Quality Power Electrical Equipments Limited (QPOWER) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Quality Power Electrical Equipments Ltd. Q1 FY27 Earnings Conference Call, hosted by Asit C Meta Investments Intermediates. As a reminder, all participant clients will be in the listen-only mood, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-to-end phone. I now hand the conference over to Mr. Siddharth Bhamre from Asit C. Mehta Investments Intermediates. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. It gives us great pleasure to host this Q1FI27 earnings call for Quality Power Electrical Equipments Committee. As we all know, Kota 1 saw a huge swing in commodity prices due to geopolitical uncertainty, and one would have anticipated its negative impact on the supply chain. However, QP has delivered excellent set of numbers, especially on the margins front. We at Asit Team, as a phantom at Google company, would like to congratulate the management of Carnegie Power Processes. Today, on this call, we have Mr. Ghandi Dalin Pahlian, Joint Managing Director. Mr. Sanjog Matre, CEO, Mr. Rajesh Jaiaraman, who's CFO, and Mrs. Parika Jado, Senior Vice President, Finance. Over to you, Vanni.

Thank you, Siddharth. Thank you, everyone, and good afternoon.

Welcome to the meeting. This quarter has been operationally intense with customer qualification, capacity expansion, and acquisition execution progressing in parallel. We completed several detailed audits by global OEMs and utilities, while customer visits to our facilities increased materially. Both reflect the larger programs we are qualifying for and require direct senior management involvement. At Sangli, machinery installation at the new facility is progressing. As expected in a new project of this scale, there are few minor last-mile issues around sequencing, utilities, and statutory interfaces. These are being addressed effectively, and we do not see anything structural. Trial production is targeted during the current month, subject to remaining approvals. Machinery installation for high-voltage CTC magnet wire facility is also commencing. At NDOX in Turkey, civil construction of the power conversion system facility is complete, with operations expected to begin during Q3 this year. In parallel, confirmatory due diligence on Win-Win Specialty Insulators Ltd. has been completed without adverse findings, and we are progressing towards definitive agreements. One area I would specifically highlight is management bandwidth. As we acquire and integrate businesses, we are increasingly looking at management as a common group resource rather than individual company teams. Experienced leaders across from Nehru, NDOC and other businesses are taking responsibilities across the group, while quality power managers are similarly being deployed wherever their capabilities can add the most value. This creates a common pool of management talent across the group and allows us to scale without having to recreate management ability independently in every business. Win-Win will add further experience operating pool to this talent. We have also strengthened our technology leadership with the appointment of Mr. Shailendra Kumar as Group Chief Technology Officer, bringing in over three decades of experience from HVDC, FACS, Power Quality, and Grid Technologies from Hitachi Earthwild ABB. We closed this quarter with an order book of $1,945 crores, approximately 1.9 times last year's revenue. Demand remains strong across our businesses with particularly encouraging traction in energy storage at Endox. The intensity we are seeing today is a result of several years of work coming together at the same time, new customer qualifications, new manufacturing capacities, and new technology and acquisitions. Our responsibility as management now is very simple. Execute each of these properly, preserve our operating discipline, and convert this opportunity into sustainable growth. Thank you. Now, I hand over to Mr. Sanjog Matre, our CEO.

Thank you, Mr. Pandan, and good afternoon to everyone on the call. I would like to focus my remarks on execution, operating priorities, and the capabilities we are building for the next phase of growth. The most significant activity during the quarter has been the installation of machineries at our new sungly manufacturing facility. Given the scale and complexity of the facility, This is a highly coordinated exercise involving equipment placement, foundations, alignment, utilities, interconnections, and readiness of supporting infrastructure. As is normal in a project of this size, we are encountering a few minor last mile execution issues during installation. These are largely related to sequencing interfaces between equipment and infrastructure and closure of certain site-level dependencies. None of these are structural in nature, and the teams are addressing them effectively through detailed daily coordination and prioritization. In parallel, we are preparing the organization for the next stage. This includes process documentation, operator training, quality systems, calibration, traceability, and customer audit readiness. In high-voltage equipment, the ability to move efficiently from machinery installation to qualified production depends as much on organizational readiness as it does on the physical assets. Our objective is therefore to ensure that once installation is completed, the transition into trials, customer qualification, and commercial production is as efficient as possible. At Meheru, our focus continues to be on improving throughput from the existing asset base. We are working on line balancing, reduction of changeover time, better material flow, and removal of operational bottlenecks. The emphasis is on improving productivity and asset utilization before adding further capital. At the group level, We are progressively moving towards a more integrated operating model. Engineering practices, manufacturing methods, and testing protocols are being standardized across facilities and capabilities developed in one business are increasingly being shared across the group. Procurement is another important area of integration. We have appointed a Chief Procurement Officer with a mandate to consolidate group purchasing, aggregate volumes, rationalize supplies, and standardize common specifications. As our scale increases, we expect this to improve both cost efficiency and supply chain resilience. On technology, HVDC remains a major strategic focus. We continue to strengthen engineering depth. Simulation capability and specialist talent, while progressing through technical qualifications and customer audits with global OEMs and utilities. These qualifications expand our addressable market and improve our ability to participate in increasingly complex programs. At Endox, the energy storage business is seeing strong market traction with inquiry levels ahead of our original expectations. This reflects the broader acceleration in utility-scale storage procurement across several markets. More broadly, the demand environment remains supportive across our portfolio driven by transmission expansion, renewable integration, HVDC and PACT deployment, grid modernization, energy storage, and data center power infrastructure. Our priorities for the coming quarters are therefore clear. Complete machinery installation at Sangli, address the remaining last mile dependencies, prepare the facility for customer qualification, improve throughput across existing plants, realize group-level procurement and operating synergies, and continue strengthening our engineering capability. We are investing ahead of demand because we see a significant opportunity moving forward. Our focus now is disciplined execution and converting that investment into sustainable growth, stronger operating efficiency, and improved returns on capital.

Thank you, Sanjur, and good afternoon to everyone on the call. Revenue for the quarter was Rs.256.4 Gross profit was Rs. 121 crore with gross margin improving to 47.2% from 44.6%. Reported EBITDA was Rs. 64.7 crore at a margin of 25.2%. Profit before tax was Rs. 59.4 crore and profit after tax Rs. 46.7 crore. EPS increased to Rs.4.66 from Rs.3.12. I would first address the IND-AS29 impact on our Turkish operations. Other expenses include a Rs.7.82 crore net monetary loss arising from hyperinflation accounting. This is entirely non-cash. Excluding this adjustment, EBITDA would have been Rs. 72.5 crore at 28.3%, PPT, Rs. 67.2 crore, and PAT, Rs. 54.5 crore. The reported numbers are statutory, but the adjusted numbers provide a better view of the underlying operating performance. On margins, there are few important points. First, our increasing group scale is beginning to translate into procurement efficiencies. Approximately Rupees 3 crore of volume discount benefited the quarter as we increasingly procure materials at the group level. Second, raw material movements affect our businesses differently. Meru has a shorter manufacturing cycle, so changes in input prices are reflected relatively quickly. Quality Power's coil products have a longer manufacturing cycle. Materials being consumed today largely relate to orders booked several months earlier. Consequently, current raw material movements will flow through the standalone financials primarily during Q2 and Q3. Importantly, every executable order currently in our order book has been booked above the margin guidance communicated to the market. We have not compromised pricing discipline to build volumes. We also want investors to factor in the commissioning of our new sangli capacity. Fixed costs such as depreciation, Manpower, power, and factory overhead will come into the P&L before utilization fully ramps up. We therefore expect some temporary moderation in standalone margins, particularly in Q3. As utilization increases over the next 15 months, we expect these costs to be progressively absorbed and margins to normalize. Our consolidated order book at the end of June was Rs. 1,945 crore, approximately 1.9 times last year's revenue. NDOX contributed Rs. 801 crore, Meru Rs. 585 crore, and Quality Power Standalone Rs. 553 crore. This provides strong visibility as we bring additional manufacturing capacity online. Finance costs remain low at Rs. 1.4 crore. Depreciation increased to Rs. 3.9 crore and will rise at sanglies, the CTC magnet wire facility, and end-of-power conversion systems facility are capitalized. Cash balances have reduced because we are facing funding this expansion largely through internal resources rather than debt. The Board has declared an interim dividend of Rs. 0.25 per share. Finally, confirmatory due diligence on Win-Win Specialty Insulators has been completed with nothing adverse identified. At an enterprise value of approximately Rs. 315 crores, the transaction remains comfortably within the group's balance sheet capacities. Overall, the strategy remains straightforward, maintaining pricing discipline, invest ahead of demand, use group scale to improve operating efficiency, and continue building quality power as a global high-voltage and power-quality technology platform. With that, I will hand the call back for questions. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, please press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Beidik Sarkar from Unify Capital. Please go ahead.

Gentlemen, hi. Good morning, and congrats on a strong quarter. A couple of questions. Could you break up the quantum of your YY growth between endox, Mero, and quality? And I'm sorry, I didn't quite catch the CFO's comments on the margin pressure in QC27. If I could request for a rehash of that, I can.

Thank you.

Sir, I may not have the year-on-year of individual company, but I can give you some idea, roughly the estimates I know. Year-on-year, I think quality power went from 37 to 69 crores. Mayhew went on from about 60-odd crores to about 83 crores, and I don't remember exactly Endox, but Endox contributed about 107 crores in this revenue. All the Indian entities increased their revenue. The Turkish companies had a slight dip in revenue. Primarily, it's the middle of the year, and they had an Ease holidays for two weeks in between. That was your first question, sir. The second question, can you just repeat it if you don't mind?

Yeah, yeah. I was just trying to, you know, appreciate the CFO's comments

on the margin pressure that he said were data from Q3 or 27, which is rehash static empties, you know, the exact line items where we suffer, and, you know, how exactly we should imagine

your margin trajectory in H2.

So, the margin profile for the reactor or the coil products business, as what Mr. Rajesh indicated, for Nehru, whenever there's a copper or oil increase, the impact is immediate because the cycle time is about eight weeks. So, it comes and flows through the quarter. For somebody like Quality Power, when there's an increase in aluminum this quarter, it normally hits us about six months later because we buy aluminum today. And by the time it is going into winding, it's almost four or five months later. So, the cautionary note was towards Q3, where any impact of anything in this quarter, because aluminum did have a spike this quarter, would come in Q3. The stable guidance for the coil products business is about 20%. As he indicated, most of the orders that are booked are in excess of 25%. This is more of a cautionary word rather than a real-world scenario at this point. Okay. Now, that tells you, Mr. Pandir. And, you know, one last question for you, Tavis, Jason.

You know, for quality, what I understand is that our typical in-execution time in an audiobook is between four to six months, right? So, you know, given that we have our plans, you know, due for commissioning towards the later half of the fiscal, by when do you think our

audiobook will reflect our enlarged capacities again? I understand you've been in the state for a while given the capacity constraints, but, you know, by when do you think you'll be in a position to? So, we are targeting two HVDCs. One is Old Park, which has already been awarded. I believe it's Q3, Q4. Barmer is close to, I think, tender completion this quarter. These are two HVDCs that we are planning. There are about half a dozen STATCOM projects across U.S., Europe, Australia that we are in talks with. We have got a couple of STATCOMs already in the U.S. Apart from it, the data center opportunities are typically where we are seeing the $100 million bids going on. That we are still struggling because our delivery periods are about 12 months' time. Once, I believe in about three months' time in the next quarter, when we are slightly comfortable, once we have taken over the new facility and we have stabilized it, believe me, this facility, if you come over, it's quite large. It takes you about 600 meters from one corner to another corner walking around. So, once we are able to stable, we will take in more orders. Getting orders is not a worry at this moment for us. So, if like in NDOX, we could just open up the lid and we got in, we could get in more if we are able to deliver more, the factory is still not ready. Each of the factories sitting on more than two years of order book almost at this moment, close to two years of order book, and at the last capacities.

Thanks for that. I'll come back with you too. Thank you.

Thank you.

Thank you. The next question is from the line of Rahul Maheshwari from Ambit Investment Advisors. Please go ahead.

Good afternoon, Mr. Pranjan. Excellent set of results. My two questions. First, when can we expect the soundly coil facility and the HVDC magnet wire facility to commission, and what can be the peak asset tons, which can we expect from these two facilities?

So, the machinery installation is already on. I believe we are also having a vastu shanti puja, I think, this week in the factory. We have to still get the building completion certificate from the authorities, and I think the process is on. As soon as they give us, I think we will be able to start, begin trial production in the facility. Obviously, the initial audits of ISO 9000, 14000 OSAS has to be completed. It will take us about a month. And after that is when we start the customer audits. And we may have about, as I referenced, about 60 audits on the facility before this can take over the full volume of the existing factory. We have to schedule this one by one. These are global audits, and it will take us, I think, as we guided about six months from the day we open up the facility for audits. These are highly regulated products, and every customer has to come and review the facility. However, given saying that, I think some of the large HVDC orders, we have timelines to delivery. So I believe we will start opening up, as Mr. Sarkar had said, maybe at Q3 this year to get more orders once we are comfortable. The asset turnover of this factory, I think we have still not fully capitalized, put the full capital in, but I would say 1,500 to 1,800 crores, I think this facility is good enough to deliver.

And for HVDC magnet wire facility?

The machines are already on. This is a new product for us. So we anticipate that it will take us another three months of trial run. We are anticipating by Q4 of this year is when we will be able to take a full production out of the facility. Bear in mind, the machineries have come in. It will be also installed. We've got the power. We've got everything in, including the licenses. All the ISOs and audits will be also on the facility. But being a new product in the facility for us as a company and as a team, I think we have to give it that three to five months to our stabilization.

Sure. My second question is how should we look at the order book in terms of execution means it's a good order book size and plus the capacity ramp up will happen. So when can we expect majority of order book execution to take place? If you can give some staged kind of lineup in terms of this order book, what we have?

Rahul, this order book is slated to completion in the next 15 months, give and take. So that gives you an idea of how much we can eat. That gives you a rough idea.

Sure, and we can expect the book-to-build ratio to be maintained near to these levels going forward for next 1-2 years.

I think I wouldn't commit on that, but we would try our best.

The order book demand is good enough. Some of the businesses like PCS can, you know, scaling up is much easier in a best business today. But these are, you know, as I said, we have a 4 gigawatt facility in Turkey, 1 gigawatt almost we have got an order. We will see ramping up as we start delivering products out of the facility. First, we need to deliver the products out of the factory before we start committing more.

Chunk. Best wishes to you and your entire team. Thank you. Thank you, Raul.

Thank you. The next question is from the line of Namish Sundar from Ileira Capital. Please go ahead.

Yeah, hi, sir. Very good afternoon and very congratulations on an excellent set of numbers. So just continuing on the best part, could you just explain it in a little more detail as to like your capacity, like current capacity that you have for best, probably in volume or revenue terms as of now and the new facility that you are building at NDOX for best. So what could be the scalability for best that you are expecting from this facility in probably revenue or volume terms?

My current guess is that we have about $60 million give and take of BES, that is PCS orders, in our pipeline, and we are anticipating another $40 million more in the next 12 months at least, which is in line with the guidance that we had given earlier that we see about at least $80 million of business coming in. So, at this moment, our focus is to operationalize the facility and deliver more. Once we are able to deliver more, getting numbers out of this is not a very big problem. That demand for PCS in the world is very high. Most of the governments are still focusing on making basic battery cells and cell technologies. The power electronics, software, and the hardware part is normally missed out, and there are very few players in this business. The bottlenecks continue to be the IGBTs across the world. As we are able to secure supplies, we should be able to also deliver faster. And we are also likely to, by the end of next year, get Best to India, as against what we guided two years. I think by end of next year, once we stabilize most of our businesses in India, we would like to start Best in India. The PCS for the Indian and the Asian markets.

Okay. And, sir, the execution cycle or press would be similar to the core business, like around 12 to 15 months?

No. These are very fast. I think they would be in 6 to 9 months, most of the orders.

Oh, okay, okay. So, even the working capital cycle also around the same period of time, like cash would be realized from that?

Correct. It's a fast-moving product.

Okay, sir. And just my second question on win-win insulators. So you highlighted that the acquisition cost and the asset breakup that you've given in the PPT. So on the revenue front, could you just give an idea of like the current, how much is the entry doing and like its margins and what the plan for, like would it be fully used for internal purposes or like do you foresee it having other applications as well?

So, Nimish, we are quite conservative in the way we sell internally. Each division internally buys from the cheapest source and not from the home source. And each division has to sell at the highest margin even to the internal factory. So, I would not say this business is something like a backward integration. Yes, if I buy at the market prices, yes, we get allocations. The internal demand for the product is about 40 to 45 crores per year, which is what will these guys get if the margins are similar, give and take. Right now, for the insulators, we are at least targeting about 200 crores of orders in the next nine months. That is what is our team, what we say, target that is given. We are right now focusing on qualifications and type tests. We have finished type tests in the last one month up to 220 kV. 475 kV, I think, is created in the next few months. We have also already got into our 800 kV, 765 kV DC insulator orders to them for HVDC projects in India. The customer audit, as we speak, is on at this moment at the facility. Our intention is that the facility first gets staffed by the right people, the right team, and then we start pushing on the revenues. I think the factory should be good enough at least for about 300 to 400 crores per year initially, but we are also starting capex very soon in the facility. They have two products. One is the composite insulators, which is very well covered. The second product, sorry, the porcelain insulators. The second product they have is a composite insulator, what they use for normally bushings. They have a type test out of Kyma Netherlands or 400 KB composite insulators. We are also likely to scale up that business significantly. So right now the strategy is on because we are still not acquired. There's not much of fund in the factory. Right now the focus is on strategy, qualification and type test interlator.

And margins would be similar to Meru as it was initially, and then you look to scale it up in the upcoming quarters. Would that be something that would be the view?

Yes, I think the margin profile would stabilize in about four quarters from the date of acquisition. We have to give us about four quarters. What we see at this moment is anywhere between 15% and 25% margin. The gap is very large because we still not have things under control. Once we have in control, we will narrow down the margin percentage.

Okay, so and any tentative date that you look for finalizing this acquisition, like consolidation and everything?

I think consolidation will have out of Q4, not before that. Primarily because this being an SEZ property, it will require a lot of secretaries to sign off in Delhi. So, it's a bureaucratic process in India. So, we will have to bear with it.

Okay, fine. Thanks a lot, sir. Thank you, sir. I'll get back to you. Thank you, Damesh. Bye.

Thank you. The next question is from the line of Darshal Zaveri from Crown Capital. Please go ahead.

Hello. Good evening, sir. Thank you so much for taking my question. Firstly, congratulations on a really great set of results in a challenging environment. So just wanted to know what is the revenue guidance that we can do in FY27 because based on the order book, I think we can have significant growth this year also, right? So could you just quantify that? Can we reach around 1,400 crores by this year?

Darshil, I think we have guided to 20%. At this moment, we'll stick our guns to it. Maybe at Q3, we can look at revising what we say the numbers. It's very early in the year, part of the year. I don't want to commit things I cannot honor. I would rather err in caution than be aggressive on this. We have the order book. We will build our order book more as we speak. But as I said, a lot of these factories are just yet to get commissioned fully. So we need to also bear with us that we are a factory where quality, people, systems, everything has to be established. And these are not very easy to come off suddenly overnight. So please bear with us. We will try to do our best.

Okay, fair enough. And the overall margin guidance, what would that be, sir? Because even, I think, our Q1 has also been strong, like, you know, environment, that's tough, right? So, could you just, you know, help us with that, sir?

Please model us at 20%, our high team's EBITDA. We will always try to deliver better.

Oh, okay. That's very tricky. And, sir, we're sticking to the 50% growth in FY28, right? So, that's...

I think you can start looking at our order book and the delivery timeline. I think you can start mixing it later on.

Okay. Okay. Fair enough. That's it from my sir. Thank you.

Thank you, Roshan.

Thank you. The next question is from the line of Naman Parmar from Nivshay Investments. Please go ahead.

Good afternoon, sir. Congratulations on great set of numbers. So firstly, I wanted to understand on the new product that the GIS and the grading capacitor using the circuit. What's the update on that, if you can help us on that?

So, the plant is being installed as we speak. I think this quarter, the new plant for the GIS manufacturing should be ready with all the clean rooms that is required. Substantial investments are going into that. The grading capacitors, also the trials are on. We are yet to get the slots for the type test dates from the laboratories. We are waiting for that. The product, per se, is ready. Maybe in the next quarter, we will try to put some photographs of it. So, yes, I think it is on track. We should start getting some results soon about it. I think the first product that we'll be testing is a 220kV GIS components, switching on to 400, 765kV in the next, say, one year's time.

Okay, got it. Secondly, on the bookkeeping side, like, how much would be the forex currency gain in the other income, if you can elaborate?

I think we had a loss of 8 crores, or 7.5 crores, not being.

No, that's the hyperinflation accounting entry, right? Non-monetary. But I am asking about Forex currency gain or loss. Nothing, nothing, nothing, nothing, nothing. Zero. And lastly, on the margin side, if you can help me understand what was going for the end of the Meru in the current quarter, I will tell.

Nehru this quarter delivered about 18%. Our target was to get about 22-23% internally. However, with the kind of copper and oil prices that came in just in April, they had a direct impact. I believe we should be increasing the guidance of Meiru above 15% what we were earlier. I think our revised guidance for Meiru would be around 18%.

And for Endo?

Around 18% going forward, Meiru.

No, that's why we're going to end-off.

End-offs, you will have to give us some time. The current product lines where they are already present, like Satcoms, SVCs, Automation, I think they are normally around 25%. With the best coming in, we will have to just have a look at it. The products are yet to be shipped out of the factory. I can better answer that in Q3, how the blended margins look like.

Okay, got it. And lastly, like you mentioned, you are raising the capital. So, if you can help us understand the raising of the fund will be for what and current debt structure is what?

I don't think we have much of a debt. One second, the total debt as of last quarter is I think about 23 crofts. Overall at a group level, that is also working capital at some subsidiary thing. Most of the companies are sitting on cash. However, these are at subsidiary cash. We are raising capital to close the WS acquisition. We are also proposing a 50 crore capex at that location for enhancing capacity. We have about 40 acres of land free to do what we want in SEZ. Beautiful campus. I had put across a video on it. So there we are putting 50 crores. We are started working on a lot of projects in America. We want to set up a US sales team and a sales office. So we would be deploying. We are also working on some next generation technologies in those markets. So we are also raising money for the US entry because US needs to be funded quite well. Otherwise, with just one or two people, you will not be able to get the results what you want to. So, that's the primary requirement of this.

Yeah, so, total rate will be how much?

We have not put numbers to it, but less than 500 crores.

Okay. Got it, yeah. Yeah, thank you so much for answering all questions. Yeah, best of luck for you, teacher.

Thank you.

Thank you. The next question is from the line of Ankit Jai from Anandrathi. Please go ahead.

Good evening, sir. Congratulations for delivering a very solid set of numbers. So I have two questions. Number one is, I believe that you have started marketing up Ameru's products globally. So how is the reception of the products? Are you seeing more traction from Europe or U.S.? And if the traction is good, would we need any further capacity expansion in India to cater to those markets? That's number one.

So, for Meheru, we have got a

lot of orders, but they are already full with a lot of orders. They have, I think, at this moment, supplying one and two high-voltage instrument transformer that is required in this country. They have been a very vital part of the entire Indian grid system. So, the customers are writing more of framework orders now rather than, you know, small order packages. So, we do not have much of a capacity coming in, coming in from Nehru, the current facilities. I think they will reach 100% very soon. We are looking at a facility in Turkey. I was there in Turkey a couple of weeks back, looked at the site, the space we had. We had put in some photographs also of the facility to be able to either build a facility in Turkey for the European market and deliver U.S. from India. And keep the rest of the world from Europe. That is one option. Another option is to also look at the piece of land what we have in WISA to make it especially all the export through one separate business. Our advantage of WS is that we have 40 acres of land in the campus apart from the insulator factory for doing whatever we want to do and build a large campus out of this facility. So these are decisions that we are looking at. We have about 6-7 months time before we buy the bullet.

Understood, sir. And so second would be in order to cater to more European market, would we need to set up any manufacturing facility there in the US or can we fully cater to the market from India or Turkey? So is there any localization requirement that we might need to consider?

Most of the markets are inward looking by the way they write the policies and tender documents. So, Europeans normally prefer a European-origin company rather than any other origin in the world. Americans are actually kind of open to who are the vendors in the world as long as the quality and the systems are in process. So, I believe U.S. can be catted out of India, but for the European market, which is at a different level of a boom right now because of the renewable energies, we would definitely need a facility somewhere in the European peninsula. That is one of the reasons why we are also interviewing candidates, because this is putting out altogether a totally large green facility. So, we are taking our time, taking the decision rather than rushing.

Understood, sir.

But in Europe, we are already supplying inside the Denmark grid from Meiru this quarter. And we will get more from the Swedish grid very soon.

Got it, got it. And if I can squeeze in a very quick one. So you also mentioned that you are hiring for a procurement across the group. So how does that help us? Will that lead to better negotiations? Can we see some margin acquisition when you consolidate all the procurements?

As the scale increases, we are seeing the reason why we need to start negotiating together. So give you an idea about castings, say aluminium castings. We buy about 15 or 20 crores in Meru. We buy maybe at about 250 crores of revenue in WS, we would end up buying almost 50 crores of castings. Same day in Sukrut, they buy about 10 crores of casting. Quality power buys casting. So, if all of them are talking to four different vendors, why not have a framework agreement with one vendor to get the scale and cost? So, this is us going through a natural progression of being a larger company, where we are finding at some points we need to, what we say, start consolidating and at some points retain freedom at factory level. I think we will find the equilibrium in the next two years.

Understood, sir. Glad to hear that you are moving towards that direction.

Thank you so much.

Thank you. The next question is from the line of Lovish from Burman Capital Management. Please go ahead.

Hi, sir. Thank you for the opportunity. Sir, my question is related to the family facility. I did not fully understand what led to this, what is leading to the delay in starting the production. So, can you help me understand what is the current status and by when do we plan to start the commercial production?

Technically, the commercial production can start the day we get this

clearance from the authorities, that is your pollution completion board, your factory inspector, your building completion certificate, the MIDC, all the local authorities. So the last-minute checks and balances are being done as we speak. I think we have guided this month, we are trying our level best to start commercial production this month, maybe in small volumes, not in very big batches. The reason why we are calling it trial is primarily because this being a regulated product, I cannot start producing everything overnight in this new facility because the customers want it only from an approved facility. And approval of this facility is what takes time.

Thank you. And, sir, what is the timeline for getting these approvals, the required approvals?

We have guided about six months because we have, at least in our initial scope of things, we have about 60 audits lined up, global audits.

And would we need all of these audits in one place or can we, as and when we start receiving approvals, we can start ramping up production?

So our first focus is the orders which we are executing. Let's assume that we are executing the Adani and the PowerGrid HVDC. Our first focus after getting the ISO is to get the Adani and PowerGrid HVDC approvals. For that, I need to first get the Hitachi Global approval from the facility, which is about five or six audits. Then we have Adani audit and a PowerGrid audit. So that itself is about eight audits before we shift into the next project. So we are prioritizing the audits based on, you know, which project is coming into manufacturing first.

Understood. And sir, on the win-win acquisition that we have done, I wanted to understand what was our rationale for this acquisition because it seems like backward integration will be only a small part of it. So, what was the rationale for doing this and how do we plan to turn around this facility? Because from what I understand, this is a closed plant and we'll have to spend some time into ramping up as well.

Good question, Luish. This facility will take some time, of management time, in getting it turned around. This is a very large factory, as big as a cement factory. Insulators are a capex-heavy business, unlike asset-light business of most engineering companies. Whether it is data centers or high-voltage, low-voltage, whatever we are in the business, insulators is something that we cannot, you know, live without. Let's say if you go to any substation, the first thing you see is a brown porcelain. Now, we have been finding that there's a demand for insulators internally, which is slowing down our growth, but also across board, every large multinational which is guiding for growth is getting stuck because of this. So what happens as we increase our scope of product, we can leverage or barter their growth with the supply of insulators to them. A. B. Globally, there are very, very few insulators people in the world. I think in India, there are about four or five. Globally, maybe another eight or nine people. Right? So, nobody is expanding. No new vendor is coming in, which means as the way we see the grids operate, the demand supply mismatch of insulators are going to be even more extreme. And whichever business we get into or acquire will have the problem of insulators. So, that helps us in increasing our throughput of our existing businesses and also use it as a leverage. And the amount of money I paid for the business per se is about 50-60 crofts. If you look at the valuation, we got a huge piece of land where we can start going and expanding it. The building is free for all. Only eight acres of it is the facility. So basically, the business is not very much I paid for. I think in the next two years, I should be able to collect my check back.

Good. And so just one last question. If we look at the standalone business that we have, our gross margins have increased significantly this quarter. So what led to this and is this sustainable going forward? Because I understand that there might be some increased costs on the OPEX front because of the new facility, but is the gross margin sustainable at these levels? Or will we go back to the previous levels we had last few quarters?

So, as I said, we have been traditionally doing about 25% margin in this factory, even if you see the last six quarters, give and take, that is what we are. Sometimes it's higher, but I don't hope it is going to be lower than that. I cannot really comment, you know, the way we have been, there have been sharp increase in prices, so the dollar is also depreciating, a lot of appreciating, and a lot of our orders are also exports. So, we will have to give it our, we have always exercised caution and my colleague Rajesh also exercised caution. So, please don't build your castle based on these numbers. Please build your castle based on the numbers we've guided. We will always try to do better.

But, sir, just one small follow-up on the standalone. Can we expect then around 20% EBITDA margin or somewhere close to that one? Because there will be some cost from the new... Standalone? Yeah, standalone.

Yeah, I think standalone we should be good enough for that.

Understood. Great. Thank you very much.

Thank you. The next question is from the line of Jarchit from Genuity Capital. Please go ahead.

Hi, sir. Thanks a lot for the opportunity and congrats for the good set of numbers. So, just two quick questions. Firstly, on the fundraisers that we are doing of like close to 500 P.R. So, what are the timelines of this? Like, till when we are targeting to raise 500 P.R.?

I think we may attempt raising them this month before the AGM. Our intention is to help my team less bureaucracy so that we can get both the AGMs together. I believe we will start the roadshows from 20th of this month.

That's right. And on the strongly ramp up, so like when we will, we are targeting to commence this time?

So commencement is subject to market, what we said, approvals from the bureaucrats, but as I said, our Vastu Shanti Puja is on 13th of this month, 13th and 14th of this month.

So, we can say like some Q2 will start generating revenue from this one?

I would say start looking at Q3. Some revenue tricking in Q4 is when you would see some turnarounds.

Okay, and how much we are targeting from this unit?

At this moment, our first focus is to get the factory in order before we start revising targets. Please stick to the 20% guidance at CAQ.

Okay, okay, sir. Thanks a lot.

Thank you.

Thank you. The next question is from the line of Nakul Gupta from Shikarshi Advisors. Please go ahead.

Anah, Ajabal? Yes, sir. Thank you. I just want to note that, uh, that... Accounting statement of India's 29. If we are adding back the expenses, then we should also add back the asset base. So what could be the asset base of the Turkey if we do the pre before India's 29 adjustment?

We are not able to understand your question, sir. Can you please repeat it again?

No, we are discussing the expense and adding it back to the P&L due to the India's 29 expense treatment. So, consequently, for the double entry treatment, the asset base should also be increased in the Turkey's division. So, is there any number, per se, for the revised and before NDS-29 adjustment, the asset base number? Yes, sir.

Oh, yeah.

You will have to give us some time on it. If you can write to me, we will definitely reply on it. We will definitely reply. I don't think we have the data on hand. But if you can just send us a mail, I will ensure my team responds to you before this evening.

I will do that. That's for myself.

Thank you. The next question is from the line of Rohit Tappaya, from an individual investor. Please go ahead.

Good afternoon, sir. I had a couple of questions. First is on N-box manufacturing facility. What is the peak revenue potential and contribution for the same in FY28?

So, at a high technology product, we really do not invest too much.

As I said, at this moment, the entire facility is costing us about $2 million. Give and take, we may spend about $1 million. I think that factory is good enough for about at least $70-$80 million. That is the kind of scale it can take. Yes, that would be the guidance on the facility.

Okay, that is for FI 28.

No, you asked me the peak revenue, I give you the peak revenue. I didn't say when the revenue.

Okay, and contribution for the same, you can provide this, sir.

You will have to give us some time. As I said, the factory is still not operational. The civiles are on, the interiors, floorings, the conveyor belts, and anti-static coating. There's a lot of, there's a power electronic facility. It needs a lot of interiors. It is on. Once we are able to ship a quarter or two with the products, we will be in a better position to give you guidance. At this moment, I will be shooting in the dark and I give you a number.

Okay, sir. And the second one is that on Win-Win Speciality, when you had recently acquired Win-Win Speciality, and when will it start contributing to the numbers, and how much will be the peak contribution without CAPEX and with CAPEX, as you said in the recent call?

We will start, most probably, consultation Q4 this year. Without a CAPEX, I think it should be doing between 250 and 300 cross. With the CAPEX, I believe it will be about 450 to 500 cross, but also the CAPEX is just not only for porcelain, it is also for composites adding capabilities other than just product volume.

Okay, so, and the Sandy plant, the peak revenue potential for that would be?

Hello.

Hello. What would be the peak revenue potential?

Hello?

Hello?

Am I audible? Yes, I can hear you.

Yes, sir. What will be the peak revenue potential for the sun leaf plant?

As I said, about 1,500 crores given days.

1,500 crores.

And for 1,800 crores? No, sir, that is a peak potential. FY28, we have given a guidance of 15%.

15%?

5-0.

Okay, sir, thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your question to two per participant. The next question is from the line of Bhavya Shah from 3A Capital Services. Please go ahead.

Congratulations, sir, for the great set of results. So, my question is, government has recently allowed four Chinese companies to bid for HVDC contract. So, how much this will impact our business?

Thank you. Good afternoon.

I am not aware of the news that four Chinese companies are used for HVDC contracts. I had spoken on a Motilal Oswal. I have also written about it. The four companies, if I am not wrong, you are referring to are the Chinese companies already invested in India using Indian raw material. One was TVA power transformers who were already full and supplying to Reliance and Adani most of their capacities. They are allowed to code for power grid, but even in the last tender, they did not participate. Apart from it, there is a small composite string insulator factory, which is, I think, somewhere in Baroda. That company is allowed. And two companies for GIS, I think Taikai and Pingao, one in Baroda and one in Waisak, are, sorry, northeast in Waisak, are allowed. None of these are, you know, operational factories. Most of these are, you know, deviated in the last seven years. Hardly any people out there. I think it will take a couple of years for them to even come back to where they were, you know, six, seven years back. Most of these factories have been shut down for a very long time with no teams in. Also, the government has not reduced any local sourcing norms, which means that they have to still buy 60-70% of their content domestically. So even the products, what they will have to make here, they will have to go for domestic sourcing. At this moment, what do we supply? We are already a supplier to TBA in the transform business through Sukrut. When NEPSI or Pingao comes in India for the GIS, we will supply the components that we have developed with Shosom. Apart from that, I don't think we have any relationship with the other companies.

Okay, okay.

Thank you so much.

Thank you. The next question is from the line of Viraj from MoneyGroove. Please go ahead.

Hi, Barani. Congratulations on the fantastic results and kudos to you and the entire management team for the energy and effort you're putting behind capitalizing on the market opportunity. If I can ask a little bit of background regarding WS Insulators, maybe if you can give us a little bit of history about the company, what went wrong, and then what presented this attractive opportunity for you for acquisition? Who was it last owned by? And why could they not manage it? And hence, Quality Power is looking to step in.

Thank you, Viraj.

So, W stands for Vetchinghouse. This is an American company, started in the 1960s in Chennai. This was by far the largest company in India for insulators, has a very glorious past up to 800 kV from India. Most of the insulators that were exported pre-2000 from India was from this factory in Chennai. When they were in downtown Chennai, they decided to shift a factory to Vizag in the SEZ because they were mostly exporting from India the high-voltage incinators. When they were shifting in and they had some labor problem in Chennai, and when they shifted to the cyclone, Hoodhood is a plant and almost 240 crores of the investment had to be written off in the plant. And the insurance money were taken by the financier. So this plant was sitting idle for about 6-7 years before a new set of investors took on a slump sale and spent about 150 crores in renovating the plant again. They were able to do it. They spent all the money what they had. But at the end of the day, they also got stuck when the gas crisis hit, where they were losing about 2 crores a day because the gas was becoming very expensive, not available. So that is when they had decided that they need a larger balance sheet to run the company. And they have not really sold out. They had taken a debt in the market for that money, which is what they're getting paid. And the rest of the thing, they are swapping with us. The management is coming in. They believe in the management, like how we were able to turn around Meru. They want to be a process of the growth. And we have also absorbed the management and directors into our company. So, they believe that whatever the shares they own and they will also continue running the business along with us, they will have a significantly better exit over a period of time.

Fantastic. And does the technical team stay on with WS insulators?

Because that's at the core of both the art and the science.

So are the technical heads, the plant heads, the R&D heads available to us?

There are currently about 120 people in the plant. This plant was built by the Americans, the PPC guys. This is one of the world's largest insulator companies. They built, rebuilt the plant. They have audited the plant. This product factory is already supplying 765 kV class insulators in America. But it's being branded into a different brand. We will stop the white labeling very soon. We will get into all these markets ourselves. At this moment, we've already got a lot of orders in the Indian market, including power grid for 765 and 400 KV. We are trying to get the approvals on. For us, it's a lockbox agreement. Till the day of the acquisition, any losses is to the owner's account. So, the faster they do, it'll be easier for us to be able to fund the business. So, that is why we are going in with the closure.

Understood.

We believe the legacy is quite good. WS insulators are approved in over 15 countries. Even recently, we got customers from Iraq, Abu Dhabi and all reaching out to us because they are already approved to all these high voltages. So as soon as we were there, we started getting inquiries.

Excellent. And you're already running from the Vizag plant, or is the Chennai plant still running, or is the Chennai plant available?

No, the Chennai is closed down. This is Vizag is rebranded as Win-Win, but they have an ability to use the word WS logo perpetually for insulators, but you will be changing it to quality power sooner. But all the approvals, type tests, credentials, everything is inherited into the company.

Excellent. All the best. Thank you.

Thank you. The next question is from the line of Rajasji from Fortune. Please go ahead.

Yeah, good afternoon, sir. So, sir, my question is very long-term. If you have any vision for 2030 or 2035, because I personally see our USP of Integrated Specialist as a long runway of 10,000 crore revenue. So, I mean, do you have any forward vision for that?

I have expressed it, Rajat. We would like to be the alternative to Hitachi from India, not competing them, but complementing them. I believe a country like us requires three or four companies on the technology platform like CG Power also, where you have multiple products. The differentiator between CG Power and us is we invest in high technology businesses and the new businesses. Let's say BESS, Automation, HVDC, FACTS. Where we are building our strength. We believe this is where the free cash is being generated. And we hope to generate a lot of free cash. When we generate this free cash, we intend to again buy out similar complementary high technology businesses in the high voltage transmission space. If you look at globally, Japan has Mitsubishi, Fuji, Toshiba, France has Alstom or now GE. So all the large global companies have, countries have some global multinationals. India has L&T, a fantastic engineering company from the civil background, but from the electrical background globally, I think there needs to be an alternative and we intend to be a participant in that race while generating a lot of free cash and not making mistakes on the way.

Thank you. The next question is from the line of Akhilesh Gupta, an individual investor. Please go ahead.

Hello.

Yes, Akhilesh.

Hi. I am audible.

Yeah.

Yeah. Thank you so much for the opportunity and congratulations on a fantastic set of numbers. I just have one question. There's this company within the Indox Group. It's called Inavitas.

Yeah.

They do software for, I think, Turkcell and all they've done. I just wanted to know if... Quality Power has any, like, licensing agreement with them in the future planned, something like that?

No, no, we do not own, and a couple of directors of NDOCS have shareholding in Inavitas. Inavitas is owned by also a company called Alpha Solar or Solar Company. But being directors in the group, we have always a right to call for software as if required. They are mostly into grid automation and renewable energy integration software. Not related to technically this business of high voltage what we are operating.

Okay, so do we plan to get into that segment sometime in the future? Because I think it's a high entry barrier segment.

It's a very high entry barrier segment, but the kind of software and the front-end that it is, I would not, what we say, I do not see myself as at least the next two, three years doing that. I believe there's a lot of runway in the high-voltage product space. Even in the substation, there are enough products which Hitachi, Siemens, GE do not. Control or operate where we could lap up companies at a much cheaper value. Software companies don't rate cheap and I am normally buying at a much lower value. So I will focus on manufacturing, which is our core expertise at this moment. I would never say never, but not in the next two, three years at least.

Yeah, on those lines, any like increase in the partnership with Hyosung on the GIS front like we are doing?

So we are making instrument transformers, we are also getting into grading capacitors and now with WS we are getting with insulators and bushings for GIS, do not forget all transformer bushings need porcelain or composites so for every transformer bushing that is made they will need our support in this country or anywhere else in the world or for that matter even GIS breakers composites and porcelain are everywhere. So, in the GIS ecosystem, we have just increased our scope again.

Thank you. Thank you so much, sir. That's all.

Thank you.

Thank you. Due to paucity of time, we take one last question from the line of Rahul Maneshwari from Ambit Investment Advisors. Please go ahead.

Thank you once again for giving me the opportunity. Just can you give Mr. Pandian the growth trajectory if you divide into three parts like power products, power electronics, and the ancillaries business? If you can bifurcate between these two and how within these three components or segments, how the revenue mix will be changing in the next two, three years?

I think the highest growth will come from our electronic sector because of the best coming in. The second growth area would be the high-voltage power products. And ancillaries, even though we do make a lot of stuff that is required, because we build internally, because of, I think, the accounting standard, we don't take credit for it. So we are building considerable capacity in the ancillary business, something like a CTC, HVDC, high-voltage wire. I believe over the next two, three years, we should be doing at least 500 crores in aluminum wire, which is equal to about 1,500 to 1,800 crores in copper wires as a CTC business. Same way is with our components business in Sukrut, which has turned extremely profitable this quarter for us. The other businesses we are growing in, a lot of internal consumption is not treated as sales. So I wouldn't bet too much on Ancillary at this moment. Ancillary helps us scale the other two businesses. Power Electronics will help us scale immediately in the next two, three, four quarters, and then power products will catch up.

Yes, but power product growth will be lower than the power electronics on a going forward basis also because the scope of opportunity is higher than power electronics.

It is not only the scope, it is also the supply chain. To give an idea, even if I am able to make my equipment faster, unless a large power transformer comes to the site or other equipments come to the site, the customer would not want to take a delivery. So, globally, there is a shortage of a lot of components. So, the global growth rate for a high voltage substation is still much lower compared to BESS, where there is much less of external influence on the product. So, customer can take much faster in the power electronics business. Consumption.

And just last question from my end, you are being the supplier and for the end consumer. For you, what is the biggest shortage of components that is happening or which is leading to extended supply chain?

We are not one product. We are making about 12 or 13 products and every factory has its own set of worries. Uh, and that set of worries changes every quarter. So at this, uh, if you ask for where I sit, it is a CTC cables. Uh, but if you ask the guys in the best, they are talking about, uh, IGBTs. Uh, Mehru guys are worried about the aluminum castings. Sucrutes are worried about springs. So I, it just cycles. So I would not put it on blame on one or two components. We are effectively managing it.

Thank you once again, and this precious student. Thanks. Thank you.

Thank you. Thank you, everyone, for joining this conference call. On behalf of Asit C. Mehta and Quality Power Electrical Equipment Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.