Mahindra EPC Irrigation Limited (523754) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mahindra EPC Irrigation Limited Annual Audited Financial Results of FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashok Sharma, Managing Director. Thank you and over to you, sir.

Thank you very much. A very good evening, ladies and gentlemen, and a very warm welcome to all of you for the seventh investor call for Mahindra EPC Irrigation Limited. On behalf of Mahindra EPC, I would like to sincerely thank each one of you for joining this call. So today, I'll be sharing with you on the key developments in the micro-irrigation industry, the company's performance and a broad industry outlook for F '23. Today, I thought let me first talk a little bit about Israel. Many of you know about the technology developed in Israel, and micro-irrigation technology, it has come from that country. As you are aware, Israel has a very small land region, does not have natural resources, very less rainfall. And Israel has always overcome these challenges through innovation. And I'll talk about the innovation in the area of water management. In the early years of Israel's existence, the population grew rapidly. And as the tiny country struggled with a significant water shortage, Israel developed water initiatives all over the country. The Israel Water Authority launched a series of programs for children that taught them how to save water by simple means, building a whole new generation of water-conscious citizens, a country with over 60% desert and less than 20% naturally arable landmass. Today, India -- Israel has become a world leader in water management and water cycling. Over 90% of Israel water is recycled, and nearly 80% of drinking water consumed is either desalinated or recycled. So 90% is recycled, and 80% drinking water is desalinated or recycled. And Israel has reduced the amount of water needed for irrigation by more than 30% using micro-irrigation largely and also an increase in ground water level through efficient management and maintenance of traditional water storage structures. By doing this, Israeli farmers have made the desert bloom with the pioneer use of irrigation innovative farm technologies. So today, agriculture is thriving in Israel and they've successfully traveled the journey from a water scarce to a water-abundant country. Now this is an example for the world on how to move from a water-scarce to water-abundant country. Cut to India. In India, again, I've been repeating this, but I'll just repeat, there will be some new listeners today. The agri sector consumes the largest amount of water. Almost 80% to 90% of the water is used by agriculture. And micro-irrigation becomes a very important driver for water conservation. And given the high focus and environment, social, governance, it's very typical that companies like ours are contributing to the environment and conserving water. You've also heard about water futures [indiscernible] exchange in U.S. Today, India is a water-stressed economy. And very fast, we are going to become a water-scarce economy. So what does it mean for the [ micro-irrigation ] industry? It means a lot because as time progresses, all the citizens, farmers, governments have to get more and more water-conscious. And today, only 12% to 13% of the arable land is having micro-irrigation facility available. And the overall area available for using micro-irrigation is close to 70 million hectares. Out of that, only 10 million is covered under micro-irrigation. So clearly, there are a lot of positives in terms of the need for micro-irrigation and especially for a country like India given its large arable land. The benefits of micro-irrigation, I will repeat again, is that it increases your crop production for the farmer by 20% to 30%. And also the labor costs come down due to lack of needs in the farm, which reduce the labor cost. We've all been hearing about various schemes by the government to promote micro-irrigation, various announcements in terms of more crop per drop. And clearly, that is over the last decade and a half has driven this industry to this level. Now coming to Mahindra EPC. Mahindra EPC Irrigation company, we always focus towards supporting the farmers and helping them to be more prosperous, and that's the vision of our company: how do you contribute to farmer's prosperity and also contribute to nation's priority of doubling farmers' income and protecting environment, ensuring that our country remains water-positive and not water-stressed or water-scarce. In terms of the whole strategy of the company. I will just repeat the key points which I've been emphasizing on our previous calls. We've always focused on delivering high-quality products and giving services to the farmers which help them to install the products properly and use the products properly. And how do you do it? Our strategy is very simple. We focus on very critical markets, and increase our market share year-on-year. The last 3 years, we have been increasing our market share by approximately 0.5% every year, and we are close to 6.5% market share now. Over the years, to increase the margins, we have shifted from low-margin sprinklers to high-margin drip products. Now the big challenge in the industry is managing working capital, and that has been an area we have been very mindful of. And we have tried to plan our growth based on the working capital cycle from the government. As far as last 2, 3 years are concerned, consciously, we have taken a call to move towards a more nonsubsidy business so that there is less dependence on subsidy. And a major thrust has been given on reducing costs. If you look at our numbers, our F '22 fixed costs are lower than our F '20 fixed costs. So the whole idea is to make the business model more lean so that we are able to manage our businesses profitably. This was the overall context. Now let me talk about very specific things, which you are very keen to know about how the industry is doing now and what is the future. Unfortunately, the last 2 years for the industry have not been very favorable. And the industry has been de-growing year-on-year. Just to share some statistics which are based on the published data, in F '19, almost 11.5 lakh hectares were covered through micro-irrigation. In F '19, there was a de-growth of 20% and -- sorry, in F '21 there was a de-growth of 20% and further de-growth of 25% in F '22. So in F '22, we are estimating around 7 lakh hectares were micro-irrigated. This data is still to be confirmed, but this is our industry estimate and this is what we believe. Now one has to think why these 2 years have been so tough for the industry compared to the previous years, where industry was going at an average 6% to 7%, and in some areas, it was flat, but never have we seen this kind of de-growth in the industry. Looking at these 2 years a bit closely, what one can see is that in the last 2 years, largely due to the impact of COVID, the state governments have given less focus in terms of allocating funds for micro-irrigation. And perhaps there was an urgent need to use for public health. That was one big challenge we saw. And the second challenge we saw is the overall impact of climate change. There has been unseasonal rains, which have an adverse impact in certain markets, and also there have been cases where because of cyclones, some good markets could not perform. And the third reason, which is, again, something which is very peculiar for the last 2 years, has been the increase in raw material costs. I've been talking about this on the previous calls, and the trend actually remains unabated. And as a matter of fact, in the year F '22, the raw material -- which is our main raw material which is polymers, the raw material cost has gone up by almost 30% over F '21, which means an impact of almost 15% on the total material cost. So 15% increase in material cost is what the industry faced. Mahindra EPC could reduce the impact by certain innovative design improvements, by process improvements, efficiency improvements. And our impact was less than 15% by around 2% to 2.5%. But still, we had a adverse impact of material cost increase of almost 12% to 13%. The major reasons for this increase in raw material cost has been the overall supply and demand situation. We have seen that the demand for polymers had increased significantly for applications for medical and other areas. And also, there have been many instances of large companies either reducing production or going for large breaks. And other drivers for this raw material cost has been the increase in crude oil prices. In the last 1 year, if you look at 1st April to this 1st April, the prices have grown more than 70%. Crude oil price increased by more than 70%, which has impacted the material costs. Obviously, this has put a lot of pressure on the industry in terms of reduced revenues, reduced margins. And also in certain markets, it has become unviable to serve the products profitably. So this is the challenge, which we saw in the last 2 years in the industry. Clearly, based on this, a lot of efforts have been put by the industry association and players to raise the case with the government. And the government has been in a position that how can we have a pricing which is linked with the raw material dynamic pricing rather than having a fixed pricing which is currently available, how the schemes can be run more efficiently by doing DBTs to the farmers and ensuring those schemes are available around the year. So based on this, there have been some positive developments in terms of the government deciding to -- central government allowing the state governments to increase the price in October that was announced. And after that, the various state governments have started the process of price revision. And up till now, Telangana government has already increased the price. And other governments, state governments are in the process and we expect some more price increase coming from different state governments starting this quarter. Also, what is favorable for the industry is that stable markets like Maharashtra, Gujarat and Tamil Nadu, which have been consistently well-performing, have demonstrated their commitment to use adequate funds for this year. And on the ground, we see them working efficiently to ensure the business or the industry does not suffer. There are 2 other developments which we think are positive for the industry. One is renewed and strong interest by the Telangana state government. They have declared oil pump cultivation as a big priority for the state government. And towards that, they've allocated a budget of around INR 500 crores towards micro-irrigation, and they've been actively engaging with the industry to increase micro-irrigation in Telangana. That seems to be a good opportunity for the industry. And they've demonstrated that by increasing the price and declaring the new price in ahead of other states. Another development, which is worth noting, is the development in AP government. You would be aware that for the last 2 years, the Andhra Pradesh government has been quite dormant in the micro-irrigation industry. And recently, last few months, we are seeing a renewed interest, and demonstration of that has been sizable payments made by the AP government to the various companies for the amounts which have been due for quite some time. And the balance has been also assured in this month. And the department has been actively engaging with the industry to now restart the micro-irrigation business. So these seem to be on the positive side, increase of prices by state government, focus of stable states continues, government and large states like AP and Telangana getting reactivated. And we expect this should drive the industry well for the coming years. Having said this, there are challenges which continue. We are not seeing any relief on the raw material prices. They have been increasing in the last few months, and we expect that we may remain on a similar level or marginally increase in the next few months. And perhaps as the geopolitical situation uncertainty reduces across the globe and also we are expecting some new capacities to come in. And also, there has been an expectation that the port conditions are creating a lot of issues in terms of movement of goods. So as we ease during the next few months, we would -- we could perhaps expect some stabilization/softening of raw material prices. But today, it's very difficult to take that view. Today, we are not seeing in the immediate future any scope of relaxation on raw material prices. So this is the context which I wanted to share with all of you so that in this context, you are able to see the financial performance of quarter 4 and for the full year. You've already gone through the results, I'm sure. So I'll just share the highlights in quarter 4. Mahindra Irrigation -- EPC Irrigation Limited raised a revenue of INR 66.7 crores in F '22 quarter 4 versus [ INR 72.5 crores ]. And we had a minor loss before taxes of INR [ 0.45 ] crores versus a profit of INR 5.59 crores in the last quarter. And as you would have seen from the financials, the material cost has increased to 63.7% versus 55.7% in the last quarter. So there has been a significant increase of almost 8% on the material cost. It actually has impacted our bottom line. On annual level, we have had a de-growth. Our revenue was INR [ 212 ] crores compared to INR [ 257 ] crores of last year. And we have had a loss of INR 10 crores versus a profit of INR 25 crores in F '21. And again, if you look at the material cost, it has moved from 51.7% to 62.8%, significant jump. And we do not see any major price increases from the government last year. And clearly, this increase of 11% has impacted our bottom line significantly. Now I talked about F '22. I talked about the challenges. I talked about the efforts put by the industry, some actions by state governments. But when I look at internally, how this year has gone for Mahindra EPC, I think many good things have happened in terms of what we could do internally. And I'll talk about that one by one, that once we realized that last 2 years, the raw material prices were going up, and the revenues may be under pressure because of state government funding, a lot of efforts have been put to move towards a business model which is having less dependence on subsidy. Just to give some statistics. In F '20, our 1% of the revenue was coming from nonsubsidy business. And last year, our revenue was 15% from nonsubsidy business. In the past, we have been putting efforts to focus on states which are more stable with better payment cycles. And last year, we could have achieved 33% of our revenue from these states, states like Maharashtra, Gujarat compared to 22% in F '21 and around 19%, F '20. So from 22% to 33% revenue we could move to markets which are more stable and more dependable in terms of payments. Moving to our joint venture, Mahindra Top Greenhouse. There's been some good development there. We've been able to find MOU for providing net houses for rural livelihood increase for small farmers, we've signed up with AP government. And there are a good pipeline of orders for the year, which we expect we'll be able to fulfill during the coming time. Another benefit, if I would look from -- for the last 2 years is our focus on cost. We could put a lot of additional focus and we will manage to keep our fixed costs lower than F '20 levels despite the inflation. And that has been possible due to various innovative ideas in terms of reducing the waste in the system and improving productivity and able to manage the cost strongly. Even the variable costs have been contained in F '22 by a lot of optimization of the mix despite increase in freight costs and other variable elements. So you know rather challenging environment with a few opportunities opening up for the company, we believe that our efforts to perform better than the industry will continue, and we will be focusing on our strategy of key market focus, improving our mix, working in profitable states and increasing our nonsubsidy revenue. And so that we are having faster payment cycles for those businesses and keep our eyes on cost the way we have been doing. And with this, we are quite hopeful that going forward, our performance will continue to be better than the industry. And our farmers who have always trusted Mahindra EPC for its quality and for its good service, that promise will continue. So with this, I end my opening speech in a manner of speaking. And I will now be very happy to hear your suggestions, questions and comments. So over to you for the Q&A session.

Sir, should we open up for questions?

Yes. Absolutely.

[Operator Instructions] The first question is from the line of Aejas Lakhani from UNI Capital (sic) [ Unifi Capital ].

Yes. [indiscernible].

Sorry, Mr. Lakhani, sir, we are not able to hear you clearly. Can you use the handset mode while speaking?

Yes. Is this better?

Much better, Lakhani. Go ahead.

I want to check with you with that, could you speak a little bit about the receivable position? And we have odd INR 40 crores, INR 50 crores, if I understand -- if I remember correctly, INR 40 crores is the pending receivables from the AP government. So could you speak a little bit on that situation?

Okay. Any other question, Lakhani?

I'll follow it up with another one, sir.

Go ahead, tell me then I can answer together. This is a simple one. Anything else, if you want to ask that.

Yes. So sir, also going ahead now, sir, the [ pain ] that you've seen with the AP government, if you could just highlight that the better governed states, what kind of a receivable do you have from them? And what kind of ability do you have to further increase our sales in those regions versus where you've been currently selling? Because I presume you are predominantly selling just 6 to 7 states, right, or actually 5 or 6 states, if I understand. So that also.

Sure. Sure. Sure. Very right. I think you're -- Lakhani, thanks for putting this question because this is clearly one of the most important drivers in this industry. So as far as AP is concerned, yes, the whole industry, as I mentioned in my opening comments, that 2 years, there was hardly any payment. But recently, which is the last month in the month of April, we received -- see almost around INR 40 crores payment is due from AP, and we received around INR 15 crores last month. And also a similar amount is expected in this month as per the government, but that we'll have to wait and see. But definitely INR 15 crores we've received. So that's a positive development as far as AP is concerned. And what we are now getting a sense is that this government also has very -- lot of pressure from the various groups to focus on micro-irrigation, and they want to again rejuvenate the activity there. Now coming to the -- your next question. Actually, if you look at the industry, Lakhani, it's largely around these 5 to 6 states, if you look at the big ones, Maharashtra, Gujarat, Tamil Nadu, Andhra, Telangana, Karnataka. I mean these would contribute almost 75%, 80% of the entire industry. So everybody is in those markets. And in this market, Maharashtra, Gujarat are the industry markets, which tend do pay on time. And you asked the question, how much time. So it varies from season to season, but this is a broad idea. An efficient state like Gujarat would end up paying us between 3 months to 6 months, depending on the -- which part of the year. And in Maharashtra, the scheme is better, where we don't have much receivable issues because the payment is directly made to the farmers. And that's the model we are actually recommending to the government with a direct benefit transfer. So our receivables are very less in these markets. That's very good for us in terms of working capital management. Tamil Nadu is the third big market, which has been driving the industry. And that state is also -- it's not very efficient on payments. And they have larger timeframe for payments, it could go beyond 6 months. But the -- again, the silver lining is this that we do get our money, it's sometimes delayed, but governments do honor their commitment. And depending on their current situation, it goes off sometimes by a few months here and there. Now the last question which you asked about focusing on these markets, I mentioned in my opening comments that from 22% revenue from the good markets, typically, we consider Maharashtra and Gujarat as the good markets from payment and profitability. It will be 33%. That's one positive sign. And we have some very good plans to further strengthen our position in these markets. I hope that answers your question, Lakhani.

Yes, sir. Just a couple of follow-ups again on that. One is what is the size of Tamil Nadu and Gujarat -- sorry, Maharashtra, Gujarat and Tamil Nadu in terms of size, if you could just expand on that. And also, sir, you mentioned that Telangana has already increased prices. So could you quantify what is the increase in prices that Telangana has done and if you have any indicator of what the other states are likely to do?

Okay. I think you ask questions on everybody's behalf. [indiscernible] all the key questions you've asked. If you look at Maharashtra and Gujarat, these markets actually hover around INR 600 crores to INR 800 crores each, depending on the year. And Tamil Nadu has been growing quite at a faster pace recently, the last 3, 4 years. And that's also around in the range of INR 500 crores to INR 600 crores now. So these are the 3 markets which contribute to almost INR 2,000 crore plus/minus [ 5%, 10% ].And again, it varies year-to-year depending on various factors. So that's point #1. Coming to Telangana. Telangana, the price increase they offered is actually in line with the increase in input costs for last year. So almost 20% price increase they have given, which, of course, just take care of the increase of F '22. So that's a positive sign. And the question is what will be increase by the other states? I have no idea about this.

Yes. If you have an indicator?

I have no idea. But what I can tell you out of experience that once states like Telangana, Andhra, big states gives a price increase, it actually becomes some kind of benchmark for other states all [ to think ]. But frankly speaking. it's very difficult to say. Every state has their own way of thinking. But we are happy that indeed Telangana has taken the right position to give a reasonable increase for the industry so that the industry players are interested to promote micro-irrigation in that state.

Got it, sir. And sir, you had mentioned I think on the last call that there are newer states of UP, MP, Rajasthan, Bihar. They were looking to participate. So any green shoots there? And just a follow-up on [ APEC ]. We have had a terrible experience. So is it that, that once the [indiscernible] philosophies and we willl not be very aggressive in that state any longer? Or given that they are opening up their postings, we'll continue to sort of focus again and hope for a better payment cycle from that government?

No. So clearly, I would agree with you on the second point. And we need to be cautious in AP because -- and as an industry, we have put a lot of conditions. I think the AP situation industry came together, and they've put a very strong request with the AP government in terms of the payment cycle, et cetera. And we have certain norms internally where we manage our business based on the payment cycle. So once we see the payment cycle are favorable in any state, then we increase our revenue or efforts or business in the state. So we wanted to monitor AP, how it goes. If it is paying well, then definitely, we would like to participate. But if it is not meeting into amounts, then we'll calibrate our efforts there. So that's as far as AP is concerned. Now the other question we discussed about, and I did mention about the states like UP, Bihar, Jalkhand, Orissa, Rajasthan, actually kind of showing some promise. And so on a lower base, they've not been so badly impacted compared to other large states. But overall, last year, sentiment was rather low. And frankly, the call we took during last year given the huge pressures on revenue is to go very conservative in terms of costs and not put too much cost upfront. So we have been, I would say, very cautious in the new states and given the overall environment of the industry. But we are looking at them. We have some good strategy. As the industry moves ahead, we'll definitely take more aggressive position. But the short answer is compared to what we thought for last year, we have not been able to -- we've decided not to push so aggressively, counter to what we have thought. [ If ] we see the environment is good we'll then retry the [indiscernible] states. Good. So we can move to the next question, Lakhani, with the permission.

The next question is from the line of Aditya Shah from Vikram Advisory Services.

Sir, I have 2, 3 questions, [ Ashok ] sir. One is regarding our market share currently. Second one is the growth expected for the industry and for us, since last 2 years were de-growth. Third question is the 8%, 9% revenue which came in H1 from the nongovernment business, what was that in H2 and for the full year? And what is the -- what is your plan to increase up to what percentage in the next year, FY '23?

Increase what?

Increase the percentage of nongovernment business in F '23.

On subsidy, okay?

Yes.

Thanks, Aditya. Thanks for coming for this call and asking these questions. Now if you look at EPC, every year consistently, we have been growing by 0.4%, 0.5% on our market share, most of the years. And if I look at the last 3 years of looking at data, we have grown the average 0.4% year-on-year. Today, our market share is between 6% and 6.5%. I must also caution that these are estimates. There is no reliable data available through independent sources. This is based on our estimates of other players at the [ R&D ] level and at the state level. So this percentage could be a little bit off in terms of absolute numbers. But the trend has been a gradual increase in market share. And the reason again is very important. See, our company has always focused on the customer. Our product quality is perceived to be the best in the market, our service. And this business, this product requires a service and handling holding to the new farmer who is buying the system for the first time. So starting from the design of its equipment because each plot has to be customized, the design has to be customized to the plot. Proper installation has to be done. And then the farmers have to be properly educated for using it well. Coming to the third question about -- second question about growth. It's a tough one because CapEx is going through quite a difficult path last 2 years. But when I look at the positives in terms of the -- like I mentioned, the government states wanting to get active, price increase, which would make the industry also then drive the growth. So -- but there is a [indiscernible] of the raw material cost, which industry has to deal with in the short term. So our estimate is that maybe half 1 will be maybe a single-digit kind of a growth, 5% to 10%. And maybe half 2, depending on how the Monsoons go and how the policies unfold, if they are favorable, then we can expect a better growth in H2. And on this positive scenario, if I have to say give a range for the year, I think from 5% to 12% could be the annualized growth rate on -- depending various factors. This is our current estimate. But of course, next call, we can update this on the new data available. And as far as Mahindra EPC is concerned, we don't give any specific forecast or our forward revenue projections. What we can share with all of you is that our attempt and effort is always to grow faster than the industry and which we have also demonstrated in the last few years. That will be the case. We will always ensure that we put all the efforts, all the strategies and try to ensure we are doing better than the industry. That's answering your second question. Now when you say nongovernment business, actually, we mean nonsubsidy business. Nonsubsidy business segment, I think 2 years ago, I had mentioned on the call that looking at COVID and other factors, we want to now develop this portfolio. Now there are 3, 4 subsegments in that. The first segment in that is a segment which is called thinwall drips. They are -- the very thinwall drips means very low mm, less mm drips that's made by the companies, and they're offered to farmers at a lower cost. And they have a lower life, but they do the job as good as regular drips, and they're available outside subsidy. The farmers can buy them. That is called thinwall drips, that is one segment. Other segment, which is there is the segment of projects, which is government-linked but not subsidy-linked. And in these projects, government issues tenders and notices, and companies are encouraged to work with the government. And we can choose to decide which project to work in, depending on the payment terms and on the past interaction with those governments. So we select projects which are having good payment terms and we execute that, that's another segment. Then the third segment is exports. Then the fourth segment is nonsubsidy business. So meaning there are farmers who have already availed subsidy in the past, and they're not eligible for new subsidy. So that segment also is growing because subsidy -- because micro-irrigation in states like Andhra, Maharashtra, Gujarat have been there for many years. So many new farmers are coming up. And we have a database of our old farmers and since we are in the business for many years. So we are reaching out to them. And those who are not eligible for a subsidy, we encourage them to go for nonsubsidy product. So this is on nonsubsidy business. And last year, we did around 15% nonsubsidy business, as I mentioned before. This year, the thrust continues, and our target is around 20% for nonsubsidy. So that's where we are, Aditya.

Okay. Sir, to follow up with that. The pricing changes that the Telangana government made, let's say the other governments don't make any kind of price changes. Then if we have -- we want to sell the unique micro-irrigation products to the farmers at this prices without the increase, do we sell it at a loss or a very minor profit?

So as you can see from the last quarter's financials, there in front of you, with the old prices, this is what the performance was. So at a top line of -- as you can see, the top line of INR 66 crores, we almost broke even with the current cost and pricing structure. So as the -- I mean, if the cost gets favorable, pricing gets favorable, then obviously, things are positive for us. If cost is not yet favorable and price gets marginally favorable, then a little better scenario emerges. And let's say, if cost gets adverse and price has not changed, then we have a still worse-case scenario coming. So these options are there. And you have to see how the market unfolds. So I've explained before what could be the upside and what could be the challenges.

Sir, but from 2011 to 2016, just going a bit back, if I look, your raw material cost had been for the 4 years when like just when Mahindra acquired EPC between 60% and 65%. And even after that, the operating margin was positive between 5% and 9%. I believe the change in the business model by paying higher sales commission is creating a bigger drag on the net profits. Because today with 63% raw material cost, our operating margin is negative 3% versus a positive 5%, 9% in 2011 to '14 or '15. Now sir, why is this change done? And can we change it again to have these cost and cost savings and efficiencies that we talk about?

I think Aditya, the material cost, which you're saying in that period was not so high. We can look at the data. Let me check again. But as per my memory, it was not so high because this is -- experiencing this high cost in the last 2 years, and we had 1 year in '17 or '18 when the cost was higher. So that is one. Now second point which I want to highlight is in the early days, our material cost was higher than '16, '17, '18. The reason was we were having much higher dependence on sprinkler business. In those days, we used to have almost 75% to 80% business of sprinklers, which has lower margins and higher material costs. And 25%, we used to have on drip business. So over the years, we have moved away from sprinklers and more into drip. And as a result, our margins will increase significantly. Another point that we need to talk about is the -- in the early years, '11,'12,'14, the pricing was on largely the markets which were active were Maharashtra, Andhra, those days, and the commission system was -- payment system was different. We used to have less commissions for Maharashtra because of the nature of the model. Then Tamil Nadu came in. Our commissions started increasing more. So as a result, our commissions went up, but overall, our margins remain the same. So overall, the trend is much better in terms of margins. But if you don't mind, I'll ask our team to connect with you later on and eactly share the discussion on '11 to '15 data or I just ask my team to give the data, if I can get the data, I can come back to you on this point.

The next question is from the line of Rajan Shah, an individual investor.

Sir, first of all, thank you for the opening remarks. They were very informative. I had certain questions. One was this last quarter, INR 66 crores of top line which we did. Does it include any price hikes or all the prices hikes have happened post 31st March 2022?

Okay. Next question?

Next question was, sir, in your opening remarks, you mentioned that in 2021, we saw a de-growth of 20%. And '21-'22, we saw a de-growth of 25%. That means there was a net drop of 40% in the industry in this 2 years.

Right. Right.

Are we still looking at this 12% growth, sir? If there's a 40% drop, if we want to go back to that -- regain these 2 years of losses in the current year and assuming that industry goes back to '19-'20 levels, we -- aren't we looking at a higher growth because 5% to 12% seems to be very, very low, sir.

Okay.

I would also like to know about -- you mentioned in your opening remarks that Telegana has given 20% rise in prices.

Yes.

Assuming that other states grew 15% rise and net-net, it is 15% across the country. And if the industry were to go back to '19-'20 levels, are we looking at a revenue of beyond INR 300 crores for the current year? That was my question. And a little bit on the Top Greenhouse turnover expected because you said we had some good orders for the current year?

Yes.

And sir, any new states you have entered?. And one more question, sir, the last 2 years was very stressful for many companies. So is the industry seeing reduced players in this right now at this point of time because of the stress for the last 2 years, many of the smaller players may have got wiped out. So is it the scenario such that smaller players are taking stress and maybe winding up their businesses or something like that? So if you can give some idea...

Sure. Sure. Thank you very much for asking very pertinent questions. So starting with the first question. Now in the INR 66 crores, actually, there's one price increase which has happened by Gujarat state government, which happened early on. I think September, October, they announced this, which was around 5% to 6%. There is one increase happened. The Telangana has happened just after that in this year. So answer is only Gujarat is [indiscernible] 5% to 6%. The second point which you said is true that industry has gone down to almost 40% in last 2 years. It's a matter of concern for the country. It's a matter of bigger issue with the PMO, state governments, are thinking that need to change [ hard ]. We met the secretary for agriculture, the new secretary has come in, he was very concerned about this. And he did express that there has been a lot of internal concern on the matter? And the government is absolutely not happy with this -- central government for sure, because it is not in line with the declaration which they had given across last 4, 5 years, budgets and other communication. So clearly, there is a need for the industry to grow back fast. But why we are taking this view, Rajan, is that we want to be more cautious and conservative in our approach because we have seen in the past that while we expect the things sometimes don't fall in place. So there is reason, in state government working sometimes it's internal bureaucracy, sometimes elections, sometimes some new factors. So we would rather prepare ourselves in terms of the cost structure and expectation management with this kind of numbers. The industry is looking better, obviously, we are geared up because we have capacity, we have presence in all the markets, and we can really ramp up our presence. We have plants in Kondapur, in Baroda, in Nashik, and we have a very good supply chain available. So for us to achieve stocks -- supply the INR 300 crores on that is not a problem. So let's see how it goes. And as of now, this is what we think is a more conservative and more reasonable view. But we'll see. And as quarter 1 goes, I think things will start emerging. I would love that industry grows and it reaches the F '20 levels, and we achieve record business. Obviously, really happy if that happens. But we'll have to wait and watch, sir. Now coming to your next point about 15% channel price increase. Now if that happens and the governments are having the proper fund and working well, then clearly, it will be a turnaround -- and we will be having -- going back to the good times of '17, '18, '19, where the industry was doing well. But we'll have to wait and watch. And currently, after last year, we want 1, 2 quarters to see something on the ground before we really start hoping. So we are still not seeing those signs, to be honest. Once we are, let's say this, in this May or June, if 2 or 3 governments follow price increases like the way Telangana has done, then obviously, we'll be in a better position to communicate and plan for it. But one thing I can assure all of you that in terms of our readiness to grow faster than the industry, even if the industry is very fast, we are prepared because we have all the wherewithal. We have a very strong brand, strong manufacturing capability, supply chain capability, efficient at working of the management, so all those systems and processes are in place. So that's a positive for our company. Coming to Top Greenhouse. Now Top Greenhouse is now slowly coming of age. But again, it's a small business. I don't want to give a impression that, that's going to grow exponentially and really impact a big percentage of the total revenue. Today it contributes to a hardly 4% to 5% of -- 5% to 6% of EPC revenue. But yes, the growth rate is going to be much higher, and we want to grow the business much faster. And the traction which you are getting from some segments is quite interesting. And we hope to grow that business by 25% to 30% in this year for sure. And then let's see if we good response, it would be even higher than that. Now regarding this competition of last 2 years, yes, your point is absolutely valid. We have seen that a lot of smaller regional players have kind of withdrawn or just slowed down, reduce their whole capacity, manpower, a lot of these companies have reduced their costs. And many companies which are small to medium size actually have had a lot of financial issues in terms of not getting payments from markets like Andhra, where they were aggressive at some point of time and did not have proper rules for working capital. They've really faced the pressure. So to that extent, it is encouraging for larger players like us and 3, 4 other companies who are well managed and capable of exploiting. But having said that, I must also hasten to add that in this industry, if the industry goes up in the next 1 year or 2 years, then the entry barriers are not much. So it's very easy for these players to come back again because they're all opportunistic, and they could even come back to -- again come back fast. It's not going to be sustainable for long. New players can always keep coming in. So Rajan, I hope that answers your question, I think we are running a little bit out of time...

Yes, sir, But I have one question. You said Gujarat has done 5% to 6% hike. So we can expect one more hike of another 10% or something like that, right? I mean...

We have made a pitch. Yes, we have made a pitch. And Gujarat government has -- [indiscernible] has been very open, [indiscernible] understand. And they are working on it. And I think you state governments, the bureaucrats, [indiscernible] they understand because data is in front of them. They can make out the cost increase, they know everything. So that way, they are quite positive. And let's see step by step how they react, but they have been open for sure. An industry has done a very active job. Our association has been really working very hard to explain to all the stakeholders.

The next question is from the line of Vijay Kumar, an individual shareholder.

[indiscernible] good performance in spite of a lot of macro issues that are plaguing us. I think most of the questions are covered by my colleagues or friends. I have 1 or 2 more. One is knowing this business, more of the government subsidy-led [ 80%, 90 % ], are we looking at [indiscernible] in agri, the [indiscernible] precision agriculture [ or any other space, like we volume to increase that? ] and any other things that we are looking at to grow faster then -- because there will always be challenges in micro-irrigation. It looks very lucrative, but I know it's a very tough business to be in. So is there any opportunity as a group? Because I've heard that the CEO of Mahindra Group talking about precision agriculture as a priority for the group. So will Mahindra EPC play a big role in that?

Okay.

That's my question. Yes, yes.

Any other question?

And sometime back, the group was also talking about consolidation within Mahindra agri pockets. So we see in the near horizon or any -- I know it's a broad level at the [indiscernible] level, but anything that is possible in the next medium term to longer term at least?

Okay. So Vijay, coming to your first question, you're right. We need to have lesser dependence on state government, and that is the path we have started. And as I mentioned, that from 1%, we are at 15%, and we want to further progress it, that's in the -- with the current developed most product, which as I discussed in the past. Second thing which you are now working on is the Greenhouse project. We expect the greenhouse project to come of age in the next few years and start adding to the significant contribution of the company. So these 2 are already there in the realm and you are aware of it. Now we're also studying some other areas where we can leverage our -- even in the last call, there was a suggestion by one of the members on looking at manufacturing PVC and -- for the other areas. So this we are evaluating in study, there is no finalization now, but we are looking at that space that could -- so we're looking at some spaces which are beyond, but we are also mindful that we would like to be strategic core. We don't want to dilute, and we would like to keep the focus on the farmer and not going to do too much of unrelated diversifications. So that would be one of the criteria I would keep in mind. And coming to the question about precision farming. So precision agriculture, micro-irrigation is precision agriculture, which is one of our important decision farming methods. And there are other precision farming methods which are being thought about, but they are not in the Mahindra EPC, they are in the M&M space of tractor business that are being incubated and thought through. But clearly, we have synergies and we work together. So wherever precision irrigation require, EPC would come into that system and they would contribute there. As far as your next point about consolidation and some future things. Frankly, we cannot comment. There is nothing available to discuss now. But as I remember is something, surely we'll obviously keep it updated. So currently, there's nothing to update on that. And can you have a last question because it almost close to 5. So let's take the last question, if any.

The last question is from the line of Aditya Shah from Vikram Advisory Services.

Sir, as a follow-up, I wanted to ask that what the sales data from some of these centers owned by Mahindra. And what is the percentage of sales which are direct sales, so called, you may say? Another one, the person before me asked was the consolidation within the group. So I believe from what the public data I have is there are Mahindra Agri, Mahindra Summit and all of those companies together probably have around INR 500 crores, INR 600 crores of turnover. So together, do Mahindra at a group-level plan? Do you sort of have a larger entity like which can have INR 1,000 crores of turnover and which is why we can have better cash flows and all of that?

Yes. So Aditya, let me just first confirm your point, if you talk about material cost, that you know I have just responded.

Yes. Yes.

So what you have said operations, right? And the answer, which I give you also was right in terms of the commissions, in terms of the mix? And also, as we -- also, you like to remember that in F '11-'12 when Mahindra acquired the company, we also had to make some investments in people and organization and IT and other things. So that was the kind of journey we had then. So -- but your data is correct, so that's fine. Now coming to the question on synergies with [indiscernible]. So roughly, we do around 8% to 10% business through some of these centers, and that happens through them and it's going to [indiscernible]. And we use the tractor dealers, their reach and their presence. So not only for the 8% to 10% business, but also we have joint efforts in the field in terms of promoting joint farmer meetings, et cetera. So that the farmer sees Mahindra as one, and that's the unique strength which we have. So that definitely is one of our important image and brand-building avenues also in addition to sales. And coming to your question on consolidation. Yes, what you said Summit, Agri, all that is there. I think these are options which are always there for the management to review and consider. But as I've said before to Vijay, [indiscernible] which I have asked to update you on. But these are options, there are many other options are there. So when the time comes, obviously, we will keep you updated. Good. Thanks a lot. So with this, can we end the call, Ma'am?

Sure. Sir, would you like to add any closing remarks?

Well, I would just like to thank each one of the participants for their wonderful support and the interest in Mahindra EPC and for their very valuable questions. And I hope they were satisfied with the answers. And I look forward to connecting again in our next call after H1 results. And let's see how the industry goes. If it indutry goes well, I'm sure we'll have some good news to talk again. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Mahindra EPC Irrigation Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.