HLE Glascoat Limited (HLEGLAS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HLE Glascoat Limited Conference Call to discuss the acquisition of the assets of Omeras GmbH, Germany. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Parth Patel from MUFG Intime IR for opening remarks. Thank you, and over to you.

Thank you, Brian. Good afternoon, everyone. Welcome to the HLE Glascoat Limited conference call on acquisition of assets of Omeras GmbH, Germany. Today on this call, we have Mr. Aalap Patel, Whole-Time Director; Mr. Harsh Patel, Whole-Time Director; and Mr. Nilesh Ganjwala, Senior Advisor. This conference call may contain certain forward-looking statements about the company, which are based on our beliefs, opinions and expectations as of today. Actual results may differ materially. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. With this, I hand over the call to Mr. Harsh Patel for the opening remarks. Over to you, sir.

Good afternoon, and warm welcome to all participants. Thank you for joining us today to discuss our recent acquisition of Omeras GmbH. It is my privilege to welcome you all to this important call, where I share with you another milestone in HLE Glascoat's journey, the acquisition of certain specific assets of Omeras GmbH and its wholly owned subsidiary, OmeraStore GmbH, through our wholly owned step-down subsidiary HLE Surface Technologies GmbH. As you may recall, on 14th August '25, we had informed the stock exchanges about the execution of the definitive agreements for this transaction. I'm pleased to update you that as of 18th August 2025, HLE Surface Technologies GmbH has completed the acquisition of certain specific assets of Omeras GmbH, which also includes all shares of OmeraStore GmbH. This marks the formal conclusion of the acquisition process. Omeras is a company with an illustrious 187-year heritage in Germany, specializing in architectural facades, vitreous enamel coating and advanced metal processing. Through OmeraStore, it also markets glass-fused-to-steel tanks and silos, ranging from 8 cubic meters to over 20,000 cubic meters in capacity. These modular bolted tanks are widely used for storage of potable water, wastewater, sludge, industrial liquids, animal feedstocks, biogas and grain. Omeras has successfully delivered 350 tanks in Saudi Arabia alone in the past decade, highlighting its international credibility. Omeras has a 21,000 square meter facility in Lauter-Bernsbach, Germany, which is a symbol of its engineering excellence and capability. Let me briefly touch upon Omeras' recent financial performances. In 2024, Omeras reported revenues of EUR 21.9 million with a gross margin of 54.3%, reflecting the inherent strength of its product line. However, due to pandemic-related disruptions, surging energy costs in Europe and delays in certain large project executions, the EBITDA margin compressed to 4% with a negative PAT of EUR 0.46 million. Omeras has historically demonstrated the ability to generate steady and growing revenues and resilient gross margins. We believe that with HLE's engineering skills, financial discipline, supply chain efficiencies and customer access, we can turn the business back to sustainable profitability and growth. The high order visibility in silos and facade segments gives us confidence in a near-term recovery. This acquisition is transformational for HLE Glascoat. We are extending our core strength in glass lining from chemical process equipment into infrastructure, architectural and renewable energy applications. Omeras' European base opens door in Europe and the Middle East, while also positioning us for tender-based projects in Asia Pacific, Africa and Latin America. Our portfolio now will include large storage tanks, silos, biogas digestion tanks and architectural panels, which helps reduce dependence on our traditional chemical and API industry clientele. Operating out of Germany also enhances our brand aligning with premium engineering standards, which are recognized worldwide. The timing of this acquisition coincides with powerful industry tailwinds. The European Green Deal and the broader energy transition agenda are driving strong investments in renewable energy and biogas projects, directly supporting massive demand for digestion tanks and sustainable construction materials. Global investments in water and wastewater infrastructure are projected to exceed USD 100 billion annually by 2030, a market where modular storage solutions like Omeras' tank offer speed and durability advantages over concrete. Governments worldwide, particularly in the Middle East and Asia Pacific, are modernizing transport hubs, tunnels and clean rooms, creating a long runway for architectural enamel-coated solutions. By combining Omeras' installed base and credibility with HLE's global customer network of more than 1,500 companies, we will unlock strong cross-selling opportunities. While Omeras faced financial headwinds, the fundamentals of its business remain robust. With our strong balance sheet, manufacturing expertise and disciplined execution, we are confident of reviving Omeras' profitability in the short term, scaling its operation and positioning it for long-term growth. This acquisition also significantly enhances HLE Glascoat's role in global glass lining ecosystem from chemical plants to storage solutions, from silos to architectural facades. This acquisition will help us in broadening our horizon and strengthening HLE Glascoat as a truly diversified global engineering and technology company. We firmly believe this is a value-accretive acquisition that enhances growth, visibility, further diversifies our portfolio and aligns us with global sustainability priorities. With that, I would now request the moderator to open the floor for any questions. Thank you.

[Operator Instructions] The first question comes from the line of Sucrit D. Patil from Eyesight Fintrade Pvt Ltd.

My question is now that Kinam is fully integrated and working in oil and gas attraction, how are you planning to scale its engineering abilities for high-spec global clients? Are you considering any facility upgrades, automation or joint design platforms with THALETEC to meet international standards faster? What is the guidance of the company on this?

Good afternoon. So you very rightly said that we are targeting chemical -- rather oil and gas and petrochemical clients in the Kinam segment of the business. To do so, a large portion of the required skill set is already available within the company. We are already equipped to meet many of the global standards, be they -- whether we -- whether they are related to heat exchanger design, specifically, or pressure vessel designs such as PED or U Stamp. Also, certain skillsets, which may not be available at Kinam currently, are existing elsewhere in the Indian operations in the sense that our F&D and glass line divisions are well equipped to design as per EAC, which is Russian norms; GIS -- SELO, which is for China, so on and so forth. So we are pretty well equipped to cater to pressure vessel and heat exchanger needs across the globe. And to do so, any input -- further inputs from THALETEC are not really necessary at this stage.

Just a follow-up and my final question. Are you building a new pricing or delivery model that reflects higher customization and margin potential?

Is this in relation to Kinam?

Kinam.

So if you look at how Kinam currently operates, they are already in a customized heat transfer solution space, which is already quite differentiated from the traditional fabricators who are offering similar products to the chemical and pharma industry. And we are also able to do so in a very large volume. So we are currently in a position to execute close to 3,000 heat exchangers per annum. So that is already, in a way, it's a space that we are working in and we are working in quite effectively.

Okay. Great. And I wish the team best of luck for the next Q2.

Thank you so much.

The next question comes from the line of Ajay from Niveshaay Investment Advisors.

Congratulations on the acquisition. Sir, my question is, will HLE be liable for any outstanding debt or any other liabilities beyond the acquisition amount? And if you can also provide more details on the specific immovable property included in the acquisition agreement? Because there was no breakup of the EUR 2.75 million transaction. And if you can also break it further into how much -- because we are going to acquire specific assets of Omeras, and we have acquired the complete shares of OmeraStore. So if you can break this amount, that will be helpful.

Thank you for your question. I think on the -- we are specifically acquiring only the specific assets of Omeras, which also includes the 100% shareholding in OmeraStore, which is its wholly -- or which was its wholly owned subsidiary. So we are not acquiring any liabilities of Omeras. We are only acquiring specific assets. We are acquiring some trade liabilities of OmeraStore because OmeraStore has no other third-party liabilities other than certain trade liabilities. So -- and those trade liabilities are very, very, very small. We've already done a detailed diligence before completing the transaction. With respect to the question on the real estate, we are, by virtue of this, acquiring roughly about 21,000 square meters of land, and there is a constructed factory building on top of it. So we are acquiring the land and the building. The market value -- current market value is a little under EUR 1 million currently. We also acquire the entire equipment, which has not been independently valued, but the value is considerably higher. We also acquired the intangibles, which include the brand Omeras as well as the entire technical know-how related to the manufacturing process as well as the specialized products that they manufacture. We also acquired the entire inventory as on the date of transfer, which includes all the inventories that they currently have, whether it be raw materials, work in progress or finished goods. And we have also taken over the entire order book on a specific order basis. So we have picked the orders which are profitable and left behind the orders which are not. So we have -- we also have acquired the specified members of the team, which we believe will be required to continue operations of the business, which includes management at all levels of the business.

That gives a lot more clarity. Sir, another question is regarding the acquired business operations, if you can mention what is the current order book? Because we mentioned in the document that we have a healthy order book and expect to turn around a little fast. So if you can break -- if you can mention what is the current order book and its composition by product type like between tanks, facades, biogas. And also by geography because how much is it based -- or completely, is it -- how much is it based in Europe or Germany, particularly? And lastly, and -- because there were some order delays on these recent orders, so what is the potential impact on existing penalty clauses on the near-term revenue?

Maybe I'll take your last question first. We are not taking over any of the orders, which are related to the EPC business, which are -- which is the business which led to these losses. In any case, in none of the cases, is there any risk of any delayed execution or delayed delivery charges or any such, so we have not taken anything or any order, which carry those, let's say, past liabilities or obligations as far as the orders are concerned. With respect to the total order book, the total order book currently, which is the order book, which is partially executed, is roughly in the range of about EUR 7 million, and we have an order book of about EUR 28 million, which is currently under negotiation. As and when these are finalized, these will then be executed over a period of maybe 12 to 18 months.

Just to clarify, the EUR 28 million is the inquiry pipeline.

Yes, yes. Correct. And by product composition, would it be possible to give a breakdown of these? Like how much it would be tanks, facades or biogas?

So it's a mix of tanks and facades currently. Biogas is something which is still under discussion. So I -- and the numbers that I have provided for you do not include biogas.

Okay. And sir, there seems to be a difference between the architectural product portfolio because if I go and visit the Omeras, the holding company website, and the product shown under OmeraStore, so -- and given our existing product portfolio of glass lines and reactors, so I was not able to completely understand the synergies. So if you can explain how these architectural panels will be integrated into our existing product plan? And how can we leverage these with our customer base and the current application of our product?

Yes. That's a great question because that's also the question that we had to answer first before we considered acquiring the business or assets of Omeras and Omeras Store. See, primarily, our interest in the business stemmed from the tanks and silos business because that's what has the maximum opportunity for cross-selling to our existing customer. The way that these panels are made, the manufacturing process is fairly automated. And the way these are manufactured or rather the facility in which the panels are manufactured, whether it be panels for architectural or whether it is panels for tanks and silos, they are manufactured in an almost identical process and almost in a facility that overlaps almost to the tune of 80%, 90%. So to have volumes for the business, I think the architectural and facade business primarily ends up being a very good volume driver for the business because, as you may understand, a single tunnel project could have several thousand square meters of panels, which need to be lined. And it also gives us a very good visibility because these are usually 6-month, 12-month, 18-month supply period. So it gives us certainty of volumes. It also gives us not just certainty, but also the overall size of the manufacturing facility is fully utilized. What we also realized when we dug deeper is that these are not just any architectural panels, enameled panels are quite specialized and they can be very high end. So with the capability of Omeras to manufacture in a variety of different finishes in different functional designs, especially the back-ventilated enamel panel that they make, enameled or glass line panels that they make, really set them apart from any of the competitors. So while on one side, the same facility, it ensures capacity utilization, but on the other hand, it also gives us access to some very unique and niche markets. Also, this fits quite nicely with our thrust on also diversifying away from our, let's say, reliance on the chemical and pharmaceutical markets. So while the end application is different, the manufacturing technology required for this is exactly identical to that for tanks and silos. I hope this gives you more clarity.

Yes, sir. And sir, on a strategic level, like -- because when we acquired THALETEC, we soon introduced those products into India. So are there also plans for these products of the new acquired acquisition to market into the Indian market? Or is it just like we'll be focused on the export geographies?

Yes. So we have clear plans to manufacture and market these products in India. India is a growing market for biogas, a lot of infrastructure projects are ongoing right now in India, especially for metro rail for -- a lot of tunnels have been built. So there is a clear possibility of introducing these products in India. And we are -- as we speak now, we are developing a roadmap for introduction of these products in India.

Got it, sir. And sir, based on the assets, which we have acquired and -- like if you can highlight like how much revenue will -- can they generate at an optimal utilization level? And -- because we have also acquired a sizable land, so is there any immediate CapEx that we are looking to incur over there? Or is it -- or is there any plan to incur CapEx in near timeline, if you can also outline that?

Based on the current installed capacity at Omeras, I think the aggregate capacity utilization is right now around -- maybe even below 50%, so there is substantial scope for further growth without any major CapEx requirements. So there may be some incremental CapEx for balancing equipment and things like that, but there is no major CapEx that is envisaged in the near term. In terms of the land available for the expansion, yes, there is land available, but again, there is no immediate plan to build more capacities.

No, sir. I'll just repeat my question. I mean -- because we are requiring this specific assets of Omeras, and Omeras does close to around INR 200 crores of revenue based on current conversion of euro to INR. So I'm asking on the basis of the assets which are acquired, how much peak revenue can that generate?

As I said, we are working at the INR 200 crore equivalent revenue, it's roughly at about 50% of the capacity.

But we are not acquiring complete Omeras, that's what I understand.

No, we've acquired -- all the manufacturing infrastructure we have acquired in total. We have acquired it entirely. The entire manufacturing infrastructure has been fully acquired.

Okay. And -- because currently, we have -- as we mentioned, the order book is currently around EUR 7 million, and the pipeline also looks healthy, and we have a very good history of turning around business in quite a good timeline -- I mean, be it THALETEC or Kinam, which we have acquired from maybe liquidation or NCLT. So -- I mean, is there any similar timeline which you are working upon? Or do we even see this to turnaround at a faster pace, if you can also share your thoughts around that?

So I think we will -- we are looking at this to be a healthy profitable business within a time horizon of about 3 to 4 quarters.

And the margin profile, I guess, in yesterday's interview, Aalap, sir, also mentioned the margin for the same is going to be double-digit margins. So...

Yes. That is correct. Yes.

So would it be similar to our glass line business margins, which we have in THALETEC or it would be different?

I think considering the cost structures that we have evaluated as well as the margin profiles and the gross margins, et cetera, we believe that this business will also provide a similar operating margin and net profit margin comparable to THALETEC. Yes.

Got it. And sir, I'd like to squeeze in one more question. I mean, because the product portfolio, the silos, the tanks, facades and the biogas side, I mean, if you can share more insights on the market and the competition side? Like, obviously, Omeras has a history of 187 years, but from what we are able to gather, they have a history of delayed orders. So if you can also highlight on the competition side, like how are they placed and how does Omeras differentiate itself among the big market opportunity which it presents?

So there are a couple of players of size similar to Omeras in this space, but -- so when I say this space, let me clarify, there are a couple of players of Omeras' size in the tanks and silos business. There are also other players who specialize in the architectural facade business, but Omeras is the only one who actually masters both. So there are very, very few players who are actually able to deliver quality products in both these spaces. I would say the players for the tanks and silos are located in North America and Europe, largely. There are also a few in China, but they are largely catering to the Chinese market. Similarly, also in the facade business, there are 1 or 2 competitors within Europe, but they are much smaller, and like I said, they only manufacture architectural panels.

In the architectural business, actually, there is no company in the world as per our understanding who can deliver at scale that Omeras can deliver. And -- so that is 1 big advantage that Omeras has.

The next question comes from the line of Karan Sharma from Kredent Brokerage Services Limited.

Sir, my question was a little strategic in nature. It also could be stemming from the fact that my knowledge might be lesser in this area versus you. So I see some part of capital allocation recently entering Europe, and in what...

Sorry, but we can't really hear you. Can I request you to please speak up?

Yes. So my question was a little on capital allocation. So we have seen some part of capital allocation moving towards Europe in the recent times. And from what our reading suggests and what we have seen basically is basically whenever Indian companies have gone on to acquire assets in Europe and Germany, they've found it difficult to turn it around -- means, there might be larger acquisitions, smaller acquisitions, but it has been a difficult task to turn these around. Now, us acquiring THALETEC and now Omeras in Germany, where usually the recent news flow has been around a lot of companies there, chemical and others, closing down or shutting down because it is unviable to run these assets at the cost structure that the countries have. So is there something different that you guys have seen probably which could help us or give us more insight into why this decision making into Europe? That is my first question.

So I think, firstly, I do not entirely agree or we do not entirely agree that the industry or the industrial scenario in Europe in general is bleak. I think there are certain pockets. And there will always be certain industries which may not do well. But in general, for example, our experience with the THALETEC acquisition has been very, very good, as you would have seen. I think we have not only acquired it at a value, which was very, very attractive, but we've also been able to build that business and generate both double-digit growth rates as well as double-digit margins. And you will agree that, that definitely speaks well for what we've been able to do with that company. With Omeras, the advantage is that it is already in a very, very high niche area. So I think one other thing that we are very conscious about is in our selection of targets. THALETEC was a one-of-a-kind company and continues to be a one-of-a-kind, which competitors have found very difficult to emulate. Similarly, Omeras is also a one-of-a-kind business, which we are very confident they will be able to stay ahead of competition, if any, for several, several years to come. In addition to this, we are acquiring Omeras at a value, which is less than its inherent asset value. So we are not even talking of business valuations here. More importantly, we are acquiring not just the business and its order book, but we are also acquiring the management team. We always look forward to continuity in terms of management and the capability that they bring with them. And this always has helped us in good stead in all our acquisitions so far. So we obviously want to look at it very closely. We do a very close study of the pros and cons of any acquisition, most importantly, sustainability and the management bandwidth. And that has also gone into the evaluation of this acquisition as well. So I think we feel very, very confident that we've actually got a jewel at a very, very affordable rate.

Perfect, sir. If I may ask one more question?

Yes. Yes, please go ahead.

Yes. Sir, second question was a little looking into the future. So a couple of our acquisitions or adjacencies have been into areas where we usually have not been in the past, like F&D and GLE, so Kinam, the heat exchanges [Audio Gap] the architectural panels, so what is our capital allocation in the future look like? Would we be adding more adjacencies? Would we be exploring other countries also as well in these stores? Or would it be like more internal, domestic oriented?

Yes. So see, whenever we do an acquisition, we always look for certain synergies. So in all our acquisitions, whether it is Kinam or THALETEC or currently with the assets of Omeras, the synergies has been the technology -- inherent technologies that are required to manufacture these products. And in the case of Kinam and THALETEC, there is a large overlap of customers also. So the acquisitions have not been without strong synergies already present in the business. Similarly, the Omeras acquisition right now is basically based out of the strong synergies that emerges from the technologies that are used in manufacturing the products that Omeras is making. And on top, there is a synergy in the final customer base. So there is some cross-selling possible within that. So we have -- we are not going out looking for companies just for the sake of growth or acquisition. Only if we find value and synergies in a target, then we go ahead and look deeper into that. So there is no real plan of -- I mean, we don't have a plan for looking for different kinds of companies. So we are not shopping, let's just put it that way.

The next question comes from the line of Deekshant from DB Wealth.

Congratulations on our acquisition. The first question is, let's say in the next 12 to 18 months, what kind of consolidated topline growth can we see from our current numbers?

So I think in our earlier call, we had indicated our annual growth to be in the high teens, in the 16% to 18% growth rate, maybe on a consolidated basis. This could get closer to 20% looking at the current order book. So actually, things are looking very, very encouraging on the existing business across all our segments. With -- and of course, the Omeras' addition will be a straight add-on over and above that. So I'm not putting a percentage terms to that because that will be a bolt-on addition in terms of our numbers. So I would say, 12-month revenues, maybe in FY '27 for Omeras would be -- we are expecting it in the range of between EUR 20 million to EUR 25 million.

Got it, sir. Sir, secondly, are all of -- whenever we have done an acquisition, our opportunity has always been better. And you have mentioned on the call that operating margins would be better than our current businesses or similar to the higher range of our businesses. So what kind of consolidated operating margins can we be expecting? Do you think we can go back to the high teens and more?

I think, all our business are in -- have the potential to be in the mid to high-teens with possible exception of Kinam, which is actually in excess of 20% in terms of operating margins. So I think, on an average basis, mid- to high-teens is definitely something that we are aiming to achieve.

Okay. Sir, maybe this is not relevant to our acquisition, but it might be relevant to the macroeconomic environment of EU. So EU has, in this year, really announced a huge defense budget. And generally, it seems that there has been some correlations in defense and infrastructure spending overall in the past cycles. Do you think or has this one of our consideration while currently doing this acquisition that we see better infrastructure growth in the EU space? Or like what kind of macroeconomic activity are you seeing there, which is giving us more confidence?

Yes. So see, many countries in EU are basically trying to diversify out of the dependence on Russian gas. And mostly, this is happening via the biogas route or some part of it is happening via the biogas route. And it is expected that the biogas market -- the investment in biogas is roughly going to be EUR 28 billion in the coming years in Europe. And this was one of the considerations because Omeras has already -- already has installations in the biogas storage facilities in, say, Italy, for -- as an example. So this was one of the important considerations. Also, there is a reasonable infrastructure push going on in Europe. And there are many metro stations, either being built or being renovated because they have their systems so old that now it's time for renovating stations. So we have seen -- in fact, we had -- as a part of due diligence, we met a couple of customers who were executing these underground tunnels or metro stations to get an understanding of what is going on and what may pan out in the coming years. So that's also been a consideration. And this is on top of the basic tanks and silos, which is like an evergreen business going on. And also, I would like to add that this is a global opportunity. This is not just for EU because if you have traveled across U.S., you would have seen that a lot of grain storage facilities are glass steel tanks, and Omeras has not even ventured there. So we also -- in the course -- in the due course, we also intend to address those markets. There's also -- apart from EU, there is also a macroeconomic factor being that countries like, say, in the Middle East, they are building artificial city -- or I will not artificial, they're building new cities. And when you build a new city, like, for example, in Saudi Arabia, they need a lot of water, and a lot of sewage plants are coming up in those areas. And Omeras has already given some supplies to those kind of projects. So yes, we have taken into account a lot of macroeconomic factors while taking this decision.

So sir, let's say, a 20% growth on our top line for the FY '26, and Omeras should be completely over and above. We are not considering Omeras as in this 20% calculation.