On the Industrial segment, can you give a flavour of growth in key sub-products like LT Motor, HT Motor, railway propulsion systems for Vande Bharat, KAVACH order visibility, and exports trends?
On Industrial, growth has primarily come from the railway side. Motors business also went up - not in very high digits but some decent progress. Both IIP and EMA data showed negative trend for the quarter, consistent for last couple of quarters. Good news is Motors went up showing efforts and actions are showing results. Drives and automation subsidiary - revenue numbers not so good but bookings have started flowing in, which means it's just the execution now.
On KAVACH orders - last year around INR 800 crores, this year Q1 around INR 180 crores. What kind of run rate should we expect annually over next few years, say INR 800-1,000 crores range?
KAVACH is 99% focused on execution now. Reaching stage to start executing - process is in process, test results done, passenger trials in progress. Expect at least 100 KAVACH installation commissioning per month starting next couple of months. Business opportunity is phenomenal - it's just strength of designing and executing these orders on track. Not giving guidance but more and more orders will come as we execute better and faster.
Power segment inflows have jumped to nearly INR 4,000 crores from INR 1,800-2,000 crores range previously - is this in anticipation of new plant going live? At what incremental margin levels have these orders come in?
Good question. These are across power sector transformers as well as switchgear together. Outgrowing because we are expanding in terms of pipeline, go-to-market rather than being conservative. Going out in market to capture and increase pipeline of orders - win percentage is also increasing. On margins, they are at decent margin - we are not compromising on margins to get more orders.
What is the mix of the power order backlog now between PT and Switchgears roughly?
Split we are not giving, but I can only say that both are trying to beat each other. So it's a good game to have.
On LT Motor - market has been stagnant to marginal decline for 4-5 quarters. Are you starting to see any hints of a recovery? When do you believe this growth comes back and which sectors need to fire?
Market has further deteriorated. Don't see revival happening. But positive - bit of impact on margins which we are countering by increasing prices in market effective July. Market recovery cannot be forecast - depends on smaller CAPEX starting to come in which we don't see in a large way. Not 100% dependent - focused on penetrating verticals where we are not yet present. When market is negative and we are still positive, that's where growth is coming from.
Over next 12 to 18 months, how do you see longer-term margins stabilizing across Power, Railways and Industrial?
It can only get better. At company level, at some stage, we will bounce back to 14%, 15% PBT margins. Power side current 20%-odd levels - should go even better. Aspiration is much bigger.
On exports progress, especially on the motor side?
Progressing well. Doing foundational work - Jatinder Kaul increasing and improving capacity, working with Marais who is making investments in go-to-market. Presence in Northwest French Africa, Africa, Europe - added headcount to increase on the channel. Takes a couple of quarters to see real effect. Getting partners onboarded, having footprint on the role and manufacturing capability building.
In light of Chinese actions indicating they don't want India to become manufacturing hub - has there been any change in government attitude towards manufacturing companies? And what is CG's thought process on newer areas of revenue?
Macroeconomic trends and political discussion between countries will keep happening - we don't tweak our strategy every second day in line with that. If not China, if not others, opportunity for the whole world. Doesn't change our manufacturing footprint strategy at all. We will keep on investing across our portfolio across different businesses - huge opportunity across globe including India. Open to look at adjacencies of each business that makes sense.
On HT Motor - no similar price increase? And how is HT Motor demand and market share trending?
HT Motor is customized - every motor unique, like building a Taj Mahal. There is big demand in the market. Currently served market is very small - serving a smaller portion. Plans in place to invest on design and expand to more verticals. Key focus area - how to have a bigger market share and expand overall served market. Will have to have right set of solution for customers.
Updates on commercial volumes for EV Motors? And on export front for motors - which applications and regions are priority?
EV Motor - still in the beginning. For 3-wheeler motor and drive, we are ready. Motors have already been tested - passed homologation for individual motor and inverter. At testing at OEM level. Hopefully in next few months, will get approval and start supplies. For larger trucks, still in development stage. For conventional motors exports - similar portfolio - industrial piece plus customized motors. Need service centres in export markets - Marais and team setting up right now. Will be for both.
On Power - what kind of trajectory and visibility over next 1 year for order inflows? How will capacities be utilized over next 2-3 years with T&D CAPEX?
For Power, very very bullish for even next 5 years. Will keep expanding capacity. Even with 85,000 MVA capacity invested, won't be satisfied - will keep adding capacity as pipeline swells. Next 5 years nothing is going to happen - it will keep going up. The capacity versus demand gap will always stay there.
On Axiro - first year transition with lower margins - over medium to long term what could be the steady-state margin for this business?
First year for any acquisition is transition year. Upfront costs, setting up - office in Bangalore with lab. Not giving specific guidance but the way they performed before, it will be easily a double-digit margin.
On big uptick in Power inflows and go-to-market strategy - can you give split of orders between domestic and international? What is the company doing to gain market share?
Majority of orders won are all domestic - primarily from India. Not a big skew for exports. Almost same proportion as before. Continuing to build pipeline - company confidential where it comes from. Will not reveal until converted to order.
Can you elaborate on Service business - what efforts are being taken and any target by 2030?
Service is a passion. As of today, no clear road map till 2030 - not ready. But results will definitely show in future and actively working on it. Service business is multistage - not simple spare part or service orders. Working towards full-fledged 5-10 year contracts, taking full responsibility of products. Even exploring motor-as-a-service kind of package where CG makes the investment and sells energy efficiency. Requires a lot of hard work being done now.
On Power Systems - INR 9,000 crores of orders and strong traction in inflows. What is the execution period and what kind of revenue are you looking at for the full year? Also what is happening on transformer exports?
Backlog for transformers specifically - with the latest large order, up to 26 months. But can execute in 18-20-22 months. Need to keep filling up the pie. On export piece - work is continuing, also looking at strategic lever to play a bigger game in that market.
Industrial Systems subsidiary business - volatile performance and margins hovering negative to 10% versus earlier 10-15%. How soon to expect margins reverting to low double-digit range?
What could be controlled has been done in terms of cost and control. Good news is bookings have seen upward trend - continue momentum and will show up in revenue in forthcoming months. Fixed cost already taken care of - any increase in revenue will improve margins consecutively. Very, very small portion of overall Industrial business.
On India-UK free trade agreement and zero tariff engineering goods exports opportunity - what are your views?
This has just happened at high level - need to evaluate what it means for exports. Not very very big in terms of UK exports. Free trade agreement and tariffs don't impact too much - export model is mostly FOB or Ex Works. When interaction with customers, changes like that they will pick up. So we won't be too worried about these macroeconomical changes.
On propulsion systems for Vande Bharat - any more orders from the RVNL JV or possibility of orders from other companies executing Vande Bharat trains?
The received order is being designed and executed. Appetite is much bigger. Exploring other opportunities not only with Vande Bharat but with other partners as well.
Industrial Systems margins have deteriorated by ~300 bps year-on-year. How much is from sales mix impact due to railways versus raw material impact?
Majority of impact is coming from Railways. PVC clause (price variation clause) with Indian Railways is complex - you don't end up getting complete inflation back into numbers. Railway team is working on i2V to improvise on what can't be passed on. Majority impact from Railways and a bit from Motors side. Motors - recently increased prices by almost 5% starting 1st July, will start showing results in subsequent months, takes about 2-3 months.
On Power side, what are current utilization levels across plants? Are you facing any capacity constraints?
Capacity is of course the issue right now across the globe, not only in India. That's why huge impetus on increasing capacities - in full acceleration mode. Existing plant getting up to 40,000 MVA by September from current approximately 20,000 MVA. Also 45,000 MVA new plant - construction has already started.
On semiconductor - by when do you expect larger ramp-up and meaningful revenues from CG Semi and Axiro?
Two portions - CG Semi and Axiro. CG Semi absolutely on track. Mini plant as projected - FY '26 it will start production. Main plant which is the larger one will start production in '27. Reviewed the project - in fact a little ahead of target. Axiro - radio frequency chip designing facility - revenue will start already flowing in as it was a direct movement and acquisition.
On Motors - in weak demand environment, taken 5% price hike effective July. Has rest of peer set also raised prices? Could this impact market share gains?
LT Motors - we are the market leaders. We define what should be the pricing in the market. After we increased pricing by 5%, lot of competitors are following what we are doing. That's the way to continue to be market leader. Doesn't mean 100% realization - even if 50% realization, from pricing discipline point of view that's a good step forward.
Recent INR 400 crores order from Kinet Railways - is that impacting Industrial Systems segment profitability or yet to execute?
Execution has just started. That should give good days ahead. It is the routine business and the mix that has changed - more skewed towards traction electronics. That's where the impact on margins has come with railways, whatever reverse auction they do. Nothing related to Kinet.
52% increase in employee costs year-on-year at consolidated level - is it largely on account of Axiro or CG Semicon?
It's coming out to CG Semi as well as from Axiro acquisition. In that business, the staff cost and employee cost would be much high. CG Semi has almost 170 people on board with no revenue - strategic investment. Most of them have been trained from operators to engineers in various plants of partners outside India. Lead time from manufacturing start till shipments will be compressed with this investment.
In CG Semi, how much is the total CAPEX done so far? And what is the total planned CAPEX including government contribution?
Approximately around INR 400 crores done so far. Total CAPEX - central government assistance is 50%, state government support between 20% to 25%. CG contribution would be around INR 1,700 crores. State government support discussion ongoing - might be on similar line as central government, could come while investing, not just after production start.
On CG Semi incentives - are they being booked as received or only once facilities are operational?
Not a subsidy support like capital support. Money going into the pool pari passu and then coming from every stakeholder - then it goes to suppliers. Will come while investing, not necessarily only once facility is operational.
Have you started booking orders for the new transformer facility coming in September for the capacity extension to 40,000 MVA?
Construction has just begun - will start taking orders hopefully in next 2 months. Focus is on taking short delivery orders where delivery can start within 12 months. The existing facility extension to 40,000 MVA is on track for September.