Symphony Limited (517385) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Symphony Limited Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Bhartia from Investor Capital Services India Private Limited. Thank you, and over to Mr. Bhartia.

Thank you, Nirav. Good evening, everyone. A warm welcome on behalf of Investec India to the conference call of Symphony Limited. This is to discuss the outcome of the Board meeting in respect of divestment and monetization of stake in Climate Tech and IMPCO, Mexico, sale of technology and intellectual property rights by GSK, China to IMPCO and ESG initiatives. We have with us the senior management team represented by Mr. Achal Bakeri, Chairman and Managing Director; Mr. Nrupesh Shah, Managing Director Corporate Affairs; Mr. Amit Kumar, Group CEO and Executive Director; and Mr. Rajesh Mishra, CEO, International business. Now I hand over the call to the management for initial comments and presentation. Thank you, and over to you.

Yes. So over to Achal bhai.

This is Achal Bakeri here. A warm welcome to all participants on this afternoon to the Symphony conference call. We have some important updates, which Aditya just spoke about. We have a presentation in that respect, which my colleague, Nrupesh bhai will take you through. And as usual, the customary safe harbor rules apply. So over to Nrupesh bhai.

Yes. Thank you, Achal bhai, and good evening to all participants. Thanks for connecting. So as announced earlier, we had a Board meeting on last Saturday, and in this conference call, we are going to take you through these 3 outcome of the Board meeting. One is approval to explore divesting and monetizing stakes of Symphony India into Climate Technologies, Australia and IMPCO, Mexico. So Symphony India has 100% equity stake in both the companies. And in turn, Climate Technologies has also a step-down subsidiary based in United States and Climate Technologies holds 100% stake in that. Second outcome is to sell the technology know-how and IPRs by GSK, China to IMPCO, Mexico for about USD 5.1 million that is close to INR 43 Cr. And finally, review of key ESG initiatives. So the first and foremost, the reason for divestment of Climate Technologies, in fact, as many of the fund houses, analysts and rightly so were urging that in Climate Technologies, there is a disproportionate capital deployed, and it is dragging the overall performance. And there was also a suggestion that in overseas subsidiaries, considering the overall performance, also might be taking management bandwidth and time when there are immense opportunities in India especially with several initiatives which we have taken in the last 2, 3 years and also direct export market. So obviously, as known to all, Climate Technologies is really dragging our return on capital employed. And due to a variety of reasons, it has not delivered and performed up to the mark so far. Of course, as guided earlier, we have succeeded in reducing its overheads to less than half vis-a-vis when we acquired, and we have also launched recently a series of new products as befitting to that market and also creating the marketing and distribution network and has also converted it into asset-light company. And we expect Climate Technologies to turn around and do decently well down the line. As we have demonstrated successfully earlier recently with GSK, China and earlier with IMPCO, Mexico. However, directly, indirectly in Climate Technologies, Australia, the total capital employed is about INR 351 crores and figure is available in public domain and announced up to 31st December for trailing 12 months, its turnover was INR 167 crores with a negative EBITDA of INR 21 crores. Coming to IMPCO, Mexico, trailing 12 months up to 31st December, top line was INR 187 crores, EBITDA was INR 24 crores and its capital employed was INR 86 crores. However, in IMPCO, Mexico, normally on 31st December, there is the lowest capital employed. This is the capital employed as on that cut-off date, 31st March and 30th June is the highest capital employed, which hovers to around INR 125 crores. And both put together, as guided in this chart, the top line is INR 354 crores, EBITDA is INR 3 crores and capital employed is INR 437 crores, translating into combined ROCE percentage that is EBITDA to capital employed 1 percentage. So if we remove these 2 companies, as it is shown on extremely right-hand side in the last column, the consol turnover will be INR 1,164 crores and EBITDA will be INR 264 crores, while capital employed will be nearly INR 46 crores, translating into very high double digit EBITDA ROCE percentage on core capital employed. Another reason is sharpening management bandwidth and focus -- just show all the points. So by exiting from these 2 companies, it is to be kept in mind, we are exiting from these overseas subsidiaries. But there will still be a strong possibility whereby Climate Technologies and IMPCO under new ownership may continue to procure the products from Symphony India as well as GSK, China, particularly in Climate Technologies, considering obvious benefits, especially with new geopolitical situation. There is also a possibility about the brand licensing arrangement in both the markets as some of the products are sold under Symphony brand. Importantly, management bandwidth and time, especially of the top management, we wish to devote on highly growth-oriented and profitable segments in domestic market as well as potential overseas exports directly from India, especially to United States, Brazil, Europe and few other countries. And why we are saying so and why we have arrived at this conclusion because in last couple of years, we have taken some major strategic initiatives whereby in last 5 quarters, our actual financial performance, especially in Symphony India as well as GSK, China, it has been successfully demonstrated and those initiatives include our entry into adjacent product categories and they are tabletop cooling appliances as well as kitchen cooling solutions both selling around the year and have immense potential to grow profitably. Last year, we have launched innovative storage water heater, which is counter seasonal. Apart from that, in the last 3 years through series of initiatives, we have penetrated well in rural and semi-urban market and has a great scope as well as there has been a rapid rise in turnover through various digital initiatives and digital channels, which includes sales through D2C, e-commerce as well as a few other initiatives. And of course, this has been newly supported by very conducive summer. As far as U.S.A. market is concerned, it seems that current geopolitical maybe once in a lifetime opportunity because whether in U.S. or in other global markets, our main competitors are Chinese player. Currently on China, the duty is about 145%, on India, it is 26%. Assuming over a period of time, duty from China rationalizes, but even if we have a decent arbitrage, even in that respect, Chinese players don't have that kind of profit margin. And even currently, as it is, we are competing well and we may have a huge opportunity in that respect. And in last couple of weeks, we have also received some direct inquires in that respect, of course, at very early stage. On top of it, in respect of direct exports from India, Symphony Brazil model that is establishing a trading subsidiary and selling well has also proved quite successful. So this is part 1 of the update. Part 2 is sale of technology know-how and 9 IPRs by GSK, China to IMPCO, Mexico. So over a period of last couple of years, GSK, China develop the technology as well as IPR, keeping in mind Mexican market and IMPCO's product requirement. And in current situation, it has been deemed appropriate by GSK as well as IMPCO, Mexico to enter into this purchase and sale arrangement at arm's length price of about USD 5.1 million, that is INR 43.5 crores. These are the technologies and IPRs specially developed by GSK meant for IMPCO, Mexico. So sale of this technology and IPR no way is going to impact performance of GSK, China. We have fully evaluated as well as GSK is quite confident that its current as well as future growth potential will remain unimpacted. IMPCO, Mexico is going to pay this consideration fully out of its internal accruals. And by the way, this transaction will also help in optimizing the valuation of IMPCO, Mexico. As far as GSK, China is concerned, it will receive INR 43 crores, and it doesn't need this fund either for its working capital or growth. Its current working and internal accruals are sufficient to take care of it. So net of taxes and expenses close to INR 40 crores, GSK, China will use to repay the loan to Symphony India. Loan outstanding from GSK, China to India was about INR 60 crores as on 1st April '24. Over the last 12 months, close to INR 13 crores has been repaid. And as of today, including interest accrued, the outstanding is INR 49.6 crores. So post completion of this transaction, the outstanding loan will be close to INR 10 crores, which we expect considering GSK's strong performance to be completely repaid down the line in few quarters out of its internal accruals. And by the way, end-to-end, this transaction is also quite tax efficient, fully complying with all the regulatory requirements, including transfer pricing guidelines. And finally, some of the key ESG initiatives because time to time, Board was taking stock of major ESG initiatives, and it has been taken note that the governance structure is very robust, fully aligning with the best practices much above the regulatory requirements. Key committees that is Audit Committee and NRC Committee comprising fully of independent directors. Each committee has 4 independent directors, and this is the status since long. 5 out of 9 directors on the Board are independent directors and 3, that is 1/3 directors are women directors. As many of you may be aware, it has been the practice of Symphony that other than sales and purchase transactions between Symphony and subsidiary or [indiscernible] among subsidiaries as well as managerial remuneration, both of which are absolutely normal course of business, there is 0 related party transactions. In addition to regulatory requirement, along with mandatory BRSR since '23-'24, Symphony is publishing the integrated annual report providing comprehensive view of ESG initiatives and performance in line with the best global practice. Again, for better transparency and governance, more than 25 ESG policies are in public domain, again, in line with the best global practices. And our product per se itself is environment-friendly, and management of environmental footprint through periodical life cycle assessment of the products is also being done quite systematically and ultimately helping in also optimizing the commercial performance. Symphony has for 3 consecutive years, including current year, received the certificate for Great Place to Work and every time with improved scoring. And this is also evident by industry-leading improvements in ESG score by independent external ESG rating agencies. So thank you. And with this, we are open for Q&A.

[Operator Instructions] The first question is from the line of Shraddha Kapadia from SMIFS Limited.

Am I audible?

You are.

So my first question would be with regards to the ROCE. So for this transaction, you have highlighted that there will be a huge ramp up in the ROCE, which is expected. So is there any internal target which you have for ROCE for FY '26?

Yes. So obviously, there are internal targets, not only for ROCE, but also for the top line, bottom line, including for respective product and subproduct and also geographically. But again, as per our IR policy, they are not in public domain.

Okay, sir. Also...

But what we have indicated in the presentation, as it is, where it is, as on 31st December, based on trailing 12 months, the ROCE on the core capital employed, assuming CT Australia and IMPCO are not there, it would have been 583 percentage. And that took considering EBITDA of INR 250 crores on a stand-alone basis as on 31st December for trailing 12 months. So all these are historical numbers.

Yes, sir. Yes, sir. Okay. So if you could just help with like we are now majorly focusing on India, U.S., Brazil, which is there. So is there any expected revenue share, which we expect the international markets to reach in a year or something?

Yes. Achal bhai?

So look, we really haven't set a target for that. But we believe that considering that as of now with CT and IMPCO, when CT and IMPCO are not there, the revenue from international would be significantly reduced. So the upside is going to be much higher in terms of percentage. And with the opportunities that have presented themselves in the U.S., this could be a really big upside. And in Brazil, also, it's a very large market and which in the last 2, 3 years, we have been able to grow in and we expect to continue to grow in that market. So I think collectively, all these markets will -- do present huge opportunities. I would not put a number to it. But as we go along the way, the numbers will sort of present themselves.

And as conveyed in the presentation and overview, we are not ruling out the possibility that so as well as Climate Technologies even under new ownership may like to continue sourcing of the products as it is currently being done from India due to obvious advantages apart from maybe a possibility of Symphony brand licensing in these 2 territories. So what we are trying to convey is maybe we are exiting from these 2 companies, not necessarily from these 2 territories.

Okay. Sure, sure. Got it, sir. That was helpful. Also, if you could just highlight the...

Sorry to interrupt you. May I request you to come later for a follow-up question. [Operator Instructions] Next question is Aditya Bhartia.

Sir, just a couple of questions from my side. Firstly, I wanted to understand at what stage are we in terms of monetizing stake in these subsidiaries. Have we initiated the process? Or is it a thought that we are having at this stage that this is something we should be doing and the process would get initiated and could take a few months to get consummated?

Let me answer that. So obviously, this decision we have arrived at after extensive discussion and deliberations, considering all the aspects as to what is in the best interest of the company as well as shareholders. And that deliberation has taken place over a period of several months, and then it has come to the Board for the final approval. So before putting to the Board, obviously, we had also done the beauty parade of several IB bankers. And now IB banker has been already decided and their terms of references, including the milestone in terms of the time frame of various steps as well as their commercials have been also decided. So by the time of appointment of IB bankers, they have also informally got some sense from the likely buyers. And based on that, we have finalized that. So I would say that now formal process will begin and whatever time it takes to conclude the process.

Understood. Understood. But we have already had some very preliminary discussions with prospective buyers that has happened.

So I won't exactly answer that because you will appreciate that in such M&A deal, these are very, very delicate issues. But as I highlighted, there has been some decent sense from the investment banker. And accordingly, we are going ahead.

Perfect. Perfect, sir. And sir, given that you kind of highlighted that markets of U.S. or Brazil can still offer you compelling growth drivers. Just wanted to understand, could there be some noncompete agreements that you may have to enter into, especially when you are selling Climate Tech, given that it has a presence in the U.S.

Yes. Achal bhai, over to you.

Yes. Okay. That is a little too premature to gauge at this point, Aditya. It all depends on how the negotiation unfolds with the potential or prospective buyers. So one never knows how this is going to develop. So we'll try and retain the opportunity to sell in those markets. But let's see how things evolve. Even if we cannot sell under the Symphony brand, there is nothing preventing, no noncompete would prevent us from selling to other customers or retailers in that market who will import from us directly from India.

Sure. Fair point, sir. And just one last question. We were seeing Symphony as a company that was targeting overall air cooler market globally. Now we want to be centered a lot more to Indian markets. What are the additional growth drivers that can...?

No, no, Aditya, I'll correct you there. That is not at all the thought here. Nothing changes as far as Symphony is concerned. We will still continue to pursue opportunities internationally. As Nrupesh bhai said, we are only exiting from these 2 countries. And at the very worst, let's say, there is a noncompete, which you alluded to, at the very worst, we are exiting from those 2 markets, and they are not the biggest markets in the world. So we are then focusing on markets which are much bigger than both Australia and Mexico, which are namely the U.S. and Brazil. So we are in no way at all sort of defocusing from the international markets. But the way we will address those markets has changed rather than having subsidiaries -- rather manufacturing presence there, we will have -- we'll sort of pursue the export route. And if required to grow in a country, if we have to establish a subsidiary merely like a trading subsidiary as we have done in Brazil, then we will do that. But under no circumstances, are we taking the eye off the international market. We are absolutely going to pursue that.

It will help us put our management bandwidth in a more focused manner on some of the larger global growth markets, including U.S., Brazil and some more. So this is just making sure that our bandwidth is at the right place where we are seeing larger growth opportunities.

So it is management bandwidth time as well as much better capital efficiency.

Let me also add, these are all going to be profitable opportunities, more profitable opportunities. And especially with the current tariff situation emerging, the opportunities that have sort of presented themselves or have come knocking on our door in the U.S. market could be enormous, could be enormous.

Perfect. Perfect, sir. That makes it very clear. But does that also mean that we will be becoming more aggressive and more focused on India growth opportunities. We could look at opportunities beyond our existing product categories and start looking at Symphony in a slightly kind of larger manner?

That, too, of course. And we have sort of demonstrated that as well with the introduction of water heaters, which are not really in adjacency, they are sort of counter seasonal. And the adjacent categories of tower fans and our tabletop range that we've launched about a year ago. So we are certainly diversifying the basket of products for the Indian market while pursuing opportunities for coolers internationally.

Next question is from the line of Rahul from Haitong Securities.

Yes, I'll start with what Aditya was referring to. In terms of now that you all have decided to exit Mexico and Australian entities, you talked about other markets that you wanted to focus and you specifically spelled out U.S. and Brazil. I want to know, to start with, which are the other markets that you all are targeting? So we have Brazil, we have U.S., which are the other couple of markets that you are targeting? And the size of this opportunity, maybe you could talk about the markets of U.S. or Brazil or some of the other countries that you all are targeting. What will be the size of that? So that's the first question.

Over to you, Achal bhai.

Yes, the other markets that we are not only pursuing, but we are already in our major markets are the Middle East, parts of Europe and parts of Southeast Asia, and of course, Africa. So that covers the whole world. So we are in various markets. Now the biggest -- of course, the big markets are Brazil and the U.S. Off the top of my head, I wouldn't have the exact numbers for these markets. But I would say that the largest market -- domestic market in the world for coolers is India, it's followed by China. And the third largest is the U.S. and the fourth largest is Brazil. So these are the 4 largest markets for coolers in the world.

And GSK, China has registered a strong growth momentum with decent profitability. So that addresses China domestic market as well as Southeast Asia.

And of course, we have representatives, we have people. We have people on our payroll in 3 different countries in Europe. So we are sort of working on growing those markets as well.

Sure. Now second question is actually related to China. Now China is mainly serving the Mexican market. And these IPRs, which were developed were -- now obviously are being transferred to that entity. Now after that happens, I'm just trying to think the Chinese entity, how much of that sales will be a domestic sales and how much of that would essentially go towards Mexico? And if these IPRs were to go out, does it impact the revenue potential of GSK?

No, no. GSK is about, let's say, [Foreign Language], half the sale comes from international and half domestic China. And of the half international, of the half international, a very small percentage comes from China -- from Mexico. A significant amount is exported across the world. So it isn't as if it is dependent on the Mexican business to continue its operations, it is not. However, as mentioned by Nrupesh bhai, even post this transaction, there is a possibility that the new owners might want to continue to source from GSK, China and from India -- from Symphony in India because we have the products and which are -- which have been doing very well in those markets. So there is no saying that, that's not going to happen. So we are exiting from those companies, not necessarily from those markets. So if not one way -- one way or the other, we will also be present in those markets. And as far as the IP is concerned, those IPs are really relevant for the Mexican market. So by transferring those IPs, again, it really doesn't affect China whatsoever -- GSK, China whatsoever.

And again, as outlined in presentation, as such GSK, China owns 51 IPRs out of which only [indiscernible] to Mexico. And as IMPCO and GSK deem appropriate, only 9 IPRs are being bought out, plus technology. So it's very much going to retain 42 IPRs. And such as not even a fraction of the percentage of its current or future performance will be any way adversely impacted. In fact, this transaction will help in multifaceted way in the sense IMPCO, Mexico will be more valuable in terms of the monetization. GSK, China is getting these funds, whereby loan to Symphony India will be repaid and its annual interest outflow of about INR 3 crores will be saved and in the process, GSK, China will be almost like down the line in line with Symphony India in terms of the capital efficacy. So that's what we wanted to highlight.

Okay. Fair enough. I think that's helpful. Now the next question is on the very purpose of selling Mexico and Australia. I thought these companies were on the way to turnaround. I think obviously Mexico was doing well. I think in the last couple of years, you've spent a lot of time and energy to turnaround some of these businesses. So why sell or divest now? And why not wait for turnaround? I thought we were not very far from turning around these entities.

No. See, first of all, IMPCO has long ago been turned around, as the numbers will demonstrate themselves -- prove themselves. So IMPCO's turnaround happened 10 years ago. So China's turnaround happened more recently. Australia's turnaround is sort of on the cards. It's going to sort of take another couple of years to turnaround. But considering the exposure at in Australia and considering the employees over there, even its turnaround will take a while for it to become ROCE-healthy. So it is going to be -- it is still a sort of a more time-consuming process. So while there are other opportunities that have come our way, so we felt that maybe it's a good time to pursue those opportunities rather than continue the path of turning Climate Technologies around. And although that's all certainty, but it is going to take a little more time than we would like. Ideally, it should have happened earlier. And really, it would have happened much earlier but it really not for 2 factors which impacted Australia. One was COVID of course, that COVID sort of parts of Australia had the longest lockdown in the world. Melbourne was closed for 270 days. That had a huge impact on our business. As a result of that, the Australian economy sort of took a hit. Many of our major customers and our products go to the real estate market. Many of our major customers who are real estate developers have gone bust. So our business sort of shrank. On top of that, more than half of our sales in Australia came from gas-ducted heaters. And now the major market in Australia is in the state of Victoria, which has put a ban on gas-fueled products. So the bottom has also dropped out of the gas-ducted heating business. So all in all, we've been sort of unfortunate with the series of events, which have prevented the turnaround from happening earlier. And while that happened and in the process, sort of we kept on bleeding and the capital employed over there just kept on increasing. So I think it's about time that we sort of turn our attention to bigger and better opportunities.

Sir, my last question before I get back in the queue is on the domestic business. Now you talked about management bandwidth. Logical extension for air cooling companies would be getting into fans or getting into room air conditioning, which I believe you have it in Mexican entity. Any thoughts on which are the areas where you are planning to focus, where you see more growth? Very briefly, if you can talk about that.

Rahul, as of now, we have got into the products that we felt there was immediate opportunity. While we are constantly scanning for opportunities, we haven't really zeroed in on anything, but we are constantly exploring. We're constantly exploring.

Next question is from the line of Jayesh Gandhi from Harshad H. Gandhi Securities.

My question is regarding the U.S. sales. What is the U.S. sales number currently? And are we back on track? I mean, last 2 summers back, I think we had INR 200-odd crores of sales. Are we on that track or still not?

No, no. As of today, for the current year or something, we are not expecting all of that to happen. I mean this is -- what we are talking about is for the next summer in the U.S. and the summers thereafter. So the U.S. business is still at a few million dollars. So I won't say that we are back on track, but we see the opportunities, which have suddenly emerged in the last few weeks.

Okay. And one last question is, what was the source? I mean, what -- where are we sourcing from for U.S. sales? Is it India or China?

From both -- from India, from China, from Mexico. So products have been going from all 3 subsidiaries and imports from some third-party vendors. So it's going from [indiscernible].

Yes. But what we are trying to say, henceforth, considering the unique geopolitical situation, there are immense and great opportunities emerging, obviously, because of the advantage to directly export from India.

In a worst situation, are we even looking at setting up a manufacturing plant in U.S., if nothing works out with Trump even for, say, India or China, then are we looking at setting up a manufacturing plant in U.S.? I mean are we even thinking on that?

No, no. That wouldn't even be necessary because we can continue -- we can export [indiscernible] we can export from India.

The reason being, see, in any case, tariff on India is not going to be higher than tariff on China. And certainly, even if 145 percentage tariff doesn't continue in China, say, it theoretically, reduces to half. There is such an arbitrage just by tariff and Chinese players don't have that kind of margin. So they will find extremely difficult to complete just price-wise. So it doesn't need that. And still end-to-end, whatever tariff we end up with, 26% or lower or 0, still end-to-end, we will be far more competitive.

Got it. And one last question, sir, if you permit me. In all this restructuring, is there any losses that we are taking? And if we are taking, is it this quarter or next quarter?

I don't know where from your this question is. So currently, our total equity investment in IMPCO, Mexico, INR-wise is less than INR 3 crores. And because originally, we had bought IMPCO, Mexico at $6.5 lakh. Other than that, there is 0, 0 investment by Symphony direct, indirect. So about IMPCO, Mexico, we expect decent valuation and monetization. As far as Climate Technologies is concerned, of course, currently, it's not doing well. But wherever any business is sold or available to buy, there are several parameters that includes products available, brands available, team, market access as well as the kind of the work we have done and the future prospects and potential. So based on that, we expect appropriate valuation for Climate Technologies Australia, too. So I think that's how we would like to see and we get some feel also that if these 2 geographies are available, there may be some interested buyers to have a combo deal.

Yes. Also to add to that, as far as Australia is concerned, historically, we were playing only in the coolers and the gas-ducted heating space. So cooling and heating combined, the market in Australia is just a couple of hundred million dollars. Now that we have ventured into air conditioning and into reverse ducted cycle air conditioning into heating and into fans, we are now or CT is playing in a multibillion-dollar market. We're talking about some $6 billion, $7 billion market that it is playing in. So in fact, the prospects for CT or for any new owners are huge. We have done all the cleaning up and all the hard work. And now it's a time when anyone can sort of reap the benefit. And just sort of -- we've done the transformation that is all [indiscernible]. The only -- whoever, new buyer only has to build the business. So there will be a decent valuation. And again, we do not know what was the rationale behind your question of booking a loss that as a possibility sort of we don't foresee that happening.

Next question is from the line of Vinay Nadkarni from Hathway Investments.

Just wanted a couple of questions. One was on CT Australia. Your -- the Slide 5 of your presentation says that you have invested INR 351 crores in CT Australia. Equity was around INR 182 crores. The balance is loans and guarantees for the loans? Or what is it?

No. So my [indiscernible] it says direct, indirect exposure. So INR 351 crores is inclusive of our capital investment, loan granted by Symphony India as well as its borrowings because ultimately, it's borrowings. We being a holding company, we need to consider that also and that borrowing includes acquisition loan, which is currently $10 million as well as some working capital loan. So that's how -- and it has been clarified also below the table.

Yes. Secondly, I can understand the logic of selling CT Australia. I couldn't quite comprehend the logic of selling IMPCO, Mexico because that is giving you a good ROCE. I presume that it is more to do with setting off the one against the other in order to make sure that you don't lose money, I presume. Am I right in that assumption?

No. We expect to make money in both the deals, Vinay.

Fantastic. Then just one question. The money that you would get because the total investment in both these companies put together, capital employed what you have shown is around INR 437 crores. So if you're making money in that, then you would be getting more than INR 437 crores in your PT. What do you see that being used for going forward?

Our business model remains the same. It's a capital-light, asset-light business model. So we -- and again, if you are -- I mean if there's certainly no acquisitions on the horizon, and we are not even going to be pursuing route at all. So whatever we need -- I mean, international growth will come by direct exports from India. And if at all, like I said before, we'll establish a trading subsidiary in a certain geography. But other than that, we will have no use for that capital.

Okay. So it can be ROCE negative going forward?

No, it may not be ROCE negative. You would have observed that we have a stated payout policy whereby at least 60 percentage of the PAT is to be distributed and in reality, I think in last 10 years, our payout is more than 80 percentage out of a PAT. So -- and in between, we have resorted to buyback, we have resorted to special dividend. So if we don't need the capital, obviously, those revenues are there. That's number one. And number two, at no stage, none of we are saying or committing any numbers in any respect. Obviously, disclaimer statement applies because you will appreciate that. The process has begun. We have some [ feelers ], we have some indications. But once it is fully wrapped up, we will come to know the precise number and details. So just as a cautionary statement. [indiscernible] going to impact, the reason being, finally, apart from this currently, Symphony India is sitting on a treasury of INR 600 crores. So in the worst scenario, assuming everything else we have to write off, I'm saying everything else, still it doesn't change anything, right? Whatever is going to be merely is accounting adjustment and entry.

Next question is from the line of Mayur from Wealth Managers.

Am I audible?

Yes.

You are audible, loud and clear.

So sir, first, congratulations entire team of Symphony, Achal bhai, Nrupesh bhai. And you actually took us by surprise in the last call, I remember you asking about CT Australia and we didn't know it was around the corner so soon. So anyway, it was a very good move from the management standpoint.

Neither did we. Mayur, neither did we.

No, no, I purely understand, sir. Otherwise, we have not had such a candid discussion there, but it was a very well thought-out move, and I'm sure, and great congratulations after a long time, it was overdue. So the management deserves all the full credit. And more importantly, the fact that you just highlighted that we are going to make money on both the deals, at least it will be positive, sometimes in...

No, no. Mayur, we have not said anything like that. Mayur, we have not said anything like that.

Expectation to make both the deals positive.

Yes, yes. Our expectation is to make INR 1,000 crores. Now it doesn't mean that we are going to make INR 1,000 crores.

I understand, sir. I'll be more selective with the words. I understand sir.

Yes. Yes, please don't put words in our mouth.

No, no, no, sir, I expect -- so sir actually keeping this in perspective, first, very small clarification from Nrupesh bhai. We say Mexico had INR 86 crores of capital employed. This is all, I believe, would be cash largely which is sitting, right? Because from that only INR 43 crores will be paid out, right?

Yes. Mayur bhai, this INR 86 crores is as on 31st December. And there, it is a working capital-oriented business. And this INR 43 crores of repayment we expect to happen in next 2 to 3 quarters. So one out of internal accruals, which is [ ordinary ] and expected to be very healthy. And secondly, we have IMPCO -- in fact, IMPCO has worked out the plant to squeeze its working capital. Currently, partly it is in cash, small amount, but mainly in working capital to fuel its growth. So basically its working capital will be squeezed and its internal accrual.

Was there any kind of restriction of regulatory-wise to declare dividend from IMPCO when it was a cash free cash flow positive business over these years, just to understand over a slightly longish term, were there any kind of restrictions from Mexico situation country? Was it not tax efficient?

That's right. It was not tax efficient.

Okay. Okay. Okay. So this current situation also helps us to get that in place and make it more tax efficient way?

Yes, by complying all the tax laws and transfer [indiscernible] multi-purposes.

So sir, I'll focus my question on the -- more on the opportunities which are there. So we spoke very candidly about the U.S. market. But -- so U.S. market is close to INR 4,000 crores, INR 4,500 crores for air coolers. We have been knowing this for last many years now. And fortunately, a little bit growing at whatever small percentage possible. It's not shrinking. And theoretically, I understand we try to address that market through whether it was -- even Mexico was -- could have been all these years and good potential to supply to U.S. markets. While there may be certain products which may not be there -- suitable there. But it would have been possible, whether Mexico, whether Australia, [indiscernible] whether China. Why -- what do you believe has actually changed in the current scenario apart from the fact of tariffs and the regulatory situation, what do you believe has changed for us to be able to address the U.S. market now a little more attractively than all these years? That is the first. And secondly, competitive situation, relative competitive environment for us, how does it -- how it is? Does U.S. import a lot of air coolers? Does it domestically procure orders? And within that, the players wise, it is more all large retail malls driven. So from a competitive situation and supply sourcing, what is it that gives us a right to increase our business in U.S. now compared to where we were in the last couple of years?

That's a valid question, Mayur. And -- but so all these while, it was really -- see, there are like 1,000 different manufacturers of air coolers in China. So locally, China and export out of China, it's extremely competitive. And they were the ones who sort of dominated the U.S. market. There are some players in the U.S., which manufacture -- 2, 3 players that produce much larger -- smaller volumes and very large coolers. So not really the kind which dominates the market. So all these while it was sort of difficult to sort of compete with those Chinese players and there was no consistency because these players -- I mean, these buyers are, like you rightly said, these large retailers like Home Depot and Lowe's and Walmart. And there, there is no sort of loyalty. Every year, they shop around for a different supplier, and they will -- they bought from us for 2, 3 years, and then they sort of opted for some other vendor. Now with China, at these current tariff rates or even if the tariff is a little lower, there'll be -- we expect that the tariff will be significantly higher than the tariff on India. China is out of the equation as far as coolers is concerned. So that is what has changed. Really speaking, as far as the U.S. market is concerned, that is what has changed and nothing else.

And I believe Symphony is one of the few players in India, at least, which has mastered the low electricity intensity with fan-based coolers. So when we see the -- over these many years, what we see as someone of the competitor advantage. And U.S. has a lot of fan base. Am I -- will that be a right way to look at?

I didn't quite understand your question. U.S. has what? A lot of...

In terms of product which gets sold in U.S., the technology-wise, it is -- so from a product perspective, they use a lot of fan unlike a blower technology, right? So -- and we have those products.

That's correct. That's correct. Yes.

Okay. Sir, I wish you all the best and hope to see more and more good numbers. Just one perspective from the investor side, please take this as a well-wisher's feedback and not as a negative comment or anything. First, when we look at Symphony as very long-term investment opportunities, the key for investor is the growth element and not the efficiency element as much because as Nrupesh bhai has always been hammering to us over the last 25, 30 quarters that the ROCE is infinite, and it is well placed and you have also been master of ROCE. So for us, ROCE has never been the concern for us, capital allocation has never been a concern. The key aspect we look at is Symphony as a growth, which has been the key aspect, which for some -- few years bearing the strong summer season, sometimes it lacks. So we hope that, that comes in place with all the restructuring and new focus. We also hope some new talent pool and young blood comes in the picture, not that -- old is always gold, but just to add on to that and takes up the more responsibility and drive the growth element. So the growth is the missing puzzle in that area, and we hope with all this, you are able to address that in a consistent and meaningful manner, sir. Wish you all the best and thank you.

No, absolutely, Mayur. You're absolutely right. And that growth is being driven by our young colleagues, one Amit Kumar, who is on the call as well, who is the Group CEO and Executive Director, who is currently focusing more on the India business, and he's demonstrated very good growth, as you will -- as you have seen in the past, in the last few quarters. And then there is Rajesh Mishra, who is right here with me. He heads the International. All the revenue outside of India is something that he has been spearheading. And he's also doing tremendous work and has demonstrated great results. So between the two of them, Amit Kumar is in his mid-40s, Rajesh is around 50s. So they are significantly younger than the old guard, as you rightly said. So they are the ones with all the energy, the drive, the zeal and all of that. So they are the ones who are taking this company -- propelling this company forward.

Yes, sir, wish you all the best. And for Mr. Rajesh Mishra, we want to put a 50% CAGR for the next 5 years as a target in international markets?

Rajesh is here. I am asking Rajesh to see...

I hope he is hearing that and this is without excluding the sales of CT.

Yes, Mayur bhai, we will invite you every time in our budget meeting and review meeting. This is very helpful.

Next question is from the line of [ Vineet Prasad from Investor Capital ].

Sir, just one question from my end. If you can give a number as to what is the proportion of exports out of China and India business to IMPCO and Australia?

Does anybody have numbers over there?

So broadly from India export to -- so say we have 1,065 top line of Symphony stand-alone of trailing 12 months as on 31st December. Out of this export to IMPCO and Australia won't be more than 3, 4 percentage. I'm saying indicative figure. I have to see the exact figures, but about 3, 4 percentage.

Okay. Okay. We had shifted quite a bit of production from Australia to India. So would that also be a part of it? Wouldn't the number be higher?

No. So as on 31st December, this is how it will be. And I think your next question was about GSK, China. So in GSK, China out of 86%, it might be about 20 percentage.

Understood.

And like we said earlier, Vineet, that it is quite possible that, that can continue even under new ownership because we are still offering products which sell very well over there.

That most likely will continue. There wouldn't be any better option for a new buyer than continuing to buy from GSK, China.

So in one sense, we will have our cake and eat it too.

And also, a very important point to note is that most of the retailers in this market like continuity. So for that reason also, the new buyer may not want to -- it will be too risky for them to change the product line overnight. And so it will take at least 2, 3 years before this thing even kind of starts if at all.

GSK, China may serve good purpose for Australia and for Mexico Symphony India, coupled with GSK, China may serve good purpose.

Ladies and gentlemen, that was the last question. I'll now hand the conference over to the management for closing comments.

Thank you very much. Dear participants, I think your questions have given us a lot of food for thought and have also with Amit Kumar and Rajesh Mishra nodding their heads and giving their commitment to Mayur's sort of suggestions. So I think you've done our job for us. So I would like to thank you for that as well. So well, all the best, all the best. Thank you. Good evening.

Thank you very much. On behalf of Investec Capital Services India Private Limited and Symphony Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.