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Edited Transcript of KIRLOSENG.NSE earnings conference call or presentation 3-Feb-20 6:30am GMT

Q3 2020 Kirloskar Oil Engines Ltd Earnings Call

Feb 12, 2020 (Thomson StreetEvents) -- Edited Transcript of Kirloskar Oil Engines Ltd earnings conference call or presentation Monday, February 3, 2020 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Sanjeev Nimkar

Kirloskar Oil Engines Limited - COO

* T. Vinodkumar

Kirloskar Oil Engines Limited - CFO & Chief HR Officer

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Conference Call Participants

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* Abhishek Puri

Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power

* Chintan Sheth;Sameeksha Capital;Analyst

* Deepesh Agarwal

UTI Asset Management Company Limited - Associate VP of Equity Research

* Manish Goyal

Enam Holdings Pvt. Ltd - Investment Analyst

* Ravi Swaminathan

Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP

* Sandeep Tulsiyan

JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Kirloskar Oil Engines Limited Q3 FY '20 Earnings Conference Call, hosted by Axis Capital Limited. (Operator Instructions)

Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Puri from Axis Capital.

Thank you, and over to you, sir.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [2]

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Thank you, Lizzie. Good afternoon, ladies and gentlemen. On behalf of Axis Capital, I am pleased to welcome you all for the Kirloskar Oil Engines Limited Q3 and 9 Months FY '20 Earnings Conference Call. From the company, we have with us today Mr. R.R. Deshpande, who's the Managing Director and CEO; Mr. Vinodkumar, who is the Chief Financial Officer; and Mr. Sanjeev Nimkar, the Chief Operating Officer of the company.

The call will be initiated with a brief overview by the management, followed by the Q&A session. Without much delay, I'll pass on the call to the management. Over to you, sir.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [3]

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Thanks, Abhishek, and good morning, ladies and gentlemen. We're pleased to present to you and discuss the results of the third quarter and 9 months of FY '19/'20 for Kirloskar Oil Engines Limited.

Before I dive into the financials, I would like to share some good news. We're extremely pleased to inform you that KOEL has received the business excellence award in November 2019 from CII for having crossed the milestone of 600-plus in the last business excellence assessment carried out by CII. You will realize the magnitude of this achievement when you know that only 18 companies -- or even parts of the group of companies, not even entire company in India have so far crossed this threshold in the last 25 years.

This only goes to reaffirm that our systems and processes have been going through continuous improvement, and these are, in many cases, best-in-class now.

The score reflects positively on KOEL's leadership, strategy, people, processes, innovation, new product development, digital transformation and several other processes, which have evolved over the years.

The reason I choose to highlight this achievement is because it has been demonstrated in the past that it's only companies with strong processes and customer orientation that are sustainable over the long haul, and KOEL is right up there.

I've always maintained that we have worked hard to fortify our back-end and looked at several measures and initiatives, taken the path as an investment and not as a cost. And this acknowledgment by CII gives us tremendous boost in confidence as we go forward.

Now moving on to the results. The economic slowdown together with the vagaries of the monsoon continued to have an adverse impact on our business in quarter 3.

Sales for the quarter at INR 714 crores, though sequentially 6% higher than quarter 2, was 7% lower than the previous figure of INR 766 crores.

With this, the year-to-date sales, net of excise, stood at INR 2,142 crores as against INR 2,332 crores of the previous year, which translates to an 8% drop. The major drop has come from the Industrial business, which has witnessed a 32% drop quarter-on-quarter and 23% on a year-on-year basis. That having said, we are beginning to see early signs of revival here and do hope the worst is behind us.

Despite having virtually no momentum in the Telecom segment, the Power Generation segment registered a quarter growth of 7% sequentially and 9% as compared to the previous year. However, on a cumulative basis, we still remain 4% short of the previous year figure.

Whilst the Large Engine business registered a 28% growth on a quarter-on-quarter basis, resulting from deferment of spares' orders from the government, sales on a year-to-year basis are down. This, however, is expected to be made up in quarter 4. On a year-on-year basis, exports have registered a 16% growth. We saw gains in Middle East, East and South Africa.

In Agri, Electric Pumps have shown promise and albeit on a small base, the year-on-year growth has been 40%. Excessive rainfall in many parts had a negative impact on the agricultural business.

Operating EBITDA for the quarter at INR 57 crores was 14% lower than the previous year figure of INR 66 crores. The drop was largely attributable to the loss in contribution resulting from lower sales. The lower contribution was partially contained by a tight rein on fixed cost. The profit before tax for 9 months stood at INR 164 crores as against INR 199 crores for the previous year. Income from investments were lower by approximately INR 18 crores resulting from infusion of INR 500 crores into Arka Fincap.

And our subsidiary, La-Gajjar Machineries, clocked INR 357 crores revenue for 9 months, a growth of 17% over the previous year. EBITDA margins at 8.5% were marginally better than the previous year. On a consolidated basis, sales for 9 months at INR 2,519 crores was 4% lower than the previous year and PBT at INR 181 crores was 7% lower than the previous year.

So with those brief remarks, we'll open it up to questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Ravi Swaminathan from Spark Capital.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [2]

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Just wanted to check with you, are there any large Telecom orders which are there in the anvil as of now?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [3]

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Right now, we do not see any large orders of Telecom, at industry as a whole, not only for KOEL. But we are seeing that last 3 quarters, Telecom is extremely slow. They only executed what they have concluded orders in the same quarter last year. And after that, last 3 quarters, there are no more new orders being worked out. That is one. Second, there is also some internal movement of consolidation happening within telecom industry, and that will have some implications from -- on the time frames.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [4]

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Okay. And large customers also, like Reliance, they are not giving orders as of now in the anvil, next 12 months?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [5]

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No. It is not. They are not there, but small orders continue to come every month. But that magnitude is small, like in some few hundred, 100, 200, 300, like that, some quantities keep on coming, but not in the thousands, which used to be the trend.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [6]

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Got it, sir. And both Industrial and Agri this quarter has seen significant decline in terms of revenue. I mean Industrial is understandable that end-market demand from construction equipment, et cetera, has been down.

Agri, past 2, 3 quarters, that has also remained weak. I mean is it that the decline in diesel pump set sales is declining at a faster pace? And they're only partially being offset by Electric Pumps? How is it, sir?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [7]

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Yes. That is true. The decline is faster. And another thing which happened because we were anticipating that Electric Pumps will take over faster than it will compensate not only that, it will start giving some minor growth as well but this year, specifically, this monsoon patterns, what we observed, were very erratic compared to any other year. So the rabi season for this thing has completely got shifted and that has impacted big way in the Agri sector, both diesel engine as well as Electric Pump.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [8]

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Got it, sir. And Industrial, any traction we are seeing, I mean, from roads, (inaudible) equipment and all these things?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [9]

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I think, Vinod touched this point in his brief that we are seeing early signs of revival. Because see, last 6 years, if you look at it, in Industrial, we have seen 3-year cycles. But now after this downturn of last 1 year, close to 1 year, we are seeing the turnaround right now, last 4 months, things on ground, we are seeing are improving, but not to the extent what it should be. But at least, there is some positive sign.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [10]

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Got it. And my last question is with respect to Large Engines. So any order from NPCL (sic) [NPCIL] or [equivalent] possible next 12 to 24 months?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [11]

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There are some tenders on cards, but that will be in quarter end of next year or next to next year.

But there are some tenders on cards.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [12]

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Okay. And magnitude wise, will they be similar to the ones which we had seen in 2011? Or I mean, it will be on the lower side?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [13]

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No. Not that big. A little smaller quantity, but there are some tenders on the cards.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [14]

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Okay, sir. And how much investments so far, we have made in the NBFC, sir? That's my last question.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [15]

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NBF -- INR 530 crores.

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Operator [16]

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(Operator Instructions) The next question is from the line of Sandeep Tulsiyan from JM Fincancial.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [17]

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Sir, if you could share if there has been any material movement in the growth rates between the low horsepower, medium horsepower and high horsepower within those categories, if you could highlight? And has there been any change in the market shares for KOEL?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [18]

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Yes. This is a good question. Growth rate overall last quarter and last 9 months, PG -- as per the published data available with us by some other external agency, PG overall market is around 7% to 8% decline, market as a whole domestically. However, we have a good story on LHP and MHP, KOEL has gained 2% to 3% quantity share in the market and 1% value share. So -- especially last quarter, I'm talking about. So that -- we just receive the data and in that it is revealed that 1% value share we have gained in the LHP, MHP and 3% quantity share.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [19]

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This is LHP?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [20]

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Yes.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [21]

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LHP and MHP Sandeep.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [22]

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LHP and MHP.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [23]

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Okay. So the cumulative share would be what now, sir, for KOEL in this category?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [24]

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Cumulative share, all put together will be around -- quantitative will be at 33% for KOEL and value-wise 23%.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [25]

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Understood. Sir, second question is regarding this customs duty that was imposed on power tillers. Does this create any kind of differential between the cost of production for importers versus guys who're manufacturing locally or...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [26]

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Sandeep, just repeat that. I didn't hear the question.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [27]

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So basically, there's import duty increase on power tillers, which was done on Saturday. Does this create a differential in terms of cost -- costing the -- for the manufacturers versus the guys who are importing? Or largely, they were...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [28]

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Nobody is directly importing power tillers. It is what is coming from China, it is too -- I think it's a little early to look at the impact of that because there's nobody who's importing and selling on a, let's say, on a regulated basis.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [29]

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I see, sir. I see. So for us also, it's largely...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [30]

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Yes, so for VST [MMB]. You know VST has got a large share in that. We've got whatever...

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [31]

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(inaudible)

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [32]

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It won't make a difference.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [33]

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Our import content is...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [34]

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Very, very negligible and...

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [35]

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And that gives...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [36]

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(inaudible)

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [37]

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No. The change is only for the finished goods and not for the...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [38]

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(inaudible) even otherwise our import content which is very less is also [whole period ago].

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [39]

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Okay. Okay. So now on the parts, there is nothing. No change.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [40]

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No. There is nothing.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [41]

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Understood. Secondly, sir, on this some numbers that you used to share on DV set in terms of volume and value and also the Electric Pump sales in stand alone, if you could share this year, also last year?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [42]

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What do you want? The DV?

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [43]

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(inaudible)

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [44]

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(inaudible)

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [45]

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Yes.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [46]

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So quantity. You want Q3?

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [47]

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Yes. Q3 numbers.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [48]

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Q3 is 379 and volume is 77 [cr] -- value, sorry. And then what do you want? Previous year?

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [49]

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Yes.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [50]

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287, 53.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [51]

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Got it. And for Electric Pumps, if you can give us a stand-alone numbers, which was (inaudible) in 2Q?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [52]

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One moment. So Electric Pump, Q3, INR 53,820 crores. For Q3 -- you want -- previous year will be nothing much. One minute now. I'll have to -- just give me a minute. Anything else you want just ask in the meantime.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [53]

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Sure. And sir, just on this new contract that we have got from Doosan, if you could give us some more color on that based on what's the size? How it will be ramped-up? What's the nature of that contract?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [54]

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See, the word contract is not correct, actually. See Doosan in our new customer, which we have added to our Industrial portfolio. And this is specifically for their Backhoe application. So -- and the way things stand right now, out of all the OEMs, we find this particular OEM is marching with a very high aggression in capturing the market share domestically. They have come out with very robust range of products. And incidentally, our engines are well set with that. So with -- remaining 6 months, as well as the BS4 transition, which is coming in, we expect Doosan to be amongst top 5 OEMs for us.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [55]

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Okay. Okay. That's going to be interesting.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [56]

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[They're very] significant, yes.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [57]

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Yes, I think that's it from my side. Sir, if you could just share that number as soon as you have it.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [58]

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Yes. Meanwhile, we can go for any other question.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [59]

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No, I'm done from my side, sir.

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Operator [60]

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(Operator Instructions)

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [61]

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It was INR 9 crores in the previous year.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [62]

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Yes, the Electric Pump...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [63]

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(inaudible)

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Operator [64]

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Your next question is from the line of Deepesh Agarwal from UTI Mutual Fund.

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [65]

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Can you help me with the CapEx number for FY '21?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [66]

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FY '21?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [67]

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What is that?

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [68]

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What is your estimated CapEx for FY '21?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [69]

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'21 is next year.

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [70]

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Yes.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [71]

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We've not even had our budget discussions with the Board.

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [72]

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Okay. This was -- I am trying to understand what is the likely CapEx requirement for (inaudible).

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [73]

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(inaudible) the next call after we have discussed with the Board.

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [74]

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Sir, my question is with regard to CPCB 4+. So what is the likely investment we will be required to make to meet the new norms?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [75]

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As I said, it is still very early. We will -- we've got a Board meeting coming up in March. After that, in the next investor call, we will discuss that.

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [76]

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Okay. And on the Kirloskar Capital, can you share some numbers? What is the loan book or the PAT, PBT and the average cost of borrowing and average interest yield?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [77]

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Average cost of borrowing is about 10.2% -- 10.25%. The maximum we went on the loan book was about INR 650 crores. And as of December end, it was about INR 370 crores.

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [78]

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Okay. And what is the PBT or PAT in the NBFC?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [79]

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Hold on. Okay. So the PBT for 9 months was INR 6 crores.

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Deepesh Agarwal, UTI Asset Management Company Limited - Associate VP of Equity Research [80]

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INR 6 crores?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [81]

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Yes.

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Operator [82]

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The next question is from the line of Chintan Sheth from Sameeksha Capital.

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Chintan Sheth;Sameeksha Capital;Analyst, [83]

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As you mentioned INR 6 crores on an investment -- equity investment currently at INR 530 odd crores you have invested so far. So what kind of targeted IRR or ROA you are looking at for this particular business? And what kind of...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [84]

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I'm not getting into the details of Arka. This is a KOEL call. I don't want to get into detail of Arka, if you want it, we'll arrange a separate call with the Arka management, because day-to-day business is run by completely separate teams.

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Chintan Sheth;Sameeksha Capital;Analyst, [85]

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Okay. And any color on what kind of loans, we are MSME -- as at -- in our previous transcript, that you are targeting? Are you able to provide any strategic color on...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [86]

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If you want to drill down into Arka, we'll arrange a separate call with the management.

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Chintan Sheth;Sameeksha Capital;Analyst, [87]

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Sure. And secondly, on the Industrial side, you mentioned there's some green shoot, and we are kind of halfway through the bottom of the cycle, the 3-year cycle, you mentioned. How do you see typically the growth coming back in terms of -- it's a lumpy growth in the initial phase and then it smoothens out and then the decline starts. That's the way the cycle works? Or -- it's how do you (inaudible)?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [88]

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The way the cycle has been working in the past is if you look at 2, 3 years of growth, you will -- it will be followed by a 2, 3 years of degrowth also, at least 2 years. And what Sanjeev mentioned is that we are seeing a small revival or upturn earlier than we would have expected. So it's barely 1 year since we saw the downturn, we're seeing an upturn. Also, if you look at the kind of -- if you look at the outlays, if our government -- in the recent budget, I think it's encouraging because with the money which they're talking about on roads, it will directly impact your off-highway business.

So of course that is -- that would not have factored into Q3, but it's encouraging to see that -- that's something which will come. So if you look at some of the big investments, if you look at what the government is talking about, the Bombay-Delhi corridor, then this 12,500 investment which is there, which is -- or what 15,500 kilometers in the new budget, we just talked about. So it's -- the signs seem encouraging as of now. And there is a small uptick, maybe it's still a little early to talk about whether it is -- has completely turned around. But after having seen 30, 35% growth, and then seeing a sharp dip, we are seeing (inaudible) revival.

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Chintan Sheth;Sameeksha Capital;Analyst, [89]

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Okay. And sir, the gain from sale of Nagar property is recorded this quarter or during the next...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [90]

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Yes. INR 16.5 crores.

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Chintan Sheth;Sameeksha Capital;Analyst, [91]

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That's in the 3Q number, right?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [92]

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Yes.

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Chintan Sheth;Sameeksha Capital;Analyst, [93]

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Right. And lastly, sir, the Agri business, you mentioned heavy rains has actually kind of overall pulled down the demand side. How do you -- how do we see generally when this happens historically, because now -- when we talk to any Agri -- input companies, they are kind of buoyant and are very positive about the demand side because of the heavy rains and healthy water reservoirs currently throughout the country. So do we expect that in the ensuing quarters, we can see some uptick or a very strong uptick in our Agri business?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [94]

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Yes. You are right. Because see, this year's pattern, the kharif crop almost got wiped up in many states, not all but many. Rabi is very, very -- the people are buoyant on the rabi right now. And there will be a lot of money in the hands of farmers, which will boost the consumer companies as well as it will reflect in [even] demand for us, both on the diesel engine side as well as on the Electric Pump, more so on the Electric Pump side because we are seeing the electricity availability in 7, 8 states, especially the earlier BIMARU states. There, the electricity is very good and -- which is boosting the requirement of Electric Pumps. We can see good requirement on that front in coming quarters.

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Chintan Sheth;Sameeksha Capital;Analyst, [95]

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Right, right. And sir -- sorry, coming back to Arka, what will be our average interest rate which we disburse the loans for 9 months. You mentioned the cost of debt, that was 10.2%. What is our…

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [96]

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I'm not too sure.

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Chintan Sheth;Sameeksha Capital;Analyst, [97]

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Not sure? Okay. I'll request a separate call.

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Operator [98]

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(Operator Instructions) The next question is from the line of [Chandra Mouli from Partisan].

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Unidentified Analyst, [99]

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Last...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [100]

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Hello? Yes. Go ahead.

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Unidentified Analyst, [101]

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Sir, last quarter's con call, you'd said that this year, you'll close comparative [you're] flat top line compared to the last financial year due to the new addition of [more] OEMs and some things like that. How is it shaping (inaudible) understand (inaudible)?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [102]

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Due to the addition of...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [103]

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I'm not sure that we said due to the addition of OEM because that's only an Industrial business. And to catch up on Industrial business, we've already -- if you heard my initial comments, we're already down by some 23%, so catching up on that for last year is not going to happen. We were talking about the company as a whole, we were looking at closing close to last year, which is ending flat. And we're still holding on to that as of now.

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Operator [104]

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(Operator Instructions)

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [105]

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Just one small question from my side. This is Abhishek from Axis Capital. On the PowerGen business, you have grown 10%, whereas Industrial you have declined 30% in the current quarter, whereas when I look at the composition of other peers, their PowerGen has declined meaningfully, and Industrial has grown. So just as a comparison, has there been a major shift in the market share in any of the segments there? Or what would be the...

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [106]

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No, no. Abhishek, the only change there is the -- PowerGen, you are right because we gained something from railways in PowerGen. So we count railways in our PowerGen, whereas some of our competition counts railways in their Industrial. So this is one composition change, the way we...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [107]

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Look at our businesses.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [108]

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Look at the businesses. So that is the major change in the composition. And also, you have gone through the transcripts of different competition listings. Even the exports have reflected differently. So our exports are reflected little better side, whereas the other side it is not.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [109]

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So my market share question was mainly on the domestic market. So it's only railways, which is contributing meaningfully here?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [110]

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Yes.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [111]

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As a percentage, what will be the number here out of INR 328 crores, what will be the contribution

(technical difficulty)

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [112]

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So power car in Q3 is about INR 35 crores.

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Operator [113]

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The next question is from the line of (inaudible) from SBI Mutual Fund.

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Unidentified Analyst, [114]

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This is [Bhavin Rio] from SBI Mutual Fund. So one question on -- if you can just help us with your market share in Power Generation, in LHP, MHP and HHP. And would also appreciate if you help us, how do you classify in terms of kVA ratings in these respective [markets]?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [115]

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I think -- I do not know whether you are attending this call first time, but this question, we've addressed many times. But quickly, I will run down. The way we define our LHP is less than 30 kVA, and 30 to 200 kVA, we define MHP, and more than 200 kVA is HHP for us up to 625 kVA, and more than 625 kVA, we call UHHP, whereas some other players in the industry define it little differently. So you need to check it with that. So that is the composition part of it.

When it comes to our market shares, and I'm restricting myself to the quantity market share. In LHP, our market share is around 37%. In MHP, we are around 33% in MHP. In HHP, which is more than 200 kVA, our market share is around 23% to 24%. And in UHHP, which is 625 kVA onwards, our market share is 11%.

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Unidentified Analyst, [116]

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Okay. Would it be possible to share value market share?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [117]

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Value detail level, I do not recollect of the [term], this thing. But value, collectively, our value market share is 23%.

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Unidentified Analyst, [118]

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Understand. And have you gained market share in any of these subsets?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [119]

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Yes, that's what I mentioned earlier, that LHP and MHP, we have gained market share in last 3 quarters, not only in the last quarter, but last 3 quarters, we have gained. That is precisely because we launched the iGreen series of products last year. And those products have really caught up in the market very well. In fact, those products are setting the industry trends for the customers and most of our competitions are forced to match our offerings in that segment, so -- which is helping us to gain share. Because markets overall were slowed down, as all of you are aware, but these things have helped us, so this corrective action of KOEL last year, what we have done has helped us to not only retain the share but gain also.

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Unidentified Analyst, [120]

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And which are the subsegments of the end-user industry that we are seeing traction? And how do you see -- I mean, if you were to put a guess estimate on FY '21. What would be your expectation of industry growth and KOEL's growth for FY '21?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [121]

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For FY '21, again, our projection is LHP will -- maybe, 4%, 5% decline in LHP. The MHP will be 5% to 7% up. And HHP should be 8% to 9% up. So overall, industry will be 6%, 7% up in next year. That is what is our estimation.

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Unidentified Analyst, [122]

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Understand. And this -- you are expecting a growth for Industry and your new initiatives will also help gain market share. So can we expect KOEL to grow better than the industry?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [123]

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We will definitely attempt to be better than industry in all the 3 segments.

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Unidentified Analyst, [124]

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I understand. The second question is on the exports. We are seeing encouraging trend on the 9 months, although we have seen some slowdown in the third quarter. The initiatives that you have taken in the U.S. also, how do you see export panning out over a 1- and over a 3- year basis? What, in your view, can be the share of exports? And are exports more profitable than domestic?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [125]

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The first question, first, yes, the exports are more profitable than domestic. That's the first answer to your last question. Coming to our strategies, in export market have worked out better, whatever we changed our stance in the last 2 years have started giving us results.

In FM-UL, as a segment, which is a firefighting segment globally. So KOEL is aspiring to be a dominant #2 or #3 globally in this segment, and we are very much on that track. So it may not be all export markets have fared better in terms of market growth, but our strategies have helped us to gain share. So in entire Middle East and from those as a (inaudible) market going to some other European countries, the products, especially into the firefighting segment has helped us to gain share, and all our products are well-accepted. So -- and that will remain our growth story for next 2 to 3 years, and we'll continue to gain share there. In South Africa and other bids in Industrial segment also, we have given some better solutions to our customers, well accepted, and we are gaining share in those markets. HHP segment in international markets has also started gaining traction, which is a very heartening thing for us. So quite a few countries have started giving us repeat orders in HHP.

And U.S. market, we have qualified for the emission norms in last 6 months, so we have supplied our initial batches there, which are getting converted into the finished product, and which will be given to the end customers in next 2 quarters. U.S. remains our prominent focus market for next couple of years. And right now, the operational part is over, so we'll be working on the front-end side of it.

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Unidentified Analyst, [126]

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And how large is the firefighting segment globally, where your aspiration is to be #2 or 3 globally?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [127]

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Again, a good question. This market is not very big market, but we felt the -- margin-wise, this market is better. And overall, if you look at it, 10,000 is the quantity globally (inaudible) converting into roughly kind of INR 900 crore to INR 1,000 crore as a market size globally. So -- and we, aspire when we'll settle down in this segment, 30% global market share in this domain.

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Unidentified Analyst, [128]

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Last question to Vinod housekeeping. Can you help us with La-Gajjar revenue, EBITDA, PAT numbers?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [129]

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Pardon me?

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Unidentified Analyst, [130]

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La-Gajjar numbers. Sorry, if this is a repeat question. Actually, I got disconnected in between. La-Gajjar revenue, EBITDA, PBT, PAT numbers.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [131]

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Just one minute. Of LGM?

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Unidentified Analyst, [132]

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Yes.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [133]

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So I'll give you 9 months, April, June.

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Unidentified Analyst, [134]

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Absolutely fine.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [135]

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So 9 months, INR 357 crores of top line, EBITDA of INR 30 crores, PBT of INR 21 crores.

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Operator [136]

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(Operator Instructions) The next question is from the line of Manish Goyal from Enam Holdings.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [137]

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Just I missed the PBT number of La-Gajjar. How much was it, sir?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [138]

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INR 21 crores.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [139]

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INR 21 crores in 9 months, right?

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [140]

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Yes.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [141]

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Yes.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [142]

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Okay. So just on overall Agri portfolio, sir, so basically, looking at the segmental numbers, what we see again, seems to be that the domestic -- sorry, the stand-alone Electric Pump as well as the power tiller business seems to be losing money. Just wanted to...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [143]

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(inaudible) domestic Electric Pumps?

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [144]

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Basically the pumps -- Electric Pumps, what you sell from stand-alone entity?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [145]

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Doesn't lose -- it's not losing money. Why do you say so?

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [146]

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Because your 9 months' PBT -- PBIT number in Electric Pumps is INR 21 crores.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [147]

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I have not given PBIT for Electric Pump separately.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [148]

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No, no, sir. You gave consolidated numbers. And you also gave consolidated segmental numbers. So from segmental numbers, the Electric Pump revenue is INR 423 crores in 9 months and a PBIT number of INR 21 crores.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [149]

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You've got it wrong. Because I'll tell you the numbers. Electric Pumps is [INR 423 crores], we've not even reached INR 100 crores.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [150]

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No, no. On both La-Gajjar and...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [151]

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Firstly, don't mix those 2 and don't -- because -- I'll tell you for 2 reasons. One is that LGM is not a pure-play Agri business. It is rural plus urban. Also, KOEL is rural and urban. But, of course, the share of urban, rural in LGM would be almost 50-50. Whereas here, it is much more of Agri because the whole idea of Electric Pumps in KOEL was to make up for the degrowth in diesel engine pumps. Okay?

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [152]

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Sure. Okay.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [153]

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Don't add these 2 anyway and -- But even if you add them because on a stand-alone basis, if you look at LGM, I gave you the number. If you look at Agri -- are you also adding power tiller, you're adding power tiller, engines, everything put together. So let me just give you a straight answer. The only place where we are losing even now is power tiller. And that also, we hope that going forward, that will be -- we're looking at a breakeven for the simple reason that the 12 horsepower is now completely gone into the market. And the large volumes is in the 12 horsepower as against the 15 horsepower which we were selling. So I think if you add pumps -- okay, now I know what you've done. But if you add the whole Agri portfolio as a total, then you'll get this. You'll probably get what you're getting.

Don't look (inaudible), look at LGM completely separately, and you look at our Electric Pumps separately, you look at -- even our Agri standalone is making money in diesel engine. It's only the power tiller, which we have lost.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [154]

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Okay. So the Electric Pumps sold from the Kirloskar Oil is...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [155]

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That's making money.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [156]

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(foreign language) That is making money, okay. Okay, fine. And on financial services, just -- I know, but just wanted to get a sense that now that you have got credit rating approval as well. So are you looking to now go forward and leverage...

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [157]

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We will. We will, Manish. Like I said, like I was saying earlier also, if you want more detail on that, I'll put you on a call. But you -- we will -- as we're going forward, we will -- we're already in -- we are already in discussions with banks, so there will be some amount of leveraging happening there.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [158]

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Sure. And last question on the higher rating gensets, the 1,200 and 1,500, what is the status in terms of product readiness and the launch in the market?

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [159]

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(inaudible)

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [160]

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We are looking at Q4 '21. (inaudible) in the market, yes.

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Operator [161]

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Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Abhishek Puri for his closing comments.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [162]

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Yes. Thank you so much for giving us the opportunity to host this, and thank you to the investors for being on the call.

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T. Vinodkumar, Kirloskar Oil Engines Limited - CFO & Chief HR Officer [163]

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Thank you.

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Sanjeev Nimkar, Kirloskar Oil Engines Limited - COO [164]

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Thank you. Thank you very much.

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Abhishek Puri, Axis Capital Limited, Research Division - Executive Director of Capital Goods, Infrastructure and Power [165]

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Thanks.

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Operator [166]

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Ladies and gentlemen, on behalf of Axis Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.