LMW Limited (500252) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Earnings Call of LMW Limited for Quarter Three of FY '25-'26, hosted by NSDL. [Operator Instructions] Please note that this call is being recorded. This is Sameer from NSDL, and we have with us Mr. V. Senthil, Chief Financial Officer; and V. Dhana Lakshmi, Associate Vice President of the company. Over to you, sir.

Thank you, Mr. Sameer. A very good afternoon to everyone, and thank you for joining LMW earnings call for Q3 of FY '25-'26. I will brief about the overall performance of the company for the period ending December '25, followed by an interactive session. I would also like to clarify that certain statements made in the discussion during the call will be forward-looking in nature. To begin with, let me explain the overall performance of the company, then we'll go into segment-wise and consolidated performance. The financial results have been posted on the company website, and I hope you had an opportunity to go through the same. The revenue for the quarter ended December '25 is INR 767 crores as against INR 776 crores for September '25, which is flat. For the nine-month period ending December '25, the revenue stands at INR 2,228 crores as against INR 2,120 crores for the same period for the last year. The PBT for the quarter stands at INR 56 crores as against INR 59 crores for the immediate previous quarter. And for the nine-month period, it stands at INR 149 crores as against INR 93 crores for the nine-month period for the previous year. There is an exceptional item of around INR 11.5 crores during the quarter and period ending December '25, which is a onetime impact on account of the new labor code regulations. And for the period ended Q3, there is a INR 1.29 crores, which was incurred towards VRS. Going to division-wise details. TMD revenue stands at INR 440 crores for the current quarter as against INR 461 crores for the previous quarter. And for the nine-month period, the turnover was INR 1,316 crores compared to INR 1,347 crores for the same period during the previous year. This is a reduction of around 2%. The overall loss for this division in the current quarter stands at INR 3 crores and the period to date, the loss is INR 1 crores as against a loss of INR 23 crores during the last period ending December '24. With respect to the order book, we currently hold an order book of INR 2,600 crores, of which the actual orders are around INR 1,500 crores. With respect to the sales, which has been clocked during the nine-month period, the ratio of domestic to export to spares stands at 65% domestic, 9% exports, and 26% spares. As we have mentioned earlier, we continue a five-day working week for Textile Machinery Division on account of lower capacity utilization. This trend continues to be monitored and depending on the order flow, we'll take next course of action. With respect to LMW Global, the turnover for the nine-month period stands at INR 128 crores as against a comparative number of INR 75 crores for the period ended December '24. For December '25, the loss stands at INR 25 crores for the current period as against a profit of INR 1.5 crores for the previous period. And the order book for export stands at INR 139 crores. In LMW China, for the nine-month period ending December ' 25, the turnover stands at INR 52 crores and for the comparative period last year, it stood at INR 54 crores. The loss for the current period is INR 11 crores as against a loss of INR 4 crores for the previous period. The order book on hand in China is INR 6 crores. Now I move to Machine Tool Division and Foundry. The revenue in Machine Tool Division and Foundry stands at INR 853 crores for the nine-month period ending December '25 as against INR 728 crores for the corresponding previous period. Out of this, around 12% relates to Foundry Division. The balance top line is towards Machine Tool Division. With respect to ATC, the revenue for the nine-month period stands at INR 150 crores for the nine months as against INR 123 crores for the corresponding previous period. At a consolidated level, the revenue stands at INR 2,274 crores for the nine-month ended December '25 as against INR 208 crores during the corresponding previous period and the profit at INR 104 crores as against INR 90 crores for the corresponding previous period. With this brief, I would like to continue to the interactive session. Over to you, Mr. Sameer.

Sir, thank you so much. [Operator Instructions] Sir, we have our first person in the attendees who would like to proceed with the questions. We have with us Mr. Divyam Doshi.

I wanted to ask that in the previous con calls, you had mentioned that demand was supposed to pick up after the Q... after nine months or approximately after December. So what is the current scenario? Is the demand showing up for the sector? And also, I wanted to know how is the management guiding towards the recovery of revenue?

Mr. Divyam Doshi, do you have any other questions apart from this for TMD?

Yes, yes. So I have... I'll ask one more question.

Yes, please go ahead.

Yes. So we have seen that... just a second, sir. What are the other indicators that you are tracking apart to show that the demand has been shown? That's it.

Again, this is related to Textile Machine Division, I suppose, right?

Yes, yes, yes.

Okay. Anything on any other divisions?

No, no, sir.

Okay. Thank you for the question. With respect to the previous, our anticipation, yes, we have anticipated that since the downturn has been a sustained one and it has extended almost now close to two years, the anticipation was that the demand would pick up. And this is indicative of, from the historical data, what we have seen in the past. However, the factors which are affecting, especially in terms of tariff, which has come in, these are the things which have -- were not factors which we know of in the past. So this is a business where we always in eight-year cycles and this eight-year cycle of going up and going down, where there's a consistent increase has always been noticed. So our anticipation was that post a slowdown of almost as 18 months, there will be a bounce back. And this has not happened because of the uncertainty on the demand side. Having said that, what we still anticipate is that during this time as well, within India, there has been a consistent utilization of spinning mills at a fairly high level. And the mills which continue to operate are waiting for certain indications. Now those indications would be one of the things which has come recently, of course, is the EU FTA. But even before that, there has been good amount of incentivization, not incentivization, at least good amount of policies from the government, be it GST, be it PM MITRA Parks, which has been given. So these are all the right actions which has been taken. So it is only the confidence which has to come back into the industry that it is a sustainable long-term demand would be there. And we will see investment coming back. With respect to the indicators for us, one of the key indicators is the order flow. And we do note that the current year, actually compared to the last... the current year, when I say it's the nine months, the order flow has been definitely better than what it was in the previous 12 months, right? So yes, there are indicators. People are investing. We are selling. But at the same time, the confidence level is not very high, and a lot of external factors are postponing. Because of the external factors, there is postponement of decision. But we look out for whatever is the order flow and how we can get more orders into the system. I think back to you, Mr. Sameer.

Sir, thank you so much for answering that one. I believe Mr. Divyam has a follow-up question or another question.

So just as you mentioned, what if the textile cycle remains weak for another 12 to 18 months, what are the levers that we have to protect our profitability or our cash flows?

Yes. So thank you. So what we do, and this is the right time and this we have done multiple times in the past as well, this is the time for us to become lean. This is the time for us to increase our efficiencies, and this is the time for us to invest. We continue to invest in our shop floor. And today, the technology has changed. We continue to invest in IoT. We continue to make our process efficient and costs efficient. And these are the time we also invest in our new product development. So these two factors is what we use our time for during a downturn because effectively, what happens is the demand from customers are more stringent because customer is also trying to struggle and survive the downturn, right? So we have to be cost efficient, and we have to pass on that, and that's what we best try to do. So both ourselves and from the customer point of view, we have to work towards a much better product and much better organization, and that's what we invest in. So one of the example is what I just now said, we have a very small VRS scheme. We did announce trying to cut down on the costs and also on the fixed cost. So we have to tighten our belts and that's... and we do that during all the lean periods. It is a very long lean period, but we have to continue to do all these activities on a continuous basis. Back to you, Mr. Sameer.

Sir, thank you so much. At the moment, we do not have any hands raised. [Operator Instructions] For the next question, we have with us Mr. Manish Goyal.

Sir, can you repeat the subsidiary numbers for Global Dubai and for the China? And what I probably observed from your segmental numbers is that in consolidation, the losses are much higher than the standalone. So like what is this pertaining to? What has led to increase in losses? So that was my first question. And also, if you can give some perspective about demand outlook for Machine Tool Division. We have seen some improvement of revenue growth as well as on the [indiscernible] demand. And so how should we look going forward over the next 6 to 12 months on the MTD? And on ATC, sir, how is order book building up over there? We now for the first time have seen double digit margins. Can we see the momentum continue on both revenue growth and margin improvement? These are three questions mine.

Thank you, Mr. Manish. Thank you for the questions. So with respect to the subsidiary, I would repeat those numbers. For the nine-month period, we did a turnover of INR 128 crores at LMW Global. And then China, for the nine-month period, we did INR 52 crores. The increase in loss, I think we have clocked around loss in both these divisions because the increase in loss on account of now the entire global setup, the export setup having moved under the holding company, which holds both these companies and the entire costs are all with the holding company, the entire decision-making is there, all the seven or eight odd countries where the offices all report into that. The normal turnover as a percentage, if you see, exports always used to be clocking around 20% to 25% of our overall turnover. But considering the countries where we are operating, none of these countries are doing well and our export as a percentage of volume has shrunk to, like I said, in the current state, it is around 9%, 9% to 10% is what the export volume is. And this is not absorbing these costs. It has been a tough situation. In fact, Bangladesh, Turkey are key countries for us, and they have their own challenges. And other countries, definitely, Indonesia is doing well and Vietnam to some extent is doing well. Egypt and a few African countries are looking at further investments. Egypt, there are some investments coming in, but it is taking time. I think the challenge what we see from... in India is similar, very similar to what we are seeing in other locations as well, right? And China in itself is investing, but it is very specific to one or two large orders where the investments are going in. So there is a challenge there as well. And that is where we see that we have spent the entire spend which has moved to our holding company, there is a loss because of that. But having said that, it's the same case everywhere. Investments are not happening. Investments will happen. It is only a matter of the right opportunity and right conditions for investment. Today, having said that, if you look at tariff both Egypt and Turkey [Technical Difficulty] Tool Division. Yes, I mean, we are quite optimistic about Machine Tool Division, especially the fact that we are seeing more numbers on the machining centers, VMCs. So the demand outlook is quite strong. We are very positive about continued growth in that sector. And within that, between turning centers and machining centers, we are working more on the machining centers because that is where we will be building higher market share because of the new products what we continue to introduce on the machining center side. There are certain... within machining centers, you have vertical and horizontal machining centers that is a subset of the machining centers, but this is a sector to focus on. And this is a sector where we have introduced machines over the last five years, and we'll continue to expand our footprint as far as machining centers are concerned. So very positive as far as the Machine Tool Division is concerned. The capacity utilization within the Machine Tool business today, still we have bandwidth to grow there. We still are clocking only 75% capacity utilization. So there is enough space for us to move and deliver for the balance capacity which is available within the Machine Tool Division. Now coming to the ATC order book. We have built... like what I mentioned in the previous call as well, a lot of RFQs have been floating. We have been able to get quite a few RFQs. The number what we had given out last time was we have got an order book for delivery of around INR 300 crores. Definitely, the order book is definitely growing. It is... the only unknown... the factor which is affecting is, yes, there's a tariff impact. And for us, ATC is almost 90% export. But as of now, we do not see much of a push out at the moment. However, a lot of discussions do happen between us and the customer as to how to handle it. And we hope this continues with respect to the negotiation and getting something... some relief on the tariff. But that is the only challenge as far as ATC is concerned. But otherwise, in terms of order booking, in terms of winning RFQs, in terms of building a longer order book, I think it is quite positive there. In fact, we have continued to invest even in the current year in ATC because of the new orders which have come in for delivery. I think the order book number which we have given last time, around INR 300-odd crores, it has gone up by another 20%. It is around INR 360-odd crores, which is deliverable over 1.5 years. That's what it is. So so long as there are no pushouts, et cetera, I think that is something which very much is going on the positive trend. Over to you Mr. Sameer.

Sir, thank you so much. [Operator Instructions] Sir, going ahead, we have with us Mr. Kunal Shah.

So I have two questions. One is on this free trade agreement. Is there any provisions for us to export over there and is there any duty exemption that we are getting with the exporting to Europe? And second question was, during the quarter, we sold a stake in a group company, Super Sales, of around 10%. So just want to understand what's the logic behind selling the stake. Is there some internal restructuring that is happening? That's it.

With respect to the EU FTA trade deal, there is no specific impact what we see from import into India point of view because, yes, there are machines which come into India. And today also, the machines can come into India at 0 duty. Yes, there will be a little more imports. But at the same time, the value at which these machines are imported is fairly high. So the implication with the duty would not be much. With respect to exports, it supports our customers' customer. We as such from textile machinery or machine tool are not exporting into Europe. Of course, there is an opportunity. Definitely, it opens up an opportunity for us. But at the moment, as it stands, we don't have a huge... we don't have an export sale into Europe as far as machinery is concerned. But from an Advanced Technology Center standpoint of view, definitely, yes. Like I said, 90% of it is our exports and more these exports are mainly to U.S. And we are also exporting from Foundry Division to Europe. These things would be a lot more cost competitive as far as the exports from ATC and Foundry is concerned. Foundry, we have customers. ATC is something we definitely will be looking forward to building a new customer base within Europe. I think it really supports us on that front. With respect to Super Sales, it was not for investment which we wanted to hold, and that is the reason we have sold the sales of... the shares of Super Sales. Over to you, Mr. Sameer.

Sir, thank you so much. Going ahead, I believe Mr. Manish Goyal has a follow-up question.

What I asked earlier was, I think, the loss number for Dubai and what was the competitive number for the nine months.

Just one second. The loss for... okay. Any other question, Mr. Manish?

And can you give us revenue breakup for the current quarter for TMD and the comparable number for the quarter? And the third question on ATC. In terms of composites business, we were expecting some orders to fructify, so any progress on that? And because this quarter, the margins have picked up. So is it composite business has also picked up and started competing apart from metallics? [indiscernible]

Okay. I think in the loss number of Dubai, for nine months, it is INR 25 crores. And for the loss number in China, it is INR 11 crores. The comparative number for Dubai was INR 1.5 crores profit last nine months, and it was INR 4 crores loss in China for the previous nine months. That is point number one. With respect to TMD, the breakup of that 65%, 9% and 26%, that is the OEM sale, export sale, and spare sale, remains same between this quarter and the previous quarter, not much different. With ATC composite, yes, you're absolutely right. Okay. Composite as a percentage of the turnover, what we see around INR 150 crores, the composite as a percentage of turnover stands at 20%, right? And yes, there was a billing on composite for a few items, and that is where the margins have become better for the current quarter. It will come back to normal. But yes, we are able to start billing for composite. And just to recap, this composite facility was always built for our space program initially where we have done the launch of the Bahubali, which got launched, the entire -- the nose cone and also some of the key parts have come out of this facility. However, over last 1.5 years, we have pivoted to also doing anything with respect to advanced technology with respect to space, aerospace, et cetera. And that is where we are pushing for a better utilization of the plant in composite. And we are starting to see the billing on composite from last couple of quarters in a small manner. But overall turnover of composite in this continues to be at 20%. With respect to the order book building, which I did mention in the previous question you asked, I would like to still state that the order book building has happened mainly on the metallic side and the investments which have gone in, in the current year have also happened on the metallic side because on the composite side, we have got enough investments which have already gone in, where the utilization has to go up by more orders to be executed. Okay. Back to you, Mr. Sameer.

Thank you so much, sir. Going ahead with our next questions, we have Mr. Jay.

I have two questions, please. Trying to understand better on the Textile Machinery Division, Senthil. Is there any kind of an understanding that we can have of the age of assets which are currently in use as an industry data that you can indicate towards? Or is it fair to try and understand if your spares and repair revenue growth over the last three years has expanded faster, suggesting that the assets in use are aging? And alternate, you also spoke about the fact that for whatever spinning mills are in business today, implying some kind of consolidation. So I just wanted to get a sense of if any of these data points can be used better to arrive at a potential recovery of the cycle.

No, no, please go on. I was going to ask you this, what is the second and subsequent question. Please go on.

So the second question is that what is the contribution to revenue today from the latest three products, let's say, that we launched in the last two years such that we get a sense of how those efforts have started to pay off or not yet contributing enough.

Okay. Any other questions?

No, that's good for now.

I think it's a very good question, Mr. Jay. I think from an industry spindle-age standpoint, we would put the current spindle-age between 40 million to 42 million or 40 million to 44 million, give or take a few million. So out of this, we would say almost 40% would be older spindles, right, which is... when I say older spindles, we are talking about 15, 20 years and above. We are also clear that the current spares which we see is basically because of the consistent increase in spares, consistent performance is coming out of two things. One, our continued focus within the spares business because spares is a large business volume. Our continued focus from LMW on this business, we have done a few things. We have a separate division within Textile Machinery for that. We have increased the footprint within India. We have established our warehouses in Indore, for example, and we are in the process of establishing others as well, where the reach to customers is a lot quicker, where we are trying to not only deliver after a particular period of time, but try to get it as quick as possible from the time of order. So with the possibility of doing a better service to the customer, that is an indication of how the turnover has increased. This is from what LMW has done. But from a spindleage usage point of view also, if you look at all the spinning mills, yes, because certain spindles have shut down, the running spindles are running at almost full capacity. And you can talk to any spinning mill, and they'll fairly give you at 95%, 90% and above utilization or 95% and above utilization. So the consumption of spares has been also consistent. It has not resulted in a dip, so dip in spares consumption. So it is a factor of two. Aging of machines, I think that most of the machines which probably shut, I would attribute it to older spindleage and smaller units, which has got shut. But at the same time, there is -- the reason for spares I mentioned are twofold. With respect to... again, going back to the spindles as such. There is a lot of incentives today for spindles to be established or new mills to be established in various states. There are state incentives, there are central incentives. So now like I mentioned, it is the confidence level at which we can invest and people can commit, the investors can commit to these investments. And that is where whilst we do have a lot of discussions, we have a lot of customers who are discussing on investment, the decisions are not coming forward because of the uncertainty around what is going to hit us. And definitely, the tariff has been and is and also has been a major factor in this for the decisions not to come through. With respect to the NPD, NPD, we don't want to give out the NPD number or exactly what you are asking for. So I may not be able to give you the NPD number. But what we do inform and in fact, in the last exhibition also, we have shown our Auto Winder, our Lakshmi Winder, our... there's a new 1.25, 1.28 card machine, which has been launched and the new draw frame, which has been launched. So we do track them for market share in these independent segments, but we don't give out the NPD percentage. Over to you, Mr. Sameer.