Shakti Pumps (India) Limited (531431) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Results conference Call of Shakti Pumps India Limited, hosted by Kirin Advisors. The conference call will be for 45 minutes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to [ Mr. Vastupal Shah ] from Kirin Advisors. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. I would like to welcome Mr. Dinesh Patidar, Managing Director of Shakti Pump India Limited; Mr. Ramesh Patidar, Director Export; Mr. Akhilesh Maru, Associate Director, Corporate Strategy; Mr. Dinesh Patel, CFO of the Company; and Mr. Ravi Patidar, Compliance Officer and Company -- Secretary of the Company. Dineshji, over to you, sir.

Thank you. [Foreign Language]

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

Congratulations on decent set of numbers. [Foreign Language]

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[Foreign Language] Is there any clause which protects us from the -- from this kind of variation in the list of solo model prices or something else? [Foreign Language]

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The next question is from the line of [ Hardik Raj ] from Economic Times.

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The next question is from the line of [ Pritesh Chheda ] from Lucky Investment.

[Foreign Language] And when do you think that EESL then will open the tender?

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[Foreign Language] [Technical Difficulty]

Sorry to interrupt. The management line has been disconnected. Please stay connected while I reconnect the management. Ladies and gentlemen, thank you for patiently holding the line. The line -- management line is reconnected. Thank you, and over to you.

So I'm just clarifying so the quantity tender is opened and everyone knows their quantity. Whereas rate tender is yet to open. And based on the rate, whether you want to take the tender, matching the L1 rate is yet to happen. [Foreign Language]

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The next question is from the line of [ Raj Shekar ], an Individual Investor.

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[Foreign Language] that is the farmer is buying without the subsidy, correct? [Foreign Language]

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Okay, okay.

Okay? [Foreign Language]

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So that means we are dependent on Kusum to a great extent of 50% -- 60%?

Kusum is my great dream and we are led by kusum. [Foreign Language]

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[Operator Instructions] The next question is from the line of Forum Makim from Equitree Capital.

Congratulations on a good set of number. [Foreign Language]

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The next question is from the line of Keshav Kumar from RakSan Investors.

Sir, first of all, congrats for the recovery after a very, very tough quarter for everyone. [Foreign Language]. On the market situation prevailing in DCR cells. [Foreign Language], I was reading that the domestic capacity is roughly about 3 gigawatts right now. And sir, if we are taking a total quantum [Foreign Language]

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[Foreign Language] So if we consider the big module manufacturer [Foreign Language]. So if they are also participating in the tenders. [Foreign Language], who will have the upper hand? [Foreign Language] compared to Shakti Pumps which is specializing in VFD and their own core pumps, whereas somebody who is producing a DCR cells and modules?

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Yes, yes.

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Okay, okay. So this would be executed this year success [Foreign Language]

Yes.

The next question is from the line of Samir Palod from AUM Fund Advisors.

Can you hear me?

Yes, Samir. [Foreign Language]

So my one question is currently, also you were supplying under the Kusum scheme at the old rate. Now what is the incentive given that those are fixed rates. And now there has been so much commodity and raw material inflation, why would -- you think it's remunerative to be -- continuing to supply under those old rates given where raw material prices are?

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[Foreign Language] Totally this price tender that you're talking about for the other 4 bidders comes out then depending on who the L1 is everybody will have to match that price. Is that correct?

Yes, correct. [Foreign Language]

[Foreign Language] this is the price for everybody who wants to supply to the farmer, correct, the same price?

Correct, correct, correct.

It may or may not be acceptable to some of the bidders who are already won under the quantity tender that has already been opened?

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[Foreign Language] the government -- the quantity tenders have already been opened and let's say, a few companies have got their quantities done, and L1 establish [Foreign Language] and that their pricing is lower than you all, then everybody will be -- will have to match the L1 pricing, correct?

Correct.

In that case, if some -- if -- given where commodity price regulation is which is not acceptable to the interesting bidders [Foreign Language]

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[Foreign Language] Suppose the pricing, or the L1 price [Foreign Language] Can the farmer decide that I want to buy all 3 lakh pumps from, let's say, Tata Solar or from Shakti Pump?

Yes. Perfectly right. Perfectly right. [Foreign Language]

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Perfectly right. Perfectly right.

Okay. Fair enough. And then you are saying for FY '23, there will be a new tender with -- in next year?

Right, right. Because see we are leader in India. [Foreign Language]

Okay. Sir, so related question was that [Foreign Language] because you are getting under the -- for old rate. Suppose the L1 rate that you got remaining for say even after the 4 tenders are opened and there is no change in your L1 pricing. Where do you think margins will increase in the next 6 months from the current year-on-year?

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Okay. And sir, last question was, your Uganda order if you start bidding from this year, will the INR 250 crores come in the next 2 quarters or you will just be moving on to the next year?

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Okay. Sir, requirements on their side and in terms of delivery schedule and all that, is that before the end of FY '22?

Yes.

So you will have to do before FY '22, right?

Right, right, right.

No no, not FY '22, FY '23.

So it is '23?

Yes.

So the total order this year INR 250 crores which could be spread over the next more than 2 quarters?

Yes. It is 2 quarter plus next 4 quarter, total 2 years.

[Foreign Language] Given where you are during -- in October and part of October has already passed. And given that these tenders are still not opened, those 4 price tenders. What is the realistic sales growth target that you are looking for? This INR 2,000 crores was extremely difficult.

Yes. [Foreign Language]

The next question is from the line of [ Dharia Trivedi from VJD Investment ].

Congratulations on a good set of numbers. [Foreign Language] Is my understanding correct?

Correct. [Foreign Language] Yes.

Okay. [Foreign Language]

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Okay. So 25,000 in Kusum and 15,000, is this domestic? Or also overseas?

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Sorry?

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Okay, okay. [Foreign Language]

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Right, right, right. So even without Kusum, my understanding is that we can do over INR 1,300 crores to INR 1,500 crores in this financial year, right?

Right, right, right. [Foreign Language]

Right, right, right. [Foreign Language] Is he a competitor? Or is he a customer? [Foreign Language]

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Okay. So basically, directly, they are not manufacturing pumps, right?

Yes. [Foreign Language]

Okay, okay. Right. [Foreign Language]

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Right, right. And going forward we see this market share being maintained, right?

Right. [Foreign Language]

The next question is from the line of [ Ketan Vora ].

[Foreign Language] That is not going to be in this year itself, right? So it will be over a period of 2 years. And billing will be starting from quarter 3 onwards. But it is tough to see [Foreign Language]?

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[Foreign Language] incremental regular exports are INR 160 crores, Uganda INR 250 crores, okay? [Foreign Language]

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Right. And sir...

Right? [Foreign Language]

Right, right. The second thing is that [Foreign Language] provided at a given price, right sir?

Yes.

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Right. And lastly, sir, [Foreign Language] that is under the litigation, right? [Foreign Language] Correct, sir?

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Okay. And over and above that [Foreign Language], is that right?

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Right sir. [Foreign Language]

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Right. And lastly from my end [Foreign Language] any specific reason to that?

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The next question is from the line of [ Himesh Satra ] from Sequent Investment.

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The next question is from the line of [ Tanvi Bhandari from Hem Securities ].

I wanted clarity on the working capital base for this quarter as well as the previous quarter because most of our billing is from the government and subsidies, generally, it takes time and plus we are not able to pass on the price rise, especially for the Kusum, which is a major segment for revenue? And also, as you mentioned that we are working on more capacity to work for [indiscernible] Kusum, we are assuming a good order book despite of Kusum not bringing into the next 2 quarters, so what capacity do we see after the normal situation for the second half of the year?

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Yes. You're asking about the capacity utilization for next quarter, right?

Yes. And why was it so low? [Foreign Language]

We have a total capacity of 5 lakh that too in 3 shifts. So we beside the capacity and our production in a batch wise manner. And in batch wise also, even if we are at, let's say, 50% to somewhere in the batches wise, we are at good utilization level in some of the plants.

So this is what...

Yes, go ahead.

And so what is the ideal capacity utilization given the current batch-wise production or the -- or shifts that you guys undergo?

See, that -- as I'm saying, we have 3 shifts. Some of the machine are working in one shift, some of the machines are working in 2 shifts. Some of the machine has a capacity to go beyond 5 lakh also. So batch wise capacity is based on the actual production and demand, then we decide our production cycle. And then we go up to the optimization level and how we have to continuously run or whether we have to run in a break wise manner.

Okay.

At 50% also in some of the machine, we are at good utilization level, and some of we are -- you are right that we are at underutilization level.

Okay. So what is the capacity utilization guidance, if any, for the next quarter?

See that purely depend on the supply and demand because even...

Supply and demand.

Yes, if you go to -- if we want to run at 100%, but we don't have a demand, and we're able to see 5 lakh pumps, then what is the use of it?

Right.

That too at a higher cost.

Okay. And one, what is the working capital base for this quarter?

See working capital base right now, our datas are -- on average basis, our datas are more than 100 days. But in absolute terms, if you see in this quarter, it's quite effective. We are within 90 days. We already brought down to 90 days. Creditors, we have around 80, 85 days, which is, again, brought down just to get a little more extra discount on our raw material prices to get a little more profit. And then we have inventory, which is right now around 65 to 70 days, keeping a little bit extra, considering the logistics and supply disturbance, RM cost, disturbance and material shortages.

Okay. And can you give -- share a same number for the previous quarter, June '21?

June quarter, we -- all the numbers were on the higher side, considering -- inventory was on a higher side. Debtors were also on the higher side and creditors were also on higher side because we were preparing for the Kusum Part 2, unfortunately, it get delayed because if big project come, then we have to prepare in early. So we will prefer for that, but get delayed.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to [ Mr. Vastupal Shah ] for closing comments.

Thank you, everyone, for joining the conference call of Shakti Pump India Limited. If you have any queries or any questions, you can write us at [email protected]. Once more, many thanks to everyone, for joining the conference.

Thank you. On behalf of Kirin Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.