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8 min Read

Exciting times for India’s electrical equipment industry!

On the one hand, overcapacities and lacklustre demand has affected many segments of the power equipment industry; on the other, massive opportunities appear to be within a stone’s throw.

In fact, a combination of the Atmanirbhar Bharat programme and a slew of structural reforms may draw the electrical equipment industry out of the deepest slumber.

Is a sector re-rating on the cards?

Let’s find out.

Read this carefully!

Energy Efficiency Services Limited (EESL) recently cancelled a smart metering contract awarded to PT Hexing of Indonesia previously, due to its failure to fulfil the criterion of domestic manufacturing. Simultaneously, EESL floated a tender for procuring 23.5 lakh smart meters from Indian manufacturers.

As you might be aware, the Indian government has set a target of replacing 25 crore conventional electricity meters with smart meters by 2022 under Smart Meter National Programme (SMNP).

EESL is a joint venture amongst 4 PSUs under the ministry of power, which helps consumers, industries and governments effectively manage their energy needs through energy efficient technologies.

EESL has so far procured only 1.5 crore meters under SMNP thereby leaving ample growth opportunities for the domestic manufacturers. The potential cumulative market opportunity in the smart metering space is as high as Rs 60,000 crore to 90,000 crore.

In another development, Solar Energy Corporation of India (SECI) lately auctioned 200 MW and 400 MW projects to Al Jomaih Energy and Water of Saudi Arabia, and Green Infra Wind Energy of Singapore respectively for a record low tariff rate of Rs 2/unit. Interestingly, NTPC—the second lowest bidder had quoted a price of Rs 2.01/unit for 470 MW. This highlights the level of competition amongst bidders.

As you must be aware, NTPC recently formed a subsidiary, NTPC Renewable Energy, to aggressively pursue green energy business. The company has set a target of generating at least 25% of electricity through renewable sources by 2032.

These developments shouldn’t be treated as isolated cases; rather they could just be a trailer of an upcoming high-voltage thriller.

India is working with an ambitious target of generating 450 GW of renewable energy by 2030—232% of India’s current installed capacity. Higher power generation will require efficient power evacuation which may create a huge demand for transformers, insulators and switchgears. With renewable coming up in a big way, not only is the energy mix changing but the nature of power generation is becoming distributed against the bulk generation carried out so far.

This may create substantial opportunities for electrical component manufacturers.

India’s imports of power equipments amounted to Rs 71,000 crore in FY19 of which 30% were from China. The government may use various tools to push Atmanirbhar, which includes duty hikes and domestic manufacturing incentives amongst others.

As per the new rules, countries sharing land borders with India can’t invest in India through an automatic route. Department for Promotion of Industry and Internal Trade (DPIIT) has issued a circular in this regard in April this year. It means, even if an overseas player from a country that shares borders with India tries to set up manufacturing units in the country, it has to go through the entire bureaucratic process of approvals.

You see, cancellation of a contract awarded to PT Hexing might have set a precedent for other component verticals too. Metering, solar panels, insulation are a few other areas where India still has very high import dependence.

Under the Production-Linked Incentive (PLI) scheme, the government has already committed a financial outlay of Rs 4,500 crore for promoting the domestic manufacturing of high efficiency solar PV modules.

Can domestic equipment manufacturers take advantage of this Tik Tok opportunity?

We have identified 5 such companies that can be potential beneficiaries of India’s thrust on domestic manufacturing if they play their cards well.

ABB Power Products and Systems India

ABB Power Products and Systems India is an Indian arm of ABB Power Grids. Technology is playing a crucial role in promoting growth in the power sector and ABB Power Products is at the forefront of this shift.

ABB group has been operating in India for the last 6 decades. ABB Power Products has 16 manufacturing facilitates at 5 locations.

ABB Power Products and Systems offers products across the power value chain—generation, transmission, distribution and consumption. They include grid automation and integration products, transformers and high voltage products. Its joint venture with Hitachi may help it push the boundaries further.  Recently, ABB Hitachi signed an MoU with Ashok Leyland and IIT-M for the pilot project of e-busses.

EV Infrastructure, rail micro-grid, grid automation & software, energy storage, data centres have been identified as the key growth areas which may help ABB Power Products to grow its business exponentially in future.  Exports account for 15%-20% of the company’s revenue.

The stock valuation isn’t cheap; but please don’t forget it’s an Indian arm of a multinational company having sound technologies and reach. And more importantly, we are at the cusp of a new growth phase; and not towards the fag end.

Elantas Beck India limited

Elantas Beck is an Atlanta group speciality chemicals company. Like ABB, Elantas too has decades’ of presence in India. It manufactures a range of speciality chemicals used in electric insulation and construction industries. The company has two manufacturing facilities—one each at Pune and Ankleshwar

(MMA: Monthly-Moving-Average)

Elantas caters to three product verticals—electrical insulations, engineering and electronic resins and, material and construction chemicals. Electrical insulations accounts for 87% of the company’s top line.

Elantas Beck recently signed an MoU with Talegaon Industrial Park, Pune for acquiring land for its Greenfield expansion.

Its wire enamel business is expected to get a boost as the prospects of the power sector have brightened up. Low-cost imports, especially from China, have been affecting the domestic wire enamel industry negatively so far. With the change in the policy stance, the domestic production may get a boost, going forward.

Similarly, the domestic appliances industry and e-mobility hold promise.

Bharat Bijlee

The company addresses four key market segments—transformers, electric motors, magnet technology machines and drive systems. Transformers and electric motors divisions contribute 45% and 44% respectively to the company’s top line.

MMA: Monthly-Moving-Average

Electric motors account for approximately 35% of India’s total electricity consumption. Thus, the quality of electric motors plays a crucial role in electricity savings. Bharat Bijlee is one of the oldest and highly trusted players in this space.

The transformer division of Bharat Bijlee offers a product range of upto 200 MVA, 220 KV class. It undertakes electric substation EPC projects of upto 400 KV.

So far, factors such as the overcapacities prevalent in the sector and stagnant demand for transformers have given rise to intense competition among manufacturers. Nonetheless, the outlook appears promising since the capex cycle is expected to revive and the share of domestic manufacturing in the country’s GDP is likely to rise in future.

HPL Electric & Power Limited

HPL is a 4-decade old Delhi-headquartered electric equipment manufacturing company. It predominantly caters to five functional areas namely—metering, modular switches, switchgears, LED lighting and wires and cables.

MMA: Monthly-Moving-Average

Of these metering division accounts for 53% of the revenue while the contribution of the lighting and switchgear business is 22% and 19%, respectively. The company claims 20% market share in the domestic electric meters market; while its share is 50% in on-load change over switches. It’s the fifth largest LED lighting manufacturer in India.

At present, the B2C segment makes up 49% of HPL’s top line. The company aims to improve the contribution of B2C business further. It intends to grow the retailer touch points from 27,000 at present to 1 lakh over the next 3 years.

Genus Power Infrastructures

Genus power is a Jaipur-based power equipment manufacturing company that has a track record of 24 years and offers a comprehensive range of metering solutions in India and overseas. It is a small cap company having an annual manufacturing capacity of over 1 crore meters. As on March 31, 2020, the company’s unexecuted order book was Rs 943 crore.

MMA: Monthly-Moving-Average

It claims a 30% share in India’s electricity metering market at present. The company is hopeful that it will gain market share in the smart metering business. Genus Power also has a presence in the engineering construction and contracts (ECC) segment and caters to the power transmission and distribution sector.

Strangely, despite winning a tax litigation case in the High Court, the company opted to settle the case under Vivad se Vishwas scheme 2020 by paying Rs 12.6 crore in Q2FY21. This will raise many eyebrows.

India Ratings and Research has affirmed its credit rating IND A+/Stable. It’s noteworthy that, the company is net-debt free.

Genus Power may ride the potential boom in the smart metering market. However, its governance practices may require a microscopic view.

Will financials improve with the improving prospects for the sector?

Note: 4-Quarter average revenue and profit excludes June–quarter numbers to smoothen out the lockdown impact. Similarly, the calculation of P/E and RoE also excludes June quarter profit.
ABB Power Products and Systems and Elantas Beck follow calendar year as their financial year
(Source: ACE Equity)

Concluding thoughts

Smart metering is the lowest hanging fruit for the equipment manufacturing industry. However, the existing installed capacity of Genus Power and HPL Electric & Power put together can barely meet 10% demand.

In other words, if these companies sense a good demand visibility, they might even go for capacity additions. On the contrary, if the opportunity attracts more players to the market, there would be adequate space for all. Genus and HPL both are hopeful that smart metering orders will help them expand their profit margins.

As remains the question of other electrical components such as transformers, insulators and switchgears, the demand may pick up gradually. Government’s emphasis on increasing the contribution of green energy in India’s energy mix will pave the way for unprecedented opportunities.

Are Indian electrical component manufacturers ready to shrug off years of gloom and ride the potential boom?

Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble—Warren Buffet

Please Note (read as a disclaimer): None of the stocks discussed in the article are recommendations to buy, hold or sell. This could just be the starting point for deeper analysis that you might want to carry out on your own. You may also take professional help as you feel appropriate.

If you are investing in any family run company, besides governance, you may also want to take stock of significant developments in the lives of the promoters. Sometimes, their personal life can overshadow market sentiments. Also pay attention to issues such as pledging of shares by the promoter group and the working capital.

You may also like to read: 15 potential multibaggers of Atmanirbhar Bharat



We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

Consult your financial advisor before taking any investment decision.

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflicts of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.



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