GMM Pfaudler Limited (505255) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '25 conference call of GMM Pfaudler Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhaval Rajput. Thank you, and over to you, sir.

Thank you, Neha. Good evening, ladies and gentlemen. A very warm welcome to all of you into the Q2 FY '25 Earnings Call of GMM Pfaudler Limited. The earnings presentation was uploaded on the stock exchanges today and is also available on our website. I hope all of you had a chance to go through it. From the management, we have with us our Managing Director, Mr. Tarak Patel; our CEO of International Business, Mr. Thomas Kehl; our CEO of India business, Mr. Aseem Joshi; our CFO of International Business, Mr. Alexander Poempner; our CFO of India Business, Mr. Manish Poddar; and our Compliance Officer, Ms. Mittal Mehta. We will give you a brief overview of the performance of the company, after which we will get into the Q&A. Before we begin with the overview, a brief disclaimer. The presentation that was uploaded on the stock exchanges and also available on our website, including our call discussions that will happen now contain or we have certain forward-looking statements regarding our business prospects and profitability, which are subject to several risks and uncertainties. The actual results could materially differ from those in such forward-looking statements. I would now hand over the call to Mr. Manish Poddar to provide an overview of the performance. Over to you, Manish.

Thank you, Dhaval. Good evening all, sharing with you some insights on the quarterly performance. On a consolidated basis, we recorded a revenue of INR 805 crores with an EBITDA margin of 11.6% for Q2 of FY '25. Our order intake stands at INR 762 crores for the quarter, and backlog stands at INR 1,773 crores. On a stand-alone basis, we have had a revenue of INR 208 crores with an EBITDA margin of 10.8%. While the P&A is more steady and stable, we would like to highlight a few points on the balance sheet and the cash flow front. As you note, our backlog is at INR 1,773 crores as of 30th September versus INR 1,689 crores as on 31st March, marginally high. While our H2 revenue at INR 1,591 crores is marginally lower than the half yearly average of FY '24, which clocked the revenue for the full year at INR 3,446 crores. Now a healthier backlog with a muted revenue direct towards higher shipments in the upcoming quarters. This is also visible in our balance sheet as follows. When we compare 30th September versus 31st March balance sheet, we observe our unbilled revenue and inventory have gone up by INR 28 crores and INR 32 crores, respectively. This highlights higher activity and the production flow. As a corollary, our customer advance refis are also up by INR 30 crores. On the other hand, our receivables are down by INR 21 crores due to correction focus, which directs us to the cash flow statement. We have been steadily improving our cash flows. We have been steadily improving the FCF as a percentage to the business cash generation over the past 3 years. However, you would have observed for the past 3 years, our H1 performance for the year has generally been lower on the FCF generation perspective. This year, we have been able to generate 50% FCS as per Slide 8 of the Investor Day. We expect to remain on a healthier cash flow generation side for H2, [ Q3 ]. With that, we can open the call for the Q&A.

[Operator Instructions] The first question is from the line of Sagar Shah from Spark Capital.

And congratulations for at least a stable set of numbers in this kind of environment. I have a couple of questions. So my first question was that sequentially, we experienced a 3% growth in this quarter, but even though margins were steady. And -- but going ahead, we guided for almost very healthier margins for this entire year 13% to 15%. So my first question was on the revenue front that how are things shaping up on at least on the global level right now? Because we saw a 3% sequential growth. And going forward, H2 has always been being the strongest for GMM Pfaudler. So the kind of order intake that we have seen in this Q1 and Q2 and the kind of order backlog of around INR 1,773 crores, so going ahead, can we expect a better H2 -- better sequential growth in the H2? And if yes, then it will be led by which segments among the technologies?

Yes. So I think a couple of points that you brought up very important. So I think on a half yearly basis, order intake has improved by about 18%, 20% odd, that means we definitely have a strong few quarters of order intake, which is definitely a good thing. And that's why we believe that the second half of the year can be a little bit stronger in terms of both revenue and margins. We have, obviously, businesses that have a much stronger backlog, especially businesses in India like the HE business has a backlog which probably will take us into Q2 or Q3 of next year. We have strong backlog in mixing. We have strong backlog, obviously, in terms of the other in glass-lined technologies, where we have seen a shortfall and where we do see a little bit of stress is in the glass-lined business, especially when it comes to the chemical and when I say chemical, mainly the agrochemical sector, where the investments have really dried up, right? And it does seem that there is probably a few more quarters of, I would say, muted investment. I don't see that turning around very quickly. We've spoken to a lot of our clients, customers, a lot of experts, industry experts as well, where we do believe that chemicals will turn, but I don't think it's going to happen very soon. So we do need some time here. I think what's important for us is that while we are at the bottom of the cycle, we work on internal kind of cost optimization. I think we've done a lot of good work around that. We currently have a major project going on here in India. We've taken some actions internationally as well to reduce costs, so we are looking internally. And hopefully, when the market turns, we will be able to drive some of the growth in improvement in both revenue and margin. Having said that, I think it's also important to keep in mind that while we have been addressing the market to bring in orders, there is obviously going to be some pricing pressure as well. However, having said that, being the market leader, we are able to still get a little bit of premium over our other competitors, right? So all in all, I think the numbers are stable. We expect these numbers to remain stable as well for the next few quarters. But we do believe the second half of the year will be a bit stronger than the first half.

Okay. Okay. So -- but industrial amongst in the entire revenue mix, what percentage of technologies is particularly industrial mix in for H1 FY '25?

Mixing up for H1 2025, I don't think we have it on -- I think the breakup there is some breakup given -- we will check that number and come back to you. But in technology, if you want to try to understand what happened in technology, you will find that the glass-lined business obviously has seen a bit of a slowdown while the other product lines are making up for the shortfall, right? So mixing, heavy engineering, Edlon, all these are the 3 areas which have seen significant growth in order intake and they are doing quite well. 10% is the number that we have currently in terms of mixing and mixing is an area where we want to grow, right? So there is a big push for us to kind of get into new industry segment, maybe open up to petrochemical, oil and gas, food and beverage, lots of other industries, which are not currently under -- in a down cycle. So the focus is to really kind of maximize order intake and opportunities from these sectors.

Okay. So basically, around 10% of the total revenues has come from mixing that you give the number?

Yes, approximately, yes.

Okay. Okay. Sure. My second question was related to your nonglass-lining technologies. Nonglass-lining technologies, as you said, your subsidiaries, Edlon, Mavag, have been doing very well, so do you see at least in this year also, these subsidiaries doing well? And can you specify or carry through a number that at what can we expect -- what kind of growth rates can we expect among these businesses? And which of the ones do you think you will stand out, either it will be Edlon or Mavag or it will be Normag or heavy engineering?

Yes. So I think the few areas that will stand out where we will see double-digit growth. I think we see definitely one of these areas where we believe there are opportunities. The HE business will grow also at double-digit rate. It's profitable. We have a good backlog there. We won some large orders, and we have a lot of opportunities open that we expect to finalize in the coming months. So that gives us a lot of visibility. . I think the Edlon business has done increasingly well. They obviously have been a [ known creator ] to the semiconductor industry. So we have booked out for the year. We've actually kind of reguided a little bit of CapEx for them to increase capacity because the market is moving as the semiconductor space in the U.S. is doing quite well. So Edlon is doing quite well. In terms of the glass-lined business, I think the area of glass-lined business has been exceedingly well, they are ahead of their fee budget. U.S. and China remain a little bit soft. China we've definitely seen some kind of slowdown in terms of new investment. And in India, we have seen the glass-lined business actually picked up in the pharmaceutical sector in the last couple of months. We've seen some large projects in pharma. And there's definitely more talk now in the pharma space or new investment coming in. So that should drive some more glass-lined order intake as well.

Okay. Okay, sure. So just my last follow-up question that due to the revenue pickup that we see in the H2 supporting by these businesses, so sequentially, also in H2, do you see better margins? Or if you can guide us on what are the margins that you are targeting for this year? And my last question was also on that. that in the after post this year, in the next 2 years, as you just highlighted that in the initial commentary that we are a few quarters away before we see pickup in the investments. So at least on FY '26 and FY '27, can we expect a better environment than the current year? Or still times are so uncertain that we cannot guide for that?

I think the chemical cycle will turn, it always happens. It's always been cyclical. This is not something that's new. A couple of years, we've already been in the down cycle. We probably expect a few more quarters, but I think definitely, there will be a turning point. I think a couple of things will happen. One is that while we are in this down cycle, and we've already done a lot of work to make sure that, one, we have diversification. So we don't only focus on chemical and pharma. So over the last few years, we have really started entering new industry segments and a lot of the new industry segments are giving us or making up for the shortfall that have been caused by the slowdown in the chemical sector. So that's been a really good learning for management and for us. As we look to the future, we do believe that diversification is going to be the pillar of our strategy to say that listen, tomorrow, we don't want to have all our eggs in one basket, even though chemical and pharma is a big industry segment for us. We need to find new areas where we can grow faster and where we can grow margins as well. From a outlook here, again, I mentioned today that it is muted. This year we expect to be flattish. We are in the peak of a down cycle, so it did start out there. I think all we can do as management is continue to be aggressive in the market at the same time looking internally to reduce costs. I think we have done and we are in the middle of a major EBITDA improvement kind of project and we're working on India. We should act now starting our [ coding ] operations as well the first order of equipment have been made imported already. So we expect that some of these initiatives eventually will help us reduce cost. And then in the market, like you said, in 2026. 2027, we definitely will have a lot of less to grow both revenue and margin.

Okay. So can you guide us, sir, for at least what is the margin by?

I request you to come back for a follow-up, sir. [Operator Instructions] The next question is from the line of Ganeshram from Unifi Capital.

So just to start with the international segment as we were discussing, could you give us a sense of what's happening in the major geographies that you're present and plan to because we're just looking at half yearly revenues, first half '24 versus '25 and there's a bit of a decline in the revenues there, right? And also if you look at the backlog on a quarterly basis, there's a bit of a decline happening over there. So if you could just tell us in the major geographies in the product lines that you're working in, what's happening because we have the India piece together now. And with the international piece trying to get a sense of where it could go from here? And do you think this is the bottom of this cycle that you're experiencing? That's just the first question.

Good question. I think a lot of it is maybe crystal ball reading, but maybe I can ask Thomas to jump in. The question was, Thomas, on the different geographies. Maybe you can talk to the U.S., Europe and maybe China, 3 major geographies and give them an idea in terms of what are you guys seeing? And when do you expect those markets to kind of start [ fighting ] a little bit?

Yes. Happy to do so, thank you. Start off with the Americas. In Americas, we do see consumption. We see projects coming in. We have quite a few quotations. The timing of when a quotation becomes an order has been slowed down a little bit. It means that the market is somewhat hesitating. The capacities that was created over the last 3 years after the pandemic kind of sufficient. And since the supply chain in the chemical and pharmaceutical industry in the Americas and Europe, but also in Asia have been disturbed for quite a while there was, let's say, an activity going on that the inventory has been back to and a lot of companies have their inventories not yet worked off, what they do now, therefore, they're slowing down their production and the need for these projects. In total, pharmaceutical and chemical industries are still consuming and there is still growth of the consumption over the years and the capacity that seems to be a little bit on the high side right now is going to be absorbed over the next couple of quarters and then the cycle will be over and turning to positive. And that would be true for all 3 major regions.

Yes. Understood. Understood. So what gives you confidence, just continuing on that line of thought. Typically, we see very cyclicality. But what is sort of the thing that you look out for as management, and say okay, fine, this might just be the bottom. Are you seeing it in terms of inquiries or how do you sort of decide that this is when the cycle is bottomed out and it's starting to inflect and you prepare accordingly for that? Because you've kept your costs quite under control, but right as that optimism starts to return. I think you'll have to adapt to that as well, right? So just trying to get your perspective on that.

Yes. I think it's, again, a good question. I don't think we can time the cycle perfectly. I think there will be a bit of lag between when things change and when we will see results because first, I think the first people that the cycle should turn toward in our clients. then they should get back into the mindset of the investment, right? So for chemical companies, [ biochemical ] companies, that mindset may be is a few quarters away. I think right now, people have invested with the [ times ], with their asset before new investments go in and then they would need like visibility in terms of their clients asking for more product, right? So once that kind of get built into the system, then that excitement that interest level will start increasing. We will start seeing it maybe a few months later when the project gets sanctioned and then obviously, the opportunity will be tend to watch in terms of how much investment in CapEx will come in for you. In the meantime, obviously, I'm saying that even though agrochemical might be a bit slow, there's still opportunity in chemical, in pharma, which has been positive. It is much better today than it was maybe 6 months, 9 months ago, especially here in India. We think pharma obviously be a little bit more active, which is good. But generally, there will be a lag between when the cycle turn, all the chemical agrochemical players and then, obviously, a few months later for us when the increase levels and the inquiries will start improving.

Understood, sir. Understood. And the second question, and after this I will rejoin back the queue, is within the context that are in right now, right? I'm looking at the guidance that you gave us in Q1, that would imply we need to make about INR 3,600 crores in top line, even at the lower end, 5% top line growth and the 13.5% margin is about INR 490 crores, which means just if we compare the first half and second half last year to this year, we need to grow by about 10% and on a sequential 30% top line, right? So do you still feel confident in that guidance? Or do you think, given how things are at the moment, we need to probably take down our expectations a bit?

So I think our guidance was flattish guidance, right? So we said at the top line level, maybe 3%, 4%. I think that -- I think we are in kind of -- yes, I think we are okay on that. Margins, obviously, there will be some margin made up in Q2 as of -- sorry, Q3 and Q4. But I think obviously, margins are under a bit of pressure. We hope to be at a similar level like last year. But probably, there will be some amount of margin that will still have to be made. Let's hope that the next couple of quarters, we are able to kind of improve margin. Maybe Manish, you want to add something?

So if you recall Ganeshram, if you break the previous financial year into H1 and H2 out of the INR 477 crores of EBITDA, we did I think INR 270 crores, INR 272 crores in H1, and we did INR 205 crores or something in H2. So it was a sharp drop from H1 versus H2. And we have been continued and maintaining that almost the same number, similar number in the current half of the financial year. Now the challenge is how well are we able to recoup the large ground in H1 versus H2 last year into the second half of this year. So that is something that we are absolutely seriously trying to get to that. The question is how much can we recover.

[Operator Instructions] The next question is from the line of [ Rishab ] from [ Aquarius BMS ].

Yes. Am I audible?

Yes, please go ahead.

Just wanted to know your sense on when you say that the chemical cycle will turn around. So what are the tangible quantitative parameters that you keep tracking? So when I say that, I want some quantitative parameters that you keep tracking when you say that cycle will turn around.

Okay. So this is Aseem. I'll talk about how we look at the market. I'm not sure if I can give you tangible specific quantitative ones, but there are a lot of [ specific things ], right? I mean, we have to recognize the market, there's a lot of sentiment on [indiscernible]. So we look -- we look at, first of all, the announcement that we hear from our customers. We look at -- we, of course, are in the market every day. So we are talking to the decision-makers in these companies. That's our first indicator of their plans, and we really get a sense of what's happening in the next 3 to 6 months. The second, of course, there are a lot of databases that are available and that talk about pricing of various commodities and that's also an indicator that has started to show up, people start looking at more -- they're more willing to put in capital. And of course, the third aspect also is the margin profile of our customers because if they start showing up, their confidence ends up being more [indiscernible]. These are fairly obvious things. But that's the 3 areas that we look at from a -- to assess how these markets are going to evolve. Based on that assessment, I talked about [indiscernible] [ being here ], that's certainly the case, and we anticipate that will remain the case for a couple more quarters at least. We will continue to monitor and then take action accordingly. In the meantime, just to reiterate, we are very steadily focused on ensuring that our cost position is appropriate for the market [ to predict ] and that I expect will start helping us from a margin perspective as well.

Right, right. No, that's quite clear. Just a follow-up on what you said. So you said about 3 things. One is announcements of the customers, one is the databases where you keep tracking the pricing of commodities and one is about the margins. So let's say, from 10 customers, so where would -- where you are actually seeing that the margins are coming back or the announcements for the new CapEx that they are doing that is seeing some uptrend? So just to...

Pharma is the only place we are seeing CapEx in a big way. There's a lot of investments happening in and around Hyderabad now, large projects, peptides, things like that. So pharma. And I think because of pricing pressure easing up in the U.S., pharma has been a little bit back on investment, right? So API, [ well ] drug, pharma is probably looking a bit stronger than they did maybe a year ago. . And I think for us also, like I said before, that chemical and pharma is obviously, or was, let's say, maybe 3, 4 years ago, maybe 90% of our total revenue was coming. But over the last 3, 4 years, we've diversified and brought that down to maybe 60%, right, where a lot of our own -- where most of our growth and some of the shortfalls have been made up is coming from new industries that we started getting into, right? So important for us to continue on this journey, both for our product as well as an industry diversification because at the end of the day, there will be cycles, so cycles will happen. So we just need to make sure that management that eventually when 1 or 2 industries are going down, something else makes up for the shortfall. So that's an important part of our strategy going forward. And this would also lead into M&A and stuff and looking at new industries, which can give us 3, 4 years of continuous growth, double-digit growth with good margins, right? So that's something that we are thinking about.

The next question is from the line of Rohit Ohri from Progressive Share PMS.

Couple of questions from my side. The first one being, do we have some sort of an index or do we track brand affinity as well as cross-selling? And if we do so, then can you share the numbers which were probably last year same time?

So I think brand affinity, I'm not sure, but a good question. I don't know how we will calculate that. But in terms of cross-selling, yes, we have cross-selling numbers that we have kind of built into our models and our plan where every salesperson will have some targets for cross-selling and they will get incentivized on cross-selling. So that's already kind of something that we work on quite well. But it's important that cross-selling really happens within a specific industry. We don't go cross-selling across industries. But within this chemical, pharma, why can't we sell the same customer buying a blast [ line ], a filter [ trial ], a mechanical [ tig ], active recovery plant. So there are definitely opportunities there. Are we 100% kind of great and fantastic cross-selling? Probably not. There's a lot of work to be done, but it's something that's part of our strategy, and we will spend a lot of time trying to grow the cross-selling aspect of [ all of these ].

I had one quick one. I think for the first part of your question around when it's going to be good. We do not currently measure it the quantities of it. We have concerns [indiscernible] like NPS, the possible way to do it [ going ] on this part. But what we do have is a regular impact from customer on what the moment that can give us the indication of loyalty, and we feel comfortable that we are in a good position on that front. [indiscernible].

Okay. Tarak, you did mention about pharma been picking up and then there are some schemes which are coming up in India for some new 50 new plants coming up over the next 2, 3 years with PLI. My question was, can you share the behavioral changes of some of your clients, if at all, if you can give some sort of discussions that are happening? Or are there some new engagements or commitments since on the international level also, we are almost nearly year ending, so they must be trying to create their own budgets for the next year. So any sort of discussions or behavioral changes that you've recently noticed from these guys?

I think a couple of things maybe. I think one is that the need for more sophisticated equipment is definitely now something that people ask for. It's now because we are now getting into much higher value production, better production, better quality is required. So I think that is something that people are more aware of now. Can I reduce my batch times, can I reduce my cost, if I can make a product in -- if I can try something in 15 hours instead of 25 hours, immediately I have more capacity, right? So people are looking at a way to improve and become more efficient. And that obviously is something that helps us. There's also more critical products, right? So the quality of the product becomes more and more important, especially when you're exporting, and that's why they need more sophisticated equipment. We also see a lot of work around these weight-loss drugs, right? So Novo Nordisk and things like that, that is driving a lot of ancillary industries as well. And some of these drugs will go off in 2026, 2027, and we accept that also to probably fuel some growth. Our CDMO business is growing quite well in India. And then like I said, peptide is becoming really huge across the globe, right? So we see a lot of investment in peptides. Some of it will happen in India is a tough process. It's been done mainly in the U.S. and Europe right now, but India could become a kind of a house of peptide manufacturing as well. So pharma generally is looking quite positive, and the need for highly sophisticated equipment is growing in pharma. That's where we play. We've had specific increases where we won large orders with Interseal. We've had German certifications in terms of [indiscernible] supplied in India because the end product -- the end customer was German and he was kind of defining what equipment was to be used, and he was using Pfaudler equipment in Germany and hence, the Indian manufacturer has to use also our GMM Pfaudler equipment, right? So that's happening. And I think in the non-glass-lined technology, I think there is where people are really starting to think creatively Systems businesses. We've got some large orders in the Systems over the last few quarters, close to $30 million, $40 million, of $25 million, which is more process-driven. So how do we help improve the customer processes and make their life simpler. I think that's where we will also play an important role.

Is this a part of the living lab initiative from U.K. decarbonization for the pharma? Are you playing a role over there as well?

Sorry, which -- sorry, what was that again? Living?

Living labs.

No. So I'm not sure what that is. No.

Okay. My last question before I fall back in the queue. Any developments that you'd like to share in terms of the F&D filtration and drying businesses, maybe with the light- and medium-duty top entry? And your recent association, which you did allude a bit about the peptides recently, but your recent association with Gravner which opens door quite a lot of business-related commentation, if you could share some details on that.

Sorry. Could you repeat the last question, our recent association with who?

Gravner.

I think that was a wine story from the wine-producing things.

Yes.

Yes, yes, okay. So we may talk a little bit about that. But yes, go ahead, yes.

Okay. So as far as filtration brand is concerned, I can talk about a couple of areas. Our strategy here has been to differentiate by focusing on more value-added products or more sophisticated products. I'm happy to say that it's working out quite well in a lot of the lines that we had expected. So we have launched 3 new products in the last 3 years, 3 new products in the last 2 years, and those are getting good traction in the Indian market. In fact, vertical conical dryer, which is the first one to be launched is also [ being used with ] European customers with 2 being sold there already. We will continue our innovation journey implementation, and we think that is the right way for us to grow. There is, of course, the low end of the market there, which is sold by others. There, I think the low margin, somewhat commoditized space, which we're having for the most part. The other aspects of [ innovation ] in drying I will talk about is our expansion in the U.S. market, which is a little [ uncertain ]. We had pointed this out as part of our strategic initiatives a couple of years back and we transferred the senior executives there to drive that business. [indiscernible] shared that, that business is now well set. We have about $4 million to $5 million of annual revenue that we already expect from that market, and we'll continue to grow there. We've also built up our team in the U.S. to serve that market growth from sales as well as from an operations perspective. And so it's a good new stream of revenue and margin for us from the U.S. I think as far as Gravner is concerned, we will be [indiscernible] and invite Thomas to share today.

Thank you, Aseem. The company, Gravner, has a vineyard that is quite old in the north of Italy. Their wine philosophy is that they let their wine age 15 to 20 years before they put it out to sell. And aging the wine in wooden barrels or other media is somewhat risky if you do it for 15, 20 years. So they are looking for storage tank that gives them the cleanliness and the no throughput system from outside from any wood or anything to let their wine age for 15, 20 years before they fill it up into bottles and sell it. And they have looked at a couple of technologies in towns that gas lines, steel tanks was the perfect fit for them, and they have ordered a couple of things where we delivered in a couple of weeks, the first batch and the second batch in the first quarter. And we see this is a good opportunity to take our existing technology and branch into new applications that we haven't seen before in this case.

The next question is from the line of Ravi Mehta from Deep Financial.

Just a question on the pricing. So when you said that we are at the peak of the down cycle. Just wanted to understand how pricing has been in earlier down cycles vis-a-vis where it is now? Is it more bad, some anecdotal thumb rule?

Yes. I think glass-lined is bad. It has been a area of concern definitely. We've seen prices now stabilize a little bit. And hopefully, we can kind of reverse the trend and start kind of increasing prices slowly. It's always tough to increase price once you've already given the discount because most customers will have history and data available to take a last order system, so why are you asking unless. So we will definitely track. What we do try to do is obviously try and differentiate and say, I'm going to give something that's more, I guess, better or technology that somebody else doesn't have, then we can charge definitely a much higher price, right? But yes, in general case in glass-lined, the pricing has taken a hit. However, I think now we've come to a point where I think it has stabilized, and I do see it probably improving over the next few quarters a little bit.

Maybe just to understand in rough numbers, like say, I suppose the normalized pricing is 100. And during down cycles, the prices hit 75, just an example. So is the current down cycle seeing a price like 70, 65, like just...

Yes. So I would say the discount levels have increased by about 10%, 15%, a little bit more in some cases. It has probably been a little bit more than that, but now we are at about 10% to 15%.

Okay. Okay. And one more question was on the order intake. So we had seen a good sequential uptick for last couple of quarters. And this quarter, the order intake was kind of lower on a sequential basis. So has there some slippage happened like closing of an order intake case or anything which you would like to highlight?

No. So I think generally, we were pretty happy with the order intake. Obviously, there are things that get pushed out by a few weeks here and there, but there are large opportunities that we expect to finalize, big ones, and we expect them to kind of maybe come in Q3. But no, generally, I think it's in line with our expectations maybe 1 or 2 orders were pushed out, but generally, we were able to close the majority of the orders that we had targeted. Yes.

And any color on the mix of order intake vis-a-vis last couple of quarters? Because I thought the non-GL was adding a lot to the order intake and order book. So just some color around that.

Yes it is. Definitely in India, I think GL order intake has actually improved this quarter significantly. So we have booked good glass-lined orders, which obviously means that for the next half of the year, we will have a pretty strong backlog. The nonglass-lined order intake, especially heavy engineering, mixing, Edlon have done exceedingly well. They have more than a year of backlog, I would think in most cases. So those are the areas definitely where some of the shortfall has been made up, right? So we expect that the HE business will grow double digits this year as well. They are completely full up, and we are now also trying to extend and see if there's any more kind of opportunity in that space that we can kind of work for.

The next follow-up question is from the line of Sagar Shah from Spark Capital.

My first question was related to the India business. Just a follow-up from the earlier participant's question. So they said also well the growth that we are anticipating would be largely domestic-based, as you just highlighted. The heavy engineering business will grow in double digits. The glass-lining business is showing traction. So as far as India business is concerned, so the contribution, can we see at least higher margins going forward in H2 as compared to what we have clocked around 11.5% in this H1? So is the -- as the domestic business shows traction and the domestic business is a margin-accretive business for GMM as far as you have provided before. So can we expect higher margins in H2 because of the domestic business coming up? And secondly, in the next 2 years, what I wanted to ask as far as the global business is concerned, you were about to hire the international mixing business head also, so going ahead, I wanted some sort of a more granular outlook on industrial mixing business, how do you proceed now when we actually the global economy recovers in the likes of U.S., China. Actually, is the recovery in FY '26 and '27, so how do we see that business growing? Because as far as your numbers say, it's not growing right now, but I want an outlook growing that. So these are my 2 final questions.

Okay. So I'll take the domestic question. So we have indicated that this is going to be a flattish year. and that's how we anticipate -- we continue to answer this year will be. As far as the breakup is concerned, last time because it serves agrochemical in petchem and pharma industry, it has been slow. We are -- we are happy to see a reasonably good order intake last quarter in glass-lined. But of course, there's still some more time to go before these business returns to sort of strong performance we saw a couple of years ago. That gap has been made up by our non-glass-lined business, and that is part of our strategy. The [indiscernible] for the heavy engineering business is growing double digit as well as good growth in terms of our other non-glass-lined businesses like filtration, [ drilling ], midstream and as well as our Systems [indiscernible]. So overall, the net effect of this is a flattish year as far as margins are concerned, we're focused on our cost, and I think those will help us improve to some extent. But it will be a while before we return to the 17%, 18% number we were performing at couple of years back. So we are there on our way. And as we mentioned, is taking on a big EBITDA improvement projects in India, and I think that should pay off for us next year. And as far as the global mixing is concerned, perhaps, Thomas, would you like to...

I'll just maybe add something here on the mixing [ leaving here ]. So you're right, we have hired a head of mixing who's been now with us for nearly 6 months. Last week, we had the entire mixing group from across geographies, the Canadians, the Indians and the [ trends ] sitting in the room, 26 of them, defining their strategy. and building their plan for the next 3 years in terms of both the go-to-market strategy, their projections as well as the investments that are required. That's something that we will be discussing in the next few weeks, and we should be able to have a clear idea in terms of growth areas, geographies, industries that we will be catering to and maybe during the next Board meeting, we can probably -- at the next investor call and earnings presentation, we can include maybe some kind of color or a slide on the next thing. So bear with us for a few more months, and we'll come back to you on that.

[Operator Instructions] The next follow-up question is from the line of Ganeshram from Unifi Capital.

In its contexture to the reserve branded asked one -- a few on the near term and a few on the longer term from here, right? So just on the new when we talk about the competitive pressures that you're facing. Can you tell us how does this sort of shape in the conversations you have with clients? Because these are products the safety and quality matter. So why is there a pricing pressure, right? And what is our wallet share typically in our customers? And are we seeing any protection or erosion in that sense because of this competitive pressure? That's just the first part of it, please.

Yes. So I think at the end of the day, the glass-lined business, obviously, there is technology, there's always -- a glass-lining is something that can kind of break off or chip off very easily. So life of equipment becomes very, very important, removing these large reactors from chemical plants is not so easy for repair or to send back to the vendors. So that's a hassle as well. So quality is definitely important. But you do not [ price the ] Indian clients or generally clients around the world, who usually have procurement departments who have the ability to get maybe multiple quotations, right? So there will always be competition. The internal view might be that GMM Pfaudler is the preferred vendor, but they cannot be a very large price gap. I cannot be at 100 and somebody else is going to be at 75 or 50. The gap should be a little bit smaller. And so that's something that is part and parcel of the Indian market, generally, the global glass-lined market as well. So there is always going to be competitive pressure, but there are customers who clearly have defined that when it comes to glass-lined, they will buy it from us because they've used it and they've seen the quality difference between us and the other vendors, right? In some other cases, for not so large customers, not so sophisticated customers, people might try other equipment one-off. There could be somebody comes in and buy something, but they would realize after a few years that, yes, the equipment did not work as well, did not have the same life as maybe a GMM Pfaudler. So it will take a couple of years, but those customers will come back to us, right? But pricing is important, and you know the mindset, people want to save money today, but they don't really look at the total cost, right? Because there's cost of service, there's a cost of replacement, there's the cost of removal. So it's a little bit of short-sightedness. But at the end of the day, I think we clearly communicate to our customers that if you buy our equipment, you're definitely getting a longer life versus a competitor's equipment, right? How much do they want to pay for it? That's something that keeps changing and it changes between customer, industry and regions as well, right? But that's normal, I think, competitive landscape across most industries where there will always be a #2 and a #3 and you can't be completely off, right? Unfortunately, we're not in a business like NVIDIA is and we can charge because we are only suppliers. But there are other suppliers and unfortunately, there is competition, and we have to deal with it. We have to get better in terms of convincing the customer that our equipment is better and why we should pay a little bit more for it, right? I think that is more important for us.

Understood. That's very helpful. So internally, do you have any estimate of how your market share has tracked or your wallet has tracked over last few years?

I didn't get that last question. Can you repeat, please?

Asking -- I just heard your answer and I was asking if you have an internal estimate as to how much your market share and wallet share has evolved over the last few years?

So I think that the wallet share in our key accounts has definitely grown. We are also currently working on a rebooted key account management process where we will kind of have multiple touch points. But our key customers continue to buy, we continue to discuss. We talk about process technology, all that kind of stuff, right? So wallet share in our key customers is growing. And like I talked about earlier, cross-selling has become an important part because we have multiple products that go into the same customer, the same industry, which obviously means that when a customer is sitting with one of our salespeople, he should be spoken to about all our products and not only one, right? So the idea to grow wallet share is a key strategy that we had. And I'm sure that over the last maybe 5, 6 years, if you look at our wallet share in the key customer account, it would have grown significantly. Yes.

Understood. Understood. And just -- there is a return [ yet here ]. What I'm asking is, from where we are right now, right, are there any pockets that concern you or where you think any incremental risk could build up? And then on the existing order book that we have, what's the time line for execution, right, ballpark?

Yes, I would say that we are in a situation where, obviously, it's tough out there. I think we are confident that the strategy and the work that we're putting in now will have a positive impact at a point when the market also turns. In the meantime, I think it's important that as management, we realized that we had a lot of focus, one, on glass-lined. If you look at our numbers, maybe years ago or 8 years ago, you would see 90% of our revenues coming from glass line. That has reduced significantly now. And again, like I said, industry focus, right? We switched from chemical and pharma, and we are now in a much wider industry. And that's why today we can say that we will be flat even though there has been a big slowdown in glass-lined and chemical pharma, right, because these other industries are making up for the short term. Now we -- I mean at the bottom of the cycle, we probably are at the bottom of the cycle. How long is this bottom going to continue? It's probably a little bit longer, right? I don't see the green shoots yet. I do see some stuff happening in terms of new investments coming in, like I said, in the pharmaceutical industry, we do see positivity, but chemical and agrochemical in particular, seems to be a little bit more time before we see a complete turnaround, right? If you also -- I'm sure you follow a lot of the chemical and agrochemical companies, many of them are now also not clear in terms of their order intake visibility and guidance as well, right? So from that perspective, we are also kind of flying a little bit blind because we expect them to kind of know before it kind of translates into order for us. But we have to keep working on our internal cost structure, which we are doing and at the same time, look at opportunities which are not in chemical and pharma, which we are trying to do, right? So I think from that perspective, I think we are kind of -- I'm confident that the work that has gone in will give results. Timing is obviously something that -- obviously, I can't tell you exactly if it's like 6 months, 3 months, 9 months, that's something that obviously, we will all have to take that journey, but it doesn't look like it's going to turn tomorrow. It's going to be at least a couple of quarters before we see some traction, especially in agrochem. But by then, hopefully, we are also diversified and we bring in some other sources, which is making up for some of the shortfalls.

Understood. And just a question on the order backlog, how long would it take us to execute this backlog?

So most of the stuff will go out this calendar year. There would be some spillover. But generally, because we have capacity available today, we will definitely, at least from an India perspective, most of the stuff will go. Even actually, there are some large projects in the Systems business, which will obviously take a bit longer to execute because that's the nature of that business. But in India, about 90% of the backlog will be shipped out this quarter. And we still have room to book more. So the stuff that gets booked now up till maybe November, December and that can still get shipped out this year, right? So there is that and plus Services. So keep in mind that Services will always be on top of the spare parts, mandate, Services will be on top of this and discounting as a last minute, which is not something that we've built into the backlog.

And that is especially relevant for the international business, which is a significant portion of that is.

Understood. Understood. Understood. And then the last question probably is on the longer term...

Maybe you're better placed to tell us about the chemicals sector, right? Because one of the things that we always also kind of ask investors and analysts, what are we journey from customers and your investor companies from the chemical sector, right? Is there some light at the end of the tunnel or not, and I think maybe you probably could have a very similar view like I did, right? So...

Yes, yes. I mean, I can try to connect with you offline and we about have a chat about that. And another -- the last question I have right and first in the last [indiscernible] but the 3-year plan, they're expecting to see, I think, next quarter as far as you said, but how is it shaping up? And how do you see the company positioned '26, '27, bottom of this cycle, right? I think we're diversifying as a business, we're getting into different kinds of products, setting different geographies, right? So if this engine is running at full capacity, what is the potential that it could deliver? And how long do you think it's going to take for us to get there? And what's being done to get us there?

Yes. So many questions in one. I think give us some time. I mean we have been planning. We are working on a strategic plan. It's dynamic right now because obviously, things are changing quickly. We are also having some ideas in terms of diversification and things like that. I think from a numbers perspective, we had built some numbers in -- up to 2027. We are reviewing those numbers. We have a strategy meeting that's planned for early next year as well. So give us some time on this. I think right now, we are working -- the most important stuff for us today is to be aggressive in the market, to get orders in where we can, cut costs, like Aseem mentioned, we are doing a transformation project here in India. Like Thomas has mentioned, we are looking at [indiscernible] and some kind of rationalizing -- rationalization also internationally. So that work is ongoing. But on the numbers and the outlook, I think that will require some more time because it's a very dynamic situation, uncertain situation. we will need a little bit more time on that. Maybe early next year is probably when we will probably have some more clarity on this.

Understood. And the new management hires that you've done, where I saw a press release briefly before I joined the call. So how does that sort of fit into this strategy? Or is this more of an ongoing replacement?

No. So I think there is definitely a new mindset, new perceptions that have been brought into our management team. I think we've made a couple of important hires here in India, a head of manufacturing and a head of sales. The project that is being run right now has seen a lot of traction because of the new perspective that we brought in. We made some hires internationally as well. So that's ongoing. We are strengthening areas. We recently hired our [ process ] head as well. So we're trying to build process as a technology that we will sell along with our equipment. So that's becoming a part of our strategy. We are also opening up an engineering -- we have already opened up an engineering center here in India where our international colleagues have hired engineers as well to do work there for the international business. So all these things are ongoing. And we expect them to kind of really help us, at least during uncertain times, keep the cost under control, but the thing that if the market will return, the business starts improving, then you will see significant and quicker improvement in terms of both revenue and margins.

The last follow-up question is from the line of Rohit Ohri from Progressive Share PMS.

So my last 2 questions. Has there been any spillover or is there a big order or some sort of thing that has been not been shipped and probably you see that happening in the second half?

No, not really. I think most of the stuff that we have really shipped out and -- so nothing something which is out of the view and all that. So nothing is concerning. It's absolutely routine business. So your -- the capital project. So you would expect 15, 20 days, 1 month here and there coming out from the customer requirements as the case maybe because they may be needing equipment earlier or later versus their original plan. So that's absolutely normal. So we are on track for that.

Okay. So Manish, what gives us the confidence that we will probably try to reach the revenue turnover of last year? And another thing is that we see there's a provision for inventories, the consolidated cash flow of some INR 13.7 crores. If you can share what exactly is that?

Sure. So the confidence that it gives us on the H2 number is basically a higher backlog versus when we started the year. So from that perspective, we expect that delivery to happen. And as we see ourselves, the factories are more filled up from an action perspective that shop floor is not build up. So therefore, as we speak, November, December, January, February, we should see that much more shipments going out. That would be a much more realizations and cash collections and all that. So that's perfectly -- it's an execution of the backlog that comes into me. As regards to inventory provision, so it is basically a compliance of the [indiscernible]. We have a policy with regard to if some product is not being used for a particular time slot, we have to make a provision. But it is a metal, so it is not a -- it does not really have a shelf life and all that. So as we use those meters and specifically, for those is coming up. Most of that does routinely come back into the P&L.

Are there some strategic metals or something of high quality that we're making provisions now?

No, no, nothing like that. Just that you buy a particular product, and you were left over with some inventory and get like [indiscernible].

And Rohit, I just want to add on one point. I think you had asked a question about one of your colleagues had asked a question about the living lab earlier, I just want to add color to that. So internally we call it as CPI [ MCL ] project. So apologies for not addressing it. Yes, we are involved in that project. NPL of India, of course, and actually chemical lab and CPI as a process improvement from the U.K. We have a collaboration with them along with needing innovative companies from the chemical space. And the idea is to set up the plant in NPL with an emphasis on figuring out ways to decarbonize the industry, chemical companies, pharmaceutical companies. And amongst the existing providers, we're the only one because they wanted industry leaders to participate in that. So we are participating actively in that and as we develop new solutions, of course, we bring them, the NPL will be announcing that as appropriate.

That's great, Aseem. Last question from my end. Manish, if it is possible to kind of share the pyramid of the customer sizing in terms of the deals in terms of rupees million? And Tarak did mention some developments in Poland. Are you looking at consolidating some of the businesses and bringing everything in Poland? Is that something that you're looking at?

Poland becomes an opportunity. We already have India as a low-cost sourcing hub, but we also wanted to have something in Europe because customers, some of the customers in Europe would be accept European-made equipment. So Poland is a nice option for us. Like I mentioned to you, we laid the first set of 2 equipment for Mavag, our subsidiary, and the FAD was actually done a couple of days ago and the results were quite encouraging. So Poland becomes an important kind of strategic idea for us. And because it's in Eastern Europe, the cost structure there is significantly lower than Western Europe, right? So I think that it's good. Plus we have young engineers, young welders, both English-speaking and available. So getting people there is also not so difficult. And then area where we are focusing on, where we have our facility is already an area where there's a lot of multinational companies like Boeing and aircraft manufacturing and stuff. So engineers are available quite eagerly, welders and the quality levels there are also quite good, right? So we don't have that learning growth that we did have in the past with India. So Poland gives us an option, a very good option and Poland is a strategy that we would hope to kind of build on over the next few years.

And I think on your previous question with regard to the previous part of the question with regard to customer mix, that would keep changing as the CapEx plans hopefully or practically ends up changing every year for us simply because of the CapEx cycle that the respective companies would have.

Yes. And I think this year, I would like to add that the ticket sizes for heavy engineering are very different from glass-lined and glass-lined project would be INR 5 crore, INR 6 crores, heavy engineering project would be INR 50 crores or INR 100 crores, right? So depends on what it is. The product mix, also the size and the ticket type is changing. And like Manish said, if you look at the last 3 years, you would have a change in the top 10 customers because projects and investments don't continue every year. So one [indiscernible] to that [ would top the full year ], so that keeps changing.

The point on Poland was quite encouraging. Hopefully, we get better margins going forward in the next 2, 3 years.

Thank you. Ladies and gentlemen, we'll take this as a last question. I now hand the conference over to the management from GMM Pfaudler Limited for closing comments.

Thank you, Neha. Thank you, everyone, for joining us today. It was a pleasure interacting with you, and we look forward to many such interactions during the course of the year. Take care and see you soon. .

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