Ador Welding Limited (517041) Earnings Call Transcript & Summary

Good evening, everyone. Welcome to the investor presentation of Ador Welding. We'll start the investor meet by a small presentation by our MD Aditya, sir, and then we'll take your questions.

Good afternoon. I hope you are [indiscernible]. I just want to give you a very quick introductory presentation, and then we can go into the question-and-answer section. We had our Board meeting on Tuesday. This is a quick overview of the business, which is all available in results. Ador Welding business contributed approximately INR 678 crores domestically from the -- sorry, from the Flares, it was approximately INR 35 crores, INR 172 crores of the Equipment and Automation space and another INR 678 crores from the Consumables space, gross INR 884 crores. Segment-wise margin, we saw all reported in the results itself, the Consumable margins improved with a slight amount. The Equipment margins dipped a bit on account of certain automation hits which again are getting turned around over the course of this year. And the Flares and Process Equipment [indiscernible] taken a hit on the account of slightly later than expected execution on the project. PBT and ROCE figures have due to certain segments having slightly dropping due to a hit especially [indiscernible] overall margins dip down in FY '24 compared to what we were expecting. And the ROCE level remains fairly in line with where we were last year. Working capital borrowings, especially if you look at the welding business alone has done quite well. Most of that is in line with our expectations and with the way business is moving at the moment should remain as such. The focus areas into this year and a lot of what's spillover from the previous year as follows. We're going to keep on pushing more towards high-end welding equipment also that would also have a make in India tag to it. It'll allow us to give a wider range of offerings to our clientele. The plasma cutting space is something that's very critical to us as part of our growth plans. We'll definitely be driving that, hopefully, over the next 6 to 8 months, make a larger [indiscernible] of that. The project execution is critical to us, which has been there in the last 2 years, and we need to ensure over this year that the project -- [indiscernible] project is executed correctly. We have a lot of investments that we've undertaken last year and will be undertaking over the course of this year as well to keep enhancing our welding consumables product mix [indiscernible] show richer product mix into the various markets. New geographies, product mix for Ador International. There are 3 or 4 political markets that remain our main at the revenue well, that we'll keep focusing on, and we're adding 2 or 3 new geographies over the course of this year where you already entered them. And the automation division, which had a recent revenue growth last year, but did not have a good bottom line. The main plan is to be able to turn around that to a profitable stage. These are the main focus areas for next year. The merger, you actually, to be honest, expecting it in the last meeting the NCLT. Unfortunately, it don't happen. And we are very, very hopeful that the next upcoming meeting of the NCLT, this will hopefully happen, which is quite soon. Which is why [indiscernible] Ador Welding and Ador Fontech have announced dividends to ensure that the dividend process is very clean cut prior to having merger being done. That's just a quick run through. I'll now request floor to handle the question and answer to people of the share presentation or participants and we leave it open to [indiscernible].

Good evening, everyone. I'm your moderator for today's Q&A session. Our first speaker for today is Mr. Pritesh.

Just an observation, why is the H2 number in performance, slightly weaker in growth rate, where if you look at some other industries in -- whether it's a consuming industry or capital good industry, the growth has been fairly strong there. So any specific reason with us or with our industry where the growth in H2 is relatively weak? That's first question. My second question is in the consumables business.

We lost you. Pritesh we lost you. Can you hear us, we lost you after that you said the consumables business then we can't hear you.

All right. We were expecting the executions to start. So what's the status on this?

Pritesh, we lost you after your [indiscernible] question, we lost you. Can you go back other than with the consumables.

Volume growth in consumables, the third question on the flares business. We had a INR 150 crore order, which we got from ONGC. What is the status of that order and the execution because some of it should have been flowing in '24, right?

Yes.

Okay. So over to you.

Okay. So H2 growth has been fairly much in line with everything, but it's a big part of course, as you all know that steel prices have been dipping down over from October, November onwards, every month you saw a significant trending downwards. And now we see it moving back up, in fact, starting to be improving, started seeing moving a little bit upwards again. As far as volume growth goes, it's been pretty much exactly in line with what the market expectation is. We've been seeing it in the region of 10%, 11%, 12% on the consumers front. So we're quite okay with that front on the volume perspective. On the consumables were not provide the product mix is something that we are looking at getting richer, and that's going okay. We've helped also by the international market sales of the consumables, which is also picking up. But in general, it seems to be quite okay. We're not too concerned apart from the perspective of volume at the moment. On the flares front, we are running a bit late. We were expecting to see a much larger quarter of bidding to start from December, Jan, to be honest, which is cut pushed back due to few engineering and execution issues. We're working very closely with ONGC on that front. And we are expecting that from May, June that entire ticker will start moving a lot more aggressively. Yes, what should have been approximately another INR 30 crores to INR 35 crores of revenue that should have come in last year has got pushed in and will start ticking from now.

So any reason why there is a loss in the flares? The swing in numbers third division is significant this year. It's close to INR 5 crores INR 6 crores thing so. Any reason why it's happening?

Can you say that again. I lost you... Why is it there is a loss in that main divisioin?

Yes, yes.

It's simple. I think there are two parts to it. The first part is in the cost. There is a slight cost [indiscernible] that is also happening. So the gross margin is slightly coming down in that order, which we are accounting for as well. Secondly, we adopted a very conservative accounting method for this entire order. So we've taken a lot of the cost upfront in that perspective. We've intentionally been very, very conservative on that account. Like I said, I wanted to be very conservative on that order. So we've kind of accordingly like that. So that's basically it. And obviously, because our revenue has been low, the high overheads that you have in the division obviously have not been amortized over the course of last year. So that basically adds up to that.

Okay. Just last, what will be the flares business revenue next year considering this ONGC project execution as well?

It should be anywhere in the ratio of 2.5x to 3x of what it was this year. Looking at somewhere the ratio approximately, let's say, 90 to 10 is what where we as of now booking at or working at.

And at what margin?

Very similar margin to what you had expected earlier. I'd say a slight dip because there are a few small cost overruns and stuff that they need to be looked at.

Our next speaker for today is Mr. Ankit Gupta.

I have 3 questions each on the 3 segments that we have. So starting from the consumables segment. So if you look at it, we have registered a growth of around 10% in our revenues throughout the year. As you were saying, the volume growth also has been in line with the revenue growth, last year. So when all your -- the major industry that you cater to, whether it is shipping, whether it is manufacturing, whether it is defense, all the sectors in the entire CapEx cycle is growing through a very good time. Despite that, the -- our comments on the growth front on the consumables has been relatively on the muted front. So if you can talk about why the end segments which we serve to are doing exceptionally well despite that, our performance hasn't been that great?

On the consumables?

Yes. This is particularly on the consumable front yes.

Well, I think on the consumables, I don't necessarily, as I mentioned, you have to keep in mind that the steel prices are very closely related to our product pricing. And if you look at the volume growth that we've kind of had last year, I would say -- I wouldn't say it's been a good year. I wouldn't say it's been a bad year either. I'd say it's been a fairly average year from that perspective. And you have varying segments. You have segments that we developed in Q1, Q2 and the segment starting to pick up now. But I think it's fairly on par what we were expecting across the industry basis, the changes that are happening in consumables. I don't feel it's -- I don't think it's exuberantly great. I would agree with you on that. But I don't feel it's below bar as to what we are seeing with the rest of our peers probably.

But some of your customer industries or the consumer industry that we [indiscernible] to have been doing exceptionally well. Do you think our growth rate for next year should up from what we have done last year?

I think it should pick up. I would agree with you as it should pick up. But I think if I actually look at the welding industry per se, I think whatever data we get and whatever our market studies we run, we are pretty much in line with the volume growth that the industry is having. I would have -- like I said, I would agree with you that we did not outgrow in the market. I would completely agree with you on that. And that remains something that we are focusing.

Sure. My second question was on the equipment front. We have seen a very good growth on the equipment front on the revenue side. But our margins have been pretty subdued and they have reduced quarter-on-quarter for the past 4 quarters. And earlier, we used to talk about when you used to hold phone calls 2, 3 years back that are -- when this business scales up to, let's say, INR 150 crore plus kind of top line, our margins in this business should at least match the consumable margins. But last year, we saw very good growth, but margins have been very -- have, in fact, come down significantly compared to last year. There was no benefit of operating leverage. And earlier, there used to be some challenges on the supply chain front, but I think those have been...

Yes, we are close to those kind of [indiscernible] slightly better yes, you're right. So we have 2 issues that I think primarily have [indiscernible] we know what we are looking towards. First is, I would say, the product mix issue, and that's [indiscernible]. We had a slightly, I would say, not as a venture product [indiscernible] like that has a lot to do with the demand from oil and gas and pipelines and stuff like that, that leads to a little more. In fact, whatever forecast we are seeing should be fairly a little bit better than it was last year, a little bit better than it was last year on that front. That's number one. Number two, like I said, on our welding and cutting automation which is part of our lending equipment. It all comes under the same thing. We, in fact, increased -- our loss went up over there [indiscernible] our loss went up on account of some orders that were poorly executed. We are in the midst of that turnaround happening. And you will definitely see a lot of benefit to that over the next 12 months. You can look at margins going up for sure, if we can acknowledge these metics correctly. I don't think that [indiscernible] level yet, but I definitely think there's a lot of scope for improvement. You are very right about it.

Will it be possible to reach double-digit kind of margins in the equipment business?

It will be a fair approach, but we can get close to it. We can get close.

Sure, sure. My third question was on the flare side. we had incurred a big loss in the flare segments during 2018 to 2021, on our Middle East business. And then we adopted a calibrated approach towards this segment. We had recruited some top management professionals from very good companies and we were hoping that this segment will also report 10%, 11% kind of margins, over the long run, and we will scale this business in a judicial manner. But as you were saying, there have been some cost overruns on the ONGC project. So how do you see this segment shaping out for us? And given the cost overruns in the ONGC projects, do you still think we can do 10%, 11% kind of EBITDA margins in the segment?

So yes, I think it's a very important question, [indiscernible] I was expected will asked. Look, I think where we are right now is just to keep our head down and execute this project correctly, as per our commitment and as per our -- try to achieve the margins we had planned to. And I think at that time, which is in another 6, 8 months from now, to reassess exactly the question you asked whether this makes sense as a long-term play in a large capacity or not. But I think we are -- I'm not in a position to answer that question today. I definitely will not say yes or no, neither way. I just need a few more months to get this -- execute this order and execute to have that clarity. But you're very right. It's a very relevant question. It's been discussed at board level, it's been discussed at senior management level. It's not like we are adamant for any position. But right now, our thing is that we must correctly execute this. But your question is very important.

Just last question on the Fontech front. Last year has been flat for us on the Fontech front. So how do you see this business shaping out for us for next year?

Fairly, the Fontech front is going to be driven by 2 or 3 things. It's going to be driven by what we have is our maintenance and repair product line and then we have our maintenance and repair service line. The maintenance -- the product line has a growth opportunity, which is fairly in line, like I would say, sort of an IIP type of number. You're not going to see exponentially growth. Where you can see exponential growth come from is the service part, [indiscernible] better that numbers coming from there and a better order book come from there. I think you'll see a little it of growth in line with the welding type of growth plan for next year and the ability to push that a little more over another 2 years.

Our next speaker for the day is Mr. Dhwanil Desai.

So a lot of the questions have been asked. Just one thing I wanted to understand. So what is the revenue from export this year, if you can spell out that number?

We managed to actually have a very good year on the export front. We managed to double the growth -- double the number versus last year again. So I think we were close to approximately INR 120 crores of our welding business being export...

My question is that if I look at the numbers, we have a delta of around INR 60-odd crores between last year and this year in terms of consumables. And I assume that a large part of our export is consumables.

That's actually not the right assumption. We have a very healthy product mix in the exports. It's actually 70% consumables 30% equipment.

But still, the domestic part -- the volume growth domestic part is still lower than what we are indicating. Is that the right way to look at it?

The volume growth on the domestic part is -- yes, you're not wrong. It's pretty much in line with what we see the market growth rate happening in terms of the other -- what we do a market assessment study and we get a sense of what is the volume growth that is happening in the industry is pretty much in line with that. I think what's important is, look, in the welding industry, you're going to understand the sectors you cater to [indiscernible]. If you look at our general infrastructure that we cater to, heavy engineering sector we cater to, we're seeing good volume growth over there. You see our auto, we are not seeing volume growth. You see our railways, we had the first 6 months, 9 months, we had good volume growth happening over there. You have to look at it sector by sector. I know you guys would love to be operate a brush. India's growing so well and every sector is doing so well and the growth to be so much. It's not -- it's very sector oriented. So I actually am very happy with certain key sectors having done well and the overall revenue mix and product mix that we are moving towards, especially if you want to keep pushing the margins up, which we are able to start doing decently in the consumables. So I have to say -- like I keep saying, it's also simple in answer, but it's very okay. It's not great. It's not bad. It's somewhere -- it's okay.

The reason I'm asking all this is because I wanted to understand as a management, fairer low-hanging fruit in H4. We have been talking about that. You've been phenomenally well on that side. So when you set expectations for a year or 2, 3 years, do you set out expectations separately, that okay, domestic CapEx cycle you call. So this is how we want to grow and export, is where you want to take it?

Yes. yes. That it is completely separate.

And second question is on equipment. I think we have done...

[indiscernible] that it pertains to. You just keep in mind that Ador is very distributer facing in terms of its sales [indiscernible]. So we have approximately 65% of our consumables, 70% of our consumables go through the distribution market, which is a lot of stock in trade and stuff like that, that also happens besides our end user base. Just keep in mind that if you have the last 6 months were flat, prices were moving a little bit downward rather than looking upward. You always have a more conservative stock position happening in the market. So that's something of a reality we have to also deal with, but it's not a big deal, just giving you an overview. It's not a big deal, it's manageable.

Second question on equipment. I think we have done very well on the top line side of it. So if you can elaborate on what is driving such strong growth? And given that now we are at a base of a much larger INR 150 odd crores, how do you look at in terms of your growth aspirations from here on, on the equipment side?

Equipment seems to be -- I think we are getting advantages on 2, 3 funds. One is the product vis-a-vis the imports, the gap is reduced a lot. I think the preference for domestic product is also there. I think our serviceability, all of that is there. We have to select large customers who like working with us in bulk, which helps a lot. I think it's a question of us just being smart about cutting out the fact in the manufacturing turning around the equipment out of the automation part of it, and automatically, we should see a big jump happening. I can think that the fundamentals are in place for another good year on that front. But we do have to improve our margins for sure, yes.

Last question. I think in your focus areas you've talked about two things. One is plasma and second is better product mix on the consumable side. So if you can talk a bit about contribution currently, where do you want to take it, impact on gross margins. Why are we doing all these things? And why those are the focus areas, if you can talk a bit about.

So I can't really correlate it back. I can't correlate it back into a margin over here. But what I can tell you is that at the end of the year, the net margins that we've ended up, which has been -- if you need to remove the flare impact, the net margin is at high scope for further improvement. That scope of further improvement will not count purely by large volume. It will come by more specialized metals in the consumer space, higher-grade steels that we work on stuff like that. So that is where that will end up coming from. And on the plasma cutting front stuff, there's a lot of scope or just moving into high-end applications, all of that. So that's where we want to keep moving towards that. Getting the brand to have more upper tier significance and all of that. And a larger per unit price on many different orders. So that's [indiscernible] kind of moving towards and I think that will definitely help us.

Just a follow-up, do we have that capability in-house? Or are we building it or?

Its a mix. Some parts are -- we have a large technical development center, but the truth is also that there are times we [indiscernible] collaborations and stuff like that. So it's a mix.

Our next speaker for today is Mr. [ Nasar Parik ].

First is on volume growth you mentioned, can you give Q4 volume growth in consumables for us?

Compared to Q4 of last year? Compared to Q4 last year, we had approximately 1% or 2% volume growth quarter-on-quarter for Q4. And versus the previous Q3, we are [indiscernible] 14% growth.

So on Q4, that's the question, right? 2% volume growth is the industry in Q4 just growing at 2%? Or are we losing market share?

So as per my assessment, I've been quite clear on the fact that I don't think we're losing market share. I'm quite clear on that front that I don't think we are at the moment unless I happen to see another 3, 4, 5 months or something that doesn't take a then maybe we are losing a little bit. But as of now, whatever we are gauging and we are assessing, we are not losing market share. I think you have to keep in mind the points I'm talking about when you talk about price correction happening and the industries that they're working on. And I think keeping all of that in mind, I think they are fairly stagnant at the moment. There is not a loss of market share. As of now, whatever I've seen, I don't -- I would not tend to believe.

So maybe not an organized market share, then are we seen unorganized flares kind of that? Or is there anything on that? Because the underlying industries -- I think a couple of people ask that question where underlying industry is so strong. It's very difficult to believe that -- or not understand how 2% is the end market growth, right?

Yes, I understand where you're coming from on that front. But I think if you look at it on the overall year basis, is still looking at approximately 10% volume growth or 10% 11% volume growth. You have to keep setting all the segment in mind on that part. [indiscernible]. I have to give a slightly longer window to study the data and that's where it is. I think you have sectors as [indiscernible], they're not as exuberant in certain fronts that you would think that maybe in terms of volume that is happening. So it depends where we play in those segments and stuff like that. But in general -- as of now, I feel fairly confident that we're in line. But in 3 months, if I see something different than maybe I'll have to reassess that. As of now I feel we are in line.

Next one you have spoken about automation and automatic -- autonomous lending and all that. So in that -- are we making any progress? And what percentage today would be either in equipment or consumables would be the automation part?

Automation is still tiny for us. [indiscernible] approximately 12%, 13% of our equipment revenue, but the contribution to the loss is quite significant on that front. We expected to jump to anywhere this year at least to 20% of our -- sorry, let me get my math right. It'll be approximately 25%, 30% of our revenue for this year, on our welding equipment front. And it should be in a position to positively contribute at a good net margin better than the equipment line, if we do it correctly.

[indiscernible] Does it only mean newer equipments that we are launching? Or its something with integration?

[indiscernible] integration basically when you do -- for any automation of a line, basically you're picking up your welding more tucking and [indiscernible] integrating it right in the solution from that respect.

And lastly, on the BIS case?

There's no movement. Stay in high court remains good, which is fair and it remains on that front is absolutely no traction legally either which way of that.

And if I can just squeeze in one last. When we look at our fixed assets, our gross [indiscernible] obviously are very high. If we compare it to some of our peers. So one, is there -- what kind of utilization we are at? And from a CapEx perspective, is it fair to assume we don't need to do any more CapEx for the next couple of years?

No. So CapEx, we've done on CapEx last year. We have a little bit of CapEx, not a little bit. We have, I would say, 70% of the CapEx plan we did last year. We will have this year as well. We do have new lines, refurbishment, all of that taking place, new product lines getting entered in. You have to change a few odd lines, all that. I think you have to keep in mind -- look, you're a legacy company that's sitting on a few gross block like that. That's perhaps why it seems like that, but no, it will change. You see -- but at least another 18 months of CapEx will remain.

One more thing. If you are comparing with our peers, they are having 30%, 40% trading balance [indiscernible].

It's very different in that regard.

Our next speaker for today is Mr. Viraj Mehta.

My first question is on the flares division. We basically -- when we took up this project in a couple of public interaction that you mentioned that the margins in this should be at -- I mean, high single digit or low double-digit kind of level for us. Now my question is that if we actually include INR 8 crore loss that we have done because we have done losses -- I mean, we incurred cost for this year, then should the margins next year should be temporarily much higher than only at a project level over a 2-year period, it will make sense of 10% margin, right?

Yes, you're right. Like I said, firstly, we're running late on this project. And secondly, we have [indiscernible] on those projects. So we will [indiscernible] on exactly the right number that you mentioned, and we sort of worked our way down a little bit, we sort of water that down a bit, and we got to make sure we execute correctly. So I think you'll see -- I mean, we should be in a better result, obviously than this year. But no, you will not see an exponential massive jump happen on the bottom line. No, it will not be exponentially large.

Am I fair to assume that I see a significant difference in your tone regarding this division and how do you think about the prospects of this division?

I'll be very open on that front. I think it's not about my tone or nod anything like that. I think I was very clear look, I'm going to take this on to see if we are well suited to be in this space. I kept saying okay we are going to take on so. We had problems that we had in the past. And [indiscernible] those problems and we came back into it and said okay, is this company well set up to go and execute these play orders or not. We're very well placed in the welding space. [indiscernible] I think what I'm learning over time is that there are many, many challenges in terms of how we run it versus the conventional welding business, and there are slight differences that are there. And right now, my focus is just -- our team's focus is just on execute this correctly. And then we'll see strategically, is this the right fit or not.

My last question is on the export front. What kind of growth on a very small base in exports do you see over this year and next year?

So the base is gone up, so we were [indiscernible] INR 32 crores and the base is gone up to INR 120 crores. So what is [indiscernible]. Having said that, there's a lot of potential out there. There is a lot of bit of story of the India -- many other things that you use a push. I'd like to be able to push. I don't think it's realistic to expect over 100%, 100% year-on-year throughout, but I definitely think that in the region of 35%, 40% is something that we can definitely good.

Right. And if I just take out the exports growth that we have had this year, then at least on the domestic side, it makes the picture even more worse off. As it will be like single digit -- low single-digit growth for our domestic business.

On a value basis, yes. On a value basis, correct.

And on the volume basis, how much it will be?

It's somewhere in the region of approximately I would say, 7%, 8% or something like that. About 7% on the consumables front. But on the equipment front, we've done okay on the vesting front.

Our next speaker for the day is Mr. Santosh.

I missed the initial commentary. So I might ask some based on the questions. What I understand is that, I think, can you please help me understand what has been the overall industry growth of the welding consumables industry in FY '24. And what would be the mix from the end user point of view, something on the lines which we had shared in the FY -- June '21 presentation that we had shared? If you could just give some color on that front.

Sure. So the I think we expected the volume growth in the market to be anywhere in the region of 8% to 10%. And I think we are somewhere in that band at the moment is what we saw last year. That's our assessment of [indiscernible] . We break that band into many different industries that you operate in and depending on like you said [indiscernible]. For us, [indiscernible] generally in sharing -- may be in sharing [indiscernible] that going to stop has still been a big growth driver. We expect shipbuilding to be a big growth driver coming into this year because a lot of stuff is starting to traction on that. Railways was good, especially in the first 6 to 9 months of the year, and we expect that to continue to be good going into this year. Oil and gas, started picking up a little bit also. We're seeing a lot of investments going to cement infrastructure increases, stuff like that, where we also expect to [indiscernible]. Hope that helps, other, I can't give you much more detailed clarity than that some way.

This is helpful, sir. Just a follow-up to this. If one way to understand -- my understanding is that after us, the next -- the third largest, fourth largest, like that, the top 7 players after the top 2, I think have a very small market share and they are very industry-specific and their growth has been coming from very limited number of industries. They are more -- right? So I just wanted to understand what are the industries where the #3 to #7 player has grown and has impacted anyways our market share? And what are those industries, please? Also, what industries we have gained market share and where we have seen some competitive intensity increasing?

I would say, the -- I keep going back to -- well, I just keep going general engineering, heavy engineering, that type of constructions. So to stop, I think we are doing kind of okay over there and that's doing fairly well. I think we are doing okay there. I would say, we [indiscernible] a bit on certain -- we are not very strong on, for example, the renewable energy sector, the wind energy sector, stuff like that, that's fairly good. I think there's also stuff on thermal power and all which are getting into a little more, we're a little bit behind on that front. But otherwise, maybe the Auto segment lower and lower price yields happening in certain places, we may not be seeing that much traction as the rest. We have done okay on the construction equipment front. I've been quite happy with the construction equipment, that's doing well. So it's a bit of mix like that.

On the same lines, in specific industries where we have made very significant inroads, sir?

Very significant inroads...

When I say, in FY '20 -- let's say, FY '19 pre-COVID, if one, let's say, shipbuilding was contributing a very small percentage on absolute number basis, that would have grown 4x, 3x, something like that has happened within our end user industry mix from '19 to as of today, sir, this year?

You would see that a little bit over the course of this year, and you can see 2x, 3x, 4x, you cannot think of where you would specifically see it. Railways as an example. Railways is given -- simply the demand is where it is. So that's a completely different game. We would definitely lean on, like [indiscernible] for sure.

And lastly, sir, if one has to look at the overall industry geographically, like east, west, north, south, if my understanding is right, Western Central or West would be the larger geographies, what would be the industry mix and how are we mapped to the industry? If you could give some color on that front...

So we are well placed, we basically end up having West Coast -- West, Central, North, South, East was basically is the way in which our sales hierarchy goes. And the West, we...

Consumables. What would be the mix, sir?

That [indiscernible] will be like that only, West will be strong, then we'll come into the Central part, then we go into the South, North, and then into the East.

Our next speaker for the day is Mr. [Saket].

So one of my question was that, when you consider the welding consumer market, and the size and the growth of it, do you also include, say, the consumable that goes into all those welding robots?

Yes, yes. The consumable that is used in the welding robots. Yes, very much so.

So my question was, is it like -- because you just mentioned that maybe on the automation side, you might be slightly, say, behind the curve. Now in sectors like auto where there's a bigger trend of say, welding automation through robots and stand-alone welding machines like [indiscernible]. So is that market growing slightly at a rapid rate, that's why that's not getting reflected in our numbers. Is that a safe assumption?

[indiscernible] the consumables get very affected by it, and we are doing okay on that front where we do lose our resources on automation totality of the solution part of it, but not in the consumables, no.

Okay. So when you mentioned say 13% automation, is it like 13% of your consumers go towards automated...

No, it's the solution to the welding equipment part. The solution part, it's part of the welding.

Okay. And if we say -- have the same breakup for consumers, say how much goes into automated and how much goes into say the welding person operated stand-alone machines? How would that mix be?

Sure, it is almost -- I would say, my estimation is 90% to 93% to 94% would still happen through the -- 90% would still happen through a very conventional mix.

Okay. And does that tally with the, say, the overall India landscape in automated versus...

Fairly even.

Okay. Now I joined a couple of minutes late. So is there any update on the Fontech amalgamation, if you can just...

Yes, we are still [indiscernible] (00:40:58) is in a position to pass it through.

My next question would be that there is some bit of -- I think the price, especially of these metals, say, copper, ammonium are on the rise. So do you see that impacting our margins in the consumer space or anything on that front, if you can guide us?

I don't see that having any negative impact. I think we should be smart about how we handle it. We've gone through a fair amount of learning curve on this and we need to be smart and implement what we got in place. I don't think it's going to be a...

And any view on the channel -- say, inventory right now, is it manageable or on the higher side?

No, I mean, if you ask me personally, I would say, [indiscernible] earlier because prices have been doing down over the last 3 to 4 months. Hopefully, now it is going back up. I feel the channel inventory [indiscernible].

Our next speaker for the day is Mr. [Vandit Dharamshi].

I just have some bookkeeping questions. If you can just give absolute volume number and metric tons, say, for consumables and then exports and...

I'm sorry, Vandit, I can't give you absolute numbers. We don't do it. And to be honest with you, my competitors only give segment results. So I personally just don't it. I'm sorry, I don't you absolute numbers. I can give you a rough estimate of something if you want. I can always given you a rought estimate.

Yes, even rough estimate will work.

All right. So what do you want?

What would be the volume mix maybe in terms of percentage when it comes to exports and domestic consumables?

Volume mix of export and domestic will be at least I presume 85% - 80% to 85% would be domestic.

Okay. And maybe number of units in equipments business that we would have sold, say, year-on-year? If you can give percentage growth or absolute number, whatever works?

We've grown by about 25%, 30% this year on the equipment numbers. I don't want to give you those numbers because that's a little sensitive, especially because all of my competitors import their data -- import their stuff, but it's about 25%, 30%. We've seen 30% plus we've see volume growth. Sorry, I hope you understand. I'm just very careful on that.

Our next speaker is Ms. [Harini].

A question on the consumables front on the domestic side. You said you're working on a few things to see if we can possibly eke out a little more growth than the market this time around in FY '25. Would that be more product offering led or that is something that we...

Product offering led. We just implemented 1 or 2 new lines. So it will be product offering led, very correct.

Okay. And our mix versus our competitors, are we 85%, 90% there in the same basket now or?

[indiscernible] 85%, at least, 75% to 90%, it's a little more -- look, there are -- I don't want to comment on that. I don't comment anyone else's business, but I can just tell you that there's an element of -- like I keep saying knowledge process outsourcing on the nonproduct front where we want to play a role. And on the second front, there is obviously the MMC ability to outsource exotic materials in a different perspective than I do. And so -- but that doesn't mean that we don't have the offering, we have 85% of the offering. It's a question of implementing that offering correctly that we need to learn.

Got it. The second point is on consumables margins. It is domestically when we ask around the listed prices seem to be very similar versus your competitors now. So trying to understand why they report sort of better on gross margins than us? So is it -- because it's not pricing-led anymore, right? We are pretty much...

Maybe 2%, 3% -- 1%, 2% could be pricing-led, you're right, it's not a massive difference. So I think product mix is -- the basket, the India basket of sale, the amount of exotic that is there is still a higher [indiscernible]. So that's where I going to keep seeing that. We have to keep pushing that. That doesn't mean we don't have the offering, we've built up the offering. We're building it up more and more, but that doesn't mean we're selling the offering adequately. So we have to keep pushing that.

Our next speaker for the day is Mr. [Devansh].

Sir, any commentary if you can share on competition from imports? Do you see that going higher this year or any...

As told, I don't comment much on competitors. It would be [indiscernible].

And sir, any outlook you can share for Ador Fontech? Where do you see the business for the next 2, 3 years?

I think the business is now, as we consolidate and as we get into the [indiscernible] what ends up happening is your Ador Fontech -- basically, you have maintenance in different products, you have maintenance in different services, and then you have a capital base. Capital range is combined [indiscernible]. That all goes into one basket in the welding and cutting front. And [indiscernible] production services. The [indiscernible] have been in this for a long time, you keep pushing a few competitors, you keep pushing through the distribution network and you are looking [indiscernible]. Depending on how [indiscernible] where you can hit between 8%, 10%, 12% growth of that, I think, we will see a good value mix on that going forward. On the services front, where you can take on more and more jobs and more and more benefit with larger solutions, there is potential to do that exponentially if executed correctly. But again, you have to execute correctly. So that's where we aim to push over the next 3 years.

And in terms of any internal targets we have in terms of what is the kind of sales profile we are looking at for Fontech for next 2, 3 years?

It's -- like I said, I don't want to give out exact number, but it's pretty much -- like I don't give a forecast. It's pretty much in line with what we are saying on the IRB front in terms of what their top line is today. It should be, I mean, at the lower level.

And I mean, any reason why sort of like the business has been kind of consolidating for the last 3 years, like in terms of -- and actually for an even longer time? So where do you see the change will come that can change the trajectory for sales growth profile...

The [indiscernible] welding thing with automatically see [indiscernible]. We've been focusing a lot more in the last year or 2 on the [indiscernible] front, especially on the products, rather than the capital equipment because we knew the merger was happening. So that's how we sort of played it out a little bit on that one.

Our next speaker for today is Mr. Rahul Jain.

Sir, my first question is with regards to the equipment side. So typically, say, not just about the next year, but overall, in next 2, 3 years, what kind of margins do we feel our equipment business can do on a longer-term basis?

Like I said earlier, I think we should be in a position to at least increase it by 60%, 70% compared to where it is today at least. We should do few basics correctly and a few things to turn around and we should -- and remove some [facts] from the process, I think we should be able to do it easily.

And sir, with regards to the Flare business, you mentioned there are cost overruns in that project, which could probably lower our margins. So typically, those margins will be somewhere, say, in the region of mid-single digit or what kind of -- maybe not the exact number, but what kind of range it could be next year?

Like I indicated earlier, we are always looking at 9%, 10% type of level. I think we [indiscernible] down a little bit, so somewhere there...

And sir, with regards to domestic business on the consumer side, can we expect double-digit growth going ahead? Or what can drive that double-digit growth?

I would assume -- elections apart and everything else apart, just regular movement of the economy [indiscernible], I would assume so that we would be in a position to do that, yes.

Sorry, I missed the last 2, 3 lines.

I said, I assume so. There is no reason we should not be in a position to do that, yes.

Our next speaker for today is Mr. [ Ram Prasad ].

My question is regarding your subsidiary, 3D printing technologies. It has been making continuous losses. So what is the outlook for that subsidiary?

So we think [indiscernible] we can discuss it right now. We -- the market around, basically, the subsidiary works on the [indiscernible] and the market around us has changed a bit and there is a lot of funding that's happened to larger organizations that have been burning a lot of fluid. So we will [indiscernible] stick to our above philosophy, keep driving it and while doing it, keeping our world completely in control. We managed to reduce our losses quite significantly year on year. We managed to reduce our burn quite significantly year on year. Just work on the core philosophy of what we want. I think in the next 6 to 8 months we will see that industry has made some changes, but then we take a call on which way it should move. But I think it's very simply like we keep saying, what is the core business [indiscernible] correctly.

But does it have any synergy to our core operations of welding?

It does not have any synergy to the core operations at the moment. It does not have any synergy, let's be clear about that. That's the reality. So we have to figure out how to do something where we created some value correctly. We'll get there. But right now, it's a very small subset of the entire thing, but you're right, it has to be figured out correctly.

Okay. And then my next question is on the -- how are the imports for the consumables in the welding consumables, please? Can you throw some light?

No, no. In the welding consumables, there's nothing major [indiscernible] type of steel work, then automatically, [indiscernible] we are trying to work on how we have better products or we have better offering over there. I'm not too concerned about the major down segment part of the [indiscernible].

Is it not heading into our quantities, I just wanted to know...

No, I don't think that's [indiscernible]. I'm not stressed about that part.

We have a follow-up question from Mr. Ankit Gupta.

My question was on -- I had 2 questions basically. One was on the dividend payout front. So last year, we saw 40% kind of dividend payout. And a year before that also, we had given the same -- like the dividend payout was around the same percentage. So with the CapEx that you are planning to do for next year also, so our dividend payout will remain the same? Or do you think there is a scope of improving the dividend payout, let's say, [indiscernible]?

I think the idea is we keep the -- we are not sure where it is today, for the last 3 years [indiscernible] benchmark and as soon as the opportunity arrives correctly, we'll be able to go about that benchmark. I just don't want to commit to it at the moment.

Sure, sure. And on the consumable front, you did highlight about the challenges that we faced in the second half of this year of last year. But I was just going through Q2 or H1 on-call transcript, where we had -- that our volume growth in the consumer front in H1 was around 22%. So it seemed that second half has been pretty challenging for us. So is that...

[indiscernible] the Q1 of the previous year [indiscernible] Russia war and all that thing that happened. So the basic growth that happened over H1 last year was very high compared to the previous year. And that's sort of streamlined a bit. But yes, you're right, in Q3, Q4, it's got a little more subdued than you would have seen in H1 on that front, yes.

Okay. So given the kind of base that we have for next year, like do you think the kind of growth we are targeting at least in double digits will be possible?

Yes, I just stand by the fact that I think it is possible, and I stand by the fact that it is definitely possible.

Our next speaker for the day is Mr. Kiran D.

Just one question, sir. I need a slightly broader commentary rather than any specific numbers. So we have seen across capital goods, and I'm not just referring to your competition, but generally broader capital goods where every player has reported great numbers, every player is talking of growth, CapEx and so on and so forth. So if you could help me understand, and I've been part of the shareholder of the company for about 5 years, help me understand at what part of the cycle will we be able to see growth because we had the low part of the CapEx and all the maintenance -- including Fontech as well, as well as welding. So the maintenance part of the business, the operations part of the business, the consumer part of the business. So we had the lower part of the CapEx for about 7, 8 years. And then we have had the last 1 to 2 years or at least 18 months where there's been tremendous growth in almost all capital goods. So if you could just tell me how -- where does Ador Welding especially fit in because we were neither part of the growth previously when the CapEx was down, now we are not part of the growth in the last 18 months. So where do we fit in and how does our...

[indiscernible] see growth is something I find a little odd. I'm talking about Q4 mainly where there's a 1% sort of growth only. I never talked about the last 18 months or the CapEx cycle. Let me be clear, and if you've seen my results, you can see that it's not the same in line with what you are saying. Our volume growth and our top line growth has been very much in line or outperforming the market before that. I'm talking about the last 3, 4 months. So let's not mistake my commentary for Ador Welding's inability to catch on to the CapEx cycle. I'm talking about the last 3, 4 months. And I don't know if you have seen the last 3, 4 months data on the welding industry front or not from any other competitor, but you will not see anything very differently to this in the last 3, 4 months. Let's just be little clear on the time lines we're talking about, right? Our numbers in terms of volumes altogether have pretty much doubled in the last few years. So there's a huge difference on that front what you are seeing and what I am saying. So let's be clear on that. Now you're talking about the last 3 or 4 months, I'm saying the last 3 or 4 months. We have had a fairly subdued thing because I feel the industry has also been a little subdued on a welding perspective due to product mixes and due to industry picking up. The railways in the last 3 months has not been exuberant. The railways in the last 12 months is exuberant. There is a slight difference that is happening over there. So we need to understand that. Is it going to be exuberant going forward? It should be. Whatever we can see on the spending front, it should be very good on that front. So this -- you have to understand the time lines we're talking about and the scenarios we're talking about. The welding industry per se on our equipment front, we're seeing good numbers, we are seeing all of that takeoff as well. So we have to be clear on that perspective.

We have another follow-up question from Mr. Santosh.

I just wanted to understand what would the approximate revenue mix of the consumables -- FY '24 consumable revenues between stick electrodes, solid wires, flux cored wires and soft flux?

So probably, basically, we stick electrodes is one segment and you take all the other wires and flux in another segment. Electrodes are probably be approximately 60%, 65% or something, 58.2% is what we are looking at.

Okay. Sir, also one more from a business point of view, I think, is it fair to assume that the project-based business tends to have lesser gross margins than the dealers and distributor-based business? Can you please help me understand the difference?

It's slightly lower, slightly lower, depending on the product mix, slightly lower, yes. And also the fact that you're extending a larger payment term credit cycle also. So yes, slightly. Slightly.

If I have to understand the differential in -- margin differential at the gross margin, is it fair to say 100 to 150 bps kind of difference could be seen in these 2 models of doing business? And on the collection cycle, what would be the collection cycle for these 2?

Average collection cycle will be somewhere in the range of 60 to 75 days when you're talking about direct on the large end users and you're talking of end users with our own distribution, it will be somewhere in the region of 20 to 30 days. On the basis points difference that you see would be maybe about 100 basis points. That's fair enough.

Okay. And sir, what all end user industries in India are currently seeing increased adoption of robotics and automation within the welding industry? Are we strong in those end user industries from a equipment side?

Yes. So you see automation happen where there's obviously going to be large scale happening a little more. So you're going to see it happening a little bit more. Auto is always one at the forefront of that. You'll have a high automation also happening on -- we're seeing more and more in the fabrication [indiscernible] also coming in. So when you have large scale fabrication, we have a little more automation coming in over there as well. So you have a certain mix of all of that happening.

Sir, if you say that auto industry sees large automation, scope for automation is there. If my understanding is right, the 6310 cities is the most used in auto industry, where I think it's more of a commoditized area. I think where, again, we see a lot of imports happening in that side. Do you see that it is going to change this automation and increase adoption of automation?

Slightly. It's a slight up there. So let me clarify that. You had mentioned 6310, which I presume you're actually in 6013.

6013, I'm sorry, 6013. My apologies.

Yes, 6013 is a type [indiscernible] which is the base commodity usage for mild steel fabrication. That is an electrode that does not come into automation, that comes under standard fabrication. So actually, auto industry, those who automate will not be using it that much. They'll be using what we call, wires -- mid wires and stuff like that continuous where the higher rate of deposition happens. So it's slightly different on that front. So 6013, I would compare with the automation perspective at all, it's completely separate. 6013 plays a role in heavy fabrication, general fabrication, stuff like that altogether. Wires -- though the imports are not a major concern on that front in terms of the material supply, in terms of the automation there might be a fair...

And sir, lastly, if I may, who are the top 5 players in the industry level when it comes to the reclamation welding market, sir?

There aren't really 5 key players, I would say, EWAC which is [indiscernible] is definitely the leader, then Ador Fontech comes in second and then we have 2 or 3 other players that come in slightly after that and maybe be part of imports and some domestic use.

The next speaker for the day is Mr. [ Sriram R ].

I just have one question. Can you give the sector-wise revenue for FY '24? Like, how much would be from steel railways, et cetera?

Just give me one second. I'll give you the broad numbers. It would be about 18%, 20% will be construction against [indiscernible] 10% will be steel and cement [indiscernible] especially with the cement expansion business.

[indiscernible] 20%, construction is about 14%, railway 9%, shipbuilding is 4% and all others is 20%.

And how much would be cement?

Cement, we are [indiscernible] primarily this year. So it's coming to that [indiscernible] cement seems to be having an even larger expansion portfolio with an [indiscernible].

Yes, but what would be the -- in terms of percentage, how much would that be?

Must be somewhere in the region of 7%, 8%.

Our next speaker for the day is Mr. [Nitish].

So my question was mainly on the merger. So are we seeing any cost revenue synergies, which we've identified -- the management has identified from this merger? Are there any low-hanging fruits when it comes to cost synergies?

We did see that and did that at the time of valuation of the merger as well. We've been doing it now also. We have these projects that run basically -- and we do have it. I don't want to put a number to it, but we definitely do have it from that perspective. And we do see definite amount of synergies that will come in primarily on some back-end services, on management, on certain production benefits and import benefits hitting our production, yes [indiscernible].

And on the overall margins, our peers have EBITDA margins above 18%, while our FY '24 margin is 10.2%. What kind of margin should we assume going forward? Is the scope of reaching EBITDA margin reaching close to 14%?

I think [indiscernible] where we have been able to come much closer to it and we've had a [indiscernible]. If you would remove the impact of flares and stuff like that, you should that see we are much closer to that number and at least halfway to that number. There's no reason why we should not be moving up towards it. And I think we seem to reorganize and recalculate everything together.

Okay. And just on the equipment business, margins have been quite volatile, FY '24 margin at 4.6% versus 6.7% in FY '23, while 4Q margin is even lower at 2.5%. So why is there such volatility in these margins? And what should be the steady-state margin going ahead?

The steady-state margin is little higher than that. It's basically on account of, like I mentioned earlier, some [indiscernible] losses that we had, which are getting [indiscernible] and should not be a factor leading into this. So steady-state margin should be a little better than that. It should be closer to about 7%, 8%, 9%.

There is no one-off setting there in FY '25, right, in revenue on the equipment side?

There is no major one-off. It's just that we had some higher cost overruns on the automation side. That's it. But that we can turn around. It's not something of major loss. [indiscernible] oneoffs.

No, I was mentioning more on the equipment revenue growth, which we've seen in the year and during the quarter. Can we say this INR 175 crores is like the new base when it comes to equipment automation revenue?

Yes. Absolutely.

That was the last speaker for today.

All right. Thank you.

Thanks a lot.