- Smart meters are part of the advanced metering infrastructure solution that measures and records electricity use at different times of the day and send this information to the energy supplier. This gives consumers better access to information and allows them to make more informed decisions on the use of electricity in their homes, leading to reduced power wastage, and long-term carbon and financial savings
- Ministry of power is planning to make smart prepaid meters mandatory across all states starting 1 April, 2019. Central Govt plans to make all meters the smart meter by 1st April 2022 - -
- Talking about the problems in the process the minister said, “But there is problems of technology meters are not available. We are, however, pushing it. We have added 2.26 crores new consumers. It is a record high.
- DISCOMs will benefit as they will get payment in advance. This means just like a prepaid SIM connection for a mobile, which can be recharged and used again, electricity will be used in the same form. This will help poor consumers. Instead of mandatorily paying for 30 days, they can now pay for the days or hours they would like to consume as per their requirements - -
"This step is likely to bring revolution in power sector by way of reduction in AT&C losses, better health of DISCOMs, incentivize energy conservation, ease of bill payments and doing away with the paper bill “
The government is procuring smart and prepaid meters to be deployed across the country. State-owned Energy Efficiency Services Limited (EESL) has floated two global tenders for procuring a total of 10 million smart meters.
Attempts to bring down the price to Rs 1,500 to Rs 2,000 and finally below Rs 1,000. The
Minister of Power said that the meters would be entirely made in India, as the country is one of the best manufacturers of such devices in the world.
Union power minister Piyush Goyal had said that the electricity meters, priced at around Rs 10,000 to Rs 15,000, would come down to under Rs 1,000 a unit.
Advance Metering Tech Ltd. (AMTL)
AMTL was born out of demerger from EON Electric Ltd in 2011-12 when EON Electric (formerly known as Indo Asian Fusegear Ltd.) sold its Switchgear business for more than 600cr. Indo Asian switches was one of the rare electrical fitting brands that was created in India.
Indo Asian was left with the lightings, wires and cables business and between the two promoter families it was decided the Indo Asian would be rechristened Eon Electric which would continue with lightings business and the other promoter, the Ranade Family, that more interested in Energy management, conservation and metering business would form the other entity called Advanced Metering Technology Ltd (AMTL). AMTL in its true sense was a startup with no existing business but was incubated with very experienced management that had a strong vision.
The management has proven credentials and have built huge successful business in the past and has laid a strong foundation in the present one as well. Business Segments AMTL is Noida based company having 3 subsidiaries but none of them contribute significantly.
AMTL‘s business has primarily three things : 1. Wind power 2. Energy Audits and 3. Electric Meters.
Wind Mill : AMTL operates 3 wind mill power projects located in Jaisalmer district in Rajasthan with a total capacity of 11.7 MW and has been operational since 2012. No recent addition of capital to this segment, only the first done gross block exists. Energy audits : This vertical is small relatively but this has immense potential and is probably capable of generating higher margins as its simply service business with not much direct costs associated. Direct sales breakup for this is not available Smart Meters It is their fastest growing vertical and has humongous potential. Smart meters, which also include pre-paid meters is being used heavily in the smart cities and in the majority of new societies that are being formed because of Govt thrust to move to smart meter from conventional meters. The demand in this sector is huge and India is facing capacity constraints as mentioned in their AR
Since, they were new, they were just qualified to do some job works as a sub-sub- contractors and therefore, the volume and margins were low but now they have enough Smart meters manufacturing experience which has made them eligible to become consortium sub-contractors which is bringing significantly higher volumes now. But the biggest kicker is expected to come in the next few quarters , when it would also become eligible to be part of the consortium itself (based on the volume of meters manufactured). So, the script appears to be for strong and sustained growth.
Management’s focus on Meter business
Management has been constantly increasing the asset base of the Meter segment compared to only initial investment and no additional capex done in Power generation segment.
This indicates management’s expectations from meter segment are higher as the asset base increased by 10x in past 6 years
Meter Segment- 57% of assets contributing 84% of revenue currently
Recently management did capex for backward integration in the Meter segment as well- producing the plastic component and electric component used in meter, this will help in reducing the costs of components and better in-house quality products. It seems this benefits are not yet completely reflected in the numbers
Topline growth in meter segment has been fantastic with growth of 72% CAGR (base effect as well). Whereas, during the same period, growth from power generation has been flat.
Currently its contributing 85% of companies revenue which is very significant division. Also for HY19 company doubled the previous year’s numbers, indicating significant revenue increase even on higher base.
From MD&A- “India is in electrification overdrive, with about 30,000 new electricity connections being granted every week. Prepaid and smart meters are going to get greater thrust from the government as India moves towards the target of achieving universal household electrification as part of the Saubhagya scheme by end of next year. There is assured demand for smart meters. The households which will be electrified in future will be connected through smart meters.
Co is also focused on expanding product basket and enhancing market reach. As the demand for meter further increases, Co. plans to add higher capacity
India has large electricity customer base with about 120 million consumers – approximately 90 million domestic, 13 million agricultural, 12 million commercial, 3 million others ( public lighting, water works etc.) With the Central Electricity Authority mandating the use of static meters, the Indian energy meter market has shifted largely to static meters from earlier electronic mechanical meters. With this shift, India is expected to install 130 million smart /static meters by the year 2021.
With higher volumes, company is able to the meter division profitable at operating level, unlike earlier. This indicates that profitability would be better due to higher margins as better scale is achieved
Power generation has always been profitable business but its very capital intensive. Strong visibility even in this segment as company got 20-25 years of fixed tariff at roughly 5rs/unit from state boards
The meter segment turned operating profitable in last 2 Quarter- June’18 & September’18
Various States of India are also making the “Energy Audit” mandatory for all the industrial and commercial consumers. The company has a group of experts for Energy Efficiency improvement and most of them are “Certified Energy Auditors”/ Managers . The Company is accredited by the Bureau of Energy Efficiency and is also an empanelled auditor for PCRA, Ministry of Petroleum & Natural Gas for Demand Side Energy Management. The company has already carried out energy audit assignments in various manufacturing industries and commercial buildings. Keeping in view the importance given by the Government in Energy conservation, this vertical of the company has a very bright future.
- The market in India is showing steady growth owing to technological advancements. The market which was dominated by electromagnetic meters and simple static meters is steadily moving towards adoption of intellegent static, digital and smart meters by utilities and industries. Government is showing increased attention towards rural electrification and efforts to replace old meters with new meters. This step of the Government has given a huge fillip to the demand of digital and smart meters.
- The Energy Audit management vertical of the Company is manned by experienced and certified engineers with vast experience. Within a short span of one year, the company has been able to bag prestigious energy audit assignments in the hospitality, medical and other sectors.
- The Power Generation and the metering division of the Company have witnessed many challenges during the year, despite the various challenges faced by the Company. Challenges like the wind fluctuations, thefts and maintenance issues due to which the generation by the Wind Power projects has witnessed a downfall. Also, prices of key materials have soared.
- Meters: India is estimated to install 130 million smart meters by 2021 but progress could be stalled by significant infrastructural development and capacity building issues. “Reduction in commercial losses is one of the principal advantages of using smart metering, particularly of relevance for India, which arguably has the highest AT& C losses in the world at about 28%),” Certain government initiatives are leading the way towards metering smartly in the country.
- Energy Audit : India is in its nascent stage as compared with those in other nations. From a humble beginning of 3 Energy Audit Services industry in the early 1990s, the country has witnessed the growth in the number of Energy Audit Services Companies to 114 today of which 25 new companies were accredited in 2010-11. The Bureau of Energy Efficiency has also mandated the energy Audits in some industries.
- Your company has also strengthened its portfolio to include a wide range of current transformers, EPC services for energy sustainability, lighting solutions, solar PV solutions and power management and control. Your company continues to invest in growth opportunities in the existing business portfolio.
- Competition in Meter industry is escalating and technological changes will spur or drag the forward march of individual units in meter industry- expression of interest by foreign companies to set up new energy meters making units. However, coming years are also going to witness substantial additions particularly in the Asian regions.
- AMTL has widened it’s base to provide smart metering solutions to the power and distribution sectors. The present government has created initiatives schemes like UDAY Scheme, housing for all, smart cities etc. These schemes will throw up huge demand for smart meters and AMTL is positioned to cater to the needs of the power sector.
- Prepayment meters have recently seen steady growth as more power utilities are installing them to increase consumer visibility in terms of load patterns and to reduce the percentage of under-recovered revenue. While in developed countries prepayment meters are considered to be tariff meters, in the India they are considered as smart meters and are considered as the first step towards establishment of smart cities and smart grid projects. Smart grid pilot projects are under implementation mostly in the southern and western parts of India although, northern and eastern states also have some ongoing pilot projects
- Government is promoting smart and prepaid meters as a move to change the electricity ecosystem. A major constraint, however, remains the limited capacity of smart meters being manufactured in India. Prepaid and smart meters are going to get greater thrust from the government as India moves towards the target of achieving universal household electrification as part of the Saubhagya scheme by end of next year.
- There is strong visibility of growth and healthy orderbook Valuations
- Currently stock is trading at 32rs which equals to 50cr Market cap. Long term borrowing- 6.8cr; WC loan- 76cr ; Total= 82.8 crore Investments in mutual funds = 56 crores.
Net Debt = 26.8
- Enterprise Value= 77 crore
Despite constant losses earlier, net-worth is quite high- currently around 120cr due to past demerger arrangement.
- As there is no significant EBITDA yet, the multiple looks quite high but can be completely different if and when it starts generating significant operating profits.
- Very strong above discussed tailwind from the Govt policies to directly benefit the meter segment by providing ensured demand to the segment for next 3-5 years
- Lead by 1st generation management with rich experience and past history of shareholder wealth creation
- Management’s focus increasing more on the Meter segment
- Secure Meters Ltd
- BENTEC India Ltd
- Superior Products Industry (SPI) - Towa engineering works
- Schneider Electric India Pvt Ltd Unknowns
- Kind of numbers that can be generated from the existing capacity of Meter segment is unknown currently.
- Expected margin level that would be sustainable over long run once the company attains significant volume in meter segment.
- Whether the company got any recent orders from state electricity board- clients
- How long will it take to ramp up production and turn operating level profitable
- Having 56 crores of investments in mutual fund seems to be risky diversification- an amount equal to current market capitalization