Genus Power - Smart Metering

You cannot blame on poor Corporate Governance. If you go through the last Concal, management had clearly indicated that big orders from Govt can start flowing any time.
Jan 2008 high for the stock was Rs 80 and now it is available at 100…
There is no harm in loosing initial 10 to 20% rally when there is a decadal opportunity… People now entering will have a benefit regarding certainty of Smart meter project… If you are looking for long term investment its always good to onboard when things are more clear…

Concal Excerpt for reference:

Capacity utilization is around 40% to 50% in the current times due to the shortage of raw material and what we feel the way we have done the planning in last two quarters and the
way that things are getting normal every day - by the end of June I would say second quarter of the next financial year capacity utilization will start getting better, will start
reaching the normalized phase from July end. Once the capacity utilization gets normalized
the margins will also get better than previous levels but it will be from Q3 or Q4.

**The tenders are highest ever historically.So if I talk of as on date, , we have almost Rs.
13,000 Crores tender which are in the pipeline out of which almost Rs. 1,800 Crores has
been quoted and Rs. 7,000 crore tenders will be quoted in the next two to three months. And
even the order pipeline if you see the industry wise, like we got some orders from
Jharkhand, from private utilities, we have got some good order booking in last quarter and
this quarter also order booking will have some good numbers. Same way the industry wide
also you will see very good order booking. Otherwise also like EESL, they got an order of
Rs. 600 Crores from Assam. So now they have come out with a tender in the market where
they will buy meters. So order booking has also started from the State Electricity Boards to
system integrators like IntelliSmart. InAndhra Pradesh AP Board have given orders, so
again the tenders will be floated in the market to buy meters. When the order booking from
the SEBs has also started, from system integrators to people like us has also started. And
Genus plays both the roles that of system integrator and also a major supplier also. So we
are getting orders from both the works.

We have been maintaining this in the past also that we have enough capacity to take care of the requirements and enhancement of capacity for a company like Genus
because they are so well vertically integrated - currently we have a capacity of 10 million
meters to 12 million meters annually, and to reach to the level of 16 million to 20 million
meters annually, it is a matter of three to six months. So what I believe is from the next
calendar year onwards, we should be in a position where we are able to do 100% capacity
utilization, and then we can add on to our capacities. So thus we have planned internally
from May, June onwards looking into the way the industry is moving, we will start working
on our capacity expansion if required

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I agree to the above. Management has been conservative and upfront about the opportunity, their excitement about the new opportunity and the capacity that they have to support the ensuing opportunity. It is our call as investors on how much certainty do we want before we get in. Also, not only Genus, these big announcements from most of the companies are generally known in advance to key participants/players in the market as information leaks through the system.

Regards,

Nikhil

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https://www.bseindia.com/xml-data/corpfiling/AttachLive/924797a3-271a-45bd-8f40-f52fed029a8b.pdf

Similar trend of results continue. Metering revenue has de-grown Q-o-Q and EBIT has degrown slightly from 9.1% to 8.9% Q-o-Q. Cash generation continues to be poor.

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Presentation - https://www.bseindia.com/xml-data/corpfiling/AttachLive/4d5d9c85-9390-4dfa-a82f-8f16370bda78.pdf

Order book net of taxes - 1908 Cr
Bullish commentary continues w.r.t. smart metering industry under the RRPDSS scheme
Re-iterates that semiconductor supply for FY23 is secured and FY23 Q1 onwards revenues should see a significant jump

Stage is set, now let’s see how well promises turn into results in Q1.

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If you check last concall, management said Q4 FY 22 will be better than last quarter and next would be better than this quarter on margins due to better capacity utilization. If you analyze the results, margins have not improved at all as sales were lower than last quarter. Entire incremental profit as compared to last quarter (+5 Cr on PBT level) is coming from other income +5.8 Cr and lower finance cost (-1.5Cr).

So we need to see if this is due to further semiconductor shortages due to Russia war and if so, what happens to semiconductor supply assurance for FY 23 due to this changed situation?

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QoQ improvement ( atleast expected topline)was a key miss per last Qtr concall guidance, been a hope story, difficult to trust mgmt guidance. Narrative vs delivery has some gaps as of now.

Exited

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Genus numbers for this quarter were average at best. The hope story continues. Management is guiding for significant improvements from Q3 onwards (earlier it was Q1, then Q2). Till that time, they are saying that we would see improvements on Q-on-Q basis. This is what we really need to see.

  • On positive side, the new order additions takes the order book to ~2000 Cr now, out of which 1200 cr can be executed in Fy 23. This is the guidance that management is now giving for Fy 23. (Scaled down from 1400-1300 Cr 1-2 qtr back).

I am still giving management the benefit of doubt given the huge opportunity and a challenging macro environment which may have put spanner in their efforts. Also they are dealing with government , SEBs who move at their own pace.

So intend to hold this for next 6-9 months and see if the hope translates into reality.

Nikhil
Disc: Invested.

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Poor results by Genus. Revenues are flattish QoQ but EBITDA margin has compressed 300 bps QoQ due to lower gross margins and higher employee costs.

I am afraid this company is demonstrating why some stocks with tailwinds also don’t deliver shareholder value. Anyway, will hold till Q3 to check if Management guidance materializes.

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Somebody needs to check with the management- which of these tenders they participated in and whether they have got any orders from these.

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Hi Aniket, Can you share the source of this data? I will try to join the call today and ask some questions if I get a chance.

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This is from IntelliSmart website.

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Company has recently added this page in their investor presentation:
Lot of hopes are build up in the narrative but since these are related to government projects the element of uncertainty is very high:

This Company is the only dedicated player in this segment with a healthy balance sheet and cash in its book to take advantage of the situation. Opportunity size is huge because of which I am tempted to remain invested in this company.

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Pursuant to the relevant provisions of SEBI (Listing Obligations and Disclosure Requirements),
Regulations 2015, we would like to inform you that the officials of the Company will be meeting
Investors/Analysts (Participants) as per the details below.
Date Type of Interaction
19th August 2022 Group Meeting

“The central transmission utility has tweaked the technology criteria in the tender inviting bids for setting up one crore smart meters just days before the bid closes on August 30, industry sources said.”

The Ministry of Power launched a new program –Revamped Distribution Sector Scheme (RDSS) which, among other reforms for the beleaguered power distribution sector, aims to roll out smart meters to 250 million customers by 2025.

As India executes the world’s largest electricity smart metering programme aimed at reducing electricity distribution losses, the industry is looking at new and cost-effective solutions.

Genus being a dedicated player and with strong balance sheet may emerge out as a strong beneficary of the smart metering drive.

https://recindia.nic.in/revamped-distribution-sector-scheme

Revamped Distribution Sector Scheme: Reforms-Based and Result-Linked

The government of India has approved the Revamped Distribution Sector Scheme (RDSS) to help DISCOMs improve their operational efficiencies and financial sustainability by providing result-linked financial assistance to DISCOMs to strengthen supply infrastructure based on meeting pre-qualifying criteria and achieving basic minimum benchmarks. The scheme has an outlay of Rs 3,03,758 Crore over 5 years i.e. FY 2021-22 to FY 2025-26. The outlay includes an estimated Government Budgetary Support (GBS) of Rs 97,631 Crore.

REC and PFC have been nominated as nodal agencies for facilitating the implementation of the scheme.

The scheme aims to meet the following objectives:

  • Reduction of AT&C losses to pan-India levels of 12-15% by 2024-25.
  • Reduction of ACS-ARR gap to zero by 2024-25.
  • Improvement in the quality, reliability and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.

*he Scheme has the following components:


> Part A – Financial support for Prepaid Smart Metering &**

System Metering and up-gradation of the Distribution Infrastructure.

  • Part B – Training & Capacity Building and other Enabling & Supporting Activities.

Learning from the experience of previous schemes, the Revamped Distribution Sector Scheme has been developed to address state-specific needs. Some of the salient features are as below:

*> Prepaid Smart Metering to be prioritized for
> * 500 AMRUT cities, with AT&C Losses > 15%
> * All Union Territories
> * MSMEs, Industrial and Commercial consumers
> * All Government offices at the Block level and above
> * Other areas with high losses
*

> Prepaid Smart metering for remaining consumers and areas is proposed to be taken up by the respective DISCOMs in a phased manner.

  • Prepaid Smart metering and system metering are proposed to be implemented through PPP on TOTEX (CAPEX+OPEX) mode.
  • Part A of the scheme also provides financial assistance to DISCOMs for infrastructure creation and undertaking reforms to achieve the desired results towards improvement in operational efficiency and financial sustainability.
  • Provision of feeder segregation for unsegregated feeders. Thereafter these feeders are to be solarized under KUSUM – leading to cheap/ free daytime power for irrigation.
  • The pre-qualifying criteria need to be mandatorily met with the DISCOMs before they can be evaluated based on the Result Evaluation Matrix. Thereafter, performance based on Result Evaluation Matrix shall form the basis for the release of funds under the scheme.
  • For Prepaid Smart metering, a grant of Rs 900 or 15% of the cost per consumer meter (whichever is lower), shall be available for “Other than Special Category” States. For “Special Category” States, the grant of Rs 1350 or 22.5% of the cost per consumer (whichever is lower) shall be available.
  • To incentivize the States/UTs to fast-track installation of prepaid Smart Meters by December 2023, an additional incentive of 7.5% of the cost per consumer meter or Rs. 450 (whichever is lower) shall be available. For “Special Category” States the additional incentive shall be 11.25% or Rs. 675 per consumer meter (whichever is lower).
  • For works other than smart metering, maximum financial assistance given to DISCOMs of “Other than Special Category” States will be 60% of the approved cost, while for the DISCOMs in special category states, the maximum financial assistance will be 90% of the approved cost.

https://recindia.nic.in/meter-disposal

EOI-Disposal of Electricity Meters

Expression of Interest (EoI) for Business Models for Disposal of Replaced Electricity Meters across India

Dated: 13th Jun, 2022

Expression of Interest (EoI)(248 KB) PDF had been floated by REC at the behest of Ministry of Power, to solicit the business models from interested participants relating to disposal or recycling or reuse etc of electricity meters, getting replaced on account of ambitious rollout of smart metering programme of Government of India.

The last date for submission of EoI is Monday, 4th July, 2022.

https://recindia.nic.in/uploads/files/Smart-meter-PMA-SBD.pdf

Disclosure : Invested and increased position in recent downfall to 5% of portfolio and views are biased.

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https://www.dvvnl.org/UploadFiles/RDSS/DP
Detailed Project Report for Distribution Infrastructure Works under

(i) Loss Reduction : 3771.51 Crores
(ii) Modernisation : 3999.91 Crores
The major basis of RDSS scheme is Smart Metering

https://www.dvvnl.org/UploadFiles/RDSS
ACTION PLAN
REVAMPED DISTRIBUTION SECTOR SCHEME REFORMS-BASED AND RESULTS-LINKED /Action%20Plan-RDSS-DVVNL.pdf