Strategic Growth and Future Prospects of GE Vernova T&D India Limited || from Management’s conference call

Growth Strategy

1. Leveraging India’s Grid Modernization and Renewable Energy Expansion
   • The company is capitalizing on India’s rapid investment in grid modernization and decarbonization.
   • Expansion in key components like transformers, switchgears, control relay panels, software solutions, and HVDC systems to support renewable energy evacuation.
2. Diversified Order Book
   • A strong order backlog of INR 107.8 billion (as of Dec 2024) ensures revenue visibility for the coming years.
   • Significant projects include 765 kV GIS, transformers, and shunt reactors for renewable evacuation in Gujarat.
3. Export Market Expansion
   • Focus on increasing exports with participation in markets like Europe, Africa, Southeast Asia, and Latin America.
   • 15% of the Q3 orders were from export markets, with expectations to maintain around 30% in future order inflows.
4. Operational Efficiency and Lean Management
   • Implementation of lean principles to drive efficiency and cost savings.
   • Improving profitability by managing supply chain dynamics effectively.

Future Outlook

1. Sustained Demand for Grid Infrastructure
   • Investment supercycle in India’s power sector to continue, driven by renewable energy projects and infrastructure expansion.
   • Strong emphasis on cybersecurity for grid infrastructure.
2. Higher Execution Run Rate Expected
   • Revenue growth expected to accelerate with a focus on fulfilling large backlog orders.
   • Increasing execution of export orders, which have longer delivery timelines (up to five years).
3. Potential Capacity Expansion
   • Current facilities in Vadodara have space for brownfield expansion.
   • Evaluating further expansion based on demand growth, but current capacity is not yet fully utilized.
4. Focus on High-Margin Segments
   • Increasing share of automation and digital solutions in the order book.
   • Targeting mid-to-high teens EBITDA margins, currently at 18% for the first nine months of FY 2024-25.

Challenges

1. Supply Chain Constraints
   • Dependence on global supply chains for critical components.
   • Rising raw material costs impacting pricing flexibility.
2. Competitive Market Dynamics
   • Intense competition from domestic and international players.
   • Private sector tenders can exert pricing pressure, though the company maintains secure payment terms.
3. Regulatory and Policy Risks
   • Government project approvals and delays in tendering processes (e.g., Power Grid HVDC projects).
   • Changes in renewable energy policies and tariff structures can impact order inflows.
4. Macroeconomic Factors
   • Fluctuations in public sector capex can impact ordering momentum.
   • Global economic conditions influencing export demand.

Key Advancements

1. HVDC and Renewable Energy Projects
   • Significant contracts secured for HVDC transformers and GIS substations.
   • Ongoing projects with Adani, Power Grid, and Reliance for renewable energy evacuation.
2. Smart Grid and Automation Solutions
   • Increasing orders in automation and control systems.
   • Growing demand for digitalization in grid infrastructure.
3. Financial Strength and Cash Reserves
   • Strong cash balance of INR 8.6 billion as of Dec 2024.
   • Positive cash generation, with INR 6.4 billion cash flow before dividends in 9 months of FY 2024-25.
4. Export Market Penetration
   • Secured approvals from European utilities for Indian-manufactured products.
   • Targeting new international markets for expansion.