Schneider Electric Infrastructure Limited (NSE:SCHNEIDER) Q2 FY23 Earnings Concall dated Nov. 04, 2022
Corporate Participants:
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Mayank Holani — Chief Financial Officer
Analysts:
Harshit Kapadia — Elara Securities — Analyst
Prajesh Kapari — Accurate Advisors. — Analyst
Raj Harishi — CTR — Analyst
Viraj Mithani — Jupiter Financial. — Analyst
Nikhil Jain — Galaxy International — Analyst
Sanjeev Zarbade — Stream Meter Investment. — Analyst
Sanjay Satapathy — Ampersand Chemical. . — Analyst
Manish Goyal — Enam Holdings — Analyst
Jatinder Agarwal — Legal Investor — Analyst
Rajesh Kapari — Enterprises. — Analyst
Mithani — Capital Financial. — Analyst
Bevan Shah — Alpa Advisors. — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Schneider Electric’s Q2 FY ’23 Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshit Kapadia from Elara Securities Private Limited. Thank you, over to you, sir.
Harshit Kapadia — Elara Securities — Analyst
Thank you Chris. A very good evening to everyone. On behalf of Elara Securities, we welcome you all for the Q2 FY ’23 and H1 FY ’23 conference call of Schneider Electric Infrastructure Limited. I take this opportunity to welcome the management of Schneider Electric Infra represented by Mr. Sanjay Sudhakaran, Managing Director; Mr. Mayank Holani, Chief Financial Officer; and Mr. Vineet Jain, Head, Investor Relations. We will begin the call with a brief overview by the management, followed by a Q&A session.
I’ll now hand over the call to Mr. Sudhakaran for his opening remarks. Over to you, sir.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Good afternoon, everybody. This is Sanjay Sudhakaran, Managing Director of your company, Schneider Electric Infrastructure Limited. I hope all of you are doing well.. And we will go straight to page number three, where we have a small lens about the economic outlook for India. As you can see, India has been performing pretty well during these turbulent times. I think it’s one of the most attractive economies, as you can see globally probably because India has managed to insulate itself from the energy crisis, which many countries like in Europe are facing. And at the same time, the prudent physical policies have also paid off in terms of a stable economy.
We feel that from the overall macroeconomic statistics that India will continue to have a good run going forward. However, these things are a little bit predictable — unpredictable given the global economic situation that we are facing. There are talks of global recession in the U.S., there are talks of uncertainty in Europe. You’ve heard about the U.K. issue and things like that. And we need to be cautious about the fact that one cannot be decoupled from the world economy in general. So I think we should look forward to the next few quarters. with cautious optimism. We go over to the next slide, which is page number four, taking off from the macroeconomic scenario into what it means for us for our core segments that we operate in. Power and Grid was looking to be a very promising story with the government-linked incentives towards modernizing the grid, etc.
But there seems to be a little bit of a slowdown in the actual deployment of funds that one would expect into this segment given the mandate that was given to more or less privatized the power hundred utilities and also to modernize the grid in that process. However, we feel that even with the time lag, there will be investments flowing into this sector in the next few quarters. So we are optimistic about the segment, though there might not be an upside that we have anticipated it to have. On the mobility side, I think investments in infrastructure continue to especially on the metros that is urban transportation, tunnel projects as well as new airport infrastructure that are coming up. On the minerals, mining and metals, I think the story has been pretty good so far. However, we can expect some amount of a slowdown in the steel sector, primarily because of the incentives to the sector that were provided in terms of higher duties on exports out of the country.
There is consolidation also happening as you would have read about with wholesale exiting India and Adani Group taking over. However, there that seems to be sufficient capex that is flowing into the cement industry. So we expect cement to grow for some more quarters as we go forward. Industry and buildings has been kind of muted, especially due to the coal. But we feel that investments in this area will come back strongly and vacancy rates of falling across the country in terms of commercial buildings. People are coming back to offices. So we would expect a rebound in the building industry as well.
Driven by the data loss, I think the cloud and service providers or the data center industry continues to flourish with more and more multinational players coming into the country. And also, we see good amount of interest among some Indian real estate developers also to capitalize on their land bank and their ability to develop real estate pretty quickly. So we see many joint ventures real estate companies going into the cloud and service provider segment. So we expect this market to grow as well. So overall, I think for our core segments, the outlook is positive. Just to give you some glimpse of the kind of orders that we have been bagging, I think we’ve got a pretty large order from Bhutan, where we are helping the country with its electrification needs, this is a repeat order, something of the similar magnitude, which we had last year.
We continue to serve the customers in a very engaged manner despite all the challenges of supply team as well as COVID, and we have managed to get a repeat order for 33 kV and 11 kV package substations. A large order from a global data center customer for 33 kV GIS package. This is the second order, a repeat order from the same customer and quick succession. I think our strengths here have primarily been faster deliveries and making sure that we execute the projects flawlessly so positive news here as we. On minerals, mining and metals, we have a large order from the steel industry, a fully connected product with integration with software. So an intelligent solution in line with our strategy to digitize more and to be able to deploy more and more EcoStruxure solutions with customers. We go to the next slide, which is Industry & Buildings.
This is for a government establishment building, operating good infrastructure. And again, in terms of digital and connected where we have transformers, HD panels, ring main units and package substations, all connected products, and we will be able to leverage cloud analytics here as well as we are creating a road map for that as well. So this is a good win in the building sector. that we can be proud of. Another area which is of concern keen interest to us, I would say, is a centralized building management where we continue to deploy our software assets like advisory layers on clouds to be able to move buildings from being managed, building by building into more of a central command center. This will help organizations and the building industry to move towards their objective of net zero, being able to manage their assets proactively with predictive maintenance, etc.
So this is a huge step forward with one of the IT companies that we have done in deploying our asset advisory solutions onto other solutions as well from the Schneider basket, including building management and connected products. We’ll go to Slide number 10, which is on — again on services. Here is an acquisition that we Schneider mail globally, which is for a transformer analytics company. It’s not a transformer manufacturing company. It’s a purely analytics company with sensors and software, which will help customers predict the life cycle of their transformer assets, be able to take proactive actions and extend the life of the product as well as make sure that the transformers perform to better uptime and efficiency. So this is a global acquisition, which we are actively working in India for pilots, etc, to be able to deploy quickly in the country. Let’s go to Slide number 11. I think we are at different maturity levels as far as our accelerating digital is concerned.
This includes digitizing our products, being able to connect it to cloud and being able to provide a capex to opex conversion. So we see that the power and grid sector continues to be highly regulated because it’s a national infrastructure. So there are restrictions on connecting to cloud. So our deployment has been slow here, but we have many other edge control solutions, which need not be connected to cloud, so which we are deploying with these customers here. On the transportation side, we are working with key metro customers to be able to provide them with more and more digitized solutions. We have spoken about certain reference projects that we have won on the steel side, minerals, mining and meters where we are digitizing the entire powertrain.
Of course, industry buildings and cloud and service providers also remain our focus as far as the division is concerned. So EcoStruxure Asset Advisor, which is a primary software layer, which is on the cloud which is what provides us with the service stickiness and life cycle revenues with our customers is profitable and accretive to the company as well as helps our customers in bringing down their operational cost and better efficiency and asset productivity is the key thing that we are trying to promote and provide in the marketplace. Going to Slide 12. All these initiatives on the digital side should be able to take up our revenues in terms of maintenance and digital contracts, which we call as recurring revenues, so recurring revenues, we expect to move from 12% in 2020 to around 22% in 2025. This is key to executing our strategy on digitization.
This will enable us to be associated with our customers across the life cycle of the product. It will provide us with better stickiness in terms of customer relationship and also pull-through business that will come through from the customer in terms of space, modernization and other green tried projects, which will follow to a satisfied customer base. Going on to Slide 13. What we want to do here is that on services, we want to reinforce the core that is being able to get more and more service contracts modernization projects and spare parts with special emphasis on maintenance contracts, we also want to accelerate the growth on digital and consulting services, track our installed base more carefully and also grow our business to partners to be able to cater to a larger geography within India. So I think these are the six strategic pillars that we are trying to work on, on the services side. This has the fundamental for our pursuing digitization and cloud services to customers. Your company has been pretty much active in the mind share with key customers. We have held a number of events with key accounts with the Ministry of Civil
Aviation, many power and grid customers such as Ministry of Power, Ministry of Energy Department in Karnataka, strong even in Katmandu, event in Dhaka and also a number of events with the airport infrastructure that is coming up with GMR, etc, we have been kind of very active in our thought leadership, trying to build a good positioning for ourselves with our innovative solutions and what we can do to decarbonize can digitize the powertrain as we go forward.
So with this, I hand over to Mayank Holani, your CFO, to take us through the financial update.
Mayank Holani — Chief Financial Officer
Thanks, Sanjay, and good afternoon, ladies and gentlemen. Operator, please move on to Slide 16. So on orders for the quarter, we — the slight drop in orders, about 3% over than the same quarter previous year, owing to the shift in some of the orders, major orders finalization to the next quarter. But if you look at the half year or six-month period, we have a good growth of 11.6% in the outside group orders for this financial year. And next slide please. Moving on to sales. Continuing with the momentum we had seen in the previous quarter. This quarter, also, we have about 39.5% growth in sales. we’re at about INR420 crores or INR301 crores in same quarter previous year.
And with this, the sales for half year stands at INR792 crores, which is about growth versus same quarter previous year. And we see a good momentum in almost all the segments that sense. Next slide, please. Now moving on to the P&L for the quarter. We still see continued subscription in the raw material prices, some of the commodities keep going up and down. So at the overall quarter level, if you see our gross margin is 31.1% versus 32.4% in previous year. And also the mix also plays a role has.
And the profit after tax, as you will see, is about INR87 million versus a loss of INR87 million in previous year, which is a data of about 500 basis points. And there is an exceptional item, which is a gain of about INR33 million, which is due to the sale of — we had some assets in nonoperational leased and in many was the plant closed long back that has been disposed of and this exceptional gain is coming due to that. Next slide, please. For half year, our gross margin has improved to 32.4% versus 32.1% in the previous year. And profit before exceptional items of INR193 million versus loss of INR248 million in previous year first half. And if you look with the exceptional items, the profit after tax and INR352 million versus a loss of EUR248 million in previous year. That’s it from the P&L side and on the finance side.
I will close here and open it for question and answers. Thank you.
Questions and Answers:
Operator
Our first question is from Prajesh Kapari of Accurate Advisors.
Prajesh Kapari — Accurate Advisors. — Analyst
Really good set of numbers. Is it possible for you to give a little bit more insights into which of the segments where we see strong traction from here on? And how do you see the order win over next six to 12 months?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So on the segment side, as I mentioned, I think mobility and mobility, data centers and a mix of, I think, certain portions of the power and grid and cement should be strong as we go forward.
Prajesh Kapari — Accurate Advisors. — Analyst
Okay. And in terms of the — if you look at the next 12 to 18 months kind of an opportunity, how do you see that from the order book perspective?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So as we went through the presentation, I have been articulating that the markets seem to be doing well. And despite the turbulence in the global economy, I think India should be able to tie over it. And given the fact that we also are well positioned like solid product offering with adequate digitization, content, etc, I think we should — we have every reason to feel positive about that.
Prajesh Kapari — Accurate Advisors. — Analyst
So recently, I think one month back, there was an announcement of INR80 crores kind of a capex for increasing capacity. And I think there is more of a — the parent company probably trying to shift from the Germany to India manufacturing plant. Can you a little bit further elaborate on that? And do you see more such opportunities?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Yes. So I think there is a factory which is based out of Calcutta, which is primarily making vacuum into us. And this is a factory that caters to as a core component factory, which caters to India as well as for many countries across the globe. So I think the rationale behind the investment is primarily to increase our exports out of India and to cater to more and more geographies as well as to cater to the growing demand in India as well. So it’s a futuristic investment that we’re doing given the strong demand that we are seeing across many global markets, and this is an additional infrastructure that we have announced.
Prajesh Kapari — Accurate Advisors. — Analyst
So how did you be funded, sir?
Mayank Holani — Chief Financial Officer
The funding will be built through partly borrowings and partly through internal accruals.
Prajesh Kapari — Accurate Advisors. — Analyst
I see. So this will be spread over.
Mayank Holani — Chief Financial Officer
And also just fundamentally, this INR138 crores capex is not going to happen in on go, maybe in next quarter or next two quarters. It is if you had at the announcement about three years. So that will be fully functional by 2026 and right kind of — financial year 2027. So it will be a phased investment.
Prajesh Kapari — Accurate Advisors. — Analyst
You mean December 2026, the capex will get.
Mayank Holani — Chief Financial Officer
Yes, March ’27 financial year.
Prajesh Kapari — Accurate Advisors. — Analyst
But the factor will start — is like Phase sector will open or the full entire capex will come on stream only from Jan 2027?
Mayank Holani — Chief Financial Officer
No, no, it will be — the capex will start probably from next financial year. And partly, some operations may start in, say, ’24, ’25 type of, but it will take time moving because the operating the factory, there will be some moment from existing setup also. So the fully functional will be by ’27, FY ’27.
Prajesh Kapari — Accurate Advisors. — Analyst
And sir, do you see any more such opportunities because there are many companies particularly in Europe, they are basically making more investments or more sourcing from their Indian subsidiaries because energy costs definitely is becoming a little bit pain point for the global companies. Are you seeing such opportunities apart from the Kolkata what we are looking over the next six to 12 months?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
See, the company is in a constant evaluation phase on their supply chain. So as and when they find something viable in terms of investments, I’m sure they will consider that.
Prajesh Kapari — Accurate Advisors. — Analyst
I see. But I mean, like from a global perspective, can you share in terms of the competence of the — our company when they look at the other subsidiaries across the globe, which are the areas where we believe that Indian companies are one of the most competitive when it comes to the reliability of supply as well as the cost competitiveness?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
I think across — at what point in time we need to trigger a capacity expansion and what form the capacity expansion could take it can be in terms of certain amount of outsourcing to certain amount of in-sourcing, plant and machinery, people, etc. So this is a very robust process, which is followed by the company every year where we plan five years in — for plus five years.
Prajesh Kapari — Accurate Advisors. — Analyst
Understood.
Mayank Holani — Chief Financial Officer
And if I may give some extension of that question slightly, given the demand it has revived quite a bit in that given the fact that we are already at 80%, 85% capacity utilization. Do you see like near to midterm major expansion plans? Or do you I think as you mentioned earlier that in December quarter, you just extending shifts to make up for the increased demand. So measures like that would open up does not show any immediate trigger to do something that is adequately different. We have a road map to be able to cater to the demand to adjusting various other parameters.
Operator
The next question is from Raj Harishi of CTR.
Raj Harishi — CTR — Analyst
I would like to know the digital offerings of Schneider, your parent, is it all in this listed entity?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So as you know, we have an execution arm which is in terms of projects and in terms of services. Now all digital offerings are accessible by the execution arm as well as the services of the company. So we have the ability in terms of products and the capability in terms of integration to be able to deploy these products and services. primarily focused on digitization of the powertrain.
Raj Harishi — CTR — Analyst
I didn’t get you. primarily focus on?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Digitization of the powertrain. You see digitization can be processed, digitization can be building automation. So we stick to our core, which is digitization of the powertrain.
Raj Harishi — CTR — Analyst
Okay. Okay. Okay. And any conflict of interest between say, the listed entity and other subsidiaries of the parent in India? Or it’s clear to define what each will do.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
I think it’s pretty much clearly defined.
Raj Harishi — CTR — Analyst
Okay. And how do you see data center as a business opportunity for you? People are talking about like massive growth potential over a period of time. basses to be energy-intensive and labor, both of which should be good as far as India is concerned.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Yes, I think that’s a very — it’s a good opportunity for the business as far as medium voltage and solutions are concerned. And I think I spoke about it at length both in terms of the segment dynamics as well as the digitization opportunity there.
Raj Harishi — CTR — Analyst
Okay. And sir, any time frame to retire the borrowings which you have from the other subsidiaries or parent? Do you have any like strategy space or something?
Mayank Holani — Chief Financial Officer
See, we are — as you see, we have started to getting into a profitable June from last financial year this quarter is the fourth consecutive quarter, right, where — otherwise, we used to have between you, we’ll see the quarter, some quarters with profit and again looking. So once we are back on profitable and not in terms of — on a consistent basis, then obviously that will help reduce the borrowings when we generate the cash from operations.
Raj Harishi — CTR — Analyst
Okay. But sir, you also said that the capex, which should be done would be from internal accruals plus borrowings. So the internal accruals will go for the capex and how would you retire the borrowing.
Mayank Holani — Chief Financial Officer
Yes. So see, there are — I mean, there are different things we are working on. And the capex is also, as I mentioned, not going to happen on day 1, right? It will be spread over the next three to four years.
Operator
We’ll move on to Viraj Mithani of Jupiter Financial.
Viraj Mithani — Jupiter Financial. — Analyst
The coordination in good and recommended. Am I audible?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Yes you are.
Viraj Mithani — Jupiter Financial. — Analyst
So first two accounting questions. One is that our employee cost has been constantly high between 15% on quarter-to-quarter, 18.5% half year, coupled with 70% of material cost. I don’t understand why our — costs are so high? Are we expanding? Or is that — is the were only company having such a high employee cost?
Mayank Holani — Chief Financial Officer
See, Viraj, the employee cost for the quarter, if you see is high because this quarter, there is the cost of employee share option plan, which gets booked in this quarter. So on an absolute number, this is you will already see in the September quarter and employee cost going up from the previous quarter. But — and I mean, if you see year-on-year, the increase due to the normal inflation. While we continue to work on optimizing and restructuring based on the business evolution.
Viraj Mithani — Jupiter Financial. — Analyst
So what would be the idea employee costs will be working in future with like just for the — just to get some fair idea into that?
Mayank Holani — Chief Financial Officer
Viraj, actually, our business is on the cyclic and the action is usually lower than the S2. So if you are looking at the percentage and an it’s looking a bit high. But our year-end level, if you see, if not 15% or 17%, it’s around and between 12% to 13%. So looking at the current opportunity that we are seeing in the market. So as of now, we are not seeing any much decrease in terms of the employee cost number. But yes, definitely, it will help us to increase the sales volume. I hope that way I’m able to answer your question.
Operator
The next question is from Nikhil Jain of Galaxy International..
Nikhil Jain — Galaxy International — Analyst
I just had one question. So I just wanted to get a view on what is the kind of EBITDA margin that this business can actually deliver right? So it has been quite very well and we have been improving. But what will be like a sustainable EBITDA margin that the business can actually deliver over or will be long term. So can you say think to turn something like that if you can give a view, what do you think about that?
Mayank Holani — Chief Financial Officer
See, I mean, we — if you look at the numbers for the last few quarters, and the P&L has been impacted a lot by the fluctuations which we have seen in the commodities, right? So which has made it a bit unpredictable and sometimes going up and down. So while we — our focus is to continuously improve and that’s where we do a lot of selectivity in terms of what kind of orders we pick up and the focus is always on picking up orders with better margin than with the focusing just on the top line. So our focus is to consistently improve EBITDA margin on a year-on-year basis. Quarterly numbers may vary based on the mix of different products and projects because that’s something which you can’t manage on a quarterly basis exactly to the number. But our focus is to improve it on an ongoing basis.
But yes, last few quarters, if you see the last two financial years, obviously, these are impacted by the supply chain challenges, whether it’s economics or raw material prices and even the freight. So the debt has impacted EBITDA margin and get by on a quarterly basis, you will see very big fluctuations. Though I would not quote any number, but we are working on consistently improving and get where if you see the numbers for last two financials also — financial years also — it has improved in last financial year also by about 0.7% in spite of the raw material and surprising issues. But.
Nikhil Jain — Galaxy International — Analyst
So can we say so in a normal world, right, which is difficult to predict. But in a normalized world, we can, let’s say, look forward to at some point of time, an EBITDA margin of 10% to 12% kind of a rate, which is — or we will be working towards that.
Mayank Holani — Chief Financial Officer
Today, where we are 10% to 12% is quite a distance. So yes, we will continue pushing for a better margin and focusing on it. But yes, it will take time not going to happen, say, in one year or a few quarters right one year, two year.
Operator
The next question is from Sanjeev Zarbade of Stream Meter Investment.
Sanjeev Zarbade — Stream Meter Investment. — Analyst
Sir, my question was again on the debt side because if you look at our debt compared to other category, we are much on the higher side. And if we want to grow, then our working capital will also increase and we also have a capex plan going ahead. So I would like to know what kind of vision we have, where we want to see this debt three, four years down the line? And the second thing is — another way to reduce the debt is if we can increase our margin. So on that already, to some extent, you have answered, but I would like to know to what extent the material prices have to go down or something or where do you want that execution to reach so that our margins reached somewhere around 10% to 12%, still lower than the current margin, which is around 15%. So some thoughts on that.
Mayank Holani — Chief Financial Officer
You rightly mentioned that our margins are on the lower side in comparison to the parent side. So yes, we are working for us to minimize the gap as much that we tend to give in the Indian market. In terms of the debt, you are saying currently, the management has to reduce the debt from our operationals and if you find any other further opportunity to optimize and do the definitely, we will work on this and at appropriate time, we will commit it to the market.
Sanjeev Zarbade — Stream Meter Investment. — Analyst
And regarding the order intake, order for you to quantify roughly the amount of orders that would have filled over in the current quarter?
Mayank Holani — Chief Financial Officer
Close to the — INR450 million to INR500 million would have spilled over to this quarter.
Operator
The next question is from Sanjay Satapathy of Ampersand Chemical..
Sanjay Satapathy — Ampersand Chemical. . — Analyst
Sir, in this quarter, your raw material cost we enter compared to the June quarter and despite the fact that raw materials like Campo and most other things, they went down, so how do you really explain this, sir?
Mayank Holani — Chief Financial Officer
Even in the last con call also, we have specifically mentioned that the raw material cost for the last quarter was abnormally low, just because of a few of the orders are mixed. And secondly, the impact of the ramen down will not immediately impact on the quarter because we are in a business where at least you need three- to six-month period to actually adequate order and to cover into sale.. So in this quarter, when we have purchased the material was on a higher side, and of course, that this impact is coming. So definitely, in the future quarters, we will see the impact of downside of this raw material or the all the matters that’s going down. But because there’s a cyclical business, this impact is coming. And secondly, it’s also mixed with some of the ForEx side because some of the product material –side, which has further impact on the raw material side.
Sanjay Satapathy — Ampersand Chemical. . — Analyst
Sir, on the ForEx side, I assume that the import mostly from Europe, right, sir?
Mayank Holani — Chief Financial Officer
Not mostly, but yes, the majority is signal product from Europe, but we have imports from China as well, China, U.K., other parts no.
Operator
Our next question is from Manish Goyal of –Investor.
Manish Goyal — Enam Holdings — Analyst
Sir, like we have been talking about adopting digital offerings. And in today’s presentation, we have spoken about our vision 2025 on the services. So would it be just possible to give us perspective like how has the journey like in terms of how the revenue contribution has increased probably in recent past? And how do we see it going forward? Because we have given a breakup about maintenance and digital contracts revenue increasing from 12% to 22%. But I believe that is part of the overall services. So maybe if you can give us a perspective how do we see this revenue share going — increasing going forward? And what does it imply for our margin –? That’s the first question, sir.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So I think the information that is there on the actual data and the vision that we have, we have shared with you, I’m not able to understand.
Manish Goyal — Enam Holdings — Analyst
Like in overall revenues, what could be our revenue from both digital offerings and services, what we are aiming to grow as a layman for the shareholder, how should we kind of bench funds or we should this?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So the idea is to grow services share in the overall business to a better contribution. And within that to grow digital and recurring to a higher contribution within the services mix. So both of these fixes because of the higher operating margins should be accretive to the gross margin story.
Manish Goyal — Enam Holdings — Analyst
Sure. But any aspirational numbers sir, say, by 2025, what should we kind of expect services revenue to be.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So we don’t want to give a forward-looking guidance in that so much of granularity. So please excuse us.
Manish Goyal — Enam Holdings — Analyst
Okay. And on employee costs, ESOP, see, last quarter, I believe we had a INR8.1 crores as a ESOP cost. So what would be in the current quarter?.
Mayank Holani — Chief Financial Officer
It’s in the same range, Manish, around INR eight crores.
Manish Goyal — Enam Holdings — Analyst
And how do we see the supply chain challenges on, say, like availability of other semiconductor chips? And has it eased out? And do you see that it probably not hamper our revenue growth going forward, and we probably have our peak December quarter coming up. So just want to get a perspective.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So if I’ve been managing this crisis all throughout now for almost six to seven quarters. I think with the support of our global parent, we have been kind of being able to manage our global relationships with suppliers to be able to manage that. The challenges are real we have been supported by our customers as well in this journey. So I would like to thank all our stakeholders, whether it is our customers, whether it’s our suppliers, and everyone for supporting and making sure that we are able to kind of continue to deliver on the top line that we have been projecting..
Operator
The next question is from Jatinder Agarwal, who is also a legal investor. Moving onto the next question, which is from — of — sorry, Jatinder, can you hear us?
Jatinder Agarwal — Legal Investor — Analyst
Yes, I am on the call.
Operator
Would you like to ask a question, sir? You were in the question queue.
Jatinder Agarwal — Legal Investor — Analyst
I’m sorry, my network is a bit patchy. I have just one question. and this is related to Schneider Electric, India Private Limited. Can you please explain me in payment down, what is the big difference in terms of the business of the listed entity and this one?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
I didn’t get your question. Can you repeat your question?
Jatinder Agarwal — Legal Investor — Analyst
Yes. So there is another listed company, which is Schneider Electric India Private Limited, right? No of the group. Sorry..
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Schneider Electric India Private Limited is not listed.
Jatinder Agarwal — Legal Investor — Analyst
No, it is an unlisted company of the group, right?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Yes. Yes.
Jatinder Agarwal — Legal Investor — Analyst
Yes. And so my only question is I would like to know what is the differentiation in terms of business of the listed entity versus unlisted? And if you could just explain that more than payments as an outsider to better understand the differentiation and the overlap, if there are any?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So Schneider Electric, the unlisted entity holds a number of other businesses, which are like the UPS business or the automation business home and distribution business, low-voltage business, etc. So there are a number of entities in India which we launched to Schneider Electric, not just SCIPL. So there are a number of entities in India that cater to different segments of the market. This particular entity is focused on the medium voltage electrification needs of customers.
Jatinder Agarwal — Legal Investor — Analyst
And there are no overlaps between the listed entity and resi?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
There would be a very small overlap between the company between some of the portions that have been acquired under the — from L&T, etc. There will be a very small overlap in that segment, but that’s a separate brand that is not operated under the Schneider linked to that.
Jatinder Agarwal — Legal Investor — Analyst
Okay. And is that — so when we look at some financials, obviously, you have taken this from third-party sources. But when I look at last 10 years, revenues in that business have almost become like three times. And the listed entity, obviously has they be managed about 1.5 times and 10, 11 years. Over these 10, 11 years, are there segments that are about interchange or whatever in the entities?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
No, the segmented — segments interchange does not affect the business because the medium-voltage technology business risk entirely with this company, so it does not rest. But these things are not comparable because Schneider has had both organic as well as inorganic growth. And it has a number of product lines that are operating in India.
Operator
Our next question is from Rajesh Kapari –Enterprises.
Rajesh Kapari — Enterprises. — Analyst
My question is the direction of the margin, you said that your efforts will be to improve the margins. If you have it like assume, say, three-year kind of a road map that how do you plan to improve this margin? Once you talked about the services business is going to increase from currently, where are we. What are the other various steps we are going to take to improve the margins because your capacity utilizing is already 80% to 85%. So at 80% to 85%, if you are operating at 6% kind of a margin, then basically, I’m just trying to understand where the leverage will come from?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So there are a number of actions that on plans for this particular activity. One is to probably localize more and more in the country, reduce reliance on imports enter new segments of the market with newer product introductions, business selectivity digitization, services growth, recurring growth, transactionalization of the business. So there are a number of such levers that are being applied along with the transformation that customers are going to we must remember that the market is also changing. The market is also asking for more and more solutions, which requires decarbonization and electrification and digitization. So I think the needs of the customers are changing. And with the technologies that we have, we should be favorably placed in the marketplace. So the factors that will contribute to the margin expansion.
Rajesh Kapari — Enterprises. — Analyst
Okay. So for example, the first driver is should you say localization. So currently, how much we import versus localization?
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So it’s not just a matter of how much we import versus the market also will change, right? The market will be going for more and more high-end products. So when you localize those products in India and you transfer those technologies into India, the ability to low margins. So the mix change also happens along with localized.
Rajesh Kapari — Enterprises. — Analyst
Yes. I’m just trying to see, I think everybody is just focusing on this call because everybody is after — in the fourth quarter, and there’s a really great job company management has done. So everybody just trying to understand that from here to your road map, and I’m sure you will be able to meet your target, what are the various things and a little bit if you can share a few details on that, that currently where are we, what are the directionally what we are planning to do with some probably hard facts, then that gives probably more as an external minority shareholder. We get a little bit more color into that.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So I’m not sure if I can provide you with more granularity than the overall strategic direction that we are applying going forward. Otherwise, it will look very specific in terms of forward guidance.
Operator
The next question is from –Mithani of Capital Financial.
Mithani — Capital Financial. — Analyst
Yes, sir. I would like — am I audible, sir?.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
Yes.
Mithani — Capital Financial. — Analyst
Sir, I would like to review some color on this EcoStruxure platform in terms of EBITDA and price margin and growth. And your digital consultancy you talk about in your slide something we
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So digital consultancy is all about certain acquisitions that have been made globally in terms of our ability to digitize the powertrain and provide customers with insights as to how to optimize the powertrain. So we are building that competency within the company to be able to use those — leverage those acquisitions into value propositions for customers. So the idea is to have an agnostic consulting with customers to be able to help them optimize and that increases the stickiness of the customers with us. So that is the idea of consulting. And what’s the second piece of question? I just. So in the conceding, does it mean the margins will be on the higher side coming in the same question. will be having the much higher margins compared to our product than on right now? So consulting per se, if you see as a product line might have higher margins. But it is not just the benefit of that, which accrues. It is also a benefit of increased customer loyalty, which would come trusted adviser and having the first right of refusal projects. So these are some of the benefits that come in terms of both top line and margin expansion on the existing products as well.
Mithani — Capital Financial. — Analyst
So my next question on the EcoStruxure. Can you throw some more light in terms of growth prospects there. margins which we can enjoy. I understand we were sharing agent with the parent so.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
So EcoStruxure margins are per se, not measured as a product or a product line. This is a bundled solution that you provide to the customer. And when you bundle the products, it is your ability to price up based on the value proposition that you have with the customer. So it is not a measure directly in terms of what is the margin on this product line and what is the cost that is associated with it and what is the drop-through that you get out of it. It’s not measured that. It’s measured in terms of your ability to sell a project to a customer at a particular price and margin..
Operator
The next question is from Manish Goyal of — Individual Investor..
Manish Goyal — Enam Holdings — Analyst
If I can get — what is the outstanding order book and the breakup of the same? And also similarly for orders in and the revenue share for the quarter two?
Mayank Holani — Chief Financial Officer
So backlog is around INR1,000 crores and ratio is around 63% is the strong 21% is transactional and 16% in around services.
Manish Goyal — Enam Holdings — Analyst
And on the order inflow, if you can — like you can also give me the IG what was the order inflow and the breakup of directionally in close, please.
Mayank Holani — Chief Financial Officer
I will be around INR90 crores this quarter. And breakup is equipment 48%, project 12%, transactional 22% and the services around 18%.
Manish Goyal — Enam Holdings — Analyst
And for the revenue breakup, please?
Mayank Holani — Chief Financial Officer
Sorry. Equipment is 43%, project 10%, transaction 40% and services around 8%. And — will be around 19%.
Manish Goyal — Enam Holdings — Analyst
Sorry, sorry, sorry. Can you please repeat again?
Mayank Holani — Chief Financial Officer
Equipment is 43%, project is 10%, transactional is 20%, services 18% and balance is IG.
Operator
The next question is from Akshay Kothari of Envisia Capital.. We move on to the next question from Sanjeev Sarbadi of Stream –Investment.
Sanjeev Zarbade — Stream Meter Investment. — Analyst
Sir, I just wanted to know, were there any revenue mix changes in this quarter because of which the margins that declined on a quarter-on-quarter basis?
Mayank Holani — Chief Financial Officer
Yes. So there is a mix change impact obviously on last year, last quarter, margin — June quarter margin was abnormally high, if you see it from any of the previous quarters also.
Sanjeev Zarbade — Stream Meter Investment. — Analyst
Yes, yes. Okay. So this time, maybe the services component would have declined and more of projects would have increased. So that…
Mayank Holani — Chief Financial Officer
Yes.
Operator
The next question is from Bevan Shah of Alpa Advisors.
Bevan Shah — Alpa Advisors. — Analyst
I have just one question, and that is related to that order flow, which is only spillover. So can you share that number again? Was that INR45 crore, INR50 crore.
Mayank Holani — Chief Financial Officer
Yes, it’s in the range of INR44 — is an opportunity not the exact order number, it’s a opportunity..
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
It’s opportunity, which were not closed in previous quarters.
Bevan Shah — Alpa Advisors. — Analyst
Yes, that was INR45 crore, INR50 crore. Now number is correct..
Mayank Holani — Chief Financial Officer
Yes.
Operator
Ladies and gentlemen, I will now hand the conference over to Mr. Harshit Kapadia for some closing comments.
Harshit Kapadia — Elara Securities — Analyst
We would like to thank the management of Schneider Electric infrastructure, Mr. Sanjay Sudhakaran, Mr. Mayank Holani and Vineet Jain for giving us an opportunity to host this call. We would also like to thank all investors and analysts for joining for this call. Any closing remarks Sanjay sir that you want to share.
Sanjay Sudhakaran — Managing director, Chief Executive Officer and Additional Director
I’d like to thank everyone for taking the time out and participating along with us in this discussion that we just had. Thank you, everybody, and have a good day, please.
Operator
[Operator Closing Remarks]