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

Ladies and gentlemen, good day, and welcome to Shakti Pumps (India) Limited Q3 and 9 Months FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohit Anand from Ernst & Young LLP. Thank you, and over to you, Mr. Anand.

Thank you, and good afternoon, everyone. Before we proceed, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses risk that could cause future result performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. To take us through the financial results and the key developments and to answer your question today, we have the senior management of Shakti Pumps (India) Limited, represented by Mr. Dinesh Patidar, Managing Director; and Mr. Ramesh Patidar, Executive Director, Export; Mr. Dinesh Patel, Chief Financial Officer; and Mr. Ravi Patidar, CS and Compliance Officer. We will start the call with a brief overview of the past quarter by Mr. Dinesh Patidar, followed by a Q&A session. I will now hand over the call to Mr. Patidar. Over to you, sir.

Thank you, Rohit. [Foreign Language]

Thank you, sir. In Q3 FY'23 our revenue from operations increased by 17% Y-o-Y from INR 269 crores to INR 314 crores. In 9 months FY'23 our revenue from operation was INR 785 crores compared to INR 794 crores in the previous year. Export revenue stood at INR 166 crores in 9 months FY '23, up by 24.5% from INR 133 crores the previous year. EBITDA for the Q3 FY '23 stood at INR 21.9 crores as compared to INR 27.3 crores in Q3 FY '23. EBITDA for 9 months FY '23 stood at INR 55.7 crores as compared to INR 74.2 crores in 9 months FY '22. EBITDA margin for Q3 FY '23 stood at 7% and for 9 months FY '23 stood at 7%. The company reported profit after tax of INR 11.2 crores in Q3 FY '23 and INR 21.9 crores in 9 months FY '23. PAT margin stood at 3.6% in Q3 FY '23 and 2.8% in 9 months FY '23. With this, I now request the moderator to open the floor for question and answer.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Balasubramanian from Arihant Capital.

My first question, SECI has issued a new tender of around 6.66 lakh solar pumps. So the bidding expected to complete by March 2023. So like what kind of opportunities in terms of numbers? And how much competition we may expect for that -- who may take -- how many of them are going to bid? How much we can able to grab in these opportunities? Since we have a strong market presence of 32%, 35% in major tendering states, we may be able to grab 30% to 40% kind of opportunities in this tender? Could you please throw some more light on that?

Yes. Very good question. See, this is 6.6 lakhs tender and it is -- we are in a very good position in Madhya Pradesh, Maharashtra, Rajasthan, and Haryana. There is a 5 lakhs already sanctioned by MNRE. And our position and our brand image is very good in this area. We are confident we will get more than 35%, 30% share in the market. So it's very -- you see this time is tender execution is very, very tight. And we think and we are very positive to -- yes, this time is rate also very good and competition also less. So we are confident we will get the good business.

Okay, sir. Sir, on the export side, like which countries -- like which are the countries we are targeting it, what kind of pumps we are experiencing demand over this near term?

Yes, our U.S. A. company is doing very well, job in U.S.A. and Ramesh can handle this question deeply.

Yes, we are growing in all the sectors and in all the continents especially in Africa and U.S. A. for export business. Okay?

Okay. Sir, one more question. We got 2 patents out of 29. So what kind of patents -- what kind of like more are in these patents?

Yes, this patent is very good, patent and very big patents. So in future time, we will -- definitely, we will get good business of these things because we have started in U.S.A., this S4RM motor our technology and we have marketed in U.S.A. So recently -- yes it is in a development phase. Definitely, we will take the good business and profit for U.S. A. company for this patent.

Okay, sir. So what is our R&D spend and what kind of R&D spend we may expect over medium term?

Yes. Basically, Shakti Pumps is R&D company, and we have a very good R&D setup inside. For whole company, 150 R&D engineers working. We have done a very good job in this power electronics. We have developed a VFD solar controller, solar inverter and our motors are very good efficient motors worldwide. We are very good and in good position. So you can compare with any Japanese motors, we are including -- we are very good with same position in Japanese motor or Indian motor, our Shakti motors.

Next question is from the line of Vishal from Swan Investors.

This is for Mr. Dinesh Patel. Sir, what was our overall debt level for this quarter because your interest cost has fallen significantly.

Yes. So around INR 10 crores, we have some loan and around INR 46 crores, we have short-term loans. So totality INR 56 crores, we have outstanding as on 31st December 2022.

That is the reason our finance cost is very less.

Great. Sir, the second question is to Mr. Patidar sir. Any status on the price hike you were expecting on the earlier KUSUM scheme? Any color on that when the government is expected to give the price rise of 25%, 30% [indiscernible]

Yes, definitely. [Foreign Language]

Okay, sir. [Foreign Language] Can you share some idea on that?

[Foreign Language]

Next question is from the line of [Devansh Shah] from Niveshaay. Please go ahead.

My question is what are the reasons for declining EBITDA margins? Is it only because of rising raw material prices and also which are the key raw materials used in production.

Yes, definitely only raw material price. You can compare by this result [Foreign Language]

[Operator Instructions] The next question is from the line of Ankit from JHP Securities.

So I have 1 question. So in quarter 2 of financial year '23, 12,000 solar pumps were kept on hold for execution. So what's the status of that?

[Foreign Language]

Okay, how much will it be?

[Foreign Language]

Next question is from the line of [Senthil Kumar] from [indiscernible] Capital.

I have 2 questions. First is, what percentage of exports revenue we derived from USA?

U.S.A. export percentage?

Yes.

It's around 33%.

33 percentage of export revenues, am I right?

From U.S., yes.

Okay. Okay. So what kind of growth now we expect -- we can expect going forward overall in the export market?

[Foreign Language].

I'm sorry, sir, I don't know Hindi, can you speak in English, please?

Yes, are growing frequently in U.S. market, and we are like -- strategically expanding our network also in all the U.S. market, all the U.S. states, covering all the U.S. states -- 54 states. So we are expanding aggressively in the U.S. market.

So what will be the share of overall exports revenue in the total revenue?

We're trying to maintain our growth in each and every continent. So we will continue growth -- grow in the U.S. market as well as other continents also.

So what will be the mix in the overall revenue, sir, for FY '24, full year?

Approximately 25%, 30%.

Okay. And my next question is this regarding this investments in EV. When can we expect the commercialization of our EV products of our subsidiary?

Because EV, we are in development phase, we are doing development because we've done auto rickshaw and 2-wheeler motor, 3-wheeler motor. So still is going on thing because it is a very good business for us, and we have already started 1 company, the Shakti Green Company for 2-wheeler, 3-wheelers, 4-wheelers EV motors and there is -- we have already purchased land and development has started and building, we can start around 6 to 8 months time and plant and machinery already we are searching. So you can think after '24, we will start our major sales. Right now, we have already started our sales in the -- around 3,000 to 4,000 motors we have already sold to -- around 5,000 motors we have sold to 2-wheeler and 3-wheeler market. And still, we are testing our motors. Our motor is better than any Chinese motors.

So we can expect from FY '25 onwards. Am I right, sir?

Yes. '24, we can start this new company segment, 2-wheeler and 3-wheeler. We still we are in developing phase.

Okay. Okay sir. So what are the other products apart from EV motors, we are manufacturing we are planning to manufacture in EV segment?

Only motors and controllers.

Okay. What 2-wheelers and 3-wheelers?

Yes. 2-wheelers, 3-wheelers, 4-wheelers, controller, motors, both.

Next question is from the line of [Jatin Kodia] Individual Investor.

Thank you for giving this opportunity. I have a few questions. First thing is the solar prices, the polysilicon and the solar panel prices in China have reduced drastically. So just wanted to understand if the trend is continuing in India as well because I understand that you are procuring from Indian manufacturers only.

Yes, Jatin, very good. This is -- the Indian policy, we have to use only the -- sales is required, domestic manufacturing sales is required so we can purchase only a few companies in India, we have to purchase domestic sales only. So there is a tender condition because that is our Building for Bharat.

Understand, sir, what I was asking specifically was since globally, prices are decreasing for the solar panels, has there been impact on India given the export duty, are the prices decreasing from previous quarter to the current quarter for your solar panel which is your major raw material costs?

No, no, no, not like it. Because see, in solar panel, our Indian government put -- 40%, they have put at this duty for [indiscernible] Bharat purpose. And rest up our raw materials they have already increased the price. So no price decrease in the last 2 quarters. Every solar cell manufacturers in India, they have -- depend on the Chinese manufacture, so they have not reduced that. Chinese -- invoice in Chinese raw material for solar mix, so solar panel making companies.

Okay. I understand. The second question is that I think in U.S., are you selling solar pumps? Or as you alluded to 1 of the previous questions you are selling the parts to EV?

So in U.S., we are [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Yes, distributor [Foreign Language]

Next question, [Foreign Language] high solar price, high raw material prices. [Foreign Language]

Yes, yes, [Foreign Language]

Sir, for the current quarter, last quarter of FY '23, [Foreign Language] KUSUM pumps in India.

[Foreign Language]

Next question is from the line of Hardik Vyas from Economic Times.

Sir, I have a few questions.

Hardik, sorry to interrupt you, but you are not audible at all. May I request to please speak to the handset?

I'm speaking on the handset. Am I audible now?

Sir, no, you're sounding very distant from the phone.

Am I audible now?