Thank you, Yusuf. Good evening, ladies and gentlemen.

A very warm welcome to all of you to the Q4 and year-ended FY26 earnings call of GMM Pfaudler Limited. The earnings presentation was uploaded on the stock exchanges today and is also available on our website.

Hope all of you had a chance to go through it. From the management today, we have with us our Managing Director Mr.

Tarak Patel, our Group CEO Mr. Gregory Gehlhaus, our Group CFO Mr.

Alexander Pöndl, our Deputy CFO Mr. Ankit Nair, our Company Secretary Ms.

Mittal Mehta. We will give you a brief overview of the performance of the company, after which we will get into the Q&A.

Before we begin with the overview, a brief disclaimer: The presentation was uploaded on the stock exchanges and also on our website, including our call discussions that will happen now contains or may have certain forward-looking statements regarding our business prospects and profitability, which are subject to several risks and uncertainties. The actual results could materially differ from those in such forward-looking statements.

I now hand over the call to Mr. Tarak Patel to provide an overview of the performance.

Over to you, Tarak.

Thank you, Raveen. Good evening, everybody, and thank you for joining us today.

Let me start with a brief overview of last year's performance. We delivered another steady year with a notable increase in revenue by about 10% and EBITDA at about 11%.

Our margins remained stable in the year, and the India business particularly did quite well. The India business grew revenue by about 12%, and the EBITDA grew by about 24%, and the PAT margins in India also grew by about 40%.

The good news is that order intake continued to remain strong this quarter as well, but on a year-on-year basis, order intake is up 20%. We have an order intake this year of ₹3,714 crores versus ₹3,100 crores in the previous year.

Our opening backlog on April 1st is also up by about 24%, which gives us a strong revenue visibility as well. The general economic business environment is not so strong and has been difficult over the last 6 to 9 months, mostly simply of course you all have been part of the turmoil in the Middle East, which has of course kind of created uncertainties and investments going forward.

There are definitely geographies within the global sphere that we operate that are doing quite well. We do see also some positive developments in certain industry segments as well, but in our traditional segments of chemical and pharma, pharma has done quite well this year, but chemical still remains slow, especially in our India and international markets.

Having said that, our diversification strategy is now playing out quite well. Nearly 50% of our order intake this year has come from non-traditional industries.

When I say non-traditional, these are non-chemical and non-pharma. Our diversification strategy into these new industries has given us a lot of additional order intake as well.

Some of the new industries are, like I've said before, semiconductor, defense, oil and gas, petrochemical, metals and minerals. We've also had some organizational changes this quarter.

We had as of this board meeting announced Gregory Gehlhaus's appointment to Group CEO, and Ankit Nair will join us as Deputy CFO of the company. With that, I now hand over the call to Alex.

Alex will take you through the brief financial performance of the company. Over to you, Alex.

Thanks, Tarak. As said by Tarak, I would like to say also a few words about the financials, especially focused first on the exceptional items, which we already flagged in the last quarter.

There's a minor change. It's an increase of ₹9 crores for our restructuring initiative in Germany.

This comes from the fact that we now signed the agreement with all the individuals, and it was slightly more costly. However, it also then results in a higher cost saving going forward.

Regarding the balance sheet, would like to focus here on working capital. We were able to achieve an improvement versus the half year, which I think we also already estimated in the last call.

We were able to achieve this. Therefore, we generated a strong free cash flow of ₹367 crores, which is even slightly upwards the prior year by ₹49 crores, and our free cash flow to EBITDA ratio remains slightly above 90%.

We have repaid our long-term debt of ₹60 crores during this year, and therefore, with also the strong cash generation that we achieved in this year, we reduced our net debt to adjusted EBITDA ratio to point 0.4 times versus 0.5 times in the previous year, significantly below our target range, and the net debt to equity also remains low with 0.2 0.5. If we come to the outlook, we have a really strong backlog as Tarak already said, this also gives us some comfort for the near start, but however, as already mentioned in prior calls, there are also still some territories which are impacted by the ongoing crisis due to the tariffs, due to now new Middle East conflict, and the general geopolitical tensions and uncertainties.

We are confident, but we also do not want to be too bullish. We will also benefit from the initiated restructuring measures.

This at least will help us to improve our profitability. This is all from my side as of now.

Therefore, I hand over to Raveen again, and we start with questions.

Thank you, Alex. Yusuf, you may now open the lines for the questions.

Thank you.

Thanks for the opportunity. A very good evening to the entire management of GMM Pfaudler.

Sir, my first question was related to our margins, actually. In this particular quarter, obviously our revenue growth was quite good, almost 7% sequentially, 17% Y-o-Y, but there was some serious derailment in margins, actually.

More than your other expenses, looks like your gross margins have went even on a standalone, even on a consolidated level. Our consolidated level margins stood at 55.4%, and compared to Y-o-Y as well as sequentially, has dropped down.

I wanted to know what was the reason behind the same? What are the sustainable margins going forward that we can assume, actually?

That was my first question, sir.

Let me start off by saying, just looking at one quarter in isolation would not be fair for the company. We are a manufacturing company, we will have a little bit of fluctuation in margins, especially when we have a very wide range of products, right?

Sometimes we have shipments and dispatches that come from maybe a lower kind of key margin business, and some quarters we might have obviously the mix of the products will definitely play a part in that. We don't believe that this is something that will continue.

It's probably a margin day specific to this quarter. We would like to at least maintain or grow margins in the next year.

Even for the full-year basis, if you see, we have still improved over previous year, right? Our EBITDA value has increased from what, 361 reported last year to 403, and even the margin percentage has gone up by 1 percentage point on a full 12-month basis, right?

Again, I think the foundation is in place. It's been a tough year for us.

There's been a lot of multiple different issues that have impacted our performance. I just again highlight some of them.

There's already a general slowdown in chemicals, especially agrochemical, so that has impacted us. Europe for us has been slow.

The story in Europe in terms of the new investments. However, I would like to add that the large orders that we've received and the order intake has actually also come from Europe.

Even though the execution, the performance was slow, the order intake from Europe is much stronger this year, which obviously sets us up nicely for next year. From a margin profile perspective, I'll maybe let Alex speak a little bit in terms of what the expectations are next year and what specifically happened this quarter.

Yeah. Hey.

Look, and thanks, Tarak. As Tarak already mentioned, if we just look at one quarter, it could be a little bit misleading.

I think we stated once in a prior call that it's better to look on an LTM basis, always a 12-months period, because then at the end you do not see this big fluctuations, which are coming from the share of the different businesses in the quarter. In general, we improved versus last year.

We were also able to increase our margin. We significantly increased our order intake.

We are confident to see further improvement in the next year. We have a really solid basis based on the backlog that we have, based on the operational improvements that were initiated.

On a constant basis, we expect an improvement, which we already started in this current, I would say, difficult economic environment.

Just to add to that, there has been significant work that's been done in Europe in terms of taking out costs. The German factory, which we have downsized, right-sized, we have reduced people there, which will definitely benefit us a little bit next year, and obviously for future years as well.

We've also right-sized some of the other operations within the European continent to make it more efficient as well. Our Poland facility is now up and running, so that should also help as a low-cost source for Europe.

We've shut down the UK and the Hyderabad facility here in India. We are working to a much more efficient cost structure.

There are still low-hanging fruit that they're working on. They've not finished all the work, but if the volumes were to return and with the backlog that we have now, we do believe that next year we should definitely improve from this year.

I agree, sir, that you have a very solid order backlog, and you have done the measures to actually curb the cost. I wanted to understand particularly in this quarter, is the increase in the glass-lining business has led to the derailment in gross margins?

How can we read? Secondly, the guidance for FY27 and FY28, what are the stable state EBITDA margins that we can target, sir?

A couple of things on this. I think there was a large HE order that was shipped out this year, which could have impacted the margins.

That was one. Number two is that we probably had a little bit of increases in some of our costs, which were a result of the gas prices going up and metal prices and stuff like that.

That has now stabilized, we should be okay. Looking forward, I think what I can say now is that we had with our board yesterday a strategic plan meeting.

We've outlined some basic three-year plans, and we are in a good position to come to the market in the next few quarters. Again, we would like to come when we have a little bit more confidence around just the general business environment, but we have something in place now that will at least give us some visibility and vision for the next few years, right?

We are preparing. I've spoken about it before.

We're there now in terms of at least the ideas, the initiatives, the broad level numbers, and now we will find the right opportunity to come to the market and explain to you what we are talking about and what we're trying to do.

Okay.

From that perspective, we improved versus last year. Really look on a 12-months basis a continuous improvement.

We really were able to improve order intake significantly. That when we are stating we are confident that also next year will look better, we feel really comfortable to state this.

Really on a quarterly basis, it's tough to say how each quarter will develop. Really let's focus on 12 months, be confident seeing the order intake, the backlog that we have, the restructuring measures initiated.

For the next year, we are really confident to see further improvement.

Okay. Okay.

Sure, sir. My second question, sir, as you are seeing a very good outlook for the next 2 years, what would be the drivers?

I understand the diversification beyond chemicals and pharma, the disclosures that you have given on investor presentation, that is one of them. I wanted to understand that what would be the drivers within the non-glass lining technologies, whether it will be industrial mixing, or whether it will be some add-on services business, or where we will see some supernatural growth which will actually help GMM Pfaudler to at least clock double-digit growth in the next 2 years?

In terms of revenue.

I think there are a couple of things that we would like to speak about here. One is that when we speak about the three-year strategy, the vision of the company, we've broken it down into three big buckets.

One is growth, right? Growth is going to come from multiple different avenues.

Growth can come from share in market share, it can grow from regional expansion, it can grow by selling into new industries, or some new phenomena that comes in which drives further more requirement of a specific product, right? Growth is something as a company that we've been focusing on, and not every product of ours will grow.

Of course, a glass-lined business of ours, where we are a market leader, we have a very high market share, the growth phase there will be slower than let's say a heavy engineering business, where we have a small market share, and we have multiple different industries that we can cater to who are currently growing. Mixing could be another growth area for us, but again because mixing we have a global organization and it caters to multiple different industries, we have growth there.

Right, growth is definitely something that we are planning, but again I can't say one product or one industry will drive growth, it's going to be multiple different levers across multiple different products. That work has gone in.

The second part is cost, right? As a company, we are the technology leader, can we also become the cost leader?

A lot of work that we've had, we've inherited a lot of cost in Europe, and those geographies obviously are not as growing as fast as we would like. The only option really for us is to create a much more efficient cost structure in these geographies.

That's what we're working on as well. You'll see that also happened last year.

That gives us confidence that next year we are operating with a much lower cost structure, right? We could say that things are fine and we expect Europe to come back in a big way and have 20% growth year on year.

Realistically, I don't think that's going to happen. If it does happen, great, fantastic, we have more orders in at a lower cost structure, we'd be happy with that, but we're not building our plan around Europe in these geographies, right?

The last is organization. If we want to win, if we want to operate in these multiple different geographies, in these different industries, we have to kind of reorganize and change behavior as well.

Going from an international Indian organization, can we really align by product, by vertical, by industry to really drive some of these growth, right? A lot of work has gone in, a lot of work is going in, and growth is a very important part of our business, but do keep in mind certain geographies will grow fast, some will grow slow, but we do believe that we have plans in place to help us grow at least double digit over the next whatever, 3 years or so.

Okay. Just last one, sir.

You had guided for a closure of the China plant. You were working on that.

In the last quarter also you mentioned to curb down the cost further due to lack of business there. Any color on that, sir?

No, that's an incorrect statement. We have never said anything about closing our China facility.

It remains a very important part of our business. We had just looked at maybe taking some costs out with the slowness in the business, but as of this quarter, some of the business has come back in China.

We hope that will continue. I don't see China closures or any cost reduction there to be a big part of this year.

If anything, we expect China to do okay.

Okay. Okay.

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

Thank you.

Hi, Tarak. Very good evening.

I know it's a tough time right now. Just two questions.

One is on the tax. How are we on that?

How are we working on improving? Because in this quarter, the tax has been pretty high.

Is the Luxembourg entity which is still not solved, or are there more further complications in other places as well? The second question is we were to change the way we report our segments.

Are we going to be doing it from next quarter onwards, or what is the plan for that? Because last time we met you in the conference, you said that there'll be a corrosion resistant tech, heavy engineering, process performance, and systems, we'll be reporting it in that way.

Will we be doing it from the next quarter onwards?

I think a few points before I let the technical answer come from Alex. One is that, like you started off by saying it's a tough time, it's definitely not as tough as what it was 12 months ago, right?

I think as management today, we are confident that some of the work that has gone in will definitely bear fruit in the near foreseeable future. I think that the market itself also is showing some positivity.

I just hope that some of this craziness that's happening around the world, if that were to stabilize, I think things can look very, very different. We are positive.

Again, like I'm saying, it's part and parcel of life. You're never going to have every quarter where they're going to grow by 20%.

There are going to be good quarters and bad quarters, it's not going to be just smooth sailing going forward. As a good company, I think mitigating risk, identifying risk and these issues, and even for us if you do look back, and we are a large company, ₹3,500 crores for a manufacturing company is not small, and to have that much order intake coming in this year, especially when our core industries, our traditional industries were not growing that fast, I think that is a significant achievement, right?

These sectors, until 2 years ago, we were not even speaking about, right? To get an order of ₹130 crores from nuclear or getting a $30 million order for some acid recovery are not normal.

We have worked hard, we have put in, and we were there at the right place to capture this. We could have very easily said, hey, everything is slowing down, we will degrow.

Even in a tough year, we've grown 10% revenue, and what's even better is our profitability at the EBITDA level has grown at the same rate or slightly better, right? We haven't lost a lot.

Yes, there's a lot of work to be done in costs in Europe, there's a lot of work to be done in our restructuring, and I'll let Alex speak about that. Alex.

Regarding the taxes, I think it's coming up regularly, and we already worked on it, and if you take a comparison here on the quarter, you already see an improvement in the international connections. Nevertheless, it's not there where it should be, and it's coming mainly from the Luxembourg entity, fully correct, and we are working on this, but this unfortunately does not go so fast.

It requires some time. As said, as you look to the quarter-over-quarter comparison of the tax rate for the international business, it already improved.

Alex,

maybe you want to also talk about the FX and stuff like that while we're on anything they're doing for the loans and that.

For example, this is one, and I think it was also mentioned in prior quarters, there's one intercompany loan which we have between the German entity and the Luxembourg entity, which creates some FX exposure which also impact the results, and this also triggers or could trigger some additional tax expenses. There, especially in the beginning of the calendar year '25, at the beginning of our financial year, we saw a negative impact, and this drove significantly this strange tax rate.

However, if you look to the international business in the last quarter, you see a tax rate in the 30% area, which I think comes already closer to the expectations, and we are working on it to get this also settled in the coming financial year.

Great. Just one question: How are we placed on the order contracts?

Do we have a pass-through? How much of raw material input cost that has risen, can we pass through to the customer?

It depends on the contract. On fast-moving contracts, small contracts, you can't.

In any case, we buy materials to stock for our glass-lined business, there will always be that discrepancy, but sometimes it helps us, sometimes it doesn't, but it's not a significant impact. Some of the longer-term projects have always been escalation clause.

Heavy engineering, some of the system contracts will have that, if we kind of go above or below that 5% threshold, we can go and ask for more, or they can ask for less, right, in a worse-off situation. That's something that we have, but internationally most material is only ordered after the order comes in, so that material cost is already priced into the cost of the product.

Okay. I think I'll fall back in the queue for further questions.

Yes. Hi.

Thanks for the opportunity. I had a couple of questions.

The first one was, I was trying to understand the commentary on when Alex was referring to the fact that he sees that the management is confident, but don't want to be too bullish. Tarak, you yourself are also referring that you would want to defer guidance until more clarity emerges, want to come back later, right?

I just wanted to understand, on one hand, you have a very strong order book and order intake that seems to be going well, but on the other hand, of course, there are macroeconomic uncertainties related to the war and other issues, right? I just wanted to understand your reluctance to provide guidance.

Is it more driven by worries that orders could get cancelled or delayed, or whether the margin on those could be volatile, or just wanted to understand, double click and understand further on that. That's my first question.

Look, if you currently see the economic environment, I think we are all agree that a lot of uncertainty is going on. I think in the last conference call, we were not aware of the crisis in the Middle East.

If you now look to our order intake, it increased by 20%. If we would now just say, okay, the order intake gives some guidance for the next financial year, I'd consider this to be too bullish.

Why? Because some of the order intake is also coming from businesses like the systems business, which does not have the direct conversion into revenue.

Some of the bigger orders that we gained, they will be converted over 2 or even 3 years into revenue. This is in the intent to not set an expectation that we will improve by 20% next year and then the EBITDA improvement is even higher.

We are confident we will improve. We improved this year.

I think we are fully on track what we said. We just don't want to be too bullish.

We would like to be realistic. As I said, I repeat myself, we will improve.

We have profitability improvement and cash flow improved. The restructuring measures initiated, we will have, I think, a solid year again, but will be impacted by all the economic situations.

If there's something else is coming up, of course, we will see it.

Just to finish off that point, I think the apprehension is not about giving, and the idea is so we were hoping to come to the market, the plan was August-September. With the current crisis in the Middle East, we probably would still like to meet that date, but if not, then a couple of months more.

This year, we do believe that we should be in a position, if everything goes smoothly, to articulate our strategy, our three-year vision to the capital markets. We've seen other companies do certain things, and if you don't achieve those numbers, then that also hurts, right?

We want to be realistic, at the same time we want to be smart about it, right? The last thing we want is to come out and give a number and then not achieve it.

I think it's a right combination, but again as management, the last couple of years has been tough, a lot of work gone in. Even for us to build more confidence, we would like to see momentum build, some good quarters, and the idea is to have improvement every year, right?

From not only the internal performance, but things like taxation, FX, loans, everything, right? Cash flow.

Across the board we're trying to improve, and I think when we're ready to give that number, we will do so. We're not afraid to give that number, but we want to have more confidence before we do.

Understood. My second question was a broader question on the disclosure and presentation itself, right?

Over time as the business has evolved, and now as you yourself mentioned, reasonably a good part of the orders as well as revenues are coming from non-traditional industries. The presentation format seems to be still somewhat, kind of indexed to the older kind of business model, right?

Just wanted to get your

That will change. Sorry, I know you're talking about it.

Sorry to interrupt, but we don't like to change something during the year, because it would be weird to change it now in Q4, but next quarter onwards, you will see some different stuff. We are reorganizing.

We have a new organization in place. We have new ideas.

We will come to you with that. You will get more information.

It's a work in progress, and we are going to come at least next quarter for sure with a new reporting system with much more clearer data where you can track different things, it is something that we're working on.

Understood. Just one follow-up to what Alex was saying earlier on the order intake.

If I look at the overall order intake, it seems to have been largely helped along by a large systems order intake uptick, right? Whereas the rest of the orders were probably low to mid single-digit kind of a growth.

Just wanted to understand your thought process on the sustainability of this, because quite a significant part of the increase has come from systems, right? Yeah.

That's absolutely right. Two large orders in systems, one in the US and one in Eastern Europe.

We are still in the process of many more opportunities in this space in Europe. We currently have open opportunities, and we believe that that should at least generate $20, $30 million of order intake per year for the next few years, right?

It's not only a European play, we see that happening in more geographies. We are now in talks with Indian companies as well to look at the same technology for India, and I think that's going to be at least maybe one of the growth areas for us globally, not only in Europe.

The other businesses which were traditionally focused, they were more traditional in nature, more dependent on chemical and pharma. Chemical has definitely been slow.

You guys know this, we know this. Europe chemicals is definitely slow.

BASF, Bayer, you hear of people shutting down facilities, it's not something that is growing at 20% for sure. India has also seen some slowdown because of agrochemicals, because of overcapacity in China, but the good news is the last few quarters whenever we speak to owners, promoters, management, the volumes have come back, you have seen a spurt of new opportunities that have been finalized, large orders, and you are seeing something more happening now as well.

Pharma in India is still being driven by CDMO, they're doing quite well. Internationally, pharma picked up also because of GLP and the other drugs and also localization.

The American market is also something that we're quite bullish on. Hopefully, some of the deals that Mr.

Trump has signed will translate into new investments, which will benefit us. Having said that, again the general uncertainty, the tariff situations, just the mindset today is not gung-ho investment.

People are more cautious, and we would like to be a little bit more cautious right now. It's a tough environment for sure, and it's something that we will have to work around, and that's probably the new world order, I guess, how things will operate in the future.

I think for us, we do believe that growth will come from these non-traditional industries, but again we have to focus more and build an organization to capture more and more from this, right? Yes, the work definitely is happening, and we believe that this is a growth opportunity for us.

Thank you. Thanks for the answers.

Hi. Hi, team.

Am I audible?

Yes, yes. Go ahead, Anil.

Yeah. No, just wanted to check with you on your cash flow statements, on the consolidated cash flow that you released, there is a line item for unrealized foreign exchange fluctuation loss of about ₹72 crores.

Where would that be sitting in the P&L, please?

It's in the OCI.

You don't see it direct in the P&L,

you see it in the OCI. No, and

in the other comprehensive income, or okay, in terms of the ₹137 crores that you talked about, is that where it is sitting?

Yes, as said, you do not have one single line in the P&L, you see it everywhere, because the impact of the FX is impacting several lines as you are there, as

it summarizes with Fine. Understood.

My second question to you is, in the sense, when we look at your P&L account, we continue to see pretty large finance cost for the year. When I look at your gross debt and then I look at the cash on hand, the net debt is actually not that much.

Clearly, the interest income that we earn from the cash seems to be meager to nothing, but we are really paying up for our loans, whether it's long-term or short-term. What use is this cash, ₹600 crores plus that is just sitting in terms of cash and bank balances?

It's just doesn't make sense. From EBITDA to PAT, the flow-through just is very, very meager.

There are several impacts. First, you already talked about the FX fluctuations, and if you remember, we thought were questioned, I explained one big intercompany loan that we have between the entity in Germany and the entity in Luxembourg.

We have an FX fluctuation which you also see there in the interest due to this intercompany loan. Additionally, you are also right, we have a lot of cash on the balance sheet.

It's too much cash, and usually you would repay the debt. Currently, we have our financing agreements in place till 2028.

We will restructure this, and this is also a part of the general tax restructuring, which I answered before. We could not do it within a few months.

It's intended to do it in the next year, but unfortunately currently we have to live with this.

I'm sorry, but there are many companies in India listed companies operating across the world. I haven't seen this kind of a flow-through from EBITDA to PAT to be as meager as this, and particularly on the interest side.

Net debt is about, if I leave out the pension fund liability, which anyway is a year-to-year change, it's you're not paying interest on it on a yearly basis. It's just, our net debt would be less than ₹200 crores today as of March '26, but I still end up paying ₹120, ₹130 crores of interest.

We are On this Anil, let me just allow Alex to just jump in. You're right, absolutely right.

It is a work in progress. We already got some approvals today for restructuring, it's ongoing.

Do keep in mind that this was inherited because when we acquired the Pfaudler business, it was structured in a certain way. The restructuring also comes at a cost, but we are working to reduce and improve the flow-through from EBITDA to PAT for sure.

You will see some improvement also next year in the coming quarters as well. The work is going in, but some will take a little bit longer.

We are on this. We understand the concern here, and we're definitely working on it.

Now we obviously have Alex also supported by Ankit, who has joined us as of May 11th, they will work together to create the right structure and create the right efficient movement of between EBITDA and PAT. As said,

as Tarak said, unfortunately we have it since a few years. You could not get it settled within a few months.

The plan is there, the board approval is there to change it, and it's coming from the intercompany loan we managed, we already mentioned, and from the setup with the Luxembourg entity. We are not properly set up there, but it takes a while to clean it.

We I'm sorry

I just

Yeah.

Yes, sir. Am I audible?

Go ahead.

Yeah. Thanks for the opportunity, and congratulations on a good order book in this tough environment.

I again want to pick up from the last participant who had alluded to the fact that you currently have almost ₹680 crores of cash, and on the other hand, our debt is increasing. I do understand that some of these would be through the acquisitions that have come to our balance sheet.

Sir, if I just look at your cash flow statement, since the last 2 years, you have been generating a lot of cash flow. Almost ₹380 crores of cash flow in both the years.

Cumulatively, if I look at that, it's almost ₹720, ₹730 crores plus of cash flows that you have generated in 2 years. Is it why is it taking almost 2 years and still our debt is going up?

Can you just give a timeline as to when do you plan to reduce it, because I think that ₹122 crores can literally flow to our PAT and improve our earnings? Sir, I believe that 2 years is a reasonably good time for a management to realize this.

That's my first question. Thank you, sir.

I agree. Look, we are on this.

We will reorganize the financing within the next calendar year. This is something which currently is in place.

However, what you should also not overestimate, we have a lot of these big contracts, they came with prepayments of customers, and therefore a lot of cash that we have on the balance sheet, we require to finance these big orders. We discussed, especially the systems business, we received a lot of cash which we now have to use in the coming months to finance the business.

Currently, the balance sheet looks really strong, but let's not say that we generate this kind of cash also going forward. Yes, we also still need some cash.

Right, sir. I got your point.

Can you give some numbers as to what kind of debt profile would it look for FY27 and '28? Based on that, what will be our interest cost for the coming 2 years?

At least some directionally if you can give something, some range or a number, would also be good.

We will repay or intend to repay easily $20 million.

From the

group to reduce the cash and to reduce also the debt position. This could be easily done.

Right, sir. We can assume at least ₹200 crores of debt coming down in FY27?

It will probably not be there as of March. We have the structuring in place, and we also have some financing arrangements in place which were signed, which came also with the transaction, and it's because we have to check with other parties, we have to check with tax authorities, and I could not get it implemented just within a few months.

I know that it takes long, but unfortunately to change these setups, it takes a little bit longer. It was inherited, and we are working on this.

We get some board approval to continue now with the proposed measures, but I do not want to confirm that it's solved by end of this financial year.

Right.

Okay. Because it's a long conversation and I think from a management perspective, I need to just highlight a couple of things.

One is, do keep in mind the complexity of the scale and size of the operations we have, we're in about 18 jurisdictions. Money is there, it is in different jurisdictions.

We need to be smart about it, and we are trying to reduce obviously the debt position. If we have cash, there's no point for the cash to sit there not earning interest, right?

These are all things, like I said, besides operations, besides the growth, besides the cost, besides the organization, there are also low-hanging fruit in some of these inefficiencies that we have in the system. We are working on them, and you will see some improvement, right?

Right now, you don't see it because we needed time also to first understand the situation. We've brought in the Big Four, who've spent 6 months to identify the ways that we could do it.

We've looked at multiple different options. Some cost us money, some don't.

It's not as easy as saying, okay, let's move ₹400 crores from this jurisdiction to this and pay it off, right? It is a bit complex.

Maybe we're a little bit slower than we should be, but let's do it right. The intent is there to clean that up once and for all and not have a situation where we lose, because we as management also and Alex is part of this, sometimes we feel bad that the hard work that we do at a business level sometimes doesn't show up at an earnings level, right?

We are working on that. We can't change what's happened in the past, but the idea is to definitely change what we can do in the future.

Right, sir. My second question is on again the European operations.

We have completed significant restructuring actions in Europe, especially the closure of the UK Leven facility, and there was some workforce rationalization that we did across Germany, France, and Switzerland, and the commissioning of the Poland plant at a very low-cost manufacturing hub. We did have an exceptional item, and somehow or the other, either a small number or a large number, but an exceptional item keeps coming.

My question specifically is that how much more exceptional items should we expect going ahead? Once the rationalization has already been done, can you just quantify the annual run rate cost savings that we expect once these actions are fully absorbed, both in terms of the absolute terms and also in terms of improvement in the international EBITDA margins, which are currently at 10%?

Thank you, sir.

On the one-offs, I don't think we will have anything significant next year. I can't say right now, but as of now, there is no plan.

Most of the stuff that we wanted to do has been done, there's no specific plan right now to do anything in terms of one-time costs, right? I don't see that hitting the P&L next year.

In terms of the cost savings, I think we had mentioned something, we've added about 4 or 5 more people to that restructuring as well, and we could probably articulate some savings. They start over next year and really materialize as and when people retire, we could share something.

Alex.

In fact, we would like to share that we save with this initiative ₹45 crores on an annual basis.

On

the German restructuring one. I echo it's exceptional, yes, you are right.

We had last year exceptional, we have this year exceptional. Why do we have it?

Because we really shut down sites, and this of course will not continue. Currently, there's not the plan to do something, but of course, depending on the environment, and if we think we have to improve here and there, and we initiate another big restructuring measure, we will report it as an one-off item, but then you will also see additional cost saving in the future.

As said, Germany restructuring cost is one, and therefore we see ₹45 crores improvement.

Sir, sorry to interrupt. Just wanted to get a clarification.

The ₹45 crores that you alluded to the number, that was an exceptional item in the Leven closure alone cost, right? When we say that we have made the Poland plant

No. You're talking about the German Wächtersbach, the $4.5 million, $5 million that we spent this year, yeah.

I think as exceptional in this year, we have ₹65 crores. This consists of the restructuring, namely severance costs in Germany as well as impact from the labor court in India.

This ₹45 crore what I mentioned, this is an improvement, the cost saving going forward in the international business in Germany. In fact, the costs that were taken out with this restructuring initiatives.

Sir, normalized EBITDA for the international business, currently for this quarter it was around ₹50 crores, but if I even look at the annual EBITDA number, it's around ₹260 crores for this quarter for the international business. We can expect that to be anywhere between ₹320 to ₹330 crores.

Is that a fair assumption?

What he's saying is, if everything remains the same, if business continues, margins continue, prices don't increase, everything's the same, you will see that savings coming through and adding to that number, yes. In an ideal situation, but there could be some other savings that might come up, pricing might increase, it could increase to that, it might decrease a little bit, but the savings in terms of what we pay people, the salary that goes out, will

decrease. That's right.

Currently, if you start with ₹260, ₹264 EBITDA this year, you have to add the ₹45 to come to a like-for-like comparison just based on the restructuring measures. As also Tarak mentioned, we will not get everything directly from April because some people will leave during the year.

The 45 is a full-year impact.

Right, sir. We can expect

Am I audible?

Go ahead.

Sir, I have two questions. The first one being, in the last quarter, I remember you mentioning our sustainable operating margin structure.

I understand there are some gross margin issues this quarter, but if we have to understand our sustainable operating margin structure, how should one think about it maybe if not next year, probably 2, 3 years out? What is the management vision there?

A company of ours in engineering, we believe that a 15% EBITDA margin, if you look at some of our peers, that should be something that we should definitely aspire to. We are today at an 11.5%, 11.4%, and we believe that in the medium term, that is a number at least as a minimum that we should achieve, if not more, right?

If our initiatives work out the way we planned them, if the growth comes in, if the order intake comes in, there's no reason why we should do it even faster. Again, general business environment today is a bit slow, it does take a little bit of time.

We do believe with this year's also initiatives, we believe that next year we will improve again, right? Yes, it's an improvement that maybe some of us feel is a bit slow, but keeping in mind the current situation, I think it's a steady performance this year.

Again, next year again, like you said, people would like to see improvement, and some of the improvements which are within our control, they would like to be done faster, right? We are working on those.

I think a 15% margin is something that we should definitely be targeting, and I think management and my colleagues here feel I think that is at least a minimum that we should be having. At

a global

consolidated level, right? At a global consolidated level.

Within that, you'll have certain products maybe earning a 20% EBITDA margin, and some maybe at a 12% EBITDA margin, but as a blended rate, we believe a 15% margin would be achievable.

This is slightly lower compared to what we had expected last quarter. If I remember it correctly, last quarter it was more like in the range of 16% to 18%, if I'm not wrong.

Again, we're taking a three-year view, the idea today is again to be cautious and to be I would say, we are optimistic, but again committing to something and then not achieving it. The idea is to get to 15 as soon as possible.

If that time frame becomes faster, then there's no reason why 16, 17 should not be achievable, right? So,

No, makes sense. I think I'll just ask my second question.

Sir, fundamentally any company will drive their growth in two ways, right? One is through existing products, and the second one is the new products, right?

I know that now GMM is working in the areas of semiconductor and nuclear. We just wanted to understand what are the kind of products which we are working, and who is the typical customer, what are the end use cases here, and how do you see this vertical growing for us if not next year, probably a 2, 3-year view, and what are the typical margin structures?

Are these higher-margin products? I think this is the question I had.

This is maybe a slightly different way to answer the question. Continuing on the strong order intake for last year, in spite of the current situation, we do see a good amount of traction also in Q1.

Order intake is continuing to be of a decent level, so that's definitely a positive. Again, this quarter we've seen a nice order coming in from Edlon in the tune of $8, $9 million.

We've had a large order in Asia, in India as well, for our heavy engineering business. Order intake is coming in, and like you're saying, it's coming in from the non-traditional segments of, for example, defense, oil and gas.

We've got some international export business as well, right? These different industries are definitely driving a little bit of growth.

Our current markets of pharma have also seen some improvement here in India. The CDMO play is picking up, like I've told you.

The peptide play is also adding to that. Chemicals unfortunately has not seen significant improvement.

We are still kind of waiting for the big projects to line up, but still they are a little bit few and far in between. I think that's a concern, but generally some of the slowdown in chemical we've tried and made up from the other industries.

No, got it, sir. My other question was more in the lines of semiconductor business.

What are the

No,

let him finish that question here. Let him finish that one here.

Sorry, go ahead. What was the last part of the question?

I did not get it.

Yes, sir. My question was more in the lines of what are the applications in semiconductors and

nuclear you're

working on, what are the end applications, and who are the typical customers you're working in,

and

what are the typical operating margin structures? Sorry, semiconductor, yeah.

In our Edlon business, we have maybe the big focus on semiconductor where we work with Micron, we work with Intel, we work with all these companies who manufacture fabs and chips and things like that, right? Because they require very high purity linings within those vessels where they do these kind of chip manufacturing and things like that.

The who's who of semiconductor. Today Edlon, if you remember a few years ago, it was a $10 million business, it was put up for sale, and as this market turned and semiconductor started booming, we decided to keep that business within the group.

It's now a $25-plus million business, high-margin business, and good growth as well. That's the application.

Edlon also now is seeing some traction into the nuclear industry in the US where they're making glove boxes lined with the same material, so that's another area that we are kind of trying to get into. The third part for the other products where I think we've done a lot of work in diversification, we have a lot of new emerging kind of technology like lithium extraction, battery technology, we build systems for that.

Then in our mixing technology business, we've done a lot of work with metal and minerals. Both our South American unit, Semco, has done exceedingly well.

This quarter, they got another large $12, $13 million order for agitators as well. Mixpro in Canada also based on the same investment going into metals, minerals, is growing quite well and highly profitable, right?

There are different pockets around the world that are doing quite well and generating good order intake. The chemical, traditional markets of chemical are a bit slow and patchy, and hopefully that will come back.

Hi. Just a couple of follow-up questions.

One is on the other intangible assets in the balance sheet has grown about ₹150 to ₹160 crores. If Alex can maybe just guide us how the Semco acquisition has been distributed on the balance sheet, how much is for goodwill, how much is for the intangible, and how much assets, the property, plant, and equipment?

We can, but it would probably better if you just connect directly. We can share the working with you because on the call you might get some different numbers, probably better to get this.

These details are easily available. I think Raveen can share with you, just reach out and we'll share it.

Sure. Just one on the provisions.

Provisions also have increased by ₹110 crores. These are the pension liabilities, has that increased, the long-term provisions?

No. You ask regarding the pension liabilities on the balance sheet?

Yes.

Yes. No, this is coming just from a different interest rate.

It's the valuation which was provided by the actuary, but the plans are closed, in fact, we have here regular there are some fluctuations, but this is just driven by the assumptions, by the interest rates mainly.

Okay. Thank you.

Just coming back also regarding the intangibles and goodwill, I think it was provided, you see it in the papers, and the new amount is coming with the Semco acquisitions and partly INOX, the two acquisitions. The split, I think, you also see there.

Okay. What is GMM INOX, Tarak, can you brief on that?

That's the Poland facility that we incorporated this year,

so

that is our Poland facility.

Do we plan to acquire 100% of that in future?

Yes, we are. Go ahead, Alex.

We have the possibility to acquire at one stage, but currently we have a strong local partner, and currently it's not the interest to increase it to 100%, no.

How much is the capacity utilization over there right now?

It's full. It's completely full.

We need to build another two sheds as soon as possible.

Yeah. Currently by this acquisition, we invested, yeah, more or less it was a cash investment to get the 51%, and now we are setting up, we are increasing the site, and as mentioned before, it's more or less to set up more production facilities for the other sites in Europe to also benefit from cost saving in Poland.

Okay. How much revenue from Vatva facility, the heavy engineering, how much revenue has been done this year?

Heavy engineering, I think 300-plus-ish crores, yeah.

All is domestic, right? No,

I think they would have had some small export component, but not major, but the new orders that have come in, there have been some good export orders. For last year, I don't remember them having a very large export, maybe a couple of ones to the Middle East, but nothing significant.

Generally mainly domestic, but the current order backlog will have a little bit more exports.

INOX is not heavy engineering.

You're talking about the Vatva facility, right, our heavy engineering business?

Yeah.

That's grown year on year double digit, it has grown for sure. The plan there is to continue growing as well because that's one business line that has the legs for growth.

We can do how much revenue from there, about ₹600 crores from current

No, I think from the current facility we could expand a little bit more there, but I think around 700 to 800 can be targeted from that facility with some more investments, small investments. More than that, we would need a new facility.

This will be a 15% plus margin? Yeah.

Okay. Thank you.

Thank you, Yusuf. Thanks, everyone, for joining us today.

It was a pleasure interacting with all of you, and we look forward to many such interactions during the course of the year. Take care and see you soon.