Kirloskar Oil Engines Limited (KIRLOSENG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '21 Results Conference Call for Kirloskar Oil Engines Limited, hosted by Axis Capital Limited. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Abhishek Puri of Axis Capital Limited. Thank you, and over to you, sir.

Thank you, Aisha. Good morning, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you all for the Kirloskar Oil Engines Limited Q1 FY '21 Earnings Conference Call. From the company, we have with us today Mr. Sanjeev Nimkar, Managing Director; Mr. Pawan Agarwal, Chief Financial Officer. The call will be initiated with a brief overview by the management, followed by the Q&A session. With that, I would like to hand the conference to Mr. Agarwal for his opening remarks. Over to you, sir.

Thanks, Abhishek. Good morning, everyone. This is Pawan Agarwal, and thank you all for joining us on this call today. At the very outset, we hope and wish that all of you and your families are keeping safe and healthy. As all of you are aware, the first quarter of FY '21 started with an uncertain and unpredictable environment with the proliferation of COVID-19. The company's performance was severely impacted by the lockdowns, and we witnessed significant disruptions in April '20, when most of our businesses came to nearly a standstill and our offices, depots, warehouses, manufacturing locations remained largely closed. It was only in May and early June that the company was able to revive its operations to a large extent. The pandemic continues to rise in the country, and we have had approximately 12 cases across various locations in the company. Most cases are mild, though, and many have recovered and resumed work. Fortunately, we have not had any fatality due to COVID-19. KOEL and its subsidiaries have adopted protocols regarding safe running of plants and other places of business in adherence with the COVID-19 guidelines issued by the relevant authorities across various states. All workplaces have implemented safety and hygiene protocols, like wearing a facemask, physical-distancing norms and workplace sanitation, to make sure that the health of our people is assured. Continuous awareness of these protocols amongst employees has been carried out. These protocols are being reviewed regularly and updated based on the revisions and guidelines received from various authorities. Our understanding of the current scenario is that flexibility, adaptability and nimble-footedness will take precedence over structured long-term planning and execution. As we move into the sixth month of COVID-gripped nation, it looks like uncertainty will last for some time to come, and all of us have witnessed a surge of lockdowns across the country in July. This uncertain business environment will certainly impact our business performance. We will keep revamping our plans regularly and look for contextual solutions during these uncertain times. In parallel, we will continue to build our medium- to long-term strategic plans in the coming quarters as we look towards the longer term and more stable external environment. I would now like to discuss our first quarter stand-alone financial performance. Our first quarter stand-alone sales at INR 315 crore was 58% lower compared to sales of INR 755 crore for the same period in the previous financial year. Total revenue from operations, which includes other operating income, for the quarter stood at a little over INR 320 crore against nearly INR 764 crore in quarter 1 of the previous financial year. Total income of INR 325 crore for the quarter was 58% lower compared to INR 776 crore for the same period in previous financial year. In comparison to domestic business, international business was impacted marginally in quarter 1. Our export sales declined from INR 50 crore in quarter 1 of last financial year to INR 46 crore in quarter 1 of the current financial year. A good traction was seen in GCC countries in quarter 1 as far as exports are concerned. A number of cost-control measures taken in the quarter helped contain losses. We missed positive EBITDA for the quarter by a whisker. Quarter 1 saw a negative EBITDA of INR 4.5 crore compared to INR 73 crore of positive EBITDA in quarter 1 of last year. We made a provision of INR 6.5 crore towards doubtful debts in the quarter. We are reasonably confident of collecting these amounts from our customers in coming quarters. Had this provision been not made, the company would have delivered a positive EBITDA of INR 2 crore in quarter 1 despite COVID. Loss for the quarter before tax stood close to INR 15 crore as opposed to profit before tax of INR 67 crore in quarter 1 of FY '20. The DSOs and inventory days have increased due to significantly lower sales in quarter 1. However, in terms of absolute numbers, these numbers have reduced significantly in quarter 1 compared to quarter 4 of last year. Our cash position has improved by INR 5 crore in quarter 1. Cash and cash equivalents were INR 329 crore as on 30th June 2020, vis-à-vis INR 324 crore as on 31st March 2020. At a consolidated level, the revenue from operations declined by 53% from INR 901 crore in quarter 1 of FY '20 to INR 422 crore in quarter 1 of FY '21. Total income for the quarter declined from INR 914 crore in the previous year to INR 427 crore in the current year. All the 3 subsidiaries of the group delivered positive EBITDA in quarter 1. As a result, EBITDA for the quarter at consolidated level was INR 11 crore as against INR 84 crore EBITDA in the same period previous financial year. Loss before tax for the quarter was a little over INR 9 crore compared to profit before tax of INR 72 crore in quarter 1 of previous financial year. That's all on the financial side. In conclusion, we would like to mention that every crisis is also an opportunity. We are looking inwards to improve ourselves by taking various measures, focus on profitability improvement, in making our businesses more competitive, and we are looking outwards at the same time to continuously enhance our engagement with customers and improve on sales. We would like to assure all our stakeholders that KOEL continues to remain optimistic and confident amidst all this turbulence. With this summary, we may now commence question and answers. Thank you so much.

[Operator Instructions] The first question is from the line of Ravi Swaminathan from Spark Capital.

Just wanted to know how the LHP, MHP and HHP performance at a market level has been vis-à-vis the usual normal, both in the first quarter and how July run rate has been?

Good morning, Ravi, and good morning all who have joined on this call. This is Sanjeev Nimkar on this side. Ravi, coming to your question...

Sir, sorry to interrupt. Mr. Nimkar, your voice is not quite audible. There's a slight echo in the line, so we are not able to hear you clearly.

Is it audible now?

Yes, sir. You can go ahead. Thank you.

Good morning, Ravi, and good morning all for joining on this call. This is Sanjeev Nimkar this side from KOEL. Coming to your first question related to different power-generation segments, LHP, MHP and HHP, how have they performed? First, 1.5 months of this quarter was a completely shutdown situation. So whatever business we have done is fundamentally in the last 1.5 months of this, in May mid to June end. So that is the thing what we've got in our hand. However, we indeed had MHP and HHP orders in hand when we exited in March with an abrupt stoppage. We've had orders in hand, so that came handy for us in terms of our execution during May second half and June second half. So MHP, HHP, the in-hand orders were there. However, the order booking was on the lower side. But towards the end of June because of our continuous touch base with many inquiries as well as the existing customers for their training, for upgradation about the technologies and training to their internal teams, we had established digital connect with lot many customers. And by end of June, we observed that customers were extremely -- rather we can say compatible or acceptable to the digital way of closure because this was the first time this kind of capital goods buying customers were closing the orders digitally and negotiating digitally. But we more or less settled down and the order board started kicking off. So -- and then we found that LHP pent-up demand in the second half of June was shooting up. So that's what we observed. So initially, MHP, HHP, the order board we had that we executed. The demand was not much. Then LHP started kicking off. And end of the quarter, we saw customers were comfortable in negotiating digitally and concluding digitally. So that's actually been the story.

Got it, sir. And June and July, would it have been 60% to 70% of normal demand, usual demand? Or how was that, sir?

Yes. So by the time we hit June and some extent of July, we saw demand at various percentages in different BUs. So when it comes to power generation, the demand was around 40%, 45% in power generation. And within that, you can say, LHP was 60%, 70%, then MHP and HHP were in 30%, 35% kind of thing. If you come to the other BUs, the industrial demand came to around 60%, -- roughly about that. Then agricultural demand for the electric pump side of the story was up to -- closer to 80% plus. So that's actually the observations in the market.

Got it. And July also was same run rate kind of...

July, almost similar, slightly better than June.

Got it, sir. Got it. And industrial demand, do you expect any traction in the second half? Do you expect government spending to be better and that will lead to industrial demand? Is there any kind of charter like that, that you have seen?

See, generally, end of July, traditionally, we have seen the industrial demand slowing down and then picking up towards the end of September or early October. That has been the traditional thing. But last 1, 1.5 months, 2 months, we have not seen that. So the industrial demand continued to be growing from wherever -- it has started picking up in the month of June. So we are not seeing the typical cycle of every year what used to happen. So July, August looks to be on a better track. And if the same trend continues, maybe H2 can also be better on the industrial side. But we do -- we are crossing our fingers whether it will be touching the last year's level, we are not sure, but it will be better than the Q1.

Got it, sir. And my last question is with respect to inorganic opportunities you had mentioned in the PPT. You told we are close to INR 330 crores of cash, and we are looking at inorganic opportunities at an attractive valuation. Can you give more flavor on it? Or is it like we'll talk about it once we have decided.

Yes. This is Pawan Agarwal. You are right. I mean we are always on a lookout for a right opportunity, which is aligned to our existing businesses and which is a natural extension of our current businesses in agri and pump and engines side. So we are exploring that. And since, as you rightly mentioned, we have sufficient cash in hand, so we will talk more about it when it happens. We are still at exploration stage.

[Operator Instructions] The next question is from the line of Apurva Shah from PhillipCapital.

Sir, I am looking at the company for the very first time, so pardon me if, like, you find some questions very basic. Sir, as a management, how do you look at the incremental growth at steady-state level? So I'm not looking for the current situation where the overall economy is impacted by COVID. But at stand-alone business, how do you envisage the overall growth rate over the next few years?

Yes. This is Nimkar here. So that's a good question. See, the industry in which we operate, primarily Kirloskar Oil Engines was the engine company. Then we expanded into various things in nearby domains, so agricultural things. We were only agri engine company, now we are giving electric pump sets and that business is expanding very well. In engine side also, we are traditionally giving diesel options. Going forward, you will see a lot of gas domain options coming up from the company side and further new technology options coming in. So upgrading or keeping the company in sync with the customer expectations [indiscernible] has been the new mantra the company's management is adopting. In the last few years, we have continuously proven that to the market. We are leading the technology curve in whatever domains we operate in. So going forward, we expect there will be changes in the industry structure itself, whether the power generation domain remains in similar way or whatever way. Our industrial engine segment is also shifting towards a different way of working. That is the part and parcel of the evolution of the industry. But keeping pace of the technology required, the company will be ahead of the curve, that's for sure.

Sir, that's very commendable. So I think as I understood clearly, sir, the majority of incremental growth may come because of the product expansion or maybe the product category expansion itself, right?

Absolutely right.

Okay. So sir, in that case, what can be the -- so I think in one of the previous questions you answered, we will be looking for some acquisitions and like -- even though it's a very preliminary phase, but that may be like agriculture-related. So what can be the other areas where you can find where that product offering is suitable to your existing basket and we can grow in a smoother manner?

See, initially, we thought we are an engine company, but 2 years back, we took a resolve internally, and we have taken ourselves a vision that from engine company, we will be migrating to the energy company. And what is the energy company? Not a typical way the energy is interpreted by different investors or by the market, right from oil to everything. No. We have carved within energy segment for ourselves that we will be operating in the domain of converting and conditioning of the energy. So that's the segment which we'll be expanding ourselves. Even today, when we look at our genset domain, what are we doing there? We are converting mechanical energy -- or chemical energy through mechanical energy to electrical energy. So that's the conversion which we are doing. Tomorrow, we may look at doing the reverse: get the electrical energy and convert it back to mechanical energy or vice versa. The conversions of energy from one form to another form will be the operating domain where we'll play. So that's one expansion side. And another domain what we have taken up for ourselves is the water management domain. So that's another area where we are expanding, that we want to be a leading water management solution company. And we are approaching on that track.

Great, sir. So sir, we have in-house capabilities for this expansion? Or we need to acquire in terms of either technological tie-up or some inorganic acquisition?

It will be a combination of both. So we do have certain strengths with us because when we acquired LGM, we got some strength in water side of the story. When we are expanding in the energy domain, we may have to take some external competencies with us, but with our current cash situation, that should not be a problem. So internally as well as externally, we will be building the competencies.

And sir, what kind of incremental CapEx we require for our stand-alone business? I'm not looking for any inorganic as of now.

This is Pawan Agarwal. So for FY '21, we are looking at roughly about INR 70 crore, INR 75 crore in that range, the CapEx. And these are all ongoing programs, which are going on. So that is the number we are looking at.

Yes. Fundamentally, the emission changes which are happening, so there will be emission change, which is on the way for the industrial engines. And post that, there will be emission change for the power generation side also. For those changes -- and also our gasification of our range. So these are the 3 top-level projects which we are driving for the current businesses.

[Operator Instructions] The next question is from the line of Deepak Krishnan from Goldman Sachs.

Sir, just wanted to understand, within the industrial business, how are the various subsegments doing? And which subsegments do you see demand recovery happening quicker?

Yes. In the industrial space, we have a combination of the engines, what we supply in the tractor domain and the engines what we supply into the off highways or you can call it as construction equipment and earthmovers. So out of these 2, all of you by now must be knowing that tractors is moving at an unprecedented pace because never in the history tractor domain has seen that kind of a growth, and the same benefits are flowing to us as well. So whoever are the OEMs buying tractor engines from us, that demand is ahead of even normal demand. So that's first. Second, coming to the off highway side, that is construction equipment and earthmover equipment, that demand has started picking up now. Two years back, it had reached its -- one of the peak. Now last year also was a year relatively lower compared to the year before that until the COVID happened. So now it is again starting -- started picking up. So we feel another 3 months down the line, it should go back to last year's level at least.

And in the power gen segment, like you've kind of indicated that LHP is doing better than MHP and HHP. But are there any particular end markets that are seeing demand recovery faster than the other? Anything specific that you can highlight?

Actually, there is one clear indication coming here is, in data center side, demand is recovering faster, which is actually a part of [ HHP ], but it is a segment of [ HHP ], which is picking up. Then second domain we are seeing good traction is, warehousing and logistics domains are moving at a much faster pace. So that's the second one. Third, we are actually seeing lot of green and brown expansions happening into the pharma and FMCG sector, consumer goods company. So for that expansions also, the gensets are required. So that demand is also coming up. So these are some green shoots, which we are seeing.

And you would expect demand to come back in 3 months to industrial or would it take a bit longer than that?

Power generation may take longer.

Yes. Okay. May take longer. And any specific postponement of the emission norms or they say they remain as is because there's no postponement due to COVID or...

We are on the right track. There is already the announcement of 6-month extension for the industrial emission norms which were supposed to get executed on 1st of October, the coming October, now it will be 1st of April. So that's the -- government circular is out on that.

The next question is from the line of Manish Goyal from Enam Holdings.

I had a couple of questions. One is related to the regulation which we are looking to pass with a change in MOU to expand our business segments. So if you can highlight which are the areas which we are looking to kind of enter or expand going forward, number one. Number two, other resolution is increasing more funds into Arka Capital as they are floating a rights issue. So I just want to know how much money we are looking to invest more. And second, just want to know why -- like it's already well capitalized, so why are we looking to kind of infuse more equity and probably not leverage the balance sheet over there?

So let me address the second question first on Arka. This is Pawan Agarwal, Manish. Yes, you are right, there is a rights issue and the offer is open. The offer is open for the period 27 July to 10th of August. As we had mentioned earlier, we are keeping a close watch on Arka's performance. The Board has been regularly reviewing the performance of Arka. And this matter came up for discussion in the last meeting as well and this meeting also, Board meeting. The performance of the company is improving. It's doing good. Quarter 1 has been substantially better compared to last year, and the company is moving on the right track despite COVID-related disturbances in the market. The Board took a review of the business plan of the company for FY '21 and beyond. And this business plan was, again, revised a little bit downwards given the COVID uncertainty. Still the scenario looks very optimistic for Arka, and quarter 1 results are a testimony to that optimism. We are looking at investing INR 125 crore in Arka in this year. It will be some 11.34 crore shares at the rate of INR 11, which is INR 1 premium is included. And the money will be infused in 3 tranches: one on application, then there will be first call and second call, INR 4, INR 3, INR 4, respectively. So at this moment, initial tranche of INR 45 crore would be given to Arka, and then first call and second call will be taken care of at subsequent period, depending upon the business performance and how Arka does. That's about investment. As far as the capital structuring is concerned, they are raising debt also from the market. In fact, they have raised about INR 180 crore debt in the market. They got their -- listed -- rated also from CRISIL. So they are in the process of raising further debt also. So there will be a reasonable balance, which will be maintained between equity and debt in Arka.

So ideally, what is the ratio you are looking at in terms of what kind of leverage you are comfortable with in Arka Capital?

So the detailed nitty-gritties of Arka, we can -- we may not be in a position to talk about here. As we have mentioned earlier also, it's a separate management team led by Vimal Bhandari. He is the CEO and Executive Vice Chairman. If you guys need further information, we can certainly have an independent call with Arka management team.

Manish, coming to your first question, did clause change, you are aware that last 3, 4 years, we are actively engaged into a power car business with railways.

Sorry?

While we are doing this business with railways, we also observed that railways themselves are undergoing technological change. So from a normal power car, which goes in 1 train or 1 rack, you can say, there are 2 power cars going. So now they are internally evaluated and almost finalized plan of going with HOG, that is, Head on Generation, as a new way of managing the train. In that case, the power car requirement will be only one. So whatever we have planned the business on that, so we are clearly seeing the business maybe impacted because of the railways changing their own technology and their expansion plan. At the same time, it also opens an opportunity for us to look at beyond the power car within the same train, and we looked at coaches. Then we found out that having established our relationship with all the approving mechanism and authorities at railways, so why not to use that competency to expand our portfolio. And then we found that along with our genset, they may be requiring the transformers, which are used in the coaches and which is a far more expanding business. So we felt that yes, we can provide a high-quality, high-design transformers. So at the back end side, we have evaluated the right suppliers and right mechanism for that, and we will be expanding on that. So that was one of the domains which we felt -- which was not explicitly covered up in our earlier object clause. So we felt this opens up a window of opportunity for us. Not only that, in power generation side, we are supplying gensets to the market, but at the same time, whatever is happening into the storage technology is also a substitute for the genset in maybe LHP side or, to some extent, even MHP side. So tomorrow -- rather in coming times, we already have plans with us to provide solutions, either the hybrid solutions or stand-alone solutions into the storage domain. So that was also not explicitly covered up in our earlier object clause. So we felt it is the right time to expand this domain even on that side. Similarly, see, the fact that core -- we are very clear that one will be from the power generation side leading into the energy conversion and conditioning company, and from the electric pump side, leading towards the water management solution company. So this object clause change was fundamentally on this track [Technical Difficulty] There was some disturbance, actually. So that is our thought process on this object clause change.

Okay. So just to clarify, within railways, basically, one is that we are probably looking to -- for a newer technology. And so would it entail any acquisition of external technologies? Or will it entail any more CapEx, number one? And number two, just to clarify, so when we said we want to expand, are we probably looking into building the entire coaches, is that right or just if you clarify?

No, no, no. So railway is expanding coaches -- manufacturing of coaches for themselves. Every coach needs transformer. There are different types of transformers. The way -- every train needs a power car. Now earlier, 2 power cars were needed for 1 train. Now that will come down to 1 power car per train. But at the same, there are, let's say, 12 or 14 coaches per train. Each coach needs a transformer. Now with that also, we will be controlling the quality and the design aspect of that. So we have done -- we are into the process of closing the right suppliers for that, where we'll be continuing to [indiscernible].

So no major CapEx in this regard. Yes.

The next question is from the line of Ankur Sharma from HDFC Life.

A couple of questions. First on the power gen side. One, specifically, on the real estate segment, if you could just talk about -- I would assume demand would be weak, but how are you seeing that over the next few quarters? And also, how big is that in our total power gen sales? And have you heard of any cancellations or deferment from either the commercial or the residential real estate, please?

I think this is a very, very important question you've touched upon. And as earlier question also I replied that power generation will take a little more time than others to recover, and this is precisely because the construction segment is expected to recover relatively slower compared to others. So services sectors are recovering, like IT or IT affairs kind of the segments are already recovering. Manufacturing has also started recovering. Data centers are recovering. But construction because of the peak labor migration and overall market sentiments are on a slower track, so it will take time. But coming to your question in terms of any major cancellations, we have not seen any calculations whatever order board we had. But there are cases of deferment because of the financial management of some of the customers. So 1 month, 2 months or, to some extent, 3 months deferment we have seen. Customers have paid advance to us, but they have asked the deliveries they will take in a deferred way. So yes, that is observed. Coming to how will be the recovery, what we'll see there, I have a little different thought on this particular thing. It is -- some demand will be definitely there, but who will cater this demand will be the big question. Because it is not a question of just a normal situation that there is a demand and whichever brand gets the order, we'll be able to supply. We are seeing quite a good disruptions in the back end side. There are a lot of MSME suppliers or a lot of even then, what you can say, the proprietary suppliers. Their factories are undergoing a lot of crisis on a daily basis, different kinds of crisis coming in, which is disturbing the supply chain. And where the way we have established ourselves as one of the reliable suppliers in the industry for the last 6, 7 years. So we have an edge here. So even if market may not expand or market may not come back to the normalcy, but within available market, we may have edge, if you compare to some of our competitors that we may be able to manage supplies better. We have grown that in the water management side in the last 2, 3 months. So relative to our competition, our supplies were far superior and better, and we are proving similarly in our industrial and power generation business also. So market recovery in the construction side, I expect on a slow track, but our recovery may be a little ahead of the curve. That's what I anticipate.

And sir, if you have to break out the end market-wise sales, right, either for you or for the overall power gen industry, how big would, say, real estate and industrial segment would be individually?

Within power generation?

Yes, within power generation, how much will industrial and real estate be?

Within power generation, industrial generally is around 25%. And construction, the real estate is around 35%. See, eventually, everything is real estate for power generation, eventually. Within that, when we talk about real estate, it's fundamentally the residential side of it.

Residential, yes. Okay. And secondly, on this whole new CPCB 4 norms, I think something was mentioned on the industrial side. But again, on the power gen side, by when do you think these norms could come through? And more importantly, because we hear about different figures from different players in terms of the cost/price increases needed. So our understanding is that this increase would be much higher for players who are going from mechanical to the new norms and lesser for those that are going from electrical to the new CPCB 4 norms. If you could just throw some color on what's your view, both on the time lines and on the cost/price increases?

Yes. You are right. Industrial, I just addressed that it has moved forward by 6 months, and we are sure the government will stick to that. Further, we don't anticipate. So 1st of April will be reality for industrial. Coming to CPCB 4+, as on this moment, the indication is 1st of July 2022. So that's what -- there is no circular out, but this is per unofficial interactions or whatever you can say. So this is not to be published kind of thing, but you asked certain date and this is our anticipation. And it is not -- the circular is not out. And we do not see this date to be crossing further because we do not see the need for that. So there is a sufficient time available. Coming to the cost aspect of it, yes, compared to what happened in CPCB II, the cost rise -- compared to this time, the cost rise will be significantly high because barring up to 20 kVA, everything beyond 20 kVA will virtually move to the electronic situation, that is, CRDi kind of a technology, where everything will move. So there will be a significant impact on the cost structure of it. But again, I'm anticipating the question, how much will it impact to the size of the market? The answer is it may not impact to the size of the market. Even if the cost impact is high, the size of the market will not get impacted much.

Okay. Okay. And just one last question, sir, would be on the volumes of generators sold, and I'm just going back in time. So in FY '20, what would have been the industry size? And any estimate of what you believe could be the overall industry size for '21? Obviously, I'm expecting a decline, but what kind of decline would you expect if you had to give a number?

FY '20 itself was a decline in the power generation side in terms of number. So close to 120,000-odd in FY '20. And I anticipate it will be 95,000 to 100,000 end of the year for FY '21.

The next question is from the line of Sandeep Tulsiyan from JM Financial.

So the first question is on the power tiller side. There was a recent notification restricting power tiller imports to a much lower quantity than what the companies were supplying earlier. So how does that change the competitive dynamics? And what does it mean for Kirloskar? If you can just give your views on that?

Yes. Are you referring to the recent government circular on banning the challenge import on power tiller?

Yes. Yes.

Okay. Okay. So we have gone through that circular. We have studied it very, very carefully. Incidentally, it is not impacting us beyond, like, 2%, 3% kind of the extent, not beyond that. So we are relatively safer on that side. But it is definitely going to impact some of our competitors. That's our assessment right now. And at a broad level, we feel around 25% to 30% market may get open up for anybody to grab. And we have equal opportunity to grab that market. So going forward, we feel we will be able to garner some share out of that. And whatever -- despite COVID, last 3 months, our story on power tiller is extremely positive. So we are able to cater to the market demand, whatever is there. In fact, power tiller market is growing, and we are able to cater to that growth. And we are also having good institutional orders with us. And so going forward, if this circular is executed in letter and spirit, I won't be surprised at least 5%, 7% additional market share we garner further.

Right. So sir, when you mentioned 2%, 3% for KOEL, means do we have some import component that you are trying to localize? Or are there some particular models which we import and sell? What is that?

We do have quite a good components which are imported from -- for power tillers, but they do not fall under the categories what are notified. So only that 2%, 3% some electronic component is falling into that category, and we have quickly aligned local source for that. So down the line 2, 3 months, we will -- from that 3%, we will be out of it.

Understood. Understood, sir. And within -- second question was on the industrial segment, where you've reported a decline of 56%. If you could break this up how it was within the construction equipment and tractors? Because I think our commentary on tractors was relatively much more positive.

Yes, yes, yes. I will give the exact details.

So in industrial -- this is Pawan Agarwal. So in industrial, overall, as you rightly mentioned, year-on-year decline is 56%. Tractor has declined by 48%, and the off highway business is down by 60% year-on-year. Within segment, if you see, so construction equipment, about 80% drop year-on-year, earthmoving 83% and fluid handling, the other significant material item, is about 64% down. So that's the construct of industrial.

Okay. So tractor is 48%; off highway is 60% decline; construction, 80%; and fluid handling, 64%.

So when we say other than tractors, then it has construction, earthmoving and fluid handling. These others are sub-elements.

Okay. Got it. And sir, I just needed some more numbers, if you can help me with. What was the DV series sales, volume and value for the quarter? And can you share comparable numbers for last year also?

Yes. Just a moment. So this quarter, we had 11 numbers, quarter 1 financial year '21. And last year, quarter 1 number was 26. This is -- we are talking about 750 kVA upwards.

Okay. And so the numbers that you have shared earlier with us is about, I think, 282 numbers last year. So that is the entire DV plus SL, is it?

So we have other DV series also. This is UHHP segment we are talking about, 750 kVA upwards. So overall, DV number -- just a moment. So overall DV series quarter 1, we have 61 in this year. Corresponding number for previous year is 282.

Okay. And in terms of value?

Value this year would be about INR 11.3 crore.

Yes, INR 11.3 crores.

And previous year Quarter 1 was INR 48 crore.

Got it. Got it. And also if you can share how much was the electric pump set sales in the quarter?

Yes, just a moment...

Within the KOEL brand...

In KOEL, electric pump set sale was -- quarter 1 was INR 18 crore.

Okay. Got it. Sir -- and my last question is, I know it's a little difficult, but do you have any guidance in terms of sales growth for the current financial year based on whatever traction that we are seeing currently from customers or whatever order booking that you have been able to do right now?

At this stage, we are not in a position to provide any guidance on revenue for the year. This is highly volatile times. We'll have to wait and see.

The next question is from the line of Renu Baid from IIFL.

Sir, I have 2 questions. First, can you share with us what is the backlog that you have on the large engine order side? And to what extent do you expect the execution in this category to ramp up in the next few quarters given that 1Q has already been pretty healthy? And second question is related to the PG portfolio, where you mentioned that you're looking at alternate fuel sources and gasification is an opportunity. So your -- in the existing portfolio anywhere, do we have gas-based engines with us or any tie-up on the technology side? And in your view, what could be the kind of time frame required by you to get this kind of a capability to take place in India?

Okay. I think we heard your question a little bit missing some words here and there, but I got the gist of it. So I will answer your second question first, which was related to the gas-based engines.

Gas-based engines. Yes.

And whether we are tying up with any technology or what is the time frame. First thing is we are running this program of gasification of our engines for the last more than 3, 4 years, we had kickstarted that. And as we speak, we are supplying some long blocks, that means the basic structure of the engine, to U.S. market. That for a long time, last 3, 4 years, we have been doing that. So -- and it's well accepted there. So they take the long block from us, and they would make an engine out of it and they use, where long block is like kind of thing is 80% of the engine kind of thing. So we have developed in-house capabilities to manage that. Now looking at our domestic market, we felt it's time that we need to start offering the PNG or the LNG gas-based option to the domestic customers because in our country, 5 years back, the footprint of gas availability was not that good, but government has taken so many good steps to enhance the gas footprint, and next 5 years, this footprint will be enhancing further. If that is happening, then it's time that we should be offering good gas range. So starting as early as next quarter, we will start offering some ranges in the domestic market, and over the next 1 year, we will be completing the major part of gas options for the country here domestically. And the entire technology is indigenously developed by our engineering team, our R&D team, and we are proud of it.

Sir, what is the kind of comp assumption that you're expecting on the gas-based engines versus conventional diesel gensets in this category in which you are launching?

It will vary from note to note, but it can be anywhere -- up to -- from 5% to 10%, not beyond that. But customer will get enormous comfort because, see, the biggest pain for a lot of customers right now, especially the residential societies or the commercial complex, is bringing the diesel and tracking the diesel to be put in there. So the moment you shift to the gas, you can just connect the available gas pipeline there to the genset, and you are done for it. So that's the biggest comfort this brings in. And efficiency-wise, this will be also coming closer to the diesel genset efficiency. So customer will be -- and also the operating CapEx for customer will be on a lower side because still, in our country, the gas prices are significantly lower compared to the diesel prices, especially what diesel has moved in the last 1, 2 months. So it will be a good offering to the customers.

Right. So would this also imply that as you move towards the new CPCB 4 norms in the next 2 years for diesel gensets, so gas-based gensets could be a better option and will turn out to be better and more competitive under the new cost structures for diesel gensets?

Not necessarily because even gas will also follow the emission norms. If you are using gas, it doesn't mean there will not be emission norms. There will be emission norms. So you'll have to -- but it will be different than what are the emission norms for, let's say, diesel gensets. So we'll be adhering to that. So -- and customer will have a choice because, see, gas -- although I'm seeing the footprint in the country will be improving, but in the best of the scenario, 20%, 25% customers will have access to continuous gas even down the line 4 years. The remaining will have to depend on the diesel and fuel -- available fuel. So that's the way the customers will have to look at it going forward. Coming to your first question on the large engine side, last quarter, we have booked good orders. So around INR 35 crores to INR 40 crores order we have booked for the large engine side. And going forward, we will be executing this year as per the initial operation plan we have taken for ourselves. So large engine, more or less, remains intact despite COVID.

The next question is from the line of Bhavin Vithlani from SBI Mutual Funds.

Sir, just dwelling on the question on the power generation side, if you could help us. So you mentioned about 30-odd percent is the real estate part and about similar quantum is on the industry side. Infrastructure is an area I felt is a bit more optimism that you are alluding to. And we spoke about some metro projects also in our presentation. So how are we seeing the demand from the infrastructure side? And what -- because your expectation for the market is about 20% drop for the year-end, whereas for the quarter, we have seen 75% drop. So what areas are you seeing that can actually lead to the ramp-up on the month-on-month side, and that will lead to an overall improvement in the subsequent months and quarters?

Yes. So coming to your first point, that is, infra demand, we clearly see -- initially, we thought there will be impact on the infra side of the story because last 3 years, the infra side of the story because last 3 years the infra story for the country, especially with the government spending, has been very good, rather it was impact story. So with COVID and this happening, we were -- all the corporates were expecting that infra will get impacted. But I think government has come back aggressively and committed to the market that they will not allow infra funding to slow down. There can be a minor slowdown, but not majorly slowdown there. So -- and we are seeing that happening. That means the infra story about the road expansions in the country and ports and all the things, ports, airports and road. So that story is recovering fast. And by the end of the year, we'll see it will be as good as coming back to the complete normalcy. So that will help in driving some of the demand on this side. Another story is LHP side of the story, so between 20 kVA to 30, 40 kVA, that range. So that we are seeing a good traction. And as I was mentioning that the supply chain disruptions for a competitive player can also give us the opportunity to grab a better share there. Not only that, the demand for tractor and this is going up. So some of our competitors are not able to focus on the genset side. That also we have observed because the people who are majorly from the tractor segment, they are not able to supply some engines into this LHP, MHP demand, so they are not able to cater. So these are some observations. So that will also continue to grow. And currently, MHP, HHP is on a little slow track. We expect once the sentiment starts coming to the site, so a lot of projects, which were going on a slow track, they will come for the projects, the capital projects will come for the full [ closure ], and that will give us -- in Q4, the demand for MHP, HHP will be back to the normal.

Yes. Understood. The other question is on the export, where I think the situation is far better than the other areas. And if you could dwell a bit more because you spoke about, a, some firefighting-related engines. That was one opportunity. And the other opportunity that you were talking about is exports on the construction equipment and the OE side. So it will be useful to understand the update on the export side. And how do we see over a 3-year period, let alone what we are seeing currently?

So last quarter, we had quite a good order board when we stopped for COVID, that helped us to supply that, and we have executed all those order board. Not only that, during the quarter and also currently, our order booking in international market is reasonably okay. We are also seeing some of our OEMs in the international market and customers, also derisking China, where some of the orders are getting diverted to us, and we are getting benefit out of it. Our strategy on firefighting side, especially FM-UL, has been working exceedingly well in all markets. So right now, we have started getting orders from many, many customers in different geographies. So that story is not only intact, but it is giving us results beyond our expectations. Our story on the industrial side that we had given some mining solutions in some markets has also been very good, but some order booking is stopped because of COVID because those mines are also stopped. But we are sure once the operations start there, it will come back to us. Overall, we feel for the next 3 years, growth story for KOEL will be minimum double-digit plus growth year-on-year.

Understand. Sir, do you have a target -- this is my last question. Do you have a target in terms of percentage share of the business over 3 years that you are working with?

See, we had, but now with the current fluctuations, the way it is happening, that remains this thing. But the first initial milestone we'd like to look forward to is double-digit percentage of the total turnover should come from exports in the short-term vicinity, that is, maybe in the 2, 3 years' time frame.

Thank you. Due to time constraints, I now hand the conference over to Mr. Abhishek Puri for closing comments.

Thank you, Aisha. We would like to thank the management team, Mr. Nimkar and Mr. Agarwal, for providing us with this opportunity to host the call. And thank you to all the participants for the interactive session. Mr. Agarwal, do you have any closing comments?

We would like to thank everybody for their continued interest in KOEL, and we look forward to strengthening the business. Thank you so much.

Thank you.

Thank you, sir.