GMM Pfaudler Limited (505255) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '26 Conference Call of GMM Pfaudler Limited. [Operator Instructions] I now hand the conference over to Mr. Raveen Kanabar. Thank you, and over to you, sir.

Thank you, [ Rituja ]. Good evening, ladies and gentlemen. A very warm welcome to all of you into the Q3 and 9 months FY '26 Earnings Call of GMM Pfaudler Limited. The earnings presentation was uploaded on the stock exchanges today and is also available on our website. Hope all of you had a chance to go through it. From the management, today, we have with us our Managing Director, Mr. Tarak Patel; and our Group CFO, Mr. Alexander Poempner. 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 was uploaded on the stock exchanges and also on our website, including our call discussions that will happen now, contains or may have certain forward-looking statements regarding our business prospects and profitability, which we 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. Tarak Patel to provide you with an overview of the performance. Over to you, Tarak.

Thank you, Raveen, and good evening, everybody. So as you can see, we are continuing with the momentum again this quarter. It's been a stable quarter in terms of revenue and profitability. However, it's been a good quarter in terms of order intake. If you look at our last 3 quarters of this financial year, Q1, Q2 and Q3, you will see that, of course, order intake has been significantly higher, and that obviously puts us in a much stronger position for the next financial year. In terms of revenue, our 9-month revenue is up 8% year-on-year, and our EBITDA grew by 14% on a 9-month basis. Our margins have also been stable or slightly improved over the previous same period. Order intake, like I mentioned to you, INR 961 crores, which was 9% up this quarter, but 20% year-on-year. And subsequently, our 9-month order period also saw a growth of about 16%. What is also very comforting is that today, our backlog stands at INR 2,205 crores, the highest it's ever been, which is 27% higher than previous year. We expect Q4 to be a strong quarter in India in terms of revenue and shipment, and we also expect Q4 the momentum to continue with order intake, which then hopefully will put us in a very strong position for next year. With a 30% higher backlog for the next financial year, of course, there would be both improvement in -- and growth in revenue and in profitability as well. Having said that, the global environment continues to remain challenging. As many of you will know and would have investments in chemical companies, the chemical outlook still remains quite stuck and the worrying areas or the geographies for management today is Europe, which is, of course, slow. India continues to improve, driven by investments in pharma, oil and gas and nuclear. So we have diversified there. Chemicals remained weak due to overcapacity and uncertainties in global trade. Europe, like I said, remains slow and uncertain, especially in our traditional markets of chemicals and pharma. However, our systems business has seen significant order intake driven by increased defense spending in Europe. American markets are recovering and seeing improvements. And also with South America, Brazil, SEMCO and [indiscernible] in Brazil, we are seeing growth driven by metals and minerals and rare earths and oil and gas. China continues to be challenging for us, and we are now implementing cost-saving measures and strategic investments to make sure that China recovery is on track. I would also like to mention here that you will see in one of the slides in our presentation that what's also very encouraging is that now 50% of our order intake over the last 9 months and the corresponding backlog comes from nontraditional industries. So when I say nontraditional industries, I mean these are orders, not from chemical and pharma. So as a company, you can see that our diversification strategy is now gaining momentum. It's something that we've been speaking on for a long time. And today, we are in a stronger position. We are able to show growth even in spite the challenging conditions only because we have this diversification strategy. Lastly, I would also like to talk a little bit about 2 exceptional items in this quarter. One, I think most of you will be very aware of. This is regarding the new labor code. There is some provisions to be made as the new labor code got implemented in Q3. The other onetime expenditure is for our facility in Germany. As you would have known over the last few quarters, we have been consolidating our cost structure across the globe in our glass line business, our manufacturing footprint. This started with our shutdown of our Hyderabad facility and the land, which was subsequently sold off, and we will receive the proceeds this month, INR 55 crores. And then we also shut down our U.K. facility in Q4 of the last financial year. This continues and our glass line capacity today as what we have across the world needs to be consolidated. And the next initiative in this front is to reduce about 30 people in Germany. We have signed an agreement with the Works Council there that will see 30 people, 14 of them have already left this quarter and the balance 16 will leave over a year's time. And the provision for that has also been taken entirely in this quarter. I would now like to hand over the call to Alex. Alex will give you a little bit background about the financial numbers and maybe a little bit more details about these 2 onetime impacts. Over to you, Alex.

Yes. Thanks a lot, Tarak, and hello, everyone. As already started by Tarak, I would like to say or focus especially on the 2 exceptional items. The first one, as Tarak mentioned, due to the consolidation of our global footprint of our global glass line setup, we started a further cost reduction improvement program at our site of Pfaudler GmbH in Germany. This resulted in an exceptional impact this quarter of INR 44 crores. This covers the -- it's mainly severance payments for staff already left and staff which was agreed to leave now in the coming financial year. So this is a full downsizing staff reduction program to really adjust our footprint to the future requirements. The other onetime exceptional impact is coming from the new labor code in India. I assume everybody already is aware of this. Also several other companies faced this. It resulted in an impact of INR 13 crores this quarter, and this was also fully provisioned for. And you see it in our income statement that, as I said, both together classified as exceptional and therefore, have a onetime impact on our results. I think these are the 2 key areas from my side. I now would like to hand over back to Raveen, but yes, probably you will have further questions.

Thank you, Alex. [ Rituja ], you may now open the line for questions. Thank you.

[Operator Instructions] The first question is from the line of Sameer from AMBIT Capital.

[Technical Difficulty]

I'm sorry to interrupt you, Mr. Sameer, but we are unable to hear you clearly, sir. Can you please check?

Can you hear me more clearly? Is it better?

Better.

So my first question is, how should we think about the margins and return on capital employed for the nontraditional end markets? Is it comparable to your traditional end markets? Or is it lower or higher? Anything on that?

So when I say nontraditional markets, you must keep in mind that these are markets that we have been serving for quite some time. So they are not new brand-new markets. Our heavy engineering business serves definitely nontraditional markets because their markets are oil and gas, petrochemical, fertilizer and now nuclear as well. Our systems businesses serve markets like defense, space and other stuff, our mixing business. So generally, we feel that in terms of diversification, there are 2 or 3 things that we look at. One is, of course, our ability to engineer and manufacture these goods. So that's something that we have as a USP as a company. So that continues. But these new verticals or these new businesses that are helping us diversify are now entering or helping us grow from nontraditional industries, right? So most of our growth -- most of our business, nearly 70% of our business, maybe 18 to 24 months ago, maybe even more came from chemical and pharma. And while the chemical market kind of went down over the last couple of years, it was important for us as a company to diversify as a long-term strategy, if you want to see continuous and sustainable growth, the more you diversify, the more at least the buffer that you have, right, because all the verticals and all the industries, hopefully would not go up or go down at the same time. So that's the thought process behind the diversification. And many of our products can also be used in nontraditional markets. So we are trying to improve our penetration in the new market areas. In terms of margin profile, they remain quite similar. If anything, once we move up the value chain and we give process technology like we do with our systems business, you will see margins improving there, right? Again, in terms of return on capital, the other thing that I would like to just mention here that these factories and these businesses are not heavy in terms of assets. They don't have large manufacturing sites and facilities and footprint. They are pretty much buying and assembling and putting it all together and selling it to the customer, right? So it's a combination. And I think -- I hope that kind of answers your question. Alex, do you want to...

No, no. I definitely have to echo. In fact, the new businesses, they should be at least as attractive as the current ones regarding the ROCE. And we gave a long-term ROCE guidance in our last Capital Markets Day. We are currently not there, but we are confident that we will bring up continuously.

Yes. And I think as a strategy, the way I would hope people think about this is that a company that was famous and only known for glass line today has 50% of its business coming from non-glass lines, non-pharma, nonchemical, right? So a lot of people talk about diversification, but you can see now with the orders that we have, the size of the orders that we have. So a large order in defense, close to $30 million, a large order from nuclear, close to about $15 million, right? So these are large orders where we would not be getting these orders if we were not capable or we didn't have the kind of capabilities to kind of support these large projects, right? So that shows that over time that we have diversified and this initiative or the strategic initiative is going to be very important for us over the next few years as well.

Okay. My second is, what is the reason behind this lower EBITDA margin sequentially? I believe SEMCO is margin accretive, if I'm not wrong. So if you can provide some details on that?

Sorry, margin negative SEMCO? No. So SEMCO is...

No, no, accretive. Accretive I'm saying. I'm saying margin accretive.

SEMCO definitely -- yes. So SEMCO is doing quite well. I was in Brazil actually last week. SEMCO has a very strong order book and the outlook looks very positive. There are large investments coming into metals and minerals, oil and gas, petrochemicals, even chemical, pharma in South America, which we should definitely try and get involved in. So SEMCO is a company that today is strong in terms of both backlog and opportunities and continues to remain that way.

Okay. I was just thinking about the lower EBITDA margin sequentially. Is that driven by something else? Or I mean, what are the factors behind?

SEMCO, specifically SEMCO, lowest EBITDA margin.

Lower, lower, lower.

The lowest...

No EBITDA....

[indiscernible] units or what do you need?

In general. In general, in general. I'm just the total EBITDA margins for the company.

Okay. So I think the EBITDA margin, if you see as a group consol numbers, it's flattish, right? It's about 12% versus 13.5%. But again, I would just recommend that when you look at GMM Pfaudler, we must look at it on at least a 9-month or a 12-month basis. Quarterly would not be a fair way to look at an engineering manufacturing company where most of our orders are long term and over a period of time. So I think as we have said that during this year, we will maintain 12.5% to 13% margin and look at upside if the market picks up. So I think it's a stable margin. It's better than where we were. There are obviously rough -- I mean, there are tough places in the world right now where we do have problems. We don't have order intake as much as we would like, and that is always going to be the case. Some geographies do well. Some geographies will not do so well. But generally, we are definitely happier today and more -- have more comfort because of the order intake and the backlog that we have there.

Just to add here. I think if you compare on a 9-month basis, the EBITDA margin is increasing from 12% to 12.7%. So we see the upward trend. There are, of course, and these are especially the new investments where we achieve already higher EBITDA margins. But unfortunately, we have some units which are performing not good. We -- of course, you could imagine that Pfaudler GmbH, the unit in Germany, where currently we initiated cost-saving measures, their EBITDA is definitely not where it should be. We also still have some challenges in Switzerland. And also China especially with the outlook from the EBITDA margin perspective, it is not there where it should be. It's below average. However, and I think this is fair to say, especially the new businesses that we invested in, there, we're already trading at higher EBITDA margins. So what we have to do, we already started. We have to improve the underperforming units.

Just one more point here is that, one, obviously, there is a product mix that has a place. Sometimes you will see that there will be a large HE order that could get shipped out. So it's really, again, a quarterly would not be the right way to look at it. I think from a margin perspective, we believe that there is obviously room for improvement. We are working towards this. And as volumes pick up and as some of these cost initiatives take effect, we will definitely see margin to hopefully move in an upward trend.

Okay. That's helpful. If I can squeeze in one more, just a small one. That's order inflow. Can you give the breakup of India and international markets? Is it driven by more from India market or...

It was around -- yes. So just broad level, India was about INR 290-ish crores, so INR 300-odd crores, India, INR 600 crores something in international. So both of them have recorded quite strong order intake. And this quarter also looks good. And the nice part about at least India is that the glass line business is looking a little bit better. We have recently been -- we've won some large glass line business as well. So that's also a positive at least from an India perspective.

The next question is from the line of Sagar Shah from Spark PWM.

Congratulations to the management for delivering such numbers in such uncertain times actually. Now my first question, sir, was just a follow-up of the previous participant actually. The volatility, I understand it's an engineering company, so there must be volatility in the margins. But what I wanted to understand is there is some -- there's a huge difference in the gross margins as well. So the gross margin for this quarter is at around 60.1% as compared to the previous 2 quarters, we were clocking about 63%? So is this difference in gross margins is just because of -- it's because of product mix? Or is it something else? Or is it related to any kind of tariff or tariffs? Are they related to that? I wanted to understand that point, sir.

I think what is important to consider for us is probably if you look on a 12-month basis or 9-month basis. If you just do a quarter-to-quarter comparison, there could be a high impact just due to the business mix. So we also intend to focus more in the future on a 12-month basis and not just on a quarter because it could be exactly as you said, it could come just due to a really strong performance, high gross margin business in 1 quarter and then you have the resizing on the full move.

Okay. So Okay. Got your point, sir. So what are the steady-state gross margins or EBITDA margins that we would like to target in the next 2 years, anything between in FY '27 and FY '28 if this global situation actually remains stable and it actually improves?

I think what we gave, and we definitely stick to this as a midterm EBITDA margin to go back to the 17 percentage, 16% to 18% range, and we are getting there because especially the latest investments, they already achieved better EBITDA margins. We have to admit that currently, we have the challenges in the global economy. We see the uncertainties. We have still some underperforming units due to this, and therefore, we are not there. But as said before, the EBITDA on a group level compared to last year, it increased from 12% to 12.7%. And we are confident that we also bring it slowly up again in the next financial year already. But the full achievement, the target, by when we will reach it, it also depends on the global economic situation that we currently could not really foresee how it will develop.

Okay. Got your point, sir. Now my second question was related to disclosures. Yes, sorry.

No, no, I was just going to add to that, even though that the global situation, of course, is something that none of us can predict in terms of what is going on. But at least from the perspective of -- from the perspective of the customers that we speak to, at least the chemical customers, which is currently our biggest, I would say, pain point is that volumes have now come back. So at least that's a positive development. Maybe the margins will take a little bit longer, but people are at least now running full factories, which means that hopefully, the next investment cycle is not so far away, right? So at least from that perspective, we've had 2 years and many of you have been following chemical companies. I know that there is not too much positivity right now, but the cycle has to turn at some point, right? So we all, I guess, have our fingers crossed that at some point, things will improve. And I think now there is at least from a global trade perspective, some amount of, hopefully, stability. And maybe I speak too early, but at least with India, Europe, India, U.S., maybe there is some potential improvement and development on that front.

Okay. Got your point, sir. My second question was related to disclosures. You -- this time is the first time that you have given disclosures that how much percentage of your orders were from nontraditional sectors actually. So don't you think now it's the time to give disclosures even within technologies that which segments is it from the industrial mixing side? Or is it from the GLE or is it -- or is it from the lab and the process glasses or which businesses are actually are giving you higher order intake? What is the outlook regarding that so that investors can get further more confidence, sir, that how GMM can grow in the next 2 years?

So one of the learnings over the last few years after speaking to people like you is that our business is confusing, right? And there's so much stuff going on with so many different entities and international versus India, I think it becomes difficult for investors and analysts to really put a finger, right? There's much easier companies to track than GMM Pfaudler. So we get that for sure. I think what we have to do, one is obviously to make it easier for you, but I think the more important part is to make it easier for management to think about businesses, to strategize about businesses, right? So we are now going through a transformation, which I've spoken about quite a bit. You will see a different company in the next few years. We have already reorganized. We are in the process of reorganizing our business lines to meet specific needs. We also believe that every vertical or every business life has different strategies. For example, our glass line business, for example, is a mature business. It's not growing at 20%. We are the market leaders, and it's a mature market, right? There, the play is not growing market share. The play there is not growing. The play there is to really cut cost. And that's why you see we have already looked at 3 facilities in terms of reducing and kind of downsizing, right? These are tough decisions to take, but we are taking them because we believe it's the right thing to do, and we believe that we already have enough capacity for glass lines, right? So over time, this should play out to our advantage. Our other verticals like heavy engineering, for example, are high-growth verticals. So our strategy for that is completely different. Our strategy there is to add salespeople, to add capabilities, to add different kind of geographies and PPR so that we can cater to a much wider range of industries, right? So every vertical will have different strategies. Every region within those verticals will have different strategies, right? So that helps us as a company deliver and initiate strategy based on specific needs and not a one size that fits all. So hopefully, we are in the process. We obviously will go internally to the Board with next year's budget shortly. And at some point, we will also start articulating our next strategy, the next long-term strategy. It's been quite some time, and we've been talking about coming back to the capital markets with our Strategy Day, our Analyst Investor Day. We were hoping that the market stabilizes. We didn't want to come back too early and then still kind of struggle. So we were waiting until the market stabilizes before we come to you. But -- the plan is ready, the ideas are ready, the numbers are ready, the strategies are ready. So I think the thinking has already started because what this company was 5 years ago, it's not the same company today. So the strategies will need to evolve. The people, the organization will need to now evolve. And like I said, once business picks up, things should look good. But I'm excited. I think the people in the organization are excited. And I think that at least from the last maybe 2 or 3 months of changes that we implemented, there is definitely more accountability. There is definitely more excitement. So I think it's definitely a positive. Alex, do you want to add something to that?

No, I agree with them.

Sir, my last question was related to the non-glass lining technologies and the trade deals behind that. Within the non-glass lining technologies that you are getting from the nontraditional sectors, defense, nuclear and even metals and minerals, you just highlighted about South American market also in your opening comments. But I wanted to understand that which of these companies are actually gaining traction? Is it Edlon or is it just heavy engineering in the India business? Or is it MAVAG for the filtration and drying systems? Or is it process and glass systems, which are the actually segments or which are the companies internationally actually are giving you that kind of traction or will give you higher traction in the future?

So I think -- sorry, go ahead Alex. You start.

I think what definitely we already announced before, we have a strong focus on mixing. You saw it also from the latest acquisition to setting up this mixing platform with the entities Mixel in France and China, MixPro in Canada as well as now SEMCO in South America, combined with Mixion in India, we have the platform there. This is something where we expect further growth to come and especially also margin improvement because as I said before, this is, from our perspective, attractive margin business. We also still have -- it's a smaller unit, but the Interseal business, it's an entity in Germany, which also belongs to the non-glass line business, which also shields high margins. So this is attractive from our perspective. Besides the non-glass line, we also have the system business. And the system is also helping us currently with the order intake. And there, we -- I think we announced in June last year, the big order intake of INR 330 crores, so EUR 33 million. This is going more to the, call it, the defense industry. So also, it's broadening our customer portfolio, and we are developing there in the right direction also with attractive margins.

Sorry to interrupt...

We have heavy -- just last sentence that in India, of course, we have our strong heavy engineering business, where we are also developing in other industries. Also, there's now something in the nuclear sector. So this is also helping us in broadening our customer base, our customer industries. And this is also something where we expect further growth to come, especially also top line growth.

Sorry to interrupt. May we request Mr. Sagar Shah to please rejoin the queue. We have other participants waiting for the turn [Operator Instructions] The next question is from the line of Salil Desai from Marcellus Investment Managers.

My first question is on this Germany restructuring, right? So between what you've done at the U.K. facilities and what you're doing at Germany. So how do you think differently of what interventions are required at each unit? And related to that is what more can we expect? And does production suffer with the German initiative that you've taken?

Sorry, Salil, could you just repeat that? It wasn't very clear. Could you just say that one more time, please?

So I'm saying that what you've done in Germany versus what you did in U.K., right? So how are you thinking differently of different facilities of what intervention is required? And once that decision is made, in the future, can we expect something more in the pipeline? And how does product change what you've done in Germany?

Yes. So I think let's start off with the global glass lining business. There is obviously an addressable market. There's a market size. And obviously, as you know and many of you would know, we have glass lined facilities in U.S., Brazil or we had rather U.K., Italy, Germany, China and India, we had Karamsad and we had Hyderabad. So on a global basis, obviously, considering the growth and the market, we felt that we had too much capacity. So we had to look at reducing capacity, especially in Europe. Started with U.K. because U.K. was our oldest facility. It was about 100-plus years old. So definitely the first one that we went after in terms of downsizing. That is completely done now. So there is no glass line production now in the U.K. We then, obviously, in India, we had our Karamsad facility, and we had a Hyderabad facility, again, too much capacity for the Indian market. We decided to move everything into one rather than have 2 factories running at 50%, we would have 1 factory running at 80% or higher. And that's what's happening now. Hyderabad facility was sold off. The people were let go and the land is now sold, and we should now receive the proceeds this month. The German facility, again, considering the current order trends in Europe, that is a proactive step where we have taken because we know that our cost structure is high in Germany. And we had an agreement over the last couple of months, we negotiated and we signed an agreement with the metal union workers to reduce 30 people, 30 plus another 5 over time, so 35 people, which accounts for nearly 30% of the total wage bill of Germany. So it's a significant restructuring. I know it's not fun to restructure. We would love to have business that was growing and orders coming in and we could have these factories completely full. But unfortunately, that's not the case. But I think it kind of gives us a better standing for the future. We already have a facility in Italy that does quite well, which is a very different model because they outsource a lot of their production. So that continues. The German facility will also continue, however, with a different cost structure where a lot of the metal fabrication will now not be done in Germany and could be done in lower-cost countries. So that's part of the strategy. And in terms of further downsizing, I don't think there is anything significant right now that we are looking at. China is a small facility. China strategy is something that we are working on. China is slow for sure. What we do with China is something that we will need to kind of figure out over the next few months, but it is not something that is a big problem for us. So I think where we need to work in Europe. Europe, we've already done a lot of hard work, and this is just one more step to make sure that we are from a cost perspective, just much more comfortable.

Understood. And second question is, can you just remind me on nuclear, what applications are we getting orders for? And has anything moved on the semiconductor side?

So nuclear, we have received a couple of orders, large orders from the Nuclear Power Corporation of India. So these are for ancillary equipment going into the nuclear power plant. So these are not nuclear stamped vessels. However, they are large pressure vessels, heat exchangers and columns. So they go into the same plants that generate nuclear power. So that's where our play is. There are not many people who are qualified. And because of the acquisition of Hindustan Dorr-Oliver or HDO, we were able to kind of break into this market. So that was in nuclear. Going forward, India, nuclear, there has been investment already approved. So we believe that over the next few years, the nuclear power sector here in India will continue to grow. And again, we will be well positioned to capture some of that growth. Sorry, your second question on this was -- sorry, Salil.

On semiconductors, I thought we had some opportunities there also possibly, right?

Yes. So semiconductors is basically our unit in the U.S. Edlon doing quite well, has a good strong order book driven by semiconductors and also quite profitable. And how big would Edlon is now?

It's USD 25 million. And please consider for Edlon, this is -- we also announced an investment, a setup of a new site because we expect a significant growth over the coming years based on the Semiconductor business Inflation Reduction Act, which was signed in the U.S., I would say, 12 or 18 months ago. So a lot of investments are coming there. And therefore, we invested early in the new site and we expect a significant increase on this high profitable business.

Yes. And Edlon also does work for the nuclear industry. They make some PTFE lined glove boxes also that goes into nuclear. But I think you would remember, Salil, a few quarters ago when Edlon wasn't performing that well, we had actually put it as an asset for sale. We were running a process. This was before the semiconductor boom has kind of happened, and that was about an $8 million to $9 million business, which has now grown about 3x and is quite profitable. But we need to push that business. and maybe see if there are more opportunities to grow faster and quicker on that front.

The next question is from the line of Kunal Mehta from Sunidhi Securities.

And my first question is, I think a while back, you all had mentioned that the heavy engineering as a mixing business can be $100 million business each in the next 3, 4 years. So now that we have 4 brands under mixing and we have the Hindustan Dorr-Oliver facility for the heavy engineering, how do we see this growing? Are we going to see any more acquisitions to -- for your capacity expansion in the heavy engineering so we can have a facility overseas so we can cater to orders overseas as well? And how is the mixing segment also looking in terms of order intake?

Yes. So on the heavy engineering front, we have enough of capacity to hit maybe about INR 600 -- INR 600 crores to INR 700 crores mark from this very site. So no further real investment needed. But if you want to go up to INR 1,000 crores of revenue, then of course, we would need to add capacity. We have space available to expand even within the current site. So for the next 2 to 3 years, we don't see any significant investment in HE -- in our HE business, heavy engineering business. As for mixing, of course, so mixing, again, like you said, 4 different facilities around the world. Our SEMCO and our -- so our SEMCO Brazil and Canada MixPro are doing quite well, driven by oil and gas, metal, rare earths, et cetera. A very strong backlog and very strong opportunity pipelines, doing a lot of work for some of these newer and nontraditional industries. India and Europe, India is okay in terms of mixing some large orders to be finalized. Europe, because of the general weakness in chemical and pharma continues to remain weak, and we are looking at obviously manufacturing some of these equipment outside of the high-cost Western countries to make our product more kind of attractive for the European market. So that's the general feel around mix -- in mixing.

And China is -- and China, it's still a small unit, but nevertheless, it's also a mixing unit. And there, we are in line with the Chinese economy, order intake also behind our expectations. So this is also not doing good.

Okay. Sir, my next question is India just signed a trade deal with EU. And do we see any indirect benefits from this in terms of -- because there might be some expansion of orders from defense or nuclear or maybe the export scenario becomes better, like from India, we can leverage new facilities, the low-cost base of India to supply to Europe as well. So can we see as a possibility?

Yes. I think that if you -- I think one of the things at least I was reading was that chemicals can now be imported into Europe from India. So that could obviously drive investment in chemical manufacturing in India, which obviously means that, that would result in more business for us. Pharma collaboration, again, I think it's too early to comment. It's definitely a positive. But if you were to ask me specifically which and where it's going to impact us, I can't say right now, but I do think that it will definitely add some benefit in terms of even trading between the 2 countries, export licenses in certain cases, there could be some benefits as well, right? So I see that. And then, of course, now with the U.S. coming back in again, we had $5 million or $6 million worth of shipment to the U.S. last year or orders from the U.S. that now obviously, we can then now process and kind of again start looking at the U.S. market from India.

And is there any -- like I think last time I spoke with Alex sir, he mentioned about a little drag in the filtration and drying segment. So are there any issues that we're facing in the Europe market?

So Europe, again, generally is slow. But again, there are very large projects in the pipeline. So for example, there is a once-in-a-generation investment of Roche that is going on in Switzerland. That obviously could mean more business for the group. So there are some projects coming in, in pharma. Chemical is, of course, slow. Chemical is something that is -- remains slow, and we don't see too much excitement on that. In India and at least in India and maybe also in Europe now, peptides is becoming another area where more and more people are looking at adding investment. So in the U.S., Eli Lilly, in Europe, Nova and then, of course, in India, quite a few pharma players are now getting into peptides, right? So that could be a nice area for us to get into as well.

The next question is from the line of Praveen Kumar from Equitas Capital.

I had a couple of questions. The first one was on the international business. Again, if I look at it on a 9-month basis and split it into services versus technologies based on your disclosure. So on a 9-month basis, it still looks like that on a Y-o-Y basis, the services part is still -- the growth rate on the services part is where it is highest, followed by technologies, right? So just wanted to understand all these businesses, nontraditional businesses you're talking about, mixing, heavy engineering, et cetera, largely, those revenues will be classified under the technology segment, whereas services probably would be your old GLE kind of business, right? So just wanted to understand, despite the slowdown in GLE and despite all these other segments doing well for you, on a 9-month basis, why do we still see services being the highest growth segment versus something like the technologies? That's my first question.

I'm not sure if I understood correctly. You're saying the international business, 9 months comparable period, you're saying services is growing the fastest.

No, it's not. No, no, no. No, services is more or less -- it's flat. It's one of the growth areas that we expect on a global level. We also expect there something to come, and we always said from India and China because their services is underrepresented. This we did not achieve so far. So we don't see it.

I think general view on services is that services was slow. But last quarter and now as well, services have seen some improvement, especially in the U.S. So I think services will come back to the normal levels, especially in the Western U.S. and European markets.

Because if I look at your numbers, right, if I look at the 9-month numbers on services, it adds up to around INR 699 crores for 9 month FY '26. The comparable number for 9 months FY '25 seems to be INR 647 crores. That's like 8% kind of a growth rate versus on technologies, INR 884 crores last year has grown to INR 950 crores. So that's like a 7-odd percent kind of growth rate. So that was my -- I mean, unless my numbers are wrong, that was the question.

No, your numbers seem okay. So both growth rates are around 8%, 10%, right? That's what you're saying.

Like services is 8.1 -- services is 8.1%, the other is 7.4%. That was the question.

Yes. So what are you saying now? What is the question that...

Services consolidated is INR 800 crores for the 9 months versus INR 699 crores, correct? -- for consolidated.

Yes, yes. So my question was that services -- I'm sorry.

That's 14%.

I think we can take it offline. Let me get back to you.

Yes, take it offline. We'll be happy to kind of give you the breakup so that you can clarify.

Services, we do not see the growth so far in India, neither in China. This we say, otherwise, services, I think it's a good performance.

Understood. Understood. And my second question was on the margins. I think earlier, you were saying that you aspire to get to the 16% to 18% kind of EBITDA margin trajectory. So just wanted to understand from your current levels to get to that level, how much of that would be in terms of getting more operational efficiencies versus how much would be driven by growth rates? And what kind of growth rates would you need to get to that level?

Put it this way. First, let's start with this non-glass line business. So this is a ceiling. This is the mixing. It's already trading at significantly above average margin that we have. These businesses, we also expect to grow faster. Therefore, just due to a higher share of this business, we expect the margin improvement. On the other side, we have especially the glass line business where currently we are not doing as good as we want to, and we are also not achieving the margin that we want to. This is due to several effects. First, we have some under -- significantly underperforming units, partly loss-making units. We already explained Germany. We also said China, and we have to turn these around. So therefore, we already started with the restructuring measures. We had this cost-saving program in Germany we talked about. We also -- what we could do in China. And by turning this around, we will also bring the currently low EBITDA margins of our glass line business up again. And in combination, this will result in this mentioned 16% to 18% target EBITDA range. So really on one side, taking -- okay, you got it, perfect.

The next question is from the line of Bhavik Shah from Invexa Capital.

So my first question is, can you just help me with the split of the order backlog and order inflow in terms of India and international?

For this quarter, about INR 290 crores was from India and the balance was from international approximately.

This is for inflow, right?

Yes. This is for order intake, yes. And the backlog would be divided...

So the backlog is INR 550 crores for India and the balance INR 160 crores -- something for...

INR 1,000 crores, sorry INR 1,600 crores for the international.

Okay. And sir, regarding this write-off of exceptional items which were taken the -- we have...

I'm sorry to interrupt you, Mr. Shah. Can you speak a bit louder? You're sounding very low.

Is this better?

Yes.

My second question is regarding the German unit and employee hit which we have taken. So does that mean our structurally employee cost come down from next quarter onwards? If yes, how much is that reduction which we are seeing? And in last 3 quarters back or something we took a similar hit in the U.K. business and then we took an impairment. So are we expecting some impairment also coming in the Germany unit?

No. In fact, the key difference between the restructuring program in the U.K. and in Germany was that in the U.K., we really stopped the OE glass line manufacturing. So we also had to write off the inventory, some assets which were related to this without any cash impact. I think this is also what we said a year ago that there were only some resulted in a cash outflow. In Germany, we still have the operations. We just sized these down, and therefore, we took out or will also still take out some people. Therefore, we do not have the write-off of inventories or impairment of assets. So it's slightly different. And the cost improvement in Germany, it will phase in over 2 years because we said we just started with Phase 1, which is 14 people in FTEs and we expect there already an improvement in the result of roughly INR 15 crores to INR 70 crores.

Okay. So by quarterly, INR 15 crores to INR 17 crores...

For the financial year starting next year.

Okay. So INR 15 crores to INR 17 crores is the entire year savings in FY '27, right?

This is a full year saving, and then we will still -- some further FTEs will phase out in the next financial year. And the full year impact that we expect due to them leaving will be in the area of INR 25 crores. So in total, we are above INR 40 crores impact.

Yes. So this is a big downsizing for us, nearly 30% of the cost is being -- removed 25% to 30% is being kind of taken off over a 2-year period, right? So it is a restructuring of a large size, and it definitely will impact us positively going forward.

Understood. And sir, can you go through for [indiscernible]?

Mr. Shah, may we request you to please rejoin the queue?

For FY '27?

No [indiscernible].

Hello?

Sorry, can you repeat or go to the next...

Can you just help me with the guidance for FY '27 in terms of growth rates in India and international business?

So I think just wait a little bit, Bhavik. We will let us get into this quarter a little bit in detail. So we know what our starting backlog is, let the order intake continue, and we would happy to kind of give some broad level guidance maybe in the next quarter.

Mr. Shah, may we request you to please rejoin the queue. We have participants waiting for the turn. The next question is from the line of Rohit Ohri from Progressive Shares.

Two questions, probably 2 parts to that. First one, that we see that you are building the order book for HE with all these opportunities coming from oil and gas, nuclear or maybe green hydrogen. My question is that are we already insulated contractually for these projects? Or do we see volume margin fluctuation or risk associated to that?

So I think we are pretty well insulated. So these are fixed price contracts with some amount of escalation clauses if material prices were to change. There are also payments are milestone based. So we don't see any significant kind of risk. But of course, the sizes of these projects are larger. So we need to be efficient in terms of ordering, procuring material, manufacturing, execution, quality. So it's like any other business, just the size and the scale of these orders are bigger. So of course, from a project management perspective, we have to be completely on our toes to make sure that we execute these projects very well.

Do you think that you will be going aggressively after the market share in HE division?

So HE is a business that is a really large business, and I think there's enough of space for at least quite a few large companies. In our niche space, we have a group of companies that we normally compete with and there are companies above us and also kind of be below us, right? So the idea is to move up again over -- in terms of value chain to make sure that over time, in terms of material, in terms of thicknesses, in terms of weight, in terms of complexity, we can take better stuff and higher stuff as well, right? So that is the push. And over time, as you would have seen, we would have started -- maybe when we started this HE business 3 years ago, we were 90% for the material handled would have been carbon steel. Today, that carbon steel has come down to 40%, where we have stainless steel, we have Hastelloy, we have Titanium, we have Inconel. So all these materials coming in. So from the same capacity, you can get much more revenue if you can increase or change the material, right? So that's something that we are working on. And again, here, the export market is very lucrative as well. So the Middle East, Southeast Asia, Saudi Arabia, all markets that we can cater to. And one of the strategies to really build our presence and penetrate those markets quite well.

Tarak, congrats on this big order that was shipped out for some oil refinery, [ Piaui ], Equilloy,which was, I think, 48 meters or so. But the thing is that going forward, do you think that in the next 2.5, 3 years, HE alone can be somewhere like INR 1,300 crores or INR 1,500 crores kind of order book for you?

So see, it's a growth vertical for us. But again, like I said, we don't want to grow and go into markets where the margins are tough and the competition is strong. Let's find a nice niche for us. There are quite a few different industries that we can cater to in this market. So between this, we'll find some place to play. Of course, growth is a challenge in our traditional markets. So we have to find growth from new markets, new markets such as nuclear, oil and gas, defense, metals, minerals and stuff like that. So we are trying. Some of them -- we will succeed. Some of them won't grow as fast as we would like. But I think that we have created a strong brand. We are a well-known player now in heavy engineering. So we are considered as one of the premium players here. We are no longer somebody who's trying to get in. We are already in. We've got our foot in the door. We are approved by most of these government companies, EIL and also big, big multinationals as well. So the idea is to grow the business, but grow it profitably.

One last question related to Poland and the recent developments there. If you can take us through that, what is the size of this plant or maybe there is a free land available? And what could be the estimated peak revenue that you get because of what I read -- there is another -- yes, the Poland property.

Yes. So the Poland facility has just started about 3 to 4 months ago. So we are already producing at this site, which is helping our Swiss and French subsidiaries. So about 80% of the business that Poland does today is for these 2 sites. They are booked out. So all the new orders that have come in have been now outsourced to Poland. So that's something that's ongoing. We do want to invest and we do plan to invest in Poland for another facility to increase our manufacturing footprint there because then we can really use Poland to even start making maybe stainless steel vessels or Hastelloy vessels for agitator businesses and things like that, right? So Poland has turned out to be a good option for us, and we need to kind of build that and reduce cost in high-cost countries like Switzerland, Germany and France.

Ladies and gentlemen, this will be the last question for today, which is from the line of Mukul Deshpande from Insightful Investment Managers.

Sir, I have 2 questions. First one is, given the substantial increase in the order backlog as well as we're seeing healthy continuing order inflows, should we now expect a higher revenue growth of, let's say, 15% to 20% for the next 2 to 3 years?

It depends on who you ask. If you ask Alex, he will say no. If you ask me, I might say yes. So see, the idea is -- I mean, so jokes aside, I think it's simple, right? A company like ours, if you had to judge or you had to base your views and your future projections on a company like ours, our backlog is a very strong metrics of that performance, okay? We are one of the only companies in India that puts out backlog data, and we'll be putting it out for the last maybe, I don't know, 12, 15 quarters, right? Most of our peers do not share this data. They share -- they talk about this data in terms of months, in terms of -- I don't know, right? So we are upfront and honest because this is something that you can't fool. I mean you can't -- I mean, this is clear numbers, right? So having a strong backlog is definitely a sign of future revenue and future growth if that backlog is big enough. In our case, the backlog is 30% -- 27%, 30% higher, which is good. But it still means that we have to book orders for Q4. We need to ship out in Q4. Q4 should be a good month in terms of revenue and shipment, that means the backlog will get depleted, but we are quite confident that we have and we have already enough of opportunity. Some of them have already been booked in this Q4 to help us have a stronger backlog for next year. But it's clear across the organization, everybody knows that order intake is critical. Order intake for Q4 becomes even more critical because that means you start the year off with a much stronger backlog, right? And for a manufacturing company like us, that is really the name of the game. That is the most important part of our business.

Yes. Right, sir. Sir, and with so much being done on the cost-saving initiatives, like we closed 2 plants, we are moving a facility from Switzerland to Poland, and we also have let off some people in Germany and the other initiatives that you mentioned in your opening remarks. Sir, all these initiatives should lead to much better margin for the coming quarters. Is that a fair assumption? And also, could you share the quantum of the same?

So again, I would just say, if you believe in the story, I would say, trust the process. We are still going through a very tough economic situation. It doesn't look as bad because we've done so much stuff and some of these benefits have really helped us, like these large orders from nontraditional industries, if they had not come in, we would have been 30% lower in terms of revenue for this year, right? So we have done well. I don't want to speak too much about this, but it is a clear strategy. It's something that we will continue to do. And of course, the cost strategy -- so cost is something we control, right? So cost is something that as a company, yes, obviously, in the past, things have been different. After COVID, everybody was booming, order intake was great. All the factories were fulfilled to capacity, but today, it's a different situation. And that actually forces us to take some tough decisions, which is good because it makes us stronger for the future. And I think that's the most important thing that we will be a stronger company coming out of this last 2 years. It's a tough situation. It's not the greatest time to -- obviously, the last maybe 24 months, the numbers have not been great. It's been up and down. But yes, a lot of work is going in. And hopefully, some of these things will kind of turned out to be the right thing. And hopefully, the numbers will reflect those improvements.

I think maybe also a little bit from my finance perspective. We have a really solid, good backlog to start the next financial year. It's 27% up versus last year. However, please do not expect that the next quarter, we grow by 27%. The 27% increase is also coming from other businesses, partly the system business. It will not directly convert in revenue. On the other side, what you mentioned regarding the cost improvements, I think we have done our homework. We have considered the current situation. We reduced our cost significantly. We still see an improvement. Nevertheless, there are still some areas where we are not doing well and there are still uncertainty and where we still have also not the EBITDA margins that we want to have in the next quarters. So of course, maybe on the finance side a little bit more prudent and not overcome with the, let me say, expectation due to the strong increase in order intake and backlog. We will improve, but constantly.

Yes. So I think with that, I think I'll hand over the call back to the moderator.

Thank you very much. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

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

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