Hitachi Energy India Ltd:Annual Report 2023-24 Analysis

Hitachi Energy India Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Hitachi Energy India Ltd, formerly known as ABB Power Products and Systems India Limited, officially rebranded on May 26, 2021, following Hitachi’s acquisition of ABB’s power grids business in 2020. However, its roots in India trace back much further to ABB’s long-standing presence in the power and automation sectors.

Headquarters Location and Global Presence #

The company’s headquarters in India are located in Bengaluru. Hitachi Energy, the parent company, has a global presence in over 90 countries, enabling Hitachi Energy India Ltd. to leverage global expertise and resources.

Company Vision and Mission #

While specific, publicly available statements of vision and mission for Hitachi Energy India Ltd. are limited, the overarching goal, aligned with Hitachi Energy’s global objective, is to advance a sustainable energy future for all. They aim to contribute to a stronger, smarter, and greener grid.

Key Milestones in Their Growth Journey #

• Early Establishment (ABB): Strong presence in India providing power and automation solutions as ABB.
• Hitachi Acquisition: Acquisition of ABB’s power grids business by Hitachi in 2020.
• Rebranding: Officially rebranded as Hitachi Energy India Ltd. in 2021.
• Continued Expansion: Focus on expanding its portfolio in renewable energy integration, grid automation, and e-mobility infrastructure.

Stock Exchange Listing Details and Market Capitalization #

Hitachi Energy India Ltd. is listed on the Bombay Stock Exchange (BSE: 543187) and the National Stock Exchange (NSE: HITACHI). The market capitalization fluctuates with market conditions; it is recommended to check real-time financial data sources for the most up-to-date figures.

Recent Financial Performance Highlights #

Refer to the latest annual reports and quarterly results published by Hitachi Energy India Ltd. on the BSE and NSE websites for the most up-to-date financial performance data.

Management Team and Leadership Structure #

Information on the management team and leadership structure can be found on the company’s website.

Any Notable Awards or Recognitions #

Hitachi Energy India Ltd. and formerly ABB have received awards in the past for its technological advancements, sustainability practices, and contributions to the Indian power sector. Detailed information on recent awards can be found on their website or in industry publications.

Their Products #

Complete Product Portfolio with Categories #

Hitachi Energy India Ltd. offers a comprehensive portfolio of power products, systems, and services. Key product categories include:

• Grid Automation: Protection, control, and automation systems for transmission and distribution networks.
• High Voltage Products: Gas-insulated switchgear (GIS), air-insulated switchgear (AIS), circuit breakers, transformers, and other high-voltage equipment.
• Transformers: Power transformers, distribution transformers, and special transformers.
• Power Quality: Reactive power compensation systems (SVC, STATCOM), harmonic filters.
• Grid Integration: Solutions for integrating renewable energy sources into the grid, including energy storage systems.
• E-mobility: Electric vehicle charging infrastructure solutions.
• Services: Installation, commissioning, maintenance, and lifecycle management services for all product lines.

Flagship or Signature Product Lines #

• Gas-Insulated Switchgear (GIS): Known for its compact design and reliability in demanding environments.
• Power Transformers: Customized transformer solutions for various applications.
• Grid Automation Systems: Advanced digital solutions for enhanced grid control and optimization.

Key Technological Innovations or Patents #

Hitachi Energy invests heavily in R&D and holds numerous patents related to power technologies, including:

• Eco-efficient GIS: GIS using alternative insulation gases with a lower global warming potential compared to SF6.
• Digital Substation Solutions: Advanced digital technologies for enhanced substation automation and control.
• High-Voltage Direct Current (HVDC) technology: Used for efficient, long-distance transmission of electricity.

Manufacturing Facilities and Production Capacity #

Hitachi Energy India Ltd. has multiple manufacturing facilities across India. These plants cater to domestic demand and exports.

Quality Certifications and Standards #

The company adheres to international quality standards such as ISO 9001, ISO 14001, and OHSAS 18001, ensuring high quality and safety in its operations.

Any Unique Selling Propositions or Technological Advantages #

• Global Technology Leadership: Leveraging Hitachi Energy’s global R&D capabilities and technology leadership.
• Local Manufacturing and Engineering Expertise: Strong local presence with manufacturing facilities and engineering expertise to cater to the specific needs of the Indian market.
• Complete Portfolio: Comprehensive portfolio of power products, systems, and services, offering integrated solutions to customers.

Recent Product Launches or R&D Initiatives #

Details of recent product launches and R&D initiatives can be found on the company’s website, press releases, and industry publications.

Primary Customers #

Target Industries and Sectors #

• Power Utilities: Transmission and distribution companies.
• Renewable Energy Developers: Solar, wind, and hydro power developers.
• Industries: Cement, steel, oil & gas, and other energy-intensive industries.
• Transportation: Railways, metro systems, and e-mobility infrastructure providers.
• Infrastructure: Data centers, airports, and other large infrastructure projects.

Geographic Markets (Domestic vs. International) #

Hitachi Energy India Ltd. serves both the domestic Indian market and exports to other countries.

Major Client Segments (agricultural, industrial, residential, etc.) #

Major client segments include industrial, infrastructure, and power sectors.

Any Notable Government Contracts or Institutional Clients #

Details of significant government contracts are often publicly announced.

Distribution Network and Sales Channels #

Hitachi Energy India Ltd. utilizes a combination of direct sales, channel partners, and distributors to reach its customers.

Major Competitors #

Direct Competitors in India and Globally #

Key competitors include:

• Siemens: Globally and in India.
• GE: Globally and in India.
• Schneider Electric: Globally and in India.
• Bharat Heavy Electricals Limited (BHEL): Primarily in India.

Competitive Advantages and Disadvantages #

• Advantages: Strong brand reputation, comprehensive product portfolio, global technology leadership, and local manufacturing capabilities.
• Disadvantages: Intense competition, price sensitivity in the Indian market, and potential challenges in navigating regulatory complexities.

How they differentiate from competitors #

• Focus on sustainability: Focus on developing eco-efficient technologies and solutions for a sustainable energy future.
• Digitalization: Advanced digital solutions for grid automation and optimization.
• Customer-centric approach: Offering customized solutions and lifecycle services to meet specific customer needs.

Future Outlook #

Expansion Plans or Growth Strategy #

Expansion plans include:

• Expanding manufacturing capacity: To meet growing demand for power products and systems.
• Investing in R&D: To develop new technologies and solutions for emerging energy trends.
• Strengthening its presence in key segments: Renewable energy integration, e-mobility, and grid automation.

Upcoming Products or Innovations #

Future product innovations may include:

• Advanced grid automation systems: With enhanced cybersecurity features and artificial intelligence capabilities.
• Next-generation transformers: With improved efficiency and reliability.
• Eco-efficient switchgear: Utilizing alternative insulation gases with even lower environmental impact.

Sustainability Initiatives or ESG Commitments #

Hitachi Energy is committed to sustainability and ESG principles, which include:

• Reducing carbon emissions: Through its own operations and by providing sustainable solutions to customers.
• Promoting diversity and inclusion: In its workforce and in the communities where it operates.
• Adhering to high ethical standards: In all its business activities.

Industry Trends Affecting Their Business #

Key industry trends include:

• Increasing demand for electricity: Driven by economic growth and urbanization.
• Growing adoption of renewable energy: Solar, wind, and other renewable energy sources.
• Need for grid modernization: To improve grid reliability, efficiency, and security.
• Rise of e-mobility: Increasing demand for electric vehicles and charging infrastructure.

Long-term Vision and Strategic Goals #

The long-term vision is to be a leading provider of sustainable energy solutions in India and globally, contributing to a stronger, smarter, and greener grid.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: Increased from ₹4,468.51 Crores in FY 2022-23 to ₹5,246.78 Crores in FY 2023-24 (17% increase).
• Profit Before Tax (PBT): Increased from ₹130.82 Crores in FY 2022-23 to ₹221.70 Crores in FY 2023-24 (69.5% increase).
• Profit After Tax (PAT): Increased from ₹93.90 Crores in FY 2022-23 to ₹163.78 Crores in FY 2023-24 (74.4% increase).
• Operational EBITDA: Increased from K 221.7 in FY 22-23 to K 350.2 in FY 2023-24.
• Earnings Per Share (EPS): Increased from ₹22.16 in FY 2022-23 to ₹38.64 in FY 2023-24.
• Order Backlog: Grew to H 7,229.5 at the year end of FY24.
• Debtor Turnover: Increased from 3.04 in FY 2022-23 to 3.44 in FY 2023-24.
• Inventory Turnover: Increased from 3.75 in FY 2022-23 to 3.99 in FY 2023-24.
• Current Ratio: Remained stable at 1.16 in both FY 2022-23 and FY 2023-24.
• Net Profit Margin: Increased from 2.09% in FY 22-23 to 3.12% in FY2023-24.
• Total Orders: Secured orders of H 5,536.3, increasing by ~14% over FY23.

Business Segment Performance #

• Hitachi Energy India Limited operates across four business units: Grid Automation, Grid Integration, High Voltage Products, and Transformers.

Grid Automation #

• Focuses on substation automation, communication networks, and grid edge solutions. Strong growth due to increased demand for digitalization.

Grid Integration #

• Delivered HVDV transmission corridors and innovative transformers for power quality needs.

High Voltage Products #

• Offers a range of high-voltage products up to 1,200 kV (AC) and 1,100 kV (DC), contributing to enhanced safety and reliability of power networks. Noted for innovations in eco-efficient switchgear.

Transformers #

• Provides end-to-end solutions for power and traction transformers, experiencing high demand from power generation, transmission, and distribution sectors, including heavy industry.

Major Strategic Initiatives and Their Progress #

• Expansion of Manufacturing Units: Investments of over ₹250 Crores in the last three years to expand manufacturing base.
• Localization of Portfolio: Increased focus on localized offerings for emerging segments like E-Mobility, BESS, and Hydrogen.
• Digitalization: Launch of new products in digital and air-insulated switchgear and strengthening local capabilities in e-Mobility and energy storage.
• Sustainability 2030 Goals: Actions included achieving 100% fossil-free electricity, reducing carbon emissions by 88% since 2019 baseline, reducing water consumption by 18% and recycling 97% of waste.
• Partnerships: Collaborations with industry and technology partners, including academic institutions such as IIT Roorkee, NIT Warangal, and IIT Kharagpur, to drive innovation.
• Exports: Expansion of export footprint with a current contribution of approximately 25% to the order book, with growth in orders from Asia, Europe, the US, and Africa.
• Diversity: Aims to achieve gender diversity up to 16-18% by 2030.

Risk Landscape Changes #

• Identifies key risk areas, including supply chain disruptions (semi-conductors and electronics), geopolitical challenges, climate change impacts, and cybersecurity.
• Operational risks associated with project execution and workplace safety are actively managed through the Company’s Enterprise Risk Management (ERM) function.
• Cybersecurity: Focuses on the ISO/IEC 27001 standard and IEC 62443.
• Financial risk is being managed via conservative hedging.

ESG Initiatives and Metrics #

Environmental #

• 88% reduction in carbon emissions since 2019.
• Transition to 100% fossil-free electricity consumption in facilities.
• 37% reduction in energy consumption per crore of revenue since 2019.
• 18% reduction in water consumption and 97% waste recycling rate.

Social #

• Zero incidents of corruption and bribery.
• Gender diversity initiatives with targets for increasing female representation.
• CSR programs focused on education (particularly for underprivileged women), healthcare, and environmental sustainability.

Governance #

• ESG Committee formed at the Board level.
• New Code of Ethics and Business Conduct launched.
• ISO:37001:2016 certification for Anti-bribery management system.

Management Outlook #

• Anticipates continued demand from utilities, manufacturing, rail, e-mobility, and data centers for capacity enhancement and digitalization.
• Expects growth opportunities from the power sector’s expansion, particularly in transmission infrastructure development, requiring an estimated investment of H 4.75 trillion by 2027.
• Sees signi/ficant potential in the HVDC market, with one project expected per year.
• Focused on expanding service portfolio and export footprint, leveraging its ‘make in India for India and the world’ approach.

Detailed Analysis #

Financial Position Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(All amounts in INR Crores, except where stated otherwise)

Significant Changes in Major Line Items (>10% YoY) #

• Other non-current assets: Increased by 796.85% (from 1.90 Cr to 17.42 Cr).
• Other current assets: Increased by 135.02%, from 526.24 Cr to 1,236.53 Cr due to a rise in contract assets and balances with government authorities.
• Other Current Liabilities: Increased by 76.29%, from 533.79Cr to 941.16Cr
• Short-term Borrowings: Decreased significantly by 45.45% (from 275.00 Cr to 150.00 Cr).
• Other Equity: Increased significantly by 11.98% YoY.
• Deferred Tax Assets (net): Increased significantly by 68.50%
• Total Assets: Increased by 20.14%
• Total Liabilities: Increased by 23.84%

Working Capital Trends #

• Current Assets: Increased substantially from 3,071.86 Cr in FY 2023 to 3,828.75 Cr in FY 2024.
• Current Liabilities: Also increased considerably from 2,654.38 Cr in FY 2023 to 3,291.15 Cr in FY 2024.
• The increase in current assets can be attributed to Inventory, Trade Receivables, and Other current assets.

Asset Quality Metrics #

• Inventory Turnover Ratio: Increased slightly from 3.75 to 3.99, indicating a marginal increase in efficiency.
• Debtor Turnover Ratio: Increased from 3.04 to 3.44, demonstrating improved collection efficiency.
• Non-Current Asset to Total Assets Ratio: The ratio of non-current assets to total assets has decreased from 21.6% to 18.7%.

Debt Structure and Maturity Profile #

• Short-term Borrowings: Decreased from 275.00 Cr to 150.00 Cr.
• Long-term Debt (Lease Liabilities): Increased from 59.31 Cr (PY: 46.62Cr non-current and 12.69 Cr current) to 63.68 Cr (52.07 Cr non-current and 11.61 Cr current).
• Debt-Equity Ratio: Reduced to 0.11 from 0.23, indicating lower leverage.

Off-Balance Sheet Items #

• Contingent Liabilities: Decreased significantly to 0.35 Cr (March 31, 2024) from 47.44 Cr (March 31, 2023). These were related to various matters contested by the Company.
• Guarantees: The Company provided guarantees related to the performance of contracts and projects. Specific amounts and nature are detailed in the notes.
• Export Obligation: Company has an Export obligation due to incentives availed from the Government.

Segment-Wise Financial Analysis: Hitachi Energy India Limited #

Revenue Breakdown #

By Offering (FY 2023-24) #

• Grid Automation, Grid Integration, High Voltage Products, and Transformers. (No specific revenue figures provided.)

By Sector (FY 2023-24) #

• Industry: 37%
• Utilities: 32%
• Transport & Infra: 23%
• Exports: 8%

By Geography #

• India: 75.50% of total revenue in FY 2023-24, with revenue of C 3,954.54 Crores
• Other countries: 24.50% of total revenue, with C 1,282.95 Crores (up from C1,188.62 Crores in FY 2022-23).
• Export orders increased by 43% YoY in FY 2023-24.
• Exports contributed approximately 25% of the order book.
• Overall revenue increase by 17%.

Cost Structure Analysis #

• Cost of raw materials, components consumed, and project bought-outs: Increased to C 3,108.60 Crores in FY 2023-24 from C 2,721.24 Crores in FY 2022-23.
• Employee benefit expenses: Increased to C 490.15 Crores in FY 2023-24, up from C417.29 Crores in FY2022-23.
• Subcontracting charges: Increased to C 183.42 Crores in FY 2023-24 from C 150.58 Crores in FY 2022-23.
• Finance costs: Increased to C 46.55 Crores in FY 2023-24 from C 40.09 Crores in FY 2022-23.
• Other expenses: Increased to C 995.85 Crores in FY 2023-24, compared to C953.75 Crores in FY 2022-23.
• Royalty and technology fees: Increased to C 190.71 Crores in FY2023-24, up from C 146.22 Crores in FY 2022-23.
• Depreciation and amortization : Increased to C 90.01 Crore in FY 2023-24, from 80.16 in FY 2022-23.

Margin Analysis #

• Operating Profit Margin: Increased to 6.67% in FY 2023-24, up from 5.65% in FY 2022-23.
• Net Profit Margin: 3.12% in FY 2023-24, improved from 2.09% in FY 2022-23.
• Operational EBIDTA margin: 6.7% in FY 2023-24.

EPS Analysis #

• Basic and Diluted EPS: Increased to C 38.64 for FY 2023-24, up from C 22.16 in FY 2022-23.

Cash Management Analysis #

Cash Flow Analysis #

Operating Cash Flow (OCF) #

• The primary driver of OCF was the profit before tax of ₹221.70 Crores in FY 2023-24, up from ₹130.82 Crores in FY 2022-23.
• Depreciation and amortization contributed significantly to OCF, adding back ₹90.01 Crores in FY 2023-24.
• Working Capital movements were positive during the year.

Investing Cash Flow (ICF) #

• The major component of ICF was the purchase of property, plant, and equipment, which amounted to a net outflow.
• Proceeds from the sale of property, plant and equipment were minimal.
• The net cash flow used in investing activities was ₹(88.72) Crores in FY 2023-24.

Financing Cash Flow (FCF) #

• Net proceeds / (repayment) from short-term borrowings significantly impacted FCF, showing a net decrease of borrowings.
• Dividend payments totaled ₹14.41 Crores.
• Finance cost paid was ₹40.90.
• The net cash flow (used in)/ from financing activities was ₹(198.74) Crores in FY 2023-24.

Working Capital Management Efficiency #

• Debtor turnover ratio was 3.44, indicating collection processes.
• Inventory turnover stood at 3.99.
• Trade payables days outstanding were 135 days for FY 2023-24.

Capex Analysis by Segment #

The Company invested in expansion projects with a particular focus on certain business opportunities with industrial customers.

Renewables #

• Hitachi Energy India Limited will help the client evacuate 300MW of renewable energy from solar module to the grid at Bikaner, Rajasthan and contribute in India’s carbon neutral and energy transition initiatives by providing solutions to green energy market.

Data Centers #

• Hitachi Energy India Limited has supported the customer at two different locations, Hyderabad and Pune by providing Power Transformers and GIS Support.
  • 4x90 MVA 220/330kV Power Transformer for a leading technology giant for their Hyderabad data center: HYD 01 & HYD 11 and PNQ06 Data Centre
  • 2X220kV GIS Project for a leading technology giant for its Pune data center, PNQ04 and PNQ06.

Industry #

• Hitachi Energy India Limited will provide GIS substations and multiple transformers to customers for greenfield lithium-ion cell manufacturing projects at Bangalore.
• Hitachi Energy provides over 60 Dry Type transformers for India’s first semiconductor plant in Gujarat.

Transmission #

• Hitachi Energy India Limited would be providing customer with a STATCOM for the Fatehgarh-III project that will evacuate 20 GW Solar Power to the grid.
• Hitachi Energy India Limited has enabled India’s pioneer transmission body to upgrade its SCADA system enabling them to have modern communication and network control to manage the National Grid of the Country.

Transportation #

• Hitachi Energy India Limited will deliver its transformers to the Indian Railways, which aims to become a net-zero carbon emitter by 2030.
• In the Chennai metro rail projects, Hitachi won orders for a significant amount of varied materials.

Dividend and Share Buyback Trends #

• A final dividend of ₹4.00 per share (200% on face value of ₹2.00) was declared for FY 2023-24.
• Dividend payout resulted in a cash outflow.
• The company did not announce share buyback during the year.

Debt Service Coverage #

• The interest coverage ratio was 5.31 for FY 2023-24.

Liquidity Position #

• The current ratio was 1.16 as of March 31, 2024.
• Cash and cash equivalents were ₹128.04 Crores at the end of FY 2023-24, a decrease from ₹163.19 Crores at the end of FY 2022-23.

Financial Analysis of Hitachi Energy India Limited #

Profitability Ratios (3-Year Trends) #

• ROE has significantly improved from 8% in FY 2022-23 to 12.7% in FY 2023-24, indicating better utilization of shareholder’s equity.
• The Net profit Margin improved to 3.1% up by almost 1% indicating good cost management.
• The Operating Profit margin has improved from 5.65% in FY 2022-23 to 6.67% in FY2023-24, that indicates a good efficiency.

Liquidity Metrics #

• The current ratio remained stable at 1.16, suggesting the Company maintains a stable, if somewhat tight, short-term liquidity position.

Efficiency Ratios #

• Inventory turnover slightly improved, showing marginal gain in the efficiency of inventory management.
• Debtor turnover improved, indicating better collection of the debt, which positively affect the company’s collection processes.
• Net Capital turnover ratio dropped, which means the efficiency of use of working capital decreased.

Leverage Metrics #

• Debt/Equity ratio decreased from 0.23 to 0.11, signifying a reduction in financial leverage and a stronger equity base relative to debt.
• Interest coverage ratio improved from 4.37 to 5.31, indicating an enhanced ability to meet interest obligations.

Financial Performance Analysis FY 2023-24 #

Revenue and Profitability #

• Total orders: ₹5,536.3 crores, ~14% YoY growth (excluding HVDC orders).
• Revenue: ₹5,246.8 crores, 17% YoY increase.
• PBT: ₹221.7 crores, up 69.5% YoY.
• PAT: ₹163.8 crores, up 74.4% YoY.
• Operational EBITDA: ₹350.2 crores, 6.7% of revenue.
• Net Profit Margin: 3.1%
• Earnings per share: 38.64

Market Position #

• Technology leader in the power grid sector.
• Significant position with half of all HVDC links in India using their technologies.

Product and Service Performance #

• Strong performance in traditional and digital products and solutions (traction transformers, dry-type transformers, switchgears, SCADA systems, energy management systems, substations, HVDC, and FACTS).
• Service orders up 43% YoY.
• TXpert™ Ecosystem represents next-level transformer digitalization.
• Nationwide scale to energy transition with HP STATCOM and HVDC.

Geographic Distribution #

• Strong domestic presence across all states and Union Territories in India.
• Exports represent approximately 25% of the order book.
• Sales offices span across the country in 12 states with presence in 19 cities.
• 8 manufacturing locations with 19 manufacturing units.
• International sales offices in Bangladesh, Nepal, and Sri Lanka.

Capital Expenditure and Return on Equity #

• Invested more than ₹250 crores in the last three years to expand manufacturing.
• CAPEX (For the year ended March 31, 2024): 135.63 crore
• CAPEX investments focused on expanding manufacturing units across all four business units (Grid Integration, Grid Automation, High Voltage Products, and Transformers).
• ROE: 12.7%

Operational Efficiency #

• Debtor turnover ratio: 3.44.
• Inventory turnover ratio: 3.99.
• Current ratio: 1.16.
• Operational EBITDA margin: 6.7%.

Growth Initiatives and Challenges #

• Growth Initiatives:

  • Expansion of the customer base.
  • Focus on localized portfolios for emerging segments like E-Mobility, BESS, and Hydrogen.
  • Plans to double digital and services business by 2030.
  • Strategic partnerships and collaborations.
  • Expanding export footprint.
  • Organizing Energy and Digital Workshops (EDW)

• Challenges:

  • Supply chain limitations (semiconductors and electronics).
  • Geopolitical challenges and global supply shocks.
  • Ongoing climate led challenges.
  • Shortage of skilled labors.

Segment-Wise Financial Risk Analysis: Hitachi Energy India Limited #

Strategic Risks #

• Severity: High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Focus on R&D, partnerships
• Control Effectiveness: Partially effective
• Potential Financial Impact: Significant. Failure to adapt could lead to loss of market share, while successful adaptation offers high growth.

Operational Risks #

• Severity: Medium to High
• Likelihood: High
• Trend: Stable
• Mitigation Strategies: Diversification of suppliers, Supplier Sustainability Development Program (SSDP)
• Control Effectiveness: Partially effective
• Potential Financial Impact: Operational inefficiencies and delays can affect margins and revenues

Financial Risks #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation Strategies: Hedging of foreign currency exposures, maintaining committed credit facilities
• Control Effectiveness: High
• Potential Financial Impact: Foreign currency exposure

Compliance/Regulatory Risks #

• Severity: Medium to High
• Likelihood: Medium
• Trend: Increasing
• Mitigation Strategies: Compliance embedded in governance, Code of Ethics and Business Conduct, ISO:37001:2016 certification
• Control Effectiveness: Appears high
• Potential Financial Impact: Fines, penalties

Emerging Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Focus on innovations in power system flexibility, early entry into BESS and smart grids, partnerships with industry associations
• Control Effectiveness: Difficult to assess
• Potential Financial Impact: Could be significant

Hitachi Energy India Limited: Strategic and Financial Analysis #

Long-Term Strategic Goals and Progress #

• Hitachi Energy India Limited aims for sustainable and profitable growth, targeting faster-than-market expansion.
• The company is focused on localization of portfolios for emerging segments like E-Mobility, BESS and Hydrogen.
• Sustainability is core, with a goal of carbon neutrality in its operations by 2030 and 88% reduction in carbon emissions achieved since the inception of Sustainability 2030 program.
• 100% fossil-free electricity consumption has been achieved in Company’s facilities.
• The Company aims to achieve 10% female diversity by 2025.

Competitive Advantages and Market Positioning #

• Hitachi Energy India Limited holds a leading position in the Indian power sector, with a strong market presence and expertise in high-voltage power technologies.
• The Company has comprehensive portfolio that allows for full energy cycle management across renewable and conventional sources.
• The Company leverages seven decades of legacy in India to build trust and deep customer relationships.
• Hitachi Energy India limited has large installed base in India, which provides a solid foundation for expanding the service portfolio.

Innovation Initiatives and R&D Effectiveness #

• Hitachi Energy India Limited emphasizes R&D through global centers and local businesses, driving localized product development.
• The company is launching new products in digital and air-insulated switchgear.
• Key innovations during FY2023-24 include Lumada APM for asset performance management and SAM600 3.0 for digital substations.
• Partnerships with eks Energy and Google Cloud are strengthening power electronics and energy management capabilities.

M&A Strategy and Execution #

• The Company’s parent company, Hitachi Energy, acquired a controlling stake in eks Energy, enhancing power electronics and energy management capabilities.
• A strategic partnership was established with Powin, which maintains a significant ownership stake in eks Energy.
• Strategic agreement formed with Google Cloud for co-creating cloud software products to support the energy transition.

Management’s Track Record in Execution #

• The Company achieved a ~14% YoY order growth in FY 2023-24 (excluding HVDC orders) and a 17% increase in revenue.
• The company has demonstrated effective execution of its strategy by managing inventory and supply chain challenges.

Capital Allocation Strategy #

• The Company is increasing capital expenditure to expand its manufacturing capacity across all four business units.
• Strategic investments are being made in new-age manufacturing sites and the supply chain.
• Focus is placed on the launch of new products and expanding capabilities in digital and air-insulated switchgear, e-Mobility, and energy storage.
• The Company has invested more than C 250 Crores in the last three years in expanding the manufacturing base.

Organizational Changes and Their Impact #

• The Company underwent a name change from ABB Power Products and Systems India Limited to Hitachi Energy India Limited, aligning with the rebranding of its parent company.
• A new Code of Ethics and Business Conduct was launched in 2022-23, with efforts in 2023-24 to internalize its principles across the organization.
• Re-classi/fication of certain Promoter/Promoter Group entities to ‘Public Category’ effective from October 6, 2023.
• Key leadership appointments included a new Head of Grid Automation and a Head of Human Resources during the year under review.
• Constitution of an ESG committee at the Board level to drive sustainability initiatives.

ESG Analysis of Hitachi Energy India Limited #

Environmental Metrics and Targets #

• Achieved an 88% reduction in carbon emissions from the 2019 baseline.
• Transitioned to low-carbon fuels (PNG from LPG in Maneja and Halol, biofuels for boilers in Mysuru).
• Achieved 100% fossil-free electricity consumption in operations.
• 37% reduction in energy consumption per Crores revenue since 2019.
• Reduced freshwater consumption by 18% and water consumption per Crores revenue 49% relative to the 2019 baseline.
• 97% of waste was recycled; 40% reduction of waste per crores revenue achieved during this year against the base line of 2019.
• Planted 2,450 saplings till close of FY24.
• Mysuru facility sources nearly 90% of its electricity from renewable sources through Power Purchase Agreements. The remaining carbon from grid is offset through I-REC.
• Project sites utilize solar power, with a total capacity of 47.7 kW across various locations.

Social Responsibility Programs #

• Supports over 200 girl students from Tier II & III cities in engineering courses, providing scholarships, laptops, and training.
• Program for 500 girl students from economically disadvantaged backgrounds in STEM courses.
• Deployed mobile deep freezer units for vaccines, funded emergency medical needs for underprivileged children, maintained hematology labs, and provided ambulances.
• Engaged in urban afforestation, green cover projects, carbon-neutral schools, and smart traffic signals.
• Supported academic institutions through lab infrastructure development and industry training.
• Spent ₹ 1.51 Crores on CSR activities during FY 2023-24.

Governance Structure and Effectiveness #

• An ESG committee was formed at the Board level.
• A new Code of Ethics and Business Conduct was launched in 2022-23, with employees internalizing its principles in 2023-24.
• Certi/fied for ISO:37001:2016 for its Anti-bribery management system.
• Enterprise Risk Management (ERM) function identifies and mitigates enterprise-wide risks. Annual risk campaign and cross-organizational dialogue.
• Holds ISO/IEC 27001 certi/fication, along with IEC 62443 certi/fications for service operations, product development, systems, and products.
• Diversity 360 champions an inclusive culture, with 33.33% women in the board of Directors.

Sustainability Investments and ROI #

• Over ₹ 250 Crores invested in the last three years to expand the manufacturing base.
• ₹ 1.36 Crores in capex investments during FY 2023-24.
• Investments in renewable energy and energy conservation projects (e.g., solar installations, LED lighting, HVAC optimization).
• Invested in partnerships with academia such as NIT Warangal, IIT Roorkee, IIT Kharagpur, IIT Madras and other top-tier universities for smart and digital lab development.

Regulatory Compliance and Future Preparations #

• Compliant with applicable environmental laws and regulations, including Water (Prevention and Control of Pollution) Act, Air (Prevention and Control of Pollution) Act, Environment Protection Act.
• Implemented Supplier Sustainability Development Program (SSDP) to ensure suppliers uphold human rights, safe operations, and regulatory compliance. 14 suppliers were assessed under SSDP with in India.
• Committed to complying with applicable cybersecurity laws, directives, acts, and regulations, particularly for critical national infrastructure.
• The company implemented the code of conduct and policies.