Schneider Electric Infrastructure’s Roadmap to Future Growth: Digitalization and Renewable Energy

Digital transformation is critical for all businesses, from small to large. That message is heard loud and clear in nearly every lecture, panel discussion, article, or study about how firms may remain competitive and relevant as the world gets more digital.

In recent years, the COVID-19 epidemic has added urgency to achieve digital transformation goals, forcing many organisations to accelerate transformation efforts.

So, what is digital transformation? In general, we can define digital transformation as the integration of digital technology into all aspects of a business, resulting in profound changes to how firms function and provide value to customers.

This company that we are going to explore today, is a prominent player in the realm of digital transformation. Schneider Electric Infrastructure Limited is at the forefront of empowering businesses to embrace digital transformation. 

With a diverse portfolio of offerings spanning various sectors, including energy management, automation solutions, and sustainable infrastructure, the company is committed to enabling its clients to utilize the full potential of digital technologies.

The stock has delivered incredible returns over the past. Over the past one year, the stock has surged 344 percent. Looking at a period of three years, the stock has given a tremendous multibagger return of almost 730 percent.

In this article, we’ll delve into Schneider Electric Infrastructure Limited’s business model, explore its key segments and financial performance, and assess its future outlook in an ever-evolving digital landscape.

Corporate Overview Of Schneider Electric Infrastructure

Schneider Electric Infrastructure is part of the Schneider Electric Group (Group), a worldwide firm that specialises in energy management and automation solutions. The Group began operations in India in 1963 and has since become a major provider of energy management solutions, industrial automation technologies, and software solutions.

SEIL provides a diverse range of goods and services for many categories, including buildings, data centres, infrastructure, and industries. They specialise in energy efficiency and sustainability solutions, power distribution and automation, home automation, and critical power and cooling.

Business Segments Of Schneider Electric Infrastructure

The company operates in four main areas – Power & Grid Segment, Mining, Metals and Minerals, Transportation/Mobility, and Industry and Buildings.

Power & Grid Segment

The Power & Grid section is prominent in the company’s portfolio. The continuing demand for electricity, driven by increased industry and retail consumption, provides an ideal platform for SEIL.

Furthermore, the Indian government’s commitment to digitalisation and the move to renewable energy sources provides SEIL with significant potential. The government aims to achieve net-zero goals by investing around ₹350 billion in digitalization and renewable energy.

This change enables the company to provide electricity infrastructure solutions and services. SEIL is also actively monitoring the allocation of green hydrogen, with the goal of transforming it into a viable economic opportunity.

Mining, Metals and Minerals

Governmental infrastructure spending on projects such as metros, airports, and steel opens up significant economic potential for Schneider Electric in the Mining, Metals, and Minerals industries.

This investment is expected to boost cement demand and drive capacity expansion in the industry. Furthermore, steel capacity increases are expected to increase by 50% by 2030-31, creating additional growth prospects.

Schneider Electric’s innovative technologies and expertise in energy management may help these industries expand by increasing efficiency, lowering costs, and improving sustainability.

The portfolio of products and services is geared to the steel and cement sectors, aiding them in achieving their goals.

Transportation/Mobility

The government is investing extensively in modernising railways, metro networks, and airports, with a record-breaking capital investment of ₹2.40 lakh crore for railways.

Schneider Electric is well-positioned to capitalise on these advancements by offering a wide range of solutions in this market sector.

Industry and Buildings

The company is dedicated to providing a diverse range of sophisticated automation and control solutions and services customised to the industry and building sectors.

SEIL also intends to accelerate digital transformation for buildings, infrastructure, and industry, with cloud analytics playing a critical role.

Its cloud analytics solution, along with linked devices, enables it to provide a centralised building management system that provides proactive asset management and predictive maintenance, helping organisations and the building sector to get closer to attaining their net-zero goals. 

Financials Of Schneider Electric Infrastructure

In the fiscal year 2023, SEIL saw a substantial increase in revenue, surging by 16% to reach ₹1,777.19 crore as opposed to ₹1,530.34 crore in FY2022. Analyzing a span of four years, encompassing FY2020 to FY2023, the company displayed a  Compound Annual Growth Rate (CAGR) of 8.7% in revenue.

Simultaneously, there was a noteworthy upturn in net profit, experiencing a 348% increase from ₹27.62 crore in FY2022 to ₹123.62 crore in FY2023. The growth in sales was primarily driven by the MMM and Oil and Gas segments. The gross margin improved by 2.7%, mainly due to better sales mix and raw material prices softening. 

Considering the vast business opportunities as discussed above and as well the company’s strategic focus and expertise, the management expects this growth in the margin to continue at the same, if not better, momentum in the near to mid-future. In FY23, SEIL maintained favourable financial metrics with a Return on Equity (ROE) of 39.36% and Return on Capital Employed (ROCE) of 18.39%.

Future Plans Of Schneider Electric Infrastructure

Future Growth Prospects Look Promising

The management of Schneider Electric Infrastructure Limited exuded confidence about the company’s future growth prospects. With the Indian government’s strong focus on infrastructure development, renewable energy, and electrification of mobility, the company is well-positioned to capitalize on the emerging opportunities. 

The interim budget announced a massive capital expenditure outlay of INR 11.1 lakh crores, which is expected to provide a significant boost to the economy and drive demand for the company’s products and solutions.

Leveraging Digitalization and Sustainability Offerings

Schneider Electric Infrastructure Limited aims to differentiate itself by offering digitalized and sustainable solutions to its customers.  The company’s EcoStruxure platform, which encompasses connected products, data collection systems, and software solutions, is designed to enhance efficiency and sustainability for its clients. 

Additionally, the recently launched EcoCare subscription model offers condition monitoring, maintenance advisory, and support services, enabling customers to optimize asset performance and reduce downtime.

Strong Order Book Position

The company reported a robust order book position as of December 31, 2023, standing at INR 1,010 crores. This represents a substantial 24-25% growth compared to the order book at the end of the nine-month period in the previous year. 

The healthy order book provides visibility and a comfortable pipeline for the company to achieve its deliverables in the coming months, underscoring the strong demand for its products and solutions.

Diversified Business Model and Focus on Value Addition

Schneider Electric Infrastructure Limited’s balanced business model, spanning power and grid, metals, minerals, and mining, mobility, semiconductors, data centres, and other industrial segments, enables it to mitigate risks associated with cyclicality in any particular sector. 

The company is focused on providing value-added solutions to its customers, not just by delivering equipment but also by offering services and support to ensure seamless operations and optimal asset utilization.

Conclusion

Schneider Electric Infrastructure Limited has demonstrated remarkable growth and a strong financial performance, fueled by its diverse portfolio and expertise in digital transformation solutions. The company’s future prospects appear promising, driven by the Indian government’s focus on infrastructure development and sustainability initiatives. 

What are your thoughts on the company’s ability to continue thriving in an increasingly digitised business landscape?

Written by Nalin Suriya

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