Elgi Equipments Limited (ELGIEQUIP) Earnings Call Transcript & Summary

Thank you very much. Welcome to our meeting. Pleasure to have you. I know [indiscernible] people appreciate the time that you take with us. I hope the next bit of time that we will be spending -- I hope it was [indiscernible]. I will take you through some general stuff and then my colleagues talk about finances, the technology and the other more important investment stuff. So this is the standard display of we have to [indiscernible]. I'm sure it will be less than half a second to [indiscernible]. We're continuing to expand not so much in our core markets, but more in terms where we are doing business in different parts of the world. Maybe the next time, we'll give you a bit of progress statement in that what we have [indiscernible] around. Again, we are expanding. We'll give you a bit of a progress statement. This is business snapshot as we are today. I'll leave it [indiscernible] on the project and our leadership at the corporate office is our people who make this [indiscernible]. Our manufacturing, besides going through we also have manufacturing of our portable compressors in Italy, as well as our [indiscernible] are manufactured in the U.S. Manufacturing context is mainly selective by backward integration. We are big backward integration not so much more financial benefit more so was strategic benefit. So we look at our [ boundary ] is financially not the greatest of investments. But strategically, it's a huge amount of that they did it -- but I think the numbers -- all that into numbers, it's impossible [ to verify ], both customers and also what value it [indiscernible] measure. The same thing with our pressure vessels. We value at the ongoing of activities [indiscernible] but we do it anyway. That's because it's a safety critical mark. And when you're doing business all over the world, especially in markets like Europe and the U.S. [indiscernible] being related pressure [indiscernible] variant and we are in the best of our business in the past 8 months [indiscernible]. [indiscernible] which is production, which is our latest rates [indiscernible] again to drive a value proposition for the customer and also to reduce our risks on China, supply dependent risks on China. So these are some of the things that we do. This is the part we do, some of you have done it today, some of you have done it in the past. So we kind of take you through this quickly.

And to realize this aspiration, we have to play in some of the top markets in the developed nations of the world. Now for a company like ours, which is where brand is relatively unknown, and we have a made in India label appended to us. We have to lead into these markets with value selling rather than a price-based selling. Now value in this context is about providing benefits to the customers from a life cycle cost perspective as well as providing a product which has got just outstanding levels of quality. This is -- we consider as stable stakes in our -- being building the competitive advantage for our company. Now even though we lead our sales program with well -- for a company with our -- in our context, price. So we have to have a cost advantage in order to able to compete and provide the expectations of the customer. Now our -- in order to make all of this happen, value, quality as well as cost competitiveness, we have done selective integration -- backward integration in our manufacturing. I'd like to talk about 3 of them. One is our foundry. With the foundry, the primary goal is to build the quality of our castings of product. The value proposition for the company is about getting the very high-quality castings that are extremely competitive cost and in terms of low volume and high variety kind of procurement. Second that I would like to talk about is our motor business. In our motor project, we have integrated backwards so that the percentage of our value in our compressor goes from about 30% to 60%. Now that's one part of it. The other part of it is by making our own motors. We have significantly improving the efficiency profile of our compressor. And this is a [ value ] to that customer. Besides [ timing ] and building motors up. The third aspect of backward integration is the machine tools that we build -- design and build for ourselves. These are special machines, which are very expensive and being able to use Indian engineering talent and capabilities, we've been able to significantly lower the cost of these machines by virtue of -- without compromising the technology and quality -- bring our cost.

The manufacturing processes and flow lines are designed to capture the quality parameters at every stage and assure adherence every stage before passing on to the next stage. [Presentation]

We have deployed auto-guided vehicles and digitalized feedback based measurement system, the quality in each state. Our capturing systems are deployed in machine shops to track the process capabilities real time. [Presentation]

So for us backward integration is a very selectively strategic initiative where we put opportunities by which we are able to enhance [indiscernible]. [Presentation]

Process and people are 2 key enablers in this journey. Our process excellence is driven by adoption of total quality management. Elgi winning the 2019 Deming Prize, while it is a testimony to our adoption of TQM has also put a huge responsibility on us to continue to institutionalize and excel in TQM. People, the biggest asset that we perpetually invest in are leveraging the world-class product and process excellence to meet and exceed customer expectation, which we believe is what will take us the company that we [ aspirate ]. [Presentation]

[indiscernible] the next time. Some kind of key events that have happened since the last year. We've launched some exciting new products in our [indiscernible] both for the construction and mining as well as the water well segment. The water well is still a little subdued, but there's still has an opportunity for us to keep innovating which is what we're doing. This is a new product that we have launched. We had the overview, enhanced the trade. This is our [ digital ] compressor that gives us the ability to go deeper into some of the markets where our current -- earlier designs were not so competitive. We have introduced these products in Europe. So we -- I think there's a lot of exciting possibilities out of India, [ especially ] in the U.S. market. This is initiative that we run every year. It's our technology made. We call it the state of the future. We have students, faculty, researchers come in and make a lot of presentation. That's an event that we celebrate, we showcase some of the new stuff that we have done through selling outside the [ network ] people, so this was started on the 15th of December of last year. We do it every year 15th of this month. And for the engagement globally, outstanding this year, we had what we call as our finish line -- whatsyourfinishline challenge. This is a preamble or a processor to the Bharat profile to [indiscernible] get the entire company involved in terms of setting personal goals, competing with each other all over the world. So the participation has just been amazing and this is -- and to see the -- this is the round of [indiscernible] all about employee all over the world [indiscernible] doing it and congratulations to the corporate communications team. They have done an excellent program of this every year. And of course, we participate, we contributed to the Coimbatore Marathon where it proceeds a big goal for cancer treatment money that is spend. And we have closed about 1,200 employees actually running in about [indiscernible]. Mental Health, we have a program, people can dial in, speak to counselors. This is a follow up on what happened in COVID and we are continuing that program. So people can -- there is a subscription that we have and people can call in and speak with you. Some of the key initiatives we talked obviously the last [ meet ] itself talent management program. It's -- it's come a long way and is -- we have covered quite a few of our [indiscernible] right from manager onwards [indiscernible] staff, we have identified the key positions in the company. We have identified where there are successors, what needs to be done for development, which are the areas where we are vulnerable and what is it that we are planning to do. So there's an overall program. That's a long process and it will take up a few years to get into a certain metro or state, but it's a good start, and we are coming along quite nicely. So this is basically some details about what we call it integration of talent. So we are in Phase 3 and this is the other program that we talked about in our -- in one of the thing is project COSMOS. It was a variable cost reduction program. We started it. We used an external agency. And -- it was an 8-month program involvement of people pretty much across the company. And this was our target, and we are pretty much achieving that target. This will be recurring annual savings provided the sales that have [indiscernible] future date, so we have to be careful. The digital transformation is something that we incubated 1.5 years ago. There's a lot of high [indiscernible] of noise about digitization and some people say digitize [indiscernible] and you're going to ask them what does that mean. We had some review of [indiscernible] basically says nobody has a clue what that is. So we said it's too -- it's too [ fashionable ]. But at the same time, this is something that's quite powerful. We need to put into it, we've got to learn and we got to understand this. So we started this program and we have created a small nimble organization, and we have also created networks into colleges. We call it the Digital Dojo, we have set up Elgi centers in colleges where we provide students with live projects and students actually do projects that are for the company and specific thing, there's been very good traction in that journey. And for us, basically, the starting point or to improve the digital [ portion ] of the company. Basically, in our opinion digital transformation or we have to leverage the power of digital technologies. It has to be in the hands of every employee of the company. It cannot be -- it's not like an ERP that you buy a box and come and keep it into the -- into the company and make it work. It's all the digital tools something that the actual practitioners of business have to employ the specifically [ here what ] so it means that digital portion has to go up. They need to know how and where they can leverage the power of this, so that's really what our starting part of the journey is concerned. We are moving along that. So we have to wait and see how -- we've got some good successes like our monthly MIS, our account closure happened very quickly. I think third working that we have our P&L. So these are all significant improvements that have come out a bit. So we continue to do that. So our goal, to be mentioned on goals. One is how can we improve stakeholder experience of the company by using the technology? And the other is how can we improve our processes currently to become more efficient and more effective in value [indiscernible]? So these are 2 drivers or goals that we are trying to [indiscernible]. ESG is something that -- okay. I mean this is not something that we are doing because statutorily we have to report. This is something that we have been following for many, many years. It is just that we didn't know that it was gonna be ESG. We were doing it because it is the right thing to do. So we formalized it this year. Again, we used the services of an outside agency to bring in -- bring some clarity, bring some definition into what we need to do or what we are doing and how will we report it and how we monitor it, how we review it. So we looked at multiple dimensions of -- for defining our goals, basically, we said these are the focus areas that our stakeholders, both internal and external. We even spoke to some of you represented in the view of everyone to understand what is it that's important for you. We spoke to customers, and we spoke to distributors, suppliers, employees, and then we say, as management was in the peaking and then what are the reporting requirements that are statutorily required, we have put them on together, and we've arrived at our agenda and it goes all the way up to the Board. We have a very strong sharing strategy, which consists of senior leaders. So this is exactly that's very important for us, not something that we have to do but it is something that we want to do. Now I'll pause here, and I will let JK, our CFO, take over on finance, he talk about the [indiscernible] externally.

So I hope, I'm audible. Okay. Sorry about my throat. It's not good and so my voice, I'm sounding different that much I know, and it has not been so. No, no it's fine as long as they don't have an objection. So -- so of course, financially something that we talk every quarter and keep looking at these numbers quite often. But still, it is another opportunity for us to give you an overview as well as talk us through a little into the future, right? So that's what we are attempting to do here. So let me start with how we are looking at this year. So we believe that we are going to closed the year with about a 19% growth compared to what we did. And I've just tried to kind of give you a flavor of how we are doing across the regions, which are the key regions for us and along with the other business that we do. But one of the important point, while 19% growth is impressive, just to add some sugar to it, if I really take out the opportunity, one time that we had in the previous year, which was about the oxygen. If I just knock it off, this 19% would be somewhere closer to about 23%, 24%. And which is one of the reason why you are seeing also the growth in ISAAME is not up to that market because bulk of them are in ISAAME. So if we just knock it off, it is in the region of about 8% becomes about 15%, and India is much bigger. So overall, we are looking to do a good year. All the regions are fired well as you can look at the key regions, both Europe and North America are pretty well performed. We have some more interesting information that's coming up to you. So you will see it about North America a little later. So that's the overall story on the top line for the year. Of course, we have been fortunate that the demand kept very well across the markets, and our teams have been doing a great job in capitalizing them. Just moving on, just a little longer period of time that you are looking at. We are talking about something close INR 3,000 crores, moving from INR 1,600 crores just about 5 years back. So about a 14% to 15% CAGR is what we are talking about during this period and about a 25% growth in the last 2 years each year. So that's the kind of number that we are talking about. And as you can see also, the rest of the world contribution to the overall sales is constantly growing, which is what we are really investing and out there to do. So that's the snapshot for you about the constituents of our revenue. Now of course, the other interesting thing or even more important thing is about the EBITDA. We have really moved the number from INR 1,760 million to INR 3,800 crore. So our EBITDA CAGR is about 18%. That's what we have done. Of course, while we are still absorbing losses of Europe, which we talk about in every call, the only point that I would like to mention here is that you can see that the losses that we are having in Europe is coming down, and that is as planned, and we expect it to go down further. And in a couple of years, we should be in a breakeven mode. That's one thing. And of course, as you can again see, from the subsidiaries, we are really increasing the EBITDA and we are constantly managing our 8 years business. So overall, it's very -- pretty much in line with our plan. It's another thing that I would say, both in terms of revenue and in terms of the EBITDA, we are performing to our plans this year. This is the most interesting slide. Of course, today, we are very lucky and all the teams, whatever we have done over the years have resulted in us becoming cash positive now. So we do not have any net debt. As of this month, we have paid off the debts wherever it makes sense. Of course, the net debt, what we call it, we have some debt where it makes sense. We have some cash. Net of it, we are positive, of course, also largely aided recently by the fact that we sold some of the property in U.S., which brought us some cash. But even without that, as you can see, we have been consistently dropping. This is in spite of the fact that we have very consciously invested in working capital at a higher level since we are seeing growth opportunities in key markets, and there is a strategic investment in inventory that's going on. In spite of that, we are able to bring that thing -- the point I'm making is working capital investments continue to be high, and we are doing it in a very strategic manner. In spite of that, the cash position has been improving. Sorry. Sorry. Okay. So that was the snapshot for the year, but I would like to also leave you with what we are looking it as a 3-year ahead. As you know, this is the third cycle of the strategic plan that we are doing, as we said about a couple of years back. We have started consistently doing 3-year roll forward plan for the businesses across all the regions, across all products. So then we say this is what we are going to take it and the first year's number becomes the budget. So we are through with our planning for the year already. We started it well in advance, and we always already have the number for what we are looking at. So we are saying that we are going to be $450 million that we plan to do by FY '26. So just a snapshot of it is that we are saying that we will do about a 10% CAGR in the years to come and the breakup of revenue that we will have is about 40-60. And the growth, 2/3 of the growth will come from the rest of the world, right? That's one thing. And the CAGR, if you look at it, the CAGR for India is going to be about 7%. The CAGR from the global markets is going to be about 13%. So the 10% is split like that. The $450 million is about 40-60. We are again very consistently driving this number to the plan that we have. We have also said that we are targeting a 16% EBITDA, which we committed about 3 years back when we said we would have a long-term plan. We are on the journey. We are about at 13.7%, we have really pushed the needle in terms of getting our market positioning and pricing, which has helped us to reach this besides the volume that we are able to do. So we are kind of quite well placed in terms of reaching that 16% goal. As far as the return of capital employed, we said about 30%. We are at 28% already, which I would like to mention is, of course, we have some investment plans coming up in the new facilities that we would move. So temporarily, there will be an investment that will happen in the next couple of years as we start the project. So you will see some ROCE going down, but then we'll pick back and come to 30%. That's our intention. Just a regional flavor of this breakup of the revenue and the plans that we have. Most of the regions have first stuck to the plan that they gave last year. So since we do it every year, we have seen that the regions are really retaining their plan. The growth targets and the growth percentages that we have planned for is continuing to be very close to what we had done. Whatever are the initiatives that are required to make these numbers happen. The regions are very focused on them and wherever they need to kind of recalibrate and do some course corrections we have been doing. The other dimension is driving profitability and cash. As of now, as I said, with the help of the regions, we are going to drive the profitability that we are looking at. We would -- we have seen a cash turning positive with the investments. We will see some dip, we'll have some [ debt ], but then again, we will bounce back to making the cash that we have. So overall, we have some interesting time ahead. We are looking forward to the next 3 years, very action-packed both in terms of what's going to happen in the market as well as what we will do at the back end to make it happen. Thank you.

I think next -- I'd like [indiscernible] U.S. similarly [indiscernible].

Perfect. While I appreciate the -- I think I can hear myself echo. You can let me know if it's disruptive or in any way. But I appreciate the opportunity to talk a little bit about the North American region. Can we go to the next slide, [indiscernible]? So this is my team here. I'd like to basically give you a bit of an overview of the experience that we have. So North America, we have 5 businesses with 4 leaders. So starting from the left to right, Elgi Industrial, which is the business that sources compressed air product and supplies them to distributors in the U.S. is led by Malcolm Lindsay, our Senior Vice President. Many, many years of compressed air experience has a lot of experience scaling up smaller businesses has experienced in auxiliary businesses such as piping as well and very sharp with strategy. And this is the business that requires the most strategic heft at the moment in terms of the various go-to-market strategies that were employed. We have roughly 40 employees at Elgi Industrial, and we've grown about 50% from last year. Next, moving right. No, it still on the same slide -- so next person on screen is Zeke Hendrix. He leads our Portables business. We basically source products from a factory in Rotair and sell them to various customers in the U.S., primarily regional and national rental outfits. And in the past year, we actually started branding our machines as Elgi rather than Rotair. And there is a significant brand rub-off effect that we have on our industrial business as well because many of the -- most of the portable businesses are towed behind pickup trucks and other trucks. So they serve as rolling billboards for [ advertising ]. Portables team grown about 40 -- and again, he leads Elgi distribution operations, which is essentially the leader of Patton's and Michigan Air. And this is an important [ og ] change that we've made this year so that we can -- type of operational improvements in both. Patton's and Michigan Air together have nearly 90 employees, and both businesses have grown significantly over last year. And finally, Greg Hood, he's the leader of our medical business. Patton's Medical, especially since COVID has been very, very bullish. We've seen a lot of investment in the healthcare business and healthcare capacity, frankly, in North America, and his team has done a fantastic job of building our brand. Nearly 30 employees, and we've grown a little over 20% this year. So [indiscernible] you can go to the next slide. These are -- I thought it would be pertinent to share a few of our key milestones since we're celebrating our tenth year in North America. So in 2012, we launched Elgi North America and coincided with the acquisition of Patton's and Patton's Medical. In 2013, we opened up our first headquarters in Charlotte. In 2018, we started the development of our Nexus go-to-market strategy. Many of you might be aware of Project Phoenix that we ran in India. So Project Nexus was what we -- was its equivalent in North America. 2019 was a very rich year. We started our first joint venture initiative in Seattle called Evergreen Compressed Air with [ Mike Keim ]. We launched the AB Series machine in U.S. configuration for the oil-free market. And we also co-founded Patton's with California in Los Angeles, which is the big -- which is the single largest market for compressed air. Logistically moving to the right, we opened the West Coast warehouse to better serve North America from 2 locations. It gives us a significant improvement in terms of how quickly we can get products out to customers. We also had our second largest acquisition in North America, which was Michigan Air Solutions and based out at Grand Rapids. Moving on to 2020, we had 3 joint ventures. We cofounded CAST, which is a joint venture addressing the Houston market. We co-founded G3 Industrial Solutions as well in Kansas City. And aside from that, we also moved to our new headquarters and facility in Steel Creek, our new development in Charlotte. It gives us far more capacity in terms of warehousing and office space. And that's when we really expanded into the portable compressed air market as well, launching Elgi portable compressors when we acquired the rights to do business from FTG, the prior distributor. Moving on to 2021, we co-founded Gentex Air Solutions in Dallas. I believe Dallas is the third or fourth largest market for compressed air in the U.S. And in 2022, a couple of key milestones, 10,000 Elgi equipment installation, and we passed $25 million in industrial revenue. Let's go to the next slide. So now I'd like to deep dive a little bit on the Elgi Industrial business, which is Malcolm's business. I think the business that most of you are likely most interested about, business to source Elgi products from India and sell them to distributors. As a snapshot, we've been in the market for 10 years. We have over 100 channel partners and we have nearly 4% market share. And the reasons we win are that we have a very clear go-to-market strategy in terms of how we prioritize the top markets. Very similar to India. We have a maniacal focus on customer service, both on the sales side and aftermarket out of accounts. And finally, we have a very strong team with leadership at all different levels, that's going to set us up for growth as well. Next slide, [indiscernible]. So talking a little bit about the strategic priorities, starting with the market outlook. As our performance over the past year shows, we continue to be very -- we continue to express -- expect strong demand. And when we -- when I look at the complexion of that demand changing, we're seeing increasing demand for energy efficiency and also for our oil-free segment, both areas that were well placed to be able to address. We're also seeing channel consolidation, which basically means that OEs are investing actively to either acquire distributors or control how they go to market. And that is something that we're very thoughtful about as well. Our goals, as I think through the next [ SBB ] period is a double-digit market share by FY '26 to drive profitability via aftermarket, increased control over the channels that we operate in and then focus on larger machines in oil-free. And the last point is somewhat limited -- is somewhat linked rather to our control over our channel, the more control we have over our channel, the more strategic we can be about the products we want to sell. So accordingly, with our goals, what are our strategic priorities, we really want to focus on scaling distribution in our top 40 markets. And then as a smaller goal is to invest in building a distinct oil-free organization. [ Suda ], next slide. So when I jump into the industrial business and think about how our channel has changed over time and hopefully paint a story of how we're very deliberate about controlling channel. I've used 2019 as a starting point because that's when we really kicked off our go-to-market activities to think about -- to think deliberately about the market. So in 2019, you can see that the gray bar represents all independent distributors, independent multi-brand nonexclusive distributors and then the red band denotes essentially Patton's, which we called own channel. So the 3 channels are independent distributors, own channels, which would be Patton's and Michigan Air and then the Green would be joint ventures. Now as you move from 2019 to 2023, the contribution from our owned and JV channels has been significant. And the reason why this is important is this is a stable channel, right? There is no risk of our JV partners moving to other brands. And obviously, there's no risk of our distribution businesses moving to other brands. So this allows us to be able to better predict our sales and our go-to-market plans for the future. Now one thing this chart doesn't necessarily show is how ingrained we become with some of our independent channels over the past years. And today, we have probably over 90 independent distributors and a significant portion of them only exclusively represent Elgi. And that's also significant because the more Elgi machines they have in their market, the more loyal they are to us because the Elgi machines become a more significant source of aftermarket revenue and profit. So let's go to the last slide, [ Suda ]. So I believe in the past, we've spoken a lot about our strategy to attract independent distributors. We've talked a little bit about Patton's and Michigan Air. So today, I wanted to speak a little bit more about our joint venture strategy. So the goal here is to be -- to bring -- is to be very deliberate about our entry into the top 40 compressor markets, frankly, with a focus on top 20. The basic mechanism is that we try to partner with employees who are compressed air experts and veterans in the industry, and we help fund and support set up -- the setup of a compressed air distribution business. The partners buy out our share over time with their profits. Why this works is that there's a strong alignment of interests. In order for the joint ventures to succeed, they must prioritize sales of units because that's the source of aftermarket revenue. And it's a highly efficient allocation of capital for us as well. So just going over 5 joint ventures that we have here. So starting with Seattle, they've been in operation for 3.5 years. They were really our test or guinea pig joint venture. The Seattle market is #20 in top 40 and we roughly have 4.2% market share. The next one is Patton's of California. This was a unique execution because we actually started this business as a branch of our existing Pattons' office and then we migrated it over to Brandon, our joint venture partner. This business has been in operations for 3 years. It's the #1 market in the U.S., and we have a market share of 2.5%. Now one of the things that I need to point out about Los Angeles is that it was probably one of the hardest hit cities during COVID both we had disproportionate impact on supply chain and also our ability to serve customers in the market. So that's likely one of the reasons as to why our share is slightly below where we would like for it to be. The next one is CAST, Compressed Air South Texas, been in operations a little over 3 years. It's the #5 market in the U.S. and we're coming up on 2% market share. Then moving to G3 and Gentex. G3 is based in Kansas City, 2.5 years in operations, it's the #11 market in the top 40, and we're 7% market share. So arguably our most successful joint venture, and in this joint venture, we actually piloted a combination of having 2 partners, a senior partner and a junior partner and junior partners and service senior partners and sales. So this multidimensional aspect has also brought a lot of success. And we followed that model into Dallas, Gentex Air Solutions, barely 2 years in business, fourth biggest market in the U.S. and we're coming up on 4.5% market share. So this is a very unique go-to-market strategy for Elgi. It's one that we continue to invest in as opportunities present given that it gives us more control over our channel and ultimately, our ability to achieve our CK2 goals as it pertains to the U.S. So again, I appreciate your time, and I'm happy to stick around to answer any questions you may have.

My name is Venu Madhav and I'm responsible for new product development and [indiscernible]. The technology, there is always a consistent growth focus in enhancing our product to maintain the stated means and unstated [indiscernible]. As always, this year also, we have enhanced better products with respect to their performance [indiscernible] group other segments. And we have done some new products in the company with new application and we also incorporated certain features, which will give some [indiscernible] of our products as [indiscernible]. So in the [indiscernible] product, [indiscernible] 160 kilowatt is becoming more and more prominent in the electronics and in [ food ] and pharma sector. And in Europe, there is a requirement of the retail prospective the [indiscernible]. At times we are using IE3 motor [indiscernible] motor. And that means the current energy basis, there are a lot of requirements come into [indiscernible] energy recovery from the [indiscernible] there. And in America, there are requirements where we do the compressor [indiscernible]. So there are multiple requirements that are coming. So taking all these requirements we have enhanced our existing product in the range of 90 to 160 kilowatts. So this product now is superior in [indiscernible] maybe from the existing. We are around 5% to 6% in [indiscernible] grow. The flow rate has been increased, and this has optional features like key [indiscernible] system, pull start when [indiscernible] currently our compressors we are recommending a 2 degree centigrade, now it can go up to minus 15 degrees also the compressor can be [indiscernible] and operated. So this product is launched recently through the [indiscernible]. So there is a requirement increasingly, [indiscernible] capacity compressor and turning to very low capacity is becoming more and more dominant in the market. When we are turning down, there are 2 challenges. One, is the efficiency, we do [indiscernible] motor efficiency dropped significantly down. And there are contribution on other people using [indiscernible] motors where they are [indiscernible] but still, the efficiency will come down. And the management of thermal because the compressor operating at 100% and the compressor operating at 20%, but [indiscernible] profile of thermal management is completely different. So to have in this, there is a need for developing a unique system. So we have all of permanent magnet motors that [indiscernible] of IE7 efficiency. IE7 is not a standard which is recorded however it is significantly better than IE5 the efficiency. Most importantly, this motor ensures constant efficiency up to 40% to 30% turndown and very small drop when we turn [indiscernible]. So the benefit that was significant energy saving at all the capacity of what we are using. And we developed our own indigenous ITV, that is Intelligent Thermal Valve, which operates based on the average and [indiscernible] load conditions of the compressor at various pressures and ensures the thermal management wherever [indiscernible]. This [indiscernible] so we adopted this. So this is a full feature version in 11 to 45 kilowatts, we think a very excessive [ turndown ] up to 20% without compromising the efficiency and reliability of the machines that have been developed and launched. And we are in the process of developing 55 to 75 kilowatts, we are at proto testing now and they will go to the market soon in the next 5 to 6 months' time. So this is new mobility. We would have talking about electric vehicles. So electric buses are also becoming more and more popular. And there are several OEMs working on developing the electric buses and people are approaching for compressor. The compressed air finds this application in breaking and also suspension of this electrical vehicle. And the conventional reciprocating compressors are [ base ] compressors and will not meet the stringent vibrational noise [indiscernible] of this. So people are looking for a very specific and unique screw compressor application for this. So we have developed a compressor, which for a [ 9 meter ] bus and [ 12 meter ] bus, there are 3 to 4 OEMs tested our compressor. So with the performance is very well accepted and they [indiscernible] to test on more and more [indiscernible] become a very important product in the new [indiscernible] segment as we move forward. And as the railways are getting modernized. They are looking for modern components. Currently, the railways uses a Pneumatic wiper. We have limitations on Pneumatic wiper always operate once be independent after raining condition or weather condition, the coverage -- the coverage of the smooth [indiscernible] is less with the Pneumatic and limited like. So they are looking for a very smooth operation multi-speed depending upon the rain, for example if the rain is very high so the operation has been -- it was operated at a different speed. So they are looking at multi-speed and very precision control of the speed, smooth operation and enhanced [ life ]. So we will -- since we are a dominant supplier for railways for our compressors. There is a need for us to this also [indiscernible]. So this product as usual railways will take the time to [indiscernible] the test. The first level tests have been completed and it is accepted and that we are supplying more for further enhancement [indiscernible]. The value segment as there is -- we again said last time also we talked about it is a premium segment and there is a value segment where people are looking for very low duty [indiscernible] less operating conditions not looking for a very high-end features. So there is a need for [indiscernible]. So we developed our compressors. Our [indiscernible] premium segments in [indiscernible]. So we developed [indiscernible]. So this product will meet the value and for value segment requirements without compromising with the performance and the [indiscernible] of the products. So there are some new features and some technology innovations which will bring down and tailored specifications to meet the [indiscernible] segment requirements. So the range in the sale, we have about 11 to 22 kilowatt also the range has been expanded. Here, these are direct drive. They are not encapsulated. And they -- today, we don't have [indiscernible] version with respect to [indiscernible] kilowatt range. So, this is also there which [indiscernible]. So there is a compressor range has been developed with the [indiscernible] and we are expecting this segment is up to 75 kilowatt from 30 to 75 kilowatt product is under development. So this tells majority of what we have. And in LD, there is direct [indiscernible]. They already talk to the international [indiscernible]. So we launched this product in India, which is a very innovative product compared to the current [indiscernible] versions. It should be real technology with enhanced performance and [indiscernible], that product has been offered for Europe requirements where it is going for Europe on the with reference through certifications everything will be different. So we have developed the product and we have upgraded the product [indiscernible] and this product is in [indiscernible]. I mean around 100 machines have been validated in various distributor places and the response is very positive, and we are in the process of launching -- increasing the volumes and supply flow of this particular product. And this is electric portable compressors. There is as the electricity availability in the mining is increasing more and more. The usage of electric compressors in the mining sector is becoming also more and more popular. And they are also looking for more productivity and more capacity to enhance their requirements. So we started off with 22 kilowatts and last year, when I talk to [indiscernible] product range with high pressure which gives high productivity. This product is also launched from the customer the feedback is encouraging and we have this product more into the business in the coming financial year. Outdoor Protection Kit. Again, there is a tendency of keeping low compressor room, compressor will be placed wherever they are -- is coming up. And we are also responding positively on this. The compressor need to have kits to protect from sun, to protect from weather, snow, wind, depending on the region and depending on exactly what it is doing. Last year, we've developed this for lubricated compressors across the [ range ] and it was the well accepted. As part of our enhancement offset we've integrated [indiscernible] compressor. We have developed [indiscernible] no protection kit so compressor can be kept anywhere. So there are other products, we launched in the last 6 months. This is 7 to 10 kilowatt Alpha version. Again, this is an upgraded version. This product puts us, the company's performance in #1 position in majority of the compressor ratings and this is launching now. [ 430/330 ] this is called [indiscernible] application and [ 850 150 ] this is specifically for middle east and Africa market they are looking for a high [indiscernible] solution. And we've launched our 4th generation controller and also the [indiscernible] compressors. So the implementation of [indiscernible] is in progress. There was -- it was progressing now. We could not do because [indiscernible] complex. The situation is now improved, so we are tracking [indiscernible] incorporated in all our compressors from a better customer experience. And there are several other products like Air Cooled Alpha. It will be air cooled versions [indiscernible] enhancement now and we are developing a super-premium thing. We are talking about a 2 stage compressor in 90 to 160 kilowatt range. Efficiency is important in compressor [indiscernible] it will become more and more important because the impact will be high. So 90 to 160 kilowatt [indiscernible] from an efficiency perspective. So we are developing a super-premium which will put us to maybe at least 2% to 2.5% [indiscernible] the best in the world today. So that's the margins what we have [indiscernible] superior product. [indiscernible] about it, and we are also working on relatively compressor for railway application particularly for [indiscernible] segment and these questions are already [indiscernible]. So I think that's what the overall development in the last 1 year [indiscernible].

Thank you, Jai. Thank you. Thank you [indiscernible]. Coming back to some of the feedback that we received from what [indiscernible] again. If you had how much we had invested [indiscernible] like savings, now we're giving a lot of continuous update on what we do with our backward integration. As far as the [indiscernible] is concerned, we've invested -- our plan is to invest about INR 24 crores, 240 million and our payback is less than 6 years -- or less than 5 years [indiscernible]. So that's basically and we are on track to achieve that. [Indiscernible] something like what's our market share? We don't like to divest too much [indiscernible] because all this is public whatever we speak here is [indiscernible] we tried to [indiscernible] applications, new growth areas and outlook. The letting specific that we have covered, we have to do it. Quantitative data in terms of market share, like I said, it's best that we don't talk too much about that. Major competitors in India or worldwide [indiscernible] #1, #2 and #3 for the moment. We are #6 in the ranking [indiscernible] our best estimate based on public intervention, we put it all together from multiple sources. Roughly, we are [indiscernible]. Any new customers we have [indiscernible] who's doing a lot of work in America and also in Europe and then there's is Turkish company called [indiscernible] Northern India. Top 5 countries, industries, product segments in terms of horsepower. Our top countries are India, North America, Europe, Australia [indiscernible] coming from. Again, product segment-wise position sales [indiscernible]. Details on global sales/mix market size, market share, relative position, we presented last time Australia. Now we're present in North America and every time we come in, we'll take a significant [indiscernible]. So thank you. Any questions, would be happy to answer.

[indiscernible] so where I am coming from [indiscernible] alloys or the raw materials [indiscernible] in this particular castings and so on and so forth. So I think that could be one of the ways to control the quality or to measure the quality, I mean, when we get the materials from our suppliers. Secondly, we have seen some other products in the industrial segment, not necessarily our industry, but let's say something like turbines or something like gas compressors, arguably, these are even more technologically advanced products than what we do. So even these players don't tend to have so much control over quality, they also rely on their suppliers for this kind of high-end castings and raw materials and some of the components. So if they are able to do so without integrating backward by themselves, what is the need for us to do so? I mean -- so if it were for the margin perspective, we could understand that will give you probably slightly more margins. But as we have clearly mentioned, that is not a focus area at all when we backward integrate. So if you can elaborate why not employing other means to control quality and going for things which are already available in the market, for which there are already established Tier 1 suppliers in the country. What is the need to do so?

So, it's a fair question. I think the [indiscernible] needs to be understood in the context, right? So if our ambition was to be a significant player in the Indian market, we probably would have [indiscernible]. We were a significant -- we continue to be a significant player in the Indian market. We were a significant player even earlier in the Indian market, where we didn't have a market. Now the difference is, we are a known brand in India. And if there is a failure, a customer [indiscernible], yes? I think the businesses that you are referring to are India-centric. And they have brands where the customers [indiscernible], right? When you are trying to gain entry into markets like Europe and America, where we are not selling on price. Of course, we have to be [indiscernible] but we have not seen the discount segment of the market [indiscernible] because bulk of the market is in the center, which is a value market. Now when you want to grow and where the customer already has the sale option, an existing, right, so you cannot afford it, but you may provide a logical explanation of why the failure happened, which will be accepted [indiscernible] from the company, right? To answer your question, can we not pick it up when [indiscernible]. Some of it, yes. But some of it like [indiscernible] inside a casting, you will not see the customer experience, okay? Now you can turn around and say, "Oh, this is not my production, it is from m vendor," but it's a vendor that you [indiscernible] do business. So it's not exactly the same, right? Ten years from now, 15 years from now, when the ecosystem in our country evolved to the point where they deliver to that [indiscernible] right, then maybe we don't need to -- maybe we get divested or maybe spin it off as separate business, right? But till such time, we want to protect it. Quality is obsessively #1. If you don't have it, you're not going to have a sustained presence anymore. If you look at what [indiscernible] presented in America -- in North America, for 10 years, if you want to get consistent business from the same customer, same distributor, if you didn't have the quality, if you have these niggling failures [indiscernible] and that's the reason.

Sure. Understood. Just a second question would be on the overall -- the cost breakup. So let's say, if you could break down the cost in terms of various components, let's say, for screw compressor for reciprocating for centrifugal, how much does the [indiscernible] end cost, how much -- what would be the cost of motor, different castings, blowers, and different other components, not necessarily for your products. I mean that would be probably too much confidential, but at the industry level, just to understand, I mean, what are the components which represent significant cost when you are manufacturing accomplishment?

[indiscernible] by present, industry and [indiscernible] because it's not much of a -- it's not like we make different type of compressors from us, right? So I don't want to go into too much detail. At a very broad level, the cost breakup for most companies will be 30% [indiscernible] and 30% motor, 40% is the rest, right? So that's roughly the breakup. Sorry.

This is Ravi from Spark Capital. Sorry, I joined a bit late.

We just -- we just have [indiscernible] back for you.

Sir, just had a few questions. One is, so basically, globally, do you have any market share ambition across the key geographies like U.S., Europe, Australia, is there any target that is there in mind? So for example, in India, we are like -- consistently, we are #2, 20% market share. Eyes closed, you can say that, so basically, we have been maintaining that and probably it might have even [indiscernible]. But in the larger markets, is there any revenue ambition or market share ambition that you have, which you would like to achieve over the next, whatever, 4 years, 5 years, 10 years, et cetera. Because I believe Indian market, we will be growing along with the market. There's nothing called big scope for market share gains. You can correct me if I'm wrong. But in the global markets, what is the ambition there, revenue ambition or market share ambition? This is my first question.

Yes. So our longer-term aspiration from a revenue point of view, what we call a CK2 is 1.6 billion by '25-'26 that [indiscernible] long run rate aspiration. And we've got this up to 2, 3-year rolling strategic business plan. Like we said, with the other versions of it, and we think it's being a [indiscernible] but in '25-'26, we will [indiscernible]. What is -- are there specific revenue targets as part of this in each of the regions [indiscernible] but not something that I would like to share in this call because that will be too sensitive, right? As far as India is concerned, the goal is clearly not to just host along with the growth. The Board is to aggressively go after market share, and we will continue to do that, right? We've done multiple initiatives and we still believe there are a lot more opportunities that we go after. So this is not about auto-pilot mode in India, far from it [indiscernible] right.

And the second question is within India, so we are strong in piston screw. What about centrifugal compressors. So your thoughts on that. And also, after sales, you used to say that there are a lot of spurious parts and only things which are there. Is there any ways in which we can plug the hole there and take the after sales percentage higher from here?

The centrifugal is a product that we are playing it, not necessarily making it. We have a partnership and we sell those products in the Indian market. It's just strategy that we're working on, right? So we look at all the product opportunities in this entire space called compressors, right, and we prioritize and go after them, right? So centrifugal is important, but it's not the #1 priority at the moment, but we have some activity that's going on. As far as spurious parts are concerned, there's 20% of the customers [indiscernible] they will ask for discount. There's no point in wasting your time with the customers, right. 80% of the customers, you are available and the parts are available when they want it, I don't think price is a problem. It's not so much a price issue, it's more of a presence and reach issue. You need to be there with the customer. And that's really what it is. And that's really the program that we are working on to improve market share even after...

Sir, I have 2 questions. The first one is on Europe. And just to understand our strategy over there. I think for the past 2 years, we've launched a lot of products over the AB series, the LD series is also coming. So if you could just highlight what is the current product and distribution gaps that are there in Europe, which we need to address for us to grow in our revenue and also become profitable over there. And just a [indiscernible] to that, when you look at the European market, given you've made a presence in U.S. as well, how do you think that market is different to the U.S. one? And so from a strategic point, what are the things that we need to do differently over there?

Yes. So our strategy in Europe is to be present in all countries, except Germany because Germany is a tough market. We will enter Germany after we've stabilized ourselves in all the other countries [indiscernible] So that's strategy number 1 in terms of using [indiscernible]. As far as our presence today in all those markets, we are fully present, right? When I say fully present, we are present with our own people for sales, we are present with our people for service, and we have channels in place, credible channels in place, right? Now then it's a matter of just running that machine. You keep running that machine and you keep improving. I mean that's really the phase that we are in. We are not really going to change in any strategy that is going deeper and deeper and deeper into what you've built over the last 3, 4 years. Now the difference between the U.S. and Europe, one is they all speak English; here, they speak many languages, right? And that's really a [indiscernible] for different behavior, culturally very different. You can't have 1 homogenous organization in 1 central place that manages the whole region. You need to be local in each of these countries. And therefore, it's a little bit more expensive to have a organization in Europe compared to [indiscernible]. Now having said that, what is our difference in our strategy between the U.S. and Europe was when we entered the U.S., we had to make a credible presence and communication and [indiscernible] acquisition was a example. So that was a communication, yes, it was brought in certain business, but the strategic intent behind it was to communicate to the distribution community that we are putting serious money on the table, and we are here for the long term, right? Now what did it cost us? The whole [indiscernible] acquisition costed us $34 million, right? Now the whole organic growth in terms of loss, if you take the loss as an investment, will be less than that, right? So unfortunately, when I put it in the P&L, it looks bad [indiscernible] right? [indiscernible] but effectively, the numbers, if you look at Europe, exactly [indiscernible] pure cash, right?

The second question that I had...

Yes. So I'm going to -- just a moment, so I'm going to [indiscernible] if you have any questions for him specifically, then he can move on. Yes.

Hello? Yes, this is something which we are hearing in the market nowadays is China plus 1, Europe plus 1 and all. So in North America, is there anything specific which is happening in these terms like there would be a major Chinese supplier and people are looking to replace him with an Indian and do we stand to gain disproportionately?

[indiscernible] did you get the question? Okay, I'll answer that question, right? I think the U.S., North American market is a very open market, that politics and [indiscernible] and the people level, their behavior is [indiscernible] right, there is no thing like, oh, you are Chinese so I'll not buy from you, you're Indian, I'll not buy from you, that doesn't exist at all, right? So I don't see an opportunity for an Indian company to have a special favor because of the China Plus One strategy, right, [indiscernible] China Plus One strategy is more a sourcing, derisking rather than any political bias or anything [indiscernible].

Just had 1 more question actually on the oil-free side. Like, broadly, we've got 2 sort of offerings over there, which is the traditional 2-stage [indiscernible]. If you could just throw some light on how large are both these products for us currently? What is the traction that we are getting from which end user industries? And within the segment itself, are there any product gaps that you think is inhibiting us to gain a larger share of the pie?

So I don't want to give the specific number of [indiscernible] so I don't want to say that. But what I would like to say is a big chuck of our business of our overall [indiscernible] we've had a significant growth in that segment, not only in India, but having gained certain very [indiscernible] all over the world. So you've got to understand that [indiscernible] distributors' own relationship with customers, oil lubricated compressors technology wise [indiscernible] like everybody knows it. There is no risk perception that is associated with it. So customers are quite happy buying oil-lubricated compressors [indiscernible], right? When it comes to oil-free, there is a certain perception that is a very technically sensitive product, right? Some aspects of it is true, some aspects of it is promote marketing [indiscernible]. So when that happens, when that perception exists, customers tend not to buy from distributors. They like to buy from -- directly from the manufacturers. Now if you look at our go-to-market [indiscernible] India is direct, we are in direct contact with the customer. And therefore, our success rates are far better. Whereas in Europe and in the U.S., we don't have a direct sales [indiscernible] to build a direct sales point, right? So we have to work with distributors even [indiscernible] but it takes time, right? And it's a little longer journey to build the oil-free portfolio outside of the country, right? Now having said that, why we believe that we will keep that -- the curve for us will be not as long and steep, the reason why we believe it is because of AB series. The AB series once it gains a certain traction, behaves exactly like the lubricated in terms of behavior, in terms of sensitivity, in terms of all of it. It's not as sensitive as [indiscernible]. So distributors over a period of time and customers consequently will be able to engage with each other far better than they can with [indiscernible] right? And we're willing to see that in Europe. Our lubricated [indiscernible] compressor distributors selling a lot more AB machines than they were able to sell oil-free machine for the earlier brands that they were [indiscernible], right? So it takes -- it is a journey, but I think our journey will be a lot more shorter in terms of picking it up because of our [indiscernible].

Sir, just continuing on the AB Series compressors. Where are we on the cost curve? Because I remember a few years back, you had highlighted from the China experience, we wanted to bring it down to 100. And that could be a product which could disrupt the entire market. So firstly, on that point?

So right now, if you look at our AB Series, we are at 160% of oil lubricated, right? But oil-free will be 300%, yes? And our AB Series, which is oil-free, is at 106%, right? Now goal is to be 100%, that's a bit of a stretched goal, but that's a goal, right? We are working on some initiatives that probably will move that 160 to about 140, yes. Right now, we have visibility to that, yes? Now we have ideas. We know how to take it down to even 1 way, yes. But the journey from 140 to 120 is a lot to do with customer perception, yes? So we need to go over that perception, build those products, gain the customers' favorable perception and then we are there. So for 120, we have line of sight. From 120 to 100, we still have some work to do.

Sir, and the second question was, I think, on the revenue front, I think what we are talking about is about $450 million in FY '26. I mean, this year, we were looking to end at about 3,000-plus. So that's translating into a 7%, 8% kind of CAGR for the next 3 years. Part of it will be -- globally will be higher, domestic will be slower. But from the interaction we have on the ground in India, there's a lot of momentum on CapEx, especially in India. Both small projects, large projects, especially from the government side as well and private both. So is there any reason why we are more conservative on India and our overall revenue projections?

The reason why we very conservative is we're very confident that with India [indiscernible] right? So it's more our own tentativeness about how much of the India story is actually going to happen from promise to the end, but we don't know, right? We have had this in the past, right, where there's a lot of promise, but the reality was [indiscernible], right? So nothing -- there is no thing that India is not going to happen or be able to lose share in the market in India, happens, we will. It will be far better [indiscernible] right? It is just a conservative point of view, that's point number one. Point number 2 is when the rupee depreciates, the rupee -- India value of sales in dollars terms comes down and that's what has happened now, right? So if you look at INR 3,000 crores that we have projected, whatever was India sales, the value of that in terms of its contribution compared to last year in dollar terms has come down, right? So that's something that we can do, right? Sorry.

Sir, I just wanted -- I had gone to your motor facility yesterday. So they had mentioned that you have also plans to shift that and make it into a bigger integrated facility with your existing facility. So if that's the case, then what's the kind of CapEx we'll be incurring in that?

Okay. So the motor plant CapEx that I referred to earlier, INR 24 crores, $240 million is only equipment in the motor equipment facility, right, and that equipment, whether it is in the current facility or the new facility will go up, right, will keep moving it. We've been talking about an integrated facility because we have 2 factories now, 2 main factories and 2 supply units. So the supply unit is our pressure vessel where you make pressure vessels that is sitting in town. The motor plant is here. The compressor assembly is in town and all the foundry and machining is outside, yes. So we've got a plan to ship all of it to the main campus, right, except probably our motor plant and the pressure vessel because of the supply unit, right? The final units will all know that, right? That we are -- we've started the program for planning. We hope that this calendar year, we will start the project. It will probably take us a couple of years, 2 to 2.5 years to complete it because it's a massive investment because shifting the whole thing, right? Our estimate of the cost is about INR 450 crores, right, but that will happen over a 2.5, 3 years...

[indiscernible].

[indiscernible] except motor and pressure vessel. We will not [indiscernible]. But we haven't seen [indiscernible] it's got the building, it's got the electricity, it's got the infrastructure, so why waste it, right? Why go and invest money in building a building -- building unfortunately does [indiscernible], right?

Sir, but yesterday we were made to believe that the current motor plant is -- the current motor panel is a leased facility. In 2 years, the lease will expire, so probably...

[indiscernible].

Okay. And this we have ordered for this electronic winding machines, that is included in the INR 24 crores or -- okay. So this 0 to 160 HP range completely integrated will be in that larger scheme of things?

Well, it will happen here. But if we can shift it to [indiscernible] I mean our central [indiscernible].

So probably that time the castings also will be 100%. The castings, everything will get integrated?

Casting for the motor?

Yes.

Yes, the foundry guys [indiscernible]. Having a foundry doesn't mean we will buy it at any cost. So if you look at the casting for the motor, yes, we buy the casting from an outside now. Now you can ask the question why is quality not critical there? It is not critical. It is critical only in terms of the surface finish. The inside of it is just a [indiscernible], yes? There is nothing to leak and cause performance issue, right? So if the foundry is not able to make castings that are competitive that [indiscernible].

And sir, the motor comes with the drive nowadays and the drive of the motor, we still rely on a Siemens or an ABB or any of the drive company?

Drive manufacturers [indiscernible].

Yes. So that relationship will still continue. There is no -- so we don't want to get into any of those...

[indiscernible].

And sir, 1 more thing. When Ingersoll Rand, now this Gardner Denver have integrated and they have announced a huge CapEx also. So is it that they are more bullish on the Indian growth story there putting a CapEx capacity expansion while we are not announcing or -- so I just wanted to get that why are we not increasing CapEx?

I don't know why they feel the need to announce things. You're a leader in [indiscernible]. I don't know why they [indiscernible]. I mean when we make our announcements for our factories that we're going to make, we will certainly make an announcement because it's a significant piece of information, right, but not so much to tell customers and make a thing [indiscernible].

So have you at least -- now it's been quite some time that Gardner Denver and Ingersoll Rand are together in the market, are you seeing any change in terms of your share or in terms of their aggression or any?

They're certainly more aggressive than they were in the past, right? I think they should be because they paid a lot of money. But yes, it's -- it doesn't give them a special right to win because they still have to fight hard. We'll give them a good fight. Sometimes we win, sometimes we lose.

And 1 of the other competitors, Kirloskar Pneumatic has now significantly gone for this space?

We don't see them in the market in our business. They seem to be very strong in a lot of other things like gas and refrigeration and stuff like that, yes. Just common...

A follow-up question to the previous question, which I asked earlier. I mean, in terms of increasing our market share in India, when we speak to a lot of compressor dealers and players like that. So basically, the general feedback had been that the market leader, which is Atlas Copco, they have multiple more SKUs. I mean, much more SKUs compared to other players in the industry. And that has been 1 of the key success factors when customers make a choice. Is that something that are you going to address? See, for example, some of the dealers were telling that Atlas would have 10, Elgi would have 5, Ingersoll would have 4 SKUs in the same category or something of that sort? Is that something that you would be addressing? So that is 1 question which I have. And secondly, more in terms of pricing. So average product price for us compared to Atlas, how different it is in India and other geographies. So basically, if you can give your thought process on...

To address your first question, does Atlas have different SKUs? Yes, they do. They have different brands. And as a consequence of having multiple brands, they have multiple products for the same application. Now that's -- see, when you have 30% share of the market and you want to move in the market, you've got to start segmenting the market finer and finer and finer to get to seek your opportunities, right? So in India, like what Venu said, we are building what we call is our EQ Series. Our EQ series is meant to cater to a different segment, right? We don't want to create another brand, right? It's too much premature for Elgi to have another brand like Atlas has CP, they have Mark, they have [ Chacato ], they have all kinds of other brands. That's not -- we are not in that frame yet. So yes, we will take a segment in the market. We will exhaust our opportunities in that segment and go to the next segment, right? And when we go to the next segment, obviously, we need to have a different product, right? And we'll build that, yes? And we'll be very deliberate about it, yes? The second question that you had about what is your pricing, yes? I wish if I ask -- if you ask our sales guys, they will say that we are selling at a price higher than Atlas, right? Now which cannot be true. Not possible, yes? Now if you ask our finance people, they will say we are selling it at a deep discount, right? Because they compare the P&L and then they say, you're selling it at a deep discount, right? Sales guys will come back and say, we are getting -- we're actually selling at a price higher than Atlas, we're losing market. So you will have these extreme views. And the truth is somewhere in between, yes? We are probably lower than Atlas but not by a big margin in India. In Europe, we are not a discount brand, right? So we can't be by virtue of the architecture of our products, right, in terms of performance features. We cannot be 30%, 40%, 50%. But at the same time, if you are just 10% off, no factory manager is going to pay except a 10% discount for an unknown brand, which is made in India, right? Visualize yourself in that role, why would you do that, right? There has to be a sufficient discount to take the risk, right? What that is, is if we can't afford 40, 10 is not enough, imagine somewhere in between, yes? So -- please, yes.

This was much better than [indiscernible] just 1 question, right? So initially, you mentioned that we are now present -- direct presence in 28 countries, right? This journey has been over a few years. The U.S. presentation this time, Australia last time, definitely helps in terms of getting the understanding. If you look at these 28 countries, just based on your experience, are there any markets, for example, the way you mentioned Europe is not 1 market, right, everything language extra makes it different? Are there any countries, market, whichever way you look at it, where we have truly broken out, right? And for those few markets, just a sense of -- I understand the competition would be similar. There are no new players. But, just, is the construct of the market very similar to the way it is in India? Or is that different in some of these markets?

Let me understand your question. Are you saying, is there a market that is similar to India in behavior?

No. So the first question is, are they, in those 28 markets, where we are direct presence, have we really broken out, right, in terms of saying the trajectory now is much more than what we had anticipated, where a few markets would be in terms of below our expectation or not really meeting, right? So that's the first question. And second question is in some of those markets where we are truly getting much more traction, is the market share or the industry, is it similar, or is there like someone who is really a dominant leader or is it still similar to India? You mentioned Copco, for example, India, 30% share, right? So is that similar sort of market overall?

So wherever we are directly present, the only areas where we are not gaining traction is Southeast Asia, right? We've been in Southeast Asia for a long period of time. And there's a reason for it, right? South Asian markets, including India, have a bias towards Western products or even you can add Japanese and Korean to it. And there is a bias against Asian products, right? So that's -- that is fact number one. Fact number 2 is the distributors in these countries are not mature. Their business is dependent on the brand of the principle they represent. So their relationship with their customers is strongly tied to the brand, not to their own brand, right? So when you have these 2 conditions, it's difficult for -- or not -- it takes time for a brand like Elgi, which is an Asian brand, to break into Asian markets, right, and build it. This is like one of the Chinese brands or whichever country, Asian country, brand of compressor coming to India, yes, very difficult. The critical difference is in Europe or in America, customer doesn't care. There's no bias against a Chinese, against an Indian product. The distributor owns the relationship, not the brand. right? So when you have that, it's a perfect platform for a company like Elgi to go there, convince the distributor. And then once the distributor is convinced, half of your battle is won, yes? So in Asian countries, especially Southeast Asia, which behaves very similar to India, that's the inertia. So we need to find a strategy that overcomes these 2 dimensions. We still haven't figured that one out, right? We're trying multiple things, we haven't figured that out, right? The second question -- second part is, is there a difference in the market structure? No. It's the same #1, #2 and 3 in pretty much all the markets, right? That's why they are #1, #2 and #3 because they have to be in all these markets, and I have to be significant in all these markets. There are specific markets where like, for instance, India, where number 2 is us, right? Or you go to China, the #2 is not Ingersoll Rand, right? It's Atlas, which is #1, but #2 is not Ingersoll. So you will have these anomalies, but by and large, it's these 3 guys. Yes.

[indiscernible] distributors and gain market share in India and outside India. But if you can just list what are the key reasons when we are not able -- if there are any reasons when you are not able to convince or add distributors or convince distributors to push our product in those markets. And what are the -- what are we doing from those feedbacks? This is question number one.

Okay. So the opportunity to improve the value proposition to the distributor and the customer is incrementally available. But if you don't have the critical mass of value proposition, you can't enter the market, right? So before we enter these markets, we had built that value proposition on multiple levels. One is the product performance. Second was the product quality, right? Third was our warranty program. Our warranty program is the longest -- we have the longest warranty program in the world, right? And not it's when you -- warranty is not a commercial thing. It is an expression of confidence, right? These are commercial, right? Nobody is going to buy a compressor on the expectation that it will fail. And warranty, it gets triggered when it fits. So it's not -- you don't sell it as a positive thing. It is a -- when you say my warranty is 10 years, Atlas Copco or everybody else warranties 1 year, what are you basically conveying to the customer? I'm very confident about my product, right? Now you can be very stupid, make extremely lousy products and put a 10-year warranty because you just want to make a marketing spin out of it, it'll come back and bite you in warranty cost, right? Because warranty costs in these countries is not just replacement of parts, it is -- a huge amount of the warranty cost is the labor that you pay, right, and you pay up to $100 an hour, right? So you can't do this after you enter the market. You've got to understand all of this, get your product and your systems in the back end all aligned to that reality, then you're going, right? Now once you go in, then there are -- it's a constant opportunity to improve at warranty administration. Is there some sort of a training, for instance, we had about 30 channel partners from Europe come and spend 5 days with us here, right, to product training, sales training, all that we do. So those are things that we -- those are incremental value that we add, yes?

Sure, sir. And sir, on the second question is on the aftermarket. So like what are -- if you can just list if there are any strategies in place to increase the mix of aftermarket in India and outside India?

Aftermarket is clearly being present, yes? If you're not available when the customer wants you, then it's a lost opportunity because if machine is down, they have to fix it, right? And if you're not there, they're going to give it to somebody who can come and fix it for them, right? That's simple as that. So how do you ensure that you're there, right? And that program is not one definition, it's constant exploration, constant improvement over that. And that's continuous.

Any -- means, any targets you have that you want to increase...

So if you look at our competitor, I mean, if you look at Atlas Copco, they do a very good job of that aftermarket, right, worldwide, right? So their aftermarket business is close to 40% of the revenue. And that's the opportunity, right? So if you look at India, we are probably at around 25%, 26%, right? And that's the opportunity everywhere. So the point is 40% can come once your installed base has increased. So the goal is to go and set up the installed base, yes?

Sir, on the Europe, our strategy was probably to invest 20 million in terms of the front-end cost. So are we through with our hiring on the front-end employees? And how do we see it in terms of evaluation of the losses panning out? Like we breakeven in FY '24 or '25 and also related questions on the -- question on the margin as to we have kept it at 16% despite our -- technically in dollar terms, dollar has appreciated for us. So the value of the sales going up, still the margins we have kept at 16%. So is it that there is a cautionary motive in terms -- sorry, not motive, but you believe that Europe may probably take more time or how is it like?

No. As per our plan, if you -- the graph that JK showed, clearly, from last year to this year, Europe losses have come down, and it will continue to come down. So it's like an inverse bell curve, right? So our plan as it now and it's going as per plan, is FY '25, it will -- there won't be any loss, right? So that's 2 years from now. Now that's not the reason why we have put 16%, right? Now, we're at 13.7%, right? You can say your run rate in the month of December, which was published, it was even better than that, yes? So you can say 16 is too conservative. Probably is. But I'd rather that I give you a conservative number, set you up for a smaller number than overperform, right? But have a sand bag, no. I've just been conservative, and say not even conservative, more realistic and say what happens the uncertainties in the world. I mean, who would have thought COVID will happen, right? So we are baking in for those uncertainties. They're not there. I certainly do. Yes.

Aftermarket in international as our installation is going, we probably expect that benefit of change in revenue mix to come probably at a later stage?

Absolutely. Absolutely. Yes.

And maybe after FY '26, we probably have more margins coming from Europe and then we probably have a better inflection point?

Yes. Yes. Absolutely. Jay, what is the timeline? 6? So let's do last 3 questions then.

Just a follow-up to the previous question. You told in Europe, we had a higher price difference compared to Atlas as an initial strategy. So once these price ranges are fixed in the minds of distributors, so going forward, when we get established, how easy is to increase that and close the gap? So what's the thought process on that?

I think it's a process of evolution. You look at -- for us, the biggest lessons is not from Atlas Copco. It's not from Ingersoll Rand, it's from Hyundai and Toyota. Look at their journey. They started -- Toyota started and the Americans couldn't even pronounce Toyota, yes? They're #2 in the world and look at their profitability and they get a premium for their product, yes? They started as a discount, small brand and look where they are, right? Same thing with Hyundai, right? So that's really the journey that we need to understand how that journey was architected, right? It's not Atlas or Ingersoll Rand, right? It will come. You do the right things, you make the best products in the world. You continue to invest in technology, right? It cannot be built overnight. I think people -- in our country, there is a requirement for instant nirvana. There is no instant nirvana, right? If you want instant nirvana, it is a flash in the pan like in Diwali, it burns and that's it, it's finished, yes? But if we want sustained buildup of a business, right? You do it steadily. It doesn't mean you say, okay, guys, I'm going to make losses for 20 years. I'm not talking about that model either, yes?

So that also gives us a room for margin improvement in the future then...

Absolutely, absolutely, yes. Okay. Okay. I've got 1 question on the back, so I got to be early one in the back.

Yes. So regarding volume growth, can you throw some light what could be the volume growth, say, for next 3 years? For this quarter, it was 2%, right? So most of it is coming from currency and price appreciation or the realization part. So if you can throw some light on that?

It's 2% because we had a huge oxygen sales last year, right? So you remove that out, then the actual volume growth is far better than that, right? So that's point number one. I can't predict exchange rate, right? Pricing, I don't think -- one decision that we have made is, if commodity prices shift, we will shift prices, right? Will we be able to gain disproportionately beyond our cost? No. But therefore, price-based growth is not going to be very high. That's we can be very clear, right? It will be only that inflation-based or whatever, it is not going to be beyond that. We will not have real growth in prices. We believe that we had some real growth in prices, not a normative growth. Volume is going to be where we will grow, right? Now I can't tell you -- when we make a budget, there is a marginal increase in price, which is inflation based, right? The rest of it is all volume because we tie our budgeting to a fixed rate of exchange, right? It always starts very good, but big volume growth. We'll have to wait and see.

Right. So 7% kind of CAGR growth which we are penciling in, so probably 4%, 5% kind of volume growth can when we expect...

Probably more. Probably more. Yes. This is our last question, yes? Thank you.

Just had 1 question on the aftermarket. Apart from the installed base, does the product mix also matter in terms of -- does the product mix between, let's say, a screw or a sprocket, that also matter...

It's category mix, like portable compressors have very low aftermarket, right? Industrials have higher aftermarket. Screw compressors have a higher aftermarket. Piston compressors have very low aftermarket. So definitely, what I'm talking about, whether it's for competition and for us, it is -- the percentage is after baking in all of this. It's around aggregate level.

So let's say, towards the 30%, 35% mark would essentially entail some amount of change in the product [indiscernible] would require that?

No. It's -- like I said, it's baked in, but it's assumed it's the same distribution, right? Because product opportunities are not going to disproportionately change. If we grow, we're going to grow kind of consistently, yes.

And so if I may just ask 1 more. In our margin journey, let's say, from 13.7% to 16%, what are the key levers that you're building in [indiscernible]?

One is -- clearly, one is leverage. There is leverage benefit that will come in, that's obvious. The second area that we are looking at is there will be a continuous focus on cost reduction, which will give us a marginal contribution every year. And we are confident that we'll get something. But more importantly, it's about pricing, right? Some pricing corrections in certain markets, not across the board, what he was asking. But in certain markets, there is an opportunity. So those will come. But bulk of it is leverage, yes. So thank you very much. I know it's been a long day and a long journey. I appreciate it. I think there's been a suggestion that we do this in Bombay. Next year, we'll certainly do that. Next year, make it -- sorry?

[indiscernible]

Yes. Well, that's a problem. We have customer segments. There's 1 segment wanting it here, another segment wanting it there. So we got to figure out which is a dominant segment stuff there, yes?

I was just wanting to remind about this. One small request is if you fill in the feedback form, that was too great of you.

Yes, you can send it in 2 -- so soft version also?

Yes. [indiscernible].

Thank you.

Thank you very much.