GMM Pfaudler Limited (505255) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the GMM Pfaudler's Investor Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Diwakar Pingle from Christensen IR. Thank you, and over to you, sir.

Thank you, Janice. Good evening to all participants in this call. Before we proceed to the call, let me remind you that this discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with the business risks that could cause future result, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements. To discuss the recently concluded OFS transaction and answer your questions today, we have the top management of GMM Pfaudler represented by Mr. Tarak Patel, Managing Director; and Company Secretary, Ms. Mittal Mehta. We also have Mr. Thomas Kehl, CEO of Pfaudler International; and Mr. Alexander Pompner, the CFO, to talk about the international side of operations. We will start the call with a brief background related to the transaction and then open the floor for Q&A session. With that said, I'll now hand over the call to Tarak Patel. Over to you, Tarak.

Yes. Thank you, Diwakar. Good afternoon, everybody. I think most of you have seen a few of my interviews over the last couple of days on TV. We were never planning to have this investor call today, but because of the misrepresentation of information out in the market, in the news channel and other mediums, we decided that we should clarify and be transparent to our shareholders, like we've always done in the past. And we wanted to also clear the air in terms of certain rumors that have been floating in the market. So let me just start off briefly by giving you a brief about the OFS transaction. I will also touch on some other points and then maybe speak a little bit about the business outlook going forward, and then I will open it up for Q&A. So let me talk about 3 important points about the OFS. I think it's very important to understand who and why the promoters are selling. So the promoters that have sold, and we've sold about a 20% stake in DBAG, which is a private equity company, which has owned Pfaudler Group since 2014, for the last 6 years. So as part of the larger transaction, when we acquired the international business of the Pfaudler Group, there was definitely a monetization, a liquidity event for DBAG. As I mentioned earlier, they're a financial investor, they want to see their returns, and this was an opportunity for them to take tough... [Technical Difficulty]

Ladies and gentlemen, requesting you all to please hold the line. We have -- the line for Mr. Tarak Mehta (sic) [ Tarak Patel ] is disconnected. We are just trying to reconnect him. The speaker, Mr. Tarak Patel. Please stay online. Thank you for patiently holding the line. We have the line reconnected for Mr. Tarak Patel. Over to you, sir. You may please go ahead.

Yes. Sorry, everybody, my network is quite poor. So if I get logged off again, just bear with us. So I was saying that DBAG sold 18%, and we, as a family, also sold about 2.2%. These proceeds from the sale of the family 2.2% will be directly reinvested in the international business. The international business, as you remember, clearly, was purchased for an equity value of close to $50.4 million for a company that clocks about $175 million of revenue. So all in all, we've got a very good deal for the Pfaudler International business. And by ways of that, DBAG monetized some of the additional funds from here in GMM Pfaudler. So again to reiterate, we are committed to business. DBAG still will hold around 20%. We, as a family, will own about 22%, and we are committed to the business, and we are locked in for the next 3 years. So there will be no further dilution of shares. There will be no liquidity event. After the 3-year period is completed, we will take a call in terms of what needs to be done. But I want to make it clear to you all that, again, please remember, DBAG is a private equity company and they will look to monetize their stake after the 3-year period. When and how they do it, that is something that is not decided today and we will take that decision when the time comes. From our standpoint, I also want to make it clear to everybody that we, as a family, are a long-term investor in the business. We have been part of GMM Pfaudler for the last 60 years and continue to be and will be part of this company going forward. We will also look to increase our stake. We do want to emerge as a dominant promoter. After 3-year period, we would like to increase our stake close to 30% and that is something that we will find the right mechanisms to do that at that time. I also want to hear -- kind of bring in a few more points. Our company, if you know, was a very closely held company, many investors at many calls always asked me about how do we bring in high-quality investors, how do we increase the free float, how do we bring more stability to the price in the market. And being a privately owned -- sorry, not privately owned, but the bulk 75%, 80% being held by the promoters, it was not really an opportunity for many new investors, a lot of visibility to come into this company. And that's one of the reasons that we have decided to bring in high-quality investors to increase the free float to close to 50%. And I have seen many people complaining about the price, but please understand, for shareholders, it's still a notional loss. While for me and my family, it's an actual loss. So us selling at this price is something that we were very careful about. We believe that the value is a fair value. There has to be price discovery when the stock is so closely held. In a niche business, in a business that is not very visible, to bring in really high quality investors, it's really like a re-IPO. So there is definitely price discovery that happens. And I'm very happy to share with you today that we have a very, very strong shareholder roster. Unfortunately, I cannot share the names with you, but you will see that on the day of the Board meeting. Since these funds will be only more than 1% of the company, all their names will be there. We have about 3 or 4 money managers -- top money managers in the U.S. We have a very strong institutional investor base here from India, which includes the top 3 to 5 mutual funds as well. And these people will not come in unless they have done all their diligence. They've checked on the governance. They've checked on the business aspects. They have looked at every minor detail of the company and they have found it good to invest in. And that's something that we're very proud of. And going forward, there will be stability. These are long-term investors. They normally hold for 7 to 10 years. They give the management bandwidth, time and space to really work out and do -- and focus on the business. So from that standpoint, again, we have got in, we have increased free float and I think that is going to change the outlook of this company going forward. As a company has a journey in its life cycle, there has to come a time when we have to open it out for new investors to come in, really give it that international appeal, that focus, where people will speak about it more, will know about it more, and that will only happen when the public stake is a much larger amount. From a pricing point of view, there has been a lot of backlash. And again, like I mentioned, there is a price discovery. The price of our stock has seen significant improvement over the last few years and maybe in the last 3 to 4 months as well. Compared to the price 1 year ago, it's still... [Technical Difficulty] Sorry, I went on hold, I think. So as I was saying that -- can you hear me now?

Yes, sir, we can hear you. Please go ahead.

Okay, sorry. Yes. So as I was saying that when these new investors come in and the price that we have got is something that they believe that there will be significant upside, so if you're an existing shareholder, I don't see any reason why you need to change your outlook. If you found this company valuable and attractive at INR 4,000 or INR 5,000, I don't see why it should be even more attractive at the current price. So from my standpoint and the way that we price and you have comfort of about INR 1,000 crores investment that has come into the business, they all found it very attractive to invest at that price. So I see no reason why somebody should complain about it. Let me also spend a couple of minutes just talking a little bit about this SLB matter. I think that has something that has dragged our names, our company's name into a very negative limelight. Again, I don't know what I'm expected to say about this, but nobody has pointed a finger at us over the last maybe 5 years since I've been MD, and I think probably even a bit longer since my father or my grandfather had run this business. So we've always had the best interest of the business at heart. We always respect and want to be transparent to our minority shareholders, and there's no reason why any of that should change now. Just from a logical standpoint, when we have done the biggest transaction that we could do as a company when we bought out our global parent, when we are bringing in high-quality investors, the names that you will know in a few weeks' time, it doesn't make logical sense for anybody to take a risk on shorting and making short-term benefits, which in the long term, will have no reward for people like us. So that's something, again, that I want to just reiterate that our conscious is clear. We are willing to help any agency that would like to check or need information from us. We as a company are very conservative when it comes to governance. We actually closed our window on September 2, much, much longer than what is actually required, and we do that every quarter as well. So just to reiterate and reassure investors that from that standpoint, there will never be a question mark. There will never be any kind of compromise from our side. Lastly, let me also spend a couple of minutes, a lot of questions around Indian company buying an international business, people have not done well. So again, I would like to make a few points here. One of the reasons that we actually invested as a family is to show our commitment and belief because that was one question we believe would be asked quite often, that why is the Indian company going out and buying an international player when they have not been very successful. So the idea here is to take some of the risk with us as well. We believe in the business. We've known the Pfaudler Group for now 30 years. We've known the DBAG team, Thomas and Alex who're on this call, for the last 5 years. We have a very clear idea, vision and what we want to do for this company. Not only we want to be the world leader in glass line and anticorrosion space, but we want to be more than that. We want to be the biggest name when it comes to chemical and pharmaceutical processing. We have DBAG, Thomas and his team as well, all aligned in terms of businesses. We know exactly what we need to do over the next few years. We know what acquisitions, what new products, what new technologies, and there are a lot of synergies that we can extract from joining hands. One of the big synergies that I would like to just maybe highlight quickly is India has a much lower labor cost, so that entire arbitrage will come into India. We have already sold equipment into Italy, but we are now looking at moving a lot of the production of the metal fabrications here to India, like we have done with our Swiss subsidiary. We also believe that the Pfaudler brand name is strong enough so that sourcing can come from India, with the final finishing, testing, glass lining can be done locally as well. There are a lot of new products that Pfaudler has acquired in the last few years. We are now in the process of localizing that and bringing that into the Indian market as well. So from that standpoint, we believe that there are a lot of growth opportunities for us here in India as well. Lastly, there is definitely cross-selling opportunity. And if you have gone through our presentation, which is on our website, you will see what these opportunities are, and I'll be happy to answer any questions. Just to give you some guidance in terms of numbers. So for GMM Pfaudler, this entire financial year is going to be very strong. We started the year with a very strong performance in Q1. We aim to improve that. Our order backlog, again, has reached the highest it's ever been. We have about 1,000 glass line equipment backlog. We have a Hyderabad facility that will come online in the next 5 to 7 days. So we have additional output going from there. We have 2 new gas furnaces which have already reached our factory and should be started in the next 2 or 3 weeks. So we can finally switch off our electric furnaces and all our production will come out of the gas furnaces now. So India is looking very strong. The order book for the entire year has been completed, and we are now looking at booking orders for next year. Both the chemical and pharmaceutical sectors will continue to grow, and we will be happy to ride on the back of those 2 industry segments. Pfaudler International also has done quite well. They also have a very strong backlog and over the next few quarters, you will see a lot of improvements going into the GMM Pfaudler P&L. Just to clarify, every single rupee of the international business will flow into and consolidate into GMM Pfaudler. GMM Pfaudler currently is about a INR 600-crore company. We will go to a INR 2,000-crore company overnight on a full year basis. So our guidance is INR 2,000 crores at a 13% EBITDA margin for this year and then eventually going to INR 2,800 crores with a 16% EBITDA margin by 2024. This is still a conservative estimate. We believe that there are definitely synergies and when we add the synergies, we can increase another 100 to 150 basis points to our EBITDA margin. So all in all, obviously, in spite of the last few days, we are still very optimistic on the business. This is probably the last interaction that I will have with media or with investors until our Q2 numbers out. My job now is to make sure that we perform and let the numbers do the talking. And at the end of the day, whatever has happened has happened. There's nothing that I can change or control, so my now focus is to be back on the business and to make sure that we perform as per plan. With that, let me open this up for Q&A, and I'll be happy to take any questions that you may have. And if I need to bring in my colleagues from Germany as well, they will be happy to jump in as well. So thank you very much, and open for Q&A. Over to you, Diwakar.

[Operator Instructions] The first question is from the line of Namit Arora from IndGrowth Capital.

Mr. Patel, thanks for the detailed thoughts. Could you talk us through the OFS mechanism? And did it require you to specify the flow price? And also, how do you sort of -- what's the professional advice you received from your advisers in terms of the thought process of the OFS-specific price that you specified? And my second question was in terms of your global acquisition. Did you, at that point, also consider that the entire acquisition could be done through the listed company? And what were your considerations to come up with a hybrid structure with the acquisition partly done through the listed company, partly by the promoter family?

Yes. Thanks, Namit. Very good question. So yes, in terms of the OFS, normally, this is how OFS are structured. We followed the entire process as per SEBI and all the listing agreements as well. So the process of price discovery, everything was done in the right time line, in the right manner that is supposed to be done. We, again, -- it's a very standard process. Most companies do it this way as well, and we have a certain amount of time frame by which we have to inform the markets, and that's exactly what has been done. Every rule, every regulation has been followed to the T. Regarding not having the entire listed company purchase the international business, as I mentioned earlier, buying 26% from our family standpoint made sense because it gives a sense of very positive signal to the market. We believe in the business. We believe that we can turn around the business. And that's the reason why we invested along with it. However, we also didn't want to overleverage GMM Pfaudler's balance sheet. Currently, the GMM Pfaudler investment is only about $27.4 million, out of which we have $10 million of internal accruals. So the debt on GMM's book for this international piece is going to be only $17.4 million. So again, obviously, we do believe that after the 3-year period, we will find the right mechanism to move or align the entire 100% into the GMM Pfaudler, that's something that we are aware of and that is something that we will do. Eventually, GMM Pfaudler will own 100% of the international business.

[Operator Instructions] The next question is from the line of Deepak, individual investor.

Mr. Tarak, I would like to bring to your notice that the price band was quite wide, INR 3,500 to INR 4,200, and as retail investors who are already invested and wanted to add to our holdings in GMM, we were not sure because I think being a smaller company, the visibility in the media was not much regarding the subscription, how much it has got subscribed and at what rate and such things. So we ended up putting in our bids at the maximum INR 4,200, not knowing and not having the option of a cut off-price and all those things. So could you please share something for the retail investors who have probably not got the best price and only later after the OFS was closed, we came to know that the bigger institutions and funds, they have probably got it closer to INR 3,500, whereas retail people like me, we have invested to the maximum allowed at the highest possible band of INR 4,200?

Right, Deepak. So I think there was a mechanism by which you could have gone into the NSE website where it showed the bids, it showed the kind of pricing band, and that data was available. Unfortunately, I guess, you did not have access to that. Again, even though you have got it at a slightly higher price, I still believe that if you're a long-term investor, I don't see a problem with this at all. Once the consolidation starts happening, once this performance starts improving and GMM, as you know, still remains very strong. So nothing changes at GMM level. I think there'll be -- I can't tell you specifically how much time, but I don't think you will have to wait very long to see some kind of upside on that as well.

The next question is from the line of Manish Gupta from Solidarity Advisors.

Mr. Patel, a question on the international acquisition. If you look at Indian companies, traditionally, they've not been very successful when they've ventured overseas, perhaps it's because of cultural differences or whatever. So right now, you're acquiring a company which has got plants in multiple countries; China, Italy, Germany. Do you believe that given the opportunity that is in front of you in India, which itself is a very attractive opportunity and you have such a dominant position in the marketplace, that the company might be getting a bit too adventurous?

Yes. So again, very good question. Just to kind of give you some background, we've been now associated with Pfaudler since 1988. So we know the business really well. We know the people really well. We know how this company functions, the cultural issues of this company. It's all -- this company has also changed hands multiple times, has been neglected since 2014 since DBAG came in. So there are definitely a lot of improvements that have happened in the last 3 to 4 years. Three plants have been modernized. DBAG spent close to $23 million to get 3 new facilities. The old plant in Germany was shut down. The plant in China was relocated. The plant in Italy was shut down and a new one was purchased. All these have not started flowing into the P&L. We expect that to happen in the coming quarter. And that was one of the big kind of -- we had to convince DBAG to sell this company to us at this right time before all the improvements start flowing through. Because once this would happen, then obviously, this company will become much, much more expensive. And being an investor and being retaining their stake in the business, they understood that, and that's why we were able to do this transaction at this time and also at the valuation that we got. But having said that, I think there's a lot of cultural-related work that needs to be done as well. The employees are all very good, but there has been some amount of neglection that has happened in the past. We will need to motivate these people. We need to get the momentum going. And I believe that Thomas and I share a very common vision. It is not that the Indian team is going to go in and start micromanaging the international operations. Thomas and Alexander are very capable. Most of the initiatives that they have started, they will still run those initiatives. And also an important point to note, as part of a small co-invest, many of the employees of the Pfaudler Group have also invested in the Pfaudler International business. So that's something that will also give them a lot of commitment and the alignment. And maybe right now, Thomas, if you don't mind, can you maybe just say a few words about how we plan to integrate and how we believe the companies can synergize in a much better manner?

Yes. Thank you, Tarak. My name is Thomas Kehl, CEO of the Pfaudler Group since 5 years, and let me say -- bring about our strategy. When we took over the company in 2014-2015, we immediately recognized that we have to implement the strategy, including some restructuring of sites that needed a significant cost improvement and process flow improvement. We also looked at the culture of the people and the culture of ourselves though, and we enabled ourselves to bring in new people or outside people product shipped globally -- serve the product shipped globally, to drive the business on a global aspect that we created a global sales channel that is being the platform for new products and new portfolio products that we are looking at adjacent products in order to grow the business on a global basis. And as a company, the Pfaudler Group and the GMM Pfaudler, is working very closely since they first became united -- when we met in 2015, strategically aligned. We share the same vision, and we have now further plans now when we are fully integrated to take advantage of the resources like low labor costs and so on and getting a better competitive position even then. And as Tarak said, the restructuring of the sites will take place and the benefits will flow to the P&L for the next couple of quarters already. And the benefits will come now to GMM Pfaudler rather than the Pfaudler Group that is owned. And we always had in mind to -- at one day, as those 2 companies be integrated and this now was a great opportunity to get it done. And going forward into the future, it becomes very successful bright future.

The next question is from Vipin from ABC.

So my question is, can you please break down the new shareholding pattern after this transaction? It will be good if you give us the breakdown like how much is holding by Patel family, how much is from DBAG after this dilution and maybe the other shareholders?

Right. So yes, thank you very much. DBAG is going to continue holding 32.68%, their previous holding was 50.44%. So they have sold about 17.76% to bring it down to 32.68%. We, as a family, were holding 24.56%. We sold 2.32%, and now we come down to 22.24%. Promoter Holding has come down from 75% to 54.92% and public float has gone up from 25% to 45.08%.

The next question is from the line of Srinivas Iyer from Rockford Consulting.

Tarak Bhai, I'm excited by your vision of making...

Mr. Iyer, I'm so sorry to interrupt, but your audio is not audible, sir. Could you please speak a bit louder?

Tarak Bhai, I'm excited by your vision of making our company global leader for chemical process equipment company. God bless you. I have 2 small questions. In our glass line equipment, our market share in India will be 75% to 80%, isn't it? Then when can we expect global result to be included in our results?

Right. So our glass line market share today is about 55%. But like I mentioned to you, we have the highest backlog that we've ever had. We want to reduce our backlog and what is going to help us in the very, very short term is our new Hyderabad facility, which we will get in the next 2 to 3 days. So we have already started manufacturing metal body. We've already shipped them from Gujarat. So immediately as soon as we get the keys to that factory, we'll start the glass lining and start catering to the Hyderabad market. So we believe that we definitely will have an opportunity to increase our market share in the South, plus with the new furnaces coming in Gujarat as well, we have additional capacity. So I'm confident that we can bring down our backlog very quickly over the next quarter or so and then go and try and improve and increase market share. Like you know, now GMM Pfaudler does not have equal in terms of quality competitor in India. We used to have a French company who sold us their factory in Hyderabad and has signed a 3-year non-compete. So in terms of technology, in terms of brand, we are the only international player. All the other competitors are now basically in local players. So they don't have a technology kind of background that we have. Like I mentioned, and I'm not sure if I got your question right, the closing of the transaction is expected to happen sometime in November. From November onward, the entire revenue and entire profitability of Pfaudler will flow into the GMM Pfaudler P&L. So from that day onwards, we will then be consolidated entirely as one group.

The next question is from the line of VDS Prasad, retail investor.

My question to Mr. Patel sir. Basically, what is your plans to pull back the confidence from retail investors community? Because investors like me, we bought the price at a very high level, and what are your plans to pull back that confidence from retail investors community? Like are you going to issue any bonus shares or interim dividend? What exactly is company's plan going forward?

Right. So I think, firstly, I don't see a reason why anybody should lose confidence in us because everything is done as per the book. But I completely understand where people are coming from. But again, my only advice to everybody is like we need to also see the bigger picture. There has been certain news floating around, which obviously is not anything to do with us. And once somebody picks it up, it just starts circulating more and more, and brings us a lot of negativity. But definitely, we always would like to reward our long-standing shareholders. If you have been invested and you have bought at a higher price, my only advice is to hang in there. The company remains very strong. We will completely work our hearts out to make sure that we do not lose further valuation, we will only try and improve it. We've done that over the last 5 years, while we were taking the share price when I took over as MD, it was INR 250. And until last month, it was INR 6,900, and people were very happy with me till then. So I would just say that, please, you can count on us. We will put in the blood, sweat and tears. And at the right time, we will definitely reward shareholders either through the bonus or some kind of mechanism, which is going to be EPS accretive for all shareholders.

The next question is from the line of Kunal Krishna, individual investor.

So there is always room for improvement when it comes to transparency and corporate governance. Having said that, going forward, what steps are you going to take in order to ensure that the interest of retail investors is protected amidst any new developments and considering that there may be individuals or entities privy to the company's future plans, which they may use to their advantage at the cost of retail investors' interest?

Yes. So I think good question again. I think we will definitely need to strengthen our -- we already have a very strong corporate governance policy in place, but there is no harm of, like you said, always improving. I think with the quality of investors who will come in now during [ virtual subscribing ] the OFS, I'm sure they will also demand a much higher level of corporate governance. We will learn a lot of new things, and we will hopefully implement best practices, better than what we have currently. And we will, obviously, always be transparent. And that's one thing that I have done. And the people who've been following GMM since 2015, since I took over in June, I have held a conference call every quarter without fail. Personally, I've been in all these calls. And I have never shied away from asking and being transparent and having a very open conversation with anybody. That is something that will remain the same. Obviously, that is something that we don't want to change, and we want to continue as being as practical, transparent and pragmatic as we can. However, at the same time, like you said, we will try and bring in some more corporate governance measures that strengthens our corporate governance going forward.

The next question is from the line of Vidya KR, individual investor.

Congratulations on starting the new journey into the global market. My question is, in the time from now up to the integration of these 2 entities, the global path of this Pfaudler Incorporated and GMM Pfaudler, what benefits do I receive as a shareholder of GMM Pfaudler? Point number one. Point number two is what mechanism do you envisage to integrate the 2 business entities?

Right. So I think until the time when the businesses are consolidated, which is sometime in November, you obviously have our Q2 performance to be recorded. We have a Board meeting planned on October 21. Like I mentioned to you, in spite of COVID, we were managed to get the factory up and running very, very quickly. There are not many businesses that have been able to get through this crisis fast enough, quick enough. One for us, we have been very lucky because our order book was very strong, and we expect the performance of Q2, Q3 and Q4 to also be very, very strong. In terms of integration globally, the idea is that there is no real integration because since we've been working together for the last 5 years with DBAG and Thomas and Alexander and for the last 30 years with Pfaudler, it's not that we are going into a new factory that we've never seen before or meeting new people that we've never met before. So from an integration standpoint, I don't see a problem at all. Integration has already started. We are already working together in many ways. One example is that Pfaudler has bought a company called Interseal, which is a mechanical seal company. That entire product range is going to be manufactured now locally in India. The localization has already started. Currently, we buy these seals from EagleBurgmann and from Flowserve. Now we will be producing our own branded mechanical seals and applying them to every reactor that we sell. So again, a huge kind of benefit, both in terms of revenue and profitability. These are also very, very high when it comes to aftersales market business. So that's a great opportunity. So things have already started happening. We are sharing technology on glass. We are sharing technology on asset recovery. We are selling our heavy engineering products. We are selling their products. They are allowing us to go into Southeast Asian markets. Taiwan is an order that we recently got from, some order from Malaysia. So I think the integration is going on. And before you know, things will start flowing through into GMM.

The next question is from the line of Deepak Mehta from MetLife Insurance.

So my question is about the disclosure of this OFS, sir. So at the time of acquisition, also, I think there would have been discussion with the private equity, DBAG. So even at that time, if you have -- if you would have disclosed, I think it would have made more sense in transparency. So...

Right, Deepak, good point. There was definitely a conversation, but nothing was decided at that point, when would we do it, how would we do it, at what price would we do it, who would do it, what investors would come in? So it would have been too speculative in nature to disclose anything at that standpoint. And as you know, disclosing something that is speculative will cause even more problems than the disclosing. So only once we were certain and as per the guidelines issued by SEBI is when we disclosed. But as you said, that, yes, conversations -- and we knew actually from day 1 that when DBAG came in, that they are a financial investor and they will liquidate at some point, we always knew that. But the exact time line is not that we knew for certain, and hence, we could not disclose.

The next question is from the line of Arun Kumar Ohri, individual investor.

Mr. Mehta (sic) [ Mr. Patel ], I am investor since 2006, 14 years, when the face value was INR 10. I never had a concern on the company. However, the entire transition in the last 3 months, the way it has gone, when the price was running near INR 7,000, there's no alert, and I find very difficult -- like 14 years, I never, never had any issue with share which I was keeping, That's the way I would say. But it is shocking set when the price was around INR 7,000, when it was going out of range, there was no alert given to the market. It is not to say that I am a seller of the share because my cost is INR 70. So it was hardly a concern for me to worry. But it does take a confidence. What is the kind of steps you are intending to take to rebuild the confidence of the person who took the share of the company as a rock solid, without any problem, without any issue, like a clockwork dividend used to come every quarter, good balance sheet, transparent balance sheet, never had issue, but the entire thing, the way whole exercise has been done [indiscernible].

Right. I completely agree with you. I mean on market pricing and market demand, I don't like to comment on that, but I hope that by bringing in additional free float, bringing in strong investors, long-term investors, there'll be less opportunity for people to play with the price. I think that is something that, as the company grows in size, as we grow in scale, as the more number of investors and visibility comes in, it will be beneficial for all shareholders going forward. On the other aspects of dividends and the other aspects of corporate governance, balance sheet, accounting policies, nothing has changed. Nothing will change. So you can be rest assured. I know many people have seen what has happened in the last few months. And obviously enjoyed it while the price went high. And then when it came down because of the OFS were very distraught and unhappy. But again, like you have been a shareholder for the last maybe 14, 15 years, I would still urge you to remain a shareholder. We will not let you down, and there will be no opportunity where you can point a finger at us for any kind of wrong doings or misdeeds. This is something that -- the market pricing is not in our control. And from our standpoint, our only focus is to continue making the business successful and trying to grow both revenues and profitability.

The next question is from the line of Atul Modi, individual investor.

Mr. Tarak, I have got 2 questions. I'm a small investor since last 1 year. One thing is that why was this OFS -- declaration of OFS not done prior? You declared on 21st and then OFS was open for nonretail investors on 22nd and only for -- retail investor only for 23rd. I actually couldn't apply for OFS at such an attractive price. Had it been a little more transparency, I could have done that. That was the question number one. And question number two is, why was the opportunity of rights entitlement not given to existing shareholder rather than straight away going to the public? These are my 2 questions.

In terms of the OFS notice, we were -- everything was done as per the SEBI laws, what is required to be done. So that is something that was basically dictated not by us but by what SEBI allowed. So that was your answer to question one. The OFS, I think, is a mechanism by which we are not at all increasing the shareholder base, the shareholder capital. The number of shares still remain the same. You will be earning -- the earnings per share is going to increase significantly over time. And that is one thing that we wanted to maintain. We did not want to increase the number of shares in the market. And that's the reason why we decided to go with an OFS.

The next question is from the line of Asheel Shah, individual investor.

I had one question regarding the competition that you currently have. From what I understand, you guys have a backlog of, let's say, 7, 8 months, what is -- and you don't have competition from international companies. The rest of the companies here are local and you have a technology advantage. What is stopping you all from increasing the prices and just essentially getting a much larger share of the profits?

So again, we have to be very careful. We have to find the right balance between price and demand. Obviously, these customers have been part of our growth journey and have been very, very kind of mutually beneficial relationship between us. They depend on us. And hence, obviously, after the point, pricing is something that we also have to be a little bit careful about. But having said that, over the last 4 to 5 years, we have increased prices regularly. Being the market leader, we have been able to do that, and the rest of our competitors have also followed. And a lot of the improvement in profitability as well has come because prices have been increased. Going forward, what I do see and what we see in India now is the mindset of the Indian customer has changed significantly. When I came back from the U.S. in 2000, it was a very price-conscious market. It was only about price. We had to match prices. But today, people are willing to give you a premium for good quality, for faster delivery, especially people who are building world-class facilities. So PI Industries, a Divis Lab, Dr. Reddy's and SRF and Aarti, they are not going to compromise any more on quality. Their customers are all international players. They're all multinational players. They have regular audits. So the Indian customer is also changing, and you will see now, over time, that the need for high quality, branded equipment is going to increase.

[Technical Difficulty] Kumar from CenturyLink.

So my question sound a little repetitive, but the problem is on -- the OFS was announced on the evening of 21st September and OFS opened from 22nd September. Maybe this is as per SEBI rules and SEBI may allow this. But this came as a surprise to the individual investors like me. So what made this kind of sudden surprise to be given? Is this because of planning was made suddenly? Or is this how things work? And second question is on 21st September, there was -- like on 21st September evening, the announcement was made, but on 21st September morning, there was a steep fall in the share price. So is this because the information was already leaked?

Yes. So again, I can't really comment on this, but I know one of the reasons why they don't have a big gap between announcement and actual OFS is probably because there could be a lot of pressure on the share price, right? So that's why they keep it very, very close together. I mean I can't comment on why and who and what the share price has done over the last few weeks. I don't comment on it when it increases, nor can I comment on it when it decreases. Again, I just want to reiterate to everybody that share price is obviously something that everybody looks at, but I think the fundamental of the business, the share price will obviously improve over time as the business keeps improving. And again, if you have a long-term view, I don't see any reason why this is still not a good opportunity for you.

The next question is from the line of Sameer, individual investor.

Hello. Am I audible to you?

Yes, you are Sameer. Please go ahead.

Being the old shareholder of your company, why all these details about how much the DBAG is selling or how much the Patel family is selling, why all these details could not have been published in your OFS letter itself, so as to avoid any doubt and [Technical Difficulty]?

Right. So Sameer, I think most of the information is already there. It's already on the stock exchanges. It's also on our website. All the discussions, the amounts, the who's selling, why it is being sold. I think most of the information has already been shared. Unfortunately, it did not get picked up and only a few small portions of it got picked up. But the information has been shared in a very clear and transparent manner. The only thing that we did not do and in hindsight we could have done is made more of a general statement about this transaction. But since it's not through the company, through the promoters, the company cannot really make a statement. But maybe as promoters, we could have made a broad level statement, but I don't know what kind of locus standi we have in terms of this and how would we have to make the statement to the stock exchanges. So again, I mean, normally, we followed exactly as per our legal advice and our investment banker advice, the standard process followed for OFS.