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

Ladies and gentlemen, good day, and welcome to Kirloskar Oil Engines Limited Q3 FY '22 Post Results Call, hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Shah from Antique Stockbroking. Thank you, and over to you, sir.

Thank you, Aman. Good evening, everyone. Welcome to the post earnings con call of Kirloskar Oil Engines Limited. Today, from the management, we have with us Ms. Gauri Kirloskar, Non-Executive Director; and Mr. Pawan Agarwal, CFO of the company. I'll hand over the call to Mr. Pawan Agarwal, who will give the opening remarks, post which we can open the floor for Q&A. Over to you, sir.

Thanks. A very good evening to all of you and thank you very much for taking time and joining this call. Present with me on this call are Ms. Gauri Kirloskar, Non-Executive Director; and a few of my other colleagues, namely Mr. Mr. Rahul Prabhudesai, Head of Strategy and New Business initiative; Mr. Arvind Chabra, Head of PPS Business Unit; and our Company Secretary, Smita Raichurkar. Mr. Amit Gupta, who leads the Corporate Finance function at our subsidiary Arka Fincap Limited, has also joined this call from Mumbai. I hope everyone is staving positive and testing COVID negative. As we all deal with yet another wave of the pandemic, let us hope that this will now transition into an endemic. Also, I would like to wish you all a very happy new year and filled with abundance of good health and prosperity. As you all are aware, Mr. Sanjeev Nimkar, the Managing Director, resigned from the company with effect from 27th January 2022 due to personal reasons. The Board and the entire management team appreciates the contributions made by Sanjeev and all of us wish him the very best for his future endeavors. While the company is in process of appointing a new professional Managing Director, upon request of the Board, Ms. Gauri Kirloskar, Nonexecutive Director of KOEL, has kindly agreed to supervise the day-to-day operations of the company in the interim under the guidance of Mr. Atul Kirloskar and the Board of Directors of the company. The Board has accordingly extended the term of Mr. Atul Kirloskar as Executive Chairman from 26th January till 31st March 2023 to aid in this transition. Today, we are here to talk on the third quarter and the cumulative 9-month results for the financial year 2022. While the press release and earnings call presentation, which have been released, has the performance details, Nonetheless, I would like to go through the key parameters on financial and business performance of KOEL and its subsidiaries. But before that, a customary disclaimer. We wish to start by qualifying that during our call, we may make some forward-looking statements. These statements are considering the business environment we see as of today. And therefore, there could be risks and uncertainties that could cause actual results to vary materially from what we are discussing on the call, and we would not always be able to update on these forward-looking statements. Now coming to the performance. As an overall picture, if you see, we have taken a hit on our profitability for this quarter. However, this needs to be viewed in the context of last year numbers, which had lower levels of costs due to variety of cost savings on the backdrop of COVID-19. To give you some examples, restricted movement of our people, significantly lower cost of communication and negligible sales and marketing spend, et cetera. The other development to catch upon was the overall inflationary environment. The quarter was marked by an increase in prices of raw materials has been witnessed across many industries. The company took necessary price hikes in this quarter as well to mitigate some of the impact of input cost pressures. The compounded impact of all these price increases still could not help us recoup the steep increasing input prices fully. We had informed you in our last financial's quarter 3 earnings calls that KOEL had embarked upon a cost optimization exercise and we were able to implement quite a few cost control measures. The impact of those we are flowing through into almost entire FY 2021. However, as we have scaled back to normal levels in FY '22, many of these costs have got post corrected in line with the normal scale of business operations. Understandably, therefore, the maintenance of low operating cost at the pandemic year level is very difficult and as reported earlier, not sustainable. Coming to the revenue side. Power Generation business delivered 25% growth year-on-year basis, and our exports saw a lead growth of 60% in quarter 3. Standard rains and floods in few pockets, especially in the north, south and eastern region of the country hindered electric and submersible pump business growth in quarter 3. The other details of the sales are captured in the presentation uploaded on the website. Now let's look at our results. On a stand-alone basin, the total revenue from operations for the third quarter stood close to INR 837 crore against INR 798 crore in quarter 3 of the previous financial year. As mentioned earlier, the general selling and administrative expenses in the current quarter were higher as comparable period in the last year was largely affected by COVID. And hence, the costs were not at normal levels. EBITDA for the quarter was nearly INR 51 crore as compared to INR 94 crore in the same period last financial year. The company delivered PAT of approximately INR 25 crore in quarter 3 versus nearly INR 61 crore during the same period in previous financial year. During the 9-month period ended 31st December 2021, revenue from operations grew by almost 30% to INR 2,310 crore, but EBITDA remained at a level of INR 166 crore due to lower gross profit, higher employee cost and other expenses compared to same period last year. The current year's other expenses also include a onetime expenditure incurred by the company towards the Kirloskar brand refresh program. Consequently, profit after tax for the 9-month period ended 31st December 2021 was approximately 9% lower at INR 88.5 crore. Most of the business divisions have demonstrated double-digit sales growth in the current year so far. As at the end of December 2021, overall net working capital was maintained at a healthy level of 13 days. Moving on to our subsidiaries. Following are some of the key highlights. At La-Gajjar Machineries Private Limited, which is LGM stand-alone, revenue from operations grew from INR 129 crore to INR 134 crore in quarter 3 on a Y-o-Y basis. Other than government supplies and OEMs, the other business segments such as retail and exports witnessed sales growth during quarter 3. For the 9-month period ended 31st December 2021, revenue from operations grew by nearly 13% to INR 410 crore. The steep increase in commodity input costs impacted the margins at LGM during the year. Our newly formed step-down subsidiary Optiqua Pipes and Electricals Private Limited started its commercial operations in May 2021 and for the period ended 31st December 2021 delivered revenue from operations of INR 25 crore. At Optiqua, we expect to exit the current financial year with a turnover of approximately INR 40 crore. As informed in the previous earnings call, Optiqua entered into a joint venture with ESVA Pumps India Private Limited by making an equity investment of INR 4.41 crore, thereby obtaining 49% stake in the company on 4th October 2021. ESVA Pumps delivered revenue from operations of approximately INR 25 crore during the period ended 31st December 2021. Kirloskar Americas Corporation, our U.S.-based subsidiary, saw an impact on its revenue in quarter 3 due to surge of COVID in the Americas region and supply chain and logistic issues. KAC delivered a revenue from operations of INR 21 crore in the 9-month period ended 31st December 2021 compared to approximately INR 20 crore revenue in the same period last financial year. The key highlights of the financial performance of Arka Fincap Limited can be seen in quarter 3 earnings call presentation uploaded on the website of the company. As far as consolidated performance of KOEL Group is concerned, here are the key points. Revenue from operations grew at 29% year-on-year at INR 2,840 crore for the period ended 31st December 2021. EBITDA stood at INR 269 crore against INR 240 crore for the 9-month period ended 31st December, registering a growth of 12% year-on-year. Profit after tax for the 9-month period ended 31st December '21, however, was at INR 103 crore, a 14% decline year-on-year. The Board of Directors has approved an interim dividend of INR 1.5 per share, which is 75% on the face value of equity share of INR 2 each. As far as outlook of KOEL stand-alone is concerned, we are focusing on exiting FY '22 with a top line growth of at least 18% to 20% year-on-year basis. As the commodity prices have been on the rise for past many months and impacted the margins, the company has taken a decision to further hike prices in quarter 4 of FY 2022 to offset the impact of input cost increase to some extent. However, it would be difficult to pass on the entire input cost increase on to the customers. And therefore, despite our best efforts, we anticipate some impact on EBITDA margin in FY '22 versus FY '21. It would, however, be difficult to quantify the exact impact on EBITDA margin at this point of time. As we are down with -- as we are done with the number updates, I would like to update you all on KOEL sustainability journey. As a group and also as a company, brand Kirloskar is very well known for our community partnerships and environmental-friendly operations. Our manufacturing plant at Kagal is already carbon neutral. At KOEL, we are focused on all the elements of ESG framework. From the coming quarters, we will update you more on sustainability journey and our company level efforts. Our goal is to be best in class in this area. To conclude, I would like to mention that overall, the internal and external factors today are challenging for KOEL, but we remain enthusiastic and optimistic about our market opportunity. The first of the last many quarters in multiple areas such as new product development, productivity gains, strengthening and deeper penetration of our brand, channel expansion, et cetera, coupled with favorable economic environment provide us a great opportunity to scale up the business and enhance the key business and financial performance indicators going forward. We are hopeful of a much stronger financial year 2023 as we get closer to exiting the current financial year. We believe we are well poised for the better future. We have the financial resources in terms of a strong balance sheet and a healthy cash position, a great set of products, powerful brand and an experienced team to capitalize on these opportunities. We continue to evaluate inorganic growth opportunities and as plans turn more concrete, it will be presented to the Board and also to the investor community. Now I would request Gauri to share her thoughts with all of us, and thanks from my side. Over to you.

Hi. Good evening and thank you for participating in this session. This is Gauri Kirloskar. This is my first session with you as a director to providing daily operations of Kirloskar Oil Engines, and I look forward to our interactions on a go-forward basis. First of all, I want to put on record that I'm here in the interim to supervise the day-to-day operations of the company. Our intent, as promoters, is that all of our companies must be professionally managed and that is one of my key priorities to identify under the guidance and consultation of the Board, a suitable professional who can be appointed as the Managing Director of KOEL. I shall continue to be engaged on a day-to-day basis till such a transition is completed. Separately, you may have read the disclosures made by KOEL yesterday. My Cousin Nihal and his family have expressed their desire to pursue their own independent interest and accordingly, Nihal has resigned from the Board of the KOEL Group of Companies and expressed his and his family's intent of eventually exiting as shareholders over a period of time. The Board of Directors have accepted and taken on record his resignation letter as well as the letter issued by them along with his mother and brother. As my uncle, Rahul Kirloskar, and my father, Atul Kirloskar, our Chairman, have mentioned in our press release, this is a very amicable development. We, as the first generation of the Kirloskar family, have always been encouraged to follow our passion and that is what he is doing. After his father passed way, he has and continues to look up to my father and uncle as his father figures and he treated as one of their own children. That relationship continues and we have a nice bond between our cousins as well. We are working out the modalities of the exit as shareholders from the companies according to law and applicable regulation. In the meantime, my role here is to serve as a custodian of the wealth of all of our stakeholders, and I assure you that I will do my best during this transition period and to get the right professionals in place. Thank you. We are now ready for questions.

[Operator Instructions] First question is from the line of Sandeep Tulsiyan from JM Financial.

My first question is pertaining to the letter sent out by Mr. Nihal Kulkarni last evening. So there is an intention to exit the entire shareholding that is held by him and his entire family, which constitutes a large part of Kirloskar Oil's overall shareholding as well as of the holding company, Kirloskar Industries. So would there be an intent by the promoters to buy out some percentage of this shareholding, number one? And is there a time line put towards the sale of those shares?

Okay. One, this is just we mentioned yesterday. So it is too early to comment on who will buy the shares. I'm sure we all know that as insiders, we have to comply with the regulations and would for a certain period not be in a position to sell the shares. As mentioned in their letter, we have indicated that they will be willing to share their -- sell their shares in one or more tranches over a period of time, the modalities of which are going to be worked out by them. Does that answer your question?

Got it. No, that's fairly answered, given the constraints what are -- there are on the disclosures. Second question is pertaining to the electric pumps and tiller business. It was mentioned that some of the ramp-up has been made in Optiqua Pipes and the newly acquired ESVA Pumps JV. So if we exclude these 2 entities, what has the base business grown by? And given the losses which we are doing currently, what should be the breakeven levels in these 2 businesses we should be looking at?

So if I understood your question, Sandeep, you are talking about LGM stand-alone number, such that pump business is concerned. Is that correct?

Yes. I'm not, yes -- so Mr. Agarwal, I'm talking about the segmental electric pumps that is reported as INR 173 crores in the quarter, which has grown 3% year-on-year. So out of the INR 173 crores, how much is new business, which is not there in the base that is Optiqua and ESVA? And for this INR 173 crores, at what level we should break even in this business? And what is the road to profitability going forward?

So Optiqua -- I will address your second question first. So Optiqua has a fairly low breakeven. So most likely by the end of this year, we would be breaking even about INR 5 crore to INR 6 crore -- INR 5 crore of sale per month is what is needed. And ESVA anyway is a JV where we are already making profit, so it's a profitable business. Now coming to your first question. So ESVA did a sale of about INR 24 crores -- just a moment. Yes, ESVA did about INR 24 crores, which is basically to KOEL and LGM, almost equal. And Optiqua has done a sale of about INR 20 crore -- Optiqua stand-alone is about again INR 24 crores. Out of this, roughly 50% is to external customers, about INR 12 crores of Optiqua is to internal. So INR 12 crore, INR 12 crore, INR 24 crore if you remove from LGM, the INR 12 crore of Optiqua and INR 12 crore of ESVA sales to KOEL and ESVA sales to LGM, so all put together about INR 36 crores will be -- INR 24 crores will be intra-group sales in pumps.

And what will be breakeven for pumps if I exclude, say, this INR 24 crores from this INR 174 crores broadly? That INR 150 crore, at what level should we start breaking even?

Assume was delivering profit, as you know, it was contributing about 6%, 7% EBITDA. But for the last couple of quarters, because of input cost increases and there was a lag in passing on the input cost increase to the market, which has led to the deterioration in margin. Actually that clicked into losses. However, a number of steps have already been taken and we are also taking price increases in LGM. As we speak in December, we have already taken a price increase of about 2.5% in LGM and we are about to take another price increase in the current month. So our endeavor is that we bring LGM into profitable territory in this quarter itself. But this is based on the commodity price situation as we see today. Going forward, depending upon how commodity prices behave, we will take additional measures. But to answer your specific question, we are taking all the steps to bring back LGM into profitable trajectory from this quarter itself.

Got it. And one last question, if I may, is pertaining to the new business plans. We've highlighted 3-4 major areas, one of them being the motors and the transformers on the electrical side. And second one is this pipes and cables. And third one is on the organic-based opportunity that we would own due to capitalize on. So if you can highlight what is the time lines when these business segments should start contributing materially to revenue? If you can independently in each of these business segments highlight what kind of investments will be required and any other changes in plans in whatever the segments that are mentioned?

So I'll answer your last point first. There is no change in the strategy of the company. It is as it is, as we -- what we have announced to the investing community in the earlier quarters. As far as wires, cables and pipe business, which is Optiqua right now, it is a very, very asset-light business. There are no major CapEx requirement over there, and we have significant runway available to scale it up to about INR 100 crore, INR 120 crore with absolutely negligible capital expenditure. So there, it is taken care of. Here pipes, we are talking about...

Column pipes.

We are looking at column pipes only. And motors, we have taken some tiny steps in LGM, but still a lot of work needs to be done, which Rahul will speak in more granular details. And in KOEL, our plans are afoot to launch KOEL branded motors very soon, maybe in quarter -- in this quarter or early next quarter. And what else?

OWC.

OWC, yes. So if you can answer, Rahul.

So on electric motors, we should soon expect the product launch maybe this quarter, as Pawan said, maybe early next quarter. All the preparations with respect to the team building and dealers, et cetera, is currently ongoing. So we expect it to be launched very soon. And it should contribute a decent amount in the next financial year going forward. On OWC, it is already into the market. And in the next year, we have again plan to contribute about INR 10 crores, INR 15 crores in that business. On the allied, Pawan already spoke, that is the cables, wires and pipes. So that's the current status.

And on the electric transformers for railways that we were planning to be?

So railways transformers, as we have earlier said, it's a tender-based business. Because of COVID, the tender flow from railways has been a little bit inconsistent. As soon as the tender flow normalizes, we will try and bid for those tenders. So this is tender based. So we can't really say how much we'll be able to do. If the flow normalizes, we should be able to get in. But we are ready in terms of our back-end preparation in participating that business.

Our next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

The question is on the exits of the top management. So there was a press release on the CEO exit, but there was a news echo back, along with him, the couple of other heads of the business, mainly Water Management and Aftersales have also resigned. Could you confirm this? Second, if you could also help us with the reason for such abrupt exits. Normally, we see that there is a 3 to 6 months [ gardening ] of CEOs. And this kind of abrupt exit is rarely seen in complete top management along with CEO going away kind of is very worrisome. So can you help us with the reason? What are your plans? How do you -- by what time frame do you see professional CEO as you highlighted? And kind of little disturbing to see a sudden management exits and then promoter exits. If you could just throw more light, it will be a little bit assuring.

So the exit was for personal reasons as the resignation letters that have been filed with the stock exchanges mentioned. And as I mentioned before, we are currently already looking for a professional MD as, say, the time line is about 6 months.

So could you confirm about the Head of Water Management and the Head of Aftersales also resigning along with the CEO?

Hi Bhavin, this is Arvind. When you are mentioning to the Head of Service, I think this particular stuff was already in pipeline for more than a year because of his personal aspiration. And it was a proper informed and, in fact, the Head of Service is already onboarded and it's a homegrown talent wherein this guy personally was involved in terms of creating a backup and he gave us a due course of time because he wanted to enter into his personal venture. And if you know, he has not joined anywhere. He actually has an aspiration for a very long to pursue his own business. And the business was also like -- what he wanted to do was, he wanted to just share his knowledge base with the young generation what he has gained over the time in professional career. So it was a well planned and well supported and the mutual respect of both sides, like the employee side as well as the organization side. And Head of CS Is already on board, which is a homegrown talent.

And the Water Management Head?

The Water Management Head business was sudden and we will be looking for his replacement.

So like -- so how do you plan to study the shape with complete -- if you could just give a bit more how are you planning because it's a very disturbing thing where the entire CEO and the top management exit at the same point in time?

Sorry. So we have a strong second-in-line in all of our businesses, in all of our business units, even where we have strong leaders. So there's the second-in-line now today is reporting up into the business unit head and into we -- so that's how we're managing it.

Our next question is from Kiran Sebastian from Franklin Templeton.

A couple -- two questions from me. Environment, especially for the power gen business. If you can touch upon the trends and...

Kiran, we lost you.

Hello? Can you hear me?

Yes.

You are not clear. Can you speak up, please?

Yes. It will be helpful if you could touch upon the demand environment, especially for the power gen and residential real estate end markets? And my second question is, is there a hard stop for the equity investment into Arka? Are you going to stop funding after INR 1,000 crores? Or is it open at this point?

So, Kiran, very good evening, and thanks for joining the call. This is Arvind. I would just answer your first question, and then I will request my colleague, Pawan, to address your second question. But before I try and address your question, I would just like to take this opportunity to give an overview -- overall overview of the situation. This probably would address most of the questions as well as your questions also. So if I have to just look at the quarter 3 DG market, the DG market expected to report almost 14% growth year-on-year, which is a very positive sign. Though sequentially, the quarter 3 has a degrowth of almost 200 basis points, which we can discount primarily on account of because Q2 had a pent-up demand coming in from Q1. So hence the Q2 base was slightly strong, but if we look in isolation, quarter 3 has shown a very positive sign. And when we look at the further outlook, in all possibility FY '22 overall market is expected to reach the pre-COVID level, which is like FY '19, FY '20 kind of stuff. And most of this growth is being fueled from the health care sector and are well supported by the recovery of infra segment. While we were continuing to dominating position as far as the health care is concerned and just to share one perspective that quarter 3 was a time when we could install 1,000-plus mark in terms of the pure health care infrastructure, like O2-specific oxygen plant across the country and this order board is growing very healthy. And it is well spread across the country. It is not limited to a specific geography and all. And we could manage our Q3 numbers while there was a 2% sequential degrowth vis-à-vis the quarter 2, which I mentioned. And this was majority coming from the medium and high horsepower segment, which is 40 kVA to up till like 625 kVA. Though in the quarter 3 itself, commodity continues to stay towards the upward, we may talk about the [ Tegar ] and aluminum, copper or even the related commodity, there was an increase. And if you all remember in the quarter 2, July, we increased the price and we were all hopeful that it would benefit into the quarter 3. But unfortunately, it looks to be a catching-up game for the commodity because the RM-led inflation of the quarter itself was not enough to cover the quarter 3. And as Pawan already mentioned that during the quarter 3-mid itself, we again took the leadership position to come forward and we went ahead with another price increase. Though this was a very risky call looking at the bouncy market because market was showing forward-looking growth, but then still, you always reach to a point when you stop thinking of the volume. And we were very confident that the -- others would also support and follow and we can come back to normal and which happened. I mean immediately after price increase in the mid of quarter, it was followed by others also and market has now normalized those prices. So that's the overall. Now your specific question was towards at which sector has fueled the growth? I think I covered it in my answer, though I'll just repeat it. It was well supported by the health care infrastructure. And if you all remember, in the early quarter 3, the anticipation of the pandemic put all the hospital oxygen plant on the fast track and we could capitalize on that opportunity to a large extent. Now I'll just request Pawan to answer your second question, Arka.

Yes, Kiran. This is Pawan Agarwal. As we have mentioned in earlier calls also that the Board of KOEL has confirmed an investment of a maximum of INR 1,000 crore as of now, and this is a calibrated approach that we have adopted. And we are -- the Board of KOEL is closely monitoring the performance of Arka. And depending upon the performance, growth, profitability and various other factors, the amount has been put in. So as of now, it is restricted to INR 1,000 crores.

[Operator Instructions] We have our next question from Amit Shah from Antique.

Yes, sir, one question from my side with regards to the incremental price hikes that we are planning to take, given that the gross margin compression still happening on the quarterly basis. So what sort of price hikes we are planning to take in the further quarters? And secondly, even on the Agri business portfolio, if you can just highlight how the business is shaping up over there? So these are my 2 questions.

So on the Agri side, we have taken in KOEL -- I'll first talk about KOEL. So in KOEL, on electric pump side, from April till now, we have taken 4 price increases about close to 18% to 20% in total in this period. As far as their diesel engine part is concerned, there also we have taken 3 price increases from July '22 to February '22, which is close to about 10% in diesel engine. Additionally, in diesel engine, we also sell spares and alternative. There also, we have taken price increase 2x, 3x during the year. On LGM side, just to let you know, in the last 12 months, which is from November, December last year to now, there has been continuous increases in the input cost. And we have taken close to 13% to 14% in total price increase in LGM business, which is basically electric pump and roughly 4 -- 5x we have taken actually increase and 1 price increase we have taken from the beginning of this month. And we are closely monitoring the input prices. And in case they go in the same direction, then we would not hesitate to take further price increases in order to bring back the profitability. So this was on the price rise issue on Water Management. Arvind has already talked about the price rise matter in the case of PPS business. In Farm Mechanization, where we deal with tillers and weeders, there also, we have taken -- if I see last January, January 2021 to now, January 2022, there have been 4x we have taken price increase. But of course, power tiller, as you know, is -- the cost increases are capped because there is -- it's a subsidiary-led business. So we have taken price increases in case of retail market in tiller as well as in weeder. In our customer support business, they're also in spares and tractor part oil, there have been 2x, 3x we have taken price increases in the -- over the last 9 months, 10 months. In Industrial business also, we have taken price increases with our OEM customers, most of the OEM customers, in fact all of the OEM customer in the last 9 months, 10 months. So there has been price increase decisions across businesses. However, there are time lags in some cases and also the gap between the input cost increase versus the price increase, which has been passed on to the market, there has been some data which has impacted the margins. But we are -- we take cognizance of the profitability of the company very seriously. And whatever actions are required to be taken, will be taken very quickly and it will be moving in line with the input cost increases going forward.

Yes, sir. Sir, on the demand side, if you can highlight with this kind of price increases, have we seen demand tapering off or demand continues to remain intact despite the price increases? So how the demand is panning out, both in the power gen and the farm mechanization side of the business? So post this price increase, do we see any demand tapering off?

Yes. So I'll answer the Water Management side and then probably Arvind can answer the PPS side. On the Water Management side, we are definitely seeing some slowdown in the industry. It is not -- it has got nothing to do with the price increases that we are taking. And hence, there is an impact on our sales. That is not the case. But generally, Agri sector as such is seeing some slowdown and the others are also seeing this slowdown. Other players in the segment also seeing this impact. Also as I mentioned in my opening remarks, during this year, extended rains and floods in certain parts of the country has also impacted the demand situation. But as of now, February, March onwards, the season starts. So we are all geared up for that. And the green shoots are visible. So we are hoping that February end and March onwards, there will be a strong recovery in demand.

And if I could just add for the PPS business. In the domestic market, price increase as we did towards the mid of the last quarter, which has already settled. And good news is that most of the order board is with the new price. There is no impact in terms of the demand coming down, but only thing is there sometimes shift between you taking the lead and somebody just following you. So there is some bit of business shift. But otherwise, there is no impact as far as the demand is concerned. And as I mentioned in my summary also that overall market looks to be very positive. And in all probability, FY '22 would reach to the pre-COVID level. Though in Industrial, demand is led by other factors, not the price because our price increase is not like in absolute equal percentage to the FG because there's a lot which goes into the final goods of those OEMs.

Next question is from Ashwani Sharma from Anand Rathi.

Sir, my first question is on the market share. If you can please help me with the market share on the LHP, MHP and HHP? And how it has changed in the last -- over the last 1 quarter?

So during my commentary also, I said that at Q3, though there was a sequential degrowth from the quarter 2, but we at KOEL, we maintained our number. And it was primarily supported by the medium and high horsepower in the range of 40 kVA to 625 kVA. And if I have to speak about the specific segment because this is the segment, this is the node, which especially address to the health care and the infra. And that's where the maximum growth was coming and we were the one who were leading this growth. If I have to speak about the overall market, the final numbers are yet to be out. But from the flask, it looks like that market has grown over the last year and we have been participating as a leader in that growth. But the further details like who lost it, who gain it, we'll have to probably wait for some more time by the time the final digits comes in.

Okay. And also on the Farm Mechanization side, I mean the tillers and the weeders, how is our market share out there?

Can you repeat your question, please?

A similar question on the Farm Mechanization side. I mean tillers and the weeders, how is our market share over there, sir?

Look, so in tillers, the overall industry size is also very limited, some 50,000, 55,000 tillers is the market size. And as we all know, VST is the market leader. We are between #2 and #3, so about 14% to 16%. Weeder is a smaller market, but a better margin space and we have a complete range of products available to cater to the demands in this segment. And our weeder offerings are showing very good traction in the market. And it's a small segment, but it is -- we have just made tiny steps in this direction and we are expected to consolidate our position in this particular segment.

Yes. My second question is on the large engines. I think this segment, obviously, is a small segment, but then I've been noticing that over the last 4, 5 quarters, there has been degrowth. So if you can tell us that what is really happening there? And what is the outlook that we see?

Okay. So in large engine business, as you are aware, we deal with a lot of government customers, PSUs and Government of India. And also, there is other segment where we -- basically marine and defense, this is where we deal with. And then we have spares and service business also. Over the last probably 4 to 6 quarters, as you rightly noticed, there has been some slowdown in terms of decision making or allowing us to execute the order. And while we have a very healthy order book, about upwards of INR 150 crore as we speak, but the execution of these projects are not happening because of the delays from the government side, some of our customers. Now it is opening up. Quarter 4 is looking much more brighter, and we are quite hopeful this order book of INR 150 crore, a large part of that order book will get executed in the next financial year. And as we all know, it's a decent margin business. So that gives extra support to the overall profitability of the company.

Our next question is from Sandeep Tulsiyan from JM Financial.

Yes. Just one follow-up I had on the Industrial segment. When we look at the Industrial segment sales, on a year-on-year basis, they have declined despite all the price hikes that you spoke about that has been rolled out. So if you can break it up between the construction equipment and the tractors, how each of these parts have done? And what is the outlook going forward?

Yes. Sure, Sandeep. In fact, good you brought up this question because I missed it in my brief. If you would have noticed the industry from an FG perspective, the Earth Moving and the Tractor industry has shown a slowdown in the quarter 3, where in the construction side of the equipment stayed positive. And we being very strong in the construction equipment side, hence, our impact was minimized to the range of 5%. But if you look at the overall Construction Equipment or Off-highway industry, probably there the impact is much higher. So we would say that from our perspective, it was very, very positive. But just to answer your question and add to your question, whatever degrowth we have seen is primarily from the Tractor and the Earth Moving side.

Can you share some numbers, please?

So you're looking for a specific sale number in the segment wise?

Yes, sir. I have to break up this INR 173-odd crores sales in Construction and Tractors, how much would that split be? And what is the growth rate in each of these sub-segments?

Okay. In Tractor, we degrew by 39% year-on-year and quarter-on-quarter also more or less similar degrowth, okay? Now on other than Tractor, which is Construction Equipment, Off-highway, et cetera, there, we saw a growth of 7% for quarter 3 year-on-year and quarter 3 quarter-on-quarter, sequentially, we grew by 27%.

Got it.

And the other factors which was impacting it was we all know the semiconductor issue and this all is fueled by the BS IV, the non-Tractor. That was also one of the factors in terms of the availability.

This is for your Off-highway equipment. Is it?

Off-highway equipment.

Ladies and gentlemen, that would be our last question for today. On behalf of Antique Stockbroking, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.

Thank you.

Thank you. Thank you, everyone.

Thanks.