Olectra Greentech Management Decodes Results | Earnings Edge | NDTV Profit
Olectra Greentech's net profit jumps 77% annually in Q3.
CMD KV Pradeep decodes results in conversation with Niraj Shah on 'Earnings Edge'.
CMD KV Pradeep decodes results in conversation with Niraj Shah on 'Earnings Edge'.
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TVTranscript
00:00 Electra Green Tech came out with a quarter three numbers day before. Revenues were up 33 percent.
00:06 Margins expanded marginally and despite finance costs being up, the net profit was up about 77
00:12 percent from 15 crores to 27 crores. The conversation with the management is not as
00:19 much just about the quarter but about the opportunity size that lies ahead. Mr Venkatesh
00:24 Vrath Pradeep, he's Chairman and Managing Director of Electra, joins us right now on the show.
00:28 Mr Pradeep, good having you. Thanks for taking the time out.
00:30 Pleased with the quarter or would you have hoped for more?
00:33 Yes, I am okay with the quarter as well as for the others also. Other details also I'm okay.
00:40 Okay. Tell us what went right. I mean this 33 percent uptick in revenue. Now,
00:46 you've been on record with the number of orders in the pipeline, a few orders that you won,
00:52 capacities coming on stream. Is 33 percent about the right run rate that you would have expected
00:57 at the end of quarter two for quarter three or would you have hoped for more?
01:01 As far as quarter three is concerned, let me talk about Electra Green Tech. If convenient to you,
01:08 I would like to explain briefly about the strength of the Electra. As you know very well that Electra
01:18 is one of the largest electric vehicle manufacturing companies in India. We have an order book of 8000
01:25 plus as of today, 8000 buses plus as of today. And probably you may be knowing that with the
01:33 single charge range, highest number of kilometers can be operated by Electra's products.
01:39 Number four, past seven years we are into this business with a strong portfolio of various
01:50 models and also I'm proud to say that we have done 20 crore plus kilometers on Indian roads.
02:00 And also we are working on various new models which suits to the Indian requirements and we are
02:12 developing those products. Very soon we will be coming up with those products.
02:19 Apart from that, also I would like to mention here that Electra has developed
02:27 electric tipper which is the first kind of its model in India and we are the
02:37 first electric tipper manufacturer and our tippers, almost 150 numbers are working
02:46 in various infra projects across the country. So this is the brief about Electra Green Tech.
02:52 As far as your question is concerned, in Q3 definitely we have expected these kind of numbers
03:01 as far as Q4 is concerned. We are planning to keep the same EBITDA levels and as we have done
03:14 865 crores top line and we want to add another, in the same pace we want to continue the
03:29 production and even the EBITDA also we want to be at the same level for the year FY24.
03:38 Mr. Pradeep, great to know about what you have done thus far. I would love to understand about
03:44 what is up next. You have done an X amount, I heard you say that you probably look to emulate
03:49 the EBITDA numbers in Q4 which is good to know. What about the kind of delivery that you have done
03:54 or deliveries that you have done thus far, what is to be anticipated in Q4 and then I will get
03:59 on to the capacity expansion and targets for the years ahead. Yes, Neeraj, as far as Q3 is concerned,
04:05 we have delivered 178 numbers, both the buses and tippers put together we have delivered 178
04:13 numbers. Even in Q4 we want to plan the same numbers that we have done in Q3.
04:19 Okay, this is interesting. So I am just trying to piece together this. Please correct me if I am
04:26 wrong Mr. Pradeep, but you are working towards this new greenfield facility which probably
04:31 has an annual capacity of 5000 vehicles operational by Q4. So your capacities are now in size,
04:39 the order book already at 80 to 100 buses and you are probably bagging more orders in times to come.
04:44 How does the execution ramp up happen, let us say FY25 and beyond, give us some idea about that.
04:50 Yes, very good question Neeraj. So as far as the new facility is concerned, I would like to
04:58 explain to you about the capacity expansion. We have acquired 150 acres of land nearby the
05:06 Hyderabad airport wherein we are building a world-class manufacturing facility which we
05:13 have started eight months back and very soon, probably in the month of Feb, we are going to
05:23 start using the facility partially and we want to start the production in that partially made
05:32 ready facility wherein the next quarter numbers shall get delivered. As far as the other part of
05:42 your question, for the numbers which are required to be delivered in the year FY25, we are planning
05:50 to have 2500 numbers in next year ending FY25. Wow. Mr. Pradeep, please excuse me if my math is
06:01 a bit awry, but assuming that you mentioned 178, I am rounding it off to 200 and therefore I am
06:08 coming to a number of let us say hypothetically about 800 to max 1000 buses that you probably
06:14 have done in FY24. You were talking about a number of 2500 buses or vehicles in FY25. That means you
06:22 are nearly targeting 150% growth or more than two and a half times growth in FY25 or FY24 as things
06:31 stand. FY25, what the numbers I am talking is FY25. Yes. Yes, definitely it is 7500 numbers which we
06:41 are going to deliver in our new facility which is being built. Wow. Okay. So, how does typically in
06:48 this business because it is a new business, so please humor me and explain to me how do the
06:52 economies of scale work out when your numbers move up from whatever 800, 900 or 1000 as they
06:59 may have been in FY24 to maybe two and a half thousand in FY25 to whatever number comes up,
07:04 let us say in FY26 or 27. How do economies of scale benefit you to margins, for return ratios
07:11 and for cash flows as well, Mr. Pradeep? Yes, Neeraj, I mean the economics,
07:19 the way how it works out is more than the organization, it should benefit to the
07:25 public to whom we are going to provide the services. See, more the numbers we produce,
07:31 definitely the cost would definitely be less. So, the amount of production that we increase,
07:41 the cost per vehicle shall also come down with which the end customer would definitely get
07:51 benefited and our product as we envisage would definitely become nearby to the diesel vehicles
08:03 in coming three, four years' time. So, that's the aim what we have planned and what we have
08:11 aimed is to reach out to those numbers. And as you rightly mentioned, the more the numbers,
08:17 definitely the economics is going to have a diagonally different direction.
08:24 Great. Mr. Pradeep, would it be safe to assume by what you just said that with falling costs,
08:31 but you mentioned that you want to bring the cost of the vehicles down, that you would not necessarily
08:35 to expand on the margins, but for the next couple of years, the idea would be to expand volumes,
08:41 expand gain market share and therefore, you might be fine with maintaining the margins as they are
08:46 right now as opposed to margin expansion? Correct. Probably, we want to maintain EBITDA
08:54 of 12.5% where today's EBITDA levels are 16.5. So, we want to maintain 12.5% EBITDA levels in
09:03 coming years. Got it. Okay. And the market size as we figure out and maybe coming in from what you
09:13 might have mentioned in some releases as well, that the overall market in the next three to four
09:18 years might grow to maybe 40,000 buses or thereabouts. I would love to understand how do
09:23 you think about this opportunity because from a thousand buses or less than thousand as the case
09:28 may be in FY24 to 2,500 in FY25, but you are amongst the most prominent names in this segment.
09:35 What kind of market share that you anticipate you would have by virtue of being the first more,
09:40 having the first more advantage of sorts as well, let's say three, four years out? Is there
09:45 a game plan that you have set out for yourself and the company for the next three, four years?
09:48 Yeah, a very good question from your side. So, as of today, our market share is 34%
09:55 and we want to maintain the same percentage of share even in coming two, three years time. As
10:05 the number keeps growing, probably the next year it will be something like 30,000, 35,000 would be
10:12 the numbers which are going to get announced by the government. You may be knowing that majority
10:19 of these buses are being provided to the STUs rather than the private business. These buses
10:26 are being provided to the STUs. So, majority buses are provided through tenders. We shall have to
10:37 bid for the tenders which are being plotted by the various STUs and wherever we are relevant,
10:43 we will be getting those orders. So, now we want to answer your question. We want to maintain the
10:50 same 34% market share even in the coming two years time. Wow. Well, that's a stiff number
10:58 because if the market index goes up to let's say forget 30,000, 40,000, but even if 30,000,
11:03 then we are actually talking of you maybe manufacturing an annual number of 10,000 buses
11:09 from the 2,500 buses that you are talking about in FY25. So, one, is my math correct? And two,
11:16 would you have enough capacity in the next three, four years time to be able to do that kind of
11:20 manufacturing? Yes. Here I would like to add that the facility that is being built, today its
11:29 capacity is 5,000 and the ultimate capacity of the plant is 10,000 units per annum with which
11:38 definitely we will be able to catch up the order. Okay. My last two questions, Mr. Pradeep. One is
11:44 just the hygiene question. So, am I getting it correct that you have done somewhere around or
11:48 in FY24 you will do somewhere around 800 to 1,000 buses? Is that number correct?
11:53 Around 800 is the right. Got it. Got it. My last question, Mr. Pradeep, and we'd love to talk to
12:01 you for the year ahead at the end of quarter four. So, we will talk to you in detail then,
12:06 but I understand you have paucity of time. So, I have one last question. Based on the model that
12:11 you have, are cash flows a hindrance, Mr. Pradeep, or do you reckon that because the product is such
12:16 a fast moving and an important one because everybody wants to go green that cash flows
12:21 are not an issue? Cash flows are not an issue. Being it is a go green as you rightly mentioned,
12:28 so cash flows should not be an issue and the future is for the electric mobility.
12:35 Most certainly. So, what's the working capital cycle like, sir? I'll wrap up this interview
12:39 with this question and do you expect it to contract further or would you maintain or do
12:43 you believe it will get maintained at these levels? At these levels, probably there may be some
12:48 increase in our working capital, but we are fine with the working capitals whatever today we have.
12:55 Okay. Okay. Fair call. You won't need any funds for executing the orders, right,
13:04 because the facility is coming on stream, I presume. Would there be any need for raising
13:08 any equity linked capital, Mr. Pradeep, in the near term? Yes, yes, definitely. There are some
13:15 discussions which are being done internally and unless we seek board approval, probably I may not
13:22 be able to communicate to the market. Got it. So, that's the stages up now.
13:30 Understandable. We will talk about FY24 in some more detail at the end of the next quarter when
13:35 you will be looking back at the full year and talking about the year ahead. But it's fantastic
13:39 talking to you, Mr. Pradeep. All the best with the expansion plans and the deliveries and thank you
13:43 so much for talking to us at NATV Profit. Thank you. Thank you, Neeraj. Thanks for your time.
13:48 Thanks for your call. Thank you very much. No, no. The pleasure was ours and viewers,
13:52 thanks for tuning in.