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

Ladies and gentlemen, good day, and welcome to Q4 FY '24 Earnings Conference Call of CG Power and Industrial Solutions Limited, hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Renu Baid Pugalia from IIFL Securities Limited. Thank you, and over to you, ma'am.

Thank you. Good evening, ladies and gentlemen. On behalf of IIFL Securities, I would like to welcome you all to the Fourth Quarter FY '24 Earnings Conference Call of CG Power and Industrial Solutions. Today, from the management, we have with us Mr. N. Srinivasan, Managing Director; Mr. Susheel Todi, Chief Financial Officer; Mr. Ramesh Kumar, President, Industrial Division; Mr. Mukul Srivastava, President, Power Systems; Mr. Ajay Jain, Vice President, Transformer Division; and Mr. Chidambaram Balakrishnan, Vice President, Railway Division. Without taking much time, I now hand over the call to Mr. N. Srinivasan for his opening comments, after which we can start with the Q&A. Thank you, and over to you, sir.

Yes. So thank you, Renu. Good afternoon, ladies and gentlemen. Let me extend a warm welcome to you for this Q4 and FY '23-'24 annual 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. Ramesh Kumar, President, Industrial Division; Mukul Srivastava, President, Switchgear Business; Ajay Jain, Vice President, Transformer business; Chidambaram Balakrishnan, Vice President, Railways business; Susheel Todi, CFO. So company performance, Q4 performance in FY '23-'24 of Q4, sales grew year-on-year by 17% and PBT grew by 25%. For the financial year, '23-'24, sales grew by -- year-on-year by 16% and PBT grew by about 24%. Our Q4 performance, stand-alone, aggregate sales for the quarter were higher at INR 2,084 crores, recording a growth of 17% year-on-year. Profit before tax before exceptional items was at INR 316 crores as against INR 252 crores in Q4 of FY '23. Margins were higher year-on-year by 15.2% of sales as against 14.1% of sales last year on account of higher realizations, favorable product mix and cost efficiencies in Power Systems. Free cash flow related during the quarter was INR 178 crores. Unexecuted order book as of March 31, 2024, was 45% higher year-on-year at INR 6,276 crores against INR 4,319 crores as at March 31, 2023. FY '24 performance, aggregate sales for the year were higher at INR 7,660 crores -- INR 7,610 crores, recording a growth of 16% year-on-year. Profit before tax was at INR 1,146 crores as against INR 927 crores in FY '23. Margins were higher year-on-year at 15.1% of sales as against 14.1% of sales last year on account of higher realization, favorable product mix, cost efficiencies and execution of export orders with better margins in Power Systems and higher other income. This was partially offset by pricing pressure in low-tension motor business due to increased competition. ROCE for FY '24 was at 37%. Free cash flow generated for the year was INR 784 crores. Segment-based performance, Q4 performance, aggregate sales for the quarter were higher at INR 1,263 crores, recording a growth of 6% year-on-year. PBIT was at INR 175 crore and 13.9% of sales as against INR 188 crores, 15.8% of sales in Q4 FY '23. Margins were lower year-on-year on account of pricing pressure in low-tension motors due to intense competition. Unexecuted order book as of March 31, 2024, was 25% higher year-on-year at INR 2,544 crores versus INR 2,040 crores as at March 31, 2023. FY '24 performance: Our aggregate sales for the year were higher at INR 5,015 crores, recording a growth of 10% year-on-year. PBIT was at INR 748 crores as against INR 748 crores, 16.4% of sales in FY '23. Power Systems: Q4 performance, the aggregate sales for the quarter were higher at INR 821 crores, recording a growth of 39% year-on-year. PBIT was INR 152 crores, 18.5% of sales as against INR 75 crores, 12.7% of sales in Q4 of FY '23. Margins were higher year-on-year on account of higher realizations, favorable product mix, cost efficiencies and better operating leverage. Unexecuted order book as of March 31, 2024, was 64% higher year-on-year at INR 3,731 crores as against INR 2,279 crores as of March 31, 2023. FY '24 performance: Aggregate sales for the year were higher at INR 2,598 crores, recording a growth of 28% year-on-year. PBIT was at INR 416 crores, 16% of sales as against INR 227 crores with 11.2% of sales in FY '23. Consolidated: Consolidated results include performance of the operating subsidiaries at Sweden, Germany and Netherlands; CG Adhesives Products, India; CG Semi Private Limited, India and other nonoperating and holding subsidiaries. Aggregate sales for the quarter were higher at INR 2,192 crores, recording a growth of 15% year-on-year. PBT was INR 307 crores in Q4 of FY '24 as against INR 262 crores in Q4 of FY '23 and INR 264 crores in Q3 of FY '24. FY '24 performance: Aggregate sales for the year were higher at INR 8,046 crores, recording a growth of 15%. PBT was at INR 1,137 crores, 14.1% of sales as against INR 950 crores, 13.6% of sales in FY '23. Summary: FY 2023-24 was another record-breaking year for the -- with the outperformance across financial and operating parameters. Several landmarks were achieved by the business. Switchgear and Transformer business achieved highest ever sales, highest ever order input and profits. Railway business achieved highest ever sales, order input and profits. Increase in market share of Motor business on a higher base and against a stiff competition. Highlights of the year include company received approval from the Union Cabinet under the Semiconductor Scheme to set up an Outsourced Semiconductor Assembly and Test, OSAT, facility at Sanand, Gujarat. The estimated investment of the project over a period of 5 years is INR 7,600 crores, the same is expected to be funded by a combination of government subsidies, equity contribution and the potential bank borrowings as required. Renesas Electronics Corporation, Japan, and Stars Microelectronics, Thailand are the technology and joint venture partners for this venture. India Ratings upgraded our company's long-term credit rating from AA/stable to AA+/stable. The company declared and paid an interim dividend of INR 199 crores, INR 1.3 per share in March 2024. The Board of Directors also approved an expansion of CapEx for Switchgears in the Nasik Plant at INR 155 crores, Power Transformers in Bhopal at INR 31 crores and HT Motors, Bhopal, at INR 35 crores. Total expansion of capital approved as CapEx expansion approved till date is INR 662 crores. During the year, the company sold its subsidiary at QEI LLC for the entire sale -- in America. The entire sale proceeds have been realized. Unaudited financial statement -- audited financial statement with detailed notes are available at stock exchange filing and the company's website. With this, myself and my colleagues will be happy to answer any questions. Thank you.

[Operator Instructions] First question is from the line of Mohit Kumar from ICICI Securities.

Sir, my first question is on the order inflow for this particular quarter, especially for industrial is up by 33% Q-o-Q and 45% Y-o-Y. Can you please throw some more details on this industrial uptick? And is it because primarily of Railways or is ex-Railways business, which has shown the uptick?

So the Industrial consists of both Motors and Railways, so that's why large part of the order inflow has come from Railways. So that speaks of the higher order inflow for this quarter.

Sir, last few calls, you had said that the Industrial Motor business is slightly on the -- in the sense, there is a lower activity. Are you seeing any uptick now? Do you think it will come post the elections?

Exactly. So we feel that the situation will be clearly known after the elections because right now, because of the elections, the activities in some of the projects going slow, et cetera, are quite visible. So I think we will have to wait for one more quarter than -- for the activity to pick up.

Sir, my second question is on this semiconductor opportunity. Is it possible to comment on the timelines, when do you think you'll be giving us more details or some -- when do you think the revenues will start showing from this particular segment? And if you can help us to understand, what is the right to win in this segment?

What is the?

Right to win.

So I think, one thing, it is the long gestation project. It will take about 4 years to implement the project. So right to win is I think there is a huge amount of demand. The fact that government wants these projects to come up with a substantial help from them speaks of a huge demand. I think the whole semiconductor industry is growing at -- globally. It's growing in India also now with no complete dependence on imports. We expect there to be a good amount of demand. So if we are able to -- we are also partnering some of the world leaders with some amount of buyback of the finished product. With all this, we expect I think the -- once the project is well implemented, I think there is a right to win always. That should not be a problem.

When do you think the revenues to start flowing here?

Not clear. Can you repeat?

When do you think, sir, the revenues from this particular segment will start contributing to the top line?

It'll take 4 years at least.

The next question is from the line of Rahul Gajare from Haitong Securities Limited.

Sir, can you talk about the volume growth in the industrial segment? Because I believe that given the competition, we have seen pricing pressure. Can you talk about the volume growth that you have seen in the fourth quarter and full year and also whether the competitive intensity have already eased to some extent? That's the first question.

Ramesh?

Yes, from quarter 3 onwards, it has shown positive. Quarter 3 stand-alone is about 15%, and so far, January and February, the results have come, the growth results have come. It is almost about 12%. The market growth, I'm talking about, volume growth, and we are also at the same level, CG is also at the same level.

Okay. And the intensity has begun to ease?

No, that will -- because if you see the copper also, prices have suddenly gone up in last 1 month, 1-1.5 months. It has gone up by almost $1,000. So as long as the commodities are stable, it is very difficult to predict the price realization in the market.

Right. Sir, my second question is with respect to the revenue on the industrial segment. I think in the third quarter, you did indicate that there was some revenue deferral of almost some INR 35-odd crores. First, whether that revenue deferred has already been booked in the fourth quarter? And are there any more deferrals that also you are seeing in the Industrial segment?

No, we never said in the Industrial System. It was always about Power System.

Okay. So that INR 35 crores was in the Power segment?

Yes.

Okay. Sir, my last question is on -- given that you're adding significant capacity both in Transformer and Motor, and I think Transformer was supposed to get commissioned in the fourth quarter, are there any thoughts on adding manufacturing capacity on the drive side given that there is a strong industrial demand and limited player and obviously better profitability? What's your thought on adding capacity in India because right now your Sweden capacity is full?

So we are working on various options to increase -- I mean, to grow this Drives business. This could be -- we have a unit in Sweden. So along with them, how do we increase, et cetera, currently under discussion. Certainly, our focus is to grow this business multifold. We have not firmed up our actions, yet. It may be including increasing of capacity, maybe one of the options.

Are you looking at doing some manufacturing in India or you're looking at adding capacity in Sweden?

No. So currently, it's not yet finalized. We are just looking at various options. It will take time.

[Operator Instructions] The next question is from the line of Subhadip Mitra from Nuvama Wealth.

Firstly, sir, with regard to the Power segment, it is quite strong in the current quarter. Margins are also seeing an uptick. Would we say that margins are maintainable in these high-teens range, or is it that there is some one-off in this quarter?

So there is no one-off actually. By and large, if there are -- as I said, in all this -- just my colleague in the previous question, he said copper prices have gone up. If -- by and large, if the material prices stay where they are, I think we will be able to maintain margins in this segment as projected.

Understood. Also, with regard to the Railway segment, because as you mentioned earlier, that the Railways and the Power segments seem to be the larger or the high-growth segments right now, whereas probably the Industrial segment is on the -- on a slightly lower pace of growth. So how would you see the overall margins behaving? Would we see that the higher growth and the higher margins, Power and Railway segments, more than offset the slight weakness on the Industrial margin?

So it's a very -- we have discussed this margin question a number of times. We can't assume that the margins in Industrial will be lower. Post-elections, as we said, if things improve dramatically, it can come back. It's -- we are a very high-volume player. We have the advantage of economies of scale in Motors. Therefore, we can't say that Motors, whatever is there in the last couple of quarters, based on that, I'm not willing to conclude margins should be lower in Motors, number one. See, Railways and Power, both, are tender business. I don't get my price separately. I have to bid to win the order. Therefore, in Railways, for example, again, there's a stiff competition. If I quote well, and then, competitively, I will get volumes and then orders will flow. But at the same time, margins, you have to work on it. It is not granted from -- compared to price what we get -- supposedly you get lower price, you have to work how to manage the cost and how to make up the volume, et cetera. It's not going to be easy. So overall, I think we are doing our best. So -- though difficult to comment on -- exactly commit and comment on margins.

Understood. And sir, would you be able to give us some details on the Railways business? And what was the top line? Or what is the existing order book?

So I would say that we will have a strong growth this year, at least we can grow 40% in the top line in Railways.

And what was the sales in the current year in Railways?

Current year sales, Susheel?

For the full year, it remains the same range, around INR 1,300 crore plus.

Okay. And any details on the order book, how much order book would you have right now, in Railways specifically?

So I have told you, no, that we will be able to grow about 40% this year. We don't generally separately discuss Railways.

I understand. So last piece, naturally, we've been quite enthused by how you've been tying up on the various offerings on the Railways side and clearly targeting to being a propulsion partner in the forthcoming bid. So sir, any progress on that in terms of tie-ups or with regard to Railways qualifying or sanctioning your prototypes?

So we are not in a stage where we can disclose some things, but though the efforts are continuing and are in advanced stage.

The next question is from the line of Harshit Patel from Equirus Securities.

On EV motors front, you had earlier indicated that the supplies might start post FY '24, maybe in '25 or '26. Sir, could you share an update on the development program and the potential customers?

Yes. We have for 1 application. We don't want to disclose right now, but we have developed 1 application. It is -- protos are under testing. And another 2 different applications we are in advanced stage of design. So we will be -- once the testing, everything is done, then we will be giving to one of the OEMs for testing and getting the approvals so that we can be in the market.

So sir, not only the motor, but even controller will be involved?

Yes. When I say motor, it is motor and controller. We don't develop anything separately. It is all developed together.

Understood. Sure. Sir, secondly, on the Railways front, we were working with a Korean company for the propulsion system of train sets, so how has been the progress over there? And do we have to pay a royalty to that company on a continuous basis or we will just pay a one-time fee?

We can't disclose all this information. We can't disclose. But the work is going on. We'll get -- it will get commissioned in the next -- completed in the next -- maybe by June or so, but we can't disclose all commercial information.

No problem. Sir, just a small bookkeeping question. You had previously mentioned that we want to take the share of exports to around 20% within Motors in the next 3 to 4 years. Sir, what was that share of exports in financial year '24?

So we are somewhere around 3% to 4% as of now, but we are now working on building the organization across. So we are on track.

So this has to be coterminous with the capacity expansion. We can't take any steps now. Suppose if we get orders, we will not be able to supply. So the target is to do it in the next couple of financial years and beyond.

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

My first question is given the global demand/supply mismatches in the power equipment market, especially T&D, how do we plan to leverage this and also increase our exports? Do we have any thoughts on this?

No, thoughts are there, but there is no capacity.

Yes. So practically, from on-ground capacity, where are we in terms of setting up an export facility beyond the domestic demand requirements in the next couple of years? Do you think we -- are our hands are full with domestic and export is at the back-burner for now?

No. So the -- currently, our Power Transformer, we are doubling from 17,000 MVA to 34,000 MVA. Similarly, Distribution Transformer, we are also doubling the both -- increasing capacity by 50%. Even if I double it from here, domestic demand will eat away all this demand. Collectively, only -- what we are doing is only selective orders with high margins and where payment security is there, we are considering for exports. So we are struggling to see how we can expand the capacity. There are no inorganic opportunities much. Organically, if you start doing, it will take more time. Just the current expansion will have to be completed before we take up something else. So today, the question is really different.

Got it. Sure. Secondly, within the Industrial System, we also have the Consumer Products portfolio, which is housed. Can you share some inputs in terms of how was the performance of this segment for the fourth quarter and overall for fiscal '24?

Overall, this year, I think the industry itself did not do well. So we have also not that much well. So it is -- in fact, this business was always -- last 2 years, it's been small, and then, we were marginally -- we are a marginal player here. But plans are afoot to make this big. We are working hard. You will see some action here from now onwards to increase this business. Ramesh, you want to add?

No, no. I mean, what you said is right. That -- as rightly NS said, we have initiated the action, and definitely, we'll see something coming there.

So was this business flattish, it grew by mid-teens, did not grow, any color, qualitative or quantitative?

So it degrew.

Okay, declined.

Or marginally grew. Industry degrew. We have marginally grown actually.

Got it. And secondly, on the Industrial Systems, do we have any views on the likelihood of implementation of the shift from IE2 to IE3 range of motors as a base -- technology base or it's still some time away for now?

See, complete shift can happen only if the government regulation comes. But today, if you see, almost IE3 and IE4 together crossed 50%. So obviously, now customers are looking at more and more high efficient products. So once the regulation comes, then entire shift will happen to IE3.

And any view on the likelihood of this regulation coming in fiscal '25?

At this moment, no. It would have come long back, but we don't know.

Got it. Got it. One last, if I can squeeze in. Sir, we did mention about our targets to expand the portfolio of the HT motors in larger applications like nuclear power in terms of prequalifications and other criteria. So where are we? And do you think with many large NPCIL projects lined up in pipeline, we will be able to participate in the opportunities?

We are already participating, and we are getting good orders also, but execution will take time because these orders' execution take almost about 2 years. Today, if we get the order, the execution starts after 2 years. So we are well in NPCIL. And we are there in almost all the tenders, and we are getting good orders also.

The next question is from the line of [ Akash ] from Dalal & Broacha.

One question from my side was pertaining to Railways. Sir, in Railways, we cater to which kind of trains? Are we catering to Vande Bharat and the new Vande Metro train? Are our motors being supplied to those kind of trains? Or...

No, motors are not supplied. So -- Chidambaram, do you want to answer this question?

Yes, sir. Currently, we are serving the traditional locomotive markets. And end of this year, we will begin serving the Vande Sadharan, Vande Metro and Vande Bharat, all the 3.

Okay. And what exactly are we supplying, drives, transformers, motors, switchgears?

For the Vande Bharat, we'll be supplying entire propulsion system, motors -- and the motors.

The next question is from the line of Aditya from Kotak Securities.

Congratulations for very strong results. My first question was more to things with the timeline for the new capacity for the Motors business. When are they expected to start contributing to our topline?

So it will happen in stages. I think probably next financial year.

Understood. So basically, exports should start kind of becoming better from fiscal '25, is what you're suggesting, right?

Yes.

Understood. Could you also give us an overall guidance on revenues for next year that would be useful?

We don't give any guidance.

Understood. Just on the quarter gone by, since you suggested that revenues had meaningfully contributed, could you give us a sense of, from an order inflow perspective, where is growth happening at this point in time?

No. So we have given the -- in the press release, we've already given what are the order inflow and things like that. Complete details of what is the unexecuted order book and the order inflow, both the details have been given. Power sector as of now, and also the Railways, all the 3 of them have got good orders.

Understood. Just a final question from my side. Just because you said that there was a deferral of revenues in the Power segment, should we be seeing margins at the average levels of third quarter and fourth quarter? Or do you think that [indiscernible] in the fourth quarter is also sustainable?

I think we answered this question earlier. So it depends on the way the commodity prices are falling. If the prices go up -- my colleague also mentioned that copper prices have gone up by 10% in the last 1 month or so. So it depends on the commodity prices. If they are reasonable -- they stay where they are, then probably we can move to sustain these margins.

Sure. Just a last question from my side. On the automation side of things, so you talked about drives as being imponderable in the near term, kind of extending into the adjacent business of automation, when would that start becoming, let's say, an important focus area for us? Would it be FY '25, '26, just trying to make a sense?

No, we can't commit on any timeline. So we want to grow this drives business. We never said automation. We want to grow the drives business. I can't put any timelines.

[Operator Instructions] The next question is from the line of [ Garvit Goyal ] from [ Nvest Analytics Advisors ].

Am I audible?

Yes, you are audible.

Congrats for a good set of numbers. My first question is on the Power Systems. So we saw a significant growth in Power Systems in FY '24. So at industry level, what is the outlook for FY '25? How the things are shaping up? Are you still witnessing any kind of slowdown due to elections going ahead?

So Power Systems, we have both Transformer and Switchgears. So the order book, we have details. We have shown a good amount of order book, good amount of inquiries. We don't expect any slowdown here.

Okay. And on Semiconductor side, just to understand a bit from you, like we are entering into OSAT. So when we say we are entering into OSAT, so does it mean wafers will come from outside India only, and we are there for assembly and packaging part? So if that is the case, can you explain like we will be -- who will be our potential customers here?

So this is too early to answer this question. This is a completely new line of business. It'll take some more time. I think this is -- project itself will take about 3 to 4 years to complete. Maybe, as we go, things will shape up, then we can share the information as we go on. It's too early now.

And lastly, sir, Mr. Ramesh has been recently appointed as Additional Director for the company manufacturing into Power Semiconductors. So is it any way related to your entry into OSAT?

What is he saying?

Anything which we can buy from that business.

Definitely, whatever requirements can be definitely met. But we -- our requirement will be a miniscule of what is going to be manufactured.

The next question is from the line of Rajesh Vora from Jainmay Venture Advisors.

Mr. Srinivasan, is there a thought process given the significant amount of demand on the Power and Distribution side?

What is the question? Is there -- can you repeat, please? Question was -- voice was not very clear. Can you repeat the question? Disconnected.

The next question is from the line of [ Avesh ] from Chanakya Capital Services.

I just had one question. The question was, can you give me a breakup of the Motor and Railways division in the Industrial and also the Transformer and Switchgear breakup in the Power Systems?

Susheel?

Between the Transformers and Switchgear is 45-55.

Okay. And in Motor and Railways in Industrial?

Railways is almost 30% of the Industrial business.

The next question is from the line of Bhavik Shah from MK Ventures.

Sir, you just mentioned on the call that we are seeing a very strong demand in the Transformers side, and like even if you add more capacities, the demand will get eaten up. So what is stopping us from adding capacity? Is there any constraint which you are facing? Do you see something significant here so you are not adding?

No, no, we are already expanding. From 17,000 MVA we are expanding to -- doubling the capacity to 35,000 MVA in the Power Transformer. Similarly, the Distribution Transformer, we are adding 50% capacity. So these are what we can do within the existing premises in our current setup. So this has to be completed, and then only then we can think where we can do extra, whether organic, inorganic, et cetera. It is not -- just like that we cannot keep on adding capacities.

Okay. Right. And so, sir, do you see the demand sustaining for the next 2, 4 years in this sector? Or how do you see the outlook here?

I think the -- so this demand can be sustained for the next at least 5 years or beyond that. I'm just saying because these are all linked to drive demand, so what is happening in substations, what is happening in the renewable capacity? New capacities are being created in the renewable segment. So like this, there are -- a lot of other activities are happening to increase the power capacity itself. That's the reason this demand for Transformer and Switchgear is going up on account of that.

Right. And so this is -- you're talking about only for the domestic part. You can also cater to the export part, which is not even -- like we are not looking there right now, right?

So we are doing a little bit of exports. So both Transformer and Switchgear, we are exporting.

And sir, if we export, is there a difference in margin? Do we see better margins in exports or like domestic margins and export margins are the same?

It'll be case by case. It depends on delivery period, depending upon what is the range, currency, so many issues are there. But if the margins are lower, we will not export.

The next question is from the line of Abhineet Anand from 3 P Investor Managers.

Yes, sir, this PT capacity increase, what could be the revenue potential for that, sir?

So, Ajay, you want to answer this question?

Yes. So we will be doubling our manufacturing capacity, and so the revenues will also double over the next 2 to 3 years.

Just trying to understand on current pricing, what would that -- let's say, the 17,000 MVA that you talked about incremental, what could that mean in terms of revenue if you put it on current pricing or commodity?

Should be around INR 1,800 crores.

And can you also help us with the DT capacity that we have presently in which we are increasing by 50%?

Yes. The DT capacity as of now is around 5,500 MVA, and that will go around 8,500 to 9,000 MVA. And in revenue terms, we will grow from INR 450 crores to somewhere around INR 700 crores.

Okay. And when is the -- both of these coming on stream, sir?

So it will take another 1 year, another 12 months at least.

Okay. It's not in a phased manner. The first revenue apart from the 17,000 will come, let's assume, in F'26 only -- from 17,000 to 34,000 that you are talking about will come in F '26 only. Or will it come in a phased manner?

No, no.

No, it will not. No. After completion only.

The next question is from the line of Rajesh Vora from Jainmay Ventures.

Chidambaramji explained that by FY '25 end there will be Vande Bharat supply begin, and it will be of motors, propulsion system and all that. And this year, we are expecting 40% growth, as mentioned by Mr. Srinivasan. So could you explain a little bit in detail what is driving this significant growth? And are we directly going to supply these for Vande Bharat or we'll be going via other players?

Chidambaram?

Yes, sir. Vande Bharat, we will be supplying directly to Indian Railways and other companies we are discussing with, who got the complete transit orders. And this is how we want to enter Vande Bharat. Vande Bharat -- Vande Sadharan and Vande Metros, they will be made by the Rail Coach Factory in Kapurthala or Modern Coach factory in Raebareli or Integral Coach Factory in Chennai. So we might be supplying the composite converters and motors directly to Indian Railways only to these production units. And what is driving the growth, Railways used to traditionally manufacture around 1,200 locomotives. They've gone up to 1,500 locomotives this year. And there is a limitation of approved supplier. Approvals in propulsion systems generally takes around 3 years' time. So we are one of the approved suppliers, that gives us the privilege to increase the -- and we got the increased orders.

Understood. Other than your company, who are the other propulsion suppliers approved for Indian Railways? Is it Minda?

So we cannot comment on that. We have no idea of who are the other companies.

[Operator Instructions] The next question is from the line of Amit Anwani from PL Capital.

My question is with respect to you mentioning in your opening remark about the intense competition in LT Motors. So just wanted to understand from you, how much is the LT Motors contribution. And within the overall Motors market since LT Motors segment, you mentioned, is declining, any parts or end-user industry where the Motor demand is seeing ramp up? And how is our strategy to deal with the LT Motors facing competition? Is there any product mix change which you're looking for? Anything you would like to highlight on the Motors side?

So LT Motors forms the larger part of the overall Motors. The Motors size of the business, the LT Motors occupy almost about 60%. So then, for your questions, product mix, strategy, et cetera, I cannot disclose, no. We cannot disclose this in the call actually. And then, we will -- see the -- what kind of product mix, what the market wants, what product we should produce, where my contribution is higher, there are ever so many products are there and what you will do, et cetera. These are internal, and we are -- of course, we are working on this day in and day out. It would be difficult to make those kinds of details public.

Sure. So how much was the Motors -- LT Motors' contribution in FY '24?

Share, you mean share?

Yes, yes, within Industrial Systems. Yes.

I think it's 80%, 85%. If you take Industrial Systems, take out Railways, then...

So in the remaining 70%, 85% from motors, right?

Correct.

And so just one clarification on the Railways side. So the 30%, which is coming from Railways is all coming from propulsion system, is it the right understanding?

No, we have different products.

As there are no further questions from the participants, I now hand the conference over to Ms. Renu Baid for closing comments. Over to you.

On behalf of IIFL Securities, I would like to thank the management and the participants for the interactive session. I would now like to hand over the call to Mr. Srinivasan for his closing remarks. Thank you, and over to you, sir.

No. So thank you. Thank you, Renu, and the other participants for their participation in asking questions. I have nothing more to say. Thank you again.

On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.