other segments did pretty well. So if you look at the — the switchgear, the wire and cable did pretty well last year as well. Lighting was facing a certain change which happened across the industry. So we did lose out some sales because of the value erosion happening. So that impacted the overall C&I. But otherwise, internally, we did see a good growth. This year also when you look at the wire and cable in nine months growing 25%, the domestic switch growing at 21%. So here also, again, the lighting has also in fact recovered. In fact, last quarter has been a first-time growth, I would say after seven to eight quarters despite the values coming down already, although they have stabilized, but to achieve the same value, one has to do a much larger volume for that. Only the industrial switchgear, we have seen a slowdown, which again I believe is temporary. And by the first-quarter, that also will be back.
Overall, the next two, three years we see this segment also, you are very right, you know sometimes this gets shadowed away on the other products. But this segment itself is, if you look at our manufacturing capability, our R&D, the new products which are there and it will be visible even in. This again has a huge potential and we are very well-placed in that. And I think if only if all the segments fire up in this, definitely we will start seeing a good growth coming in. But right now, the way it looks like, the switchgear, the wire and cable are set to have a good growth even in the next year. Lighting also, I’m pretty confident that with a lower base, there should be a double-digit growth going-forward for the next year. And with fans coming in, we’ve seen an initial good response, but it will take about 18 months for us to cover pan-India to really exploit the potential what we have and the existing channels, what are there. They have also been demanding for the these type of products. So that should help us overall.
Shankhini Saha
Thanks for your follow-up question, Janish. And if you have any more follow-ups, if anyone has any more follow-ups, you can write to us at Ticketson and we’ll make sure they answer to your satisfaction. That concludes our Q&A session. As soon as this call finishes, you’ll be directed to a survey for your feedback. Kindly take a few short moments to participate in this quick survey. I’ll now hand over to Gautam for closing comments. Over to you, Gautam.
Gautam Seth
Yeah. Thank you everyone for your time and continued support. We appreciate the confidence you have in HPL Electric and we look-forward for updating you on our progress in the quarters ahead. So thank you, everyone. Thank you,, and have a great day-ahead. Thank you.
Shankhini Saha
Thank you. On behalf of HPL, that concludes our earnings webinar for Q3 and nine months FY ’25. Thank you for joining us and you may now disconnect your lines.