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

Ladies and gentlemen, good day, and welcome to the Q3 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 Limited. Thank you, and over to you, ma'am.

Thanks, Sunitha. I'd like to welcome you to the CG Power and Industrial Solutions 3Q FY '22 Earnings Call. The management today is 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; and Mr. Ranjan Singh, Executive Vice President, Railways. I'll now hand over the call to Mr. Vellayan for his initial remarks, post which we'll open up the floor for Q&A. Over to you, sir.

Bhoomika, I'll just hand over to Mr. Srinivasan. Mr. Srinivasan will be driving the call. I'll be here to answer any questions from me, but Mr. Srinivasan will be driving the call.

Sure, sir.

Okay. So thank you, Vellayan. So good evening, ladies and gentlemen. Let me first extend a warm welcome to you all for this Q3 earnings call. I'm Natarajan Srinivasan, Managing Director of the company. I would like to introduce my colleagues who are with me on this call. Mr. Vellayan Subbiah, Chairman of the company, is on this call. Mr. Ramesh Kumar, President, Industrial Division, he's a CG veteran and has been with the company for 31 years and has held various senior positions in the company. He takes care of the [ motors and price ] business. Mukul Srivastava, the President, Power Systems. He's also a CG veteran, having spent about 31 years with the company. He is taking care of the transformer and switchgear businesses. Mr. Ranjan Singh is in charge of -- the Executive Vice President in charge of 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. So company performance, we have issued a press release on the Q3 performance. While we have given corresponding quarter of last year data, these are not comparable since the company at that time was under serious financial stress. We need to build our own performance data from this year onwards. Also, it would take a few more quarters to catch up with the peers as we fully normalize our operations, resolving several legacy issues. So now I come to the Q3 performance, stand-alone Q3 financial results. The company has shown all-round improvement in performance in Q3 and all the businesses have performed satisfactorily, improving sales and margins. Sales for the quarter was INR 1,446 crores. The profit before tax was at INR 161 crores, the highest recorded in the last 20 quarters. The company completed the long pending sale of land at Kanjur Marg during this quarter. And the entire sale proceeds, INR 402 crores, including refund of security deposit of INR 20 crores, have been received. The proceeds were utilized to prepay a long-term debt of INR 363 crores. Stand-alone performance. The aggregate sales for the quarter were higher at INR 1,446 crores, recording a growth of 106% year-on-year and 7% quarter-on-quarter. Profit before tax before exceptional items was at INR 161 crores, constituting 11.1% of sales as against INR 58 crores, constituting 8.3% of sales during previous year same period. On quarter-on-quarter, sales increased by 7% and PBT by 18%. Free cash flow generated for the -- during the quarter was about INR 158 crores. Better sales realization coupled with moderation input costs helped better margins. As for the exceptional income, mainly consists of the profit on sale of land of INR 124 crores and also a related provision made relating to the delay in the conclusion of the transaction, which has been reversed amounting to about INR 157 crores. And we also made some provisions for INR 39 crores, net actually, INR 242 crores is the exceptional income. Now I want to segment-wise performance. Industrial Systems. Aggregate sales for the quarter were higher at INR 1,017 crores, recording a growth of 102% year-on-year and 4% quarter-on-quarter. Profit before tax for the quarter was higher at INR 144 crores, with a growth of 91% year-on-year and 18% quarter-on-quarter. Unexecuted order book at the end of December 2021 stands at -- stood at INR 1,667 crores. I move on to Power Systems. Aggregate sales for the quarter were higher at INR 430 crores, recording a growth of 113% year-on-year and 16% quarter-on-quarter. PBT for the quarter was higher at INR 49 crores with a marginal growth year-on-year and 31% quarter-on-quarter. Unexecuted order book at the end of December 2021 was INR 1,543 crores. Consolidated Q3 performance. The consolidated results include the performance of the operating subsidiaries at USA, which is called QEI Incorporated, and Sweden, Germany and Netherlands, Drives and Automation business in Europe, and other nonoperating and holding subsidiaries. Sales for the quarter were at INR 1,551 crores as against INR 820 crores in Q3 of 2021. And profit before tax before exceptional items was at INR 174 crores against PBT of INR 64 crores in the corresponding quarter of last year. We had mentioned about the prepayment of long-term debt post this prepayment of long-term debt. The company stands -- the obligated long-term debt of the company stands at INR 527 crores. Recasting of accounts. The company has since completed the recasting of accounts for the 5-year period from 2014/'15 to 2018/'19. And then to give effect to the said recast of accounts, the accounts for the financial years 2019/'20 and 2020/'21. The recast accounts are also audited by an independent form of charter contents and the audited accounts were taken on record by honorable NCLT. The recast accounts are certified as true and fair and the auditors have expressed an unmodified opinion on these said accounts for all the years. The shareholders and investors may be aware that the auditors had earlier expressed a disclaimer on the accounts of the company. The recast of accounts for the year -- financial year 2021 has been circulated. The recast accounts for the financial year 2020 have been circulated to the shareholders to be considered at the AGM of the company convened to be held on 31/01/2022. So with this, I think the entire exercise relating to recast have been completed. Financial statements with detailed notes are available as part of the stock exchange filing and also on the company's website, www.cgglobal.com. Between myself and my colleagues, we'll be happy to answer the questions. Thank you.

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

First, I...

[Operator Instructions]

So sir, first question related to the order inflows, especially in the Power Systems segment. And last time also, you gave an outlook on the Industrial segment also how the end industries are doing. So Power System, the order inflow reaching to about INR 700 crores now. Can you throw some light how the -- where are these end segments, where the order inflow is coming from? And the outlook of your order inflows or, let's say, the end market outflow, which you've given in the last quarterly calls, if you can throw some light on that? That's my first question. I'll take up the second question after that.

Mukul, can you answer this question?

Yes, sir. See, we have been very active in the transmission and distribution sector, as you are aware. And all these segments have recorded a very healthy for sure. If I have to pick up in the order of their growth, I think the power transformer unit has been on the forefront. So many of these orders are going for supply to PGCIL, to other utilities, is pretty positive on the sector. These are all higher cable [ systems ] of 400 kV, 765 kV, and also a lot of focus and trust is on the railway supplies. So little bit action, traction at substation for those. This, again, followed by the medium voltage segment where the distribution networks in every state is undergoing a lot of demand. A lot of new substations are being established and the power to all that motor continues to have focus. And therefore, we are doing well in the motor segment. Our distribution transformers, also part of the medium voltage business, is also having a lot of good traction and received many new orders. So particularly, all segments from -- if you look at the segments in terms of real estate or infrastructure or solar, all segments are [ all a piece ].

And how will you conclude in the investment part? I mean last year you talked about like a sector like irrigation was doing for pharma was doing good. How does that changing in the end segment in the industry? And what's the outlook there?

So Mukul?

I'm not able to hear your question.

Even I'm also not able to hear. Voice is not clear.

Yes, okay. I'll try once more. So I'm asking the same outlook on the industrial part. We have been consistent in according to the INR 1,100 crores. So can you talk about the end market? How is it -- last time we talked about pharma, irrigation is doing very well in terms of getting order inflow. Can you throw some light, what's the outlook now? And which are the segments? Any new segment do you see coming back on that outlook?

Ramesh, could you answer this question, please?

Yes, yes. Actually, like last time, even we said in the quarter 2, most of the segments are doing well, and they are actually pretty well, especially the ethanol plants which are coming up now from the [ 20% ] [indiscernible] by the government project. So that is also helping us in industry growth. Last quarter, overall, if I see that when compared to the quarter 2, the industry side, the growth has been continued the same as quarter 2, but only in the agriculture sector as well as the domestic sector has been low after the Diwali festival.

Got it. And sir, my second question related to the margins on the Power System as well as on the industrial. Every quarter, we are making a new high in these margins on the -- especially, let's say, a Power System being almost like 12%, 13% [ equity ]. Is there some write-backs which are coming up or the provisions which are getting write-back? Or do you think it looks like a more sustainable margins now for us? That's it from my side.

So there is no write-back in all these actually. But regarding the question on sustainable, I will not -- we'll not be able to comment. Because now all these businesses, our material cost is close to 70% to 73%. You know how the prices of copper, steel, aluminum, they are all moving. We have no control over that. So actually, the margin depends on the material cost, then also selling price, product mix, all the 3. Given these variables [indiscernible] comment on whether these are sustainable or not.

Okay. Why I'm asking this because despite reporting 29% gross margin, you were doing this number. And I'm assuming the mix is largely -- would be higher towards Power Systems in this quarter. So beside that, you're doing such numbers. So that's why I'm asking that do you think that it looks sustaining a lot.

The next question is from the line of [ Ketri Change ] from Canara HSBC Life.

Sir, congratulations for disruptive and very strong growth which you have delivered. First of all, my congratulations for that and to the team that they have done an exceedingly wonderful job on the growth. Sir, my question is with regard to our order inflow, sir. We are seeing that our order book has increased from INR 2,100 crores to INR 3,100 crores, both divisions put together, which implies an order inflow of more than INR 2,500 crores. So what is driving such an accelerated order inflow, sir? Like last quarter, it was INR 1,500 crore. This quarter, it's INR 2,500 crores plus. What are you doing to do such an accelerated growth, can you give some guidance? That would be great, sir.

So actually, it is only the demand. For example, we have given the total order intake is actually higher in power, higher in industrial. And also in industrial, we also got some orders from railways. Railways is on a very big expansion. So 4th quarter business also continued to get good orders. So it's purely demand environment.

Okay. Sir, do you see this momentum broadly sustaining in near term?

So as of now, I think the orders that we have got will keep us in good shape, at least for the next 6 months, and the orders continue to flow. And it depends on other aspects like, for example, what will be the budget impact, what will be the infrastructure spending, overall economic scenario, which generally, I believe, will be positive. So therefore, I think this can be sustained.

Okay. Sir, in terms of the new product development and application development, what are the initiatives taken by the company? And also a few lines on our FMEG developments, what are you doing? If you can guide that would be great.

So it's a very big question. So I don't know how it will be. New product development is there in every business. So for example, railways, it depends on the customer requirements. Similarly, in Motors, there will be a number of products, number of requirements depending upon the customer requirements. It will be difficult to answer this [ in the start a couple of slides ].

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

Congrats on an exceptional quarter. I have a few questions. So first, I just wanted to understand if you can help us understand within your Motors business, how much of your revenues come from IE3, 4 and 5? And do you think that over the next 2 or 3 years, most of the mix will move towards the 4 and 5, which is realization accretive and margin accretive?

So we don't have the breakup and nor we can share that kind of a breakup actually.

But directionally, is it the right way of saying that if more of IE3 moves to 4 and 5 that realization and margin accretive?

So that is why I'm saying, no. Segment-wise, individually for how much margin we are getting for IE3, IE4, we will not be able to share.

Okay, sure. The second question was if you can highlight how large is our exports business currently, given the RM advantage in India has on steel versus other countries. Does it help you to penetrate into export market in a significant way?

So our exports right now are not significant because the local demand, as you know, we are also ramping up the production only sequentially together. Now this is the fourth quarter that we have in this company, the new management is in the company. Right from Q4 of last year, we have been stepping up our volumes. And as of now, we are just trying to meet the domestic demand. So there are opportunities for exports that probably it will happen in the years ahead, but as of now our export volumes are very insignificant.

Sure. Sir, the third question was on your B2C strategy. We've seen the new launch times and fans. Should we assume that you will essentially move towards appliances and income, I mean, in that format. So would it be possible for you to share some strategy on B2C as well, how do you plan to ramp it up?

So this is a futuristic question. Right now, we have launched, as you know, we have launched fans. So any further appliances, unless we finalize our plans, we may not be able to commit anything.

Sure. Sir, the fourth question was on EV motors. If you can highlight us, what's the status on EV motors? And a similar question was also on the BLDC motors. Do we have BLDC motors under our [indiscernible] today? Or do we plan to launch it in the future?

So Ramesh, can you answer this question?

Yes. I'm believing we are working. Definitely, we are there, but BLDC is only for EV only. As of now, for other applications, there is no BLDC which we are manufacturing. So for magnet motors, we have started off in a smaller way. For 2-wheeler and 3-wheeler, we are working right now, and we have also worked for buses earlier. We are definitely there in [indiscernible] in a big way. We are going to do it as a future business opportunity for that additional business opportunity. So there, we will be using the magnet motors. But as of now [indiscernible] other than the fan will be come into the picture after the [indiscernible] comes into the [indiscernible].

Sure. And final question is, if you can highlight at the current existing capacity that you have across businesses, what can be the peak revenues that you can achieve? And also, if you can highlight that, has the raw material inflation, how do your margins in the last quarter which is reported this time?

This is for -- you're asking for Industrial division?

No. For the RM part, I'm asking for the overall business. Have you seen -- because of raw material inflation, have you seen some impact on margins, although margins have been very healthy, but would margin be much more healthier if raw material wouldn't have been at the level that we are?

So I think I answered this question earlier. Margins depend on 3 factors. One is what is your material sales ratio. Material cost in our -- on all our products generally ranges from 65% to 78% depending upon the particular order, number one. Second is, what is the selling price at what point of time you book the order? What is the selling price? And in other businesses, other than industrial in some of the businesses in power and also in the railways, some businesses may have a price variation plus where you will get compensated. Third is actually the product mix. What kind of a product mix that you are -- you have sold during the quarter. So cumulatively, all this will have impact on the margin. Our margins have been better compared to last quarter. So that's all we can say. We will not be able to say exactly. Because variables are so much, it will be difficult to pinpoint how this will play out.

Yes. And on the revenue side, on the existing capacity, what kind of [ prepayments can we shadow ]?

So I think whatever we are currently doing, maybe another -- depending upon the department and then also the price factor, et cetera, we can certainly -- each business -- in each business can grow by 15%, 20% minimum. So beyond that, it will be difficult for me to make any statement.

[Operator Instructions] The next question is from the line of Hardik Doshi from White Whale Partners.

Firstly, in terms of just going back a bit, when you reported your fourth quarter FY '21 results, there was an exceptional item of about INR 1,076 crores for all of FY '21. And in the annual report, with actually a gain of about [ INR 940 crores ]. So can you just talk a bit about the changes that were there in the reverses, which were mainly from advances and receivables, but what is the status of this in terms of collection? And how is it going to impact the balance sheet and cash flow?

So I don't think we can answer this across because these have to -- last FY '21 numbers, et cetera, we have to go into. So maybe you can have a separate call. If you can give us more details, we can get into this and clarify the question.

The only one thing we can tell you that there is no balance sheet impact at all. All recasting impact have been given. So there is no financial impact at all, even on the cash flow side as well.

Okay. So you think there's not going to be a cash flow impact from this at all?

Not at all. Not at all.

Okay. Okay. All right. I'll get back in terms of getting the details. Just one additional question was about the recent acquisition that you've done in the tractor electric [ wave]. Can you just talk about the rationale behind it? And what is the potential out there?

So we have not done any acquisition, must be...

I'm sorry [indiscernible].

The next question is from the line of [ Biman Goel ] from Union Asset Management.

Sir, just one data point I wanted, and I guess I missed that. If you could just highlight what is the order intake for Power Systems and industries in this quarter? Order intake, I'm not talking about [indiscernible] about order intake.

Order intake for power is INR 746 crores.

Okay. And industrials?

Industrial, INR 1,222 crores.

Okay. Fair enough. Sir, the second one would be on fans and motors. As you've highlighted, these are some of the next nascent businesses that you want to get into. Any time line as to when can we see the first launch for fans? Are we there in the market yet? Or any sort of time line that you can offer over here?

Fans are already being launched. And then we have already done INR 5 crores of [indiscernible] with the last launch. Fans are already been launched in 2 places. I mean also being sold in other territory also.

Sorry, how much did you say the revenue was?

I think INR 5 crores was the -- at the time of launch, we booked the sale of INR 5 crores.

Okay. Okay. Any recent number that you would like to offer? I mean this quarter, how much have you done?

I'm not able to get you. What is the question?

How much have we -- how much revenue have come from fans in this particular quarter?

Nothing material, sir, because we just launched the fan in the month of November. So we are just starting that phase. So hardly anything is there booked now in this quarter. So it's not a very material amount in the current sales.

Right, right, right. Sir, last question from my side. In terms of your margins, I do understand that there is a lot of variability in terms of material cost. But just in terms of overall -- because I mean in terms of your overall investment and your expectations of your overall capital -- return on capital employed, what is the base minimum margin that the company looks at in order to sort of expect a good amount of -- a fair amount of return on capital. Because the reason why I'm asking this is, over the last 4 quarters, the company has been giving out fairly, fairly decent numbers, and they've been growing over the past 4 quarters despite material cost pressure. So how should we understand this trend?

So I think we cannot commit on any particular number. As you know, the last 3 quarters, we have been ramping up production and sales. Our intent will be to maintain -- at least maintain this margin, but it depends on various other parameters about which I mentioned to you. So it will be difficult for me to put to any number, either margin or ROCE or anything because these are all dependent on several other parameters.

[Operator Instructions] The next question is from the line of Renu Baid from IIFL.

My first question is regarding the Power Systems profitability. But pardon me if my question is slightly longer. If you see YTD and for the quarter Power Systems, we have sustained 14% kind of EBITDA margin. This is despite the fact that last 9 months has been commodity volatility as well as the company ramping up in terms of capacity utilization levels. And broadly, if I see, these are best in the class of margins in the current state amongst peers. So going forward, first, I want to understand what are the drivers of this outperformance in the Power System margins despite the headwinds. Secondly, in the same backdrop as we see in the last 3 to 4 months or last quarter in specific, CG has been extremely aggressive in the utility market. And as quoted for multiple projects below 15% or 20% range versus the [ other 2 players ]. So in this kind of environment where the company is quoting very aggressively new projects and tenders, can you help us understand what is the strategy? Is it a tactical drop in the prices to garner more inflows and fill up the backlog in the near term? Or strategically, since we have a phase program, which is programmed early in to cut down the cost structure, are we trying to piggyback on that and cut down the prices so that our margins are retained, even if we are able to garner higher volumes from the market at lower prices? So we just want to understand both these aspects on the Power Systems portfolio.

So actually, my answer is not going to be different. But then you will hear it from Mr. Mukul Srivastava. Mukul, can you answer this question?

Yes, sir. First of all, I'm not sure from where did you gather that. We are quoted at multiple tenders which margins below 15%.

Sir, I did not say margins below 15%. Your average prices in projects have been at least 10%, 15% lower than the other prices across...

No, I don't think so. That data may not be okay. Because see, our products are custom built. So it is very difficult to put an average standard price for an item and then say that the comparison with past price or somebody's prices, that may not be correct. So then I think will be my answer for this part. As far as the margins are concerned, yes, of course, as any good company, we are constantly working on various initiatives to improve our designs to reduce the cost, get into lean manufacturing, Six Sigma approach. All the initiatives, almost 20-plus, are being worked on very aggressively. A lot of trust has been given by the new management and people have been paid. So all those actions are resulting into good margin on sale is doing margin, lowering the cost. And this will be the -- our effort in the future also because this journey of excellence never stops. So we'll continue to work on our designs efficiency, manpower utilization, capacity utilization, everything, we'll continue to focus and let's hope.

So at least there is reasonable amount of confidence on the new order inflows carrying similar or better margins compared to what we have been reporting so far?

We have a defined structure of how do we make a quotation based upon various parameters. And there is a hierarchy and there is an approval matrix based upon the margins. So we do very strictly follow that. And based upon those aspects, we do quote. And having quoted, definitely, as at any company, we will also have a task cut out for various teams in SCM in manufacturing, in [indiscernible] our design to ensure that we do improve our design so that the margins are protected.

Got it. And if I can ask one question on the railway portfolio, can you just share a brief update in terms of how large is the railway portfolio today in the current scheme of things? And how has the market share moved? Because last 2 years, I would understand there would be some shrinkage of market share in the railway products portfolio. So where are we today in terms of broad revenue maybe for the last quarter or for the last 9 months. And how large is the backlog? And how are you looking to ramp up our presence and portfolio in this business?

So, Ranjan?

Yes. Thanks for the question. The railway portfolio is a mix of both products coming from industry as well as the power segment, while transformers and all go from the power segment and the motors and converters and all they go from the industrial segment. And from the market share perspective, I think we are at a level of about 19% to 20% market share in the various segments that we are, where a number of players are also quite high, ranging from 2 to 5 competitors who are major players. And that's how it has been in all the segments, whether it is transformers, motor or -- and [ do there ] for converters.

So any insight on the size of the portfolio?

We don't separate details on railways other than -- only industrials we are reporting as a segment.

The next question is from the line of [ Vipul Lamba ] from [ Lamba Investments ].

Can you let us know about the utilization in both these segments, Industrial and Power?

In terms of capacity utilizing, are you asking?

Yes.

Power, I think, different products. So definitely, we are in the range of between 50% to 60% today. In terms of the industrial side, we are at around 70% to 80%.

Okay. And in Power segments, how much is our solar contribution? And how does the future prospects look like?

We don't have that individual data. You are asking about the solar contribution, right?

Yes.

No, I don't think so that we share individual product data. So it's coming under the product power system only.

And how is the future prospects do you see in that?

Mukul, could you just give a rough overview?

Can you please repeat your question? Are you asking about the solar segment or the power segment?

Yes, in solar segment.

Okay. In solar segment, we have various products. These products go from [indiscernible] to switchgears and our [indiscernible] all go into the solar segments. Solar is doing well. As you know, there are a lot of solar power plants are coming. And apart from our existing portfolio of the products, we are also working on other areas, which are required by [indiscernible].

The next question is from the line of [ Suresh Nalinda ] from [ Sumpadai ] Investments.

Just a small question, sir. What is your time line to improve the remaining order book?

No, this order book will be executed over the next 6 to 8 months.

The next question is from the line of Amit Mahawar from Edelweiss.

I have 2 basic questions. First is largely on, if you see our business portfolio across Industrials and Power Systems, we have a lot of industry transition going on. So how should one think about businesses in the industrial vertical that will stay in CG Power or some of the businesses that we will enter in the other goods for our businesses. How should one look at our long-term industrial portfolio of CG Power? My question is more because we're focused on -- take an example of EV value chain. We will focus on EV motors. You have EV charging infrastructure also. So can you give a broad landscape of how should one assume and imagine long-term business focuses in the CG portfolio? That's my first question, sir.

So I think in industrial right now is consists of motors, drives plus railways. These -- all the products, whatever we are manufacturing, we'll continue to manufacture as adjusted or modified for the customer requirement or market requirements. Now earlier, there was a question on EV and then [indiscernible] that we are certainly working on that. So whatever opportunities are there available in adjacencies, certainly we will be there. So you asked about EV charging. That is also maybe -- we can't commit actually unless something is finalized. Every opportunity is being examined. So I don't know whether I've answered your question.

I think partly being my question was more -- or maybe even if Mr. Vellayan wants to answer if he's on the call still. Between 2 of you, sir, my question is more to understand within the group, how should one imagine where is CG portfolio moving in the long run, whereas other group entity industrial portfolio moving. It was more around which businesses will take care of this segment? Because as businesses transition, you might have product overlap that can happen. That was my specific target, sir.

Sure, sure. I'll take your question. See, I think if you look at our portfolio, it's shaping up fairly well. Directionally, in TII, we've kind of talked about kind of our interest in electric vehicles and all of that, which means that is going to be an OEM perspective. But if you take electric vehicles, what CG has talked about in their portfolio over time is looking at EV motors. Somebody earlier asked a question about beginning to work with permanent magnets more. So basically, from -- so we see CG becoming more a Tier 1 supplier in that space, being basically a provider of motors and controllers and perhaps kind of power electronics also to do with the whole EV segment. Because obviously, kind of anything in the power [ electronic level ] will be in CG systems. Similarly, in railways, kind of anything you're doing with the locomotive is going to be housed to CG. And CG is kind of naturally -- is natural because it has much larger and much broader relationships in [indiscernible]. So broadly, the way we -- and obviously, we've also stated consumer intent and that has started off with fans and all that. So that's obviously kind of more fans and pumps, and that's going to actually house in CG as well. So we don't see too much conflict between the 2. There's definitely opportunity for supplier relationships in multiple places. So if you see what's happening overall, we think that electric vehicles in India will continue to be geared. So Shanthi has been [indiscernible] TII is a logical provider of that. If you see the OEM capabilities being housed in TII and all of the -- like we said, all of the power capabilities in house in [ 3Q ]. Is that clear?

Very helpful, sir. Second and last question is on the entire power equipment portfolio. Now if we see the market, maybe around next 5 to 8 years, you have a huge bunching up of high technology-oriented transmission equipment business that is going to be around SATCOM, SVC, HDVC or compliant gas-based products. And also, if you see overall electrification market, we are seeing a significant shift towards low voltage. That's what all the global capital allocation of companies tell us, whether it be exiting the bridge business or some other players consolidating their medium voltage, low voltage presence. My question is more around across your group entities, we have had a position of strength across businesses. In Power Systems, what is your long-term vision, sir? I just wanted to understand directionally, how do you see your Power Segment business?

So I think Mukul will answer this question.

Right. See, as you rightly said that the Power System is a little bit of the higher technology side business and the things change, evolve very fast. I mean although it may look like a segment which has equipment serving for 35, 40 years, but the -- constantly the upgradation keeps happening. Now in CG, we are trying to keep up the pace, especially in terms of developing green trucks, which are non-greenhouse products as are aware. So that is one layer which we are focusing. Apart from that, automation has scaled up, which makes everybody life easier, fast, access to data across new contents. Those technologies also we are developing. HDVC, as far as data, we're still evaluating, but we hope to come back with the answer shortly. And apart from that, these applications -- these equipment have to be utilized in various segments like nuclear power plants, power quality, instrument transport, traction, e-mobility, all these industrials require the same bulk of the equipment, but some customization. So we are also working on those as well. And wherever we have small gaps, we are trying to cover them by either by internal development or requiring new technology.

The next question is from the line of Nitin Arora from Axis Mutual Fund. As there is no response from the line, we'll move to the next question, which is from the line of [ Rudne Shankar ] from [ Ulta 99 ].

This is more specific to the motors, especially the BLDC motors that we spoke about. Considering that BLDC motors has got 99% dependence on raw material from China, are we looking at alternating our motor play along with maybe [indiscernible] motor, other motors, or a long-term strategies to stick with BLDC motors?

Ramesh?

Yes. Actually, we are not using any BLDC motor for any industrial application. BLDC is generally using a very small motors that is particularly in automotive.

Exactly. Concerning the EV play, I wanted to ask this too.

In EV, yes, people are working on how to avoid magnet as far as EV motors are concerned. But that's going to be a very long-term strategy. Because currently, all the motors which are across the world by permanent magnet motors, which is made [indiscernible] and dependence on China is there. So that is the reason across the globe that many people are working on how to avoid magnet going forward in EV business because depending on the magnet will be very high. So that will be a long-term strategy, and we are also following the same strategy for how we can convert our PMSM motors to the other technologies.

The next question is from the line of [ Biman Goel ] from Union Asset Management.

Sir, my question was more macro in nature, given the fact that you've consistently sort of delivered very high growth in both your segments. I just wanted to get a sense on the overall private CapEx. How are you seeing that? And there have been some talks of slowdown that we are hearing of. Do you see that on the ground at this point in time? And if I were to just sort of try to break up your revenue, how much of it would be coming in from market share gains? And how much of it would be actually coming in from the market itself sort of growing? If you can help us explain that.

It depends on product to product. See there, which segment you are asking? You're asking about Industrial or Power?

Yes. My question was actually more towards industry, which typically depends on more private CapEx.

So, Ramesh, could you answer the question?

Yes, yes. The industrial, I can tell you [ RIMA ] published the data for industry, especially LT motor and large industrial machine. So we follow the data. So we -- if you compare the data availability up to September only actually. So if you compare the September growth at [ RIMA ], the market has grown by 100%. We have grown by 140%. So you can say that while we managed to get the more than the market growth, so that is from the gain from the market share as well as the realization more because of the coverage price. But we are much above the market growth. In large industrial machine also, if you see that market has grown by 32%, we have grown by 43%.

Sorry, I just missed that. In September, the 100% growth was in which segment, if you can just highlight that once again?

Between -- for our LT motors, there, we have gone by 140%. I'm talking about quantity, not the value there.

Right. Any outlook you want -- not on the company, but any outlook you want to probably offer on these -- on this particular segment, the market outlook? I'm not asking for a company specific guidance, but any outlook that you would want to share on medium-term outlook on these segments?

So Ramesh, the industry growth, motor, can we say about 6%, 5%?

It is anticipated maybe about 7% to 8% going forward, maybe slightly more with respect to large industrial machine because the industry and water and waste water is being there. It would be approximately that what we are anticipating next year. Maybe more than we predicted growth.

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

I have 2 or 3 bookkeeping questions. First, if you can share with us what is the consolidated gross debt and net debt on books at the end of the December quarter?

Consolidated?

Gross debt and net debt.

So how do you define net debt?

Okay. Gross debt or total borrowings and total cash and equivalent will calculate the net debt.

Okay. So Renu, you can note down, debt at India level, we have INR 531 crores. And net debt is almost nil.

Got it. Second question is on the Industrial Systems. What was the quantum of pricing actions that we took during the third quarter? We had mentioned at the end of 2Q that price hikes are planned. So if you can quantify what was the quantum of average price hike we announced in the market? And are there any further price hikes planned in the fourth quarter or end of 4Q, early 1Q because of the commodity inflation that we are seeing?

Ramesh?

Yes. So whatever see, if you see up to quarter 2, maybe up to, I can say, October, the raw material inflation is almost about 42% plus. So we have also increased our prices in the market to almost close to that percentage. But if you see the commodity has softened from November onwards. In fact, is slightly reduced this quarter, that is in third -- sorry, going forward in the fourth quarter. So I don't see any more price increases given into the market, unless otherwise, there is -- again, if some disruption comes into the copper, aluminum or steel.

Sure. And thirdly, what was the ESOP charge that we have recognized in P&L in the third quarter that we had issued ESOPs to the senior management team at CG. So what would be the provisioning which is booked in the P&L?

So that is approximately around INR 60 lakhs to INR 70 lakhs.

Got it. And lastly, there was somebody earlier who had asked on similar question, I'll put it out in a different way. From a long-term perspective, maybe from 3 to 5 years, are there any plans to carve out the Power Systems portfolio into or demerge or set it off at a later date? Or it would continue to be retained as a core business portfolio within CG? Relatively, as a business, it's a working capital intensive and again, a big base-driven project, relatively different from the typical Industrial Solutions business which we have.

We cannot answer this question because it's -- first of all, we have not done any work like that. Secondly, these questions cannot be done individually. These are all it has to be debated. It has to go to the Board. Chairman will have to take a view. Group will have to take a view. Several issues. We have just -- we are in this company less than 1 year.

Not a problem. And closing, if I can ask one small thing. On the industrial solutions, Mr. Ramesh had earlier mentioned that while industrial core business has remained flattish like 2Q, but there was some signs of slowdown towards the festive season in the domestic and the agri market. So if you can comment or elaborate a little more in terms of the slowdown. Is it just a seasonal impact which is there? Or actually in the end markets, are we seeing certain pockets of the market slowing down because of a number of issues, inflation or anything else?

No, it is basically because of the range we have seen this year extended rain season. Rains were there up to November in most of the places, unexpected heavy rains were there. So we far only because of that. And we are very optimistic that it will revise. It has nothing to do with the inflation or any other [indiscernible].

The next question is from the line of [ Rajiv Kapadia ] from Elara Capital.

I just have one question. What are your CapEx plans for this next fiscal year? And which segment are you looking to expand capacity?

So next fiscal, we are just working it out. We have not finalized that. So it will take some time for us to decide. So definitely, there will be some CapEx. Exact number, we cannot be able to finalize. So definitely, because all the plants require monetization, we have not much CapEx was incurred in the last 3, 4 years. So we will have to modernize various facilities. In the modernization and automation, we'll bring in some kind of automatically some expansion of capacity, but it's too early to say. We are not finalize that number.

The next question is from the line of [indiscernible] from Laburnum.

Just a question. When you talked about growth in NT motors and heavy machines industry growth if prices are stable, being around 7% and slightly higher in heavier equipment, could you break this down by the rest of our portfolio size? I'm not talking about areas I guess where we're going from a very small base motors, controllers, mag, BLDC motors. Again, new products going from a small base, but the large product segment, what should industries look for to release value?

I don't -- I've not heard your question correctly. You are asking industry growth. What is it -- what is the question?

Industry growth...

Your voice is breaking.

My question is on industry growth for other large product segments, just like Mr. Ramesh Kumar mentioned for NT motors and heavy equipments being 7% and slightly higher. What would these be for the other parts of our portfolio, the HD motors, switchgears, transformers. Just want to get a sense of industry growth in the next 3 to 5 years in your view for these segments -- for these industries.

So 3 to 5 years is very difficult to take a call. We'll not be able to say, especially for all the products it'd be very difficult to take a call.

Very broadly, there will be a range of 0 to 5...

Can only give out the statement, I can say, 7%, 8%, 10% [indiscernible] what is the source. It will be difficult to say. So I think we cannot attempt to answer that question.

So you can expect the GDP growth, what are that there. So that India next 3 to 5 years how that GDP is going to grow.

Okay. So that should be broadly the volume growth for our portfolio as a whole.

Yes, exactly.

The next question is from the line of [ Biman Goel ] from Union Asset Management.

Sir, just wanted your comment. You said that you have basically covered for the entire inflation -- commodity inflation of 40%, and you've taken the price hikes for -- which are similar. Does that mean that as and when commodities sort of normalize, you will have to reverse some of your price hikes going forward? And that could probably one possible headwind going ahead?

So I think this is fundamentally when the prices drop, then market prices will drop, and the market prices drop, we have to drop your price. Others, you will not be able to sell, as simple as that.

Got it, sir. And mostly, when you talk about 40% hike increase in prices, that would be mostly in the industrial segment? Has the power segment also seen similar sort of price hikes by your company?

So the commodity prices for all the segments are the same. Power has got water, materials, copper, steel, special steel, et cetera, prices certainly go up. Power, actually power sector, if you see, most of them are tender-driven. Therefore, some will have -- as I said, some will have a price variation plus, therefore, future prices will be protected. And it is up to you to take a call to what extent of the MSR, which will generally go by the materials cost-to-sales price ratio. So if it is not comfortable, then you don't take the product. That is how we work.

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

Congrats for very strong numbers. Mr. Vellayan, if I recollect rightly, post acquisition of CGP by Tube Investments, you had given a broad range of guidance of about INR 500 crores PBT in 4, 5 years or something like that. And you will end up probably achieving that very easily this year itself, the very first year. So would you care to give some guidance over the next 3, 4 years or on margin?

No, no, I think let us go through see, basically, we've not -- the first, obviously, we were making an estimate when we made -- when we acquired the company, and that was the estimate that I gave you. My suggestion is you let us kind of go through a more detailed effort where we come up with a long-term strategy and we have numbers that we feel confident of achieving over the next 3 to 4 years. And then we'll come up with a new set of guidance that we can give you at that stage. But we've not gone through that yet. We're just going through a regular budgeting process right now. We have not gone through that process.

Okay. Wonderful. And on the softer aspects of the business, when you acquired, obviously, there were various issues in the company, and they would relate to people management, motivation level and other things. Would you care to share some of those, how is the situation now post almost a year of you taking the rein? How is the sort of motivation level and the culture in the company? How has that changed or is being changed?

Rather than I answer that, I have the team on the ground kind of answer, and maybe we can have both the division heads perspective and the MDs perspective on that. Obviously, we think the things are quite a bit better than it was last year, but -- and do you want to -- should we let the division head talk first and then you can take the...

Sure, sure, yes. So Ramesh, few minutes, then Mukul and then Ranjan, all of you can say a few minutes on this.

Yes, yes. I mean definitely is a much better -- now people are very, very confident that there is a big group like Murugappa and these things are also happening very fast. And whether the company recovery, our legacy issues are being solved very fast and so we're satisfied. People are very confident and the motivation levels are very, very high now in the field.

Mukul?

Yes. Once the new management of Murugappa have taken over, I think our sense of calmness prevailed. We definitely feel secured that the company is going to run. So I think that's about the opp security, I think propose people to do their best. And since the earlier shock of 2 years, which was put people on the edge, once that thing was done, everybody felt [ magnificent ], secured, motivated. And on the work front, everybody wants to now contribute and give their best, but there is respect in the market now. Customers are happy to accept this fact. And we -- I mean CG as a company has always been one of the company which is an Indian company which brings down the technology at an affordable rate to customers and providing long-term solutions. So I think to that extent, when the customers welcome you, you are secured in a job, everybody feels motivated.

Mr. Ranjan?

Yes. The new management has taken the leap faith of taking the company forward with iteration of the business from the turmoils of the external environment which had affected the business in the last 3, 4 years. This helped the business, which has its own core strength of 15. The people have been handling the customers, the front line people, the people who are working on the shop floor, the people are on the development side. All of them were just looking for the support, and we have taken it so well in the short possible time that they have been able to connect the customers back, winning the orders. And with the guidance of and the trust on new directions like on the lean and movement for efficiency and project-based management, we have been working together in a close-knit team, which has helped us both in terms of the top line growth as well as in bringing efficiency in our operations.

So I think you've heard of the CG recounts but I am an outsider. During the last maybe 1.5 years, I have met with the executives, workmen, union, customers, vendors across. And whenever at various points of time, the -- generally, the overall view has been extremely positive. And as far as the employees are concerned, they were very keen to just bring back the company to its old glory and there was a passion with every one of them I could see, and they responded. Whenever we gave any opportunity, they responded and the proof is actually in the performance. And but for a very positive, vibrant an attitude, this would not have been possible across the company, across segment, from all stakeholders.

Thank you. 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.

I think line got disconnected. Bhoomika?

Management, would you like to give any closing remarks?

No. So I think we have answered all the questions. If there is nothing else, I think thanks for the participation.