Talking about the capex cycle, The Indian Railways is set to get a capital expenditure push of Rs 2.45 lakh crore in the financial year 2022-23, 14 percent higher than the budgeted capital expenditure of Rs 2.15 lakh crore for the current financial year
The Indian Railways has drawn up a huge ₹34,000 crore safety upgrade of its network that involves deployment of an automatic train protection system – Kavach, developed by the RDSO under railway ministry, (collaboration with Medha Servo Drives, HBL Power and Kernex Microsystems)
Currently Railways has been using decade old anti-collision device (ACD) developed by Konkan Railways, termed ‘Raksha Kavach’. While the older system is still in use in most trains at the moment, the new system will be introduced across all trains in the next five years.
The new system is also a lot more accurate in sending signals to trains and faster as it works on a real time basis while implementing safety measures. The indigenously-developed anti-collision technology is SIL4 certified -probability of a single error in 10,000 years.
Implementation Of Kavach
Indian Railways plans to install Kavach across
2,000 rail route networks -2022-23
4,000-5,000 rail route networks every subsequent year
To install Kavach across the entire 68,446 km.Expect to completely shift to the new anti-collision system by 2028
Indian Railways plans to install Kavach across
2,000 rail route networks -2022-23
4,000-5,000 rail route networks every subsequent year
To install Kavach across the entire 68,446 km.Expect to completely shift to the new anti-collision system by 2028
Cost of Project Kavach -30-50 lakh per kilometre (1/4th compared to ₹2 crore in other parts of the world). Private player will be given a timeframe of 2-3 years to implement the same. HBL Power will benefit immensely from application of TCAS and TMS by Indian Railways.
Majority stake in HBL is owned by Barclays Trustees. The Company has organized its business as three major verticals - Batteries, Electronics and Defence. Significant spending by Railways, Data Centers, EV and Defence are big tailwinds positive for HBL.
How HBL Power business verticals stand to benefit
HBL has two flag-ship solutions tailored to meet the demanding requirements of railway signalling in India - TCAS and TMS. They will address the railway safety and track utilisation efficiency.
HBL has two flag-ship solutions tailored to meet the demanding requirements of railway signalling in India - TCAS and TMS. They will address the railway safety and track utilisation efficiency.
It received approval for TCAS to be deployed in auto-signalling sections of Indian Railways network. Being the first Indian supplier with field experience of installing TMS and CTC systems in Eastern Railway and Kolkata Metro, HBL is well placed to secure a decent market share
They won contract from Siemens for installing TMS in the Eastern DFCC project in FY21. At the moment Kavach uses ultra-high frequency radio waves but Indian Railways is working to make it compatible with 4G (LTE) technology and develop the product for global markets Export Case
HBL in collaboration with Ericsson, set up the LTE communication infra at its R&D centre to develop the required interfaces between TCAS and LTE. This is the first such facility in India. Signed an MoU with Ericsson, under which HBL will deploy LTE networks for Indian Railways.
Apart from above triggers , battery vertical is one of the major revenues spinners for the company followed by Electronics segment. The company is gradually working to reduce its dependence on telecom sector and increasing its concentration towards defence and railways.
HBL is currently minimising exposure to lesser-attractive commodity businesses like lead battery operations as its highly competitive and focusing more on value added offerings like Nickel Cadmium and PLT battery businesses and evaluating new avenues around lithium chemistry
PLT Batteries
HBL is only Indian company to offer high powered Pure Lead Thin Plate (PLT) battery. Company is seeing growing preference for PLT batteries in data center applications, while export volume of these batteries for battle tank application has gained traction.
HBL is only Indian company to offer high powered Pure Lead Thin Plate (PLT) battery. Company is seeing growing preference for PLT batteries in data center applications, while export volume of these batteries for battle tank application has gained traction.
Tubular Gel batteries
Bagged large orders for supply of tubular gel batteries for Energy Storage Systems (ESS) from L&T and BEL. To expand product offerings for Energy Storage Solutions (ESS), the Company will leverage its capability around lithium ion battery technology
Bagged large orders for supply of tubular gel batteries for Energy Storage Systems (ESS) from L&T and BEL. To expand product offerings for Energy Storage Solutions (ESS), the Company will leverage its capability around lithium ion battery technology
Nickel Cadmium Batteries
Sustained leadership in the Nickel Cadmium Pocket Plate (NCPP) battery space in India. Successfully executed large orders for the supply of NCPP batteries to Gail pipeline projects and OEM supplier to aircrafts manufactured by Airbus, IAI and Bombardier
Sustained leadership in the Nickel Cadmium Pocket Plate (NCPP) battery space in India. Successfully executed large orders for the supply of NCPP batteries to Gail pipeline projects and OEM supplier to aircrafts manufactured by Airbus, IAI and Bombardier
Defence
Commenced manufacture and supply of Type I batteries for Kilo class submarine and Varunasthra torpedo batteries to Navy. Absorbed technology from NSTL (Naval Science and Technology Laboratory) for manufacture and supply of Lithium-ion batteries for defence applications
Commenced manufacture and supply of Type I batteries for Kilo class submarine and Varunasthra torpedo batteries to Navy. Absorbed technology from NSTL (Naval Science and Technology Laboratory) for manufacture and supply of Lithium-ion batteries for defence applications
Electric Drive Train
Developed Electric Drive Train kits for retrofitting light commercial vehicles and passenger buses.Kit comprises high efficiency traction motor, power electronics controller and high power lithium battery packs. Expects to secure approval for the kit - FY22
Developed Electric Drive Train kits for retrofitting light commercial vehicles and passenger buses.Kit comprises high efficiency traction motor, power electronics controller and high power lithium battery packs. Expects to secure approval for the kit - FY22
EV Motors
HBL offers two major EV motors
Radial flux Reluctance Motor - Integrated in medium and large commercial vehicles like buses and trucks
Axial flux Permanent Magnet Synchronous Motor (AF-PMSM) - Designed for high-performance drives, using stators and rotors
HBL offers two major EV motors
Radial flux Reluctance Motor - Integrated in medium and large commercial vehicles like buses and trucks
Axial flux Permanent Magnet Synchronous Motor (AF-PMSM) - Designed for high-performance drives, using stators and rotors
Capex
Manufacturing facility at Hyderabad for Lithium Ion cells and Electric Drive Train (EDT). Cost of capex-Rs 110 cr- Completion in two phases (Debt Rs.80 crore and balance through internal accruals). Phase I completion -Q4FY22 and Phase II -after completion of Phase I
Manufacturing facility at Hyderabad for Lithium Ion cells and Electric Drive Train (EDT). Cost of capex-Rs 110 cr- Completion in two phases (Debt Rs.80 crore and balance through internal accruals). Phase I completion -Q4FY22 and Phase II -after completion of Phase I
Risk
No management interaction with shareholders. Major risk here can be delay in implementation of Kavach by Indian railways and inability to shift from Lead Battery Division to value added products. Emergence of better efficient technology in Motors
No management interaction with shareholders. Major risk here can be delay in implementation of Kavach by Indian railways and inability to shift from Lead Battery Division to value added products. Emergence of better efficient technology in Motors
Last few quarters there has been sequential growth, Within June 2021 to March 2022, EBITDA has grown from 15 cr to 53 cr suggesting inflection point for the business. It remains to be seen how the company executes in future.
Most of its verticals witnessing very good tailwinds apart from the lead battery business. Specially application of TCAS and TMS is a big opportunity with supply side being limited to 3 companies. Source - Annual Report, Credit Rating Reports, ETNow & money Control articles.
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