Thank you, Anushka. Good evening, everyone.

On behalf of Antique Stock Broking Limited, I extend a warm welcome to all participants joining us for the 1Q FY27 post earnings conference call of Kirloskar Oil Engines Limited. We are pleased to have with us the senior management team of the company, comprising Ms.

Gauri Kirloskar, Managing Director; Mr. Rahul Sahai, Chief Executive Officer; and Mr.

Sachin Kejriwal, the Chief Financial Officer. The management will begin the call with their opening remarks on the company's performance during the quarter and the business outlook.

This will be followed by a question-and-answer session where participants will have the opportunity to interact with the management. With that, I would like to hand over the call to Ms.

Gauri Kirloskar for her opening remarks. Over to you, ma'am.

Thank you, Sanjeev, for the introduction. Good evening, ladies and gentlemen, and thank you for joining us for Kirloskar Oil Engines Limited first quarter FY27 earnings conference call.

Joining me today are Rahul Sahai, CEO of KOEL; Sachin, our CFO; Kiran, our CHRO; Smita, Company Secretary; and from Arka, Riddhi, Chief Financial Officer. Thank you all for joining us.

The first quarter of FY27 reflects an important milestone in KOEL's transformation. While the quarter was characterized by significant geopolitical uncertainty and unusually weak export markets, our domestic businesses delivered broad-based growth across all our major operating segments.

This reinforces our confidence that the strategic actions we have taken over the last few years are translating into stronger execution, improved market positioning, and a more resilient business model. Our standalone revenue grew 16% year-on-year to ₹1,461 crores, led by robust domestic demand across power generation, industrial, and distribution and aftermarket businesses.

Power generation grew by 18%, industrial by 19%, and distribution and aftermarket business delivered another strong quarter with 20% growth. These are not isolated performances.

They reflect sustained execution across our portfolio, continued customer engagement, and increasing market competitiveness. In the power generation business, one of the highlights of the quarter has been the continued strengthening of our position in the domestic power generation market.

Over the last year, we have fundamentally redesigned our approach to the sub-30 kVA market. Rather than competing with individual products, we have created a comprehensive portfolio architecture covering multiple customer segments, technologies, and price points.

This strategy has significantly strengthened our competitive position in India's largest genset segment and has contributed meaningfully to our domestic market share gains. Alongside strengthening our core businesses, we continue to invest in building the next generation of growth platforms.

Our OptiPrime modular power platform continues to gain momentum as customers increasingly evaluate resilient and scalable power architectures for data centers and mission-critical infrastructure. During the quarter, we secured an important order in the data center segment, validating both the market need and the differentiated capabilities of our modular architecture.

Now coming to the industrial business, our industrial business grew 19% domestically. Our construction segment saw double-digit growth in spite of muted growth in the overall construction industry.

Marine segment more than doubled, growing 125%. Railways grew 62%.

Both marine and railway segments are businesses where we have built durable platform relationships and a strong spares and service annuity behind the first sale. The more interesting development in industrial is that our growth is no longer confined to selling engines into applications we have always served.

We received a landmark order from the oil and gas segment for natural gas gensets across ratings up to 500 kVA. This reinforces our presence as a credible gas power solutions partner, and further, it strengthens our position in industrial gas-based power solutions and our investments in advanced fuel-agnostic technologies.

Last quarter, we also established a dedicated subsidiary for our defense business called Kirloskar Advanced Systems Limited. India's defense opportunity is expanding rapidly, and our position here is unusual.

The research, development, and intellectual property are entirely indigenous. That allows us to offer global standard solutions that directly reinforce national capability.

We are building this deliberately and for the long term. Now coming to the distribution and aftermarket business, the distribution and aftermarket business is, in many ways, the truest measure of our franchise.

It cannot be bought with a quarter of good pricing. It grows only where the installed base is large, the service network reaches, and the customer chooses to come back.

This quarter, it grew across every channel, led by service, which brings resilience and healthy cash generation alongside that loyalty. We completed our first end-to-end turnkey repowering high horsepower project.

A 1010 kVA installation won in direct competition, a signal of how far the capability now extends. On the international business, as expected, our international business remained affected by geopolitical developments and delayed customer investment decisions across several regions.

The Middle East region is an important export market for us, and it continued to operate below normal levels, impacting both business mix and operating leverage during the quarter. While these conditions affected our international performance, we remain committed to our EBITDA delivery for the full year.

We remain confident in the long-term opportunity and continue to engage closely with customers while preparing for demand normalization. On KOEL's Fluid Dynamics, our Fluid Dynamics business was broadly flat year-on-year at ₹294 crores, with domestic sales up and exports down.

Underneath that flat headline, however, the business strengthened materially. Channel pump business more than doubled, and we delivered our highest ever V8 submersible output.

On the balance sheet, total borrowings reduced from ₹167 crores to ₹77 crores, working capital improved by 11 days, and our credit rating was upgraded to AA. This is a business that is being made structurally healthier while it waits for its export markets to recover.

On Arka, Arka reported revenue of ₹210 crores, a growth of 9%. Assets under management stood at ₹7,651 crores at the end of the quarter.

The team has crossed 1,800 employees across approximately 136 branches, which gives it a considerably stronger platform for the growth ahead. Now I'll talk a little bit about profitability.

Turning to profitability, EBITDA for the quarter reflected three primary factors: lower export volumes, elevated commodity costs, and the timing difference between cost inflation and price realization. Importantly, this is not a reflection of any deterioration in the competitiveness of our businesses.

Across virtually all of our businesses, we have already implemented pricing actions. However, given the nature of contracts and customer agreements, realization occurs over different time frames.

As these pricing actions progressively flow through over the coming quarters, supported by our ongoing cost optimization and operational excellence initiatives, we expect profitability to improve. On a consolidated level, KOEL delivered revenue of approximately ₹1,772 crores during the quarter, reflecting healthy growth despite a challenging external environment.

Our power and energy businesses continued to perform well, while KOEL Fluid Dynamics maintained stable domestic performance despite export headwinds, and Arka Financial Services continued its growth trajectory with higher revenue, expanding assets under management, and a broader national footprint. A few remarks now on engineering and technology.

Beyond delivering another quarter of strong domestic execution, we continue to build the next generation of growth platforms that will define KOEL's future. Our investments in modular OptiPrime power systems for AI data centers, gas-based distributed power, defense, high horsepower engines, and advanced industrial applications are steadily expanding our addressable market and creating new avenues for long-term growth.

The OptiPrime hybrid power systems, although developed with AI data centers in mind, the architecture is also relevant to microgrids, industrial prime power, utilities, and other applications where fast-changing loads and resilient operation are essential. As we look ahead, we remain encouraged by the underlying momentum across our businesses.

India continues to present attractive opportunities across infrastructure, industrialization, power reliability, and manufacturing. At the same time, we are building entirely new growth engines through our global expansion, data center power solutions, gas-based power systems, defense, high horsepower engines, and advanced combustion technologies.

These initiatives, combined with the strength of our domestic franchise and disciplined execution, position KOEL well for sustainable long-term growth. In summary, while the external environment remains dynamic, the fundamentals of our business have strengthened considerably.

Our strategy is delivering results, our domestic businesses continue to outperform, and we remain confident in our ability to create long-term value for all our stakeholders. With that, I will now hand over to Sachin, who will take you through the detailed financial performance for the quarter.

Thank you.

Good evening, everyone, and thanks, Gauri, for the update. I will give a quick overview of the financial performance for standalone and consolidated business.

The result and the presentation for today's call have already been uploaded on the exchanges and on our website. Adding further on Gauri's remark, Q1 demonstrated the resilience of KOEL's business model.

While exports faced global headwinds, our robust domestic performance tells us that our strategic transformation is delivering real execution and long-term value. Coming to the financial performance overview, I will start with standalone performance first for the quarter.

Net sales at ₹1,461 crores for Q1 FY27 versus ₹1,262 crores for Q1 FY26, 16% year-on-year increase. EBITDA at ₹165 crores for Q1 FY27 versus ₹172 crores for Q1 FY26, 4% decrease year-on-year.

EBITDA margin at 11.2% for Q1 FY27 versus 13.5% for Q1 FY26. Net profit stood at ₹99 crores for Q1 FY27 versus ₹110 crores for Q1 FY26, that is 9% decrease year-on-year.

Net cash position, net of debt and including treasury investment, stood at ₹485 crores. Our cash conversion cycle remained highly efficient at 25 days, while inventory days increased slightly to 64 to support business expansion.

Our strong working capital position continues to ensure robust operational liquidity. Coming to the further breakdown of the standalone sales for the quarter, the strong sales momentum was backed by a double-digit growth across all the business units in the domestic business.

Within B2B, power gen was at ₹720 crores, 18% increase year-on-year. Industrial was at ₹368 crores, 19% increase year-on-year.

Distribution and aftermarket was at ₹268 crores, 20% increase year-on-year. International business was at ₹106 crores, 11% decrease year-on-year.

Now moving to the consolidated performance for the quarter, revenue from operations at ₹2,000 crores for Q1 FY27 versus ₹1,762 crores for Q1 FY26, 13% increase year-on-year. Net profit at ₹111 crores for Q1 FY27 versus ₹134 crores for Q1 FY26, 17% decrease year-on-year.

Please note numbers reported are for continuing operations only. Let us have a look at consolidated segment performance for the quarter now.

B2B segment revenue for the quarter was at ₹1,488 crores, which is 17% growth year-on-year. The segment PBIT was at ₹115 crores, reflecting 18% decrease year-on-year.

Moving to B2C, B2C segment revenue for the quarter was at ₹301 crores, which is 3% growth year-on-year. The segment PBIT was at ₹26 crores, that is 7% decrease year-on-year.

Now moving to the financial service, financial service segment revenue for the quarter is at ₹210 crores, reflecting 9% year-on-year growth. The segment PBT was at ₹9 crores, that is 31% decrease year-on-year.

In summary, our strong domestic execution and expansion into high-value, mission-critical applications continue to drive top-line performance while mitigating geopolitical volatility through disciplined cost optimization and operational excellence. We are confident that our strategic investment across our key operating segments position KOEL well for sustainable growth and value creation.

With this update done, I would like to open the floor for Q&A.

Thanks for the opportunity, and congratulations to you that despite, let's say, the export headwinds, I would say, a pretty strong performance on the domestic side, first of all. My first question is, we have had this announcement on this large hyperscaler order.

Can you just elaborate a bit more about that because there is this concern that probably the customer from which we have secured the order from may not be having a significant experience in this space? Furthermore, otherwise, how do you see the data center prospects for you in particular because in the coming year, given that we have a very strong incumbent in the market?

That's the first question.

Thanks for your question. Data centers represent an important structural opportunity because they require high reliability and rapid response, robust control, and strong lifecycle support, all areas that are aligned with KOEL's power systems capabilities.

Q1 was strategically significant because, as you mentioned, we secured our first hyperscale data center order of approximately 192 megawatt. We view that as a reference point rather than endpoint.

Our immediate objective is to execute this order extremely well and establish KOEL as a credible HHP, ultra-high horsepower alternates for hyperscalers, colocation players, and EPC partners. We are strengthening product capability, testing, supply chain readiness, controls, and service support around this opportunity, and we will be disciplined about distinguishing pipeline from actual orders and actual revenue.

No, what I meant about was, let's say, the customer profile for this particular order. Do they have any relevant experience in construction of data centers, or what's the track record?

Where do we get comfort on the customer in this particular case? Is there further orders that you are in negotiations on that we can see visibility in the coming, let's say, quarters?

The question was more meant around that.

I think to look on the customer end, we continue to work with multiple customers, and in this case, there is one that has materialized with a purchase order. Now, we do our checks and balances.

Beyond that, on further orders, that is internal and proprietary information. At this point in time, there are many customers who are entering the data center segment, and we get queries all the time.

It's not unusual for us.

That's very helpful. Also, sir, if I can squeeze one more in before I fall back into the queue.

In this particular quarter, on the standalone numbers specifically, I see that there is a sharp increase in the employee cost, roughly around, if I may say, 22% quarter-on-quarter and, let's say, close to 40% YoY. Is this the run rate that we should look at, or is there some one-off element within that, if you can clarify?

I will elaborate this. Employee-related expense increased materially year-on-year.

Our Q1 bridge indicates an increase of approximately ₹31 crores, and you rightly mentioned that is 40% increase. There are several components basically to this increase.

The number one is annual increments. Number two is ESOP-related expense because we want to reward our high-performing employees.

Then there is a capability additions and investments supporting future growth programs. Some of this cost are structural, and some are timing related.

We don't want to characterize all of them as one-off. What matters is the return on that cost base as revenue scales, particularly in international, high horsepower, and aftermarket business.

We need to demonstrate better fixed cost absorption going forward and productivity. This is an explicit management priority right now.

Hi. Thank you for this opportunity, and congratulations on a good set of numbers.

First question on the revenue growth, especially on the power gen and the industrial side. Just trying to get your sense on, one, have we started seeing the revenue contribution from NPCIL and defense, the marine contract that we had won in this quarter?

Secondly, if you can directionally give some thoughts on what is driving the growth? Is it largely led by the OptiPrime or the HHP series, or the LHP, MHP?

How the growth is panning out there? Thanks.

Ankur, just to give you clarity on this NPCIL order execution, we have mentioned in the past several times that those are milestone based, and we are we are at the execution stage right now, and some of the revenue will start flowing in this financial year, and the remaining will come in coming quarters coming years, basically. On defense and marine, we see a lot of opportunity.

Even Gauri spoke in her opening remarks. We'll continue to focus on those segments.

No contribution in this quarter specifically, right?

No, Ankur. Especially on this NPCIL order, there was no contribution in this quarter.

Sure. On the growth in HHP and the mid and smaller ones, if you can suggest that, is the larger part of growth coming from HHP or it's well distributed across?

We don't give out the individual numbers, but the largest chunk of growth, while it's coming from HHP, it's still lower because of the base. I don't have anything specific to call out.

Other than HHPs, actually we're seeing growth right across.

Fair enough. Just secondly on the RM inflation pass-through, now we are seeing around 60, 70 basis point decline on a year-on-year basis in our gross margin.

One, was there any benefit of price hike in this quarter? If you can suggest on a price hike side, are we largely covered now post the recent price hikes that we took?

Yeah.

We have been proactively taking price rises. If you look at power gen, it's different.

It's different in industrial because in industrial, you have customer-wise contracts. It's different in distribution and aftermarket.

Of course, on fluid dynamic side, it's totally different. Not all of the realization will come in this quarter.

The realization is going to be staged, but our effort is to ensure that we pass on the inflation to the extent that we can and protect our margins.

Sure, Rahul. That's helpful.

I'll get back to the queue. Thank you, and all the best.

Hi, Gauri, Rahul, Sachin, team, all of y'all. Look, two pointed questions.

One, we've seen weakness in the international business. Now, can you give us a little bit of color which geographies this happened in, and what are the current trends you're seeing, and what is your view on how this plays out over the next 3, 6 months?

Two, the raw material attribution, Gauri, that you talked about in your opening comments as the reasons for margin decline along with possibly mix, can you talk a little bit about if the pass-ons have happened, and when do you see reversion to recent trends in margin? 6 months, 12, 9 months?

I don't know. Would love your thoughts on that.

Hi, Jeetu. Just from the regions, a lot of our business today comes from the Middle East region, and due to the conflict in West Asia, we had logistics queues that were choked.

As a result, even where we had orders, some of the fulfillments could not happen. That's one.

Just from an inflation attribution standpoint, our endeavor, like I said, is just to ensure that we proactively pass on the price increases. The realization of that has varied.

In Q1, we've seen some impacts, but as management, our full endeavor is to ensure we pass on price increases.

Is there a timeline when you see this get a normalization to both these metrics? Is a 3, 6-month horizon reasonable to broadly say that happens?

I think we're all keenly watching out. We do see the queues opening up, it's more a question of just ensuring that the supply chain and the fulfillment is happening properly.

We do have demand, and we do have opportunities also available for execution. We're carefully watching, but I would say 3 to 6 months is a fairly reasonable assumption.

Okay. Great going.

Thank you so much. Good wishes, as always.

Thank you.

Thank you.

Thanks for taking my question. Hi, Rahul.

Hi, Gauri. My question is related to the demand traction that you would have seen in Q1 and even going forward also.

How is the demand traction panning out for KOEL in nodes below 750 kVA and also in the above 750 kVA nodes, particularly from the other HHP type of requirements, may not be completely from hyperscaler or data centers, but how is the demand panning out for your OptiPrime product and even the below 750 kVA nodes?

Hey, Teena. Nice to hear from you.

Look, just from a domestic franchise that we're building out, and the level of, I would say, strength that we are showing on the domestic side, especially if I, for a moment, leave out data centers, we're quite satisfied with that. We're present in all the opportunities that we need to be in.

We may not win everything, but I think we're certainly gaining in strength in terms of our market presence, below 750 kVA for sure, overwhelmingly so. Our full focus is to also build that out over 750 kVA.

Basically, you mentioned in your PPT that you've gained market share. This gain in the market share would primarily be coming in the below 750 kVA nodes?

Yeah. That would be correct.

Even above 750 kVA, we've gained market share, but it's just a smaller base, it's not significant at this point.

Right. Also, you don't specify generally the pricing element, but in this 18% growth in power gen revenue, will that be possible to broadly quantify, not maybe an exact indication, but a broad indication, how much can be the pricing-led element and how much can be the normal volume-led growth?

Teena, we don't normally specify that, and also the realization has varied across the quarter, it's going to be hard for us to truly comment on that convincingly.

Okay. The price increases that you would have taken, you've taken both in the HHP side also and even in the non-HHP side also.

Is that the right understanding?

The way to think about it is price increases can be readily passed on when the product is more distribution led. Otherwise, it is contract and tender specific, but as a theme, that could be a fair understanding.

Understood. Understood.

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

Hi, Gauri and Rahul. Thank you for taking my question.

The first question would be, since we have announced this order, right, in data center, how has been the interest from the prospective customers changed, right, because in a way, this is a first proof of the pudding in some sense? How has the conversation changed?

In the same breath, can you just tell us the journey through which Kirloskar Oil has been to arrive at this stage, right, because it required a significant change in the way we sell things and also on the product side, right, in terms of our product offering? Could you just help us understand how has the conversation changed since we have announced this order and also, how has been the journey so far and what all needs to be done from here to achieve our targeted market share in the high horsepower and specifically for the data center part of it?

I think just focusing on the data center segment has been a lot of effort that we've put in. There are a lot of upskilling programs that we've internally driven.

We are engaged with most data centers today. We've also executed a whole bunch of orders with, whether it's edge or enterprise data centers.

All of that has already happened. This particular order just happens to be an order which is with a larger data center.

Now, the conversations continue to progress with a lot of our customers. We are looking at a whole bunch of different solutions, ranging from behind-the-meter solutions to hybrid solutions for our customers as well as OptiPrime that we spoke of earlier.

We have a fairly strong suite of products now, and we're fairly confident that we will continue to gain traction as we move ahead because the efforts are going in.

Okay. On the employee cost side, right, while you mentioned that there have been some hikes and some capability building, but 40% is usually a very large number, right, in some sense, while it's a quarterly number, I agree with that.

There has to be some kind of a specific capability also which you are building, right, in some sense. Just some more texture on this 40% year-on-year growth in employee cost.

Is it a specific capability that we are building and which should probably normalize and probably either lead to revenue or normalize over the coming quarters? Some more color on that hike or that rise would help.

As an organization, we mentioned that we'll continue to invest in our capability addition and invest in supporting future growth programs. As I mentioned, that as the revenue scales, particularly in the international, HHP, and aftermarket business, we need to demonstrate better fixed cost absorption and productivity.

Thank you so much. All the very best.

Hi. Thank you.

Just wanted to revisit our view of the future. Barring our financial services business, on rest of the manufacturing activity, from a turnover of about 7,200 odd, let us say, last year, should we say in 3 years' time there should be kind of doubling, given all the opportunity and the product portfolio that now we are rapidly developing?

If that is the case, will the margin and the profitability likely to inch up from where it has been till now? Mr.

Bharat,

we have already laid down our 5-year strategic plan. You recall that we launched to create a $2 billion revenue enterprise by FY30.

We are not going a year-wise breakup. By FY30, we should be close to ₹16,600 crores company.

On the margin front, definitely we would like to earn a higher double-digit EBITDA margin.

No, I agree. Higher double-digit EBITDA margin, we already are in since last 2, 3 years in the band of 17%, 18%.

I'm saying with that journey, the $2 billion, more or less, at 16,500 is what that doubling of in 3 years that I was talking about. Which is fine.

Margin, I suppose, with that journey, improve, or you believe the current margins are satisfying, and more or less it should be on these lines?

Mr. Bharat, our endeavor is to improve the margin from here on.

Even if you look at our journey for the last 3 years, we have improved our margin by more than 400 basis points, and we'll continue to work on margin improvement going forward also. I don't want to give a specific range that where we'll land at FY30.

Sure. No, thank you.

Suffice it to say likely to be better than where we have been in these couple of years. We hope so.

We hope so.

Okay. Thank you.

Thanks for taking this follow-up. My question is related to the distribution and the aftermarket.

One of your peers in a concall had commented that they had significantly developed their distribution aftermarket in India. For mission critical, they can provide service engineers within 2 hours of logging a complaint and generally within 4 hours pan-India.

How are we in terms of service levels currently versus our peers? Also, to grow the distribution, what are the initiatives that we are taking?

What white spaces are there that we still need to address? If you can give some sort of a roadmap.

Hi. Look, as far as the distribution business is concerned, we have been driving a lot of initiatives, and what you will appreciate is that the business has consistently grown double-digit every quarter for the last 12 quarters.

Now, the initiatives that we've taken for that is upskilling of the service engineers. We have restructured our service channel.

There are new product launches that are happening there. Then there is a lot of technical capability that we have driven for replacement and repowering with our engines.

Overall, if I look at what is the right way to look at the results of a lot of these initiatives, it is increasing number of service contracts that we are seeing. A larger asset base is now under our service contract than what it used to be.

Distribution and aftermarket is something that is hard to build out. It takes time.

It takes effort. Today, we are geared to support our customers even on mission-critical applications.

In several cases, even we offer 2-hour service response guarantees. I would say we're fairly satisfied with the progress so far.

We still have a long way to go.

Sir. If I can just ask, you have shown a very healthy growth, 20% in this particular quarter, and I understand there may have been shortage of spare parts also is what we learn from the channel.

Is it possible that this sort of 20%, maybe even higher growth, may be sustained in the upcoming quarter? What is your sense on that?

Look, we will continue to aspire towards the $2 billion vision or the ambition, and all businesses have an important role to play there, including distribution and aftermarket. Yeah.

Sir. That's all from my side.

Thank you.

Hi. Am I audible?

Sourabh. We can hear you.

Yeah.

Hi. Hi, Gauri, Sachin, and Rahul.

Congrats on reasonable strength in domestic business. My two questions are: first is, again, it's a good step that we are declaring some color on our industrial business, construction double-digit, marine doubling, and railway 62%.

The first question is, this strength in marine and railways, of course, on a quarterly basis, these seem pretty strong, right? Is there some quarter-related thing or what exactly is happening here?

Is it sustainable? How should we think about this new capabilities which you have written in the annual report also that industrial is no more about one segment, but much beyond than that?

If you could share some thoughts here on each and every segment from their outlook perspective, that will be helpful.

Thanks, Sourabh, for the question. Again, within industrial, you remember that we operate out of various segments.

More specifically on railway, railway had a strong Q1 with revenue growing materially year-on-year. Beyond the quarterly numbers, the opportunity is supported by new engine application and repowering opportunities.

As you remember, railways are attractive because qualification creates relatively long product life cycles. Program timing can make quarterly revenue uneven.

Our focus is on converting qualification and order into repeatable execution rather than extrapolating one strong quarter. Rahul, can you answer on marine?

Yeah.

Look, on the marine, it was just a question of execution. This is one of those quarters which was heavy on execution and the billing happened.

I wouldn't read into it more than that. Okay.

Secondly, like Gauri mentioned in her remarks that in the O&G, we see the new opportunity where we have got this order. Can you double-click on that?

How big is this opportunity? We were not there before because we did not have gas gensets.

Maybe some color there.

Yeah. Sourabh, the way I would want us to think about is less in terms of how big this opportunity was, but more in terms of the capabilities it presents.

Today, we have probably the largest range of gas engine gensets that are CPCB IV+ compliant. We've executed across a wide variety of gas applications.

This includes biogas, wellhead gas, piped natural gas, and even in smaller ranges, LPG, liquefied petroleum gas. The capabilities that we've deployed across gas are significant, and we go through some of our OptiPrime solutions right up to 2 megawatt.

That is significant. Just for us, while this order is important and obviously is significant, which is why we mentioned, but what is more significant is what it presents in the form of capabilities that are already demonstrated in CPCB IV+ compliant gas solutions.

Sure. This comes under industrial side, right?

This particular business, what we do with O&G?

The oil and gas segment is under industrial, yes. Understood.

I know if

I can maybe ask one more. We talked about a lot about this new power architecture, etc., microgrids.

Can we share some high-level exactly what do you mean by this power architectures changing? What exactly we were not doing and we will be doing?

Yeah.

Under our new energy vertical, there are a whole bunch of initiatives that we've been driving as far as product development is concerned. In fact, gas units has been one of those development.

Now, when we say microgrids, we have a, within the group, a sister company also, Kirloskar Solar. We are looking at deploying microgrids across customers, but power systems and gensets continue to be the mainstream.

The new energy vertical is more of a program management office at this point, where we focus on developments of different kind of fuels, power systems. This includes ethanol, methanol, isobutanol, natural gas, all of that, hydrogen.

Sure. Perfect.

Just maybe if you can point this number, what was the ESOP expense actually in this quarter? That could help us try to come up with the right

Sourabh, we don't give that specific details.

No problem. Thank you very much.

All the best.

Yeah. Congratulations, team, on a good set of results, and thank you for the opportunity.

The first question that I had was on your gross margins for the quarter, which are not very different versus, let's say, the average numbers seen over the last 7, 8 quarters. This happens in spite of unprecedented cost increases that are happening on both the RM side, the supply chain side, freight side.

Much is happening. Could you give us a sense as to how the company has been able to navigate those costs?

Is it more that the company has been able to kind of trim down its own cost structure, or is it that there is sufficient room to take timely price increases?

Aditya, you must have heard that, yes, margin has contracted in this quarter, and predominantly this has happened because of massive increase in the global commodity prices, and that has impacted our margin. To counter that, we have taken price increase also, and as Rahul mentioned, that there is a lag between the price increase and the price realization.

We are working on that. Secondly, we are also working on our cost control and operational excellence, so that will help us to improve the margin going forward also.

Maybe I'll check my numbers because I thought that at least at the gross margin level, the numbers were very comparable for the quarter on a YoY and a QoQ basis. Moving ahead, wanted to also get a sense from you that at least our sense is that the peer over here is able to extract a fairly good pricing premium in the market.

As Kirloskar has been improving its offering, is it finding it easier to then argue for price increases for itself in the market for a better offering that it's able to provide? That will be my second and last question.

Yeah. Look, a lot of what the last quarter was is about being proactive in having conversations with customers on price increases, while the realization has lagged for most players.

I believe we were amongst the first ones to start the conversation. It's just being prudent and being fair to the business.

Got that. Thank you for the response.

Hi. Thank you for the opportunity.

My first question is on the data center's order, right? Could you give some sense on the execution timeline of the contract and by when will it start contributing to our numbers?

This is a composite contract. Basically, this includes the supply of the gensets plus the O&M contract, which is for a longer period of time.

I think for genset supply, the revenue recognition will happen in this financial year, and for the O&M contract, this will continue for at least 5 to 6 years.

Got it, sir. Thank you.

Secondly, on the financial services business, Arka, what are our long-term plans? Are we planning to hive off the business going ahead, or what's our strategy for the financial services business?

On Arka, stated our plans a couple of times in terms of the capital path. From a strategic point of view, last year we pivoted into a secure

Yeah. Thank you.

Sorry about that. Not sure what happened.

The question was on Arka and if we have plans to hive off this business. That is the long-term plan, but it takes time, and there's a stagewise way to get there.

Those are the options that we're pursuing. We will do it in a stepwise manner, and when there's an update for you, you will obviously hear about it.

Thank you.

Thank you. Thank you so much.

Thank you, moderator. Let me take this opportunity to thank the management of Kirloskar Oil Engines for giving us the opportunity to host this call.

Before I close, may I invite Ms. Gauri to the final comments, and then we can close the call.

Thank you.

Thank you very much, everyone, for your support and interest in the company, and I hope you have a nice weekend.