Earnings Call Transcript - XNSE:HIRECT 2026-11-11

Operator

Ladies and gentlemen, good day and welcome to the Q2 and H1-FI27 Earnings Conference Call of Heirate Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal for an operator by pressing star, then zero on your touch-tone phone. I now have the conference over to Mr. Saramya Nevatia from Hirek Lamathis. Thank you, and over to you.

Suramya Nivathia, Chairman

Good morning, everyone. And thank you for joining us for the Q2 and H1 FY27 Earnings Call of Hirec Limited, formerly known as In Rectifiers Limited. I am joined today by our Executive Director and CFO, Mr. A.K. Nimani, our Global CEO, Mr. Anand Chizamram, and our CEO, Mr. Manoj Nair, and SGA, our IR advisors. This was our highest ever quarter and our highest ever half on both a consolidated and a standalone basis. Revenue is growing in line with the target we set for the year. However, profitability has not kept pace, and I will mention the reasons for this. A few things weighed on margins this quarter. Higher raw material costs, an unfavorable product mix, the scale-up of Alventa France, and our investment in people ahead of growth. The first is largely external due to multiple factors. The others are deliberate, and both are tied to the size of business that we are building. Over the last few quarters, we have spoken about Hirect moving from supplying components to delivering complete systems. That shift is now showing up in our work. Our train set programs are underway. Our indigenous propulsion has moved from approval into supply, and new approvals from Indian Railways this quarter have widened what we can offer. Alongside this, we are building cost advantage into the business. Backward integration into copper conductors is the clearest example. It secures a critical input for our transformers, and it has started to earn some revenue from outside customers. In a quarter of rising input costs and uncertainties, it has begun contributing and has started to do its job, and we are working on more such initiatives of this kind. Our global business is the longer build. Our first orders from the United States have shown that our products can compete outside India. We have dispatched our IGBT converter for mining industry 45 days ahead of schedule, resulting in a very happy customer. We now wait for the commissioning after which we expect larger quantities. Just to further emphasize on what this accomplishment means, an R&A initiative of this nature would ideally take 24 to 30 months. We have been successful to build this product in just about three and a half months. This is because of the technology platforms we have created over the years. We are now also using our sales channels across the UAE and the EU to build new customer relationships, of which some registrations have been successful while some are under process. As InterFrance is still scaling up and will weigh on consolidated margins until it reaches break-even. However, we have been able to secure two new customers for Alventif France and one new product line. These customers are currently giving us trial volumes, and we expect a larger order intake from the next year onwards. We also have some large-scale inquiries which could expedite the turnaround, but until we have a firm PO, we do not consider that as a contributing factor at the moment. Furthermore, we have received some strategic interest in Elventive France, which are being explored as well. Looking ahead, our priorities are straightforward. Keep building technology, strengthen the core railway business, expand into newer adjacent industries and other geographies, convert our pipeline into orders, keep taking costs out, and bring Elventive to break even. With that, I hand over to our CEO. Thank you.

Manoj Nayar, CEO

Thank you, Ramya. Good morning, everyone. As Ramya mentioned, we have focused on translating our engineering and manufacturing capabilities into stronger execution and a wider range of opportunities across our Indian business. I'd like to take you through some of the key developments during the first half of FY27. Let me begin with our copper conductor facility, which is an important step in strengthening our backward integration. Copper conductors are a critical input for our traction transformer business, and developing these capabilities in-house gives us better control over the supply chain and greater visibility over a key component of manufacturing. The facility has commenced commercial production, and we have also secured orders from private customers. This allows us to address our internal requirements while gradually building an additional business vertical serving external customers. During the quarter, we received CPC and PICC approvals from Indian Railways for deployment in Traction Transformers. These approvals are an important validation of our manufacturing capabilities and further strengthen our position in the railway supply chain. We have also been included in the RDSO's U-VAN or Unified Vendor Approvals Module, list of development sources for propulsion systems. And supplies have already commenced. This is an important milestone as it expands our participation in railway requirements and provides an opportunity to further strengthen our position as a development source. Moving to our integrated railway system business, we have continued to make progress in expanding our presence in next generation trainship programs. Our development engagements in the MEMU and Vande Metro segments mark an important step in this direction. These opportunities allow us to bring together our capabilities across traction systems, power electronics, and railway technologies by strengthening our participation in higher-value integrated railway solutions. These programs are important because they allow us to move beyond supplying individual components and participate in a more integrated solution. They also provide an opportunity to demonstrate our capabilities across multiple products within a single train set program and gradually increase our overall content per platform. Alongside these developments, we continue to strengthen our engineering and product development capabilities. Our focus remains on improving in-house development, product reliability, and manufacturing efficiency, while building the technical and operational teams required to support the growing scale and complexity of our business. Going forward, we will continue to focus on strengthening our core railway portfolio, improving backward integration, developing indigenous products, and enhancing our manufacturing capabilities. We believe that these efforts will help us Improve our competitiveness and participate in higher-value railway and industrial applications. We remain committed to building strong engineering and execution capabilities that can support the company's next phase of growth. With that, I would like to invite Mr. Nibani, our Executive Director and CFO, to take us through the financial performance for the quarter and half year. Thank you.

E.K. Nemanee, CFO

Thank you, everyone. Good morning, everyone. Let me take you through the financial performance for Q2 and H1 of FI27. We have achieved our highest year quarterly and half yearly revenue both on consolidated and standalone basis. Reflecting healthy business momentum across all our operations. Starting with the consolidated performance, revenue from operations grew by 39% year-on-year to 315.7 crores due to FI27. For H1 FI27, consolidated revenue stood at 574.1 CR, registering a growth of 29.9% year-on-year. Consolidated gross profit increased by 32.1% year-on-year to 76 crocs in Q2FI27, while for H1FI27, it grew by 31.1% to 149.2 CR. Gross profit margin stood at 24.1% and 26% respectively. Consolidated EBITDA stood at 13.6 CR in Q2 F527 with a margin of 4.3% for H1 F527. EBITDA stood at 26.8 CR with a margin of 4.7%. As highlighted earlier, consolidated profitability continues to be impacted by illuminating France, which remains in its integration and scale-up phase. Alongside this, we are making investments in human capital and strengthening operations capability to support future growth. These factors have resulted in higher employee and operating expenses. We expect near-term pressure on consolidated EBITDA margin to continue over the next quarter in quarters as immunity progress towards the previous year, following which we expect a gradual improvement in business scale-ups. Profit after tax and minority interest to at 6.8 CR in Q2 FY27 and 16.2 CR in H1 FY27. These numbers include exceptional gain of 2.7 CR and 6.2 CR respectively arising from the sale of the Jera Dune plant. Coming to the standalone performance, a revenue from operations grew by 29.6% year on year. To 294.3 CR in Q2FI27. For H1FI27, standalone revenue stood at 530.7 CR, registering a growth of 20.1% year-on-year. Stain-alone growth profit increased by 15.1% year-on-year to 66.3 CR in Q2FI27. While for H1 FY27, it grew by 11.2% to 126.6 years. Gross profit margin stood at 22.5% in Q2-FY27 and 23.9% in H1-FY27. The moderation in gross profit was primarily due to the elevated raw material cost and geopolitical developments and supply chain disruptions along with an adverse product mix. Standalone EBITDA stood at 24CR in Q2-FI27 with a margin of 8.2% for H1-FI27. EBITDA stood at 49.1 CR with a margin of 9.2%. Employee and other operating expenses have increased in line with business growth alongside continued investment in human capital to strengthen our organizational capability and support future expansion. This has resulted in some moderation in EBITDA margins. Standalone profit after tech stood at 14.5 CR in Q2 FY27 and 29.6 CR in H1 FY27. These numbers include exceptional gain of 2.7 CR and 6.2 CR respectively arising from the sale of the Dehradun plant. On a year-to-year basis, H1 FY27 pet registered a growth of 7.7%. These include the financial performance update for the quarter and half year. Thank you. I would like to open the floor for the question and answer.

Operator

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. I'll repeat myself. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. The first question is from the line of Manish Goyal from ThinKwais, Wealth Advisors LLT. Please go ahead.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Yeah, thank you very much and wishing everyone a very happy D-Value and happy new year. Sir, I have two questions. First on CTC, if you can give us the perspective like we have started commercial production. So to what extent the production has we have seen in quarter two and how much of it has met the requirements? Because still the gross margins have been declining. So we'd like to know like there was another reason mentioned that there is a change in revenue rate. But as per your revenue breakup, transformers still contribute significantly, 61% versus 50%. So where are we seeing the impact? So if you can give us more perspective on gross margins decline and how should we see it going?

E.K. Nemanee, CFO

We see the segment-wide results. Our CTC business has grown up from 395 million to 588 million. We have got the major approval in the later part of the Q2 only. So we were not able to use full CTC in this quarter. So, partially we use the external and partially we use the internal also.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Sir, what would be the production and what capacity we would have, just like to get more insight, sir, on CTC?

E.K. Nemanee, CFO

Yes, CTC, today you can say we have capacities and CTC and PICC both together we can manufacture, sir, I can say, more than 250 tons of it. And which we are again expanding, which will be approximately giving you more than 500 tons of.

Manoj Nayar, CEO

Just to answer this question, Manish, from a capacity point of view, the capacity is there, but like our CEO mentioned, by the time we got the railway approval, it was towards the... End of Q2, but just to give you a perspective, we are almost at about 60% of, we utilized about 60% of the capacity in September. That's the skill. Approvals in hand, we can use.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

What kind of margin improvement can we see? Because for last few quarters, we have been seeing a decline in our gross margin as well as EBITDA margin. And also my second question, which was pertaining to change in revenue mix. So, probably unable to understand because if transformer is still contributing 60%, what is the change which is leading to the decline in margin? So, maybe if you can give us a clue on the margin as well.

E.K. Nemanee, CFO

As mentioned in the initial speech by Mr. Sriramia and both of us, Mr. Manoj and myself also, maybe at least one, maybe two quarters or maybe it may be under pressure. It may not improve the margins, gross also. Mainly because although transformers, that's a percentage will be coming down. And secondly, we will be having the product mix like you can say propulsion here will be starting all that. Okay.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Sir, on our propulsion system, what is the status of the trials? Last time we mentioned that we have done 9,000 to 10,000. So, what is the status? Has we completed 50,000 kilometers, number one, and number two, there was a tender which was floated recently by CLW for some 750 numbers of propulsion system. So, have we participated in the build and the development category and if you can give us more insight into that.

Suramya Nivathia, Chairman

Yes. So, regarding the trial, we have completed 3,000 kilometers, and the remaining should be completed in the next several weeks. However, that completion, while it's ongoing, we are not stopped from supplying the remaining pending orders that we have rigged up for the propulsion systems. Regarding the tender of CLW, I think we were L1 in that tender. We are L1 in that tender. So there have been some big changes in engine railways. Some firms have been delisted and some have not been delisted. However, regarding that confusion, what they have done is they have disheld the orders of development sources and given the orders to approved sources. And we are now under discussion with you to release the orders for development sources as well, where we expect the quantity as we are L1, and we are in the development source, of course. So I think that is in progress and should materialize soon.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

So this is what you are mentioning, what you referred was for the recent CLW tender, where orders were Given to the approved vendors as well, only those people. Not to the development vendors yet. Okay. So, then in this case, sir, then we won't be able to get 20% share of, say, 750 numbers.

Suramya Nivathia, Chairman

We cannot exactly quantify the number today, but we do expect a good quantity. Okay, sir.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Thank you, sir. I'll come back in the queue.

Manoj Nayar, CEO

Okay.

Operator

Thank you. Just a reminder to all the participants, press star and one for more questions. The next question is from the line of Vedan Sardar from Nirmal Bank Securities, Private Limited. Please go ahead.

Vedan Sardar, Analyst — Nirmal Bang Securities Private Limited

Am I audible?

Operator

Yes, sir. Please go ahead.

Vedan Sardar, Analyst — Nirmal Bang Securities Private Limited

Sir, you mentioned that EBITDA margin at consolidated level are expected to remain under pressure over the next few quarters. So, anything more on that, that it will be affected by gross margins, or what is the specific reasons for it?

E.K. Nemanee, CFO

No, it will not be, I can say, mainly EBITDA levels, because we are still scaling up the operations at Irrelative Transl.

Suramya Nivathia, Chairman

Good morning, everyone, and welcome to the call.

E.K. Nemanee, CFO

Yeah, we have a point. Basically, we have mentioned earlier that is a very good plant, and we have all the infrastructure available. We were lacking in the marketing because there was no heading person there. Now, we have reported, and actually, so we expect in the next two quarters, results should be there. As Surima mentioned in the initial speech, that itself is a, we are discussing with some weak inquiries also. So, gross margin level will not affect that much because they will be going to contribute, but there is a fixed cost will be there and scale is not as high as on today as required. So, EBITDA level will be affected.

Vedan Sardar, Analyst — Nirmal Bang Securities Private Limited

Okay, thank you, sir.

Operator

Thank you. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. The next question is from the line of Uzair Lari from Awakesat Financial Advisory. Please go ahead.

Uzair Lari, Analyst — Awakesat Financial Advisory

Yeah, good morning, and thanks for the opportunity. So, my first question is, sir, what sort of margin expansion is anticipated from internal consumption for this PPP? And what is the, like, order traction for third-party sales of the product capacity, if you could share some live on that?

E.K. Nemanee, CFO

You see, if you refer our segment-wide results, we have given what is the total CTC we have sold and what is the in-house consumption. So I can say 588 million was the total sale by the plants, including internal, and out of that 568 was the basic means this product's internal. So, total is I can say 20 million so far is the outside sales. But now we have started, sir, after getting the approval from the railway, we are getting the interest from the public. So, now it is basically proven that, yes, we can supply to the railway, it can be for other purposes also.

Uzair Lari, Analyst — Awakesat Financial Advisory

Understood. And, sir, what sort of like, since we are using this CQC for internal consumption also? So, going ahead at full-capacity utilization, like what sort of margin expansion can we see going ahead, not just right now? If you could share some like on that, too.

E.K. Nemanee, CFO

Here you see that there will be some margin improvement in the transformers, but there will be the other products also. As I mentioned in the first question, sir, where we mentioned because of this propulsions, next two quarters or maybe basically where the margin for the propulsion will be not high, so overall there will not be any improvement in the, may not be any improvement in the gross margin also.

Uzair Lari, Analyst — Awakesat Financial Advisory

Okay, understood. And so what sort of like, if you could quantify the quarters over which we can expect Elventive France to be based even in numbers like 2-3 quarters or any sort of numbers, it would be very helpful.

E.K. Nemanee, CFO

Yeah, we, sir, four to five quarters we were expecting. Maybe next year, sir, maybe we should expect, maybe by September or December, it should be approximately 4 years ago already.

Uzair Lari, Analyst — Awakesat Financial Advisory

Okay, understood. And just one last question. Like, we are in various, we are, like, shifting from component supplier to more like an integrated system supplier. So, if you could share, like, over what time frame is this higher content for LOCO expected to reflect in our revenue?

Manoj Nayar, CEO

So, there are two pieces to it. One is, from a system point of view, the propulsion system itself is an integrated scope. So, we have already started, in fact, October, we started supplies of the propulsion system. So, over the next three to four quarters, we should ramp up the propulsion systems, and then as you are aware, we have the train set orders. So, towards the second half of next year, we should expect some of these units to get going.

Uzair Lari, Analyst — Awakesat Financial Advisory

Understood. That's all for my time. Thank you, sir, and all the rest.

Operator

Thank you. Just a reminder to all the participants, anyone who wishes to ask a question, may press star and 1 on the touch-down telephone. The next question is from the line of Deepak Agrawal from Param Capital Limited. Please go ahead.

Deepak Agrawal, Analyst — Param Capital

Yes, hello, sir. I know there.

Operator

Yes, sir. Please go ahead.

Deepak Agrawal, Analyst — Param Capital

Yes, sir. My question was again on the margin because growth is very strong at 30% and I'm repping to stand alone. But in terms of the EBITDA margin, so you did mention because of the product exchange and higher raw material cost. So any trajectory you can give because this 8.2% EBITDA margin is standalone. Starting Q3 onwards, now obviously crude link seems to be. R&N seems to be going down. Any trajectory you can provide because I think that's the only concern people have that although we are going very fast at 30%, but can we sustain or actually improve the margin profile? So people are building that margin profile should have gone up, but obviously you did mention because of these reasons. It has gone down. So, anything you can share in terms of how should we look at margin next couple of quarters, if it's like we should see 50-100 basis point margin improvement every year on the EBITDA margin trend.

E.K. Nemanee, CFO

Year 5 is a mention key may be immediate in the coming few quarters, two quarters, at least it is challenging because we are increasing a lot of other, other than material cost, we are increasing a lot of expenses on for the future's business costs. This was part of our initial speech also including on employees cost and foreign favors, business developments. That's all expenses are still going and where the result will be seen may be even after some time. It may be the second half of the 27-28 or maybe all the time or maybe even one quarter later than now. Immediately, there may not be any improvement in the profits or margins also.

Deepak Agrawal, Analyst — Param Capital

And second, sir, my question was on LVNTIF, so like roughly about 10 crore quarterly loss. Again, there you have been mentioning it will take 4-5 quarters for us to turn around. So should we expect a similar loss going forward in terms of quarterly run rate over 10 crore or it will go down to maybe 90 crore too?

E.K. Nemanee, CFO

Yeah, we expect we should go down from there, I can say. Two forms of our financial reimbursements, I can say, from March onwards. December may be almost similar, or maybe slightly less, but going to the future, we will continue slowly.

Deepak Agrawal, Analyst — Param Capital

Of course, the India Railway business pipeline seems to be, as you mentioned, for propulsion systems and all, they have already started shipping orders. So, this current level of 50% kind of growth seems doable, right, enforceable.

E.K. Nemanee, CFO

No, basically, because of the railway has also reduced their target for this year. So, this year may not be because there are a lot of fund diversions to the different sectors. And secondly, they do not have some other components, specifically propulsions and wheels, they don't have as on today. For the time being, they have at least reduced their budget for this year. So geopolitical situations are improving, so it may be once they may revive itself, that's all.

Deepak Agrawal, Analyst — Param Capital

Right. Got it.

Uzair Lari, Analyst — Awakesat Financial Advisory

Thank you.

Operator

Thank you. The next question is from the line of Harsh Mulchandani from Toro Wealth Managers LLP. Please go ahead.

Harsh Mulchandani, Analyst — Taurus Wealth Managers

Hi, thank you for the opportunity. I want to understand with respect to the French entity, what progress have we made in the past few months post-acquisition and how are things panning out? I believe that we have a lot of capacity, but we need to get some orders to get the capacity to be used. So any developments which you can highlight post-acquisition which has been done?

Suramya Nivathia, Chairman

I've already covered this in the opening remarks. I'll just repeat myself. We have already received two new customers that we have broken through, and we've also received a new product line that we're building. So these are all at the initial stages, and the volumes will start coming in as we go along. Furthermore, we have reached a stage where, because they did not have a very good reputation because of the financial position that they were in, We have now started receiving large inquiries from the biggest, let's say, automobile guys in Europe, and these are at the final stages, but until we don't get a firm PO, we can't really comment on them, but we are optimistic that we should be able to receive something.

Harsh Mulchandani, Analyst — Taurus Wealth Managers

Okay, got it. And with respect to team or any small expenses, which, you know, you might have to make all that investment point of view that is done. Is that right understanding?

Suramya Nivathia, Chairman

Yes, of course. We have a new person leading the entire entity. And yeah, I think it's on the right track for now.

Harsh Mulchandani, Analyst — Taurus Wealth Managers

Okay, got it. And with respect to margins, you mentioned maybe a couple of more quarters, we could see some hit. And going forward, you know, like you mentioned the products, you know, which we have pitched for, are those going to be structurally higher margin products than the company's overall profile? Or because of a higher cost base, you know, the margins could be softer, even going forward at a structural level once, you know, we are able to utilize the capacity.

Suramya Nivathia, Chairman

If you look at medium-term to long-term, so definitely all the products that we're working on today will be profitable, will have good margins. But as we are new entrants, we have to be fiercely competitive, and we have to make sure that we are L1 in the tender so we can secure maximum quantity and establish ourselves, at least in this ecosystem. So today, all the heavy-hitting projects that we have, like propulsion, We have to be competitive where margins are under pressure. We are trying to offset the pressure caused by propulsion with other products, but the quantum of other products will not scale as quickly as propulsion, which is why the CFO mentioned that we might face a certain margin pressure for the next few quarters, because we cannot slow down the scale of propulsion. That is inevitable. But we want to ramp up other opportunities faster, and that will help us balance out. The the margin in the medium to long term.

Harsh Mulchandani, Analyst — Taurus Wealth Managers

Got it. Okay. Thank you so much.

Operator

Thank you. Anyone who wishes to ask a question, may press star and one on the touchstone telephone. The next question is from the line of Draghya Bharadvaj from Complete Circle Capital Limited. Please go ahead.

Draghya Bharadvaj, Analyst — Complete Circle Capital

Yeah, hi, sir. Good morning. Thank you for the opportunity. I hope I'm audible.

Suramya Nivathia, Chairman

Yes.

Draghya Bharadvaj, Analyst — Complete Circle Capital

So, just if you could throw some color on what could be the potential of propulsion systems now that we have a little more clarity on, you know, some of the developments which have taken place, what could be the, like, the addressable market here? That's one. Second, as you mentioned on the IGBT converters that we've been able to complete some deliveries quite ahead of schedule. Are there more orders in the pipeline? Is there, like, how are the operations shaping up here? Should we look towards more developments in this space, if you could throw some more color on that?

Suramya Nivathia, Chairman

Sure. So regarding the propulsion, considering that we are development sources, we are entitled to 20% of the entire quantity. But there are a few things that have happened in the market today, which could prove to be, let's say, more positive for us, where Railways has been unhappy with some large companies. Who have perhaps either not supplied as per commitment or as per quality, and they have started being very strict and they started delisting companies. So this gives us an advantage because we know for a fact that our quality is good and we're able to supply on time. So I think in the long run, we can look at much larger quantities, but I think for now we stick with 20% at least. And every year, Railways is still looking to procure between 1,000 to 1,400 propulsion systems. And I think we can expect a fair share going forward. Coming to the IGBT converter for U.S. mining, yes, there is a phenomenal opportunity there. And because we've been able to give a world-class product and give it ahead of time. It has really, I mean, overjoyed the customer, which was not expected at all, that it would be able to, that we will be able to execute it so flawlessly. Now they want to see the product perform in the field. And once we have that, they have committed that there will be a lot more orders coming our way for the mining industry as well.

Draghya Bharadvaj, Analyst — Complete Circle Capital

Okay, that's helpful. Thank you.

Operator

Thank you. The next question is from the line of Medun Dream. From both PMS, please go ahead.

Medun Dream, Analyst — PMS

Hi, thanks for the opportunity. My first question is, could you give us a little bit more color on the status of this 50,000 kilometer trials that you had undertaken, as the railways have undertaken for your propulsion systems? So, where are we in that, and what is the stage that you think that you are on from a movement from a propulsion vendor, or movement from a development vendor to a full-service vendor?

Suramya Nivathia, Chairman

So, we have completed 30,000 kilometers of the field trial, and the trials are continuous, and they're ongoing, and it's performing well. Thankfully, there have not been any issues with our product. So we will be in development category, but that does not restrict us from supplying the orders we have at hand or from participating in tenders which are current, ongoing, and upcoming.

Medun Dream, Analyst — PMS

You said 20,000 or 30,000? Three, zero. Three, zero. Okay. Okay. Fine. And so, by the current trend, it seems that probably post Q4, you should complete the 50,000 kilobitre client, right?

Suramya Nivathia, Chairman

Hopefully, before that. But yeah, let's see how it progresses.

Medun Dream, Analyst — PMS

Sure, and during the initial commentary, or answer to your question, it was mentioned that the rateways have not released the development vendor orders for the development vendors, and I could not see any new order wins post or order wins in the last quarter. So, could you elaborate a little bit more on that? I think the CFO was saying that. Only the development vendor orders are stacked due to some issues.

Suramya Nivathia, Chairman

That is specifically for propulsion systems because Indian Railways is, let's say, reorganizing their approved vendor list. So it has become a very critical supply item today. And those companies who are not able to fulfill their commitments Either in terms of quality or delivery, are being sort of delisted. So because of that, there was a lot of, let's say, uncertainty within their vendor database of the system, for which they have withheld development source POs and released approved source POs. But that does not affect us in any way for this standard because, as I mentioned, we are L1 and we should be expecting our quantities.

Medun Dream, Analyst — PMS

Okay, so essentially what you're saying is that it is not impacting us, it is a delay in terms of the railway procurement system per se.

Suramya Nivathia, Chairman

Only for this specific case because of their restructuring that they are doing.

Uzair Lari, Analyst — Awakesat Financial Advisory

Sure, okay.

Medun Dream, Analyst — PMS

The next question is regarding innovative. So, to be fair with you, you have always given a guidance that they take about six to eight quarters for the innovative to that entire consolidation to become margin creative and turning around in that facility. We have traditionally seen most of the acquisitions by Indian companies, not specifically in your domain, but generally we have seen in CDMO, in metals and all that, where Indian companies which have gone and acquired European entities have found it very difficult because the cost structures are very high. And generally, the labor costs and all that is not as easy as to be able to manage as in India. So we obviously have that cost advantage in India. And it has always been an accuracy for Indian companies. So what gives you the confidence of turning around this business? Do you currently feel that it has been a good sort of a move that you have done in Elevate? Well, give us some more color on the business opportunities, or you have definitely given us the reasons why you have bought that business, but can you provide a little bit more confidence to the investors on your thought process behind that?

Suramya Nivathia, Chairman

Yes, absolutely. So, firstly... Alventa France has absolutely world-class and state-of-the-art manufacturing capabilities. That is something that we are aspiring to build here in India. We are able to learn a lot from them. Yes, the cost of labor is high, but then so is the competence that they have available with them. If not for this acquisition of Alventa France, it would have been very difficult for us to portray ourselves as a global company. This opportunity has also opened gateways for us into multiple different domains, which includes opportunities in the European Union and in the US. It has actually elevated, in a certain sense, a reputation of HIREC that we are not just An Indian company working with Indian Rail, but also that we are trying to become more global. We do have global quality standards, and we do have products that can go into the global field. So from that perspective, yes, Alain De France is doing a fantastic job. There is enough opportunity, even within the European Union, as they now move towards wanting to build more local and promote local businesses. Yes, there is definitely scope for us to make it profitable, even if the cost structure of people is slightly higher. But then even with that, even the sales price is slightly higher as compared to what it is in India. And we do have certain big opportunities and big inquiries, which are at the final stages. And my level of confidence is high, and I still believe that we've done a right. We took a right decision to do this investment, and I am confident that we should be able to bring this to positivity.

Medun Dream, Analyst — PMS

Sure. Thanks for all the answers and all the very best.

Operator

Thank you. The next question is from the line of Manish Koyal from Thinkwise Wealth Advisors LLP. Please go ahead.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Yeah, thanks a lot for giving me opportunity again. Just on the proposition system, the supplies we've started, what is the current order book? What I recollect probably earlier, what we had alluded was in the previous call was 40 gross orders what we have. So maybe if you can clarify on that, like how many systems and what is the order size and by when do you expect it to complete the existing order? And number two, on beyond CLW, are we seeing more tenders from Vanaras Locomotive and Patiala Locomotives and have the bids been submitted? That was the first set of questions.

Manoj Nayar, CEO

Okay. For the first question, we have roughly about 38 systems that are supposed to be supplied. That's a pending order.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Sorry, Mr. Manoj, 38 systems, you said.

Manoj Nayar, CEO

Yeah, that's a pending order. And we have the second question. There are two tenders where we are in a favorable position. One is BLW and CLW, and the tender from BLW is yet to be processed. So that's where it is.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Okay, and this CLW, like we are expecting to get some orders, by when can it get finalized, sir?

Manoj Nayar, CEO

Can't mention a timeline that's in advanced stage, like we have already covered that topic earlier. So both CLW and CLW are in advanced stage. Okay, sir.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

And, sir, on order info, like, back of the envelope calculation shows that we have probably this quarter received orders of 350 crores. Maybe you can clarify that. And does this include the two development orders of 60-60 crores each? And how should we look? Because what we are saying is that order book is probably declining for last few quarters. Probably it was 1100 crores last year in Q2, and now we are at roughly 795 crores. So just if you can give us perspective, how should we expect the order inflow? What was the order inflow and does it include the development order and how should we power?

Manoj Nayar, CEO

So, the order booth includes those development orders. Number two, we are, like we already discussed, we are in advanced stage as far as few of the orders from the product community. We are expecting those orders in this quarter. There's been a delay in processing those orders. Number three is, which our CEO already mentioned, that the demand side from the red list has been a little curtailed due to the diversion of funds to different sectors. So that has already been mentioned in our speech as well. So it is expected to be contracted in the second half, but we do have a few options to be...

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Question, sir, on L&T, in opening remark, it was mentioned that there is probably some strategic interest which we have received. So, maybe would it be possible to provide more clarity on this? Are we looking to give an equity stake or how should we look at it?

E.K. Nemanee, CFO

Yeah, I cannot disclose this information at L&T.

Manish Goyal, Analyst — Thinkwise Wealth Advisors

Thank you so much.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Suramya Nivathia, Chairman

Thank you. I hope we have been able to address all your queries. Thank you for joining the call today during this auspicious festivities. It was a pleasure to speak with all of you, and we look forward to continuing our engagement. Thank you, everybody. Wish you all a Happy Diwali and a Happy New Year. Thank you.

Operator

Thank you. On behalf of Strategic Growth Advisors, Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.