HPL Electric & Power Limited — Call Transcript 2024

Nov 19, 2024

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19[th] November, 2024

The Manager, BSE Limited Listing Department, 25[th] Floor, New Trading Ring, National Stock Exchange of India Ltd. Rotunda Building, “Exchange Plaza”, C-1, Block G, PhirozeJeejeebhoy Towers, Bandra-Kurla Complex, Bandra €, Dalal Street, Fort, Mumbai – 400 051 Mumbai – 400 001 Symbol: HPL Scrip Code: 540136

Subject: Transcript of Conference Call with the Investors/Analysts

Dear Sir

This is with reference to the intimation dated 11[th] November, 2024 made by the company about the Conference Call scheduled for Investors/Analysts on Friday, 15[th] November, 2024 at 01:00 PM IST. A copy of Transcript of the conference call held with the Investors/Analysts is enclosed herewith and the same is also available on the Company’s website i.e. www.hplindia.com.

Kindly take the same on record.

Thanking You

Yours Faithfully For HPL ELECTRIC & POWER LIMITED

VIVEK KUMAR Digitally signed by VIVEK KUMAR DN: c=IN, o=Personal, postalCode=110095, l=East Delhi, st=Delhi, street=A 125 S-1 DILSHAD COLONY 110095, 2.5.4.20=3eb36823c8b414e7e934f2e0af3da010641437e49524495d66b6b358709bf23f, serialNumber=052767230d5f1c44b1c2164eefdb84f2c760ac7359949d646e7ce9b91f23d372, email=hplcs@hplindia.com, cn=VIVEK KUMAR Date: 2024.11.19 10:49:59 +05'30' Vivek Kumar Company Secretary

Encl: As above

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HPL ELECTRIC & POWER LIMITED

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HPL Electric & P ower Ltd.

Q2 & H1FY25 E a rnings Webinar Transcript

Friday, Nov 15, 20241:00PM IST

Answered by Management: Mr. Gautam Seth- Joi n t Managing Director & CFO

Moderator:

Good morning, Ladies and Gentle m en. Welcome to HPL Electric & Power Ltd.’s Q2 & H1 FY2025 Earnings Webinar produced by Ele v Ease. We appreciate your time and interest in joining us today. We’re pleased to welcome the seni o r management team from HPL who are present on today’s call:

• Mr. Gautam Seth- Joint Managing Director & CFO of HPL

To participate in the Audio Interacti v e Q&A session of this webinar, please raise yo u r hand, and you will be added to the que. Instructions on how to raise your hand are available in the w ebinar chat. As the management begins their opening r e marks, please feel comfortable to raise your hands to start forming the Question and Answer que.

You can also view and download H PL’s Investor Presentation and Press Releas e for Q2 & H1FY25, from the documents made accessib l e here. As a reminder, this conference is b eing recorded. Some statements in today’s c all may be forwardlooking, based on current expectati o ns and subject to risks that could cause results to differ materially. With that, I now hand the conferenc e over to Gautam Thank you, and over to you, Gauta m .

Gautam Seth:

Good afternoon, everyone, and thank you for joining us. It’s a pleasure to conne c t with you all as we review HPL Electric & Power Ltd.'s performance for the second quarter and first h a lf of FY25. I’d like to start by sharing a brief overview of o ur financial performance.

Getting into the Q2 numbers, for thi s period, our revenue grew by 20.5% year-over-year to ₹422 crore, while H1 marked a 21.5% increase , reaching ₹815 crore – both are milestone to p line numbers for the company.

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HPL ELECTRIC & POWER LIMITED

This growth reflects sustained de m and in our core Metering & Systems segment, which saw a 29% increase in revenue in Q2, reaffirming our positioning within India’s metering mar k et. Supported by an order book exceeding ₹3,500 crore (by the end of H1), with smart meters now m a king up over 90% of these orders, we are well-positione d to contribute meaningfully to the nation’s sm a rt energy transition. Our focus on smart meter soluti o ns allows us to meet the evolving require m ents of the energy infrastructure landscape, a responsibility we approach with both enthusiasm and c a reful planning.

Our Consumer, Industrial & Serv i ces segments have also demonstrated positive momentum. In particular, our Wires & Cables di v ision achieved 57.5% growth, driven by de m and across various market sectors. This segment conti n ues to gain traction within the B2C market, driven by our focus on quality and innovation. In lighting, w e expect stabilisation to occur by the beginnin g of the next financial year. Meanwhile, our Domestic S w itchgear segment delivered over 34.5% gr o wth, reflecting our alignment with customer needs an d market dynamics. To support this growth, we have expanded our distribution network to over 900 dealers and more than 83,000 retailers natio n wide. This network expansion has allowed us to deep e n our market presence, ensuring that HPL’s h igh-quality products are more accessible to customers t h roughout India. As we move through the second half for FY25, we intend to keep expanding our network to deepen our market penetration even furth e r.

In terms of profitability, we have se e n encouraging progress. Our EBITDA increas e d by 28.4% in Q2 to ₹60.58 crore, and by 33.8% for H 1, reaching ₹116.71 crore. The EBITDA ma r gin improvement to 14.34% in Q2 and 14.32% for H1 highlights the benefits of our efficiency meas u res and operational discipline. Likewise, PAT growth, w hich nearly doubled, speaks to our ongoin g efforts to balance growth with profitability, while earni n gs per share reflect our dedication to deliveri n g sustainable value to shareholders.

Looking ahead, apart from smart m e ters, we are committed to driving healthy gro w th, particularly in our Consumer and Industrial segments, where relatively shorter working capital cycl e s support enhanced cash flow and returns. We will con t inue to invest in advanced R&D and manufa c turing capabilities to foster innovation and meet the cha n ging demands of our industry. As we introdu c e new technologies and solutions, we remain focuse d on contributing positively to India’s journ e y towards a more connected, energy-efficient future.

Let us start with the Q&A session.

Moderator:

Thank you very much. Gautam, w e'll now begin with the question-and-answer session. For those wishing to ask questions, please rai s e your hand, and you'll be invited to unmute a n d speak in turn.

We'll begin with the first question fr o m the line of Sahil Patani. Please go ahead.

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Sahil Patani:

Thank you. Thanks for the opport u nity, and congratulations on a great set of n umbers. Wanting to understand the margin trajectory, o b viously we had good margins this quarter. So, we think that these margins are sustainable, or the or t he next few quarters, or how do you look at t he margin trajectory going forward?

Gautam Seth:

Yeah, yes. Saha, so the if you look at the margins broadly, I would say they are sustainable. We have seen an improvement the overall w h ether we are talking about q2 and h1 if you lo o k at the EBITDA, is nearly around 14.3% in terms of b o th the segments. The meter has seen a muc h better improvement as the execution is increasing. So t h ose the EBIT margins are around 16.5% so m ore or less, I think if you look at the metering segment, a nywhere at 15 to 16% is a sustainable EBIT m argin going forward. Now, of course, you know we are t o day in a we are seeing a lot of geopolitical ac t ivities and even war like situations happening across th e world, but I think those till now have not aff e cted us in terms of supply chain or even any spikes I n the pricing happening, and we have taken n e cessary, you know, steps to mitigate any types of whe t her they are on, we are talking on semicond u ctors or, you know, industrial plastics and all, we have taken our due precautions. But still, right no w looking at almost a scenario which is almost, you kn o w, which was happening in the next six mo n ths, if that were to continue, I think those margins, w hat we have are currently sustainable, at le a st for the next two quarters. When we look at the EBI T margins for the consumer and industrial that h as come down by a little more than one point, some p e rcent, and that's mainly because of the fluct u ation we saw in the copper prices, mainly in the wire a n d cable business, and mainly in July, where w e did see a drastic drop in the copper prices. So I think going forward there also we should see a i m provement, and we should probably come somewhere a round, let's say about 11 and a half / 12% s o mewhere. Yeah. So overall lighting, also, we have start e d seeing certain stabilization happening in the overall business. So the margins, again, should improv e as we approach the year end. So to just summarize your my answer, I would say yes, the margi n s, what we have, are sustainable, and maybe a nywhere around 1414and a half as an overall EBIT/ EBITDA margin should be there going forward.

Sahil Patani:

Got it. Got it. Thanks for that. And m y second question is, obviously, in the investor presentation, you've mentioned there are tenders abou t for about 10,000 crores in the metering sp a ce that are floating around. So what is, what is the kind of timeline for that. Like, do you see any anything that's coming out in the next few months or few quar t ers, orders being awarded? Like, just want to understand what the what the landscape is looking like,

Gautam Seth:

So I'll just like to probably add som e thing to what we have written on that. Now th e inquiries for us and the orders are coming through the AMISPS, so when you look at the overall fig u res, and I'm talking - 3 -

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about the figures, what we see in t h e public domain, roughly, I would say about 1 2 crore meter orders have been given out to the AMIS P , by the various state utilities. Now those orders are eventually getting finalized on the meter manu f acturers, and we being a prominent player, d e finitely, we do stand a good chance. So I would say, instead of tenders, you can say, probably thos e , these are, we are talking about inquiries which are g o ing to come in that. So right now also, we, w hen you look at the active inquiries, what we have are f airly good enough, and we are probably enga g ing with most of the AMISPS who are right now active a nd independent in the market. So there are a lot of inquiries. So I think right now our we are not wor r ied on that, because eventually these orders w ill come in. We are supplying already to most of the A MISPs so as more and more supplies are g o ing to them. We do expect further orders to be released to them. Certain new AMISPS, also, we've be e n talking but overall, as I think now, it's a continuous pro c ess, as in a business whereas more and more orders will be going, and depending on our delivery s c hedules, the quality, what we are, you kno w , what the product promises- I think we are confident o f getting many more orders in the future.

Moderator:

Our next question will be from the li n e of Viraj Mahadevia, please proceed with your question.

Viraj Mahadevia:

Hi Gautam, congratulations on all t he visible positive trends in the business that you've been talking about. Yeah. Thank you. Two ques t ions, Gautam, one is, can we expect the pivot in a meaningful way to smart meters to commence? Q3 onwards, would you say-can you expect a m e aningful pivot to the Smart Metering business in revenu e s to commence from q3 onwards?

Gautam Seth :

If you see the growth, what we are d oing from the last year, we are talking about a l most, you know, like 29% in this second quarter, 34% in the overall H1 so going forward, also, we will k eep seeing a growth happening like this. Now I don't se e a, you know, a sudden spike happening over a ll, like this. Because we are into the supply business. Yo u know, we are supplying to the AMISPS and n o w it is getting broad based each time. So as we have m ore and more AMISPS, whom we are supplyi n g to, plus they have multiple projects in different states, w hat each single AMISP is doing so broadly, the business is getting broad based, and we will see a con t inuous growth. I don't see a big spike happening into this. But yes, the business is growing, and we wo u ld continue to see the supplies happening.

Viraj Mahadevia:

Historically, you have obviously Ele c tricals and branded electricals business, and y ou've done more of the conventional meters. Now your order book has shifted more in favor of s m art meters. As you mentioned in your presentation, al m ost 3200 crores out of 3500 crores is smart m e ters 99-95% of that, - 4 -

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right? So now, would you expect t h is positive mix change for smart metering to play out starting q3 onwards?

Gautam Seth:

I think that's already happening an d already happening. Yeah, it's already happe n ing, and that would continue to happen. But you know, as like you might have seen, also, that ther e have been, smaller delays little bit here, and there are s mall challenges happening while the impleme n tations are going on in an interim period. The utilities- b ecause they would need some meters, and e v en for areas where they're not implementing so that bu s iness, that smaller part, will keep continuing t h e legacy meters into our overall mix, because already, we have 95% of our metering orders are s m art meters. So the change is happening, and it will furt h er happen like that.

Viraj Mahadevia:

My second question is, what is the average price of a smart meter versus a conv e ntional meter? How many times?

Gautam Seth:

You know, normally we I would refr a in from referring like that. But the figures, what normally people talk in the public domain, maybe they're a little older right now, but people talk about I N R 3000 or INR 3.5k per meter.

Viraj Mahadevia:

Just number of times. So you know, what is the conventional meter versus the Sm a rt Meter?

Gautam Seth:

The conventional meters were typic a lly at a ballpark figure of INR 1000-1200, nor m ally.

Viraj Mahadevia:

- So we're talking at least minimum 2 2.5% right?

Gautam Seth:

Roughly, exactly

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Viraj Mahadevia:

Okay, very helpful. Wish you all the best watching your progress. I'll come back.

Moderator:

Thanks, Viraj, for your questions. T he next line of questions will be from Arpit M a heshwari, Arpit, you can unmute your line and go ahead with your questions please.

Arpit Maheshwari :

Firstly, thank you so much for arran g ing this type of conferences, sir. I have two to three questions that you have talked about the domestic switch gear business, about the 34% growt h via wires &cables, around 57% growth in lighting equi p ment, it will grow but so what about your fans business? You have entered recently into the fans busi n ess. And what about the solar which is the t a lking point of the, I think, this year or the next years to c ome, what type of growth do you see in these types of businesses, and also about this industry and swi t chgear businesses?

Gautam Seth:

So I'll take a one by one. So if y o u see we, we launched the fans in the over s eas market, initially because the Indian market in fans, was seeing certain change happening, typically because of the B double E markings happening on t h e star rating. So there was some churning h a ppening in the local market. So we thought, instead of entering during those times, it's better when t he market stabilizes and offers growth. But, and I think that was a good decision at that point in tim e , we have currently launched in three states in the fa n s and now from next month in December, w e hope to now start scaling up and spreading ourselve s to much more other areas, typically, becau s e the fan season is slightly more season based. It's a lit t le cyclical.

You know, trends we see. And fro m December, January onwards, we see the that part of business picking up. So we have, we have done a lot of back end work, and hopefully by M arch, we should be present in over 50% of the pan-Indian market. Of course, we the strategy here has been that because we must align the after sales, servi c ing, we have to align a lot of, you know, manpower and such while launching. So the strategy was that we would go state wise, and I think wherev e r we have currently launched, and the figures, what are coming out- the acceptance is good. But now , till now, the season has not started from a procuremen t , from a trade point of view also. But from D e cember we will see, start seeing numbers overall. Our i d ea is that we will be a pan-India company by next year. And from next year onwards, from April onw a rds, we should start seeing certain good nu m bers and growth in terms of fans. But one thing, if you s ee the what the fans were there three years b a ck and now, a lot of changes has happened in terms o f design, in terms of technology, the BLDC is r eally picking up. So that is where we find as HPL, our f o cus on electronics has always been there for last now, two and a half decades. So I think there are s ome advantages we which we can leverage w hen we are entering new segments, like a fan and plus, it gives us a good add on, along with our othe r consumer products, - 6 -

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so that we go with a basket to o u r trade channel partners, to our customers, e ven in the building segment.

So that is it now coming to solar. Y es, we are seeing a good traction on the sol a r, especially on the solar cable, the net metering and e v en our switchgears. But this business, this re p orting, gets clubbed with our existing. Uh, you know, int e rnal product vertical. So when we look at consumer and industrial the solar products of cable gets ad d ed in the cable and cable business reporting , the meters, the net meters, going to the metering repor t ing. So we are not giving out a specific reporting on the solar part. But yes, there's a good traction e v en the new schemes of rooftop solar, which the government has come out with, that also will give u s a pan India growth in the next three to four y e ars. Now, when we look at the industrial switch gear s e gment, last two years, we have seen a very g o od growth this year because of certain procurements of the government and certain through the contra c tors. Of course, this happens all through the dealers an d distributors, through the contractors. They are the offtake has been slightly slow in the industrial switch gear segment, but hopefully that should pick u p in the second half of the year,

Arpit Maheshwari :

Can you do that in the solar meter, the solar products, bifurcation wise, like, wha t is the growth in the solar net meter? And you are clubbing those right now, and the main segments o n ly. So can you do it the separate way in the future, year s to come?

Gautam Seth :

We can look at it,but when we tal k on solar products, there are lot of it. If you l o ok at only the solar switch gear, we are talking about over 30 to 40 different products. So it's not about one product, because we have the string juncti o n boxes, we have the AC DC converters, w e have this. So it's a huge range. And eventually, when g rids are changing to, you know, from the fossil fuel to the solar and a lot of that is happening. So for us t o go to minutely in our reporting, then we prob a bly lose the broader picture, at least when we are givin g out our results. Yeah, but one thing is there, t hat's the solar is the future, and as the R & D what we h ave and the manufacturing capabilities and th e products which we have already launched, we definitel y have a good, you know, opportunity going for w ard.

Arpit Maheshwari :

So, sir, you have talked about that the fans business you are full facing through the April of the next year, but I want to know that, are you manufacturing these fans in house, or t h ere is a third party manufacturer for that?

Gautam Seth :

Right now, these are vendorized, w ith a lot of tooling and design being done in h o use. But, you know, as in with HPL at the way we see, o nce we see a growth coming in, and we reach a critical mass, then - 7 -

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probably we would look at, you kn o w, we would be open to looking at manufact u ring in a bigger way going forward, but many of our oth e r products, also, we have started the same w ay. But as we see a good traction in the market, and wh e n a critical business comes in, then I think it's a good time to invest and then go forward into the manuf a cturing.

Moderator :

Thanks for your questions. Arpit, p lease raise your hand to rejoin the queue for any more follow up questions. Our next question will b e from the line of Suraj. Jan Suraj, you can un m ute yourself and go ahead and ask your question. Yeah .

Suraj Jain :

Thanks for the opportunity. I just w ant to know what we have offering for the 5 G products, what we have in the 5G technology?

Gautam Seth :

So currently, we are supplying cert a in switch gears to the telecom companies and the wire and cables. So, a lot of growth. What we have s een in the past couple of years we are, is m a inly on the wire and cable side, where we are also doin g for their infrastructures, including the tower i n stallations. So there we are seeing and we are supplyi n g to almost every major contractor who is d o ing business in the telecom business, and also to the to the largest telco- we are supplying directly also. So it's a good segment for us. And I think we are looking at even some more products in switc h gears which can go into their installations.

Suraj Jain :

So what will be the share of revenu e over a period of time and going forward?

Gautam Seth :

So although, you know, these are, l ike the way we look at telecom business, we a lso have, you know, the real estate segment. We also h ave a lot of OEM segments, you know, like d i fferent segments.So although telecom and cable and w ire are relevant to infrastructure, I will prob a bly not have put a number, but they are decent enoug h , you know. But still we are not, as a compan y dependent only on one or two segments. So although it's a very important part of it, but roughly as a share of the overall wire and cable, it will not be so dominating, you know, because we are as HPL, we are very well spread out in terms of our customer segm e nts here, and our growth comes from all across. So if you look at wire and cable right from a resident i al segment, commercial segment, we are seei n g good growth. The real estate has been good, even on the industrial side, like the cables going to ind u stries or OEM panel builders, that's also been growing. The domestic wire, of course, has been gro w ing so similarly, the telecom also has seen a good grow t h from last two years.

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Arpit Maheshwari :

On the Smart Meter. Just want to know is the so smart meter demand is moving a s per the plan? Are there any challenges? Yeah, so o v erall market, I just want to know the overall m arket of the Smart Meter going forward.

Gautam Seth :

So the overall market for smart m eters is, of course, huge, and I think that i s well stated by the government, because, you know, t h e originally 25 crore smart meters are to be replaced, you know, from the conventional ones. And 22.5 nearly are sanctioned so. And I would say t h e orders almost are. 12 crores have been given out to th e AMISP. So the business overall is large. Wh e n you look at from a like we are business supplier, lea d ing supplier to the AMISPs. So our challeng e s are quite limited, because, you know, we have been d oing manufacturing. We have got a huge capacity in terms of R &D development. We are already ther e in this so the challenges for us are less, whil e the AMISPs, when they are implementing, there could be some challenges at the ground level, whic h may be coming up, and whenever there is a change in t echnology, because it's a change from a singl e installation meter to a complete system. So there is a l o t of work which happens at the utility level, w h ich the AMISPs are due to do that. So there will be defi n itely challenge, but I think overall, the segme n t is moving. And I'm sure these challenges and the ro a dblocks would, you know, open out and the overall system gets implemented. What is important is that the overall implementation is happening a t a good level, and even the awareness levels. And o n ce people see the benefit, the utilities are se e ing the benefit. The government, both Central and the state governments, are, you know, seeing the benefit. And they are, therefore, they are pushing the sma r t meters across the country.

Moderator :

Thanks for your question, Suraj, yo u can raise your hand again to rejoin the queu e for any more follow up questions. Our next question wil l be from the line of ShauryaPunjiani. You can unmute yourself and go ahead.

ShauryaPunjiani :

Sir, given that you have grown 30% in H1 so can we say we grow around 20- 30% in this year and next year, overall,top line?

Gautam Seth :

So, so overall, no. So we, our grow t h, if you see, is about 20-20.5% in the Q2 an d 21.5 as a company in the H1 so I think a similar gro w th would be expected going forward, for sure, yes. And as I said earlier, also that apart from the s m art meters, the cable and wire is performing well. The domestic switch gear is performing well. We d o see towards the end of the year, even lightin g part to start having - 9 -

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real term growth, and even the ind u strial segment to come back. So overall, yes, w e see the market in a good way, and a high double digit growth definitely look certain going forward.

ShauryaPunjiani :

And sir, we give that order book, t h at 3500 crore order book. So what is the exe c ution time frame for that order group,usually?

Gautam Seth :

So in this, if you see almost, we can say 90% is smart meter in this and, and almost, probably almost 95% is the overall metering, you k n ow. So if you see the Smart Meter, the norm a lly with a time lag of six months for preparation. The ex e cution is supposed to be in two and a half y e ars. So overall, two and a half to three years is what the execution timeline schedules are for the Smar t Meter. So based on that, these orders are structured, a n d that's how we are supplying,you know, thes e meters.

ShauryaPunjiani :

Thank you for that. That's it, yeah, t h ank you.

Moderator :

Thanks for your questions. Our ne x t question will be from the line of Pranjal Muk h ija, Pranjal, you can unmute your line and ask your ques t ion. Pranjal Mukhija : So I had a couple of questions with regards to the Smart Meter division. So curre n tly, are we only just manufacturing the meters, or are w e also, like, forward, integrating into the, you k now, into the whole AMI part of the chain?

Gautam Seth :

So our main focus currently is on th e manufacturing and supply of meters. So if you look at most of our orders, almost bulk, other than on e which we took up in West Bengal, I think entire order book is basically on supply, you know, de v eloping and supplying manufacturing these m eters to the for the AMSPs, and that is where our, you k now, the focus would remain.

Pranjal Mukhija :

So we're not going to have any futu r e plans to, like, get into the communications si d e of things?

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Gautam Seth :

No. Sowe are - apart from the met e r supply, we have already, like earlier, also, if y ou see, we did a tie up. So there are some things. Th e re are certain value adds which are along w i th the Smart Meter, which we are doing. So if you l o ok at the whole hog AMISPs work, which is actually involves installation, financing, you know, gi v ing the complete, you know, support on the whole thing that we are not doing. But there are the valu e adds, whether they are of the software o f the MDM and the communication part, so that we ar e already doing selectively, we are already doing we and we have supplied those also to certain of th e , you know, private utilities or the AMISPs, so t hat we are doing so that becomes a good value add for u s. But overall, looking at the AMISP as a full system integrator and doing the financing and the installation part, we are not pursuing that.

Pranjal Mukhija :

So, since you're saying that you g u ys are also into, like, communications and H E S side of things. So currently, like, what sort of communication types do we have? Is it like, cellular, RF, what are we doing?

Gautam Seth :

I think that depends on the custom e r's demand. So we can do all, whether it is RF, cellular or even NB IoT, so we can give all the three o ptions and, but I think the major demand rig h t now, probably it is cellular right now, but that will keep changing as we go ahead, but as a company, as a technology, we can give all the three of them, or rat h er, we have been giving all, all three of them.

Moderator :

Thanks for your questions. Our n e xt question will be from the line of Neha G u pta. Neha, you can unmute yourself and ask your question. Please.

Neha Gupta :

My question is with the growth in both the wires and cable 57.5% growth and domestic switch gears, 34.5% growth segments. Would yo u discuss the strategic moves that led to these r e sults? Furthermore, what market dynamics are you o b serving in the tier two and the tier three cit i es where you have expanded your retailers and distribution network? And how do you plan to leve r age this network for your continued growth?

Gautam Seth :

Yeah, so, so if you see, of course, w e've been, you know, quite upbeat on the wir e and cable segment, and I think it's a basic - the m a rketing push and expanding the channel, w hat we have been continuously doing. But now in t h is quarter, we did see a good growth acro s s all the customer segments. So whether we look at the residential, commercial, the domestic pa r t, the infrastructure, - 11 -

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telecom. So we have seen aall ro u nd growth in wire and cable. And similarly, w hen you look at the domestic switch gear there, the focus on real estate has been strong. So as a company now with because now we have almost fiv e segments of products which can go into r e al estate in a good manner. So if you look at we have MCB, DBs, we have switches, we have wire and cable, we have LED lighting and we have fans. So o verall, these five segments now can be pushe d into real estate in a bigger way. So in all the states no w , we are putting in almost like a separate verti c al within our teams, where the focus on real estate and key accounts would be strong. So I think ther e are a lot of actions we have taken on that, even if y o u look at on the branding part, I think this first half, and more specifically, the Q2 has seen certain you know. Growth in our brand visibility. W e are reaching out to more people. A lot of activities hap p ening at the ground level, whether they are th e electrician connect programs or retailer meets, even w ith consumer connect. So somewhere, I think, to some extent, on the branding part, distribution part, we have been reaching out in all the segment s . So that's what we have seen. I would say good growt h in these two segments. In fact, if you see wi r e and cable, almost 30% growth in the first H1 and the d omestic switch gear has been almost 27% gro w th in the first H1 So overall, I think these are certain o f our strategies have paid us the results in t erms of the market dynamics. When you look at on t he geographical areas, what you were asking there our focus, although the cities and metros are always covered, but I think the growth, if w e were to analyze is probably a lot of it is coming from t he tier two and tier three cities and the big to w ns, what are there. And I think the growth in terms of our channel, what is happening, the retailer, maximum growth is probably in the tier two, tier three s e gments. So I think these are the segments where, or these are the areas where, in future we would as HPL, we would see a lot of growth coming in f r om these non-Metro and non-city segments.

Moderator :

Thanks for your question. So the q u estion that has come in Gautam,is what is yo u r action plan for the smart meters that seem to be bann e d in many states, like Gujarat, Maharashtra, fo r households?

Gautam Seth :

Yeah. So you know, while we are looking at the implementation and supplies, w h ich, of course, right now a lot of work is going on acros s the country. So there have been certain prot e sts, which probably are in the news, and we are seei n g it. But I think these are, I would say, temp o rary, and in certain pockets, these are happening. And as more and more consumer awareness com e s, we will see a Go ahead on these supplies to be hap p ening. So we, of course, looking at our produ c t portfolio, this is still a smaller part being supplied to th e se states, but overall, if you see, I do expect i n the next couple of months, both these states will be b u ying again, and they have probably re-shifted t he focus to more on the commercial side, industry side a nd other things. And the domestic part will o b viously be taken up, which, as per us, personally, I feel this will come back in a bigger way whenever t h e new technology is getting, you know, implemented, w e have seen it even in 1996-2000 when the el e ctronic meters came in. So there were a lot of protests. There were sometimes delays happening bec a use people felt that the electronic meters would be, you know, like the meters would go faster. The y would have to pay more. But I would say those we ha v e seen those times also, so similarly here, al s o, as we look at the - 12 -

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consumer awareness going up, I think government is also doing a lot of w o rk to give out the information, you know, on the education part of the benefits of smart meters. So s mart meters have a huge benefit for the utilities and t h e government, because that cuts the AT& C losses. You know, especially, I think a lot of thing is also on the prepaid part, you know, changin g from a postpaid to prepaid. So I think these things hap p en, but the technology is good. I think even in individual consumer with the data, what he gets, the wa y he can analyze and the accuracy, what is there, I think the people will see the benefit and eventually t h ey would be rolled out. That's the way we look at it.

Moderator :

Thanks. Gautam, we'll take anothe r question from the line of Deepak Mehta. Dee p ak, you can unmute your line and ask your question. Ple a se go ahead.

Deepak Mehta :

Yeah. Thanks for the opportunity, sir. My question is around, what is the run w ay for smart meter implementation? So can we see 10 t o 15 years of runway for the same?

Gautam Seth :

No, so the current scheme, what y o u look at, I think the implementation probabl y in the next three to four years should be done, becaus e the way it is picking up and now, the imple m entation probably is happening in multiple states through multiple AMISPs, and even single AMIS P sare doing multiple projects in different states. Those t h ings are there- the pace is picking up right no w , because a lot of it initially, when the orders are given out to the AMISP, there is a time lag of six to eight months by the time they, you know, get the local l evel integration done, or, you know, certain p i lotmeters are tested and then go live happens. But onc e the pace picks up, the implementation would happen. And to just, you know, add on to what your que s tion is that if you look at the long-term benefit s , because right now, under this the first 10 year, you kn o w, the supplies are to happen in almost thre e to four years. And then we have a 10 year period. But e ven going forward, we would see by the time w e reach the 10 year period, probably a new generation o f smart metering coming in, new technologies coming in. And over a period, you will see the metering getting enhanced, and again, a new set of m eters coming in. So whether we look at 15 years or 20 years, it's definitely a long term story. When y ou look at the smart metering, as far as smart metering i s concerned.

Deepak Mehta :

My question is around, yeah. So y ou manufacture the Smart Meter. So what is the percentage you outsource the material from vendor s or third party?

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Gautam Seth :

Yeah. So, we are very well backw a rd integrated. I think among, I would say all t he manufacturers in India, probably we would have alm o st the highest levels of backward integrations. What we do so we do right from engineering, plastic tooling, electronics, a lot of components, everyt h ing we do, mostly in house. Only thing where we are d e pendent on others or components is items w h ich are not made in India. So certain parts, like components, could be coming from outside, but within India and when you look at the semiconductors or the a ctive, passive electronic components. Since t h ey are not made in India, they must be imported. But I t hink we are well ahead of what the industry c u rrently is doing. And even going forward, we are lookin g at, you know, making much more, you kno w , components, even which are critical to be backward i n tegrated, so that we can have a better, you k n ow, a better Supply Chain Management, maybe the pricing coming down, a consistency in quality and t echnology, and then obviously the overall, the Make i n India, what we are promoting is, I think, t hat would also get enhanced.

Moderator :

Thanks for your questions, Deepak , you can rejoin the queue by raising your han d for any more follow ups. We have another question th a t's been sent in. The question is, Gautam, w ould you be able to share the success rate of new tenders released specific to smart meters? And se c ondly, since HPL is not focusing on financing meters. A r e there cases of deals being lost? If yes, any n u mbers to share?

Gautam Seth :

So, like, as I said earlier, we are no t directly participating in tenders for AMISP, so our business is now dependent upon, you know, interac t ing and negotiating with the AMISPs and getti n g the, you know, the orders based on our merits. So tha t is it. So, there is no success ratio what we ha v e, you know, based on direct entering. So right now, o u r business from a B to G, where we were fo c used, mainly, 100% supplies going to the government are today now more of a private, you know, like a B to B, but completely to a private segment. T h at is how it is. Now, when you look at it, yes, there could be only, I think there are about one odd AM I SPs who are focused with only one manufacturer combined, you know, like kind of a JV arrangemen t . So, yes, those kinds of businesses we stand t o lose because, you know, we are not part of their con s ortium or JV, you know, which is done prior t o the tendering. But overall, that still gives us a big opp o rtunity to deal with all the independent AMIS P s, and since we are not competing with our AMISPs in i n those tenders. So, we do stand a chance to b e a preferred partner with multiple AMISPs to do that. An d I think our focus has been on the R & D desi g n, manufacturing of smart meters. And I think that is w h ere we are playing on our strengths right now in this first phase of the RDSS.

Moderator :

Thanks for your answer. Gautam, we'll take another follow up question from the lin e of Viraj Mahadevia, you can unmute your line, and ask y our question.

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Viraj Mahadevia :

Gautam will be helpful is to get an u nderstanding of the landscape of sectors or sub sectors that you're looking to cater to, whether it's ga s meters, water meters, solar meters, and where you already have this capability, or where the capabili t y is lacking and you're not looking to play?

Gautam Seth :

Yeah. So, so already, if you look a t within the Smart Meter, I think that we are anyway doing we are doing the solar meters, the solar ne t meters, we are anyway doing that.

Viraj Mahadevia :

How big is that opportunity? The Solar Net Meter?

Gautam Seth :

Solar Net Meter that gains, I think, to some in an interim period on the rooftop s olar, it gains certain traction, for sure, which we are sup p lying. But okay, but overall, I think once the s m art meters come in, then that would cover the bulk of it. You know, because they have multiple featur e s, which would also cover the net metering part, you kn o w, so that can technically, it's-

Viraj Mahadevia :

Only at the household level. It's als o at a solar farm level?

Gautam Seth :

No, all this thing like we are, if you s ee our meters, wedo grid metering. We do even in the industries, in where the loads are different, com m ercial complexes we do, and then also on th e domestic place we do so that we've been always doin g right from the start, but that opportunity is in c reasing now. That is increasing because all round the meter would go into a smart one, into communi c ation. So that would happen now regarding the other s e gments. Yes, we have been working on the w ater meter part, but again, nothing right now to share. But as we have it, I think we'll be happy to shar e the information and what kind of business then- we can look at it.

Viraj Mahadevia :

Understood. This is all indigenous t e chnology, or you're looking for partnerships?

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Gautam Seth :

No, no. I think just by us now. I thin k we; I would say not to boast of it, but I think th e Indian industry, the way the smart metering is developi n g, and, you know, right, the leading players ri g ht in future, the way things are coming I think the industry could be a technology provider for the wo r ld. You know, that's how, because the Indian landscape is challenging, and even in if you see electricit y meters, we do have problems of theft, of a lot of pilf e rage, you know, the heat conditions are di f ferent, the weather conditions, you know, you have rig h t from minus 10 to a 50 degree in Rajasthan, y ou know. So, so our meters that way as an industry, are robust, you know. And with a 10-year warrant y , and like, if you can supply in India, you know, you can s upply anywhere else you know, understood, y eah, one needs that kind of robust technology to be the r e. So, I think overall, it's a good evolution for t h e industry and for a company like us. For sure, great. M y

Viraj Mahadevia :

Second question is, why did gross m argins trend down in Q2 - was there a mix change? Was it more sale of wires and cables which are l o wer margin?

Gautam Seth :

So you're talking about the consum e r and industrial segment, no-

Viraj Mahadevia :

Overall in your business, your grow t h, your Q2 gross margins were lower, I think, t h an Q1? Any specific observation on that?

Gautam Seth :

Maybe it's just could be on the pro d uct mix, because if you see the consumer an d industrial segment, the margins have come down in th e Q2 mainly on the fluctuations of copper and mainly with wire and cable occupying a bigger space. And then the margins slightly dropping down because of the fluctuations. So that could be it. It's just that. But overall, if you see, it's still maintai n ed around 33-35%.

Viraj Mahadevia :

Yeah, thanks for your questions. V iraj, you can raise your hand to rejoin the qu e ue if you have any more follow ups. Our next follow u p will be from Arpit. Arpit, you can unmute your line and ask your question please.

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Arpit Maheshwari :

Thank you so much. Can you thro w some light on the new launches and what w ill be the margin on new products that you are mentioned in your investor presentation? And s e condly, about your consumer industrial you are talking a bout that, but missed that, your consumer ind u strial margins down from 11.56% to 10.46% so do you expect to go up in the future years to come?

Gautam Seth :

Yeah, so I’ll first take the second part of your question. The margins have co m e down. It's mainly because of the fluctuations in the c o pper prices on the wire and cable, also the li g hting part has been seeing a little flat business happeni n g over the last quarters. So going forward, ma y be not in few years, but maybe in the next one or two quarters itself, we should see the margins coming back. I do expect that even the lighting margins sho u ld see an improvement, because the fall in p rices, and although there is a volume growth, but the values have been quite a little lower. But that sho u ld improve even the wire cable business, looking at, I t hink there also the margin improvement sho u ld be there. So we should come back on that for sure. Now, when you look at the individual produc t launches which we have, because we do that almost o n a month to month or quarterly basis. A lot of products in each segment are getting added. So no w , although they have their individual profitabili t y levels, but broadly as a policy, they do get aligned more positively on the segment wise profit. So if, let's say, we are launching a new lighting product, s o whatever the current margins are there, nor m ally we look at that the individual new products added s hould have at least a more positive individual n et, you know, like a unit margin as we are adding them t o the basket. So if that is not complying, then w e do go back on the drawing board. We make sure that the pricing of launch, or the costing and other s get aligned, so that overall, we can, in the short, long te r m, improve the margins of each of the division s here. So that is but I don't think we report them individ u ally. But yes, because lighting today may hav e over 200 products. So if there are, let's say next 10 pro d ucts added, we make sure that they at least t h e they have a better margin profile than the existing product, so that overall we move to a more positive level. Yes.

Arpit Maheshwari :

Thank you so much, sir. Yeah. Tha n k you.

Moderator :

Thanks for your questions. Arpit, we'll take the next follow up from Pranjal, you c an unmute your line and ask your question please.

Pranjal Mukhija :

Hi, sir. Thank you for this opportuni t y again. So again, a couple of questions on th e Smart Meter bit. So could you talk about the competi t ive landscape in this industry, and like, the impact of like, this competition coming up on the margins, let's say, two or three years out. So the reason why I'm asking - 17 -

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this question because we're seeing new players like coming up, right, like listed pl a yers, like Salzer and with Keynes also like, you know, a c quiring, like, sort of acquiring, and they also h a ve some, like, good plans of, you know, capturing some market. So generally, wanted to understan d , like, what are the barriers to entry in this business?

Gautam Seth :

No, so there are no barriers, for sur e . The natural barriers are, of course, competi n g, you know, getting the technology right, getting the, y ou know, the overall mix of what the busine s s requires. So, you know, like every business, what we are in, and even traditionally, in the last 25 ye a rs, there were, there have been no barriers in the meteri n g industry. And we have seen, at times, over 50 companies being in the metering industry. And with the way the technology moved up with the w ay the competitive scenario was there. So, most of th e m, almost 80-90% of the companies, went o u t of the market. And okay, now it's a new opportunity. L o t of new players are coming in. So we are, I t hink, well geared up for the competition. We do have a big competitive edge in terms of our t e chnology, our R&D manufacturing. So, I think a lot of them, the list goes on and on, and I think w e will. We are really working to grow up and make sure t hat the market share, let's say, of 20-25% of t h e industry. And it's a fast-growing industry that we main t ain that. But yes, the competition will come in for sure, it will be competitive. Rates will go down in future and, but the costs are also going do w n. The volumes are going tremendously high, so and w e are also doing a lot of automation at our en d to look at the peak demands, which would come in the next one to two years. So, it's an open market, and I think the more competitive it is, the better benefit f or the entire industry, for the utilities and for the consumers. So, I think that's how the landscape is, a n d it is going to be competitive, but that's in eve r y industry.

Pranjal Mukhija :

So secondly, by when will we see t he government coming out with the tenders f o r the second half of that 25 crore smart meter target?

Gautam Seth :

So, I think the evaluations are alrea d y on. So, if they are given 12 crore orders to t h e AMISP, and this is as per government figures, these a r e not my figures. These are as per their websites. So I think they're already getting evaluated, but I thi n k maybe the next three, four months, there c ould be some gap, because it takes time to evaluate, a n d what the orders they gave, also, they were v ery early starters, so they also spent a lot of time evaluating, but I think that would happen maybe end o f the year, or maybe in the first half of next year, the balance should come out, so there's no timeline of stoppage or, you know, orders to be given. It's just a natural process. What we are seeing is ther e seems to be some gap, probably while the orders are g etting finalized to the AMISPs and the tenders a re coming out.

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Moderator :

Thanks for your questions. Pranjal, s ince when during the end of time for this earnings webinar, I'd now like to close the Q and A session. I f anyone has any more questions, you can feel free to write to us at Dickenson, and I'll ensure we get them answered to your satisfaction. I'd now like to hand over to Gautam for some closing remarks. G autam, over to you.

Gautam Seth :

Thank you, and I just want to exten d my gratitude to everyone here for their suppo r t at HPL. We remain dedicated to a path forward, guide d by a long-term perspective and a commitment to the operational excellence and market expansion. Thank you once again for being with us a nd have a present afternoon.

Moderator :

Thanks, Gautam, on behalf of Dick e nson ElevEase and HPL, thank you to all participants for attending our call today. On behalf of HPL, c h eers and have a good afternoon. Thanks, Ga u tam for your time as well. Cheers.

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