Kirloskar Brothers Limited (500241) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Kirloskar Bothers Limited Q4 FY '21 Earnings Conference Call. First, I would read out the disclaimer statement. These materials may contain forward-looking statements regarding Kirloskar Bothers Limited, our corporate plans, future functions, financial condition, future results of operations, future business plans and strategies. All such forward-looking statements are based on our management's assumptions and beliefs in the light of information available to them at this time. These forward-looking statements are, by their nature, subject to significant risks and uncertainties. Financial results performance and achievement may be materially different from those expressed in such statements. Factors that may cause actual results, performance or achievements to differ from expectations include, but are not limited to, regulatory changes, future levels of industry, product supply, demand and pricing, weather and weather-related impacts, wars and acts of terrorism, development and use of technology, acts of competitors and other changes to business conditions. KML undertakes no obligation to revise any forward-looking statements to reflect any changes in KML expectations with regard to any change in circumstances or events. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Kirloskar, Chairman and Managing Director, Kirloskar Brothers Limited. Thank you, and over to you, Mr. Kirloskar.

Thank you. Thank you very much. Good afternoon, everyone, and a very warm welcome to all of you who are present on the call to discuss our financial results for Q4 as well as fiscal year 2021. In the wake of the second wave of the COVID-19 pandemic, we hope all of you and your loved ones are healthy and safe. We are pleased with the financial and operational performance across all our products and geographies during the year. For fiscal year '21, our consolidated revenue stood at INR 2,717 crores as against INR 3,135 crores in fiscal year 2020, primarily on account of COVID-19 lockdown during H1 of fiscal '21. Our Q4 revenue stood at INR 859 crores, a growth of 9% year-on-year. More importantly, our balance sheet is extremely healthy. And we are now a net cash company, both at stand-alone and consolidated levels. We witnessed a robust pace of inquiry generation and order book during Q4 fiscal year '21. On a consolidated and stand-alone basis, we received orders worth INR 1,118 crores and INR 686 crores, respectively, in Q4 of FY '21. We have a robust order book of INR 2,131 crores across multiple product segments and geographies, thus reducing the concentration risk. This robust order book provides strong revenue visibility going forward. Products for irrigation and water resource management continued to be the major contributors to the order book with a share of 47%. And let me repeat what I've been saying earlier, these are for products only. As you're aware, the KBL has moved away from EPC business. The top 5 sectors, irrigation and water resource management, power, building and construction and industry contributed to 93% share of the total order book. Of course, as you are aware, our small pumps business has no order backlog because every month we do something. We expect the order book to remain robust going forward. We also expect our revenue and profitability growth trajectory to remain robust driven by strict cost control, inquiry conversions, excellent execution of order book and manufacturing capacity expansion. Our profitability and return ratios are also expected to improve due to operating leverage, turnaround at various key subsidiaries and a better product mix. We continue to explore various opportunities in terms of geographic expansion and value addition to our existing customers. I shall now ask Alok Kirloskar, Managing Director of SPP Pumps Limited to take you through a few sectoral highlights.

Thank you. Let me begin with the water and irrigation sector. The sector continues to be the focus area that occupies a large share of our order book. Fiscal year '21 was a successful year for the water irrigation sector despite the ongoing pandemic. The company registered a 40% growth in the products business. We supplied and successfully commissioned India's largest high-performance patented Autoprime series pumps -- pump sets for flood control application in Eastern India. We received prestigious orders for Rajasthan, Madhya Pradesh, Telangana and Andhra Pradesh through large OEMs for 300 -- for more than 300, rather, multistage and split case pumps and executed them within the expected time lines. We have received various orders to supply vertical turbine and metallic volute pumps for public health, irrigation, water supply departments across India. We also received a major order of electromechanical package supply for a raw water pumping station of a refinery. Building and construction segment, which is the next sector. Order finalization for ongoing projects in building and construction segment has picked up pace since H2 of fiscal year '21. Further improvement in average order booking is expected from Q2 FY '22 onwards. We were actively involved in many fast track hospital projects, including supply and installation of a pumping solution at various locations for a leading chain of government and private hospitals. The pressure boosting hydro-pneumatic systems and firefighting pumps are operational in all these hospitals. With increased e-commerce activities for consumer goods, we do believe there should be more warehousing construction projects to get commissioned during FY '22. The next division is the Power division. We received 2 major orders for hydro products in South India. We have successfully developed and delivered highly engineered pumps for the nuclear application, and we are expecting repeat orders. As all of you are aware, the Power division at one time is to cater to the thermal power business. But as you will be aware that, that business is not really in existence anymore. And so the power business depends mostly on hydro and nuclear activities. The next division is Industry. The inquiry flow for increase -- has increased substantially in Q3 and remained stable in Q4. Order finalization by customers has reached the pre-COVID levels. KBL registered 66% growth in the coal segment. We have received major orders to supply 38 multi-stage pumps for mining applications. We've also received various orders to supply pumps in special materials for process applications. We received an order to supply 12 especially designed low life cycle cost pump sets for a chemical plant as well. The next division is the marine and defense sector. We finalized major orders for 84 especially designed engineered pumps for the defense segment. We have received an order for the supply of 586 engine-driven vertical turbine pumps for firefighting application at Hazira Port as well. The next sector is our export excellence [ sales ], which basically looks at exporting KBL products out of India. We have supplied 112 firefighting pump sets for a metro project in Southeast Asia. Additionally, we received an order of 46 pump sets for a project in Hong Kong and 27 for an industry project in Indonesia. We've bagged orders to supply vertical pumps for water linkage projects in Belgium, Ireland and Israel. These are all directly in the KBL brand. We've received orders to supply 44 mixed flow pumps for the irrigation projects in Mauritania and 72 horizontal multi-stage projects -- pumps in Algeria. We received an order also for supplying 44 types of various pumps for sewerage project in Zambia. We've received an order for vertical turbine pumps for sugar factory in Ethiopia, and we've also received an order for 22 pump sets for various projects in Nigeria. We've received an order to supply 22 split case pumps for an education institute in the UAE. And also we've received an order for a power project in Iraq. I will now take you through subsidiary -- international subsidiary performance. The first international subsidiary is SPP Pumps Limited. We have reduced costs in the subsidiaries in the U.K. and U.S.A. through redundancies in FY '21 and have continued to push into the maintenance services business in the U.K. where we started this process back in 2016. Revenues de-grew 21% year-over-year to GBP 76 million for fiscal year '21 although PAT grew from -- grew to GBP 4 million as against GBP 0.5 million in the previous year. RoCE stood at 17% for fiscal year '21 as against 4% for fiscal year '20. Order book as of March 31 stood at 44 million -- GBP 41 million executable over the next 8 months. The next one is Rodelta Pumps International BV, as well as our Dutch subsidiaries along with Rodelta. The Dutch business continues to struggle, and we are working to make it sustainable through a specialized product profile. Revenues grew 5% year-on-year to 9 million for fiscal year '21. Losses have narrowed to 0.3 million from 1.1 million in fiscal year '20 on account of various cost reduction measures undertaken and a better product mix. Order book as of March 31, 2021 was 2 million, which is not very healthy, but it's less -- it's -- to be fair, it's below average, but we have a healthy bidding pipeline at the moment. The next subsidiary is Kirloskar Brothers Thailand Limited located, as the name suggests, in Thailand. The Thai subsidiary has reduced the lumpiness of the business. We're focusing over the last 4 years to build a standard and engineered daily business. For fiscal year '21, the company achieved revenues of THB 344 million, a drop of 11% and achieved a PAT of THB 15 million as against a loss of THB 2 million in the previous year, which is FY '20. Order book as of March 31, 2021 stood at THB 223 million. The South African subsidiaries, which are next. As most of you are aware, we faced many hurdles due to the broad-based black-empowered enterprise regulations. We have managed to overcome these by changing the business mix over the last 3 years. For fiscal year '21, the company achieved revenues of ZAR 67 million, which is rand, a drop of 3% year-on-year, but profitability stood at ZAR 5.3 million as against a loss of ZAR 7.5 million in FY '20. Order book as of March 31, 2021 stood at ZAR 29 million. We continue to penetrate the international geographies further with more focus on margin-lucrative products and services. The international business, and SPP in particular, has focused on the service and maintenance business with a large number of framework contracts in place across different sectors. We are witnessing green shoots across a few geographies, led by growth in inquiries and conversion for certain business verticals, leading to a stronger order book, which is giving us better revenue visibility for the short and medium-term compared to a year ago. Also, service framework contracts, which are mainly maintenance contracts are usually 3 to 5-year contracts, and these also help the visibility a little bit more. With this, let me invite Rama Kirloskar, Managing Director of Kirloskar Ebara Limited to take you through the performance of small pumps, oil and gas business and domestic subsidiaries.

Thank you, Alok. Let me begin with our small pumps and our oil and gas business, followed by key domestic subsidiary performance. We have been working aggressively in our small pumps business for enhancing our market share. We have also developed a series of high-efficiency products that will ensure customer delight. Our pumps are coupled to KPML's high efficiency IE 3 and IE 4 motors, our best-in-class 16 submersible pumps with KPML's oilfield motors ensure lower power consumption and enhanced life. We have recently launched a new series of high-efficiency self-priming pumps, and KBL has received its 8th India design mark for its [ KBM ] series, which is a new series of pumps for reverse osmosis applications. KBL supplies its non API range of pumps for the oil and gas sector. In the domestic market, in addition to HRRL's greenfield refinery project in [indiscernible] Rajasthan, there are quite a few upcoming refinery expansion projects namely IOCL, Paradip, IOCL Panipat, BPCL Kochi, ONGC Mehsana project, IOCL Gorakhpur Compressed Biogas Plant and IOCL Barauni, [ the online ] expansion project as well as [ starch ] fertilizer project. As far as Kirloskar Corrocoat Private Limited, during fiscal year '21, the company has achieved a turnover of INR 20 crores and made a loss of INR 0.9 crores. As of March 31, 2021, KCPL has an order book of INR 23 crores. KCPL is in the business of supply and application of corrocoating material. Our turnover is lower despite strong order book due to the lockdown as many customers have not given permission for accessing sites. During Q4, KCPL has made a profit of INR 0.5 crores. The Kolhapur Steel Limited. For fiscal year '21, the company has achieved a turnover of INR 21 crores and made a loss of INR 14 crores. Performance of the current year is affected due to lockdown and nonavailability of manpower for [ peddling ]. Orders on hand as of March 2021 stood at INR 17 crores. To support the operation of TKSL, KBL has infused additional capital of INR 15 crores. Karad Projects and Motors Limited. KPML manufactures high efficiency, IE 3 and IE 4 motors for KBL's captive consumption as well as special purpose motors for the elevator and health care industry. For FY '21, the company achieved a revenue of INR 308 crores, a drop of 4% year-on-year and PAT of INR 38 crores, a growth of 91% year-on-year. RoCE stood at 18% for FY '21 as against 22% for FY '20. Kirloskar Ebara Pumps Limited. For fiscal year '21, the company achieved a revenue of INR 183 crores and PAT of INR 20 crores, a growth of 12% and 150%, respectively. RoCE stood at 21% for fiscal year '21 as against 8% for fiscal year '20. The company witnessed robust traction in order book despite the multiple COVID-19 induced headwinds and is debt-free. As you are aware, that other than API pumps, KEPL also designs and manufacturers API drive turbines. The company has enlisted its API drive turbines up to 3 megawatts with Engineers India Limited and PDIL. It has also registered with Baker Hughes after a thorough audit of its engineering and factory capabilities and robust quality assurance and control system. KEPL has indigenously designed its first high back pressure steam turbine, which was commissioned at ONGC Mangalore Petrochemicals Limited in March '21. The company has also received API turbine orders from MNCs such as Sulzer, [ Flowserve ] and ITT for their API pumps. KEPL has been focusing on its export markets and has recently received approvals or registrations from various large refineries in Southeast Asia, Middle East and Europe. In summary, KBL's domestic business witnessed multiple disruptions during the year due to the ongoing pandemic, restricted access to sites and nonavailability of manpower resulted in subdued performance. However, with continued robust momentum of order book, the company remains confident that performance will improve significantly from H2 fiscal year 2022 onwards on account of expected economic recovery and improvement in utilization at the plant. With this, let me invite Mr. Mate, our CFO for the financial performance highlights.

Thank you, Rama. Good afternoon, everyone. For FY '21, standalone revenues stood at INR 1,800 crores as compared to INR 2,097 crores in the previous year. This contributed approximately 66% of the total consolidated revenue. EBITDA was at INR 191 crores as against INR 197 crores in FY '20. EBITDA margin was at 10.6% in FY '21 as compared to 9.3% in FY '20, an expansion of 130 basis points. PAT grew by 18% from INR 79 crores in FY '20 to INR 93 crores in FY '21. With the improvement in product mix and strict control on various costs, our consolidated EBITDA margin, including other income, showed a significant improvement of 303 basis points year-on-year to reach 10.8% for FY '21. Improved product mix, robust order book and systematic execution of projects across geographies helped us to deliver a record profit in FY '21 of INR 154 crores. In line with our shareholder payout policy, the Board of Directors have recommended a final dividend of INR 3 per equity shares, subject to approval of shareholders in coming AGM. We remain confident in strengthening our performance further in the coming years. Our balance sheet continues to remain robust. The company has incurred a CapEx of INR 76 crores in FY '21. And we have planned a CapEx of INR 105 crores for FY '22. This CapEx is aimed towards de-bottlenecking manufacturing capacity expansion. Our gross debt stood at INR 272 crores, a significant reduction of INR 277 crores from last year. Considering cash and cash equivalents of INR 300 crores, we are now a net cash company. Return on equity stood at 13.9%, an expansion of 670 basis points. Similarly, return on capital employed expanded 480 points year-on-year to 16.4%. With significant reduction in debt, our return ratios are expected to improve further. This is all from our side. We can now begin question-and-answer session.

[Operator Instructions] The first question is from the line of [indiscernible] from HDFC Mutual Fund.

Congratulations, sir, on excellent set of numbers. I have a special query. See, this is regarding the nuclear power projects opportunity. Can you specify the products that are going to be supplied by us? We are among the 2 companies who are allowed to supply these, other being an MNC. What is the scope in terms of revenue for us? And what are the kind of margins that one can make?

Thank you. The nuclear -- we are watching the nuclear industry as well. And as you are aware, we have manufactured primary heat transfer pumps for the [ fast feeder ] reactor. And therefore, the capability is there with the company to manufacture this. We had actually asked the Nuclear Power Corporation to allow us to participate in the opportunity to manufacture primary heat transfer pumps for the new projects that are coming up. And after about -- this was in 2011, and after about 4 years, they gave us a development order for manufacturing the primary heat transfer pump -- sorry, they came out with a tender for primary heat transfer pump. We put in our bid, and it took them another 3 years to give us the order. So we finally received the order sometime in 2018. 8 months after placing the order on us, they came out with a tender for a large number. We participated in that tender and we were then given the single line response, saying your bid is not technically acceptable. So we did not -- we could not participate in the first part in Haryana, which was won by our MNC competitor. And we have basically told the Nuclear Power Corporation that we would like to have the order canceled as far as the development order is concerned because they have placed an -- they are now considering placing orders for 24 pumps and only 8 are left. So it is pointless for us to continue. We have asked them to cancel the order over 2 years ago, and we have still not received a response, leaving only 1 bidder available for them. We have not understood in the times of Atmanirbhar Bharat why we are depending on an MNC, which comes from a company which has decided to get out of the nuclear field, but government obviously would know better or Nuclear Power Corporation would know better than us. But even more than that, I believe we are ready for the future, which seems to be not large globally, which seems to be not large nuclear power plants, but much smaller nuclear plants, which are decentralized. So companies like GE, Rolls Royce. They are looking at putting up 50 megawatt, 40-megawatt nuclear power plant. And we have the capability of making canned motor pumps of the same size, which would be required for such pumps. We are also -- and these are pre-packaged power plants, which is why canned motor pumps. So we've also set up a new facility for these kind of products. And we expect that we all -- as you are aware, our power sector has ordered a large number, more than half of that is for the nuclear side. So new pumps have been developed and I believe the first 4 or 5 have been delivered.

Okay. You've delivered 5 [indiscernible]. And overall for the company level, okay, margins are going up over the period of last 4 -- 3, 4 years with a change in strategy and restructuring. Now there is steel cost pressure and other commodity cost pressure. And if you remove other income, our margins are in single digit. So what is the trajectory forward now for the next 3 to 5 years, your like 2 to 5-year view?

I don't know whether one can look at commodity prices for 3 to 5 years, I wish things were as stable as you.

No, no. I'm not looking at it. I'm saying what is the intention of the company overall in terms of operating margin?

Well, the intention of the company is to increase the operating margin as we go forward. With these, we have been able to implement price rises for our products, which have been accepted in the market. And especially, you may be aware that we are the only company with a retail business, our so-called [ bazaar ] products, the pumps that go for homes, for farms and the pumps which are used for industry at a lower level. We are the only ones to sell pumps on a cash basis. We do not give credit. Our products, even at the what's so-called low end, are superior and customers would pay for them before they are delivered. So we believe that we can write that as we move forward.

The next question is from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, I have a couple of questions. One on the stand-alone operation. When we do about -- we have been in the range of INR 1,700 crores to INR 2,000 crores of top line. And what asset utilization would this top line be? And what should be the associated fixed cost in the operation?

Mr. Mate will answer this question.

I would ask you -- answer your second question first. If you look at our balance sheet or annual reports, you would see that material costs and manufacturing costs are around 70%. So I would say that is the variable cost, approximately because it changes as per the product mix, but I'm just giving you a rough idea. And the remaining is part of fixed cost, margins and finance and depreciation. And if you consider asset base, our fixed asset base is around INR 450 crores and working capital of equal amount and rest are investment. Our total capital employed is roughly INR 1,200 crores. About INR 350 crores for investment and remaining as assets in our business.

Sir, my question was at the current asset that we have, what is the capacity utilization for this?

If you say capacity utilization of our fixed assets, it is around 60% to 70%.

So which means that technically, we can be at INR 3,000 crores, INR 3,500 crores revenue on the current asset in the stand-alone operation?

At least INR 3,000 crores.

Okay. Okay. And my second...

Sorry, last year as well as other companies, we've also been disrupted, right? We have lost close to 2, 2.5 months production capability.

Okay. So is it that the last quarter, which we just reported, which is about a INR 600 crore rising top line, INR 650 crores. What should be the utilization in this INR 650 crores, it should be closer to that 80%, 90%?

I would say yes.

And my second question is, sir, on sustainability of...

I would like to interrupt once again. It also depends on the product mix. If the pump is with a lot of packaging accessories, the value would go up. If it is a bare shaft pump, value would come down. So we should not book purely by value, but the activity happening in factories.

And the -- let me add that we are operating on a 2-shift basis. We have the capability of going for another shift.

So when we are mentioning 60%, 70%, it was 2 shifts, right?

Yes.

So technically, we can add 1 more shift, which adds another 30% capacity easily.

Yes.

So it can take you higher than INR 3,500 crores, INR 4,000 crores of business?

It can. As you -- as I think Mr. Mate has mentioned, the new CapEx is for debottlenecking so what happens is a pump is supplied in different kinds of materials. It can be cast iron, it can be steel, low carbon steel, bronze, whatever. The capability of the machines is such that when you're machining steel instead of cast iron your speeds reduce. So a lot depends on the product mix. You can make more pumps with lower value or fewer pumps with higher value. But the time also changes, time taken.

Okay. My second question is around sustainability of the subsidiary margin. So there's a big swing, which we see this year. And especially, I think a larger swing is driven by SPP. So what should -- are these subsidy margins or subsidiary operating EBITDA sustainable?

I will request Alok to answer this.

I will probably say that maybe look at it from a longer-term basis, I mean SPP's normal margin historically has been between GBP 4 million and GBP 5.5 million. From 2015, I think, because of the collapse in oil prices, the product mix was significantly changed. And as you would imagine, there was a very large dependence of SPP on the oil and gas -- on the E&P side, exploration and production side, which is the upstream side, huge dependence on that market. And that market collapsed with the collapse of the -- with the collapse of the oil price. That affected 2 parts of SPP. One was the product business, which was hard and continues to be hard. And also affected our spare parts business, which also was not exactly half, but went down to about 60% of what it used to be. And you can imagine, both these are very profitable. To offset that, the company since 2016 has been diversifying its portfolio and developing its aftermarket business, which is maintenance contracts. And the maintenance and service contracts have allowed it to build back a lot of revenue, but build back more of the margin. And so I would say that yes, there will be some variations, but I expect that they should -- it should be in that area and hopefully grow from this area because that's really the objective because we can get back to pre oil collapse times.

Okay. And sir, my last question is on the stand-alone operations, also to do with the way the CapEx cycle was in the country for the last 7, 8 years, we've been in a certain revenue range, which is INR 1,700 crores to INR 2,000 crores. Do you believe that -- or do you see any evidence that probably, when you look at some total of the segments that you offer products to, there is a case for a rise in CapEx cycle or a case where growth rates might resurface for our products and the sector that we are servicing.

As we mentioned earlier, coming out of the pandemic from the H2 of last year was -- grew slowly but by -- sorry, Q2. Q3 and Q4, we saw that things were back to normal levels. The number of inquiries was increasing. And we are hopeful that when the second wave is over, we will see something like that. Of course, it depends on how quickly -- and if the third wave arrives. But otherwise, I believe that I'm optimistic about the Indian economy, and I believe that as soon as possible, when things get to normal, you will see a return to the normal cycle. The -- we've already seen the green shoots, as Alok mentioned. So let's see how things pan out going forward. But we are quite confident of things going back to where they were 2 years ago. One more, Mr. Mate wants to add.

Hello, Mate here. What I would like to add that turnover is around INR 2,000 crores for last many years, but we are moving from projects to products. In project business, you get a lot of turnover by trading and civil activities. So the real value addition in company is not that big. But now our project business is coming down and whatever we are selling is all our own products manufactured in our plants. So in the real sense, we are growing. Over 2 years, our turnover was affected due to closure of retail operations. So -- though we had capacity to manufacture, there was a limitation on distribution.

The next question is from the line of Kirthi Jain from Sundaram Mutual Fund.

Sir, My first question is with regard to the industry profitability. We are seeing our profitability also improving and competitive profitability also increased. Is there a structural change in the pricing methodology and pricing improving for the industry? Or what -- any other factor is there, sir, which you will attribute?

I don't know about the other companies. To a great extent, we have been cleaning up on 1 side, the old project business related issues. And on the other side, on the industrial -- in the industrial space, we have been moving up into the chemicals side of it as well. So the profitability gets to be higher as you move into higher end products. So that's why -- and I can't comment on the competitors.

Okay. Sure, sir. Sir, with regard to legacy projects, what would be the pending orders or pending liabilities, sir?

Basically, for the last 1 year, Rama has been monitoring what is going on with every single project. Last year, we were lucky to -- that's not lucky, but I think that, that work that was done, we were able to close almost 50% of the pending projects by just -- even if there was a pandemic going on, we met people in the 2 states where we were stuck. The government's instruction that if projects are in going towards completion, then release the bank guarantees, release -- they pay the amounts that are to be paid, that also happens. So now what we have left are mainly projects, which are where we are doing the operation and maintenance. And so there, that would be what is left. As you wait on what is left, the pending orders are still related to Andhra Pradesh and Telangana state. We are working closely with them. A large amount has already been provided for any problems we might have. So I see that these legacy issues are almost gone.

Okay. Okay. Sir, then government is stocking large projects in the Kusum scheme, the solar pump scheme. So will we be tying more with the integrators to keep our payment safe and working on that, sir? What will be our strategy for solar pumps?

Last year, we've had 75% growth in the solar pumps supplied to the solar for these projects coming out of Kusum. But we are not an integrator. We don't want to be an integrator based on earlier experience of large irrigation projects. So we are quite happy to deliver the pumps and collect the money. And what [ percentage ] of the bigger players like our pumps, so we are in a good state.

Yes. Sir, what will be our market share, sir, in the solar pumps?

Good question. I'll try and get you an answer later.

Sure, sir. So then coming to, again, to the [ Bakaji's ] earlier question, sir, what is the medium-term margin aspiration we have for the company, sir?

We would prefer to build on whatever -- wherever we are. There has been growth, and we would like to continue that. I assume that as this is -- whatever is spending on the project side, and we get to be mainly a product company, you will see margins improving.

[Operator Instructions] The next question is from the line of Siddarth Mohta from Principal India Mutual Fund.

Sir, my question is on SPP Pump. If I have to look at the FY '21 number, there has been a decline in revenue by 20%, but same has not been reflected in our PAT. In our PAT it has grown quite well. So can you just try to connect between the 2 points? Decline in the revenue.

So the sale went down, but the profitability is up.

Got it. So is there any one-off?

So Alok will answer this.

No. I think it's not a one-off situation. It's like you mentioned it may be [ the noise ]. The company actually has been -- a few things have happened over the last 5 years. SPP, as I said, average margin, historically, if you look at our numbers, have been between GBP 3 million and the highest deliveries is GBP 5.5 million in terms of profit. And that GBP 5.5 million was in 2014. And the average is between GBP 3 million and GBP 3.5 million from 2003 to maybe 2010. But at that point in time, almost -- on average the oil and gas business, which is pure product business, was between GBP 20 million and GBP 25 million. And this was relatively decent margins. And as I mentioned earlier, after 2014, this fell to GBP 8 million to GBP 10 million because, as you would imagine, the oil and gas sector has seen a big slowdown. And of course, it was triggered by the drop in the oil price. But of course, now it has continued because renewables are far more [ glamorous ] than oil and gas. So the company made an effort since 2016 to diversify away because apart from the oil price dropping and affecting the product business, it also reduced our spare business, which I [ do remind you ] again, is quite profitable. So to sort of make that transition, the thoughts were what do we -- what sort of businesses do we get into? And while we looked at onshore, which is downstream petrochemical, it was one area where we made a foray, the margins were poor. The other foray that we made using our domain knowledge was in the maintenance and aftermarket business. So that's really where we've got a lot of traction. As I've said, we've signed 25 large framework contracts with people like Petrobras, Apache, Shell and now Chrysaor, because Chrysaor as you know, has bought all the Shell and British Gas platforms. So we manage 25 players like this for oil pumps on them -- [ oil ] pumps [ or ] SPP pumps on their platforms. Similarly, we extended this to water companies. So we have exclusive contracts with most of the -- U.K. water companies. And of course, we have contracted every U.K. water company, but not all exclusive, some are non-exclusive. This has extended into the power division. So we also have contracts like that. So those are our big framework contracts, where we are on-site managing and doing maintenance continuously, using our domain knowledge that we have from the oil and gas product and installation commissioning that we used to do. Similarly, we've included our other service businesses, which is basically E&C contracts, where we have 173,000 E&C contracts, and we've gone 1 step further and converted 26 of those 173 into a subscription service. And that's really how we see the future on E&C contracts, is a onset of subscription business. So I would say that has been our strategy to move forward. Yes, I would say that GBP 4 million is a decent number. Historical average, I would say, GBP 3 million, GBP 3.5 million. But I would hope we can build from this GBP 4 million number going forward on the SPP [ side ]. Does that answer your question?

Yes, sir, it does. Very [ insightful sir, thanks for that ]. Sir, my second question is on this domestic possibility [ leaving past in these in ] Kirloskar Ebara [ para project in Motra and it gets solar in nominal improvement ]. So how sustainable these numbers are as far as domestic possibilities [ happen ]? And my final question, sir, a couple of months back in one of the daily newspapers Mr. Sanjay Kirloskar has given a statement that we are targeting ROCE of 25% and ROE of 20%. Sir, if you can -- we know that this [Technical Difficulty] [ our RoCE and ROE went up about 22 ]. So what are the key metrics which will help us to achieve this 25% of RoCE and 20% of ROE.

I'll ask Rama Kirloskar to respond on this Kirloskar Ebara question.

Yes. In terms of Kirloskar Ebara, we have focused substantially on our export markets. We have gotten quite a few registrations and approvals from large refineries abroad. And that would also help us to hedge the risk with the domestic sector and the ups and downs that we face in the projects that keep coming up for the refinery business. They're [ now in ] definitely greenfield projects going on domestically. There are expansion projects. And therefore, to hedge the risk of the order book going -- having peaks and troughs, we have looked at the export market quite aggressively this year. In terms -- therefore, I do feel in the long term, there will be sustainability of these of the order board as well as the profitability. We have also taken sustainable measures in terms of cost reduction during the pandemic year, with better rig contracts with suppliers. We're also able to pass on to the customers any increase in the prices of raw materials, and we have streamlined our execution process to reduce any pandemic-related delays and ensure that our liquidated damages are minimized. In terms of the shop floor, we have taken quite a few initiatives for automation on the shop floor. We have deployed TPS and Industry 4.0 to ensure higher productivity and ensure that productivity can continue with less manpower because I think that the pandemic is going to be a long-term scenario we're going to have to deal with. And it's better that we accept it and find solutions, rather than be in denial mode. So as far as sustainability for Kirloskar Ebara is concerned, I'm quite confident. As far as KPML is concerned. KPML, as you know, is our captive motor manufacturing unit -- essentially, the motors essentially go for KBL retail pump business. So the growth of KPML is directly proportional to the growth of our retail pump business. Therefore, you will see that whenever the retail pump business enhances its order booking, so will KPML. We feel that, that is a growing sector. We see a bright future. KPML also has a track record of a good design, research and development team. So they have been designing highly efficient products. They have also been diversifying in other areas, like I mentioned earlier, for special motors in health care and the elevators market. So in terms of profitability, market share and sustainable growth, I'm quite confident for the future years.

Now the question that you asked of me. See, as a company, we believe very strongly in the business that we are in. And a lot of times I joke that I created a huge mess, and the last 10 years have gone in cleaning up that mess that was created in the EPC space. But KBL hasn't been sitting quietly. While the last 10 years have been tough, we have done a lot of other things as well. And I think the biggest 1 that I would say is Alok and Rama also have learned what not to do from what I have done. But we have kept our eye on what is going on outside. And let me list out a few things that we have done. If you look at sustainability, that's been -- that's coming increasingly into force. But as soon as Hydraulic Institute and Europump started talking about sustainability and life cycle costs over 15 years ago, within 2 years, KBL had 2 ranges of pumps, which we call our Lowest Lifecycle Cost Pump series. And in U.K., where -- and we built it together with SPP. And in U.K., which has private sector water companies, we have close to an 80% market share because these pumps not only are highly efficient, but their efficiency lasts without a drop for at least 5 to 10 years. So we had a tough time introducing them in India because they are a little costlier, but we are seeing more and more customers preferring this. If you talk about renewable power, wind and solar power. KBL has invested long time ago in wind. We have 4 megawatts of wind power. We have over 6.5 megawatts of rooftop solar power already invested in over the last 3 years. We were 1 of the first Indian companies to come out with a sustainability report over a decade ago, and have had an integrated annual report for about 4 years. And when you talk about diversity, we are the world's only pump company with an all-women-operated and managed factory. If you look at additive manufacturing, I understand that one of our competitors is now thinking of investing in a 3D printer and also in rooftop solar power. And this is an M&C company that is thinking about it now. I have already spoken about renewable power, but KBL has had the world's largest 3D printer in Kirloskarwadi plant, which is 109 -- 111-year old plant, but we've had it since 2013 for 7 -- for now, what, 8 years or 9 years. We've got vital experience, and this machine has been contributing significantly and well to our domestic as well as international businesses. In fact, we were the first in the world pump industry to invest in such a large 3D printer. If you look at -- and this helps internationally in our maintenance business, where we are able to deliver pumps, pump components, spare parts, not only to our design, but to designs of our competitors, much faster than they can. If you look at artificial intelligence, we have documented over 40 years of knowledge of our application engineers in what we call our Dolphin Software. This allows KBL to give globally the same best solution to our customers for all their applications. Not only do our people use it, so do our channel partners as well as some of our customers who are loyal customers to us. So whatever mistakes we had made in the past, we don't make them anymore, and we give the best solution. And this software keeps learning and improving solutions all the time. If you look at Internet of Things, our township Kirloskarwadi's water supply system has been run from our head office for the last 10 years. We've also had experience with remote monitoring and predictive maintenance at Magarpatta City in Pune for over 4 years now. Our KirloSmart remote monitoring and predictive maintenance app has been operative for 5 years now and has gotten more popular as the pandemic has begun. And you can -- not only can the customer, but if he allows us, so can we see how each and every pump that's connected to it, how it is working, on our laptops, desktops as well as mobile, right? So we are now in the process of delivering tens of such systems every quarter, both with new pump orders, because customers want now such systems, as well as for retrofitment of pumps that have already been delivered, not only for our pumps, but also for our competitors' pumps. So the objective, like Alok has done at SPP, is to add subscription service on maintenance as well as refurbishment business. And we are rolling this out now domestically as well, because it's already been done internationally. And last but not the least, augmented and virtual reality. I don't think you'll hear this from any Indian manufacturer of pumps in India, whether Indian or an M&C. We started this work in 2016 and are using this technology for training as well as servicing. And this also has come very useful during the pandemic, where we've been able to show our customers how to repair our pumps without doing that. So KBL has been moving ahead. I believe you should look at us as a multinational product supplier. And I mean product as against a mere component supply, right? We supply end products. We are present in all the large trading blocks around the world as a local manufacturer. And our solutions are respected around the world. We -- KBL itself exports to about 100 countries, and through our foreign subsidiaries we add another 35, 36 countries. And we have Western brands like SPP, Rodelta and SyncroFlo. So we are an Indian company with design capability to make globally accepted products. And on one hand, we are supplying the coolant pumps for the world's largest fusion reactor, which is being built in France. And on the other hand, we can supply pumps to the Indian as well as African partners. So we look at both the ends of the frame. And we have all the certifications that any global manufacturer or M&C company has. So that's -- for the last 10 years, while the results have been not very happy, I think you will be happy to know that we have been investing in the company. We've been investing in the latest technologies. And even if you look at a company like Rodelta, over there, they are moving into -- hydrogen is supposed to be one of the fuels of the future, and we've supplied pumps to Shell for their program for blue hydrogen. And these pumps are already -- they are in the process of being supplied, not yet supplying. So that's what I wanted to say. When you say, why do you target this kind of numbers, this is why we are confident that we are future-ready, and we will be able to take on global competition.

Those are really appreciate and sir, hope you can continue business concall might be in quarter 1 and quarter 2.

[Operator Instructions] The next question is from the line of Manish Goyal from Enam Holdings.

Yes, hearty congratulations on excellent numbers, sir. I have a couple of questions. Would it be possible to give a perspective on stand-alone operations, like what is the revenue mix between B2C and B2B? What is kind of growth we have seen and how is industry panning out, it will be very helpful. And my second question is on what is the exports from India? And we have mentioned the list of orders which we have done, which is a quite exhaustive one. So what is the revenue and outlook for the exports?

So the B2B business is about 60%.

60% of the stand-alone, sir?

Yes, Approximately 60%.

Okay. And so sir, just if you can give a perspective how it has behaved, like B2C and B2B in the current year on the growth front? And how do we see it going forward?

Because of the pandemic, the results are not -- I can't compare this year for last year. But I would say that the same -- the proportion has been the same, approximately. Both sides, if I look at -- because we did not open the plants for some time. And our Madhya Pradesh plant, we already had -- before the year ended, there were certain issues so it's a little difficult to show that growth that we've had, but it stayed at almost the same percentage.

Okay. Because I was under the impression that our B2C is more than INR 1,000 crores revenue. So now with INR 1,800 crores, we are saying 60% is from B2B. So I'm just a bit -- wanted to clarify that, sir.

Yes.

Okay. And second question on the exports front, how is the revenue share from the stand-alone and how are we seeing traction on that? Also, like with China Plus One strategy, does it really also kind of provide some benefits to us going forward?

I don't believe that -- we do not compete with China. The Chinese pumps are more low-end. I have explained this before, that when it comes to a little technical solution, we don't see them at all. We see them with the very small pumps, the mass-produced standardless pumps. But in our space, we've never ever come across China. Exports have grown last year. They are about 7.5% of our company's turnover. And I would add to that, that basically what we see is -- Earlier, the number of -- percentage was much higher, and that is when we were selling motors, control panels, and other accessories with the pumps. Nowadays, we work through our international companies. We supply them bare pumps, and they make them into local products by adding local accessories and other components that are required to make them into pump sets. So European or Southeast Asian or American motors, panel suitable for local standards. That is what we do. So since we supply bare bones kind of products nowadays, the volume of that has -- numbers have gone up, but the value has not gone up because of no motors being there, no engines being there, no panels being there sent with them.

The next question is from the line of Faisal Hawa from H.G. Hawa & Company.

Yes. [Audio Gap] questions, that we have so many invested tie-ups with so many countries. And we have certifications and all. So do you think that it's actually a mindset issue that we are not able to maybe utilize at least 90%, 95% of our capacity utilization and that if you could have a mindset that we will not operate at less than 90% and [ price deals ] and exports accordingly, it could really improve [ and invest ] to our profitability, and that could actually result in -- for bringing our new initiatives like IoT and artificial intelligence also. That's 1 question. And second is, how do we -- are we making any kind of products for like bottom-of-the-pyramid sectors, like submersible, like very cheap pumps for bore wells, which could be used in the hinterland of India and which could be afforded by extremely poorer people?

Let me answer your first question about why we localize in different countries. In some cases, like in the case of HPP, where more specialized in oil and gas, very often, the oil company is very specifically saying no India, no China contact. And so it's clear why we need to manufacture locally. But the other issue we face over time is that in all these countries, they don't just buy a pump by itself. I mean a pump requires something to drive it, it requires control systems, et cetera. And if we start adding all those like we used to in India, first of all, a lot of those components need to be imported and then re-exported. And in many other cases, we will not have exactly the kind of components those people are used to. And that starts creating warranty issues and all sorts of other issues, which restricts us from making continuous and regular sales to the same customers or businesses. And that's 1 of the reasons why we wanted to have local bases in different countries, so that we are able to have repeat and regular business with those companies. The issue we are finding in the past is that the business was becoming one-off and not repeat and continuous. So I think that is the first reason. The second is that, as you are aware, slowly the world has become more into blocs. And ASEAN is obviously 1 bloc. As you know, India is not part of ASEAN, but India and Thailand have a free trade agreement. So that helps us send bare products into Thailand and allows us to add value to Thailand to be ASEAN-compliant. And this allows us then to sell into countries like Vietnam, where top tax for non-ASEAN products is in excess of 20%. And we believe there are [ many ] other countries. So that allows us for ASEAN. Similarly, Europe has many other local requirements. If you want to sell into water, there is all sorts of certification. And for us to comply with all these certifications in a major factory adds to just immense amount of complexity. Moreover, as you are probably aware, EU has just introduced into the European Parliament something called carbon border adjustment mechanism. And this, again, will add more complications in exporting goods into the EU because of, again, environmental norms which are becoming great barriers. So I would say there are various things going on, and that's the reason why we have local production facilities in the countries where we do, because we believe those are the major markets in the world -- in those geographies rather. Not in the world, but in those geographies. I hope that answers your first question.

The second question about bottom-of-the-pyramid products. We do make what are called mini pumps. We make them in hundreds of thousands. We make submersible pumps in hundreds of thousands. So we are there in that space. Our products are the 5-star, et cetera. But I don't know whether you meant cheap products or you meant products that...

No, I meant actually products which could address very large problems like, for example, in villages, irrigation and it is a huge problem. We have bore wells, which are costing, let's say, like INR 1,40,000 lakh, INR 1, 50,000 lakh to bore it and all. If we could have some solutions to it where we'll do it anywhere at a sub INR 25,000. We can take this as an engineering challenge. And if that could be -- if that could be achieved and this could be a huge mass of business, maybe at a low margin initially, but once materials are developed accordingly, it could even result in bigger margins, but the volumes would be very huge.

Yes. So like I said, we do make bore well pumps. We make them in hundreds of thousands. We make them both water filled and oil filled, and a large number of them have the 5-star rating. So we are in that space. So I didn't understand what you meant by, are we at bottom of pyramid or whatever.

I think it kind of answers my question. But unfortunately, the first question was not about localization or something. My point was, is it like a mindset issue, like an organization could set a mindset that we will never operate at less than 90% capacity utilization, and then set sales and other parameters accordingly. And that could really drive very huge profits at 90% operating efficiency. And so my question was more, is it -- is it kind of a mindset issue that we tend to move with the market or say, [Foreign Language], that's why we are at 70% and [Foreign Language]. So somewhere we have to give an outlier performance to really improve where we are. So I was more delving into the mindset issue rather than whether we are localizing or not or something. And I'm pretty much sure in most markets that you must be present on most products, our market share as a percentage of global market must not be even in double digits in many cases. So there is a market there, but we have to penetrate it.

In the local market?

In the global market, I'm saying. We may be a very small percentage of the global market. So if we have a mindset that we will now operate only at 90% capacity, maybe it could result in company really doing very well.

Yes. If you look at global market, we believe our market share globally is 2%. Right? And I think very few companies in India would have a global market share of 2%. If you look at our bank, they are pygmies compared to the global banks. So our largest competitor, which I believe is Flowserve, is about $3 billion or $4 billion in size. It's a very fragmented industry. And a lot of players, a lot of domestic players, a lot of standards, especially in Europe, to protect local manufacturers with materials et cetera, to be made to their own standards. Which is why globally also companies do not have a very large chunk as their market share globally. That being said, we are about 1/4 the size of Flowserve. On the other hand, I believe that we've decided that we would like to have certain margins, certain commercial terms to do business. And yes, we can get far more orders if we decide that we do not want to, for the sake of turnover, do business. But I think in the last few years in order to improve our balance sheet, we've taken certain decisions. We are growing on the product side, I think significantly, if you see in the last few years, as our projects [ take ] turnover has come down. We are still much larger than the second largest player, who also exports, by the way. So yes, the philosophy is do business on our terms, ensure that we are able to meet the targets that we have set for ourselves -- financial targets.

The next question is from the line of Renjith Sivaram from ICICI Securities.

Sir, congrats on an excellent set of numbers. After a long time investment and [ now analyzing analyst ] it's very heartening to see that. Sir, if you look at the last 4Q call, you had mentioned close to INR 1,000 crores for our small pump business. So is the [ like for like ] small pump business comparison will be how much for FY '21?

So, it's not very clear what you are asking, but we normally do not give figures of our different sectors that we operate in.

Okay. But small pump... [Technical Difficulty]

Sir, I am sorry to interrupt you, Sir, may I request that you use over the phone, over the handset.

Oh, can you hear me now?

Yes, it's a little better.

Yes. So the reason I'm asking, sir, large portion of the small pump is B2C standard products, right?

Large -- small pump business, what?

The large portion of the small pumps business is B2C, which is through our dealers and distributors.

It's both B2B and B2C. We have industry segment in there, which is B2C -- B2B, I mean. Sorry, B2B.

Okay. So this B2C, we are maintaining that 40% of our standalone, which is around INR 1,800 crores currently?

Yes.

And this was how much last year?

We can't hear you very clearly.

This was how much last year, this B2C portion? Has that grown?

As we said, we have grown across sectors.

Okay. And sir, we have been hearing regarding the [ delta help ] scheme. [ nasi delt ]. So are you seeing or are we participating in any of these opportunities?

We are participating as far as supply of pumps is concerned. We have -- we work through our channel partners. We do not take orders for large irrigation projects, as I have told you. We don't take orders for integration of solar systems. We don't participate in the state government programs. We deliver products to the end customers through our channel partners. And our -- basically our responsibility ends when we deliver these products to whichever channel partner we use to do -- get into this business. But we -- yes, if you ask me the other way, we are large participants in all these programs, but not directly.

Okay. And sir, in 1 of the previous [ topic announcement you said that the one future ] is completely [ out of our focus now ] so we are...

I think you've got that wrong. We do supply to NPCIL.

No, regarding that boiler fuel pump.

No, you were talking about the primary heat transfer pump.

Yes, yes, yes.

So because this is what leads to confusion. There are many products that are offered to Nuclear Power Corporation of India. And KBL supplies the majority of them. We are talking about 1 order because some M&C gets that order. There are far more products that are on order from Nuclear Power Corporation, and we are participating in that. And we have orders also.

Okay. So this -- which we have planned for the joint research and do you have some understanding to do that. So that is now you are completely [ in help with that ].

I have not understood the point you are making.

So in between, we had some plans jointly. There are some equity partnership will be also favored by the government, some arrangement was there for developing this...

We have never made, nor have ever thought of, any arrangement with Nuclear Power Corporation to set up a joint venture.

Because we had planned up some prototype, right?

We had planned for?

Some prototype for this pump. We had planned for some prototype for this large pump, this boiler feed.

Yes, yes. We had asked for -- we had got an order for a development order of 1 type of pump for primary deep transfer pump. And that order, we have requested the Nuclear Power Corporation to cancel the development order.

Okay.

Yes. But we expect that all the other types of pumps, whether boiler feed, whether -- because weather shutdown coolant pumps, weather circulating water pumps, condensate extraction pumps, all the other pumps that are required in a nuclear power plant, we expect that we will be participating in that business for Nuclear Power Corporation.

Okay. Perfect, sir.

So I hope that is very clear that we are only looking at -- I think the questions seem to be relating to 1 type of pump, when there are 3 or 4 other major systems, and many other utility pumps required in a nuclear power plant.

Because this particular pump is very expensive and it's a large order so that's the reason we keep on reiterating it. So it's a huge -- it will be a huge order, so...

But if you look at the other orders, the value may be higher than this one. Plus we are also quite concerned about the civilian nuclear liability issues.

Ladies and gentlemen, due to time constraint, that will be the last question for today. I will now hand the conference over to Ms. Rama Kirloskar for closing comments.

Thank you all for joining us on this call. We remain confident on the business growth prospects across geographies and across our businesses, our endeavors to strengthen our businesses, and turn around the loss-making ones through better revenue, throughput and cost optimization efforts. With this, we thank you for joining us for the call today. For any queries, please feel free to reach out to our IR consultant, SGA. Stay safe. Thank you.

Thank you very much. On behalf of Kirloskar Brothers Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.