Smarten Power Systems Limited (SMARTEN) Earnings Call Transcript

Good evening, ladies and gentlemen. My name is [ Sagar, ] and I will be the moderator for the conference for today. Welcome to the Smarten Power Systems Limited H1 FY '26 Earnings and Q3 FY '26 Business Update Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Punit Thakkar from Samvaad Partners Investor Relations Agency. Thank you, and over to you, sir.

Dear investors, I am Punit Thakkar. On behalf of Samvaad Partners Investor Relations Agency, welcome you all to the Smarten Power Systems Limited's H1 FY '26 Earnings Conference Call and Q3 FY '26 Business Update's Call. We have with us from the management, Mr. Arun Bhardwaj, the Managing Director; Mr. Ravi Dutt, Whole-Time Director; Mr. Rahul Sharma, the CFO; and Ms. Vandita Tripathi, the Company Secretary from the management. I will now hand over the call to Mr. Ravi Dutt for management commentary. Over to you, sir.

Good evening, everyone. Myself, Ravi Dutt, Whole-Time Director. I thank you for joining us today on Smarten Power Systems Limited conference call. On the behalf of the Board and the entire management team, I appreciate your time and continued interest in our company. I will begin by sharing our strategic vision, followed by an overview of our business performance in H1 financial year '26, our operating strength and finally, our growth road map going forward. So first, let me explain our vision and strategic direction. Smarten Power Systems was founded with a clear purpose to deliver reliable, affordable and technology-driven energy solutions. Over the last decade, we have evolved from a power backup solutions provider into an integrated energy storage and solar solutions company. Our long-term vision is to transform Smarten into a trusted mass market consumer electronics brand, especially in the batteries, inverters and distributed solar energy solutions, not just in India, but across emerging global markets such as Africa, Asia and Middle East. So let me explain our business scale and the market presence. As of today, Smarten operates with around 372 SKUs across 5 major product categories, okay? And we have around 500-plus distributors globally and our presence in Indian market in 23 states and 2 union territories. And we are doing export into 30-plus international distributors serving 17-plus countries. We have deliberated build a wide and deep distribution network supported by technological enabled customer service, including centralized customer delight center and WhatsApp-based complaint regulation, right? And regarding our product portfolio and strength, we have basically home UPS and inverters, solar charge controllers, stand-alone, PWM and MPPT-based charge controllers, solar PCU that is with MPPT and PWM based sides and going forward, hybrid systems. On-grid solar inverters, [indiscernible] tubular batteries, SMA batteries and lithium ion batteries. And apart from that, we have one line, the trading item. So we got solar panels from outside, and we do our white labeling. So actually, our core business is basically solar power generating systems. So there is 3 major components. One is the electronics like home inverter, charge controller or whatever solar PCU, hybrid systems. So we are basically designer and manufacturer of like home UPS and solar systems. And apart from that, we have a dedicated manufacturing facility for the batteries also. And the third component that is solar panel that we are buying from the outside and as a combination of like solar panels, batteries and solar inverters. So that become solar power generating system, our main business is basically for solar power generating systems products. And regarding our manufacturing facility, right now, we have basically manufacturing facility for like our electronics part, like inverter and solar charge controller and solar inverters. So right now, we have around 30,000 square feet manufacturing area dedicated for the electronics. That is basically rented place. And very soon in another 3 months, we are going to get our own manufacturing plant that will scale up more than 2x of our existing facility. That is located in Jhajjar District, Reliance Model Economic Township like Reliance MET that is very modern manufacturing facilities. And apart from that, recently, we brought one manufacturing facility for our batteries. If we talk about our financial performances, driven from the operations, like for H1 '26, we did INR 115 crores. And last year with the same, we did INR 108 crores. And this year, for H1, our profit is just below INR 6 crores, that is precisely INR 5.88 crores. And if we talk about our industry opportunity and tailwinds, so the rising power consumption, increasing solar adoption and demand for the energy reliability in both urban and rural markets. If we talk about the -- basically power backup systems, if we talk about 5, 6 years back, then the inverter and batteries took only place for the backup uses, okay? So when the power was not available, then people were using the inverter and batteries only for the emergency purpose. But right now, the inverter basically shifting its uses. It is not only used for the power backup purpose for the luxury purpose, but it is also used for the energy generation as well. right? So we have basically solutions for everything. Like for power backup, we have normal home UPS and inverters. And for the only generation -- electricity generation, we have grid inverters. And apart from that, we have hybrid systems where we can generate the electricity through the solar panels. And we have basically dedicated energy storage systems that store the electricity when the sun is there and when sun is not there, then the inverter will convert the DC energy into the AC one, right? So it is basically hybrid model. So if we talk about the opportunities in our business that is increasing day by day. And we have basically dedicated research and development team, very experienced and intelligent people are working with us, and we are far ahead from our competitors. So in many places, we were the first company to introduce many new products into this category. So like we talked about the sine wave inverters with the 20-kilowatt switching frequency and like one UFP that basically start the battery from the zero gravity, zero voltage, and we were basically company first introduced with the inverter compatibility with lithium batteries, like we introduced much earlier than our competitors like MPPT charge controllers. And right now, we are basically developing hybrid inverters that will cater the upcoming many, many years. So we have dedicated R&D team in-house. And if we talk about our growth road map, so we have basically 2 dimensions. One is our geographically expansion and second is basically our production capacity expansion. So right now, we are operating in majorly North area and dedicated into Haryana and half of the UP. So about 80% of our sales premium from the domestic market is coming from the Haryana and half of the UP. And we are basically spreading our footprint to rest of the India, right? So that is also -- that is already into introduction -- introduced in place like South India or Northeast like neighboring State, Punjab, J&K everywhere. So we are leading into the neighboring states. And slowly, slowly, we will be able to penetrate our brand into pan-India network. And apart from the -- like geographically expansion, so we are increasing our capacity from the manufacturing point of view also. As I said earlier, so we are going to get company-owned manufacturing facility that will almost double the manufacturing facility with the immediate effect. And that we are going to get in the end of March 2026. So this is from my side. Now I pass on to this -- we can start question-and-answer session. Thank you.

[Operator Instructions] Our first question comes from the line of [ Rahil Shah ] from Sapphire Capital.

Sir, firstly, this capacity expansion that you're doing, right? Just correct me if I'm wrong. So you are -- so the solar inverter capacity is going from 600 to 1,200 units per day, correct? And there will be another addition of a manufacturing -- battery manufacturing unit, correct, which is 8,000 per month, and you're acquiring that?

Right.

So is this the -- when you say you will be doubling capacity, is this a part of it? Is it separate?

It is actually right now, our manufacturing facility is at rented place. So what we are going to plan. So we actually brought one line in very modern industrial area and the building is almost complete. So over there, we will be shifting our existing facility over there also, but there will be 6 months overlap time period. So the double capacity will be the -- including our existing facility. And that is going to be only for the single shift 8 hour operation. So right now, we are operating at our rented place. So we are not basically investing heavily for the automation and everything. But in our own building, so we will do a lot of automation and other things. So maybe further after it required, then maybe we can start second shift like that.

So we can expect the new double capacity to be effective from quarter 1 of FY '27?

Right, right. Definitely.

Right. Okay. So what will be the revenue potential?

And it will be overlapping. It will be overlapping like about 6 months, there will be the previous facility also available and the new will be also available. There will be overlap period. So...

Okay. Both will work together, the new and the old capacity. Okay. Okay. So what will be the revenue potential post this expansion?

Revenue potential?

Yes.

So actually, revenue potential is required basically 2 dimensions. One is your sales side and another is your manufacturing facility side. So on the manufacturing facility side, definitely, that is -- we are going to get within -- with immediate effect because once the machines are installed and everything, all infrastructure is there, then definitely from the day 1, we can go with the double capacity. But on the sales side, so this product is basically require 24-hour service. When the customer buy a product and if there is some complaint, then our company needs to basically fix that problem within 24 hours. So this is like a hen and chicken things like no? So first, you have to basically introduce your product into the market or you establish your service network and other infrastructure into the market. So actually, we have proven our business model into Haryana and that we are replicating into the neighboring states like UP, Punjab, J&K and Rajasthan, right? So the manufacturing expansion is like immediate, but the sales expansion will take like time. So we have planned for that. We are acquiring like sales infrastructure, after sales service infrastructure everything no?. So...

No, I understand sales takes time, but then there has to be a certain number attached to it, like, okay, once you start selling, how much can you sell once you start production and then what will be that number? Like in terms of your top line and bottom line.

Minimum, we are targeting doubling into 3-year time minimum.

You are targeting double the revenue in 3 years' time.

Yes, yes.

Arun Bhardwaj this side. Every year, we are targeting about 30% growth -- bookings revenue. And within next 3 years, we are targeting more than double of this. This is our target.

And how will your EBITDA margins perform similarly?

See, as of now, EBITDA is about 8.5% or something and the PAT is about 5.6% or near about 6%. What we are looking for like after acquiring the Baddi plant, it will increase our margin, number one. Practically as of now, we are -- our manufacturing facilities is like in renting place. After own manufacturing and getting the automation, we will reduce our manufacturing cost as well. So it will increase our margin. [indiscernible] how about 9% to 10% is our target.

Next year -- you said 9% to 10% for next year or this year?

Next year.

Next year. Okay. And when you...

This year, we are just enhancing our capacity. It will not impact on our revenue as much as it.

Right, right. Okay. Lastly, just quickly before I get back in queue. So in 3 years when you are attempting to double the top line, can the EBITDA margins be mid-teens or it will be double digit yet?

No, EBITDA cannot be double because it will...

Not double, double digits. He's talking about double digits, not doubling.

So will it be just early double digit? Or will it be mid-teens?

Double digit. Right.

Our next question comes from the line of [ Arnav ] an investor.

So looking at your recent financial releases, you have around INR 6 crores currently in capital work in progress. Can you please elaborate on what that constitutes and what [indiscernible] sale?

Please come again.

So roughly INR 6 crores worth of capital work in progress and financial statements currently, what is that? What is that comprised of and what does that mean for [indiscernible].

Actually, we brought just INR 6 crores like CC limit. Apart from that, we have nothing borrowed from the bank. So only the INR 6 crore CC limit is there.

Understood. And a quick follow-up. How do you...

The line for the current questioner has been dropped from the queue. We will move on to the next question. [Operator Instructions] Our next question comes from the line of Chintan from [indiscernible].

So sir, you mentioned in your presentation that you want to move from B2B to, let's say, B2C or to every home, right? So can you tell us currently what is the amount of revenue that comes from B2C versus B2B?

Basically, our main -- as of now, our main business in B2B only, we are going into the distribution channel. Like the company is selling into area distributor, then distributor is selling to the dealer. But we are targeting to have a B2C in line of corporate sale and the project. We just started focusing on like 2 months only. And we just got the order of 4,000 CC and that is worth about -- you can say about INR 1.5 crores to INR 1.7 crores. Apart from that, we are doing like in our one subsidiary company as a Smart Store. There, we are selling like as an online platform direct to the customer basically. So this is like -- as of now, it is -- you can say about 90%, 99% business is B2B, but now we are focusing on to the B2C side as well.

Okay. Are you doing any kind of white labeling for any of the other company, assembly or manufacturing or the other?

For the distribution channel, we are not doing anything because it will disturb our distributor channel. But yes, for some like bulk supply into the government side and the project side and for the export market, we are doing the white labeling.

Okay. How much percentage will that be?

It is not much. It might be less than 5% or something.

Okay. All right. Also wanted to understand -- so we did around 15%, 20% of trading business as well, right? What has been PAT for the half yearly numbers that we have been posted? How much revenue comes from the trading side of it?

Yes, it's all together with the trading side as well. Actually, there is a 3 major components. One is like the electronic side. Second is the storage side and third is the generation side. In the generation in solar solution, it's a solar panel basically. For the storage side, it's a battery, whether it is the tubular or lithium. Secondly, like for the electronic side, we convert that basically sun energy into the -- like can store into the battery or can give to the load, that is the electronics part. So our main manufacturing is the major -- like in electronics and the battery. But the solar panel is our trading part. PAT comes into like about 15% of sales revenue.

Okay. And do you see this continuing this particular the trading portion?

We are not targeting to go into this manufacturing as of now. And like in the nearest future as well, it will be continuous 15% to 20%, it would be [indiscernible] as a solar panel.

Right. And why not trade some of the batteries as well? I mean, is there any -- if you see the demand out there for your upcoming plant, with the double capacity, so why not capture some of that market right now with some of the trading activity as well on the storage side?

See, there are 2 things. One is like first, we are targeting our existing capacity as a double, and we are starting just like battery plant. So first, we will target those markets. But we have like -- so we are having about 600 units as of now, our manufacturing facility. Now...

I understand what -- sorry, I think you did not understand my question, sir. I will just repeat. [Foreign Language] and you see the market out there right now for [Foreign Language] we can easily just address that demand [Foreign Language].

[Foreign Language] good name into the market. [Foreign Language]

[Foreign Language] we have a distributor led business right? [Foreign Language]

[Foreign Language] we have 70 plus service engineers are working with us dedicatedly, full time. One company run. [Foreign Language].

[Foreign Language]

Our next question comes from the line of [ Chetan Kumar ] from Coheron Wealth Limited.

Sir, I just wanted to understand from the sales volume perspective. So I wanted to know how many home UPS [Foreign Language] this last year versus this year, both on the domestic front and export front, power conditioning units [Foreign Language] this year compared to last year on a volume basis. So will you be able to provide me with this data?

If you'll talk about the number, then we have to check it out. But if you'll talk about like revenue that we can give the idea.

From a revenue perspective as well.

Like out of 100%, 15% to 20% is our solar panel and about the same -- in same manner is our battery, about 30% is our battery and 50% is our electronic. 50%, 55% is electronics.

Okay. Got it. And we had also mentioned about we are working on bringing in hybrid inverters. So what is the time line that we see since we are investing R&D into it. Up to what time line we expect the hybrid inverters to go live and contribute to the export market as well as the domestic market?

First half of financial year 2027 [Foreign Language] within next 6 months, there will be our own design and everything will be in the market. So it is already basically validation phase from the third party laboratory. [Foreign Language]. Once it is done [Foreign Language] It will take place around 3, 4 months' time, definitely our product will go to the market.

Okay, another question.

[indiscernible] six months. Basically we are targeting six months and [Foreign Language] that would be the main core season of India basically [Foreign Language] till then our product will be completely tested into the market as well.

On the R&D side, our product is ready or [Foreign Language]. The third party validation and testing is under process [Foreign Language]. standard is like BIS, Bureau of Indian Standards [Foreign Language] these are two certificates.

If I am right Q3 FY '27 [Foreign Language] Am I right?

Yes.

Another question would be on our Exide agreement. I wanted a more clear understanding on what this agreement is with Exide Europe? And what are the exact -- I believe there is no overlap from the product that we are currently selling compared to what we are going to be selling of Exide. So I just wanted to understand which markets are we technically targeting to distribute Exide's products?

No. Actually, this is totally different. This -- like what we have -- what we are manufacturing that is basically for the domestic market, just for the household. While that Exide Europe is manufacturing for like the big corporate or government side for the like big telecom, like for defense, some data centers, which we don't have as of now. So that is completely like project and the tender-based business. And while what we are doing as of now, that is completely a domestic market like as a distributor channel only.

So then what is this partnership that we have with them?

No, that is -- there is no partnership. That is the agreement like we are their authorized channel partner for the India. We will distribute their product. We are authorized to distribute their product in India market. So like whatever the tender or something for the power backup business, like we are having different, different variants like automotive segment, the power segment, something like this. So for the Power Energy segment, we are the authorized distributor for India for them.

Our next question comes from the line of [ Manish Sawla ] an investor.

Yes. So just to continue with the question raised by the previous participant, what kind of visibility are we looking at in the business of distribution of this Exide Europe? Have we started business or it is still under process of setting up?

No, it is just -- see, this is a tender and the project business. It is not like a distribution channel, we will go into the market and can sell the product. It depends on like for the telecom company, some big data center. We just -- we recently signed this like we got this authorization. And we have started the working into the market, like some big company, which are like UPS company, those are doing the data center work. So we are just introducing us like we are the channel partner now this product into the India, and we can give the service and everything to you. Because before that, they never know like who will give like the channel partner from there, who is the face from that side. So now we are just introducing them basically. So once we get any tender or project like things and we will go with that basically. As of now, there is no revenue for this.

[Foreign Language] It will be introduced by us only. And are we exclusive distributors for their products?

[Foreign Language] This is Europe and they are handling by the Dubai, they are having their office in Dubai as well [Foreign Language] because it is a very old company [Foreign Language] before that Exide India and Exide Europe both were same. [Foreign Language] I think that vary from India from some companies, some data centers because as of now data center business is growing up in India. [Foreign Language].

So just to get some color on the revenue expectation, we will be earning commission only, right, on the supply of those products.

You can say it not the commission; commission, you can say when company sell direct or sell through us and [indiscernible] goes to directly to them, no. That would be the commission [Foreign Language]

[Foreign Language]

[Foreign Language] somehow like there is a government of India project or some big project something like that. In that case, [Foreign Language] there is later of aftersales service as well. [indiscernible] commissioning all that technical [Foreign Language]. national power system would be the technical or like after sales service [Foreign Language] This is our understanding if it is like big project or something, otherwise [Foreign Language] and then we will put our margin and sell to them.

[Foreign Language]

First, we are targeting only INR 15 crores to INR 20 crores only. [indiscernible] [Foreign Language] This is also new thing for us because since last time 11 years, we are going into the distribution channel market only. [Foreign Language]

I appreciate. It is similar to first get some clear indication then only to talk about the expectation. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language] But everything sometimes depends on the time and the scenario [Foreign Language]. But what we are expecting, [Foreign Language] If you see, this is a trend since last 10, 11 years. [Foreign Language].

[Foreign Language].

[Foreign Language] Like if it is 115, then it can be like 125, 120 or something like 135. It should be more than 115.

Okay. And you expect about 30% growth for next year?

Yes, right, sir.

Your next question comes from the line of Ranav, an Investor.

Hello, am I audible?

Yes, sir. Please go ahead.

So, with larger players like Luminous and Microtek coming to the market and selling their products, what non-price advantages does the market rely on to defend their market share services?

Sir, please come again.

Ranav, sir, your audio was slightly muffled. If you are using the speaker mode, may we request you to use the handset, please?

Hello. Is that any better?

Yes, sir. Please proceed.

Sir, [Foreign Language].

No, sir. Actually, they are not coming now. They are working since last 20 years and even 25 years. [Foreign Language] 2001-2002, Microtek and Luminous. And you would not believe [Foreign Language] in 2014, till that time, there were no players into the market. Only just 2, 3 players were working. [Foreign Language] But due to the technology products, basically pricing, product, [Foreign Language]. We are situated in Haryana. [Foreign Language] You can say in solar segment, we are #1 in Haryana, as compared to these companies, basically. [Foreign Language] And for that, you need the finance basically. [Foreign Language] But that is not a competition, which came as of now. [Foreign Language].

Understood. And I went through your recent reviews, basically. [Foreign Language]

Sorry, sector?

[Foreign Language] So, can you tell us about the promoter's experience and how it helps in the product development, sir?

Sorry, sir. Please come again? [Foreign Language]

[Foreign Language] Like, being as promoters, what does your product experience bring to the product itself?

Okay. So, like, there are 4 promoters in the company, [Foreign Language].

Our next question comes from the line of Tanishq Lakhotia an individual investor.

Am I audible?

Sir, you are audible, but you are sounding muffled.

Now is it better?

It is slightly better, sir.