Schneider Electric Infrastructure: A global company with advantage of a industry tailwind:

Markit_Analytix · August 13, 2023, 12:45pm

Background:
Schneider Electric Infrastructure Ltd (SEIL), is part of Schneider Electric France. in 2010. Alstom Schneider consortium finalised on the joint acquisition of Areva’s transmission and distribution (T&M) businesses, together worth €2.29bn ($2.73bn). Alstom acquired about two thirds of the transmission business while Schneider transferred the distribution business to Schneider Electric.

The AREVA T&D India Limited announces Demerger of its Distribution (Medium Voltage) Business Operations. AREVA T&D India Limited’s promoters, ALSTOM Sextant 5 SAS, along with certain other entities, made an open offer to the public shareholders of the Company, according to the requirements of the Securities and Exchange Board of India [Substantial Acquisition of Shares and Takeovers] Regulations, 1997, as amended up to date.
This open offer provided that the Transmission activities (High Voltage systems, equipment, Power Electronics and Automation) will be separated from the Distribution activities (Medium Voltage systems, equipment and related Automation) of the Company.

In2011, the the demerged entity (Medium Voltage systems, equipment and related Automation, power distribution) became "Smartgrid Automation Distribution and Switchgear Limited ", then changed the name to Schneider Electric Infrastructure Limited.

In 2012, AREVA T&D (High Voltage systems, equipment, power transmission) India changed the name to ALSTOM “T&D India”, in 2016, Alstom T&D India became the “GE T&D India”, following its acquisition by US giant General Electric.

Present:
SEIL is in good position to take the advantage of infra push, power distribution area, Electrification, Metals, Mining & Minerals, Mobility, hyperscale data centre, Industry and building. They also trying for Digital Transformation in these areas.

In Q1FY24, the company announced many wins in some of these areas.

One good thing about the company is that they are not restricting the products to the ones they got as part of AREVA T&D, they are also offering the products and software platforms which were developed as part of parent company across the globe. This list contains lot of new age innovative products, platforms and services which they got by acquiring companies across the geographies. Just think of the capability addition, no other companies in India can match this. Can it be a moat ?, not sure.

The company makes money in these areas: Products, Solutions and Services

#1 Products
Transformers
Components
Ring Main Units
Automation

#2 Solutions:
EcoStruxure- Entry Level
Grid Power

EcoStruxur for Business
Electric Utilities Mining-Minerals-Metals Oil & Gas Smart cities

EcoStruxure for Partners
Contractors Global Strategic Alliance Panel Builders

#3 Services:
Partner Managed Services Manage Maintenance: EcoStruxure™ Facility Expert
Electrical Distribution Services EcoStruxure™ Asset Advisor

Financial Summery:

Profitability

Cashflow:

Balancesheet:

The company was not profitable till 2021 but from FY22 it became profitable.

In Q1FY2024

Company management is reasonably bullish on future prospects and gave a healthy guidance for FY24

Antithesis
There are some more unlisted companies in India, it is difficult to find out which company do what and transactions between them, it will be good if they are consolidated and company defines clear areas of each companies.

Debt to equity: 3.15

Valuation:
P/E is at 58 as on 12Aug23, which looks on the higher side.

Disclosure: Not invested, watching

x3c · August 14, 2023, 3:30am

Other expenses seem very high. Any royalty payments to Schneider global? India entities of MNCs often end up becoming operational entity with thin margins as all value generation is funnelled out to the global entity. E.g 3M

Markit_Analytix · August 19, 2023, 7:05pm

There was a question on the increase in the other expenses in the Q1fy24 conncall, and following the response from the management:

Extract of concall:

Regarding the royalty to the parent company, there was a question related to similar issue in q1fy24 concall, in which company said they need not pay revenue to parent company for using the SW platform, they are part of group offerings. However, it’s not same as royalty for using the IP from parent company, which is not clear from the available sources, this is the part where we need to explore more, if someone know please share more information.

Extract of concall:

Regarding the third part of your question which is funnelling out of value generation to global company, i could not find the evidence for company practicing this (with my limited understanding of the company) however, it won’t ascertain it’s not happened or not going to happen in the future. This is where we need more collaboration and more people focusing on different aspects and provide their opinions and insights which can be debatable further.

I am attaching the link for for Q1fy24 conncall and transcript

https://www.bseindia.com/xml-data/corpfiling/AttachLive/321001fc-68d2-4f9e-96d0-0150e25a87a4.pdf

We need more understanding on what all the Indian entities are doing how they share the revenue and the work including one more listed company which is currently under delist/relist confusion. They tried to delist the other listed company in India ‘Schneider electric president systems ltd’ which went into some complication and finally decided to re-list

However, there are very good opportunity for this company to grow in multiple areas which are specific to Schneider Electric Infrastructure Ltd, specially related to building the largescale data centres, as India made it compulsory to keep all the data within the country, many of the big players like Amazon, Meta, Google and other big companies which generate the huge amount of data to build these hyper scale data centres in India.

Request everyone to share their thoughts and insights. Thanks.

nbhargav · August 20, 2023, 3:59pm

Any idea why the tax is not paid last few years? Is this a red flag?

Markit_Analytix · September 4, 2023, 10:26pm

Interesting Discussion about Power and Energy Sector:

From Accidental Investor:

GKHH

From PPFAS Indian POwer sector:

Markit_Analytix · October 1, 2023, 9:56pm

White Paper on Indian energy Scenarios by CSTEP- Center for Study of Science, Technology and Policy.
compelling study on India energy history for last 20 years and evolving scenario for next decade.

White Paper on India Scenarios by CSTEP- Center for Study of Science, Technology and Policy.pdf (2.6 MB)

Some of the key takeaways from the report:

The economy of India will increase 4 times by mid-century and 6 times to 2070
By mid-century, final energy demand will double, and electricity demand will increase 6 times, up to 10,000TWh. The share of electricity in final energy demand could reach by then 50-65% of total. Solar energy
• The share of oil and natural gas in total energy supply will drop from around 30% today to 6-13% across scenarios
As surprising as these figures may seem, they actually reflect inevitable evolutions of the energy system. The rise of air conditioning and appliances in buildings, for instance, will significantly push electricity consumption upward. In mobility, the advent of electric vehicles will also lead to rising demand for electricity. In industry, the rapid development and modernization of the manufacturing footprint will also yield rising electrification levels. In fact, these evolutions reflect a new form of development, one that builds on 21st century technologies, now available at scale, a complete change of paradigm compared to what was observed in the last decades.
60% of that increase in electricity demand will come from buildings. Yet, about 35-40% of that demand could be provided by distributed generation (representing as a result 20-25% of total power generation), a major enabler and facilitator of electrification and development
Hydrogen will also play a role with 15-20Mton/y of green production by mid-century, mainly concentrated around steel manufacturing, alternative fuels production for aviation and shipping, and power generation
India’s emissions are likely to peak by the 2030s

New Pathway
The study suggests that India potentially seats at the forefront of a 21st century energy transition, which, only a few decades ago, was deemed impossible. Given the size of the nation, the choices that the government of India will make in the coming years will thus also, to a large extent, define whether global issues are ultimately resolved, or not. Achieving such a feat may be more feasible than we think

In Last 20 years…

GDP was multiplied by three with a population growth of only 30% what translated into over a doubling of GDP per capita. GDP per capita is however still 1/6th of that of an economy
like the European Union, and almost a 1/3rd of global average. There is thus still huge room for economic growth in India
The final energy demand per capita has also strongly increased (by around 40%), but is still nearly three times lower than the global average, and 4 times lower than the European Union. A key challenge for India is thus the actual growth of energy demand, which requires to be both rapid, resilient and sustainable
The energy intensity per unit of GDP has strongly improved over the last 20 years in India and is now on par with the global average. Yet, it remains 50% higher than that of the European Union
In Building

1. India is up for a massive construction phase, Residential surface per capita is today 2.5 times lower than global average and four times lower than in the European Union. hence t India will be one of the hotbeds of the construction industry in the coming decades.
India will be one of the hotbeds of the construction industry in the coming decades. Biomass is indeed a very inefficient source of energy for lighting and cooking. When this gets substituted by modern forms of energy, overall intensity per square meters tends to decrease
The larger penetration of appliances (and cooling) in the residential (and service) stock globally (and in the European Union in particular) suggests an even greater gap in building energy performance.

In Mobility

The passenger-kilometers per capita(pkm per capita) for 2/3 wheelers still significant increase from low 133pkm per capita to 6-7 times more in 2019. This is however still 5 times lower than global average and 12 times lower than in Europe
In 2000, rail and buses dominated transport. This is now less true than it used to be, with all three modes of transport almost on par. In the rest of the world, cars and 2- and 3-wheelers dominate pkm.
The steel production per capita in India, despite nearly increasing four times, remains three times lower than global average and four times lower than in Europe

In Conclusion:
India has witnessed a considerable economic development for the last 20 years and is en route to become one of the dominant economies of the 21st century. The potential for development is mind-blowing. If all economic indicators were to match current European levels for instance, the economy would be 6 times larger, the production of steel 4 times bigger, the residential stock 4 times more important, and the kilometers traveled per car (and likely the number of cars) 10 times longer. Two key
questions emerge.

– Will India effectively reach these levels, or will it invent a
different future?
– How much time will this transformation take?

India’s energy system (and building, industry and transport stocks) is yet largely to be written, given the major build out plan ahead.

RGoyal · October 11, 2023, 3:29am

Hi @nbhargav - tax is not paid likely due to the company being in losses in the previous years - there is a setoff impact of losses being carried forward

Markit_Analytix · November 8, 2023, 1:25pm

Q2FY24 Sept-quarter profit rose nearly 5x YoY, revenue up 17.8% YoY

The company is able to achieve this even after MD & CEO and CFO resigned and replaced in the last quarter.

Disclosure: Invested

Markit_Analytix · February 8, 2024, 8:37pm

Q3FY24 Results are out
Net profit and EPS doubled QoQ and YoY

GRP · February 9, 2024, 1:51am

Why 0 tax for so many years

Markit_Analytix · February 9, 2024, 4:46am

May be offsetting due to previous years losses but paid 3% in q3fy24 first time.

Disclosure: Invested

NAMAN_PARMAR · April 6, 2024, 1:33pm

Anyone is able to know how much capacity company has in the medium voltage transformer and in switchgear, also company increasing the capacity in the Kolkata any update on that.

RohitVerma · May 26, 2024, 9:11am

Anyone can put more insights please on recent result : Mainly about the provisions they have made this year and also the expenses incurred for shifting the plant from one place in Kolkata to the new place ( any insight will help to understand ) and how these points will affect the balance sheet.

Markit_Analytix · May 27, 2024, 12:05pm

Results for the Q4 FY24

Highest ever revenue in any year but the PBT decreased by 2.8 pts

suhagpatel · May 28, 2024, 7:32am

The provisions are made for anticipated higher tax outgo. They were expected the tax case to be in their favor but the recent developments have made them believe that they may not get a favorable outcome. This was clarified in the concall.

Rahul_Venkat · May 30, 2024, 6:36am

can anyone help with detail break down of provisions done on warrants and tax !!! sudden rise in expenses have gone by 24%!!

rajpanda · May 30, 2024, 3:00pm

Most of these are already covered in the conf. call. But even after going through them, i still find them confusing and wonder what’s the right way of doing them. Don’t want to try repeating them here

abcrahul · May 30, 2024, 3:08pm

Hi, Schneider Electric is investing 850 cr and where does this investment amount will show in the Balance sheet. Will it show in the Quarter results Expenses details?

https://www.business-standard.com/companies/news/schneider-group-owned-lauritz-knudsen-to-invest-rs-850-crore-in-3-years-124052901376_1.html

Rahul_Venkat · June 2, 2024, 8:54am

yeh most of them are very confusing couldn’t arrive at clear vision nor understanding!!

yudiagg1 · June 2, 2024, 9:53am

I have had a bad experience with this company. I learned the hard way that there are two separate/distinct companies viz ( Schneider Electric Infrastructure) and ( Schneider Electric). While the latter is the original French company - NOT listed in India, the first one is its subsidiary listed in India.
Their financials and functioning are totally separate. There are a lot of positive news items pertaining to the latter , which have NOTHING to do with the Indian listed company. The last Q4 financials of the indian listed company were awful resulting in 5% down circuit every day since then. I have heard the last four investor concall of the Indian listed company and was not impressed with management.

I have recently exited the stock after holding for more than a year.