Q1 2027 Elgi Equipments Ltd Earnings Call

August 14, 2026

Operator: You can begin.

Speaker #1: Campaign.

[Company Representative] (AMSEC): Yeah. Okay. Good afternoon, everyone. On behalf of Asian Markets, we welcome you all to the Q1 FY27 post-results webinar of Elgi Equipments Limited. We have with us Mr. Jairam Varadaraj, Managing Director representing the company. I will request Mr. Jairam to take us through the presentation and overview of the results. Followed which we will start the Q&A session. Over to you, sir. Thank you.

[Company Representative] (AMSEC): Yeah. Okay. Good afternoon, everyone. On behalf of Asian Markets, we welcome you all to the Q1 FY 2027 post-results webinar of Elgi Equipments Limited. We have with us Mr. Jairam Varadaraj, Managing Director representing the company. I will request Mr. Jairam to take us through the presentation and overview of the results. Followed which we will start the Q&A session. Over to you, sir. Thank you.

Speaker #2: Yeah. Okay. Good afternoon, everyone. On behalf of Asian Markets, we welcome you all to the Q1 FY27 post-results webinar of Elgi Equipments Ltd. We have with us Mr. Jayram Madraj, Managing Director, representing the company.

Speaker #2: I'll request Mr. Jayram to take us through the presentation and the overview of the results, following which we'll start the Q&A session. Over to you, sir.

Speaker #2: Thank you.

Speaker #3: Thank you. Thank you, Kamilesh. Thank you, Asian Markets Securities, for organizing this. Ladies and gentlemen, it's a pleasure for me to be with you.

Jairam Varadaraj: Thank you. Thank you, Kamlesh. Thank you, Asian Markets Securities for organizing it. Ladies and gentlemen, it is a pleasure for me to be with you. I hope you are able to see my screen because I am having difficulty seeing my own screen. Just give me a minute while I Just give me a minute, please.

Speaker #3: I hope you're able to see my screen, because I'm having difficulty seeing my own screen. Just give me a minute while I— Just give me a minute, please.

Speaker #1: So, we are able to see your screen, sir.

Operator: Sir, we are able to see your screen, sir.

Speaker #3: I know. I'm not able to see it, so I'm just trying to see which view option I should be using. Just give me one minute.

Jairam Varadaraj: I know. I am not able to see it.

Operator: Okay.

Jairam Varadaraj: I am just trying to see what view option I should be using. Just give me 1 minute. I am not able to get my screen. Just give me a minute, please. Oh, it is sharing. I am sharing it, right?

Operator: Okay.

Jairam Varadaraj: I am just trying to see what view option I should be using. Just give me one minute. I am not able to get my screen. Just give me a minute, please. Oh, it is sharing. I am sharing it, right?

Speaker #3: I'm not able to get my screen—just give me a minute, please. I'm sharing. I'm sharing it. Right. What's the view option? It's not—it's not sharing.

Operator: Yes, sir.

Jairam Varadaraj: What is the view option? It is not stop sharing. Clearly. No, it is not clearly, sir. The screen means I have to see the screen. Yeah. Okay. Can you see the screen now?

Jairam Varadaraj: What is the view option?

[Company Representative] (AMSEC): It is not stop sharing. Clearly. No, it is not clearly, sir. The screen means I have to see the screen. Yeah.

Speaker #1: It's clearing. That's it. It's giving me clear vision. The screen is— I have to see the screen now.

Speaker #3: Okay. Can you see— can you see the screen now? Yes, sir.

Jairam Varadaraj: Okay. Can you see the screen now?

Operator: Yes, sir. Yes, sir. We are able to.

Speaker #1: Yes, sir. We are able to.

Speaker #3: Perfect. I will. Okay, so thank you again. I apologize for this bit of a challenge here. I changed the format this year, starting with the revenue and then moving to the EBITDA.

Jairam Varadaraj: Perfect. Okay. Thank you again. I apologize for this bit of a challenge here. I changed the format for this year. I am starting on the revenue and then moving to the EBITDA. I want to look at Q1 revenue numbers compared to Q1 of last year. We grew by about 23%, and after that 23%, 7% was exchange related. Across the board, we had growth. I will come back and talk about region-wise performance. EBITDA, we grew by 28%. This has been good. I will again talk in greater detail about the constituents of it. Moving on a sales mix, by and large, the same between compressors and automotive equipment, and by and large, the same split between India and the rest of the world. We have introduced this slide to give you a sense for where our growth is coming from.

Speaker #3: So, I want to look at Q1 revenue numbers compared to Q1 of last year. We grew by about 23%, and ex— after that, exchange-related.

Speaker #3: Across the board, we had growth. I'll come back and talk about region-wise performance. EBITDA grew by 28%. This has been good. I'll again talk in greater detail about the constituents of it.

Speaker #3: Moving on, the sales mix is, by and large, the same between compressors and automotive equipment, and by and large, the same split between India and the rest of the world.

Speaker #3: We have introduced this slide to give you a sense of where our growth is coming from. So if you look at India's stat—which is standalone—we have grown by about 28%.

Jairam Varadaraj: If you look at India's stat, which is standalone, we have grown by about 28%. North America, we have grown by 37%. Europe, we grew by 21%, and Australia, 17%. Across the board, we have had some good growth. Despite a strong growth in India, we have been able to maintain the split between India and rest of the world by virtue of growth in other geographies as well. Moving into the classical EBITDA reconciliation that we normally present. If you look at it, exchange has been. We have carved out exchange because there was a significant impact of exchange during the quarter. We have had a good volume impact. We had a contribution negative, primarily because of raw material cost increases, tariffs, and product mix. We have responded to this.

Speaker #3: In North America, we have grown by 37%. In Europe, we grew by 21%. And in Australia, 7%—I mean, sorry, 17%. So across the board, we have had some good growth.

Speaker #3: So, despite strong growth in India, we've been able to maintain the split between India and the rest of the world by virtue of growth in other geographies as well.

Speaker #3: Moving into the classical EBITDA reconciliation that we normally present—if you look at it, exchange has been—we have carved out exchange because there was a significant impact of exchange during the quarter.

Speaker #3: So, we have had a good volume impact. We had a negative contribution, primarily because of raw material cost increases, tariffs, and product mix. We have responded to this.

Speaker #3: When we expect to see part of the— we've done this, responded by cost reduction. We have also responded by price correction in the market, but the price correction we expect to see towards the end of the second quarter and more fully in the third quarter.

Jairam Varadaraj: We expect to see part of the. We have done this, responded by cost reduction. We have also responded by price correction in the market, but the price correction we expect to see towards the end of the second quarter and more fully in the third quarter. By and large, we are confident that we have mitigated this. We started off the year thinking that there will be a 3% to 4% increase in material cost caused by metal commodity prices, but in reality, it was 5%. Then there was a possibility that it could go to 9%. We have taken 9% and we have taken some corrective measures, so we are confident that there will not be any impact. Even this quarter, we have maintained our EBITDA percentage same as last year. In fact, we are slightly better.

Speaker #3: So, by and large, we are confident that we have mitigated this. We started off the year thinking that there would be a 3% to 4% increase in material cost, caused by commodity—metal commodity prices—but in reality, it was 5%.

Speaker #3: Then there was a possibility that it could go to 9%. We have taken 9%, and we have taken some corrective measures. So, we are confident that there will not be any impact.

Speaker #3: So even this quarter, we have maintained our EBITDA percentage at the same level as last year. In fact, it is slightly better. I think it will only continue to improve in the future.

Jairam Varadaraj: I think it will only continue to improve into the future. This is the thing on employee cost, even though the increases seem significant, primarily, it is an increment that we have given across the world. So overall cost is well within control. The same thing with other expenses. There is a 12% increase primarily because we have gone and taken on some rental premises for our motor plant as well as what we sold, the facilities that we sold in the US, we have moved into rental facilities. Moving on to the full financials. Our PAT is at 9.7, roughly similar as the Q1 of last year. This is with some exceptional reorganization costs. We are going through some reorganization in Australia, in Europe, and a little bit in the US. We think there will be a little bit of these costs continuing into the year.

Speaker #3: So this is the thing on employee cost. Even though the increases seem significant, we have given across the—across the world. So overall, cost is well within control.

Speaker #3: The same thing with other expenses. There's a 12% increase, primarily because we have gone and taken on some rental premises for our motor plant.

Speaker #3: As well as, you know, what we sold the facilities that we sold in the US, we have moved into rental facilities. moving on to the fine— full financials, we are— our PAT, is at, 9.7, roughly similar as the Q1 of last year.

Speaker #3: And this is with some exceptional reorganization cost. We are going through some reorganization in Australia, in Europe, and a little bit in the US.

Speaker #3: And, we con— we think there will be a little bit of continuing of these costs continuing into the— into the year. but, you know, the— the benefit of doing this is— is, you know, very short time and it's good for the company.

Jairam Varadaraj: But the benefit of doing this is very short time, and it is good for the company. We are not too concerned about this. Net cash position in the company continues to be very strong. Our CapEx, one is our CK2, which is our program for shifting our campus to the new campus from our city factory. That has been about half of the CapEx is towards that. The other is we bought some land in Italy, which was contracted six years ago, that we had to make that commitment, and some equipment, normal CapEx in the factory. This is really what I wanted to present to you. I will now give an overall of the sales numbers, starting from Australia. Australia was a bit muted relative to the other geographies. We have had some challenges in our service business, in our distribution operations.

Speaker #3: So we're not too concerned about this. Net cash position in the company continues to be very strong. Our capex—one is our MK2, which is our program for shifting our campus to the new campus from our city factory.

Speaker #3: That's been about half of the capex is towards that. And the other is, we bought some land in Italy, which was contracted six years ago, that we had to make that commitment.

Speaker #3: And some equipment—normal capex in the factory. So this is really what I wanted to present to you. I will now give an overview of the sales numbers, starting from Australia.

Speaker #3: Australia was a bit muted relative to the other geographies. We have had some challenges in our service business and in our distribution operations. We are working towards resetting the processes and reorganizing there, and we are confident that by the third and fourth quarters we will be back to where we are supposed to be.

Jairam Varadaraj: We are working towards resetting the processes, reorganizing there, and we are confident by the third and fourth quarter, we will be back to where we are supposed to be. Moving down, Southeast Asia continues to be a bit of a challenge. Part of our restructuring cost is also towards Southeast Asia. Market is big, but there are still challenges for an Indian brand in that market. We are working on different strategies there. It is a longer-term play. It is not a significant contributor. Coming to India. India did well across all verticals, whether it is industrial, portables, aftermarket, vacuum, all of them have done well in the quarter. We expect to continue to do at this level. Though the growth rates may be less because our first quarter of last year was a bit of a muted quarter, and we had very strong second, third, and fourth quarter.

Speaker #3: Moving down, Southeast Asia continues to be a bit of a challenge. Part of our restructuring cost is also towards Southeast Asia. The market is big, but there are still challenges for an Indian brand in that market.

Speaker #3: We are working on different strategies there, so it's a longer-term play. It's not a significant contributor. Coming to India, India did well across all verticals.

Speaker #3: Whether it is industrial, portables, aftermarket, or vacuum, all of them have done well in the quarter. And we expect to continue to do at this level.

Speaker #3: Though the growth rates may be less, because our first quarter last year was a bit of a muted quarter. And we had very strong second, third, and fourth quarters.

Speaker #3: So, the growth rates may not be as attractive as we have had in the first quarter, but we'll continue to grow. In India, we have made some strong inroads into some of the growth sectors, like EV. Growth in EV has been pretty significant.

Jairam Varadaraj: So the growth rates may not be as attractive as we have had in the first quarter, but we will continue to grow. In India, we have made some strong inroads into some of the growth sectors like EV. Our growth in EV has been pretty significant. Our growth in the renewable energy segment has been pretty significant. The growth in semiconductor ecosystem has also been significant. We are riding on some of the industry waves that are happening in India. Europe is more of a P&L play for us right now. We have done all of it to make sure that it is breaking even, stays there, and it is staying there. There are some initiatives to grow the top line. We have made plans to enter into Germany and a little bit more emphasis into Eastern Europe.

Speaker #3: Our growth in the renewable energy segment has been pretty significant, and the growth in the semiconductor ecosystem has also been significant. So we are riding on some of the industry waves that are happening in India.

Speaker #3: Europe is more of a P&L play for us right now. We have done all of it to make sure that it is breaking even, stays there, and it is staying there.

Speaker #3: There are some initiatives to grow the top line. We have made plans to enter into Germany and put a little bit more emphasis on Eastern Europe.

Speaker #3: So there will be tighter control over costs, even while we try and grow some of the geographies and products. So, again, Europe is going to show up in the— in the medium term.

Jairam Varadaraj: There will be a tighter control over costs, even while we try and grow some of the geographies and products. Europe is going to show up in the medium term. It will come back to where it is supposed to be. North America was a good story. Our distribution business is not doing as well as it should be, primarily in the service side. We are working on a few initiatives. All the other businesses have done well in North America, and we expect that this momentum will continue into the future as well. This is really the overall summary of our performance for Q1. Our project to enter into the, what we call as the Tier 4 segment in the bottom of the pyramid, bottom of the industrial pyramid, where we have been facing very low-cost compressors from China. We are all lined up.

Speaker #3: It'll come back to where it's supposed to be. North America was a good story. Our distribution business is not doing as well as it should be.

Speaker #3: Primarily on the service side, we are working on a few initiatives. All the other businesses have done well in North America, and we expect that this momentum will continue into the future as well.

Speaker #3: So this is really the overall, summary of our, our, performance for the first quarter. our, project to enter into the— what we call as the tier four segment in the bottom of the pyramid, bottom of the industrial pyramid, where we are been facing, very low cost compressors from China.

Speaker #3: We are all lined up. Our products have been validated. In fact, we have got our first orders in already. The formal launch is this month in Hyderabad, at one of the exhibitions.

Jairam Varadaraj: Our products have been validated. In fact, we have got our first orders in already. The formal launch is this month, in Hyderabad in one of the exhibitions, we are going to have that. We are on track. September will be the launch. We have got our distributors lined up. The training program is gone. Our internal organization is in place both for sales and service. That project is on track. Anyway, this year is just the start year. It will be a contribution to the top line marginally, but really in the next few years, we expect that to be a very strong player. I would now stop here and rely on your questions to provide more clarification. Thank you.

Speaker #3: We're going to have that. So it's—we are on track. September will be the launch. We have got our distributors lined up. The training program is gone.

Speaker #3: Our internal organization is in place, both for sales and service, so that project is on track. So anyway, this year is just a start year.

Speaker #3: It will be a contribution to the top line marginally, but really, in the next few years, we expect that to be a very strong player.

Speaker #3: So I will stop here and rely on your questions to provide more clarification. Thank you.

Speaker #1: Thank you, sir, for the opening comment. We'll just wait for the question queue to ascend. Participants, in case you have any questions, you may please use your "raise hand" option.

Operator: Thank you, sir, for the opening comments. We will just wait for the question queue to assemble. Participants, in case you have any questions, you may please use your raise hand option, or you may also drop your questions into the chat box below. The first question we have is from the line of Ravi Swaminathan. Ravi, you may unmute yourself and go ahead with your question.

Speaker #1: Or you may also drop your questions into the chat box below. Sir, the first question we have is from the line of Ravi Swaminathan.

Speaker #1: Ravi, you may unmute yourself and go ahead with your question.

Speaker #2: Hi sir, good afternoon. Congratulations on a good set of numbers.

Ravi Swaminathan: Hi, sir. Good afternoon. Congrats on a good set of numbers.

[Analyst 1]: Hi, sir. Good afternoon. Congrats on a good set of numbers.

Speaker #3: Thank you, Ravi. Good afternoon.

Jairam Varadaraj: Thank you, Ravi. Good afternoon.

Speaker #2: Sir, my first question is with respect to the India business. It has seen a very strong growth of almost 28%. Any sense or color on how much of it would have been volume driven, and how much of it would have been price led?

Ravi Swaminathan: Sir, my first question is with respect to the India business. It has seen a very strong growth of almost 28%. Any sense on, color on how much of it would have been volume driven and how much of it would have been price led? Because significant amount of raw material price increase has happened over the past few months, especially since the war. How much price increase we would have taken over the past few months, and have we completed our price correction movement or is there further price increase that is there on the cards?

[Analyst 1]: Sir, my first question is with respect to the India business. It has seen a very strong growth of almost 28%. Any sense on, color on how much of it would have been volume driven and how much of it would have been price led? Because significant amount of raw material price increase has happened over the past few months, especially since the war. How much price increase we would have taken over the past few months, and have we completed our price correction movement or is there further price increase that is there on the cards?

Speaker #2: Because a significant amount of raw material price increase has happened over the past few months, especially since the war. So, how much price increase would we have taken over the past few months?

Speaker #2: And have we completed our price correction movement, or is there further price increase that is there on the cards?

Speaker #3: So, I would say the growth has been primarily volume driven, Ravi. There has been a marginal correction in price, which we—as I said—anticipated about a 3% increase in raw material prices, and to that extent we corrected our price.

Jairam Varadaraj: Well, I would say the growth has been primarily volume driven, Ravi. There has been a marginal correction in price, which we, like I said, we anticipated about 3% increase in raw material prices, and to that extent, we corrected our price. What really happened is 5% to 6% is the increase in the raw material cost. To that extent, we were under-recovered, but we have corrected for that in the subsequent quarters. But impact of it, we are not able to see in the Q1 yet.

Speaker #3: What really happened is 5 to 6% is the increase in our raw material cost. So, to that extent, we were under-recovered, but we have corrected for that in the subsequent quarters.

Speaker #3: But the impact of it, we are not able to see in the first quarter yet.

Speaker #2: Understood, sir. And, if it is so volume driven, that is more than 20% growth in terms of volume growth has been there. can you highlight some of the end subsegments or sectors which have actually done really well?

Ravi Swaminathan: Understood, sir. If it is so volume driven, that is more than 20% growth in terms of volume growth has been there. Can you highlight some of the end sub-segments or sectors which have actually done really well? Or is it like we have got into some newer categories and some of the newer products like the aftermarket products or the STABILISOR products, et cetera, which are contributing to this incremental growth?

[Analyst 1]: Understood, sir. If it is so volume driven, that is more than 20% growth in terms of volume growth has been there. Can you highlight some of the end sub-segments or sectors which have actually done really well? Or is it like we have got into some newer categories and some of the newer products like the aftermarket products or the STABILISOR products, et cetera, which are contributing to this incremental growth?

Speaker #2: Or is it that, is it like we have got into some newer categories and some of the, newer products like, the aftermarket products or, the stabilizer products, etc., which are contributing to this incremental growth?

Speaker #3: So, the multiple reasons. One is, I can say across the board, across all industry verticals, there's been a growth, right? So I can't say that there is one particular industry that has contributed significantly to this.

Jairam Varadaraj: So, there are multiple reasons. One is, I can say across the board, across all industry verticals, there has been a growth, right? So I can't say that there is one particular industry that has contributed significantly to this. That is point number one.

Speaker #3: That is point number one. Within specific industry segments, we've been able to grow by virtue of Demand Match. Demand Match was launched in September of last year, and the traction and receptivity have been really outstanding, right?

Jairam Varadaraj: Within specific industry segments, we have been able to grow by virtue of Demand=Match. Demand=Match was launched in September of last year, and the traction and receptivity has been really outstanding, right? And we have been able to gain entry into customers who were never our customers, right? So the value proposition that we have been able to demonstrate for the product has been very powerful, and that is really carrying. So that's the second kind of a stream.

Speaker #3: And we've been able to gain entry into customers who have never been our customers, right? So the value proposition that we've been able to demonstrate for the product has been very powerful, and that is really carrying.

Speaker #3: So that's the second kind of stream. There's been no real new products that we have launched, but just an upgrade of our entire range of products over a period of time.

Jairam Varadaraj: There has been no real new products that we have launched, but just an upgrade of our entire range of products over a period of time. Today, our product range is one of the best in the world, right? So in terms of energy efficiency, in terms of competitiveness, by virtue of making our own motors. So the overall value proposition that we are bringing into the market has been very, very strong. So this is the third. So I would say all three have contributed to the growth.

Speaker #3: Today, we have our product range—it's one of the best in the world, right? So, in terms of energy efficiency and in terms of competitiveness, that's by virtue of making our own motors.

Speaker #3: So the overall value proposition that we are bringing into the market has been very, very strong. So, this is the third. So, I would say all three have contributed to the growth.

Speaker #2: Understood, sir. And any mix change also which has contributed to this, in the sense that screw compressors have grown faster than piston? Something of that sort?

Ravi Swaminathan: Understood, sir. Any mix change also which has contributed to this in the sense that screw compressors have grown faster than piston, something of that sort. Has it happened? Or the-

[Analyst 1]: Understood, sir. Any mix change also which has contributed to this in the sense that screw compressors have grown faster than piston, something of that sort. Has it happened? Or the-

Speaker #2: Has it happened? Or is the mix, has largely been the same?

Jairam Varadaraj: No

Ravi Swaminathan: mix has largely been the same?

[Analyst 1]: mix has largely been the same?

Speaker #3: Mix has been, by and large, the same.

Jairam Varadaraj: Mix has been by and large the same. Yeah.

Speaker #2: Understood. Okay. And in terms of forward-looking enquiry numbers, etc., from certain large categories like industrials, especially metals, and then water well, infrastructure, regular general infrastructure, etc., how are you seeing the demand environment on the ground?

Ravi Swaminathan: Understood.

[Analyst 1]: Understood.

Jairam Varadaraj: There's been no significant.

Ravi Swaminathan: Okay. In terms of forward-looking inquiry numbers, et cetera, from certain large categories like industrials, especially metals, and then water well, infrastructure, regular general infrastructure, et cetera, how are you seeing the demand environment on the ground? Has there been any slowdown related to the war which has been there within India demand, or are you seeing inquiry levels sustaining?

[Analyst 1]: Okay. In terms of forward-looking inquiry numbers, et cetera, from certain large categories like industrials, especially metals, and then water well, infrastructure, regular general infrastructure, et cetera, how are you seeing the demand environment on the ground? Has there been any slowdown related to the war which has been there within India demand, or are you seeing inquiry levels sustaining?

Speaker #2: Has there been any slowdown related to the war which has been there, within India demand, or are you seeing demand sustain, enquiry levels sustaining?

Speaker #3: Enquiry still remains very strong. like I said, even in the in the, you know, annual call, enquiries remain small, but the, the gestation time for finalizations are longer than normal, right?

Jairam Varadaraj: Inquiry still remains very strong. Like I said, even in the annual call.

Jairam Varadaraj: Inquiries remain small, but the gestation time for finalizations are longer than normal.

Jairam Varadaraj: Inquiries remain small, but the gestation time for finalizations are longer than normal. It is still very strong. Water well has seen an uptick in the quarter, but it is not like a day and night difference. Yes, there has been a positive contribution in terms of increase. But other than that, I would say overall, there has been a buoyancy in the economy.

Speaker #3: But it is still very strong. Water well has seen an uptick in the quarter, but, you know, it is not like a day and night difference.

Jairam Varadaraj: It is still very strong. Water well has seen an uptick in the quarter, but it is not like a day and night difference. Yes, there has been a positive contribution in terms of increase. But other than that, I would say overall, there has been a buoyancy in the economy.

Speaker #3: Yes, there's been a positive contribution in terms of increase. But other than that, I would say overall, there's been a buoyancy in the economy.

Speaker #2: Understood, sir. Thanks a lot. I'll come back in the future if I have more questions.

Ravi Swaminathan: Understood, sir. Thanks a lot. I will come back in the Q&A if I have more questions.

[Analyst 1]: Understood, sir. Thanks a lot. I will come back in the Q&A if I have more questions.

Speaker #3: Yeah. Thank you.

Jairam Varadaraj: Yeah. Thank you.

Speaker #1: Thank you, Ravi. The next question we have is from the line of Manjit Rathod. Manjit, you may unmute yourself and go ahead with your question.

Operator: Thank you, Ravi. The next question we have is from the line of Manjeet Rathore. Manjeet, you may unmute yourself and go ahead with your question.

Speaker #2: Hello, sir. Very good to see you. I want to refer to the stabilizer product that you launched in 2025. It's spoken about as a groundbreaking technology that we had come up with.

Manjeet Rathore: Hello, Mr. Bharat. Very good to see you.

[Analyst 2]: Hello, Mr. Bharat. Very good to see you.

Jairam Varadaraj: Hi, Manjeet. How are you?

Manjeet Rathore: I want to refer to the STABILISOR product that you had launched in 2025. We've spoken about the groundbreaking technology that we had come up with. Sir, how has been the adoption of this technology, and how do we see about the product adoption when we come up with such technology? Do they have a gestation period of about 2 to 5 years before we reach a sizable scale with that, or there has been a very quick adoption?

[Analyst 2]: I want to refer to the STABILISOR product that you had launched in 2025. We've spoken about the groundbreaking technology that we had come up with. Sir, how has been the adoption of this technology, and how do we see about the product adoption when we come up with such technology? Do they have a gestation period of about 2 to 5 years before we reach a sizable scale with that, or there has been a very quick adoption?

Speaker #1: How is how has been the adoption of that technology and how do we see when about the product adoption when we come up with such technology?

Speaker #1: Like, do they have a gestation period of about two to five years before we reach a sizable scale with that, or has there been a very quick adoption?

Jairam Varadaraj: Yeah.

Speaker #1: That's my first question.

Speaker #2: So, so Manjit,

Manjeet Rathore: That's my first question.

[Analyst 2]: That's my first question.

Jairam Varadaraj: Well, Manjeet Rathore, like I just explained, STABILISOR, when we first introduced the technology, that was the name that we used. But we actually launched the technology, and the product is called Demand=Match. We launched it last year, like I was explaining, last September, and the absorption has been outstanding. Part of the significant growth in some of the industrial products where we have incorporated it. Demand=Match is a technology that sits in multiple models of our products. That introduction of that technology in models has been phased. Wherever we have introduced it in our models, the acceptance in the market, the kind of traction we are gaining has just been outstanding. That has been a contributing factor for our growth this quarter. That's only in India.

Speaker #3: Like I just explained, it's the stabilizers—when we first introduced the technology, that was the name that we used. But we actually launched the technology, and the product is called Demand Match, right?

Speaker #3: We launched it last year, like I was explaining, last September, and the absorption has been outstanding. So part of the significant growth in some of the industrial products is where we have incorporated it.

Speaker #3: So, Demand Match is a technology that sits in multiple models of our products. The introduction of that technology in models has been phased. So, wherever we have introduced it in our models, the acceptance in the market, the kind of traction we are gaining, has just been outstanding.

Jairam Varadaraj: Wherever we have introduced it in our models, the acceptance in the market, the kind of traction we are gaining has just been outstanding. That has been a contributing factor for our growth this quarter. That's only in India. We are launching Demand=Match in the rest of the world this year, and that work has already started. We have had validation machines installed in all the major geographies, and the feedback and experience has been, again, outstanding.

Speaker #3: And that has been a contributing factor for our growth this quarter, and that's only in India. We are launching Demand Match in the rest of the world this year, and that work has already started.

Jairam Varadaraj: We are launching Demand=Match in the rest of the world this year, and that work has already started. We have had validation machines installed in all the major geographies, and the feedback and experience has been, again, outstanding.

Speaker #3: We have had validation machines installed in all the major geographies, and the feedback and experience has been, again, outstanding.

Manjeet Rathore: Very good to know, sir. At this point in time, are we working on some technology that really excites us? Or how do we think about what research, in which direction should we pursue the research? Are we trying to improve our efficiency of our existing products, or we are trying to develop some new products, or it is both? Are we seeing something new coming up over the next few years? I don't want to say one year, three years, I won't put a number, but is there anything under development which really excites you?

[Analyst 2]: Very good to know, sir. At this point in time, are we working on some technology that really excites us? Or how do we think about what research, in which direction should we pursue the research? Are we trying to improve our efficiency of our existing products, or we are trying to develop some new products, or it is both? Are we seeing something new coming up over the next few years? I don't want to say one year, three years, I won't put a number, but is there anything under development which really excites you?

Speaker #1: At this point in time, are we working on some technology that really excites us, or how do we think about what research, in which direction, should we pursue the research?

Speaker #1: Are we trying to improve the efficiency of our existing products, or are we trying to develop some new products, or is it both? And are you seeing anything new coming up over the next few years?

Speaker #1: I would—I don't want to say one year, three years. I want to put a number, but is there anything under development which really excites you?

Speaker #3: Oh, there's a lot of stuff that's going on. See, there are—there are two vectors for our technology/product development. One vector is to take the existing architecture.

Jairam Varadaraj: Well, there's a lot of stuff that's going on. There are two vectors for our technology/product development. One vector is to take the existing architecture, and existing philosophy of design, and move it to the highest level of efficiency and life cycle cost. That's one vector that we are doing, and that's where new products come in, higher efficiency, and lower life cycle cost. That's one. The second vector is really fundamental technology development, which delivers things like Demand=Match. That's something that is ongoing, and we have some very exciting stuff. Unfortunately, I can't talk too openly about that. But again, the whole philosophy is how to reduce the overall life cycle cost for the customer. Pick the elements that are not so obvious and try and eliminate those costs for the customer. There's quite a few exciting stuff that's happening.

Speaker #3: An existing philosophy of design and move it to the highest level of efficiency and life cycle cost, right? So, that's one vector that we are working on, and that's where new products come in—higher efficiency and lower life cycle cost.

Speaker #3: That's one. The second vector is really fundamental technology development, which delivers things like demand match. So that's something that is ongoing, and we have some very exciting stuff.

Jairam Varadaraj: That's one. The second vector is really fundamental technology development, which delivers things like Demand=Match. That's something that is ongoing, and we have some very exciting stuff. Unfortunately, I can't talk too openly about that. But again, the whole philosophy is how to reduce the overall life cycle cost for the customer. Pick the elements that are not so obvious and try and eliminate those costs for the customer. There's quite a few exciting stuff that's happening.

Speaker #3: Unfortunately, I can't talk too openly about that, but again, the whole philosophy is how to reduce the overall life cycle cost for the customer, right?

Speaker #3: And pick the elements that are not so obvious and try and eliminate those costs for the customer. So there’s quite a few exciting things that are happening.

Speaker #1: Thank you, sir. I'll go back to the line. It's always very good to speak to you.

Manjeet Rathore: Thank you, sir. I'll go back to the line. It's always very good to speak to you.

[Analyst 2]: Thank you, sir. I'll go back to the line. It's always very good to speak to you.

Speaker #3: Thank you, Manjit.

Jairam Varadaraj: Thank you, Manjeet.

Speaker #1: Thank you, Manjit. Sir, next question, we'll take it from the line of Yash. Yash, you may unmute yourself and go ahead with your question.

Operator: Thank you, Manjeet. Sir, next question, we will take it from the line of Yash. Yash, you may unmute yourself and go ahead with your question.

Speaker #4: Good afternoon, sir. Thank you for the opportunity. I have a very broad question, sir: What is our right to win in the global markets?

[Analyst]: Good afternoon, sir. Thank you for the opportunity.

[Analyst 3]: Good afternoon, sir. Thank you for the opportunity.

Jairam Varadaraj: Good afternoon.

[Analyst]: I have a very broad question, sir. What is our right to win in the global markets? As you always say, we do not compete on price, nor the industry works that way. So what makes us different that a customer who has been using Ingersoll Rand, Atlas, or any other competitor for that reason to switch towards us, or when they expand their capacity, choose us over anyone else?

[Analyst 3]: I have a very broad question, sir. What is our right to win in the global markets? As you always say, we do not compete on price, nor the industry works that way. So what makes us different that a customer who has been using Ingersoll Rand, Atlas, or any other competitor for that reason to switch towards us, or when they expand their capacity, choose us over anyone else?

Speaker #4: As you always say, we don't compete on price, nor the industry works that way. So what makes us different that a customer who has been using inner solar at last or any other competitor for that reason to switch towards us or when they expand their capacity choose us over anyone else?

Speaker #3: Mm-hmm. So, there are two things, Yash. It's a very good question. One is, you know, customers buy compressors based on certain well-known parameters. Energy efficiency is the biggest.

Jairam Varadaraj: So there are two things, Yash. It is a very good question. One is customer buys compressors based on certain pre well-known parameters. Energy efficiency is the biggest, the second is the maintenance cost, and the third is the price of the compressor. 80% of the market looks at energy efficiency and maintenance, less on the price. 20% of the market works purely on price. They are not too worried about efficiency and maintenance. So roughly, that is the split. We would like to focus on the 80% which buys on efficiency and maintenance cost. So that is really where we are saying, how can we make the most energy efficient compressor in the world? Today, close to 70% of the models in the industrial side, we are the best in the world, right? This is not something that we are claiming. These are independently published numbers, right?

Speaker #3: The second is the maintenance cost, and the third is the the price of the cust price of the compressor. Now, 80% of the market looks at energy efficiency and maintenance, less on the price.

Speaker #3: 20% of the market works purely on price. They're not too worried about efficiency and maintenance, so roughly that's the split. We would like to focus on the 80% which buys on efficiency and maintenance cost.

Jairam Varadaraj: They are not too worried about efficiency and maintenance. So roughly, that is the split. We would like to focus on the 80% which buys on efficiency and maintenance cost. So that is really where we are saying, how can we make the most energy efficient compressor in the world? Today, close to 70% of the models in the industrial side, we are the best in the world, right? This is not something that we are claiming. These are independently published numbers, right?

Speaker #3: So that's really where we are saying, how can we make the most energy-efficient compressor in the world? And today, close to 70% of the models on the industrial side, we are the best in the world, right?

Speaker #3: And this is not something that we are claiming. These are independently published numbers, right? So that's one part of it. When it comes to maintenance, the biggest maintenance cost—which is not very well documented—is the cost of failure, right?

Jairam Varadaraj: So that is one part of it. When it comes to maintenance, the biggest maintenance cost, which is not very well-documented, is the cost of failure, right? When a mesh compressor goes down, even if you just take the cost of just renting another compressor to run the plant, that becomes the second-largest cost. We are focused obsessively on quality, and we have the lowest defect rates in the market. That is why we are able to provide lifetime warranty, 10-year warranty in different segments of the market, and still have one of the lowest warranty cost on revenue, lowest in the industry. That is a reflection of the quality that we bring into the product. So this is really what gives us our ability to win disproportionately when we are in front of the customer.

Speaker #3: When a mesh compressor goes down, even if you just take the cost of just renting another compressor to run the plant, that becomes the second largest cost.

Speaker #3: And we are focused obsessively on quality, and we have the lowest defect rates in the market. That is why we are able to provide a lifetime warranty, a 10-year warranty in different segments of the market, and still have one of the lowest warranty costs as a percentage of revenue—lowest in the industry.

Jairam Varadaraj: That is why we are able to provide lifetime warranty, 10-year warranty in different segments of the market, and still have one of the lowest warranty cost on revenue, lowest in the industry. That is a reflection of the quality that we bring into the product. So this is really what gives us our ability to win disproportionately when we are in front of the customer. Combine that with things like Demand=Match technology, which nobody else has, it takes the value proposition to the next level. That is another layer of the right to win in these markets. So that is really how we are pushing the whole go to market.

Speaker #3: And that's a reflection of the quality that we bring into the product. So this is really what gives us our ability to win disproportionately when we are in front of the customer.

Speaker #3: Combine that with things like demand match technology, which nobody else has, it takes the value proposition to the next level. And that is another layer of the right to win in these markets.

Jairam Varadaraj: Combine that with things like Demand=Match technology, which nobody else has, it takes the value proposition to the next level. That is another layer of the right to win in these markets. So that is really how we are pushing the whole go to market.

Speaker #3: That's really how we are pushing the whole go-to-market.

Speaker #4: Thank you, sir, for the answer.

Speaker #1: But, sir, how are we working on getting in front of the customer? Like, on that side.

[Analyst]: Thank you, sir, for the answer. But sir, how are we working on getting in front of the customer on that side?

[Analyst 3]: Thank you, sir, for the answer. But sir, how are we working on getting in front of the customer on that side?

Speaker #3: So that's a long process because this is primarily a distribution-led business. Distributors own relationships with customers all over the world. So the real challenge is not just giving a value proposition to the end user, but looking at what is the unique value proposition that we give to distributors.

Jairam Varadaraj: So that's a long process because this is primarily a distribution-led business. Distributors own relationship with customers all over the world. So the real challenge is not giving value proposition just to the end user, but look at what is the unique value proposition that we give to distributors. That is a longer process than getting in front of the customer. We are very confident that when we are in front of the end users, we win disproportionately, right? So the real challenge which we are working on is how do we get more distributors to represent our products? That's an ongoing process. There is no switch that we can quickly turn on to make that happen.

Speaker #3: And that is a is a longer process than getting in front of the customer. We are very confident that when we are in con end in front of the end users, we win disproportionately, right?

Speaker #3: So the real challenge that we are working on is how do we get more distributors to represent our products. And that's an ongoing process.

Speaker #3: There is no switch that we can quickly turn on to make that happen.

Speaker #1: Thank you, sir. That's it, thank you. Sir, we'll take the next question from the line of Mr. Ravi Swaminathan again. Ravi, you may unmute yourself and go ahead with your question.

[Analyst]: Thank you, sir. Merci.

[Analyst 3]: Thank you, sir. [Foreign language].

Operator: Thank you. Sir, we'll take the next question from the line of Mr. Ravi Swaminathan again. Ravi, you may unmute yourself and go ahead with your question.

Speaker #2: Hi, sir. I have a few more follow-up questions. Given the kind of strong growth that we have seen during this quarter, is it safe to assume that we would have gained market share in the Indian market?

Ravi Swaminathan: Hi, sir. A few more follow-up questions, sir, which I have. Given the kind of strong growth that we have seen during this quarter, is it safe to assume that you would have gained market share in the Indian market?

[Analyst 1]: Hi, sir. A few more follow-up questions, sir, which I have. Given the kind of strong growth that we have seen during this quarter, is it safe to assume that you would have gained market share in the Indian market?

Speaker #3: I think so. But, you know, I'd like a competitor to tell us that.

Jairam Varadaraj: I think so. But I would like our competitors to tell us that.

Speaker #2: Okay, got it, sir. And the second question is with respect to after-sales service. Has after-sales seen a similar kind of growth that the product sale would have seen?

Ravi Swaminathan: Okay. Got it, sir. Second question is with respect to after-sale service. After-sales would have seen similar kind of growth that the product sale would have seen.

[Analyst 1]: Okay. Got it, sir. Second question is with respect to after-sale service. After-sales would have seen similar kind of growth that the product sale would have seen.

Speaker #2: And what kind of contribution does after-sales have in our overall revenue mix? Both at the India level and at a global level.

Jairam Varadaraj: Yes

Ravi Swaminathan: What kind of contribution does after-sales have in our overall revenue mix, both at the India level and at a global level?

[Analyst 1]: What kind of contribution does after-sales have in our overall revenue mix, both at the India level and at a global level?

Speaker #3: I kind of expected this question based on your prior questions on the same things in the past, Ravi. So I prepared myself for this.

Jairam Varadaraj: I kind of expected this question based on your prior questions on the same things in the past, Ravi.

Ravi Swaminathan: Okay.

[Analyst 1]: Okay.

Jairam Varadaraj: I prepared myself for this.

Speaker #3: So, after-market income has grown—not only in India, but it has grown all over the world. And that's been one of the reasons why, in spite of an increase in material cost, we've been able to sustain our profitability. I'm not saying that's the only reason, but it's one contributing factor.

Ravi Swaminathan: Okay.

[Analyst 1]: Okay.

Jairam Varadaraj: Aftermarket has grown. Has grown not only in India, but it has grown all over the world, and that's been one of the reasons why in spite of an increase in material cost, we've been able to sustain our profitability. I'm not saying that's only one contributing factor.

Speaker #3: As far as after-market to revenue, I would say that, you know, if you just take parts, we are at—if you look at overall in the world, we are at around 22 to 23%, right?

Ravi Swaminathan: Okay.

[Analyst 1]: Okay.

Jairam Varadaraj: As far as aftermarket to revenue, I would say that if you just take parts, if you look at overall in the world, we are at around 22% to 23%.

Speaker #3: In India alone, we'll be at around 30-odd percent, right? 28 to 30%, right? So, the US has got a mixture of both parts and service because our distribution business does service as well, right?

Ravi Swaminathan: Okay.

[Analyst 1]: Okay.

Jairam Varadaraj: In India alone, we'll be at around 30-odd percent, 28% to 30%.

Ravi Swaminathan: Right.

[Analyst 1]: Right.

Jairam Varadaraj: US, it has got a mixture of both parts and service because our distribution business does service as well, right?

Jairam Varadaraj: US, it has got a mixture of both parts and service because our distribution business does service as well, right? Service is a very lumpy kind of a thing because we charge hundreds of dollars per hour for service. It colors the whole thing, but we are at around 30%. If you remove the service part, probably we are at around 16% or 17%. I would say it is fair to say in India, we are at around 28%, 30%, rest of the world at part level at around 15%, 16%. There is headroom for us to grow in India as well, as well as headroom to grow in the rest of the world.

Speaker #3: And service is a very lumpy kind of a thing because it's we charge hundreds of dollars per hour for for service. So that's that's, it is it colors the whole thing.

Jairam Varadaraj: Service is a very lumpy kind of a thing because we charge hundreds of dollars per hour for service. It colors the whole thing, but we are at around 30%. If you remove the service part, probably we are at around 16% or 17%. I would say it is fair to say in India, we are at around 28%, 30%, rest of the world at part level at around 15%, 16%. There is headroom for us to grow in India as well, as well as headroom to grow in the rest of the world.

Speaker #3: But we are at around 30%. But if you remove the service part, probably we're at around 16 or 17%. So I would say it's fair to say in India, we are at around 28, 30% rest of the world at part level at around 15, 16.

Speaker #3: So there is headroom for us to grow in India as well as headroom to grow in the rest of the world.

Speaker #2: Okay. And the global benchmark for after-sales service as a percentage of revenue, it used to be around the mid-30s. Is that the right understanding? Or are we— Sorry, sir, you're on mute.

Ravi Swaminathan: Okay. The global benchmark for after-sale service as a percentage of revenue, it used to be around mid-30s. Is that a right understanding? We would try to Sir, you are on mute.

[Analyst 1]: Okay. The global benchmark for after-sale service as a percentage of revenue, it used to be around mid-30s. Is that a right understanding? We would try to Sir, you are on mute.

Speaker #1: Sir, you've gone on mute, sir.

Speaker #3: Sorry, so sorry. I was clearing my throat. It's somewhere between 308 and between 35 and 40; I would say 38, probably there. Yeah.

Operator: Sir, you have gone on mute, sir.

Jairam Varadaraj: Sorry. Sorry, I was clearing my throat. It is somewhere between 38 in that, between 35 and 40. I would say 38 probably there. Yeah.

Speaker #2: Understood, sir. And with respect to—you had mentioned about EV application in your initial comments. So, if you can elaborate more as to where do the compressors go into EV applications.

Ravi Swaminathan: Understood, sir. With respect to, you had mentioned about EV application in the initial comments. If you can elaborate more as to where do the compressors go.

[Analyst 1]: Understood, sir. With respect to, you had mentioned about EV application in the initial comments. If you can elaborate more as to where do the compressors go.

Jairam Varadaraj: Sorry

Speaker #2: In your initial comments, you mentioned that we have done well in electric vehicle (EV) applications also. So, if you could talk about where the compressors go into EV applications.

Ravi Swaminathan: In the initial comments, you had mentioned that we have done well in electric vehicle, EV applications also.

[Analyst 1]: In the initial comments, you had mentioned that we have done well in electric vehicle, EV applications also.

Jairam Varadaraj: Yeah.

Ravi Swaminathan: If you can talk about where the compressors go into EV applications.

[Analyst 1]: If you can talk about where the compressors go into EV applications.

Speaker #3: No, no. I said the EV ecosystem, right? So if you look at the EV vehicles, there are suppliers to the EV vehicles, then there are EV vehicle manufacturers themselves.

Jairam Varadaraj: No, I said the EV ecosystem, right?

Ravi Swaminathan: Mm-hmm. Yeah.

[Analyst 1]: Mm-hmm. Yeah.

Jairam Varadaraj: So if you look at the EV vehicles, there are suppliers to the EV vehicles. There are EV vehicle manufacturers themselves.

Jairam Varadaraj: So if you look at the EV vehicles, there are suppliers to the EV vehicles. There are EV vehicle manufacturers themselves. The compressor is going into the factories. It is not going into an EV vehicle, no.

Speaker #3: The compressors going into the factories, they are not going into an EV vehicle. No.

Jairam Varadaraj: The compressor is going into the factories. It is not going into an EV vehicle, no.

Speaker #2: Understood. Okay, so it's kind of an extension to the auto products, then. Absolutely.

Ravi Swaminathan: Understood. Okay. It is kind of an extension to the auto products that

[Analyst 1]: Understood. Okay. It is kind of an extension to the auto products that

Speaker #3: Yeah, yeah, yeah, yeah. But you know, the number of new players in the electric vehicle category, especially in the two-wheeler segment, is a lot more than in the four-wheeler, right?

Jairam Varadaraj: Absolutely.

Ravi Swaminathan: You made.

[Analyst 1]: You made.

Jairam Varadaraj: Absolutely. Yes. But the number of new players in the electric vehicle category, especially in the two-wheeler segment, is a lot more than in the four-wheeler, right?

Speaker #2: Okay. Oh, so that is leading to they're all setting up factories and we are involved with them in in in helping with helping them with their factories.

Ravi Swaminathan: Okay. Oh, that is leading to

[Analyst 1]: Okay. Oh, that is leading to

Jairam Varadaraj: They are all setting up factories, and we are involved with them in helping them with their factories.

Speaker #2: Understood, sir. Very clear. Final questions: if you can give a mix of sales between industrial, infra, and retail sales, and also between piston and screw, that would be great.

Ravi Swaminathan: Understood, sir. Very clear. Final question. If you can give a mix of sales mix between industrial infra and retail sales, and also between piston and screw, that will be great.

[Analyst 1]: Understood, sir. Very clear. Final question. If you can give a mix of sales mix between industrial infra and retail sales, and also between piston and screw, that will be great.

Speaker #3: I don't have the number with me, but I wouldn't like to split it between piston and screw because that's too, too comparatively very sensitive.

Jairam Varadaraj: I do not have the number with me. But I would not like to split it between piston and screw because that is too comparatively very sensitive. But industrial infra and retail, I do not know what you mean by retail. I do not have the numbers in front of me, Ravi.

Speaker #3: But infra, industrial infra, and retail—I don't know what you mean by retail. I don't have the numbers in front of me.

Speaker #2: Sir, retail means automotive garages, woodwork, and all these things. I think one can classify them as retail.

Ravi Swaminathan: Sir, retail means automotive garages, et cetera, woodwork and all these things, I think one can classify it into retail.

[Analyst 1]: Sir, retail means automotive garages, et cetera, woodwork and all these things, I think one can classify it into retail.

Speaker #3: We don't break it up that way. We don't break it up that way. So I won't be able to tell you what we sell in automotive garages.

Jairam Varadaraj: Oh, we don't break it up that way. I won't be able to tell you what we sell in automotive garages. We don't measure that separately. Yeah.

Speaker #3: We don't measure that separately. Yeah.

Speaker #2: Sure, sir. Thanks a lot.

Ravi Swaminathan: Sure, sir. Thanks a lot.

[Analyst 1]: Sure, sir. Thanks a lot.

Speaker #1: Thank you, Ravi. Sir, the next question we have taken is from the line of Mr. Vipul Kumar. Vipul, you may unmute yourself and go ahead with your question.

Operator: Thank you, Ravi. Sir, the next question we're taking is from the line of Mr. Vipul Kumar. Vipul, you may unmute yourself and go ahead with your question.

Speaker #2: Hi. Congratulations, sir, on a very good set of numbers.

Vipul Shah: Hi. Congratulations, sir, for a very good set of numbers.

[Analyst 4]: Hi. Congratulations, sir, for a very good set of numbers.

Speaker #3: Thank you.

Speaker #2: So my question is, what is our in in reply to earlier question, you said we have the one of the lowest warranty cost. So is it possible to quantify what is our warranty cost as a percentage of sales and how does it compare with our years?

Jairam Varadaraj: Thank you.

Vipul Shah: My question is, in a reply to earlier question, you said we have one of the lowest warranty costs. Is it possible to quantify what is our warranty cost as a percentage of sales, and how does it compare with our peers?

[Analyst 4]: My question is, in a reply to earlier question, you said we have one of the lowest warranty costs. Is it possible to quantify what is our warranty cost as a percentage of sales, and how does it compare with our peers?

Speaker #3: Our warranty cost—I don't want to give you a specific number, Vipul—but it is less than 1% of our revenue.

Jairam Varadaraj: Our warranty cost, I do not want to give you a specific number, Vipul, but it is less than 1% of our revenue.

Speaker #2: Okay. And how does it compare to…?

Vipul Shah: How does it compare with your peers?

[Analyst 4]: How does it compare with your peers?

Speaker #3: Well, we don't know. Nobody reports it, but from, you know, people who are from competitors who have given us casual references, it is higher than 1%, right?

Jairam Varadaraj: Well, we do not know. Nobody reports it, but from people who are from competitors who have given us casual references, it is higher than 1%. That is the thing. They are higher than 1%, we are lower than 1%.

Speaker #3: So that's the thing. I mean, they are higher than 1%. We are lower than 1%.

Speaker #2: And in your opening remarks, you had also mentioned the semiconductor ecosystem. So, where are compressors used in the semiconductor ecosystem?

Vipul Shah: In your opening remarks, you had also mentioned the semiconductor ecosystem. Where compressors are used in semiconductor ecosystem?

[Analyst 4]: In your opening remarks, you had also mentioned the semiconductor ecosystem. Where compressors are used in semiconductor ecosystem?

Speaker #3: So, in manufacturing, there are oil-free machines that are used. There are suppliers to the semiconductor industries where regular compressors are used. The ecosystem of semiconductors has a wide set of applications.

Jairam Varadaraj: In manufacturing, there are oil-free machines that are used. There are suppliers to the semiconductor industries where regular compressors are used. The ecosystem of semiconductors has a wide set of applications. The final one, the fab, is the cleanest. It has got the highest standard of air quality and all that. We are participating there. We are also participating in the entire eco-chain of that.

Speaker #3: The final one, the fab, is the cleanest. It's got the highest standard of air quality and all that. We are participating there. We're also participating in the entire eco-chain of that.

Speaker #3: Yeah.

Speaker #2: What percentage of our turnover should be related to semiconductor?

Vipul Shah: What percentage of our turnover should be relating to semiconductor right now, sir?

[Analyst 4]: What percentage of our turnover should be relating to semiconductor right now, sir?

Speaker #3: I wouldn't like to share that detail, Vipul, but, you know, considering that it's a nascent industry that has come into India, it's not a significant number, but it's a growing number.

Jairam Varadaraj: I wouldn't like to share that detail, Vipul, but considering that it's a nascent industry that is coming to India, it's not a significant number, but it's a growing number.

Speaker #2: It's a very fast-growing sector. Is that understanding correct?

Speaker #3: It is a growing number. Yes, it is a growing number. Yes.

Vipul Shah: It's a very fast-growing side. Is that understanding correct?

[Analyst 4]: It's a very fast-growing side. Is that understanding correct?

Jairam Varadaraj: Yes, it is a growing number. Yes.

Speaker #2: Thank you very much, sir, and all the best for the future.

Speaker #3: Thank you.

Vipul Shah: Thank you very much, sir, and all the best to you.

[Analyst 4]: Thank you very much, sir, and all the best to you.

Speaker #1: Thank you, Vipul. Sir, the next question we'll take is from the line of Mr. Ankur. Ankur, you may unmute yourself and go ahead with your question.

Jairam Varadaraj: Thank you.

Operator: Thank you, Vipul. Sir, the next question we will take is from the line of Mr. Ankur. Ankur, you may unmute yourself and go ahead with your question.

Speaker #3: Yeah. Hi, sir. Thanks for the opportunity. First, on the distribution side—both in India, as well as in the global markets—you did mention that Demand Match has been launched across India.

[Analyst]: Yeah. Hi, sir. Thanks for the opportunity.

[Analyst 5]: Yeah. Hi, sir. Thanks for the opportunity.

Jairam Varadaraj: Right.

[Analyst]: First question on the distribution side, both in India as well as in the global markets. You did mention that Demand=Match has been launched across India. Will it be fair to say that more or less the entire nation is covered with this now, or there are still some-

[Analyst 5]: First question on the distribution side, both in India as well as in the global markets. You did mention that Demand=Match has been launched across India. Will it be fair to say that more or less the entire nation is covered with this now, or there are still some-

Speaker #3: Would it be fair to say that more or less the entire nation is covered with this now, or are there still some areas?

Speaker #2: Oh, absolutely. Absolutely. Because we have now, you know, like I said, Demand Match is a technology that gets embedded in all our products, right?

Jairam Varadaraj: No, absolutely. Because we have now, like I said, Demand=Match is a technology that gets embedded in all our products, right? We have sequenced the introduction by virtue of the most popular products. So wherever we have embedded the technology into a product, 100% it has been absorbed, right?

Speaker #2: And we have sequenced the introduction by virtue of the most popular product. So, wherever we have launched or embedded the technology into a product, 100% it has been absorbed, right?

Speaker #3: Sure.

Speaker #2: And even as we speak, we are continuing to add more products into that demand match technology. So I expect that in another year, all our products will have demand match embedded in them, all over the world.

[Analyst]: Sure.

[Analyst 5]: Sure.

Jairam Varadaraj: Even as we speak, we are continuing to add more products into that Demand=Match technology. So I expect in another year, all our products will have Demand=Match embedded in it all over the world.

Speaker #3: Sure. And the timelines that you will see for the global side as well—it's one year only, right? In India, it's largely done, and globally, you're saying one year.

[Analyst]: Sure. The timelines that you will see for the global side as well, it is one year only, right? In India, it is largely done.

[Analyst 5]: Sure. The timelines that you will see for the global side as well, it is one year only, right? In India, it is largely done.

Speaker #2: Yeah, this year we will have it globally. Yes.

Jairam Varadaraj: This year.

[Analyst]: And globally, you are saying one year.

[Analyst 5]: And globally, you are saying one year.

Speaker #3: Sure. And just a followup there. in terms of physical expansion of our distribution network, you know, let's say deepening presence in our existing markets, or adding newer ones, especially globally, how are we sort of, you know, ramping up there over the last couple of years and your initiatives there?

Jairam Varadaraj: Yeah. This year we will have it globally. Yes.

[Analyst]: Sure. Just a follow-up there. In terms of physical expansion of our distribution network, let us say deepening presence in our existing markets or adding newer ones, especially globally. How are we ramping up there over the last couple of years and your initiatives there?

[Analyst 5]: Sure. Just a follow-up there. In terms of physical expansion of our distribution network, let us say deepening presence in our existing markets or adding newer ones, especially globally. How are we ramping up there over the last couple of years and your initiatives there?

Speaker #2: Well, I don't have a specific number that we have moved from this many distributors to that many distributors. But everywhere in India, it is not about increasing the number of distributors.

Jairam Varadaraj: Well, I do not have a specific number that we have moved from this many distributors to that many distributors. Everywhere in India, it is not about increasing the number of distributors, it is about reorganizing our network in various geographies to make it more effective. There could be a distributor in one area who is sitting on too large a territory, and we are not able to penetrate in certain sub-areas, so we split territories and get deeper.

Speaker #2: It's about reorganizing our network in various geographies to make it more effective. So there could be a distributor in one area who is sitting on too large a territory, and we are not able to penetrate in certain sub-areas.

Speaker #2: So, we split territories and get deeper. So that's one type of activity in India, which is ongoing even as we speak. Then, for our tier four, we have now set a completely new set of distributors.

[Analyst]: Sure.

Jairam Varadaraj: That is one type of activity in India, which is ongoing even as we speak. Then for our Tier Four, we have now set a completely new set of distributors. It is not shared with our existing distributors because that is a completely new business with a completely new mindset, right?

[Analyst 5]: Sure.

Speaker #2: We don't, it is not shared with our existing distributors because that's a completely new business with a completely new mindset, right? So, that's another growth in terms of our network.

[Analyst]: Sure.

[Analyst 5]: Sure.

Jairam Varadaraj: That is another growth in terms of our network. In the US, our growth has primarily come from accessing new distributors into new territories. But like I said, getting distributors to come on board takes a long time. It is not something as easy as converting a customer, for instance.

Speaker #2: In in the U in your in the US, our growth is primarily come from accessing new distributors into new territories, right? That's another but all like I said, getting distributors to come on board is takes a long time.

Speaker #2: It's not something as easy as converting a custom, for instance.

Speaker #3: Fair enough, sir. That's helpful. And just, you know, a related question on the aftermarket side: how—so, one, how does that, you know, the spread that you shared, how does it vary between India and the global markets?

[Analyst]: Fair enough, sir. That is helpful. Just a related question on the aftermarket side. One, how does that, the split that you shared, how does it vary between India and the global markets? Secondly, do we have an AMC for our products, which is automatically getting renewed or it is a product-specific service as and when the problem or some issue comes in, you charge for it?

[Analyst 5]: Fair enough, sir. That is helpful. Just a related question on the aftermarket side. One, how does that, the split that you shared, how does it vary between India and the global markets? Secondly, do we have an AMC for our products, which is automatically getting renewed or it is a product-specific service as and when the problem or some issue comes in, you charge for it?

Speaker #3: And secondly, and do you have a do we have an AMC for our products across all, which is automatically sort of, you know, getting renewed or it's a product specific service as and when, you know, the the problem or some issue comes in, you charge for it?

Speaker #2: So, if you look at the full spectrum of aftermarket, there are parts, and then there is service. Yeah.

Jairam Varadaraj: If you look at the full spectrum of aftermarket, there are parts and then there is service. Yeah?

Speaker #3: Yeah. Yeah.

Speaker #2: We, LG, predominantly play in the parts business, right? We leave the service part to the dealer, right? Now, if you look at India, because the labor cost is so low, revenue from services is very, very small.

[Analyst]: Yeah.

[Analyst 5]: Yeah.

Jairam Varadaraj: Elgi predominantly plays in the parts business, right? We leave the service part to the dealer, right? Now, if you look at India, because the labor cost is so low, revenue from service is very, very small. If you take a typical dealer in India, if you say, let's say, 20% to 25% of their revenue is coming from aftermarket, I would say probably 2% to 3% out of that 25% is service. You take the same thing in the US. If they take 30% or 40% of their revenues coming from aftermarket, close to 25% of that will come from service. Yeah?

Speaker #2: Yeah. So if you take a typical dealer in India, if you say, let's say, 20–25% of their revenue is coming from aftermarket, I would say probably 2–3% out of that 25% is service.

Speaker #2: You take the same thing in the US; if they take 30% or 40% of their revenue coming from aftermarket, close to 25% of that will come from service.

Speaker #2: Yeah.

Speaker #3: Sure.

Speaker #2: We don't do service. I mean, in India, we do a little bit of service to our direct customers—you know, customers like large corporates who don't want to work with dealers.

[Analyst]: Sure.

[Analyst 5]: Sure.

Jairam Varadaraj: We don't do service. In India, we do a little bit of service to our direct customers. Customers like large corporates who don't want to work with dealers, we provide direct service, but that's not a big part of our income. Our main aftermarket is parts, right? Now, it's also our philosophy that we don't want to intrude into the profitable segment of a distributor, which is service. They have the capability. They have the service technician. They have trained service technicians. We let them earn. It's part of coexisting in that ecosystem, so we are fine with that. Like I explained, the split is, in India, we are between 28% and 30% is aftermarket. Worldwide, we have about 15% to 16%. Again, looking at parts. Yeah.

Speaker #2: We provide direct service, but that's not a big part of our income. Our main aftermarket is parts, right? Now, it's also a philosophy that we don't want to intrude into the profitable segment of a distributor, which is service.

Speaker #2: They have the capability. They have the service technician. They have trained service technicians. We let them earn. It's part of, you know, coexisting in that ecosystem.

Speaker #2: So we're fine with that. Like I explained, the split in India is that we are between 28% and 30% aftermarket. Worldwide, we are about 15% to 16%.

Speaker #2: Again, looking at parts. Yeah.

Speaker #3: Excellent service. Yeah. Great, sir. Thanks a lot for all your answers, and all the best. Thank you.

[Analyst]: Ex-service. Yeah. Great, sir. Thanks a lot for all your answers, and all the best. Thank you.

[Analyst 5]: Ex-service. Yeah. Great, sir. Thanks a lot for all your answers, and all the best. Thank you.

Speaker #2: Thank you.

Speaker #1: Thank you, of course. The next question, sir, we'll take from the line of Sri Agarwal. Sri, you may unmute yourself and go ahead with your question.

Jairam Varadaraj: Thank you.

Operator: Thank you, Ankur. The next question, sir, will be taken from the line of Shrishty Agarwal. Sri, you may unmute yourself and go ahead with your question.

Speaker #4: Thank you, Mr. Vedraj. Congrats, and good numbers. Just one from me, which is on the improvement in the margins for the international subsidiaries.

Shrishty Agarwal: Thank you, Mr. Varadaraj. Congrats on good numbers. Just one from me, which is on the improvement in the margins for the international subsidiaries. You mentioned that aftermarket as a share of overall improving is one of the contributors. Other than that, what have been the drivers of this? Because at a time when commodity costs are high, this is quite notable. Also the sustainability of this improvement, should we expect this to continue in the coming quarters as well? Thank you.

[Analyst 6]: Thank you, Mr. Varadaraj. Congrats on good numbers. Just one from me, which is on the improvement in the margins for the international subsidiaries. You mentioned that aftermarket as a share of overall improving is one of the contributors. Other than that, what have been the drivers of this? Because at a time when commodity costs are high, this is quite notable. Also the sustainability of this improvement, should we expect this to continue in the coming quarters as well? Thank you.

Speaker #4: Just, you know, you mentioned that aftermarket as a share of overall improvement is one of the contributors. But other than that, what have been the drivers of this?

Speaker #4: Because, at a time when commodity costs are high, this is quite notable. And also, regarding the sustainability of this improvement, should we expect this to continue in the coming quarters as well?

Speaker #4: Thank you.

Speaker #2: So, Sri, thank you. There are multiple things. One is obviously, let's take North America as an example. The large percentage of growth of the top line has obviously been a contributor to the bottom line health as well.

Jairam Varadaraj: Sri, thank you. There are multiple things. One is obviously the, let's take North America as an example. The large percentage of growth of the top line has obviously been a contributor to the bottom line health as well. There is no doubt about that. That's not the only factor. We have also, like you saw one of the expense items of reorganization, we are taking cost out to make the organization more leaner and more nimble and more efficient. That's another factor. The third is, in spite of the increase in raw material costs, in spite of holding our prices in Q1 to a larger extent compared to raw material price increases, the cost reduction activity that's been going on in this company has been a contributor as well, right? In-sourcing the motor, our own design has been a significant contributor.

Speaker #2: So there is no doubt about that. But that's not the only factor. We have also, as you saw, one of the expense items of reorganization.

Speaker #2: We are taking cost out to make the organization leaner, more nimble, and more efficient. So that's another factor. The third is, you know, in spite of the increase in raw material cost, in spite of holding our prices in the first quarter to a larger extent compared to raw material price increases, the cost reduction activity that's been going on in this company has been a contributor as well, right?

Speaker #2: So motor motor in-house insourcing the motor our own design has been a a significant contributor. It's just as an example. Similar to the motor, there's been many other things that we have introduced which have brought significant savings to the to the to the bottom line.

Jairam Varadaraj: Just as an example. Similar to the motor, there's been many other things that we have introduced which have brought significant savings to the bottom line. It's a series of these things. We expect this to continue because it is not a one-time thing. It's an ongoing thing. The reorganization, wherever it's to be done, will continue to happen. Cost reduction activities will continue to happen. Like I explained, we have corrected our prices based on the new reality of cost increases. That will kick in towards the end of Q2 or fully in Q3. We expect to see all this to ensure that we sustain this in the future.

Speaker #2: So it's a series of these things. We expect this to continue because this is not just the it is not a one-time thing. It's an ongoing thing.

Speaker #2: The reorganization, wherever it's to be done, will continue to happen. Cost reduction activities will continue to happen. And like I explained, we have corrected our prices.

Speaker #2: Based on the new reality of cost increases, that will kick in towards the end of the second quarter or fully in the third quarter.

Speaker #2: So, we expect to see all this to ensure that we sustain this in the future.

Speaker #4: Fantastic. Thank you. Yeah.

Shrishty Agarwal: Fantastic. Thank you.

[Analyst 6]: Fantastic. Thank you.

Speaker #1: Sir, before we move to the next person, I’ll take one question from the chat. It says, "Do we supply compressors to CNG filling stations?"

Operator: Yeah. Sir, before we move to the next person, I will take one question from the chat. It says, "Sir, do we supply compressors to CNG filling stations?

Speaker #2: No, we don't. We don't make gas compressors. No.

Jairam Varadaraj: No, we don't. We don't make gas compressors, no.

Speaker #1: Sir, the next question is from the line of Mr. Daval Shah. Daval, you may unmute yourself and go ahead with your question.

Operator: Sir, the next question is from the line of Mr. Dhaval Shah. Dhaval, you may unmute yourself and go ahead with your question.

Speaker #5: Hi, sir. Congratulations on a great set of numbers.

Speaker #2: Thank you, Daval.

Dhaval Shah: Hi, sir. Congratulations on great set of numbers.

[Analyst 7]: Hi, sir. Congratulations on great set of numbers.

Speaker #5: So sir, you mentioned in your opening remarks that renewable energy has also started contributing meaningfully in terms of growth, incremental growth. So which part, so when, solar, both?

Jairam Varadaraj: Thank you, Dhaval.

Dhaval Shah: Sir, you mentioned in your opening remarks that renewable energy has also started contributing meaningfully in terms of growth, incremental growth. Which part? Wind, solar, both?

[Analyst 7]: Sir, you mentioned in your opening remarks that renewable energy has also started contributing meaningfully in terms of growth, incremental growth. Which part? Wind, solar, both?

Speaker #2: Yes. See, again, we are not supplying directly into the solar panel or into a wind turbine. But in the whole ecosystem of production that happens for solar—right from cell manufacturing to panel manufacturing, all the way up to installation—there is compressed air that is required.

Jairam Varadaraj: Yes. See, again, we are not supplying directly into the solar panel or into a wind turbine, but the whole ecosystem of production that happens for solar, right from cell manufacturing to panel manufacturing, all the way up to installation, there is compressed air that is required. We are in that full supply chain. Yeah.

Speaker #2: So, we are in that full supply chain. Yeah. Similarly, wind turbine. Yeah.

Speaker #5: Okay, great. And sir, you said that margins are already very good in this quarter, and these margins can only go up, right?

Dhaval Shah: Okay.

[Analyst 7]: Okay.

Jairam Varadaraj: Similarly, wind turbine. Yeah.

Dhaval Shah: Okay, great. Then, sir, you said that margins, which are already very good in this quarter, and these margins can only go up, right? That's what you said.

[Analyst 7]: Okay, great. Then, sir, you said that margins, which are already very good in this quarter, and these margins can only go up, right? That's what you said.

Speaker #5: That's what you said.

Speaker #2: Yes, we expect—of course, we don't know what Mr. Trump will do in terms of tariffs. Assuming that remains stable, we have done a lot of work to absorb that.

Jairam Varadaraj: Yes. Of course, we don't know what Mr. Trump will do in terms of tariffs. Assuming that that remains stable, we have done a lot of work to absorb that. Right now, our tariff is at 25%, and we've been able to absorb that very effectively. Barring no unforeseen kind of shocks of that nature, we should continue to improve.

Speaker #2: Right now, our tariff is at 25%, and we've been able to absorb that very effectively. Barring any unforeseen shocks of that nature, we should continue to improve.

Speaker #2: Yeah.

Speaker #5: And I think on your Investor Day, you said it should go to 1,660 and a half, right, by FY28.

Dhaval Shah: I think on your investor day, you said it should go to 16 and a half, right? By FY28.

[Analyst 7]: I think on your investor day, you said it should go to 16 and a half, right? By FY28.

Speaker #2: Well, our target is to grow to 20. We had given a guidance that we will go to 18% by 31.

Jairam Varadaraj: Well, our target is to grow to 20%. We had given a guidance that we will go to 18% by 2031.

Speaker #2: Yeah.

Speaker #5: Okay. Okay. Okay. Thanks a lot. Thanks a lot. All the best.

Speaker #2: Thank you.

Dhaval Shah: Okay. Okay, sir. Thanks a lot. All the best.

[Analyst 7]: Okay. Okay, sir. Thanks a lot. All the best.

Speaker #1: Thank you, Daval. Sir, there is a follow-up question from Mr. Vipul Shah. Vipul, you may unmute yourself and go ahead with your question.

Jairam Varadaraj: Thank you.

Operator: Thank you, Dhaval. Sir, there is a follow-up question from Mr. Vipul Shah. Vipul, you may unmute yourself and go ahead with your question.

Speaker #3: Yeah, thanks for the opportunity. Sir, is demand matching optional, or is it mandatory for all new dispatches?

Vipul Shah: Yeah. Thanks for the opportunity. Sir, Demand=Match is optional or is it mandatory for all new dispatchers, sir?

[Analyst 4]: Yeah. Thanks for the opportunity. Sir, Demand=Match is optional or is it mandatory for all new dispatchers, sir?

Speaker #2: We have made it standard, people. So all LG compressors catering to a certain tier of the market—for instance, the Tier 4 compressors—will not have demand match, right?

Jairam Varadaraj: We have made it standard, Vipul. All Elgi compressors catering to a certain tier of the market. For instance, the Tier Four compressors will not have Demand=Match, right? But our Tier Three, Tier Two, and tier one compressors all have Demand=Match as standard.

Speaker #2: But our Tier 3, Tier 2, and Tier 1 compressors all have demand match as standard.

Speaker #3: Just one small clarification regarding—you said the tariff right now is 25%. Sorry, I'm sorry, you're breaking up. The current tariff is 25%?

Vipul Shah: Just one small clarification regarding tariff. You said tariff right now is 25%. Is that correct?

[Analyst 4]: Just one small clarification regarding tariff. You said tariff right now is 25%. Is that correct?

Jairam Varadaraj: Sorry? I'm sorry, you're breaking up, Vipul.

Speaker #2: Yes. Yes.

Vipul Shah: Current tariff is 25%, sir, you said.

[Analyst 4]: Current tariff is 25%, sir, you said.

Speaker #3: Have we received a refund of all earlier paid tariffs, or is anything still pending?

Jairam Varadaraj: Yes. Yes.

Vipul Shah: Have we received refund of all earlier paid tariffs or anything is pending still?

[Analyst 4]: Have we received refund of all earlier paid tariffs or anything is pending still?

Speaker #2: We, we—I think we made a disclosure in the market. We have got some, there's approval of close to 4 million of refund, and I think actual refund is about 1.6 or 1.8 million.

Jairam Varadaraj: I think we made a disclosure in the market. There is approval of close to 4 million of refund, and I think actual refund is about 1.6 or 1.8 million that we have got a refund. Yes.

Speaker #2: That we've got a refund. Yes.

Speaker #3: Yeah. Balance is pending.

Speaker #2: Yes, we just have to wait.

Vipul Shah: Balance is pending.

[Analyst 4]: Balance is pending.

Speaker #3: Okay. Thank you, sir.

Jairam Varadaraj: Yes, we have to wait.

Vipul Shah: Okay. Thank you, sir.

[Analyst 4]: Okay. Thank you, sir.

Speaker #1: And sir, there's one follow-up question from Ravi Swaminathan. Ravi, you may unmute yourself and go ahead with your question. Ravi, please unmute yourself and go ahead with your question.

Operator: Sir, there is one follow-up question from Ravi Swaminathan. Ravi, you may unmute yourself and go ahead with your question. Ravi, please unmute yourself and go ahead with your question.

Speaker #6: Yeah. Hi sir, one final follow-up question. With respect to some of the new-age sectors like EV and renewables, and probably even data centers, what would be the revenue contribution to India and global revenue for you from these segments?

Ravi Swaminathan: Yeah. Hi, sir. One final-

[Analyst 1]: Yeah. Hi, sir. One final-

Jairam Varadaraj: Hi, Ravi.

Ravi Swaminathan: follow-up question. With respect to some of the new age sectors like EV and renewables, and probably even data center, what would be the revenue contribution to India and global revenue for you from these segments? Any broad sense on this? I am just trying to figure out whether are they meaningful numbers to our revenue or not?

[Analyst 1]: follow-up question. With respect to some of the new age sectors like EV and renewables, and probably even data center, what would be the revenue contribution to India and global revenue for you from these segments? Any broad sense on this? I am just trying to figure out whether are they meaningful numbers to our revenue or not?

Speaker #6: Any broad sense on this? I'm just trying to figure out whether are they meaningful numbers to our revenue or see right they are they are developing at least in India semiconductors or renewables are developing sectors they they have a large growth themselves but they you can't compare that the the buying power of that industry sector with textiles or cement or steel which are well established.

Jairam Varadaraj: Well, developing, at least in India, semiconductors or renewables are developing sectors. They have a large growth themselves, but you cannot compare the buying power of that industry sector with textiles or cement or steel, which are well-established. So they are not a big contributor, but they have very high growth rate. Right?

Speaker #6: So they're not a big contributor, but they have a very high growth rate. Right. Okay, understood, sir. And in terms of metals like steel, copper, aluminum, etc., are you seeing big traction and enquiries picking up very significantly? Because usually, they change the entire growth rate itself because of big orders coming in.

Ravi Swaminathan: Okay. Understood, sir. In terms of metals like steel, copper, aluminum, et cetera, are you seeing big traction, inquiries, et cetera, picking up very significantly? Because usually they change the entire growth rate itself because of big orders coming in.

[Analyst 1]: Okay. Understood, sir. In terms of metals like steel, copper, aluminum, et cetera, are you seeing big traction, inquiries, et cetera, picking up very significantly? Because usually they change the entire growth rate itself because of big orders coming in.

Speaker #2: There are enquiries, Ravi, but I think all these—these, I don't know about copper and this thing. We are not that big anyway, and steel is big. I think at one point there was a huge capacity buildup, and then there were all these issues.

Jairam Varadaraj: There are inquiries, Ravi, but I think all these, I do not know about copper and this thing, we are not that big anyway, and steel is big.

Jairam Varadaraj: I think at one point there was a huge capacity build-up and then there was all these issues. I think the steel industry is bleeding out its capacity first utilization before they start looking at further investments.

Speaker #2: I think the steel industry is bleeding out its capacity, first utilization, before they start looking at further investments.

Speaker #6: Understood. And here centrifugal compressors only go into it largely or is it like the addressable it depends depends depends on the size there are centrifugals in large plants there is also a lot a lot of screw compressors understood sir thanks a lot thank you Ravi the next question we have is like is from the line of Manjit Manjit you may unmute yourself and go ahead with your question hello again sir and I'm not speaking a very specific answer at this point take your your voice is not clear could you please come closer to your mic yes am I clear now yeah hello again sir I'm not seeking a very specific answer I just wanted to pick your mic you please feel free to answer it in whichever way you feel like when we look at Atlas Copper when we look at Ingersoll Rhein their technological capabilities and our technological capability where do you see the gap lies if there is any I as far as technology is concerned there is no gap right the fact that we launched demand match is a demonstration and an evidence that we have a good mastery of the not just the knowhow of technology but the know why of technology right when you have know why you can build the next products if you have knowhow you can't build the next so this is clear demonstration that we have the why right why is something built the way it is so that you're able to question it and make the next product right so that's the trajectory we are in we have it's it it's not something that came easily we've been working on it for the last 30 years right so technically there is absolutely no different in fact we would say that there are some understanding we are superior understood sir and bearing scale what are the organizational capabilities that would differ bearing scale so what has happened if you really look at our our company you know we have gone we have taken an Indian company and we have tried to grow it internationally and it's been a huge learning process for us because there is no textbook which says you step one step two step three this is how an Indian company will build a global company so you go out there and you do certain things you make mistakes and you learn right now one of the learnings that we have is tomorrow if we really want to do the next round of scale we have to have very strong processes which will help us be efficient as well as have control over our operations without any surprises right so this is something that we are going to build out in the next few years a very strong process layer in the company and through that process layer we'll be able to bring out take out so much of inefficiencies that are currently there right so I would say the scale will come once we have built that layer and that we are going to start doing now thank you sir very good to hear from you again thank you sir then the next question is line from or is from the line of Mr. Ritwik.

Ravi Swaminathan: Understood. Here, centrifugal compressors only go into it largely, or is it like the-

[Analyst 1]: Understood. Here, centrifugal compressors only go into it largely, or is it like the-

Jairam Varadaraj: No, it depends on the size. There are centrifugals in large plants. There is also a lot of screw compressors.

Ravi Swaminathan: Understood, sir. Thanks a lot.

[Analyst 1]: Understood, sir. Thanks a lot.

Operator: Thank you, Ravi. The next question we have is from the line of Manjeet Rathore. Manjeet, you may unmute yourself and go ahead with your question.

Manjeet Rathore: Hello again, sir. I am not seeking a very specific answer.

[Analyst 2]: Hello again, sir. I am not seeking a very specific answer.

Operator: Manjeet, your voice is not clear. Could you please come closer to your mic?

Manjeet Rathore: Am I clear now?

[Analyst 2]: Am I clear now?

Operator: Yeah.

Jairam Varadaraj: Yeah.

Manjeet Rathore: Hello again, sir. I am not seeking a very specific answer, I just wanted to pick your mind. Please feel free to answer it in whichever way you feel like. When we look at Atlas Copco, when we look at Ingersoll Rand, their technological capabilities and our technological capabilities, where do you see the gap lies, if there is any?

[Analyst 2]: Hello again, sir. I am not seeking a very specific answer, I just wanted to pick your mind. Please feel free to answer it in whichever way you feel like. When we look at Atlas Copco, when we look at Ingersoll Rand, their technological capabilities and our technological capabilities, where do you see the gap lies, if there is any?

Jairam Varadaraj: As far as technology is concerned, there is no gap. The fact that we launched Demand=Match is a demonstration and an evidence that we have a good mastery of not just the know-how of technology, but the know-why of technology. When you have know-why, you can build the next products. If you have know-how, you can not build the next. So this is clear demonstration that we have the why. Why is something built the way it is? So that you are able to question it and make the next product. So that is the trajectory we are in. It is not something that came easily. We have been working on it for the last 30 years. So technically, there is absolutely no difference. In fact, we would say that there are some understanding we are superior.

Manjeet Rathore: Understood, sir. Barring scale, what are the organizational capabilities that would differ? Barring scale.

[Analyst 2]: Understood, sir. Barring scale, what are the organizational capabilities that would differ? Barring scale.

Jairam Varadaraj: What has happened, if you really look at our company, we have taken an Indian company, and we have tried to grow it internationally, and it has been a huge learning process for us because there is no textbook which says, "Step 1, step 2, step 3, this is how an Indian company will build a global company." You go out there and you do certain things, you make mistakes, and you learn. Now, one of the learnings that we have is tomorrow, if we really want to do the next round of scale, we have to have very strong processes which will help us be efficient as well as have control over our operations without any surprises. This is something that we are going to build out in the next few years, a very strong process layer in the company.

Jairam Varadaraj: Through that process layer, we will be able to take out so much of inefficiencies that are currently there. I would say the scale will come once we have built that layer, and that we are going to start doing now.

Manjeet Rathore: Thank you, sir. Very good to hear from you again. I will get back.

[Analyst 2]: Thank you, sir. Very good to hear from you again. I will get back.

Jairam Varadaraj: Yeah. Thank you.

Operator: Sir, the next question is from the line of Mr. Ritwik. Ritwik, you may unmute yourself and go ahead with your question.

Speaker #6: Ritwik, you may unmute yourself and go ahead with your question. Yeah. Hi, good afternoon, sir. Right. Good afternoon. So, my question is on our employee cost and operating cost.

[Analyst]: Yeah. Hi. Good afternoon, sir.

[Analyst 8]: Yeah. Hi. Good afternoon, sir.

Jairam Varadaraj: Hi. Good afternoon.

Speaker #6: In the last three to five years, we have seen it growing in mid to high teens. So, with you mentioning that we are looking to rationalize the cost in Europe and try to become more cost efficient.

[Analyst]: Sir, my question is on our cost, employee cost and operating cost. In the last three to five years, we have seen it grow in mid to high teens. You mentioned that we are looking to rationalize the cost at Europe and try to become more cost-efficient. Do you think that this trajectory should somewhat rationalize from current levels, or this trajectory should continue over the next three years as well?

[Analyst 8]: Sir, my question is on our cost, employee cost and operating cost. In the last three to five years, we have seen it grow in mid to high teens. You mentioned that we are looking to rationalize the cost at Europe and try to become more cost-efficient. Do you think that this trajectory should somewhat rationalize from current levels, or this trajectory should continue over the next three years as well?

Speaker #6: So, do you think that this trajectory should somewhat rationalize from current levels, or should this trajectory continue over the next three years as well?

Speaker #6: It will start getting rationalized with become two levels. One is, we obviously have to grow the top line, and the minute we grow the top line, even the current level of cost as a percentage is going to drop.

Jairam Varadaraj: It will start getting rationalized, Ritwik, on two levels. One is we obviously have to grow the top line, and the minute we grow the top line, even the current level of cost as a percentage is going to drop. That's just pure arithmetic. Besides that, we are looking at where is a particular job best performed. Again, it relates to this process project that I talked about. When you have a very clearly defined process layer and a process map across the company, across all its geographical entities, there will be clear identification of where the jobs can be done the most efficiently. I'm not saying everything has to be done in India, but there are certain locations that do certain things far more efficiently.

Speaker #6: So that's just pure arithmetic. Besides that, we are looking at where a particular job is best performed. So again, it relates to this process project that I talked about.

Speaker #6: When you have a very clearly defined process layer and a process map across the company, across all its geographical entities, there will be clear identification of where the jobs can be done most efficiently.

Jairam Varadaraj: When you have a very clearly defined process layer and a process map across the company, across all its geographical entities, there will be clear identification of where the jobs can be done the most efficiently. I'm not saying everything has to be done in India, but there are certain locations that do certain things far more efficiently. Once we get that kind of an understanding and consolidation that takes place, the overall cost will go down, the efficiency will go up. Right? That's something that we hope to achieve over the next three to four years' time.

Speaker #6: I'm not saying everything has to be done in India, but there are certain locations that do certain things far more efficiently. Once we get that kind of understanding and consolidation in place, the overall cost will go down and the efficiency will go up.

Jairam Varadaraj: Once we get that kind of an understanding and consolidation that takes place, the overall cost will go down, the efficiency will go up. Right? That's something that we hope to achieve over the next three to four years' time.

Speaker #6: Right? So that's something that we hope to achieve over the next three to four years time. Okay. So so the journey from say 15 16% EBITDA margin towards your target of 20% some part would be operating leverage on the current way some part would be the new products that you are launching would that be a fair assessment some part of it clearly operating leverage which is linked again to new products because they contribute to giving us the top line right by market share or growth into new markets but we will also be looking at how to improve our gross margin right through constant cost reduction re-engineering that's an ongoing process that we have now embedded in the company and the other is to look at our fixed cost rationalization through this process exercise right okay so all of them there will be at three levels we will be looking at improving our EBITDA margin not just relying on only leverage right okay okay so that is helpful all the best and thank you thank you thank you Ritwik sir I see no more questions so I'll hand over the mic to Kamleshi for the the vote of thanks and probably the closing remarks followed by your closing remarks.

[Analyst]: Okay. The journey from, say, 15%, 16% EBITDA margin towards your target of 20%, some part would be operating leverage on the current base.

[Analyst 8]: Okay. The journey from, say, 15%, 16% EBITDA margin towards your target of 20%, some part would be operating leverage on the current base.

Jairam Varadaraj: Absolutely.

[Analyst]: Some part would be the new products that you are launching. Would that be a fair assessment?

[Analyst 8]: Some part would be the new products that you are launching. Would that be a fair assessment?

Jairam Varadaraj: Some part of it, clearly operating leverage, which is linked again to new products because they contribute to giving us the top line. By market share or growth into new markets. We will also be looking at how to improve our gross margin, through constant cost reduction, re-engineering. That is an ongoing process that we have now embedded in the company. The other is to look at our fixed cost rationalization through this process exercise.

[Analyst]: Okay.

[Analyst 8]: Okay.

Jairam Varadaraj: All of them, at three levels, we will be looking at improving our EBITDA margin, not just relying on only leverage.

[Analyst]: Right. Okay. Okay, sir. That is helpful. All the best, and thank you.

[Analyst 8]: Right. Okay. Okay, sir. That is helpful. All the best, and thank you.

Jairam Varadaraj: Thank you.

Operator: Thank you, Ritwik. Sir, I see no more questions, so I will hand over the mic to Kamlesh for the vote of thanks and probably the closing remarks, followed by your closing remarks.

Speaker #6: Thank you. Thank you very much for moderating this session. Yes, sir, just one point. Can you help us understand the progress of the Italian joint venture? When are we likely to see the product launched?

Jairam Varadaraj: Thank you. Thank you very much for moderating this session.

[Company Representative] (AMSEC): Yeah. Sir, just one point. Can you just help us understand the Italian joint venture progress? When are we seeing the product to be launched?

Speaker #6: Sorry, say that again, Kamlesh. The new product that we are launching now—which one? In collaboration products? Oh, vacuum is already in the market.

Jairam Varadaraj: Sorry, say that again, Kamlesh.

[Company Representative] (AMSEC): The new product that we are launching now.

Jairam Varadaraj: Which one?

[Company Representative] (AMSEC): In collaboration. Vacuum products.

Speaker #6: Kamlesh, we have indigenized it. Local production has already started. We have started selling. The first quarter has been very good.

Jairam Varadaraj: Oh, vacuum is already in the market, Kamlesh. We have indigenized it. Local production has already started. We have started selling. The Q1 has been very good. I just do not want to give a specific number as yet, Kamlesh, but we have had a phenomenal percentage growth in the Q1. We expect that to continue. You got to understand, we are a very small, late entrant player in this segment. These kind of growth numbers will happen to anybody who enters this. It is encouraging to see because the quality of customers we have been able to get are very high quality customers, which is a reflection of the quality of the products and our entire marketing program. It is encouraging. We will continue to grow that.

Speaker #6: I just don't want to give a specific number as yet, Kamlesh. But we have had a phenomenal percentage growth in the first quarter, right?

Speaker #6: And we expect that to continue. But you’ve got to understand, we are a very, very small, late-entrant player in this segment, right? So these kind of growth numbers will happen to anybody who enters this, right?

Speaker #6: But it's encouraging to see, because the quality of customers we've been able to get are very high-quality customers, which is a reflection of the quality of the products and our entire marketing program, right?

Speaker #6: So it's encouraging. So, we will continue to grow that, you know. Great, sir. Great. So, yeah, thank you, sir, for all the insights.

Speaker #6: Any closing remarks you want to make? Thank you very much, Kamlesh. Thanks to you and Asian Market Securities for hosting us. It has been a good quarter, but you know, this is a quarter in a lifetime, so we don't rest on this.

[Company Representative] (AMSEC): Great, sir. Great. Thank you, sir, for all the insights. Any closing remarks you want to make?

Jairam Varadaraj: Thank you very much, Kamlesh. Thanks to you and Asian Markets Securities for hosting us. It has been a good quarter, but this is a quarter in a lifetime. We do not rest on this. There is still a lot of work to be done, and we keep looking forward into the future with great optimism. Thank you again for everyone's time. Thank you.

Speaker #6: There's still a lot of work to be done, and we keep looking forward into the future with great optimism. Thank you again for everyone's time.

Speaker #6: Thank you. Thank you. Thank you so much. Thank you, everyone. With that, you can log off the call. Have a good day. Thank you.

[Company Representative] (AMSEC): Thank you.

Operator: Thank you so much.

[Analyst]: Thank you, everyone. With that, you can come off the call. Have a good day.

[Company Representative] (AMSEC): Thank you, everyone. With that, you can come off the call. Have a good day.

Operator: Thank you.

Jairam Varadaraj: Thank you.

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Q1 2027 Elgi Equipments Ltd Earnings Call

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