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

Ladies and gentlemen, good day, and welcome to the Mahindra EPC Irrigation Limited Q3 Unaudited Stand-alone and Consolidated Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ramesh Ramachandran, Managing Director of the company. Thank you, and over to you, sir.

Thank you, Darwin. A very good afternoon, ladies and gentlemen, and a warm welcome to all of you at the 10th 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. Today, as is customary, I will be sharing with you the key developments in the business environment, in the micro irrigation industry, in your company's performance and in the industry outlook for the rest of the year. But since this is the first time we are meeting, before we start the business session, I'd like to give you a quick background about myself. I joined Mahindra & Mahindra in 2015, and I've been in the farm equipment sector, also called FES, prior to my current role as MD of Mahindra EPC. As part of Mahindra FES, I first headed the strategy function and worked closely with the business President to make the farm equipment business more diversified in terms of product, more globalized in terms of geography and more digitized in terms of capabilities and solutions. In addition to my strategy role, I headed the precision farming vertical and worked closely with farming start-ups in India and across the world, including serving on the Boards of three such start-ups, one in Canada, one in Switzerland and one in India. Subsequently, I incubated an internal start-up within FES called Krish-e, with a mandate to create and commercialize value-added services for farmers that go beyond the core tractor business. That, in fact, led to the creation and commercialization of services such as Takneek plots, Krish-e apps and IoT-enabled Krish-e smart kits for farmers, all of which are operating at scale within FES. As a result of this, I worked very closely at the grassroots level with farmers, with dealers, with multiple stakeholders across the country, an experience I've thoroughly enjoyed. I have also been part of several CII and FICCI committees as a national-level member along the way. Prior to joining M&M, I worked for Unilever in the European Foods business for several years in several marketing leadership positions. And subsequently, I worked for a boutique strategy consultancy in London helping FTSE 100 and Fortune 500 companies grow their businesses through innovative value propositions and differentiated business models. As you can probably tell, I'm passionate about the farming industry. I'm very enthusiastic about my new role as MD of Mahindra EPC, and I very much look forward to driving long-term growth and margins for your company. Thank you. Moving on now to the business session, let me start with an overview of the micro irrigation industry in India. As per FICCI, the median growth forecast for agriculture and allied activities is projected to be 2.7% for the year 2023-'24, which is on top of 3.3% growth in the previous year. The El Nino effect has had an impact on the spatial distribution of rainfall this monsoon season. But even with this, the agriculture sector will remain a major contributor to overall GDP. As we know, the most critical resource for agriculture is water. The agriculture sector accounts for 70% of freshwater withdrawals as per World Resources Institute, whereas as per Central Water Commission in India, the figure rises to a whopping 80% for the agriculture sector, with just 7% for industries and power generation, 6% for domestic use and 7% for other use. Further, the water requirement by 2050 shall be 1,180 billion cubic meters, BCM, whereas the total availability of water in the country from all available sources is going to be lower than this projected demand at 1,123 BCM. That means we are staring at a shortage of approximately 57 billion cubic meters in 2050. Thus the growth of the Indian economy in general and agriculture specifically will remain a challenge without micro irrigation. Micro irrigation addresses issues such as water use efficiency, productivity improvement and farmer income, which aligns very well with the Honorable Prime Minister's vision for doubling farmer income. Over the last few decades, continued irrigation through traditional practices has begun to show its ill effects on groundwater quality, groundwater availability, soil health, crop productivity and the cost economics of farm practices. This calls for surface water use efficiency improvement as well, which is incomplete without on-farm water management, and this makes micro irrigation critical, which currently has only about 15% penetration out of a 70 billion hectare potential. Lots of upside. Recognizing the importance of micro irrigation and its ability to improve productivity, the government of India identifies micro irrigation as a key tool to double farmer income. Although this is very encouraging, the funding also requires state governments, and this is equally important as a major part of the subsidy is controlled by the state, various critical aspects of the scheme such as pricing decisions are taken by state governments, and the government of India issues guidelines and defines boundary conditions such as unit cost norms. Let me now move on to Mahindra EPC. Coming to Mahindra EPC now, Mahindra EPC Irrigation Limited, as you know, is one of the pioneers of micro irrigation in India. Mahindra EPC is a part of the Mahindra agriculture sector and carries the legacy of the highly respected and diverse Mahindra Group. In a recent internal change, the micro irrigation business has moved under the farm equipment sector of Mahindra & Mahindra Limited to have better support through various synergies. And having worked in the farm equipment sector myself, I see various front- and back-end opportunities we can explore. Since 1986, Mahindra EPC has been an enabling farmers to rise through sustainable precision farming solutions in the space of micro irrigation, water management, automation, and community irrigation. We believe that farmers are one of the most vulnerable communities of our society, and we work with this community to demonstrate the practical and achievable benefits of these techniques. We work for driving positive change in the lives of our community, and we believe that only when we enable other to rise will we rise. Sustainability, as you know, is one of the world's biggest challenges, it seems today. It is also an industry in itself. At Mahindra EPC, we understand how important micro irrigation is in order to make Indian agriculture more sustainable. This obviously is not an overnight change and it will take some time and sustain an extensive demonstration, training and awareness programs to bring Indian farming abreast with micro irrigation practices across the world. We have always focused at Mahindra EPC on customer satisfaction, and we have always strived to provide the latest technology in water management for various agriculture applications. Let me move on to micro irrigation industry view. Let me start by sharing some specific details regarding the developments in the micro irrigation industry. As many of you know, the last couple of years have been dampening for the industry. If we look at recent years, the industry showed around 11% to 12% compounded annual growth rate for financial year '17 to financial year '20, which dropped to 4.6% for financial year '17 to financial year '23. All this is basis the hectarage covered by the industry as per the official website. This was on account of delayed fund disbursements, the COVID effect, changes in priorities of a couple of key states and various other reasons. But now we can see a bit of enabling environment with prices improved, raw material prices stabilized and key states contributing. Riding on this, the industry is likely to see a growth of around 10% to 13%. One more key development seen in the industry in FY '23 is a favorable trend for new markets within the country. This could be a beginning of a long-term development of these markets. Presently, MEIL has a low presence in such market, example, Rajasthan, UP and the eastern state. As per industry coverage data published, in the MEIL-represented states, the industry in FY '23 declined by 7%, whereas in the other states, the industry grew by 50%, and that industry amounts to some 35% of the total national industry. This no doubt has led to MEIL initiating, strengthening activities in states in the North and the East, such as UP, Rajasthan, West Bengal and Bihar. Presently, the positive that we see in the industry are softer raw material prices, some states like Gujarat pushing for growth and making good use of Atal Bhujal Yojana, some states like Karnataka getting active from December onwards, Tamil Nadu issuing work orders at a regular pace and the industry in markets, as I mentioned, UP and Rajasthan, showing a positive trend. But just as we see the positives, we also anticipate some challenges, challenges on account of some states not releasing or delaying their subsidy payments, operational issues in various states as they get into a routine with RKVY, prices of Brent crude, which after a fair stint below the USD 80 range, has started climbing up and also the likely enforcement of the model code of conduct in March with the general elections of 2024 around the corner. While all this is happening, the Government of India is also likely to look at improving the use efficiency of surface water, and thus it may come up with projects on developing clusters, pressurized pipe systems for water conveyance, et cetera. This may indeed present opportunities for irrigation projects subject to viability in the future. After briefly understanding the industry, let me now come to the MEIL performance. In financial year '24, the company saw positive movement in revenue as well as PBT. This was the result of work done on identified strategic levers, larger industry markets such as Andhra Pradesh getting active and revival of operations in Tamil Nadu, despite the support of external positive factors, as I mentioned before, such as the softer raw material prices and price revisions received in financial year '23. The company also faced challenges on account of delayed disbursement in certain states on account of fund availability at their end, changing priorities of the state and procedural delays on account of the shift of the PDMC, per drop more crop, the micro irrigation project across Government of India to RKVY, Rashtriya Krishi Vikas Yojana. Learning from previous industry trends, the company decided to strengthen its presence in markets such as UP, Rajasthan and Bihar, where we were present in the open market. This quarter onwards, we have started operating in the subsidy market of these states as well. The company has just entered the state of West Bengal, where we feel there could be a good future. Some of the strategic levers mentioned in prior conversations include improving the nonsubsidy business. To report, 2 parts of the nonsubsidy business, thin-walled revenue has improved by 52.7% over the previous quarter and 11% YTD December. Also open market nonsubsidy business has improved by 14.6% over Q3 F '23 and 13.1% YTD December. During this period, we have executed an export order for the supply of micro irrigation as well as automation material for a 2,000-hectare project. I am happy to inform you that this is a repeat order. As we've been informing you, we focus on multiple small projects which are manageable and avoid big impact on working capital. The consistent effort in this area of operations have helped increase the revenue from such irrigation projects. Irrigation projects revenue improved by 74.6% over Q3 F '23 and 36% YTD December. The company is consistently building a strong pipeline for such irrigation projects. Overall, contribution of all these nonsubsidy activities has resulted in an increase of the nonsubsidy revenue to 24.2% for YTD December F '24, whereas it only had a share of 2% of the total revenue in financial year '20. It has always been our endeavor to improve our product mix towards drip irrigation system. We have been able to improve this product mix by around 4% for the period YTD December '24 compared to the same period last year. As regard the challenges, slow pace of collections in various markets have impacted the cash. However, better days are retained in low previous year same quarter as well as previous year March level. We now come to the financial performance of the company for Q3 '24. In Q3 '24, the top line grew by 22% versus the same period previous year. This was on account of increase in nonsubsidy sales, improved revenue from Gujarat, Tamil Nadu, Andhra Pradesh and Karnataka as well as exports. The unseasonal rains and hailstorms towards November end and early December, combined with delayed subsidy disbursements, led to a decline in Maharashtra revenue in the peak season period. From a profit perspective, for Q3 F '24, the contribution went up by 8.4%, riding on favorable material cost. The reduction in the material cost was an outcome of softer raw material prices but also better negotiations and strategic buying, including imports as well as improved product mix and improved state mix. The variable costs saw an increase on account of emissions and freight as the revenue contribution from project markets increased to 49.4% versus 37.7% of Q3 F '23. Further, the site variable expenses went up on account of higher business from irrigation projects. The fixed expenses varying versus Q3 of last year represent expenses related to improved revenue, such as CNF charges, sales and promotion travel. The cash flow for the quarter was positive. Coming to the financial performance YTD December F '24. The YTD performance shows a top line growth of 37.2% versus the same period previous year. Profit-wise, the contribution has gone up by 9.2%, riding on favorable material cost. The reduction in material cost was an outcome of softer raw material prices, as I mentioned before, also better negotiations and strategic buying, including imports and finally, the impact of product mix improvement as well as segment mix change. The increase in variable costs at YTD level is on account of commissions and freight due to the increased contribution from project markets, which was 52% versus 41% of Q3 F '23. And this has been compensated by lower site inflation expenses and reduction in other variable costs even on account of improved efficiency. The fixed expenses variance versus the previous year represents primarily employee benefit expenses on account of annual increments as well as expenses related to improved revenue, such as CNF, sales promotion, travel and other professional fees. What is our outlook for Q4 F '24 from an industry perspective? The industry has shown growth so far in this financial year. But as all of you know, the general election model code of conduct is likely to be declared sometime soon, maybe in March. It is difficult to predict its effect on the subsidy business. Still in all fair estimates, the industry may achieve its Q4 F '23 levels anyway. Before I close, I want to share some early reflections on growing your company after my first months of being in this business. We believe it is important for us to drive good quality growth, which means growth that comes with prudent commercial policies and more diversified cash flows. On the one hand, we want to recalibrate the business, as we have said before, towards lesser dependence on subsidy, while at the same time, keeping pace with the subsidy industry by widening our national presence accompanied with tighter commercial policies. Hence, going forward, I would like to share with you 4 growth levers that we will be working on over the next few months. One is growth in the north and east of India for subsidy business, in line with our commercial policies as well as our business concentration risks. Two is a focus on nonsubsidy segments, including institutions, open market, FPOs, exports, and irrigation projects. Looking at the nonsubsidy segment in this way throws open many new opportunities, which today remain unexplored and so we anticipate expansion in this area. Three is leveraging benefits from the M&M Group. I come from the tractor business, and there are synergies that I can see from the front and back end which can benefit your company. Four is digitization. Precision irrigation solutions are getting more adopted in other parts of the world. And as a team, we believe there is a good opportunity for your company to create a differentiated India-first solution. We will also look at how to use digitization to increase efficiencies. So in closing, as always, MEIL will continue its effort to deliver a better-than-industry performance through its focus on revenue improvement, through sharper spread and penetration strategies, optimizing the state mix, optimizing the product mix, exploring and strengthening nonsubsidy avenues and bringing constant value-adds to our offering. Thank you, and back to you, Darwin, to start the question-and-answer session.

[Operator Instructions] The first question is from the line of [ Akshat Bhardwaj ], an individual investor.

Am I audible?

Yes, you are audible, sir. Please go ahead.

I have three questions. The first one is related to margins. So I've seen in the past year that the margins have not been great and it was told that it was majorly due to the raw material pricing. So what is our outlook on the margin profile going forward? Because according to me, these kind of margins are not sustainable for the business. Second is we are saying that we are trying to grow in the North and East of India for subsidy business. How much are we there? What percentage of revenue do we have from these areas? And what are our expectations of growth in these areas?

Okay, thank you for your question. A very pertinent question. So let me start with the first one, which is around the margins. Let me just start by saying that like all the businesses that we have within the Mahindra & Mahindra Group, we are extremely focused on both growth and margins in the long term. Now can the company revert to earlier levels of margin? Not immediately, but yes, we will move towards that. We know that the industry itself has seen some strong headwinds in the recent past. But there are signs now that the external environment is getting more favorable. Now going forward, we are looking very much at a more prudent business approach. What does that mean? It means recalibrating the business towards finding the right balance between subsidy and nonsubsidy business. So less dependence on subsidy while, at the same time, keeping pace with the subsidy industry using our tighter commercial policies. Now this resetting, we believe, is critical because it is about giving returns over time. And in my opinion, this resetting will lead to sustainable long-term growth both in terms of volume as well as margin. It will also create a business that is more resilient in the long term to the industry's business cycle. As your company's volumes catch up -- sorry, are you saying something?

No, please go ahead.

Yes. As your company's volumes catch up to the previous highs, we will see higher realization, and we will continue to manage our costs very carefully. So while some of the costs have gone up, most of these have been compensated to some extent by efficiency-improvement measures. As an example, employee costs this year will be in the range of employee costs we had in F '20, despite increments to the team over the last few years and this is the result of internal restructuring. So overall, this is about going back towards the earlier margins that we had through a recalibration of the industry.

Just a follow-up question on this, just if you can give some numbers on this, for example, what can you expect the raw materials prices? What can we expect the product prices? How will the product prices improve? You have already given us some thoughts on the labor. What is the time line we expect on the recalibration that you are doing, 1 year, 2 year or more than that? Can you just give us some numbers on that?

Yes. So I mean, broadly, on raw material prices, we expect -- I mean, we can't make predictions for too far into the future. But for us, the next financial year will look similar to this financial year. And additionally, in terms of your other question of timing, it is too early to tell. We don't -- as in the past, we've not made projections, and we don't really make projections in terms of either top line or bottom line. Your question on the North and the East, I would say that, yes, the background is that we've got into the state because we believe that there is a way in which we can grow in a prudent manner by being in the subsidy market. The idea is to build volumes through a steady sustainable approach, which is a cluster approach. And as we get to understand the business nuances in these states there, we will accelerate. It is early days for us, so please give us some time, and we will come back to you with sort of longer-term view about our prospects in these states.

The next question is from the line of [ Jigar Shroff ], an individual investor.

First of all, congratulations and wishing you all the best for taking -- being in charge of the company, sir. And then on the outset, sir, been a long-term retail shareholder since the last about 10 years, since about 2013, '14. I had a couple of questions. Sir, you mentioned global -- MIS penetration in India is about 15%, right, sir?

Yes.

I just wanted to understand globally what is the norms. I mean, what is the global penetration, just to understand the size of the opportunity, sir? Yes. That's my first question. Secondly, sir, should I...

Yes, please carry on and you can ask all of them and then I can answer them together.

Yes, okay. And for FY '20, sir, we had a turnover of INR 284 crores and an EBITDA of about 14%. I understand there was COVID in between and some states had become slow and had changed their approach towards this sector and things are gradually getting back to normal. But when do you expect, sir, to reach those levels of 12%, 14%, sir, in the next 2, 3 years? Secondly, sir, any update, sir? I mean, what is the future of the greenhouse joint venture? And third, I mean, this existing capacities, do we have enough capacity? I mean, if the industry grows that we can reach a turnover of about INR 500 crores in about 3, 4 years' time? These are my questions, sir.

Okay. So let me start in that order. So from a global market penetration of micro irrigation, it is much higher than India. Let me come back to you, Jigar, with what the exact number is. What we do know is that in India, when we look at other industries, which were at a similar point in their inflection and if I think of the farm equipment business, and I think that some of the implements which were recently at that type of penetration, the critical -- once the critical mass is reached, a lot of opportunity is unlocked. So what is important for us right now, yes, globally, it is much higher, that I know. How much exactly it is we can come back to you on. But the point for us is that in India, it is still 15%. I mean, I know that in Israel, for instance, it's 90%-plus. Now can India become Israel anytime soon is an open question. But the fact is that in India, we're still only 15%. So as an industry, it is very, very well poised for industry-level growth. That, combined with the fact that there are so many external pressures coming from climate change. The next question is on margin.

Sorry, can I interrupt sir?

Yes, sure.

So is it safe to say that -- I mean, without exactly you having the global MIS penetration percentage, but this 15% can go to 40%, 50% over the next 10 years or so?

That would be my belief. Now is it 10 years, 15 years, I don't know, but I would imagine that it needs to go to that level of penetration because the country needs to be more efficient with its water usage. And it becomes a consequence of some very important external impacts. And in India, it is only the groundwater and surface water. So surface water also gets into the picture. So the opportunity increases even more. Just moving on to your question on margins. Like I said earlier, it is important for us to drive good quality growth. Now what we mean by that is growth that comes with characteristics which are around working capital, characteristics which come with pricing flexibility, characteristics which come with a certain level of predictability. So this really relates to how we want to structure our business and rebalance, recalibrate between our subsidy business and our nonsubsidy business. Now this is not an overnight journey. It is a very important journey for us. But what I would say is that the way to think of this business is a business that is balanced in the different revenue streams that it has. And so there is no simple answer to when we will see the margins go back to the original levels. What I will say is that there is a prudent business approach that we have right now. And this will definitely set us on the path to improving our margins and going back to older high levels of margins in the time to come. And sorry, last question was on greenhouses. So it's not been -- our initial experiments in this has been mixed. We are continuing to focus on the nonsubsidy affordable solutions as part of which we've developed this 100- to 400-square-meter net house solutions, which are both for regular requirements as well as nursery requirements. In a market that is very subsidy-driven, we have not found it easy to sell this concept. But we have gone back to drawing board, and now we have some proven concepts that we believe can give a sustained income to the farmer. So quite soon, we're going to come up with a go-to-market strategy for this new product.

And sir, if I may ask, what is the reason for this huge increase in other expenses, sir, in this quarter from INR 17-odd crores Y-o-Y to about INR 24 crores, INR 25 crores?

Yes. So like I mentioned, it is a combination of both the expense -- the fixed expenses as well as the variable expenses. And on the fixed expenses, it is the increase in the employee cost, the increments with the -- to employees, but also a large part of it is just the increase, which is in proportion to our revenue such as CNF, such as sales promotion, travel, professional fees and also some impact of our tighter commercial policies, and so how we recognize extended credit losses. We've also got, as part of our tighter commercial policies, a prudent approach. We have also looked at recognizing some extended credit losses.

When do you expect, sir? I mean, you think from FY '25 onwards, sir, I mean, we should see a gradual improvement, sir, in the top line with all these measures, top line and gradually -- because at the moment, the margins are barely 5%, gradually going up to 7%, 8%, 10% over the next 2, 3 years, sir, would you say, with all these measures that we are talking of?

Yes, we are positive. I mean, you probably sense that we are positive about the future, and our positivity comes from both external factors as well as internal factors. And the external factors are that the environment seems to be moving towards becoming more favorable. The internal factors are that we are in the process of recalibrating our business to make the cash flows more predictable. And this is not, like I said, something that is overnight, it is going to take time. It's too early for us to put a date to it, but we do know, we are confident that a combination of the external factors as well as the strategy that we are undertaking puts us on the right path.

Sir, is exports a thrust area? I mean, what would be the exports, I mean, in this turnover of for 9 months, the INR 190 crores, how much would be exports, sir?

About INR 7 crores is export and it is an area that we will be looking at. So like I highlighted in my growth levers, it is part -- an important part of the nonsubsidy space, and it is an area that we are looking at. It is one of the areas that potentially the synergy with the tractor business offers and so more on that as we build a more detailed plan on it.

And the margins are better, sir, in the export business?

They are comparable with what we earn in the core business, so definitely not a dampener.

On the project business, sir, that would also be a key focus area.

Yes. I mean like we said, the irrigation project business, we have a certain approach which we don't intend to change. And that is to go after projects which are small, medium-sized projects. And with our tighter commercial policy, we will be very, very careful about which ones we sign up for and which ones we don't.

Can you explain a bit, sir, about what is the nature of this project business, so what exactly are these projects?

When you say projects, do you mean the irrigation projects business or the general work order business?

I mean both, sir.

Both, yes. So the irrigation project business, as you know, is smaller community irrigation projects. We also have projects like the Narmada Valley project in the larger states. So these are what we call the irrigation projects.

Okay. So like the work order projects...

I mean -- sorry, carry on.

It would be like building canals and...

No, no, that is not part of this.

What would be the nature of work, sir? I just wanted to understand.

The nature of work in the projects is the water from the canal to the field. So it is more about last-mile management.

I see. And the other, sir, you said?

Sorry, what's that again?

There are 2 projects, 2 divisions. The other is?

The other is as per the government subsidy program where we have work orders that we supply directly to the farmers' farm through our dealers.

So what would be, I mean, the nature of these projects?

So that's a very different business. That's what we mean by the core subsidy business, where there is a government subsidy; the price is fixed; and therefore, there is no flexibility when the raw material price changes. There is a working capital cycle, which is unique to that business because it depends on how the government releases subsidies and we get paid. But at the same time, it is a large space and it is a very important space for our business and it will continue to be an important space for our business.

So this would also be -- this project will also be supplying drip irrigation systems for this government subsidy program?

That's right. That's right. It's very much about supplying drip irrigation systems.

So we want to focus on the other one, the irrigation project, which is nonsubsidy-related, right?

That will be a part of the nonsubsidy business and it won't be the only segment. It is one part, but it has many other segments, like I mentioned. The nonsubsidy segment also includes exports. It also includes the open market. It also includes institutions, FPOs. So it's a very interesting space for us to look at more logistically, which is what we're going to do.

So I mean, just a hypothetical question, say, after the elections, if demand really shoots up, you have enough capacity, right? The capacity, that is going to be a constraint.

Yes. So [ Jigar ], you had asked a question about capacity. So I'm going to answer that and then I will have to move it on. We are getting questions in and others also have questions. So just in terms of your question on capacity, just to comfort you, we are well positioned in terms of capacity to cater to big growth in our business and big growth that the industry opportunity offers. Thank you.

The next question is from the line of [ Rajen Shah ], an individual investor.

First of all, thanks for the opening remarks. They are very informative. Sir, I had a few questions, actually. I've been a shareholder for a very long time. But before those questions, I would like to just ask that in this quarter, we ended -- the quarter which ended on December '23 quarter, our raw material cost is 50% of sales; and our other expenses, 30% of sales. So for the fourth quarter, do we expect this to remain at the same level, 50% of same raw material costs and other expense at 30%? And can we expect the same for FY '25 as well? Can I get some idea on that?

So I can tell you about the raw material prices, and the raw material prices, like I said, we -- for quarter 4, we expect that the prices will be in line with what they have been in the rest of the year. We don't -- apart from being able to say that this will be range-bound, we will not be able to say much because it's, as you know, a function of many things which are difficult to predict like the geopolitical environment. And from an expense perspective, I think that we will be in line with what we have so far.

Okay. So basically for quarter 4, we can expect 50% raw material cost and 30% other expense. And for FY '25, you're not giving any guidance but probably if crude remains at this level of $80, probably we can end up with 50% raw material costs vis-a-vis sales if crude remains at this level. You're comfortable with crude at $80.

Yes, I'm not putting any percentages to Q4, but I will say that our expectation is that raw material prices will be in line with what we see in the rest of the year, and so will our expenses.

Yes. But sir, are you comfortable with -- is the company comfortable with crude at $80?

Right now, it is still a far, far lower number than it has been in the past. So we're sort of -- it's a sort of conclusion that we're happy to use as well. Right now, I think the best we can say is that it is a price which is at a lower level for us in the business.

Okay. And sir, I mean, just -- I was just going through 2019-'20 numbers before the con call. That year, we reported INR 285 crores of top line and a bottom line of about INR 23 crores, INR 24 crores. And probably next year, assuming a little growth on the current base, probably we may touch this or maybe taking into consideration the price hikes of about 10%, 12%, logically, we should touch INR 325 crores. Now assuming that we touch INR 325 crores, basically in 5 years, we have not grown. '19-'20 to '24-'25, assuming that we touched INR 325 crores of top line, which includes the price hikes taken by the -- given by the state governments, we have not grown. Now the Prime Minister is talking about doubling of the coverage of micro irrigation from 10 million, I think, to 20 million in 5 years and here is the industry -- when you're talking about doubling, it means 15% annual growth in the industry and here is the industry which has gone nowhere, in fact, 0 growth for the last 5 years. So why don't we have the mega theme, Jain Irrigation, Finolex, Mahindra EPC, other maybe prominent companies join and make a presentation to the government that here is the Prime Minister talking about doubling the area under coverage and here is the industry which has done nothing for last 5 years, sir. So why don't we make some -- India is moving. You can see in the stock market. Infrastructure is booming, everything is booming. Why is that this industry is stagnating? Zero growth, sir, for 5 years. We need to do something about this, sir. We need to make some representation to the government about this. When the Prime Minister is talking about -- when the Prime Minister goes to Lakshadweep, everybody starts, even The Indian Hotels has announced in the latest analyst meet, they said that we'll set up a hotel in Lakshadweep. So when Prime Minister is talking something, everybody follows him. So here in this industry, we need to put it to the top people in the PMO's office and the agriculture industry about nothing happening in this irrigation industry.

Yes. No, I think that first of all, I commend your passion as an investor. You share our passion for this topic. And I would say that this is a suggestion which we will take. And our CEO is represented and very vocal in the association. So this is a suggestion we will take forward. Thank you.

Yes, because, sir, whatever the Prime Minister says, it's implemented quickly. And here, the Prime Minister very clearly mentioned doubling of the acreage of the micro irrigation but the industry has gone nowhere. So we need to do something about this, sir. That is one thing. Another thing which I would like to say is that Mahindra is a solid brand, sir. Even in the most remote and the rural part of the country, if I go and talk to -- I've been to Gujarat interior recently and when I would talk to certain farmers over there, I traveled to almost 26 different places in Gujarat recently on my personal work. So I spoke with a lot of farmers, and I interacted with them and everybody knows Mahindra & Mahindra. Nobody -- there is nobody who would say that, no, we don't know Mahindra & Mahindra. Now despite that, sir, such a solid brand, Finolex is not known so much across the country. Jain Irrigation was in a really difficult shape. They have stopped taking project business. Netafim is an outsider. Yes, they have been in this business and they have maybe 20% market share, I don't know how much. But Mahindra is a solid brand, sir. Why are we not able to -- even if the market is stagnating at this level, why are we not able to get market share from others, sir? A strong player is the one who is able to -- irrespective of the market growth, is able to get some market share from other players because of its product and because of its certain spend. So we have actually, in the last 5 years, we have not been able to get any more market share. Yes, I understand the industry is not growing, but then if industry is growing, and we are growing, it's fine. But if the industry is remaining stagnating at the current level, same level at '19, '20, but if we are growing, that means that we are taking some -- I mean Jain was in really deep trouble and yet we have not been able to capture any market share. So this is something which we need to do. We need to grab market from other existing players because we have a strong brand and we can do it, sir. Nothing is impossible if Mahindra decides.

No, no, we completely agree, and we are on the same mission here, which is to grow our sales both in terms of market share as well as to take full advantage of the prospects that this industry has going forward. I will just reiterate that, like I mentioned before, the synergy potential that we have now that we are part of the farming sector with the tractor business and all its back-end and front-end capabilities is something that we will be definitely looking at going forward. So that is very much our mission as well. So growing market share is what makes us motivated -- and we're going to use all these developments and move things forward.

Sir, last one. Yes, sir. And last suggestion, sir. Sir, now we are going into Northeast and West Bengal and maybe UP and Rajasthan, so obviously, our working capital needs also will go up. Our interest costs may go up. We are now getting into project business. Also, interest costs may go because of more projects, more work and all that. Sir, why doesn't Mahindra & Mahindra come out with a preferential issue of maybe 50 lakh shares at a price of INR 100? You get INR 50 crores, no interest cost. Interest costs will not go up at all. We can deploy this INR 50 crores. Their holdings also will go up from 54% to 60%. Shareholders also will get confidence because last 10 years, the company has done nothing, sir. The stock has gone nowhere, sir. The market has gone up 200% from 25,000 to 72,000 after COVID, but stock has not even doubled, sir. My suggestion is that we'll need a lot of funds now to grow, and that will put pressure on interest costs and all that on the profit and loss account. We need to come up with a preferential issue of 50 lakh shares at a price of INR 100, get INR 50 crores from the Mahindra & Mahindra company and then use these INR 50 crores for expanding in the region. So we don't spend -- we don't incur higher debt costs. So that is one suggestion. And with this, I would like to end, sir.

Okay. Thank you, [ Rajen ]. [ Rajen ] that was an interesting suggestion. Right now, I can assure you that all the growth plans that we have in mind are very possible for us to fund from within the business. But depending on any future plans that we might have and the size and scale, we can definitely look at all types of financing options, including the one that you proposed. Thank you very much. Okay. I think we have come to the end of our time. Is there any other question? We are about 15 minutes overtime.

Sir, we have one participant in the queue, sir.

Okay. Yes, let's go to that question. And then after that, we can stop.

The question is from Milan Shah from Urmil Research Consultancy.

Can you hear me, sir?

Your voice is a little faint. Can you please just speak a little louder?

Can you hear me, sir?

Yes, we can hear you now.

Sir, first of all, congratulations because we are very patient since last 10 years but we have hope that the Ramesh sir is going to change because when you have joined the company and we see the big change that we've seen in last 10 years. So very congratulations. And my respect, sir, can you make any presentation before con call, after the quarter results complete?

Sir, can you just repeat that?

Can you make a presentation after the quarter result and before the con call? So many investors can study the company's profile and we are very confident that you can really make the company aim very high because we have been patient for last 10 years. But you have changed on this side. We are confident that your mindset is basically to improve the company.

Yes. So we take note of your suggestion, Milan-ji, and we've not done that in the past, but we will take note of your suggestion.

Okay. And sir, can you share the e-mail address so we can in future may give some -- maybe some questions for remaining because con call is going to be expiring sometime?

Yes. So what I would suggest is that you have the contact details of Ratnakar, who is the Company Secretary. And we also have an [email protected]. So I would suggest that you, in the first instance, reach out there, and we will find a way to improve our connection with all the retail investors who are keen on being more closely connected to the business.

Okay. Thank you, sir, for your time and polite answer. And we are very happy that you are going to join the company.

Thank you. Thank you very much, Milan-ji, and all the best to all of you as well. So with that, we'll come to the end of this investor call. Back to you, Darwin.

Sir, are there any further closing comments that you would like to give, sir?

No, I would just close by saying that this was our 10th investor call, and I think that the passion that I've seen among all the investors is just the same as it was. Thank you for your support. We look forward to meeting you again soon.

Thank you. On behalf of Mahindra EPC Irrigation Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.