Kirloskar Pneumatic Company Limited ($505283)

Ladies and gentlemen, good day, and welcome to the Kirloskar Pneumatic Company Limited Q4 FY '26 Earnings Conference Call, hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhirendra Tiwari of Antique Stock Broking Limited. Thank you, and over to you, sir.

Good evening. On behalf of Antique Stock Broking, I welcome you all to 4Q FY '26 conference call. I'm pleased to have with us today, Mr. Aman Kirloskar, Managing Director and [indiscernible] CFO, along with the management team. As you are aware, the company continues to deliver long-term growth, congratulations to Mr. Aman and team Kirloskar Pneumatic, all the best for the future. Now I invite Mr. Aman Kirloskar, to discuss there post which we can take the Q&A. Over to you, Aman.

Thank you, Dhirendra. Thank you all for joining the call today. I have with me Mr. Ramesh Birajdar, the Chief Financial Officer of the company; and Mr. Jitendra Shah, the company separately. Before proceeding with the business updates, I kindly asked Mr. Jitendra Shah, our Company Secretary to read out the disclaimer statement.

Thank you, sir, and good evening to all. The presentation uploaded on the website of the company and discussion on the financial results during the earnings call may contain statements relating to future business development. and economic performance that could constitute forward-looking statements. While these forward-looking statements represent the company's judgments and future expectations, a number of factors, [indiscernible] actual development and results to differ materially from expectations. The company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. Further, investors are expected to exercise their own judgment in assessing various rates associated with the company and also the effectiveness of the majors, we [indiscernible] company in tackling them as indicated during the discussion. Thank you.

Thanks, Jitendra. Let me start by wishing all of you a very happy and prosperous new financial year. FY '27 has begun, and it is a good movement to reflect on where we have come from and set the contracts to where we are going. I would like to highlight a few key points of FY '26. During the year, we had the highest order booking of more than INR 2,000 crores. We declared the highest total income of [ INR 1,783 crores ] and the highest PBT of INR 356 crores. We developed a couple of new products, including the Zephyros air conditioning package, providing a competitive edge in a new business segment. We also declared the highest dividend of INR 12 per share, which is 600% on face value of INR 2. during the last financial year, we made meaningful progress on our long-term goals by external uncertainties. The domestic market remains strong with significant performance in the food, dairy, chemicals, fertilizers and general engineering sectors. While oil and gas lag due to slower order finalization, we saw momentum begin to pick up in the last quarter. Additionally, products such as the [indiscernible] centrifical compressor and the Khione refrigeration compressor continued to gain market share. Coming to innovation. We have made significant progress on development of several cutting-edge compression solutions represented by our highest ever IP filings of 57 for the year, taking us to over 128 IPs filed. In regulation of this, KPCL has been awarded a top 30 IP-driven organization by CII. We launched our oil-free impressed and we are quite happy to note that we have even booked a few orders for these. For the year, we also launched our Tyche semi-hematic compressors, which we have also sold. Our Zephyros air conditioning package will be commercialized in the market in the first quarter of FY '27 as we are still doing some fine-tuning to compact the design and reduce the costs. However, the units that we have installed in our [indiscernible] office at Saswad factory are running very well. Our enablers remain robust and well aligned with our values and culture. In recognition of our best-in-class HR practices and policies, we were honored with the HR Excellence Award from the Institute of Directors. Our PBT last quarter was also significantly elevated this was made impossible by all the enablers we've been working hard on for the last few years, our in-house capabilities, which allowed us to offset inflation to some extent, and result in higher margins. We also took a measured approach in markets with lower margins like boosters and screw compressors and did not get into any price war here. If you could get an order with the margins we wanted, we took it and if not, we let it go. Lastly, we focused on less contested spaces based on our own IP and import substitution, which also helped push up margins. While this quarter and year has been good on the margin front, we would like to caution that this year would be a bit of an exception, a margin expectation of 18% to 20% EBITDA would be more sustainable. While we always strive for higher margins, we must also consider the impact on growth and find a balance. Now coming to our business units. The air compressor division, the year was good for the [indiscernible] centrifugal compressors, which continue to take market share. Aside from our key sectors of metals and power plants, we have also managed to get some orders to sectors like pharma, tire manufacturing and textiles in the last financial year. Our range of reciprocating compressors also well with orders for gas and vessels hitting that Zephyros [indiscernible]. Screw compressors were a laggard than last year. ACD remains to be roughly 18% to 20% of our business. On the Refrigeration side, the business delivered a strong performance during the year, achieving record high volumes for our KC/KCS compressor range. Khione sales also continue to pick up and gain more acceptance in the market. We executed several large packages this year, some of which went down in Q4. The business is roughly 40% to 45% of our total business. Coming to process [indiscernible] systems. As we have previously mentioned, our decreased dependence on PTS has derisked our reliance on large oil and gas orders in the Middle East. However, our O&M business is expanding. We currently manage over 1,000 CNG stations across are reflecting an increasing trend in this segment. While current gas shortages have not yet impacted the CNG market and order booking remains active, we continue to monitor potential future effects. The Gas Systems division performed well this year and the outlook remains positive. We expect the geopolitical situation in the Middle East to drive demand for domestic exploration and upstream gas projects. Furthermore, there's a renewed interest in alternative fuels and KPCL is well positioned to capitalize on opportunities across various sectors, including biogas, hydrogen and coal gasification contributes roughly 35% to 40% of our business. We have also established a new business unit in the last financial year, which is Precision Engineering division. We have established this division to leverage our manufacturing capacities and capabilities, including forgings, castings and precision machine components at our Nasdaq and Hutupsell facilities. Please note that this is a nonreportable segment for FY '26. Given the renewed interest in specialized manufactured products, we believe our unique capabilities are well positioned to drive growth, while we have secured several orders in this segment, and we are currently in the execution phase, you would avoid talking too much about this business until we are clear that this is sustainable and not onetime in nature. Coming to the outlook. Despite the challenges of the past year, including delayed package orders and late vitalization of large contracts, we believe we remain well positioned to deliver strong growth ahead. The current geopolitical climate has increased demand for exploration and upstream packages alongside rising interest in alternative fuels like bias and hydrogen. We offer established solutions for all of these segments. Furthermore, our core revenue-generating sectors, including oil and gas, food bearing, chemicals and power are all expected to grow. Our localized supply chain and focus on making India import substitutes insulate us from many geopolitical risks and provide a competitive advantage. We continue to invest in unique in-house manufacturing capabilities that will further strengthen our market position. With our strong order board and the substantial volume of active proposals entered the new financial year, we are confident in achieving our growth objective of 20% plus. Now I will request Mr. Ramesh Birajdar, CFO, to take you through the financials.

Good evening. The presentation outlining key trends observed in Q4 and FY '26 results has been applied to the Investors section of our company's website. Additionally, following today's Board meeting, the financial results have been being filed with the BSC and NSC. These disclosures provide compress details on the company's performance. Quickly, I will run through the business results for Q4 and the year ended on 31st March 2026. Sales for the Q4 FY '26 was INR 706 crores against [ INR 53 crore ] of Q4 FY '25. Sales for Q4 also showed a growth by 21% over the previous year Q4 FY '25. Other income for Q4 is almost same for both INR 36 crores in FY '26; against INR 25.7 crores in FY '25. Total income for Q4 FY '26 was at INR 712 crores compared to INR 588 crores in the previous year. There is major reduction in the percentage of raw material to sales for Q4 FY '26 compared to Q4 FY '25. 50.6% Q4 FY '26 against 56.35% in Q4 FY '25. However, the YTD percentage of raw material [indiscernible] has improved by 3.1% in FY '26 due to better product mix, better selection of orders, execution of large [indiscernible] and overall cost saving efforts on account of backward integration of manufacturing in massive [indiscernible] plant. Stock cost that is RE stands at INR 53.1 crores in Q4 FY '26. That is 7.5% of total income against INR 45.5 crores in Q4 FY '25 at [ 7.7% ] of total income. Employee-related expenses for the year to date is INR 200 crores, representing 11.2% of total income as against INR 177 crores, that is 10.7% in FY '25. This rise is driven by solid increment and increased headcount. The company has incurred over INR 165 crores in the last 2 years, leading to increase in the depreciation to INR 31.1 crores in FY '26 as against INR 28.9 crores in FY '25. We continue to invest in CapEx to support growth and to meet our commitment towards new product development under the BLS. YTD other expenses are a mix of fixed and variable costs and are at INR 326 crores in FY '26, against this INR 308 crore in Sye. Increase in these expenses are mainly surge in execution of large packages announced level of the sales business, growing on business and expanding activities on our Nashik and Saswad plant. Year-to-date performance for the cult year shows an improvement in the EBITDA margin reaching 21.7% of total income, [ INR 2,388 crores ] compared to 19% of total income to INR 313 crores in the previous year. The YTD profit before tax has reached INR 356 crores constituting 19.6% of total income against 17% to INR 284 crores in the FY '25. Net profit after tax for FY '26 is INR 258 crores. That is [indiscernible] of total income in comparison to previous year [ INR 281 crores ], that is 12.8% of total income. Company has maintained the status as a debt-free company and I would like to state that the company has still net cash position of cash and cash equivalents of about INR 460 crores as of 1st April 2026. The Board and Director has approved subdivisional equity shares of face value of INR 2, in to nface value of INR 1, subject to [indiscernible]. The company issued 60,800 equity shares during the year FY '26. Previous year, 124,300 shares issued under the employee stock option program. As a result, there is marginal increase in the paid of share capital to INR 12.91 crores as this last year around INR 12.98 crores. YTD earnings per share that is EPS, for FY '26 as shown growth by 22%, reaching to INR 0.3980 per share by INR 32.50 per share was earning in FY '24. In line with our dividend policy, the Board of Directors has approved a final dividend at rate of [ INR 4.25 ] and the face value of INR 2 per share, against INR 8.50 per share. This is in advance to payment of interim dividend, which has already paid at rate of 175%, that is INR 3.50. So the total dividend for FY '26 is 600%, which is highest in the history of the company, final dividend is subject to approval by our shareholders. With about 93.4% of total income coming from the Compression segment, it remains only reported by segment and segment earned operating profit of 24.9% in FY '26, higher than the previous year when it was 21.7%. The Compression segment showed a higher profitability. This is being a one timer for Q4. However, as indicated from time to time, our Compression business margins are sustainable in the range of 18% to 20%. As of 1st April 2026, the company's unexecuted or the board amounting to INR 1,863 crores an increase by 15% from INR 1,624 crores recorded on April 1st, '25. Net unallocable assets are including carbide assets and assets of precision combo business division to the tune of INR 834 crores. Exceptional terms regarding the implementation of the new [indiscernible] that effective on November 2025, we have supplied our [indiscernible] assessment. The estimated return on version has been reduced by INR 4.2 crores in Q4, resulting in total provision of INR 14 crores for FY '26, which is pertinent to the part while the impact of FY '26 is recorded in yearly cost. Comparing the statements of consolidated business for Q4 as well as for the full year are also published. We are working on reorganizing, restructuring of our subsidiary to get the results expected projected was accorded in the company. This will take some time to get positive results from our subsidiary company. Before I conclude, I would like to place on record my sincere appreciation for our teams across operational finance, supply chain and sales and marketing, our relentless focus and disciplined execution continues to drive our performance. I would also like to extend my appreciation to our Chairman, Mr. Rahul Kirloskar, the Board members and our investors for their continued trust and support as we work towards building a stronger, more resilient and future recognition. I would also like to acknowledge Mr. [indiscernible], Former Managing Director for his constant encouragement and for shaping the company's mindset, the infra challenges and pursue ambitious growth. Thank you so much for joining us today. And we'll now open the floor for questions from our investor.

[Operator Instructions] The first question is from the line of Priyank Chheda, from Vallum Capital.

I have just 2 questions. First, on the order book. Would you want to call out the book-to-bill or say, execution cycle, so it has [indiscernible] versus past few years, just trying to match and map what would be the executable order from the opening order book that we have from 1st April? And, just a clarification in this order book, had we included the precision engineering orders, if we then would it be able to quantify that?

Okay. And second question?

We can -- I'll ask that question after this question is answered.

This INR 1,863 crores order book as on 1st April is inclusive decision component business. And out of this, roughly INR 500 crores is executive beyond FY '27 and [indiscernible] executable in this year and continuously focusing on the Equipment business, where it is a touch-and-go, where roughly the INR 600 crores to INR 700 crores business, we get it during the year, we exited and we'll discuss for the sales.

Okay. So this means that out of INR 1,860 crores executable order book, INR 500 crores order book is beyond 1 year and [indiscernible] INR 1,300 crores is minimum executable, you can say, less than 1 year.

Yes. This is not a similar trend what we have in last so many years.

Understood. My second question on the products and higher hope products that we had to -- as a strategy to scale up the revenues. First is Zephyros, what would be our the [indiscernible] strategy because I understand that FY '27 would be CapEx year. And FY '28 is where the full-fledged sales start. So if you can just touch upon the sales strategy that we plan to deploy to scale up this and what are our ambitions in terms of scaling up the sales? And second would be on the [indiscernible] if you can just call out FY '26, how much is the sales unit that we have achieved, what are the sales targets for FY '27. And maybe Aman can touch upon just any other products that we should hope to achieve a large sales number and become -- and have a larger sales contributions coming from any other new innovations that we are planning to launch.

Yes. Thank you. So I'll start with the Zephyros. So just to reiterate, Zephyros is a fairly innovative air conditioning package which uses a green refrigerant and is significantly more efficient than, let's say, traditional [indiscernible] systems. Our go-to-market strategy here would really be engaging with all the stakeholders, whether that is consultants, architects, installers and probably before that, in this financial year, we do have a target for how much we wish to sell. And this would be done largely by interfacing with builders and finding the right target markets for this. So probably the ideal markets as of now, with our current range would be smaller machine shops and small restaurants, banquet halls, et cetera. there is quite a large potential for retros and we will slowly build out a channel as we get more volumes. On the [indiscernible], we have about 130 machines in the field -- sorry, 130 machines in the field, of which 85 have been commissioned. I hope that answers your question.

And any other products which you think should be focused going ahead as a large part of sales fee?

If you remember, Priyank, in last many meetings, the indication is we are switching towards the equipment business, where the execution cycle is very short of period. And our target is to [indiscernible] something 20% to 25% business coming out of this Equipment business, where the execution cycle is very short. The same trend will continue because take [indiscernible], then again, the Zephyros-- all this is part of Equipment business and Equipment business, we just touched on. We just gave the order exhibit and with dispatch. That focus are increasing and that increasing focus will be sustainable over the period of next 3 years.

The next question is from the line of Balasubramanian from Arian Capital.

The first [indiscernible] mentioned ideal made smaller machine shops and strand. So I'm trying to understand in this business like how the -- I think our current PPA around INR 357 crores, we have committed CapEx of INR 320 crores. And I'm trying to understand whether these other small, small orders we can get times across. How do you look at ROCE and payback period of this INR 320 crore investment? And there, we can expect substantial contribution from FY '27 or 28 onwards?

Okay. The INR 320 crore is a commitment for the PLS schemes, what we did. And we developed the product. One is [indiscernible], that is air-conditioning package. And the second is the motor, again, it is developed. The Zephyros, 2 packages we already installed, 1 area of Saswad and one office in [indiscernible]. Both are absolutely value verified. There is no issue in the air conditioning package. And this Zephyros system is giving another opening for our new business segment. So far, we are into the deposition business with the [indiscernible] and all other products. And now we are entering into the air conditioning and that is the comfort. And that business will grow, and that is why we're focusing on that. And for the Zephyros, the backward integration were being in the form of motor in this form of 3 tenders and in the form of sheet metal components. Some of the things we planned in the Saswad plant and some of the activity are in the Nashik plant. And out of the INR 320 crores, roughly INR 60 crores, we already incurred for this and remaining we are targeting to incur in another 2 years' time. The commercial of this Zephyros will happen in Q1. We have a separate team for this working along with appoint of the dealers of point [indiscernible] and be expressing the already already both and the team is working to exhibit the Zephyros now.

Sir, on the payback period on the ROCE side, whether we can expect 25% to 30% kind of margins since it's like small orders?

Yes, sorry. In this segment, considering that it is a highly competitive segment, we probably will not be targeting those kind of margins. However, we will try and target very high volumes. These are volumes which KPCL generally has not [indiscernible]. So, on the margin side, it may not be as high, but on the volume side, it should make up for it.

Okay, sir. So second Spain, I think earlier we have mentioned incremental capacity for [indiscernible] will be available from Q1, whether all the machines we have installed for this net -- and secondly, was the current order pipeline for the new ended smallest [indiscernible] frame.

So in terms of the installed [indiscernible], this has been done, that it is now available. The machine has been commissioned as well. Coming to the 800 frame, I think we still need maybe 1 month or so to really get the product launched. But I think there is quite a bit of demand for a smaller center fuel. This is -- this will be the most efficient offering for an 800 CFM compressor.

Sir, my last question on the export sales, INR 140 crores, out of this, how much percentage is coming from MENA regions because it's majorly a significant part from MENA regions for CMC packages on [indiscernible] how much cost base comes from [indiscernible]. And sir, another secondly, I just want to confirm that nontraditional orders are leveraging particularly integration, like 4G, and some -- whether just on the conformer it will be reportable segment from Q1 onwards, Q1 FY '27 onwards?

For that, we have to wait up to Q1, we'll definitely disclose as a will. But definitely, there is a good progress on that part. And definitely, it will come under the reportable segment from Q1 onwards. Regarding to export, we are not fully dependent on the MENA region. We are focused on the Southeast Asia. We focused on the African region. And in a region, we a little bit less because -- we -- right now, the situation is different. So [indiscernible] focus on different and no niche area for the export.

Yes. So the MENA region was definitely a fairly large part of our export sales. However, considering the current geopolitical environment, we have shifted our focus to different regions like Southeast Asia and the North Africa part of MENA. We are still in active discussions for several orders in the Middle East. However, considering the current situation, these are going quite slowly. And I suspect that once the geopolitical situation in the Middle East cools off, we will start to see some rapid movement in this segment.

The next question is from the line of Sameer Thakur from Ambit Capital.

Just to carry on with the previous question. So this Middle East exposure, can you just get into details of what kind of products you have or whether do you have approvals from, let's say, Aramco or Qatar Energy or any certifications, which kind of at the end of the word that can help you to start rebuilding the capacities or would that help you?

Yes. So let me put it like this. So with regards to the geopolitical situation in the Middle East, there is a near-term pressure, as I mentioned previously, it is difficult to dispatch packages for orders we already have over there. And it is also difficult to book new orders. However, long term, this will all go well for us on 2 fronts. One is on the international side, as you rightly pointed out, there will be a demand for, let's say, gas packages going into some of these countries. And there is also a renewed interest in the domestic market in, let's say, alternative fuels like biogas, gold gasification, hydrogen, et cetera. on top of a real push, which is quite visible today in the upstream segment of the domestic market. I hope that answers your question.

Yes. That was helpful. And there's one more, just going to the backlog mix. Is it possible to get a separate mix or by division, I think there is a lot of backlog from the other division from precision components. So I was just trying to make sense of what is the margin in this precision components? Is that margin [indiscernible] business?

Sorry, I was not able to hear, you're asking for the margin of systems and components?

No, there's a backlog mix by separate divisions, if that is possible to give.

So generally...

My sense is the backlog is driven by maybe the other segment, which is precision components. And I just wanted to take a sense whether this [indiscernible] Engineering division, Component division, that it is lower margin than your core business?

So we generally don't give a breakup of segments However, as we had pointed out, last year, we did have to go to nontraditional segments to get orders. In terms of margins, I would say from a company standpoint, we will be around directionally 18% to 20% as we have guided in the past.

Next question is from the line of Amit Anwani from PL Capital.

So first question about the 3 comparison to out in your opening remarks. I just want just to understand, is it a completely new product? And did we get some date from this? And what is the opportunity? If you could highlight more about the oil-free compressor which you highlighted?

Yes. So the compressor, which we are referring to is [indiscernible]. It is a water-injected screw compressor naturally used in applications in food processing and pharmaceuticals. In terms of -- is there, let's say, a similar category in the market? Yes, there is. We do have some competition -- we have similar products. However, we have several unique USPs in this product. So one is that we have no oil in this machine at all. Our competitors may have oil in their bearings, et cetera. And we are also domestically produced, which means that not only are we generally more cost competitive, but we are also able to offer service and spares to customers much faster than imported machines.

So is this the completely new product launch this is there? And now we ...

This is a new product for KPC.

Understood. And wanted to end, so we have been talking about [indiscernible], Tyche and now Zephyros and I think 2 other products like Q&A or past 24 months, just wanted to understand now since these products have been kind of there in the market what kind of sustainable growth you are targeting from these products, obviously, category-wise within air refrigeration and all the new launches, which are there in the market, if we can say 2 years of perspective what is us standing currently in terms of market share of revenue for each of these products? And what kind of growth we can look forward in these products.

Yes. So in our segment, in terms of capital growth, especially compressors, these are really products which are designed to run, and they have to prove themselves before they gain broader market acceptance. So it's usually the case we're getting the first few orders is hard and then it gets progressively easier from there. All these products, you mentioned with the exception of Zephyros are now in the market. And we will start to see -- we are already growing [indiscernible] quite aggressively, Khione as well, we are seeing good growth. Tyche we did launch last year. So we did grow, but it was from 0. And -- so I think generally from new products, we target that we should have at least 10% to 15% of sales. And as a company, we want to grow at 20%, these products, depending on how old or how recently they were launched would grow at a slightly higher pace.

Right. On the Precision Engineering division, what exactly we are looking as a strategy? So I think you extend about INR 500 crore order there. And probably it's a short-cycle order. So can we expect F '27 also getting order inflows at higher INR 500 crores upward again for the Precision Engineering? Or this is just a one-off case this year?

Yes. So the reason which we are -- the reason why we have been quite opaque on this is because we don't really know whether it is sustainable. So I think that we will have to really go forward and see. But certainly, in terms of Precision Engineering, we have many unique capabilities with us -- whether it's in forging, sustains, machining, et cetera. So there will be a stable demand, but I cannot really foresee whether it will be to the same extent.

Right. Finally, in terms of the current geopolitical situation, which is [indiscernible], any way you feel that this would be a key risk in terms of business, whether it is increase in cost or the conversions with their key industries? Any sort of challenges because we saw f '26, we had different kind of challenges in terms of delays and packages. So anything which any of them, you might feel in that could impact the business because of the geopolitics getting stretched for more than 2 months now?

The order board last year being it was INR 1,624 crores. And now for the beginning of this year, it is INR 1,863 crores. So despite all this situation, uncertainties on are all uncertainties still we are higher order book compared to the last year. Regarding the price increase, we always focused on that. And whether it is a short period of the execution, we pass on to our customer, and we don't take into our account. And as far as the large [indiscernible] concerned, we already negotiated, we already finalized the order with our vendors. So there is no directly impacting our profitability.

Right. So this year, are we also focusing back again on the large packages to -- as a part of inflow? Or now we'll be keeping this lesser package orders and more equipment order as a norm for F '27, '28?

Yes. So as a strategy, we always want more products versus packages simply because it makes the business less lumpy and more predictable. That being said, the demand environment for packages does seem to be higher on the back of, let's say, lower orders getting finalized last year. So even though directionally, we do want to have more products versus packages this year, as of now, we do have quite a few inquiries out there for packages.

The next question is from the line of Pavia Doshi from Chris.

So like are we seeing -- like these segments are contributing more to the stronger order inflow which we are expecting in sales? And is there a strong traction in the CNG stations. Like are we again bidding for the other stations, which saw a higher competition earlier?

Yes. So in terms of orders for the last financial year, they would broadly be in line with the the numbers which I had mentioned in terms of the business contribution. However, this year, we did have good numbers coming from the Precision Engineering division. We generally don't like to give a breakup, but it would largely be ACR and precision engineering and gas, et cetera. On the CNG, we are actively bidding and there is a renewed interest, as I was stating earlier, to increase the amount of stations. So there is a push from various customers to close more orders, and we have been actually closing more orders in the CNG space in the last quarter and even carrying on into [indiscernible].

Got it. Got it. And as we had mentioned we had at around 10% to 5% -- 15% of the sales of company going back from the newly launched products. So given the strong IP filing, which we are to the last few years, how does the launch pipeline looks like for the new products and like how the pathway ahead?

Yes. So we have a number of products, which we are actively developing. That being said, a lot of them vary in terms of levels of complexities. The more complex it is, it generally takes longer with more testing, et cetera. We also have a couple of products where we are expanding the range. This is something which will definitely come faster. So we do have quite a -- so it's very difficult for me to commit at this stage what products we will launch this year. I think I already did mention the A-800, which is an extension of our [indiscernible] range. But, we do have quite a few products in the pipeline, which you will start to see some launches in Q1 itself.

Got it. And one last thing is like how much cost savings does our Zephyros package offer as compared to the conventional systems for the users broader [indiscernible].

Yes. So the Zephyros package is actually significantly more efficient than the traditional water filling system. It would be in the range of, let's say, 10% to 15% plus.

The next question is from the line of Mihir Manohar from Trust Mutual Fund.

My question was on the and CNG side. Once again, a focus because of the disruption there. If you can close some lines vendors and run for a compressor actually kick in? I mean is more large transmission [indiscernible] pipeline necessary for the demand of other competitors to actually kick in or they do in most compressor only some [indiscernible].

Mihir, we could not hear properly. Will you try again, there is some disturbance from your side?

Yes. Is this audible now? I really wanted to understand on the CGD and P&G side, I mean government has put a renewed focus over here, because of the disruption, which has happened. Now I wanted to understand when does the demand for other compressor actually kicks in. Lead large transmission pipelines, gas transmission pipelines in necessary for the demand of other compressors actually look [indiscernible]. I think as demand going ahead for the next let's 1 to 2 years, now government has put a focus again? Where is the [indiscernible] compressional booster compressors?

Okay. So let me try and answer your question. You do need pipelines for mother stations and generally the trend that we see is that 70% of new stations, at least 70% are generally daughter stations because these are lower in CapEx -- but the disadvantage with the daughter station is that they are higher than OpEx because you need a mother station to first compress the gas, sell into a cascade and take it to a place which has a daughter station. So there is also a trend of, over time, daughter stations is being converted into mother stations. There are -- there is a certain market where it's very difficult to put pipelines like in a hilly area, et cetera. So there, that would be a daughter station. I hope that answers your question.

Yes, yes. But I mean with now food infrastructure rollout going to happen, at least on the framework and policies. It will result higher demand for mother compressors or for booster completers?

Yes, it will be a higher demand for both, but it would -- in the short term, be skewed more towards daughter stations. But long term, a lot of them will start getting converted into mother stations.

Okay. Understood. So second question was on the good order inflow. I mean you look quite good number, INR 650 crores broadly over the last 2 quarters. If you can to some light as to what the value is contributed by the new products [indiscernible] Tyche, I this new range of compressors that you've introduced, some color over there? And what number are these new products contributing over the last few quarters?

Yes. So generally, we don't really give such granular information. A lot of these products, which you mentioned are newer products. And as I mentioned earlier, it's usually very difficult to get the first new sales, especially in, let's say, products like Tyche, Hydro, which was just freshly launched. [indiscernible] is certainly higher up in terms of the order value, and it also continues to grow quite quickly. Yes, that's, I think, the most granular that I can go.

Just lastly, your question on the Precision Engineering side ...

The next question is from the line of Bharat Shah, from BCS Capital Idea.

I think this is beginning of new innings with a bank. I think one couldn't have asked for a better start to the altogether new innings that you are about to play. I've known Senior more than 25 years, and I've seen him to be a very meticulous and very careful planner of the thing. So I definitely believe he he would have set up this organization on a beautiful for moment for you to play the at a much higher resin or at least that is what my hope is. So first and foremost, best wishes and congratulations and so on and has largely not on which the picture started.

Thank you.

I think on the growth aspect, you talked about 20% plus on a sustainable basis. So you mean for the current year, or more like 5 to 5 years and more because all along over the last few years, I've understood that these growth rate for the company could be upwards of 20%, given the engineering strength we have given the way the overall manufacturing ecosystem is rapidly evolving. And given the fact that in many ways, but Kirloskar Limited does is touching so many other industries and their needs and the innovation rate of the new products. So is the -- are the being kind of more modest and conflating -- or you think this is the most realistic which we should assume?

Yes. So when I said, 20% in the opening comment, it has always built our aspiration to grow the company at 20% plus over a long period of time. That is on top line and bottom line.

Okay. And coming to the part now that we have reached a meaningful scale in size today. And the overall manufacturing ecosystem evolution has been rapidly proliferating plus our own innovation rate of the new products. Should we be more ambitious than this? Or in your opinion, I think this is very realistic in [indiscernible] and strong number that we are talking about?

Yes. So in terms of innovation, as I mentioned, we have been recognized as a top 30 IP-driven organization. That being said, this is not all we want to be. We have our own internal targets to grow the amount of IP filings. Some of the products which we are developing today would be cutting edge, not just in India, but in the world. And I think I'm really excited when I look at some of the products under development. And I do hope we'll be able to launch a few of these cutting edge ones this year.

I will add something relating to the timing to innovation. We are giving the presentation to [indiscernible] where we the PLS approval. And the -- one of the managers there ask us who is your technology partner for the Zephyros, we said there is no technology partners. Our team is capable to do the innovation do the engineering, and we have developed this product our own. And it also surfaced from them that Indian company is doing such type of renovation and the tailor scheme, which is approved so easily that one Indian company is doing so much of the innovation and coming with the different products and they appreciated our efforts.

Delighted to get that absolutely delighted to hear that. One last small thing, if I can raise that. While clearly, the margins in the latest quarter, the fourth quarter of the year gone by about 26% plus are dramatically high. And those can't be sustainable. But you're in the entirety about [indiscernible] that we have delivered for the entire year of '25, '26. Isn't this now on a decent top line base way of creating leveraging, specialty product offerings and the overall growth opportunity? Isn't -- I'm aware that Aman mentioned 18% to 20% is more sustainable margin. But I thought in impact 21.5% margin, is that not likely to be driven for wise? Or you think 18% to 20% only say the fair guidance?

Yes. So just to clarify, what I meant is in a bad quarter, we always say don't judge us quarter-to-quarter that in the same way in a good quarter, please don't judge us quarter-to-quarter. And nextly, we will be 18% to 20%. And if we can, we'll be 21%.

The next question is from the line of Saurabh Aria from Olam Capital.

See, if we see last few calls, you have said that you have also mentioned that export would not be really a big driver for us. The bad thing to with the discussion in Middle East. So if you could submit your Middle East export opportunity and export activity in general. So first is that maybe -- and then maybe I have a related question after your comments.

Yes. So I think export as part of total sale is about 6%, since one of our major markets, especially for large packages is oil and gas. The Middle East is certainly a key market for us. That being said, because it is not a very large part of our total business, it is not that big of a risk for us with the current geopolitical situation. And as I said earlier, I think in the long term, the implications of the geopolitical unrest in the Middle East is probably quite good for KPCL.

Okay. And so be related as it comes to these approvals, et cetera, will be packages because you already have -- you already are using compressor of real or maybe how -- and they are, of course, already approved there. So why -- like so I want to understand, have we won any factors in past in Middle East is not why we did not then in [indiscernible] and what gives us confidence that mean that now we have a figure acuity?

Yes, we have won packages in the past, and we have a couple of active inquiries also going on. What I will say is that what is more active in the Middle East is more on the gas side. And there on the gas side, there's a number of approved vendors, a lot of them are from lower-cost countries. It makes it a little bit for us to compete when everything is specified. So you have to get the best from a certain vendor, if you get the [indiscernible] from and heat exchangers from a couple of vendors. So with everything specified and cover difficult to kind of innovate on the cost side and the gas packages. That being said, we are competitive in to be able to win, and we have won packages from the Middle East in the past.

Okay. This is very helpful. Second, just again, a clarification but on other side, I know we don't want to talk much about. But still, like the first number, Ramesh sir mentioned about INR 500 crore order book for next year. So I want to understand some execution cycle success that is going into next year mention that in past as that has been the case. But say, if one were to see execution cycle of this other segment, is it more than your business and majority of this INR 500 crores, which is going into the next 2 years, [indiscernible] to others?

No, no. I think there's some misunderstanding. We -- as I mentioned, the total order board, if you go into details, it's actually more skewed towards products this year. What that end products generally have a shorter execution cycle. We did get a couple of large back orders, which will spill over into the next financial year. But the execution cycle this year for the company should actually reduce.

Okay. And maybe I [indiscernible] last. So like last year also next year, our order book was INR 1,600 crores something look to build around [indiscernible] and we were set confident that revenue grew [indiscernible] And now again, at the start of this year, book-to-bill is around 1%. And we are pretty confident that we can still do 20% top line growth. What happened last year that it did not come? And what gives us confidence that with the similar book to bill, we will actually be an delivering?

Yes. So I think in the past few years, we've had quite a significant reliance on our gas business. And as we have been calling out, this is a place where we have been having some difficulties in terms of growth. We will be taking some actions this year to increase our competitiveness in the segment. And I think also the business are doing fairly well. Equipment in particular, is growing and this year with the Precision Engineering division, we'll be doing a lot of happy lifting. We believe that we will be back on track to deliver higher than order board sales and reach this 20% plus number, which we have committed.

The next question is from the line of [indiscernible] from 361 Capital.

Sir, my question was in the gross margin expansion that we've seen, so how much of it will be going to the market in operation efforts? And how much of it? And is it -- are you on to the department of orders? I say that's how you put our -- how will you attribute that [indiscernible]

No, we are not able to understand what exactly you're asking.

So we saw same expansion in the gross margin, I believe, in this quarter. How much of it is attributable to the backwardation as well? And how much of it is because of the legal deferments are you seeing that you put in the last quarter?

The backward integration, what we do in Nashik is coming to Harasafor the air compressor division as well as for the partition reason. That is [indiscernible] the total output from the Nashik is directly seen as an input for a adopter factory as well as some portions go into the Saswad also. So it is exactly we are not satiated how much is going for the compressor division and how much is for the [indiscernible]. So we need some time to calculate and come back to you for that.

Sir. And sir, what would be our sustainable gross margin you gain?

Yes. So as we have been saying, directionally, we want to be 18% to 20% on an EBITDA level.

Last year also achieved margin in the core business. That time, you also said that 18% to 20% is the [indiscernible]. This quarter also, we crossed almost 23%. And still we are saying it is 18% to 20% is a sustainable core business, that is combustion business.

The next question is from the line of Sahil Sanghvi from Monarch Network Capital.

My question is more of to understand, I mean, while Amin has already commented on this. But this new ruling that we have got regarding the government press on the March '26 for spacing more PNG and PCB line, just wanted to understand what kind of traction are you seeing on ground with this with this ruling, it says that they want to accelerate pipeline infrastructure development, including fast rollouts of CGD and last-line connectivity for P&G. So what are you seeing on ground? And when can you expect some bit of demand transferring to our order book, leading to an improved performance for the gases [indiscernible] division?

Yes. So as I mentioned, we -- I think we entered this year with an elevated inquiry level in terms of the domestic gas business. And we've also been closing some orders in this segment fairly quickly. So I think on ground, there does seem to be quite a bigger things happening. And I'd also like to once again mention that there is a lot of interest in alternative fuels, especially biogas, where we are seeing a lot of interest at the moment. It has not translated into orders for us yet.

You also see you also see the reduced presub the OLG. -- roughly the target time to invest something [ INR 200 billion ] in oil and gas, and that investment will come between 5 to 6 years. And this INR 200 billion investment when we will start investing some portion of this will come to us by support for the compression to their various projects. So we are definitely going to get that because the INR 200 billion investment by oil and gas sector by [indiscernible] India is a huge investment, and we are also focusing on that to get that business and to grow our company.

Got it. And my last question would be, I understand that you will have a shorter execution cycle for the orders that we have now in our order book, can you define that period? I mean would it be 6, 7 months? Or would it be much lower? --

The Equipment period has been 4 to something projects -- and roughly, the large packages ranging from 6, 7 months, 8 months. But towards were growing, we are being developed in many products like [indiscernible], Khione, Tyche, they are having very short execution cycle, now not very great 8 months, 12 months period that. It's not the case, we are not focusing on the large [indiscernible] business. Water business we want, we want a top line growth as well as the bottom line growth, both.

Thank you. Due to time constraint, we take that as a last question. I now hand the conference over to Mr. Dhirendra Tiwari for closing comments.

Thank you. Let me take this opportunity to thank the management of Kirloskar Pneumatic for giving us the opportunity to host. Before I close, may I invite Aman to [indiscernible] and then we conclude the call.

Yes. Thank you all for joining the call today. And as Bharat bhai had mentioned, is a new innings for me, and I have been blessed to have a great barment of Mr. Shinawasan for the past 5 years. I think we learned a lot, he really taught us how to push boundaries, innovate and really be humble. So it is -- we have big shoes to fill, and we will do our best to hit our targets of 20% plus growth. Thank you so much.

Thank you. Now you can close the call please.

On behalf of Antique Stock Broking limit, that concludes this conference. Thank you for joining us. You may now disconnect your lines.