Good afternoon, everyone. On behalf of Asian Markets, we welcome you all to the 1Q FY '27 post-results webinar of Elgi Equipments Limited.

We have with us Mr. Jairam Varadaraj, Managing Director, representing the company.

I'd request Mr. Jairam to take us through the presentation and the overview of the results, following which we will start the Q&A session.

Over to you, sir. Thank you.

Thank you. Thank you, Kamlesh.

Thank you, Asian Market Securities, for organizing it. Ladies and gentlemen, it's a pleasure for me to be with you.

I hope you're able to see my screen, 'cause I'm having difficulty seeing my own screen. Just give me a minute while I...

Sir, we are able to see your screen, sir.

I know. I'm not able to see it,

I'm

just trying to see what view option I should be using. Just give me 1 minute.

I'm not able to get my screen. Just give me a minute, please.

It's sharing. I'm sharing it.

Right? What's the view option?

It's not Stop Sharing. It's going to be here, mister.

The screen is... I have to see the screen, though.

That's it. Okay.

Can you see the screen now?

Yes, sir. Yes, sir, we are able to, sir.

Perfect. All right.

Okay. Thank you again.

I apologize for this bit of a challenge here. I changed the format for this year.

I'm starting starting on the revenue and then moving to the EBITDA. I want to look at Q1 revenue numbers compared to Q1 of last year.

We grew by about 23%, and after that 23%, 7% was exchange-related. Across the board, we had growth.

I'll come back and talk about region-wise performance. EBITDA, we grew by 28%.

This has been good. I'll again talk in greater detail about the constituents of it.

Moving on, on a sales mix, by and large, the same between compressors and automotive equipment, and by and large, the same split between India and the rest of the world. We have introduced this slide to give you a sense for where our growth is coming from.

If you look at India's stand- which is standalone, we have grown by about 28%. North America, we have grown by 37%.

Europe, we grew by 21%, and Australia, 7%- sorry, 17%. Across the board, we have had some good growth.

Despite a strong growth in India, we've been able to maintain the split between India and rest of the world by virtue of growth in other geographies as well. Moving into the classical EBITDA reconciliation that we normally present.

If you look at it, exchange has been We've carved out exchange because there was a significant impact of exchange during the quarter. We've had a good volume impact.

We had a contribution negative, primarily because of raw material cost increases, tariffs, and product mix. We have responded to this, and we expect to see part of the We've done this responded by cost reduction.

We have also responded by price correction in the market. The price correction, we expect to see towards the end of the second quarter and more fully in the third quarter.

By and large, we are confident that we have mitigated this. We started off the year thinking that there will be a 3% to 4% increase in material cost, cost by commodity, metal commodity prices.

In reality, it was 5%. Then there was a possibility that it could go to 9%.

We have taken 9%, and we have taken some corrective measures. We're confident that there will not be any impact.

Even this quarter, we have maintained our EBITDA percentage same as last year, in fact, slightly better. I think it'll only continue to improve into the future.

This is the thing. On employee cost, even though the increases seem significant, primarily, it's a increment that we have given across the across the world, overall cost is well within control.

The same thing with other expenses. There's a 12% increase primarily because we have gone and taken on some rental premises for our motor plant, as well as, what we sold, facilities that we sold in the US, we have moved into rental facilities.

Moving on to the full financials, we are our PAT is at 9.7, roughly similar as the Q1 of last year. This is with some exceptional reorganization cost.

We are going through some reorganization in Australia, in Europe, and a little bit in the US. We we think there will be a little bit of continuing of these costs continuing into the into the year.

The the benefit of doing this is is, in a very short time, and it's good for the company. We're not too concerned about this.

Net cash position in the company continues to be very strong. Our capex, one is our MK2, which is our program for shifting our campus to the new campus from our city factory.

That's been about half of the capex is towards that. The other is we bought some land in Italy, which was contracted 6 years ago that we had to make that commitment, and some equipment, normal capex in the in the factory.

This is really what I wanted to present to you. I will now give an overall of the sales numbers starting from Australia.

Australia was a bit muted relative to the other geographies. We've had some challenges in our service business in our distribution of operations.

We are we're working towards resetting the processes, reorganizing then. We're confident by the third and fourth quarter, we will be back to where we are supposed to be.

Moving down, Southeast Asia continues to be a bit of a challenge. Part of our restructuring cost has also is towards Southeast Asia.

Market is big, but there are still challenges for an Indian brand in that market. We are working on different strategies there.

It's a longer-term play. It's not a significant contributor.

Coming to India, India did well across all verticals, whether it is industrial, portables, aftermarket, vacuum. All of them have done well in the quarter, and we expect to continue to do at this level, though the growth rates may be less because our first quarter was of last year was a bit of a muted quarter, and we had very strong second, third, and fourth quarter.

The growth rates may not be as attractive as we have had in the first quarter, but we'll continue to grow. In India, we've made some strong inroads into some of the growth sectors like EV.

Our growth in EV has been pretty significant. Our growth in the renewable energy segment has been pretty significant, and the growth in semiconductor ecosystem has also been significant.

We are riding on some of the the industry waves that are happening in India. Europe is a more of a P&L play for us right now.

We have done all of it to make sure that it is breaking even, stays there, and it is staying there. There are some initiatives to grow the top line.

We have made plans to enter into Germany and a little bit more emphasis into Eastern Europe. There will be a tighter control over cost even while we try and grow some of the geographies and products.

Again, Europe is going to show up in the in the medium term. It'll come back to where it's supposed to be.

North America was a good story. Our distribution business is not doing as well as it should be, primarily in the service side.

We're working on a few initiatives. All the other businesses have done well in North America, and we expect that this momentum will continue into the future as well.

This is really the overall summary of our our our performance for the first quarter. Our project to enter into the what we call as the Tier 4 segment, in the bottom of the pyramid, bottom of the industrial pyramid, where we are been facing very low cost compressors from China.

They're all lined up. Our products have been validated.

In fact, we've got our first orders in already. The formal launch is this month in Hyderabad in one of the exhibitions.

We're going to have that. It's we are on track.

September will be the launch. We've got our distributors lined up.

The training program has gone. Our internal organization is in place, both for sales and service.

That project is on track. Anyway, this year is just the start year.

It will be a contribution to the top line marginally, but really, in the next few years, we expect that to be a very strong player. I would now stop here and rely on your questions to provide more clarification.

Thank you.

Thank you, sir, for the opening comments. We'll just wait for the question queue to assemble.

Participants, in case you have any questions, you may please use your Raise Hand option or you may also drop your questions into the chat box below. Sir, the first question we have is from the line of Ravi Swaminathan.

Ravi, you may unmute yourself and go ahead with your question.

Hi, sir. Good afternoon.

Congrats on a good set of numbers.

Thank you, Ravi. Good afternoon.

Sir, my first question is with respect to the India business. It has seen a very strong growth of almost 28%.

Any color on how much of it would have been volume-driven and how much of it would have been price-led? Because a significant amount of raw material price increase has happened over the past few months, especially since the war.

How much price increase we would have taken over the past few months and have we completed our price correction movement, or is there further price increase that is there on the cards?

I would say the growth has been primarily volume-driven, Ravi. There has been a marginal correction in price, which we Like I said, we anticipated about 3% increase in raw material prices and to that extent we corrected our price.

What really happened is 5% to 6% is the increase in the raw material cost. To that extent, we underrecovered, but we have corrected for that in the subsequent quarters, but impact of it we're not able to see in the first quarter yet.

Understood, sir. If it is so volume-driven, that is more than 20% growth in terms of volume growth has been there, can you highlight some of the end subsegments or sectors which have actually done really well, or is it we have gotten to some newer categories and some of the newer products like the aftermarket products or the stabilizer products, etc., which are contributing to this incremental growth?

The multiple reasons. One is I can say across the board, across all industry verticals, there's been a growth, right?

I can't say that there is one particular industry that has contributed significantly to this. That is point number one.

Within specific industry segments, we've been able to grow by virtue of Demand Match. Demand Match was launched in September of last year, and the traction and the receptivity has been really outstanding, right?

We've been able to gain entry into customers who are never our customers, right? The value proposition that we've been able to demonstrate for the product has been very powerful, and that is really carrying.

That's the second kind of a stream. There's been no real new products that we have launched, but just an upgrade of our entire range of products over a period of time.

Today, our product range is one of the best in the world, right? In terms of energy efficiency, in terms of competitiveness by virtue of making our own motors.

The overall value proposition that we are bringing into the market has been very, very strong. This is the third.

I would say all three have contributed to the growth.

Understood, sir. Any mix change also which has contributed to this in the sense that screw compressors have grown faster than piston, something of that sort?

Has it happened

or

the mix has largely been the same?

Mix has been, by and large, the same.

Understood.

There's been nothing significant.

Okay. In terms of forward-looking enquiry numbers, etc., from certain large categories like industrials especially, metals and then waterwell, infrastructure, regular general infrastructure, etc., how are you seeing the demand environment on the ground?

Has there been any slowdown related to the war which has been there within India demand, or are you seeing demand sustain enquiry levels sustaining?

Enquiry still remains very strong. Like I said, even in the annual call, enquiries remain strong, but the gestation time for finalizations are longer than normal, right?

It is still very strong. Waterwell has seen an uptick in the quarter, but it is not like a day and night difference.

Yes, there's been a positive contribution in terms of increase. Other than that, I would say overall there's been a buoyancy in the economy.

Understood, sir. Thanks a lot.

I'll come back in the queue if I have more questions.

Yeah. Thank you.

Thank you, Ravi. The next question we have is from the line of Manjeet Rathod.

Manjeet, you may unmute yourself and go ahead with your question.

Hello, Mr. Varadaraj.

Very good to see you.

Hi, Manjeet.

I want to refer to the stabilizer product that we had launched in 2025. It's spoken about a groundbreaking technology that we had come up with.

How has been the adoption of that technology and how do we see about the product adoption when we come up with such technology? Do we have a gestation period of about 3 to 5 years before we reach a sizable scale to that, or there has been a very quick adoption?

That's my first question. Yeah.

Manjeet, like I just explained, the stabilizers when we first introduced the technology, that was the name that we used. We actually launched the technology and the product is called Demand Match, right?

We launched it last year, like I was explaining, last September, and the absorption has been outstanding. Demand Match is a technology that sits in multiple models of our products.

That introduction of that technology in models has been phased. Wherever we have introduced it in our models, the acceptance in the market, the kind of traction we are gaining has just been outstanding.

That has been a contributing factor for our growth this quarter. That's only in India.

We are launching Demand Match in the rest of the world this year, and that work has already started. We have had validation machines installed in all the major geographies, and the feedback and experience has been again outstanding.

That's very good to know, sir. At this point in time, are we working on some technology that really excites us, or how do you think about in which direction should we pursue the research?

Are we trying to improve our efficiency of our existing products, or we are trying to develop some new products, or it is both? Are we seeing something new coming up over next few years?

I don't want to say 1 year, 3 years. I want to put a number, but is there anything under development which really excites you?

Oh, there's a lot of stuff that's going on. See, there are two vectors for our technology/product development.

One vector is to take the existing architecture and existing philosophy of design and move it to the highest level of efficiency and lifecycle cost, right? That's one vector that we are doing, and that's where new products come in, higher efficiency, and lower lifecycle cost.

That's one. The second vector is really fundamental technology development, which delivers things like Demand Match.

That's something that is ongoing, and we have some very exciting stuff. Unfortunately, I can't talk too openly about that.

Again, the whole philosophy is how to reduce the overall lifecycle cost for the customer, right? Pick the elements that are not so obvious and try and eliminate those costs for the customer.

There quite a few exciting stuff that's happening.

Thank you, sir. I'll go back to the line.

It's always very good to speak to you.

Yeah. Thank you, Manjeet.

Thank you, Manjeet. Sir, next question we'll take it from the line of Yash.

Yash, you may unmute yourself and go ahead with your question.

Good afternoon, sir. Thank you for the opportunity.

I have a very broad question, sir. What is our right to win in the global markets, as you always say we don't compete on price nor the industry works that way?

What makes us different that a customer who has been using Ingersoll or Atlas or any other competitor for that reason to switch towards us, or when they expand their capacity, choose us over anyone else?

There are two things, Yash. It's a very good question.

One is, customer buys compressors based on certain three well-known parameters. Energy efficiency is the biggest.

The second is the maintenance cost, and the third is the price of the compressor. Now, 80% of the market looks at energy efficiency and maintenance, less on the price.

20% of the market works purely on price. They're not too worried about efficiency and maintenance.

Roughly, that's the split. We would like to focus on the 80% which buys on efficiency and maintenance cost.

That's really where we are saying how can we make the most energy-efficient compressor in the world. Today, close to 70% of the models in the industrial side, we are the best in the world, right?

This is not something that we are claiming. These are independently published numbers, right?

That's one part of it. When it comes to maintenance, the biggest maintenance cost, which is not very well documented, is the cost of failure, right?

When a compressor goes down, even if you just take the cost of just renting another compressor to run the plant, that becomes the second largest cost. We are focused obsessively on quality, and we have the lowest defect rates in the market.

That is why we are able to provide lifetime warranty, 10-year warranty in different segments of the market and still have one of the lowest warranty cost on revenue, lowest in the industry. That's a reflection of the quality that we bring into the product.

This is really what gives us our ability to win disproportionately when we are in front of the customer. Combine that with things like Demand Match technology, which nobody else has, it takes the value proposition to the next level.

That is another layer of the right to win in these markets. That's really how we are pushing the whole go-to-market.

Thank you, sir, for that answer. Sir, how are we working on getting in front of the customer on that side?

That's a long process because this is a primarily a distribution-led business. Distributors own relationship with customers all over the world.

The real challenge is not giving value proposition just to the end user, but look at what is the unique value proposition that we give to distributors. That is a longer process than getting in front of the customer.

We are very confident that when we are in front of the end users, we win disproportionately, right? The real challenge which we are working on is how do we get more distributors to represent our products.

That's an ongoing process. There is no switch that we can quickly turn on to make that happen.

Thank you, sir. That's it from my side.

Thank you. Sir, we'll take the next question from the line of Mr.

Ravi Swaminathan again. Ravi, you may unmute yourself and go ahead with your question.

Hi, sir. A few more follow-up questions, sir, which I have.

Given the kind of strong growth that we have seen during this quarter, is it safe to assume that we would have gained market share in the Indian market?

I think so. I'd like our competitors to tell us that.

Okay. Got it, sir.

Second question is with respect to after-sales service. After-sales would have seen similar kind of growth that the product sale would have seen,

and

what kind of contribution does after-sales have in our overall revenue mix both at the India level and at a global level?

I kind of expected this question based on your prior questions on the same things in the past, Ravi. I prepared myself for this.

Aftermarket has grown not only in India, but it has grown all over the world. That's been one of the reasons why in spite of an increase in material cost, we've been able to sustain our profitability.

I'm not saying that's the only reason, one contributing factor. As far as aftermarket to revenue, I would say that if you just take parts, if you look at overall in the world, we are at around 22%, 23%, right?

In India alone, we'll be at around 30-odd percent, right? 28% to 30%, right?

US has got a mixture of both parts and service because our distribution business does service as well, right? Service is a very lumpy kind of a thing because we charge hundreds of dollars per hour for service.

It colors the whole thing. We are at around 30%.

If you remove the service part, probably we're at around 16% or 17%. I would say it's fair to say in India we are at around 28%, 30%, rest of the world at part level at around 15%, 16%.

There is headroom for us to grow in India as well as headroom to grow in the rest of the world.

Okay. The global benchmark for after-sales service as a percentage of revenue, it used to be around mid-30s.

Is that a right understanding? Are we would try to Sir, you are on mute.

Sir, you've gone on mute, sir.

Sorry. Sorry.

I was clearing my throat. It's somewhere between 38 in that between 35 and 40.

I would say 38 probably there. Yeah.

Understood, sir. You had mentioned about EV application in the initial comments.

If you can elaborate more as to where do the compressors go into EV application? Sorry?

In the initial comments, you had mentioned that we have done well in electric vehicle, EV applications also. If you can talk about where the compressors go into EV applications?

No, no. I said the EV ecosystem, right?

If you look at the EV vehicles, there are suppliers to the EV vehicles, there are EV vehicle manufacturers themselves. The compressors going into the factories, it is not going into an EV vehicle, no.

Understood. Okay.

It's kind of an extension to the auto products that

Absolutely. Absolutely.

Yeah. Yeah.

The number of new players in the electric vehicle category, especially in the two-wheeler segment, is a lot more than in the four-wheeler, right?

Okay. They're

all setting up factories, and we are involved with them in helping them with their factories.

Understood, sir. Very clear.

Final questions, if you can give a mix of sales mix between industrial, infra, and retail sales, and also between piston and screw, that will be great.

I don't have the number with me. I wouldn't like to split it between a piston and screw because that's too comparatively very sensitive.

Industrial, infra, and retail, I don't know what you mean by retail. I don't have the numbers in front of me, Ravi.

Sir, retail means automotive garages, etc., woodwork, and all these things, I think one can classify it into retail.

We don't break it up that way. I won't be able to tell you what we sell in automotive garages.

We don't measure that separately. Yeah.

Sure, sir. Thanks a lot.

Thank you, Ravi. Sir, the next question we take it is from the line of Mr.

Vipul Kumar. Vipul, you may unmute yourself and go ahead with your question.

Hi. Congratulations, sir, for very good set of numbers.

My question is in an reply to earlier question, you said we have one of the lowest warranty costs. Is it possible to quantify what is our warranty cost as a percentage of sales and how does it compare to our peers?

Our warranty cost, I don't want to give you a specific number, Vipul, but it is less than 1% of our revenue.

Okay. How does it compare to peers?

We don't know. Nobody reports it, but from people who are from competitors who have given us casual references, it is higher than 1%, right?

That's the thing. They are higher than 1%, we are lower than 1%.

In your opening remarks, you had also mentioned semiconductor ecosystem. Where compressors are used in semiconductor ecosystem?

In manufacturing, there are oil-free machines that are used. There are suppliers to the semiconductor industries where in regular compressors are used.

The ecosystem of semiconductors has a wide set of applications. The final one, the fab is the cleanest.

It's got the highest standard of air quality and all that. We are participating there.

We're also participating in the entire eco-chain of that.

What percentage of our turnover should be relating to semiconductor right now, sir?

I wouldn't like to share that detail, Vipul, but considering that it's a nascent industry that has come into India, it's not a significant number, but it's a growing number.

It's a very fast-growing segment. Is that understanding correct, sir?

Yes, it is a growing number. Yes.

Thank you very much, sir, and all the best for future.

Thank you.

Thank you, Vipul. Sir, the next question we'll take is from the line of Mr.

Ankur. Ankur, you may unmute yourself and go ahead with your question.

Hi, sir. Thanks for the opportunity.

First question on the distribution side both in India as well as in the global markets. You did mention that Demand Match has been launched across India.

Would it be fair to say that more or less the entire nation is covered with this now, or there are still some

Absolutely. Absolutely.

Because we have now, like I said, Demand Match is a technology that gets embedded in all our products, right? We have sequenced the introduction by virtue of the most popular products.

Wherever we have embedded that technology into our product, 100% it has been absorbed, right?

Sure.

Even as we speak, we are continuing to add more products into that Demand Match technology. I expect in another year, all our products will have Demand Match embedded in it all over the world.

Sure. The timelines that you will see for the global side as well, it's 1 year only, right?

In India, it's largely done,

and

globally, you're saying 1 year.

Yeah. This year, we will have it globally.

Yes.

Sure. Just a follow-up there.

In terms of physical expansion of our distribution network, let's say deepening presence in our existing markets or adding newer ones, especially globally, how are we sort of ramping up there over the last couple of years and your initiatives there?

I don't have a specific number that we have moved from this many distributors to that many distributors. Everywhere in India, it is not about increasing the number of distributors.

It's about reorganizing our network in various geographies to make it more effective. There could be a distributor in one area who's sitting on too large a territory and we are not able to penetrate in certain sub-areas.

We split territories and get deeper. That's one type of activity in India, which is ongoing even as we speak.

Then for our Tier 4, we have now set a completely new set of distributors. It is not shared with our existing distributors because that's a completely new business with a completely new mindset, right?

Sure.

That's another growth in terms of our network. In the US, our growth has primarily come from accessing new distributors into new territories, right?

All, like I said, getting distributors to come on board takes a long time. It's not something as easy as converting a customer, for instance.

Fair enough, sir. That's helpful.

Just a related question on the aftermarket side. One, how does the split that you shared, how does it vary between India and the global markets?

Secondly, do we have an AMC for our products across all which is automatically sort of getting renewed, or it's a product-specific service as and when the problem or some issue comes in, you charge for it? See,

if you look at the full spectrum of aftermarket, there are parts and then there is service, yeah? Yeah.

Yeah.

ELGi predominantly plays in the parts business, right? We leave the service part to the dealer, right?

Now, if you look at India, because the labor cost is so low, revenue from service is very, very small, yeah? If you take a typical dealer in India, let's say 20% 20%, 25% of their revenue is coming from aftermarket, I would say probably 2%, 3% out of that 25% is service.

You take the same thing in the US, if they take 30% or 40% of their revenue is coming from aftermarket, close to 25% of that will come from service. Yeah.

Sure.

We don't do service. In India, we do a little bit of service to our direct customers, customers like large corporates who don't want to work with dealers, we provide direct service.

That's not a big part of our income. Our main aftermarket is parts, right?

Now, it's also our philosophy that we don't want to intrude into the profitable segment of a distributor which is service. They have the capability, they have the service technician, they have trained service technician.

We let them earn. It's part of coexisting in that ecosystem, we're fine with that.

Like I explained, the split is in India, we are between 28% and 30% is aftermarket. Worldwide, we have about 15% to 16%, again, looking at parts.

Yeah. Ex of service, yeah.

Yeah. Great, sir.

Thanks a lot for all your answers, and all the best. Thank you.

Thank you.

Thank you, Ankur. The next question, sir, we'll take is from the line of Sri Agarwal.

Sri, you may unmute yourself and go ahead with your question.

Thank you, Mr. Varadaraj.

Congrats on good numbers. Just one for me, which is on the improvement in the margins for the international subsidiaries.

Just, you mentioned that aftermarket as a share of overall improving is one of the contributors. Other than that, what have been the drivers of this?

Because at a time when commodity costs are high, this is quite notable. Also the sustainability of this improvement, should we expect this to continue in the coming quarters as well?

Thank you.

Sri, thank you. There are multiple things.

One is, obviously, let's take North America as an example. The large percentage of growth of the top line has obviously been a contributor to the bottom line health as well.

There is no doubt about that. That's not the only factor.

We have also, like you saw one of the expense items of reorganization, we are taking cost out to make the organization more leaner and more nimble and more efficient. That's another factor.

The third is, in spite of the increase in raw material costs, in spite of holding our prices in the first quarter to a larger extent compared to raw material price increases, the cost reduction activity that's been going on in this company has been a contributor as well, right? In-sourcing the motor, our own design has been a significant contributor, just as an example.

Similar to the motor, there's been many other things that we have introduced, which have brought significant savings to the bottom line. It's a series of these things.

We expect this to continue because it is not a one-time thing. It's an ongoing thing.

The reorganization wherever it's to be done will continue to happen. Cost reduction activities will continue to happen.

Like I explained, we have corrected our prices based on the new reality of cost increases. That will kick in towards the end of the second quarter or fully in the third quarter.

We expect to see all this to ensure that we sustain this in the future.

Fantastic. Thank you.

Yeah. Sir, before we move to the next person, I'll take one question from the chat.

It says, "Sir, do we supply compressors to CNG filling stations?"

No, we don't. We don't make gas compressors.

No.

Sir, the next question is from the line of Mr. Dhaval Shah.

Dhaval, you may unmute yourself and go ahead with your question.

Hi, sir. Congratulations on great set of numbers.

Thank you, Dhaval.

Sir, you mentioned in your opening remarks that renewable energy has also started contributing meaningfully in terms of growth, incremental growth. Which part, sir?

Wind, solar, both?

Yes. See, again, we are not supplying directly into the solar panel or into a wind turbine, but the whole ecosystem of production that happens for solar, right from cell manufacturing to panel manufacturing, all the way up to installation, there is compressed air that is required.

We are in that full supply chain, yeah? Similarly, wind turbine, yeah.

Okay. Great.

Sir, you said that margins, which are already very good in this quarter, and these margins can only go up, right? That's what you said.

Yes, of course, we don't know what Mr. Trump will do in terms of tariffs.

Assuming that that remains stable, we have done a lot of work to absorb that. Right now, our tariff is at 25%, and we've been able to absorb that very effectively.

Barring no unforeseen kind of shocks of that nature, we should continue to improve, yeah.

I think on your Investor Day, you said it should go to 16%, 16.5%, right, by FY

'28? Our target is to grow to 20.

We had given a guidance that we will go to 18% by '31,

yeah. Sir.

Thanks a lot. All the best.

Thank you.

Thank you, Dhaval. Sir, there is a follow-up question from Mr.

Vipul Shah. Vipul, you may unmute yourself and go ahead with your question.

Yeah. Thanks for the opportunity.

Sir, Demand Match is optional, or is it mandatory for all new dispatches, sir?

We have made it standard, Vipul. All ELGi compressors catering to a certain tier of the market, like, for instance, the Tier 4 compressors will not have Demand Match, right?

Our Tier 3, Tier 2, and Tier 1 compressors all have Demand Match as standard.

Sir, one small clarification regarding tariff. You said tariff right now is 25%.

Is that

Sorry? Sorry, you're breaking up, Vipul.

The

current tariff is 25%, sir, you said?

Yes. Yes.

Have we received refund of all earlier paid tariffs, or anything is pending still? We,

I think, we made a disclosure in the market. There's approval of close to $4 million of refund.

I think actual refund is about $1.6 million or $1.8 million that we've got a refund, yes.

Balance is pending?

Yes, we have to wait.

Okay. Thank you, sir.

Sir, there's one follow-up question from Ravi Swaminathan. Ravi, you may unmute yourself and go ahead with your question.

Ravi, please unmute yourself and go ahead with your question.

Hi, sir. One final follow-up question.

With respect to some of the new-age sectors like EV and renewables and probably even data center, what would be the revenue contribution to India and global revenue for you from these segments? Any broad sense on them?

I'm just trying to figure out whether are they meaningful numbers for our revenue or not.

See, they are developing. At least in India, semiconductors or renewables are developing sectors.

They have a large growth themselves. You can't compare the buying power of that industry sector with textiles or cement or steel, which are well-established.

They're not a big contributor, but they have very high growth rate, right?

Okay. Understood, sir.

In terms of metals like steel, copper, aluminum, etc., are you seeing big traction, enquiries, etc., picking up very significantly? Because usually they change the entire growth rate itself because of big orders coming in.

There are enquiries, Ravi, but I think all these I don't know about copper and this thing. We are not that big anyway, and steel is big.

I think at one point there was a huge capacity build-up, and then there was all these issues. I think the steel industry is bleeding out its capacity first utilization before they start looking at further investments.

Understood. Here centrifugal compressors only go into it largely, or is it like the addressable market is screws as well?

No, it depends on the size. There are centrifugals in large plants.

There is also lot of screw compressors.

Understood, sir. Thanks a lot.

Thank you, Ravi. The next question we have is from the line of Manjeet Rathod.

Manjeet, you may unmute yourself and go ahead with your question.

Hello again, sir. I'm not seeking a very specific answer.

I just wanted to pick your mind.

Manjeet, your voice is not clear. Could you please come closer to your mic?

Am I clear now?

Better.

Yeah.

Hello again, sir. I'm not seeking a very specific answer.

I just wanted to pick your mind. Please feel free to answer it in whichever way you feel like.

When we look at Atlas Copco and when we look at Ingersoll Rand, their technological capabilities and our technological capabilities, where do you see the gap lies, if there is any?

As far as technology is concerned, there is no gap, right? The fact that we launched Demand Match is a demonstration and an evidence that we have a good mastery of not just the know-how of technology, but the know-why of technology, right?

When you have know-why, you can build the next products. If you have know-how, you can't build the next.

This is clear demonstration that we have the why, right? Why is something built the way it is so that you're able to question it and make the next product, right?

That's the trajectory we are in. It's not something that came easily.

We've been working on it for the last 30 years, right? Technically, there is absolutely no difference.

In fact, we would say that there are some understanding we're superior.

Understood, sir. Barring scale, what are the organizational capabilities that would differ, barring scale?

What has happened, if you really look at our company, we've taken an Indian company and we're trying to grow it internationally, and it's been a huge learning process for us 'cause there is no textbook which says step one, step two, step three, this is how an Indian company will build a global company. You go out there and you do certain things, you make mistakes, and you learn, right?

Now, one of the learnings that we have is tomorrow if we really want to do the next round of scale, we have to have very strong processes, which will help us be efficient as well as have control over our operations without any surprises, right? This is something that we are going to build out in the next few years, a very strong process layer in the company.

Through that process layer, we'll be able to take out so much of inefficiencies that are currently there, right? I would say the scale will come once we have built that layer, and that we are going to start doing now.

Thank you, sir. Very good to hear from you again.

All the best.

Yeah. Thank you.

Sir, the next question is from the line of Mr. Ritwik.

Ritwik, you may unmute yourself and go ahead with your question.

Hi. Good afternoon, sir.

Hi. Good afternoon.

Sir,

my question is on our cost, employee cost and operating cost. In the last 3 to 5 years, we have seen it grow in mid- to high teens.

You mentioned that we are looking to rationalize the cost at Europe and try to become more cost-efficient. Do you think that this trajectory should somewhat rationalize from current levels, or this trajectory should continue over the next 3 years as well?

It will start getting rationalized, Ritwik, on two levels. One is we obviously have to grow the top line, and the minute we grow the top line, even the current level of cost as a percentage is going to drop.

That's just pure arithmetic. Besides that, we are looking at where is a particular job best performed.

Again, it relates to this process project that I talked about. When you have a very clearly defined process layer and a process map across the company, across all its geographical entities, there will be clear identification of where the jobs can be done the most efficiently.

I'm not saying everything has to be done in India, but there are certain locations that do certain things far more efficiently. Once we get that kind of an understanding and consolidation that takes place, the overall cost will go down, the efficiency will go up, right?

That's something that we hope to achieve over the next 3 to 4 years' time.

Okay. The journey from say 15%, 16% EBITDA margin towards your target of 20%, some part would be operating leverage on the current base, some part would be the new products that you are launching.

Would that be a fair assessment?

Some part of it clearly operating leverage, which is linked again to new products because they contribute to giving us the top line, right, by market share or growth into new markets. We will also be looking at how to improve our gross margin, right, through a constant cost reduction, reengineering.

That's an ongoing process that we have now embedded in the company. The other is to look at our fixed cost rationalization through this process exercise, right?

Okay.

At three levels we will be looking at improving our EBITDA margin, not just relying on only leverage.

Right. Sir.

That is helpful. All the best, and thank you.

Thank you.

Thank you, Ritwik. Sir, I see no more questions, I'll hand over the mic to Kamlesh ji for the vote of thanks and probably the closing remarks followed by your closing remarks.

Thank you very much for moderating the session. Yeah.

Sir, just one point. Can you just help us understand the Italian joint venture progress?

When are we seeing the product to be launched?

Sorry, say that again, Kamlesh.

The new product that we are launching, nah? In collaboration, vacuum products.

Oh, vacuum is already in the market, Kamlesh. We have indigenized it.

Local production has already started. We have started selling.

The first quarter has been very good. I just don't want to give a specific number as yet, Kamlesh, but we have had a phenomenal percentage growth in the first quarter, right?

We expect that to continue. You got to understand we are a very, very small, late entrant player in this segment, right?

These kind of growth numbers will happen to anybody, right, who enters this, right? It's encouraging to see because the quality of customers we've been able to get are very high quality customers, which is a reflection of the quality of the products and our entire marketing program, right?

It's encouraging. We will continue to grow that.

Yeah.

Great, sir. Great.

Thank you, sir, for all the insights. Any closing remarks you want to make?

Thank you very much, Kamlesh. Thanks to you and Asian Market Securities for hosting us.

It has been a good quarter, but this is a quarter in a lifetime. We don't rest on this.

There's still a lot of work to be done, and we keep looking forward into the future with great optimism. Thank you again for everyone's time.

Thank you.

Thank you so much. Thank you, everyone.

With that, you can log off the call. Have a good day.

Thank you.

Thank you.