CG Power and Industrial Solutions Limited (CGPOWER) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of CG Power and Industrial Solutions Limited, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors. Thank you. And over to you, ma'am.

Thanks, Sujita. A very good afternoon to everyone. On behalf of DAM Capital, I would like to welcome you to the CG Power and Industrial Solutions 2Q FY '22 Earnings Call. We have the management today being represented by Mr. S. Vellayan, Chairman; Mr. N. Srinivasan, Managing Director; Mr. Susheel Todi, Chief Financial Officer; Mr. Ramesh Kumar, President, Industrial Division; Mr. Mukul Srivastava, President, Power Systems; Mr. Ranjan Singh, Executive Vice President, Railways. I now hand over the floor to the management for their initial remarks. Post which, we'll open up the floor for Q&A. Over to you, sir.

May I request Mr. Vellayan, the Chairman of the company, to say a few words.

Yes. Thank you, Bhoomika, and thank you, N.S. And I think -- and welcome all to our first earnings call. As you know, it's been a fairly transformational year for CG. And I think the company has done very well under its new leadership, and we will get into that discussion a little bit. And as you all know, basically, this is a company that we bought during COVID. So it came with significant risks not just because of COVID, but because of what had happened with the company in the past. But I do feel like the company is definitely turning a corner now. And we feel much more confident about the future of the company, which we will elaborate as we go through our conversation today. But before I started, kind of given that it's our first earnings call, I just wanted to also thank several people that have been -- that have really helped this transformation happen. Very -- first, the support that we got internally within the Murugappa Group to basically kind of do this acquisition itself, the corporate Board led by Mr. MM Murugappan, kind of helped us in that effort; also, then the former CFO, Sridhar Rangarajan, who really helped with the whole acquisition effort and the TI finance and legal team, including [ Mahindra Kumar and Suresh, Samanage Ram Shankar ], the team at Cam. But I think then kind of one of the most important kind of teams in the process that also gave us the confidence to make the acquisition with the key management at CG itself, Ramesh and Ranjan were the 2 key people, and Sushil with its 3 key people, we kind of spent a lot of time with, and then Mukul joined the team as well. So I think without their confidence, as you probably know, we actually kind of ended up buying the asset without visiting a single plant because of COVID. So if it wasn't for the confidence that we received from the 3 of them and some of the additional checks, I don't think we would have had the confidence to make this acquisition. Also, the culture, they gave us a sense of the culture of the organization at the operating level is very similar to that in the group itself. And then finally, the one other person who has been very instrumental in the turnaround, has been Mr. N Srinivasan, the current MD. And I'd like to thank him also for accepting the MD role at a point when there were a lot of unknowns as to where the company was going to head at that point in time. And I really felt that he was the ideal person for the role. It was pivotal that we had someone that we can basically trust given the current situation that the company was in at that point in time. So all that being said, we also held off a bit on having earnings calls till we felt comfortable with certain kind of factors internally, that Mr. Srinivasan will elaborate more on. And with that, I think I'd like to hand it over to Mr. Srinivasan to take us through his assessment of the performance to date. And then we'll come back to you with Q&A after that. So NS, thank you. Thanks again.

Thank you, Mr. Vellayan. Good afternoon, ladies and gentlemen. On behalf of the company, let me first extend a warm welcome to all of you for the first analyst call, the first by the new management. I'm Srinivasan, Managing Director of the company, joined this company on 26/11/2020, the day on which TA took control of this company post acquisition of the company by [ 2 ] investments of India, a consequence of the Murugappa Group. I also would like to now introduce my colleagues who are with me on this call: Ramesh Kumar, President Industrial Division. He's a CG veteran and has been with the company for about 31 years and has held various senior positions in the company. He takes care of the Motors and price business. Mukul Srivastava, President, Power Systems. He's also had a number of years of experience in CG, more than 30 years. He has taking care of the transformer and switchgear businesses. Ranjan Singh, Executive Vice President, Railway business. Ranjan is also a CG veteran with 28 years of service with the company. Susheel Todi, CFO of the company, Susheel has been with the company for about 17 years. Let me just begin. As you know, first, today, this morning, actually, the Board considered the results of Q2 and then we have approval the results to the stock exchange. And also, we also released a press release that also been uploaded in the company's website as well as in the -- to the Bombay Stock Exchange. Now with that, actually, let me just begin with the recap. As you know, Tube Investments of India acquired this company under a Swiss challenge as part of a resolution process initiated by the lenders of CG Power under the Reserve Bank of India Directive on prudential framework for resolution of stressed assets. TA infused equity funds of about INR 687 crores, the equity stake of 54% in the company, the stake is also subscribing to certain warrants. TA took control of the company on 26/11/2020. On the same day, the new Board was constituted and the new managing director of the company was appointed. As you may know, the new management had to address several legacy issues, the important of which, I will enumerate as and then. #1, the NCLT has ordered the reopening, recast and reaudit of the company's accounts for the past 5 years, ending with financial year 2018 to '19. This was to be commenced and then completed. The auditors, the main existing auditors actually had expressed a disclaimer on the accounts of the company for the past 3 years, and this also had to be addressed. 2, all lenders of the domestic entity, overseas subsidiaries, guarantee obligations which were defaulted on the loans, the use of operational creditors and other stakeholders had to be settled. #3, there were investigations by SFIO, CBI and the company had to work with the authorities by providing data information in time as per the request. #4, the company was a nonperforming asset. The new management has the task of completing all the settlements as per the resolution plan and get the account reclassified as standard. #5, the businesses had to be supported with need based working capital and to be ring-fenced from legacy issues so that they could perform to their potential without any interruption. All this took a substantial amount of time. We wanted to complete -- to comply with many of these requirements and also complete the recasting of the accounts of the company, which will help us know further risks and liabilities, if any, to which the company is exposed to. It is only after getting a reasonable understanding of the risks that are facing the company post the completion of the recasting of accounts. And also, after reviving the businesses of the company, we wanted to commence the investor call. And here we are today on our first call, and we hope you appreciate as to why we could not be in touch with you earlier. This may also now may lead to another question, whether all the legacy issues have been sorted out, no. It cannot be, and it may take some more time. But important requirements, namely settlement of lenders, settlement of operational creditors, recasting of the past 5 years accounts, have all been completed. And the businesses are on the path to recovery. So that's the background for you. Now I switch to company performance. As I said earlier, we have released a press note on the company performance, while we have given a corresponding quarter of last year data. These last year data are not comparable. Since the company was under severe financial stress last year, we need to build our own performance data from now onwards. Also, it would take a few quarters to catch up with peers as we slowly fully normalize our operations, resolving several legacy issues. Now I come to specifically to the Q2 performance, stand-alone Q2 financial results. In Q2, the company has the benefit of uninterrupted working and all the businesses have performed satisfactorily with improved capacity utilization. As you know, Q1 was impacted by COVID and we lost some working days. Sales for the quarter was INR 1,351 crores, the highest in the last 10 quarters. And the profit before tax at INR 137 crores, again, the highest recorded in the last 20-plus quarters. Aggregate sales for the quarter at higher at INR 1,351 crores, recording a growth of 139% year-on-year and 42% quarter-on-quarter. Higher prices of key metals: copper, aluminum, et cetera, continued to impact margins. Profit before tax before exceptional items was INR 137 crores as against a loss of INR 40 crores during the previous year same period. On quarter-on-quarter, sales increased by 42% and PBT by 88%, signaling a recovery in business performance. The free cash flow generation during the quarter stands at INR 119 crores. Now I move to segmental performance. As you know, we have 2 segments. One is Industrials, which consists of the motors, drives, railways, and then second is the Power Systems. Now Industrials, this SBU consists of motors, drivers -- drives business and also railways. Aggregate sales for the quarter for this SBU are higher at INR 980 crores, recording a growth of 143% year-on-year and 43% quarter-on-quarter. Unexecuted order book at the end of September stands at 1,000 -- INR [ 200,585 ] crores. This division operated at 85% of the installed capacity. Power Systems, this SBU consists of manufacturing of transformers and switch gears. Aggregate sales for the quarter were higher at INR 372 crores, recording a growth of 131% year-on-year and 39% quarter-on-quarter. Unexecuted order book at the end of September 2021 were INR 1,259 crores. Transformers, switch gears, circuit breakers instrument, transformers and bush subsegments have operated at 55% and 65% of their respective installed capacities. CG consolidated performance. So the company has 3 operating subsidiaries, 2 overseas subsidiaries, one domestic subsidiary. The domestic subsidiaries, CG PPI, which is in [indiscernible], in which we have about 81% shareholding the other 2 subsidiaries, that one is, incorporated in the USA. The other one is Sweden. In both these working subsidiaries, we hold 100% of the equity. They are wholly owned subsidiaries. Consolidated results include performance of all the 3 operating subsidies and 2 other nonoperating holding subsidiaries. Sales -- consolidated sales for the quarter was at INR 1,454 crores as against a INR 664 crores in Q2 of 2020, '21. And the profit before exceptional -- before tax, before exceptional items and tax was at INR 144 crores as against a loss of INR 37 crores in the corresponding quarter of last year. Then overall India business. The company has an aggregate long-term debt of INR 846 crores. The company does not have any short-term -- or working capital debt. Financial statements with the detailed notes are available as part of the stock exchange filing and also in the company's website, www.cgglobal.com. Between myself and my colleagues, we'll be happy to answer any questions.

[Operator Instructions] The first question is from the line of Nitin Arora from Axis Mutual Fund.

My first question is that, especially to the Industrial and your core segment business, can you help us understand how the end markets are behaving in the Industrial part, where you're getting this growth? That's the broad first question. And on your segmentation of Power System, historically, we have tracked this company more of EPC work, based on historical promos that you used to do here. If you can throw some light how we are planning to grow this segment. Because earlier [ year ], this is a segment which doesn't make money because of the nature of work. And though in last 2 quarters, the margins have been healthy. So are there some write-backs which you are doing here? That's my first question. Then I have 2 more questions. I'll take it after that.

Ramesh, you can answer the first question.

Yes. See, the Industrial division, basically, there are 3 major products where HT Motors, ELT Motors and FHE Motors. So whatever the results declared by EMA up to first quarter 1 is available. Quarter 2 results are not being declared by EMA so far. The growth has been -- in LT Motors, it is 242%, and HT motors, it's about 45%, and the FHE Motors are 110%. And if you see both in quarter 1 and quarter 2, quarter 2, of course, results have not come. The growth has been in 3-digit, and we are growing a little more than the market, what has been declared. So far, it has been in 3-digit growth for all the products in the Industrial division. Yes.

[indiscernible], you can answer.

So on the Power business, your question as to -- a mix of EPC and how you propose to grow margins, et cetera, I think it will take some time for us to decide on the strategy. Now these both transformer and switch gears, these are actually -- we have to make up for -- against orders here to produce. We have just -- the time is too short for us. We are assessing the performance of the -- initially, our task will be to just improve the capacity utilization. And so the existing customers -- and then as we move, we will finalize our strategy. It is -- it will take some time for us to contribute.

But has there been some write-backs done in the first 2 quarters in the Power System?

No.

At the operational level?

No write-back, sir. No write-back. It's a purely operational performance, and it's a product-driven business normally.

All right. Got it. And sir, just on -- the industrial part of my question was which end segments where you're getting these orders from? It's from the railways, some orders are coming. These kind of an edge segments, if you can talk more about where you're seeing the recovery, how are you seeing the visibility. That was more from a -- I was asking.

Basically, see, there are 3 segments which are doing well. One is the infrastructure, oil and gas and the pharma. These 3 are growing faster than any other segment. The major contribution for the growth is also from these --- these are the segments which are contributing for the quarter. Yes.

Get it. My second question is on the market share. So historically, we used to track this company, the market share was very high in motors. The dealers and all, they used to be very -- it's a brand which is very strong for you to get sell very fast. And then we saw -- whatever happened in the past, the market share came down against a few companies like ABB, Siemens. How has been your experience clawing back? What kind of a scenario you have seen in your market share? Have there been gains? Or it will still take more time? If you can throw some light on the market share, and then I have one more question after that.

So do you want to take...

So actually, I think we have to give some more time for -- I think we have started ramping our production. You should see the -- then also because of the COVID, et cetera, everybody had [ on issues ]. Only by end of the year, we believe that we will be able to gain market share. Certainly, we are ramping up, and we have production. So I think you have to wait for some more time. Only by the end of the year, probably you'll get some idea.

Okay. All right. My last question is, we keep seeing ads and things about the launching fans. I think we have already launched pumps. And we also talk about developing the motors from the electronic -- electric vehicles. Just 2 parts here. One, on the development of a motor for an electric vehicle, if you can throw some light, where we have reached in terms of development? Because India has almost taken correct electric motor vehicle were already in-house by the OEMs. So why would an OEM would buy your motor being the other guy? If you can throw some light on that product line. And second, on the pumps and on your consumer base facing business, how we want to grow the dealers? How much the existing dealer channel will replicate or not on these line? If you can throw some light.

You can talk about.

Yes. So I think, Nitin, broadly to your question, on the electric vehicle side, we're just starting out, right? And the -- but we see a significant opportunity because multiple trends begin happening, right? Kind of often, you have a first phase where all of the EV manufacturers want to make everything in-house. And then you usually have a second phase where more and more of it gets outsourced. The -- if you look at this whole kind of motor plus controller solution, I don't think it has evolved at all in the Indian market because the solutions that are going to evolve in the Indian market are not necessarily going to be the solutions that have evolved in markets outside of India. When you begin to look at overall, most places outside of India don't have anything in the sub-50 kilowatt range, right? And a large part of the market in India is actually going to start picking up in 2-wheelers, 3-wheelers and products that are definitely kind of much smaller than that in terms of power. So I would actually argue that though initially, some people are going to manufacture them in-house, this is going to become an outsourced space in India as well if we begin to take a 5- to 10-year horizon. And honestly, we think that kind of -- we -- in all that we are planning from a growth perspective, we are taking that 5- to 10-year horizon at least. The second is that, I don't think anybody has done any innovative work as to how these solutions in India will be different from what's evolved globally. And it's going to require people. So it's one thing to do a solution for yourself, saying how will I put in kind of a solution that I'm going to bring in perhaps from outside and put it into a vehicle here? But it's something that actually kind of -- it makes sense to develop this in India for Indian markets. So we're taking a long view as far as EV is concerned, and we definitely believe that there's a lot of legs in it. So our first stage is just to kind of to start working on technology that will help us get to kind of motors and controllers. But it's not going to be kind of a short-term effort as far as we are concerned. So that's our belief, which is that this market is going to have a lot of opportunity. The second thing which I would think will also have opportunity is that more and more of this, starting with components, starting with just stamping, for example, right? Just stamping of the motor core itself, it's something that gets outsourced by most players, including Tesla. So you can see backward opportunities that basically kind of offer themselves up for global markets. And that's another area we want to look at as well, right? Saying, how can we manufacture out of India for some of those global markets in the whole area of electric? And so that's the second opportunity that we want to look at as well. So we've started exploring this, but it's going to be a while before that actually turns into revenue and significant revenues as far as CG is concerned.

Your other question about consumer product. Just to tell you, in 2015, we have vacated this market. And then we have reentered these consumer products in 2019. Unfortunately, after that, that is because of the COVID. We could not ramp up. But as -- with respect to your question, this is -- it is existing channel partners who are well versed with CG. And we're already dealing with our motors and other products, so it was very easy for us to get into -- get back into the market. So that is why we entered into this market. So we are hopeful that we will be able to ramp up like what it was.

[Operator Instructions] The next question is from the line of Abhishek Poddar from HDFC.

Congratulations on great set of numbers. First question regarding the margins that you have showed. And there's a commentary in the press release, which says that the margins were impacted by the higher metal prices. So we don't have a good track record of the previous margin. So where do we see the margins settling now if this quarter was impacted due to higher prices?

So I think, margins, a combination of 2 factors. One is the selling price, other is the cost -- raw material cost. As you see, these metal prices have been subject to great volatility. Nobody has any clue of how the prices are going to behave. This is one. Second is with respect to our own margins for this quarter and last quarter, there were a lot of unexecuted orders contracted at various prices. In this industry, there is no price variation plus, whether we accept an order, do service. So therefore, it will be very difficult to answer this, to what level margins would settle down, because unless the new normal becomes normal, it's going to be tough. This is my duty. Ramesh?

Yes. That's true.

So we should see tailwinds for margins from here? I think directionally, that is what the press release indicates.

Come again?

My sense is because you mentioned that metal prices are very high, and that is impacting the margins, so that clearly indicates that for margins, we should see tailwinds as the metal prices moderates?

There could be because every cost increase is not being passed on, cannot be passed on. What the market bet, we'll pass it on. We have to -- I believe we have to just wait and see how things settle down.

Understood. Sir, may I ask one more question.

Yes, please?

Okay. Just on the international subsidiaries, we saw a revenue of about INR 100 crores and EBITDA of 13. What percentage utilization these are operating? And where do we see this potential to be?

So the -- there are 2 operating subsidiary mainly. Over these subsidiaries, there are 2 subsidiaries. One is the [ QA ], which is based in U.S. I think that 40%, that is the level at which it will operate unless there are some specific strategies for scaling up, et cetera. The Drives business, which also -- whatever is the turnover reported, that is what probably going forward for the current year. I think we expect to perform at the same level. Going forward, I think we have to spend some time and then see how -- what is possible.

Okay. Sorry. Just to be clear, there is a significant scope of improvement here? Or we probably have [ used ] the number which are expecting now?

So right now, this is the -- I would think that for the year, I think I'm not expecting anything because -- and were -- there are also -- there are issues. Therefore, I would think that whatever we have declared, if we are able to maintain for the next -- for the current year, that will be fine.

The next question is from the line of Charanjit Singh from DSP Mutual Fund.

Sir, my question, sir, one, in terms of motors, which is a critical part of our industrial business. How much market share loss we would have seen from the last couple of years to right now? Secondly, on the railway side, we were scaling up very well in power electronics front. And what is the prospects you are seeing right now there? And have you started building in the railways orders? And lastly, on switchgears and transformers business which would be coming from mainly power grid or some other government-related entries, have we started bidding for orders? Or are there any still major bottleneck or approval issues pending because of which we would not be able to bid for these other sites now? Yes. These are the questions from my side.

So with respect to market share, and on average, industrial motors, you can say, around 68%, what we have lost in the last 2 year, whatever the published data available as on today by EMA in the first quarter, we have gained by about 4% so far. So Ranjan, could you answer the railway part and then followed by Mukul can answer the other cost relating to your business.

Yes. On the railway business, we have been executing the orders of backlog from power electronics as well as the industrial -- for the power traction machines and signaling businesses. And there have been a growth in the sales across all the segments that we operate in the railway domain as compared to last year. The significant growth has happened in the -- this segment as well, both in terms of order intake as well as in sales. We have been participating in tenders and taking order as well.

As regards to power business with utilities and the public utilities from Central [ real estate ], we are qualified in most of the places. 1 or 2 cases where something to do with the past year financials are there. That's the only place we are working on. But otherwise, most of the places, we are now qualified to participate and win the tenders.

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

Congratulations on a swift turnaround to the entire team. So just one question from my side. The changing technology trends that we are seeing on the motor side, especially on reducing the power consumption and moving into IE3, IE4 category, if you could give us a view of how are we placed on the technology curve.

See we have always been in the forefront in putting the technology in place. If you remember, in 2018, IE2 was made compulsory in India. We are the first people to get registered and have the entire range of IE2 with the BE. And we -- and similarly, we have developed IE3. We have complete range of IE3. And IE4 also, we have developed the complete range, except for FLP, which we are on -- or testing. It is going on for [indiscernible] motors. Otherwise, up to IE4, we are ready to solve the market. And we have also done a little bit of work on [indiscernible] ranges as far as IE5 is concerned. So that is the future, which we will be working. And then we will bring that also into our products portfolio.

The next question is from the line of [ Ankur Sharma ] from HDFC Standard Life Insurance.

Just one question on the Power Systems business. Now if I remember right, the [indiscernible] CV car also was very strong on the SEB side in terms of supply transformer switch gear, et cetera. Obviously, given the fact that the higher rate in [ 7 65 ] is seen overcapacity. So how kind of demand shaping up in these lower voltage levels on the transformer switch gear side, also on the SEB as well?

Mukul?

Sorry. Can you repeat the first part? What is the SUV was? I couldn't...

SEB. I mean the state exit [ border ], the state, right?

Okay. CV power plant, the transmission side of the power is seeing an uptrend, definitely starting with the transformers. Transformers part, we are almost booked for a good period of time. So that is a good traction. On the HV side, I mean what is going from -- to 145 to 400 kV. The AIS side is not showing the same traction as the transformers, but it is improving slowly, whereas the GIS part of the high voltage is giving a good traction. There are a lot of projects coming across the country where a lot of GI substations are getting installed. So in a way, I will say the transmission part is up and running as -- we are seeing that the demand of power in the country is growing day by day. The distribution side also is picking up a great traction. The only thing is, on the AIS side of HV, it is a little slow as compared to GIS.

Okay. And just to clarify, one of the statements was that we do not have a price variation clause in these orders. I mean I always thought that EVA have these indices, right, based on which you would get a price variation based on copper, et cetera, gold, copper, right?

Correct, correct. The price variation clause is there in the large orders of the transformers, definitely. But in some distribution, switch gears, normally, these are short-term orders of 3 or 4 month. That those are -- those goes with the fixed contract. But as Mr. N. S. mentioned, that even the 4-month period in commodities have played havoc. So that is what I think he was indicating.

Fair. And just one more, if I may. On the industrial side, obviously, margins at about 12.5%, 13% of telecom entities, given where RM prices are. But just trying to understand a little bit more, because typically, XT motors are the ones where you make higher margins, more customized motors, right, where demand typically comes from cement, oil and gas, some of these industries. So are you also seeing demand coming back for these larger-sized HT motors which may possibly drive margins even higher from now?

The HT motor demand is slightly better this year. That is because of water and wastewater is doing extremely well and most of the investment is happening there. So -- but the demand has been always good. But the margin side, it is very difficult to predict because of the raw material -- the variations are so high, it is unpredictable which is happening there.

The next question is from the line of Renu Baid from IIFL.

And congratulations for the strong results. Also, thank you for initiating our investor interaction from this quarter. My first question is to understand on the technology gap side. While in motors, you did highlight that we have been consistently investing, how does the portfolio gaps look on the power systems side, specifically GIS, which you're seeing a structural shift from AIS to GIS and more so in the medium and low voltage segment? So if you can highlight how are we placed in terms of technology capabilities? And what are the steps that we are initiating to bridge the gap, especially when it comes to 220 or 400 kv? Are we also looking at possible inorganic growth options in this segment?

Mukul?

Yes, sir. On the technology side, the LV and the low voltage and the medium voltage part, we are fairly self-sufficient. And we are also developing products which are required by the customer. The products like RMU, Ringman unit or the medium voltage GIS, we are actually -- we were the forefront of technology. We lost some time in last year, and now we are catching up. And hopefully, in other 2 quarters, we should be up and running at par with most of the competition in the country. On the aspect of the HEV GIS, we have already developed and started quoting for 220 KV GIS. 400 kv GIS, we are looking at options of tying up for the short term or maybe overall development, but that will take around 18 months to 24 months for complete development. So that, we have started exploring. And if an opportunity presents itself, we will definitely participate for 400 kv GIS also. 765 kv is not that becoming a big market. So presently, that, we are not considering. On the transformer side, we are also working on transformers regards for railway applications, traction transformers, the scott connect transformers and also the green transformers with [indiscernible]. So on all fronts, in all parts of the Power division, including medium motor switchgear, high-voltage switchgear, transformers or power transformers, our technology projects are up and running. And hopefully, whatever gap was there because the last 2, 3 years, that we should be able to cover in the next 2 quarters.

Okay. Secondly, when we look at CG, it was always considered as a cost competitive player in the industry and came to power and industrial products. At the same time, PI has a very strong credibility to drive operational improvement. So in this perspective, what are the low hanging fruits with the management foresees can be derived in terms of bringing our cost savings and improving working capital from the current levels?

So firstly, the -- our first task is to actually to improve the capacity utilization, so that the costs would be absorbed, fixed costs would be absorbed on a larger scale. So only after that, maybe next year probably, we will identify. Some costs have already been identified. And any specific cost saving, I'm not able to share at this point of time. Regarding your other question regarding -- what did you say about TI?

Other than, TI has a pretty strong credibility in terms of driving operational improvement and productivity enhancement. So both on working capital as well as operational front, we were seeking if there were any identified areas which you can highlight, at the facility or a factory level or product improvement or in terms of working capital, procurement terms, et cetera?

Yes. So all these areas. In procurement, actually, there is a very big initiative which we are working. I can't share any further details. We are working with a leading consulting firm on how to optimize and bring down cost on procurement. Then we have also launched TGM and lean initiative, which has been personally driven by [indiscernible]. So these things when -- it's currently on the way. When completed, I think this will have its own impact on the productivity as well as on the costs.

Sure. And just a question on the B2C strategy. While, initially, the management did mention that they are targeting to use the existing distribution network for motors and probably for pumps. But for new categories where the company plans to enter, fans or other proper consumer-oriented product segments, what is the strategy to build capability, especially on the distribution at each side? And is there any investment that we have planned over the next 2 to 4 years to ramp up capabilities, both on the new initiatives of B2C as well as the current portfolio that we have on the Power Systems as well as the Industrial Systems side of the business?

So currently, as you rightly said, we are thinking of adding some more into the consumer business. But that -- it will not be very difficult because some of these channel partners who have been dealing our products in 2015, they are still in touch with us. Maybe some of them may not be handling our own products and some of them are already handling our own product. So it is not that difficult for us to enter. So that is the reason we have taken this opportunity to reenter all those products one after the another. So the first one, we did, and the second one is in line. Maybe going forward in a couple of years, we will keep adding some more products depending on the market and the way we establish ourselves in the market.

[Operator Instructions] The next question is from the line of [ Kiti Chen ] from Canada HSBC.

And congratulations for excellent performance. Sir, my first question is what are the steps incrementally we will be taking to grow ahead of the market in the addressable opportunities we are there? And second thing, with regard to new SBUs, which is like the electric mobility and -- towards the consumer product, what are the things which you will do differently compared to the existing players to be relevant in those market, sir? These are the 2 questions from my side.

So I think -- [ Kiti ], thanks for the question. See, I think -- and this will address part of what Renu was asking as well, right? You should think of it as kind of what NS and the team have been driving here. It's a combination of 3 things, right? Kind of -- one is fixing the legacy issues. The second is enhancing the operational performance. And the third is driving growth. Okay? So in the initial phase, obviously, I would say kind of close to almost 70% of the effort has been on fixing the legacy issues. Then 25% to almost 30% on kind of -- on enhancing the operational performance and very little focus has been there on growth. Now as a team, as you've seen, kind of a lot of the legacy issues are beginning to get fixed. So we will see that shift between these 3 horizons move significantly over time, right? So next year, obviously, there has been less work, I would say, down to less than 30% in terms of the issues that still have to be fixed. And then we'll probably move to kind of, I would say, maybe like 40% on enhancing the operational performance and then the growth engines, thinking about how the growth engines will pick up, will be the other 30%. And then as we move into the year after that, then that number will move more significantly towards enhancing and growth, right, enhancing operational performance and growth. So this is the way you have to think of the company, right, which is going to be moving from each one of these phases to the next over the next few years in time. Like we've articulated, there are different angles to the growth horizons. One is clearly kind of the consumer opportunity, which is, we think, as big as the current business opportunity in itself. EV is going to be clearly a lot slower burn, right? We are not ruling out inorganic after the balance sheet gets stronger, which we think will -- like we've said, that I mean until we become net debt free, we won't kind of think about any of the other stuff. And then the 2 other growth elements that we have articulated have been kind of -- one has been service and technology related with -- and then one has been exports, right? So either the businesses are beginning to kind of think of some of these growth elements. But the growth element will come in as their core focus. I'd say it will be about 30% of the focus next year. And the year after that is when we will really kick into those growth elements, because next year, we also need to focus on some of the operational enhancement activities as well. Like NS mentioned, we have basically initiated some of the activities on TQM and on lean and on procurement. So all of those are also going to be things that begin to drive results, we believe, next year. So there's a phase that will be more focused on improving the operating performance that will then result hopefully in kind of better -- in better PBT numbers and free cash flow numbers. And then there's a phase that begins to think of how we start pushing revenue growth. So those 2 will always act in concurrence, but with different weightages based on the needs of the business, which will -- like we said, will be a higher weightage in operational enhancements next year and then that will move more towards growth than on the year after that. NS?

That's fine.

The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.

I will answer just one question. When we had invested into CG Power about a year back where initial estimates were INR 5,000 crores of revenue 3 years out with the 10% PBT margin. And the one -- first quarter number, annualized basis, you're already there, with very little efforts gone into the benefits. So first, many congratulations for that. And is there a marked difference from that point the way you had estimated the business? How are you looking at it? Just your thoughts there.

So Abhishek, the earliest point I'll point out is you shouldn't say very little effort because this team has been putting in a lot of efforts to kind of make that happen. So I'd say that kind of it's the amount of effort that's kind of gone in that has helped achieve these numbers kind of within the short period of time. But yes, when we made the acquisition, our thesis was that we should be able to get to a INR 5,000 crore top line and INR 500 crore bottom line within 4 years. And yes, you are correct in your maths, which is I think we've been -- we've had a -- both kind of the team has put in immense efforts. Both -- like I said, right, I mean, if you think of the amount of effort that's gone into fixing the legacy issues, in terms of enhancing the operating performance. I would say it's kind of nothing short of stupendous what the team has put in to make it happen and to get to where it is today. So obviously, your natural question is kind of where do these numbers go from here. And that's where kind of I elaborated on this mix, right, which is we do think there's still kind of headroom. But we're not going to give any specific guidance in terms of what we're going to be at. But we definitely think that there's headroom in terms of operations improvement. And there's definitely a lot of legs for growth along the dimensions that we just -- I just spoke about earlier. So definitely, obviously, these are numbers that are going to revise. But I think that if we come to something that is more deterministic at some point in time, we can discuss it. But we are moving -- given that we've hit this initial, now we're moving more of our focus to what we can do to enhance operating performance more and drive growth more. Like I said, these 3 things you have to think of concurrently. The weightage is what are beginning to shift significantly over time, Abhishek.

The next question is from the line of Susmit Patodia from Motilal Oswal Asset Management.

Congratulations. This is Great performance. Vellayan, just one question is when you -- the company and where you are today. How has your outlook changed? And what are the risks that you are still mindful of that we should also be aware? I remember you had said that if we get to 10% margins kind of figures, you'd be super happy, but you must be jumping with joy since you achieved that. So is the revenue acceleration more the focus now? Or is balance sheet clean up or -- and also, on the risk part?

Yes. Susmit, thanks. So first off, like you have said, I think that like now, given a lot of the activity that's happened, balance sheet cleanup will take its natural path, but it will kind of likely get done latest by next year, right? It kind of -- it looks like kind of that will happen. So clearly, we're beginning -- when you say risks, right, I mean, clearly, there was an earlier question on technology. One of the things that we'll have to start looking at over time is how we start investing more in terms of R&D. And that is something that we are beginning to evaluate and see what we need to do to kind of invest more on that area. And then second, in terms of revenue aspirations, both NS and team are kind of beginning to kind of make that shift as well, right? Some of the internal focus is now shifting towards where -- they're looking at the existing businesses and seeing what opportunities exist to enhance those. And I think that, that is -- like I said, once that comes more front and center, I do think that the kinds of -- the axis for growth in this business are massive, right? I would say kind of the potential avenues for growth in this business are massive. So as NS and team kind of drive some of those initiatives over the next 6 to 9 months, I definitely think that we will get more visibility as to where we will focus some of the growth activity on. But there's no shortage of opportunities is what my assessment is at this point in time.

And Vellayan, any risks from litigation that are still lurking? Or do you think everything is under control?

So I think there are tax litigations which have to be resolved. We are working on it, but they are there. So just -- to that extent, you can say there is a risk. Otherwise, I don't see a big. Other than tax, there are not big litigations which are going on right now.

The next question is from the line of Kunal Sheth from B&K Securities. [Operator Instructions]

Sir, I just wanted to know about the industrial part of the business. How do we see the opportunity in the export market for our motors? I mean how big in that opportunity can be in? How are we exploring that part of the business? And related question there is, what is the long-term sustainable margin we can think about in this business?

With respect to your first question, there's no doubt that the opportunities are very big in export market. But unfortunately, we didn't push it very hard because the realizations are very low with respect to Indian market. That is basically because of the Chinese competition. Maybe going forward, the margins -- the realizations are better. Definitely, we will be pushing hard on there as far as export business is concerned.

Sure. And sir, and so basically, any targets we are drawing in terms of what are the kind of export numbers that we are looking at? Any plans that we have drawn there? Or are we just in the exploratory stage?

No. No. Right now, the indigenous demand is so good. I think we are -- we want to sell the existing customers as we plan. Our strategies for expansion, et cetera, this can be considered. All right.

Sure. And sir, what are the sustainable margins we can think about in this business over the medium term?

So I think we discussed this earlier, not just -- there are so many crosscurrents today. So we will not be able to just predict it on anything. We need to wait for a while, things to settle down, then we have to get some margins.

The next question is from the line of Jonas Bhutta from Phillip Capital.

And congratulations on a great set of numbers. Just 1 or maybe 2 interrelated questions on the industrial piece. Firstly, sir, this quarter, we've already touched 85% utilization levels in the motor business. And given that you're looking to regain the lost market share of the additional 2, 3 percentage points, you should sort of be touching peak utilization. So what are the capacity expansion plans that you have here in the immediate future, because otherwise, growth could become a challenge going forward in the next financial year? And interrelatedly, many of our competitors have started to add value-add products over and above the motor, be it the drive, PLCs, SCADA, et cetera. While we -- CG historically has the Imatron technology on drives and maybe QEI technology on SCADA, but we've not really seen a scale up. Do you believe that these could be growth levers for the future that can actually play out as and when you sort of go on that growth path? Or do you think that these will still remain the frames business that they are currently?

So in the given bottleneck, the -- what NS said, that we are utilizing it about 85%. It is in -- based on the given bottleneck operations. We are definitely investing and looking at the each and every bottleneck operations to enhance our capacity. And I'm sure, from the public domain, you must have noticed that one of the small facility which we have started for expanding our capacity, that itself will give us a bigger room for us to grow. And going forward also, we will see some of those equities also can be -- which are non-quality -- I mean, rather critical to quality activities also can be outsourced. So that way, we are planning to enhance our growth. And as you rightly also said that the Imatron is a very, very strong brand. And we are -- only because of our own internal issue, we did not really push it into the Indian market. And now we have HMIs and SCADA drives, everything is available in our range. Going forward, we will be definitely pushing that along with our existing products.

The next question is from the line of Krishna Kumar from Lion Hill Capital Private Limited.

Congratulations to NS and the team for a great turnaround. Sir, you just talking about the Power division and the utilization that we're seeing [ at about ] half, so given the current improvement in the demand scenario, any thoughts when you probably would be able to get to a more reasonably high utilization levels there?

Mukul?

Yes. See, on the Power side, the contracts are really -- I mean, long-term contracts, 6 months or so. So in the previous 2 quarters, we could execute the orders we showed earlier. And then we had a healthy order booking in the first 2 quarters and -- which will be coming for execution in Q3, Q4. So hopefully, in the next 2 quarters, our capacity utilization will exceed 75%.

The next question is from the line of Ravi Swaminathan from Spark Capital.

I have one question, sir. So can you give me the top sectors to which are -- the Industrial segment caters to, like cement, steel? If you can talk about the top 5 to 6 sectors. And how is the demand scenario? How is traction from each of these sectors that you see today?

So earlier, I think I have already answered this question. All the sectors -- almost all the sectors, we have our products. And I'm sure you must be aware that CG is the largest product basket as far as industrial product is concerned. On the top sectors, as I said, infra is doing well, Pharma is doing well and the oil and gas is doing well. Cement and steel, obviously, when infra increases, the cement and steel also goes up. So all these are doing well. And we have been catering to these other major sectors. Apart from the water and wastewater, we are already there. And the other, a lot of OEMs also, the fan manufacturers, our gear box manufacturers. So all these are big sectors where we supply.

The next question is from the line of Nitin Arora from Axis Mutual Fund.

Just 2 questions here. Just a follow-up. Sorry, I was not able to talk when you were replying on the electric motor side. I said that -- it's not about the OEMs have in-house the motors. What I was saying that OEMs already have a very strong vendor base of motors in India. Whosoever supplying the electric 2-wheelers, whether it's Serelectric, which is already enclosed 2 vendors in India. This all was operating from China Motors, whether it's role, whether it's [indiscernible], everyone having a large market share today, and there have been a significant booking, have already enclosed the vendors and taking motors from them. So the question was why would a OEM will change the supply chain and come to you? And what is the development stage of that motor? That was more of a question. And -- if you can answer that. And the second part of the question, the gross margins which have declined very significantly, and you stated reason for it. Going forward, because this time, you had a very high revenue side which saves the profitability. How one should look these gross margins? Because these are almost like 27%. So there's going to be this kind of gross margin for the next 2 quarters and then start easing down as costs being fully booked? Or do you think further cost increase is still coming? And will it all depends on the revenue of that need? So if you can help us on these 2 questions.

Nitin, first on EV, right? So see, the EV -- what you have to recognize is that the EV game in India is still kind of at, what I would call, kind of the nursery or the kindergarten level, right? And the players you're talking about -- kind of whether it's revolt or [ ramp ] or kind of these guys, it's unclear kind of whether these guys actually will be the long-term winners in this game, right? Usually, what you see in most of these kind of new games is that 20 players will emerge. And it'll either be a few of those players have become kind of the winners or some totally new guys who are not first-generation players at all, right? So I think it's too premature to actually kind of say like, hey, listen, the existing guys already have their own vendors, right? The second is, as you probably know, quite a few of these vendors are Chinese, right? And we don't think that this Chinese -- especially given kind of the government kind of desire to make in India, we don't think that kind of -- our dependence on a fully Chinese ecosystem is going to play out, right? We definitely think that it needs to be supplemented by an Indian ecosystem. It's the same problem we're seeing in pretty much any industry that is now dependent on China in any way. That nobody can get any supply, right? And it's in India's best interest to basically develop our own technology for -- our own capabilities for something like this. So the real question to ask is, are there any large Indian players, right, who are basically now going to become the dominant suppliers for motor and controller, right? And our belief is that the answer is no, right? To your second question, do we -- what is the status of our motor technology? We don't have a motor technology right now. We don't have a motor technology that we can basically supply into the EV market in a lot of these kind of power segments that we're talking about, which is why we're basically saying that it is more of a medium-term focus. We are developing our approach to it. And we also don't think that the winners are going to get defined in the next 2 years, right? Because basically, it is a space that is going to evolve. It's a space that's going to settle, at least for the next 2 to 3 years. That's our assessment at least. We might be wrong, right? So that was in the first question. The second...

How do you look at gross margins?

No. I think we are not going to comment on the gross margin. I think it's more about [indiscernible] statement. So should we say anything about plans.

I think it will take some time. We are -- we express what are the challenges in the area of margin. So I think we should wait for some more time, things to stabilize.

The next question is from the line of [ Niket Shah ] from Motilal Oswal Mutual Fund.

And congrats on a good set of numbers. Most of the questions have been answered. Just one question which I had is on the debt side. If you can just help us understand. You had certain noncore assets which you're liquidating. And obviously, there is a significant amount of free cash flow generation which will come up over the next 1 or 2 years. So how should one really think about debt from current levels moving down to a debt free kind of a status? Should be more like 1, 1.5 year or it can be slightly more longer?

So I think the time frame we said, about 1.5 to 2 years, I think, looks reasonable. So we will -- definitely, as we have more cash -- free cash flow and selling of proceeds from noncore asset side, either we will deploy it for very good opportunities available at the same time as Chairman initially said, that unless and until we make the company debt-free, we will not look at anything, big acquisitions. So the time frame you have even mentioned is reasonable to assume.

And how much your more noncore -- so one is the consumer property that we liquidated. The one is the CG cost, which [indiscernible], which you've also highlighted in the past. Is there anything else apart from this or these are the only 2 major ones as such?

So CG costs, we are not considering as noncore. So other than that, I'm not able to see anything bigger. Now there may be small pieces here and there. The large amounts of assets in -- there is nothing that I could think of.

[indiscernible] is the large chunk.

[indiscernible] is the large chunk. Got it. And maybe one more question is, would it be possible for you to give us a rough quantification of how much was the impact of raw material costs in this quarter? Very rough ballpark number, without giving accurate number.

Ramesh?

Yes. I'll just take it. He is asking for the quarter. This quarter is -- last quarter 2 was almost about 8% to 9% was the impact. Otherwise, if you see for last 1 year, the impact is almost about 40% plus.

No. I was just trying to understand percentage, like the impact on gross margin, and hence, on EBITDA margin. It will be about 2%, 3%, 4%, 5%?

So I think we need to work it out, then -- we can't just -- we don't want to give you some number, but you can -- maybe later on, we'll touch.

It's approximately around 2% to 3%, sir.

The next question is from the line of [ Rajesh from Gene Venture ].

Congrats on an amazing turnaround by Mr. Vellayan and his team, NS and all. That was pretty swift. So on market cap side, we all -- we belong to market cap side of fraternity, and we all know that has been a big surprise. But from the acquisition when you acquired, Mr. Vellayan, is there -- are there any more negative surprises or positive surprises that you may want to sort of share from a business operational viewpoint?

Rajesh, thanks for the question. I think, broadly, we've talked about it a bit before, I mean, in some of the previous answers we've given. Like NS mentioned, we don't see anything significant from the negative side anymore. There's only this one kind of ongoing issue on tax, which can be kind of a long run out affair. So we don't kind of see anything kind of significant beyond that on the negative side. On the positive side, like we said, I think kind of -- the timing has been good from the sense that we've had the market pickup from kind of the -- from the bottom of COVID to where it is today. And definitely, the outlook for all the 3 major businesses, whether it's railways, whether it's the motors business or whether it's a power business, are all very strong, given that all are 3 -- all 3 of that to kind of infrastructure growth in the country. And clearly, what we see is an environment where infrastructure growth in the country is going to pick up. And it's going to be supported by these 3 core businesses that we definitely see have a lot of legs. And on top of that, if you compound kind of the opportunities from some of these newer areas that we've been talking about, whether it's consumer, whether it's exports, I think that the platform that CG offers for growth is actually fantastic. So I would say that there's a lot more that we see on the positive side versus what we see kind of on the negative side at this stage in time.

That's very useful, Mr. Vellayan. And one related point in terms of, you have the expand of and you benchmark and company...

Apologies, sir, but we cannot hear you clearly.

Hello. Is it better?

Yes.

Yes. Mr. Vellayan, just to -- Danaher has -- you have been a big fan of Danaher, and they just keep doing great. In fact, their results just hit my inbox. And on a $7 billion revenue, they continue to grow 20% and 30% in profit. So you benchmarked that [indiscernible]. Now CGP is also in your fold. So should we look more CGP as Danaher following it, both the companies is a combined following as a role model? How should we think about it?

See, you could argue that CG was the first -- I mean, like you know, Danaher's growth has predominantly been on the back of acquisitions. And you could look at CG as that first acquisition. But your question as to whether we would use CG as a platform or TI as a platform, I would say, given the structure in India, right, it's not easy to take a public company and kind of suddenly make it private in India, right? So given that both are public companies now, I think both will be effective platforms because -- especially because they have totally different businesses, right? So there are some businesses that would naturally fall into TI's platform from a Danaher perspective. There are some businesses that will more naturally fall into CG's platforms. So like I said, when CG gets to being debt-free, then CG can also and will also definitely be a platform onto itself to drive that growth, right? And so if you see consumer, it's a much more natural fit with CG. So we won't put it in TI, right? If we were going to do EV motors and controllers, much more natural fit with CG. So as we look at new areas, we just look at kind of where it's a more natural fit and associated with that entity because that's a logical way to go. And from a group's perspective, we've always looked at -- I mean, we will always keep kind of shareholder interest in mind, recognizing that the 2 entities can have slightly different shareholders as well.

The next question is from the line of Sushil from Samat Investments.

Most of my questions are answered. Just one, I think that's it.

The next question is from the line of Abhishek Poddar from HDFC.

Sir, noncompete with [indiscernible] consumer has ended. So could you share some plans on what we have on the consumer side of the business, sir, in terms of product launches or targets that we have in mind?

So we already launched the pumps. And then we are in the line of launching the complete fans business, that is the ceiling fan and the industrial -- entire range of ceiling fans. As of now, this is what it is in the offerings. And maybe going forward, we'll add some more products depending on the -- what market demands.

Right. And any market share targets or anything that we have in mind?

See, when we allocated, we had a very good market share. And we are always targeting to reach that level what we allocated.

Understood. And on the consumer land sale, how will the proceeds be utilized?

Sorry? Come again.

Consumer land.

Consumer land sale, how the proceeds will be utilized? Does it go to lenders or some liabilities associated which will be paid off first?

That thing will go to lenders. This money will come to the company. We have to see -- maybe some portion definitely will be used for debt repayment.

Okay. And are there liabilities which doesn't go to debt repayment or some associated liabilities towards this land?

No. Nothing is there as such.

The next question is from the line of Charanjit Singh from DSP Mutual Fund.

Sir, my question is firstly on the industrial side. This is the part of the business which is also driven through the channel. So if you can just highlight, has there been any major impact on the channel or channel partners would have left us? How we are trying to revise the entire channel for the industrial side? And on the core business or overall, in terms of the manpower attrition, if you can touch upon how has been the movement of employees? Have we seen any major attrition levels? Yes.

So the -- actually, we have never lost any of the channel partners. In fact, channel partners have helped us in the difficult time. So your question of gaining back is not there. They are already intact with us. None of them have not left us. Only some of the industrial customers who have told us that because of your problem, we are going to some competition and then most of them are coming back one after the another. So there is no issue. And obviously, we are not very high in attrition. And in fact, in the difficult times, people are stayed back with the organization and they have supported the organization. And only when the market opened up, maybe a slight increase in the attrition. But otherwise, it is not that to the extent of any difficulties for the organization.

The next question is from the line of Renu Baid from IIFL.

Sure. Sir, just 2 bookkeeping questions. First, on the Kanjur Marg land parcel, the first part was, it was sold off 5 years back. And the second parcel, if I recall it right, you are making of provisions on a quarterly basis for handover of the parcel to [indiscernible]. Sir, if you can help us clarify what is the net proceed which is expected from the remaining parcel on the Kanjur Marg assets? And on CG House sales also, of the INR 380 crores, knocking out the pending views on property, et cetera, what would be the net cash inflow expected from this asset figures?

[indiscernible]

So with respect to first question about the Kanjur Marg, in terms of total money which is expected, is INR 402 crores, which includes that deposit -- what has been made with the total money in the past. So the total money to be received by the company is around INR 402 crores.

Minus INR 11 crores.

Minus some INR 11 crore which advance is there in the company currently. So we get a net amount of around INR 391 crore. This is a number which will come to the company. And this money will be used and discussed in the past that maybe partially with would go to the debt repayment and maybe also for the purpose of the group. And in terms of that CG house which we are talking about, CG house is now owned by the company only. So I don't know whether you have really seen in the past, that debt settlement had been done towards the CG house. So we paid the lenders. Now the CG house belong to the company. In terms of the lease what you are talking about, INR 80 crores, that is as of now, so we are working on that lease renewal. And it may happen maybe in 3 months to 4 months time. So there is no as such any INR 80 crore will go from the company, sir.

Got it. And lastly, if I can just check, in the industrial system that we see in the last 3 or 4 quarters, especially in the last 3 quarters, the market share gain seem to be clearly evident. Is it also that we have not entirely passed on bulk of the price increase to the customers? Because most of the industrial motors are short cycle off the shelf products which are then the LT motor segment. And if I understand, most of your peers have taken pricing actions. So is it that, that we have opted for the strategy to force gain -- regain the loss to volumes and the cost of margins? And if that is the case, would you perceive a risk to retaining these market shares once pricing actions are fully taken into effect in a couple of quarters in the market?

No. We are doing it. We are not taking any one path. We are doing it very balanced way. We are also focusing on gaining our market share at the same time where we don't want to forgo our margins because of the price increase not passing on to the customer. But obviously, as you rightly said, there is a off the product. So there is a time lag in recovery that we may have to first pay the raw material and then maybe record maybe after 2 months' time from the market. So that is how it is going on. But definitely, not in one route. It is both balanced way we are doing it.

The next question is from the line of [ Lamba ], an individual investor.

Yes. Maybe to ask the question. I -- most of my questions are answered. I just wanted to thank the management, CI management. I'm holding the stock since -- I'm a retail investor, and I'm holding the stock since they acquired, and it has really help -- the price multiple. I just wanted to thank the management and hats off to the turnaround data.

Thank you.

Thank you.

The next question is from the line of [ Deepesh Agarwal ] from UTI Asset Management.

I have one bookkeeping question. What is the extent of the contingent liability still to be settled or accounted in the book, or everything has been taken?

So as of now, there are no contingent liability, except that tax dispute which we are talking about. So that may take it [ one ] time.

The next question is from the line of Jana Goran, an individual investor.

My question is, when can we expect the first margin dividend in CG Power?

So I think -- so that this company has a lot of legacy issues. And there are still -- there are some debit balance and profit and loss account. We have wait for the year to make a profit. So then I -- we cannot give any time frame, because dividend is actually a question which is normally decided by the Board, because Chairman is here. [indiscernible] the Board, as mentioned in the [ act ], Board will take a call. But the earliest -- when there is -- when we are capable of, I can say, going by the Murugappa Group policy, whenever it's possible to make a -- declare a dividend, the group -- the company will consider declaring a dividend. Is it all right, Chairman?

Yes.

The next question is from the line of Harsh Bhatia from Emkay Global.

Most of my questions have been answered. Just one quick question. What sort of equipment or components are we carrying on the inventory side? If I can see, it's around INR 500 crore, INR 600 crore in the balance sheet. So if you could throw some light on what sort of equipment are we carrying on the books.

No. It's not equipment at all. These are all raw material or finished goods. So we have an event period which is around 45 days with respect to our sales. So we do not have any equipment in inventory. It's all about the raw material and the finished goods.

Yes, yes. But there could be some equipment in terms of -- if you look at drivers, you might have some subcomponents. But the largest components are -- will be kind of steel, copper.

Raw material.

The next question is from the line of [ Arvind Joshi ] from Batalia Advisor.

Sir, I just had a couple of clarification. This debt of closer to INR 700 crores which was there mentioned as a net debt currently, does this include the sale proceeds from consumer or is it before the consumer sale? And my next question was, sir, what kind of tax shelters do you have after the entire proceedings are settled?

So this doesn't include that consumer proceed as of now.

Okay. And what kind of tax shelter would we be having as the things progress and you get visibility on it?

So I think it's very difficult to quantify or state anything about tax rate, but there are several issues can go this way.

But on a broad cut, I think we should have a significant cover, right?

No, I don't think so. I don't...

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Ms. Bhoomika Nair for closing comments.

Yes. On behalf of DAM Capital, I would like to really thank the management for giving us an opportunity to host the call and all the participants for being on the call and participating. Thank you so very much so far and wish you all the very best.

Thank you. Thank you.

Thank you.

Thank you.

Thank you.

Thank you.

On behalf of DAM Capital Advisors Limited, that will concludes this conference. Thank you for joining us, and you may now disconnect your lines.