Ladies and gentlemen, good day and welcome to GMM Pfaudler Limited Q3 FY 2022 Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Priyanka Daga from GMM Pfaudler Limited. Thank you and over to you, ma'am. Thank you, Aman. Good evening, ladies and gentlemen. A very warm welcome to all of you into the Q3 FY 2022 Earnings Call of GMM Pfaudler Limited. The earnings call presentation was updated on the stock exchange and available on our website as well. Hope all of you had a chance to go through it. From the management we have with us our Managing Director, Mr. Tarak Patel, our CEO of India Business, Mr. Aseem Joshi, our CFO of India Business, Mr. Manish Poddar, our CFO of International Business, Mr. Alexander Poempner, and Company Secretary and Compliance Officer, Ms. Mittal Mehta. We'll give you a brief overview of the performance of the company, after which we will get into Q&A. Before we begin with the overview, a brief disclaimer. The presentation which we have uploaded on the stock exchange and our website today, including our call discussions that will happen now, contains or may have certain forward-looking statements concerning our business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. I now hand over the call to Mr. Patel to provide an overview of the quarter performance. Over to you, Tarak. Thank you, Priyanka. Good evening, everybody, and good afternoon, good morning to people dialing from other parts of the world. This has been another solid quarter for us, driven by strong execution in both our international as well as our India business. Order intake continues to remain positive with our order backlog at an all-time high across the globe. Our key industry segments, Chemical and Pharmaceuticals, continue to invest in new capacity and our outlook remains positive. Chemical, Specialty and Agrochemical investments continue to drive growth with large projects planned in the coming months. The China Plus One strategy, backward integration to reduce raw material volatility and the CRAMS opportunity will continue to drive investment in these sectors. Further, pharma continues to remain a bit subdued. However, with the new government initiatives like PLI, we may see investments in the coming quarters. Let me now take you through the business performance, starting with our international business. As I mentioned earlier, we have shown a strong execution in the special business for the third successive quarter. This goes to show that our focus, operational excellence strategy and integration efforts have started paying off. It is now clear that some of the underperforming units, namely Germany and China, have turned around and will continue to perform well. We have managed to significantly grow the international business' revenue, which is up 25% over the last nine months on a comparable basis. On the profitability front, we have also improved profitability by 52% and our EBITDA margin has increased from 8.5% to 10.3% over the last nine months, again on a comparable basis. When we bought Pfaudler International, it was an EBITDA margin of about 7.5%, so this is definitely a significant improvement. This is a fantastic achievement and will go a long way in building confidence and momentum in the international business which we acquired only a year ago. Order intake in the international business continues to remain strong with an increase of around 46% for nine months. The backlog of the international business is currently at an all-time high at INR 1,589 crores, which is around 52% higher than the previous year. Some of the order highlights during the quarter. We received an order from South Korea for Acid recovery in the range of $10 million. We received another filtration and drying order in Europe for $6 million. The Mavag backlog currently stands at CHF 38 million. We received some systems orders from France for about EUR 3 million as well. Now talking about our India business. Again, the execution across our product line has been quite strong. Revenue is up 30% and EBITDA is up 31% on nine-month basis. However, higher input costs and investment in our new facilities, which are basically Vatva and Hyderabad, have impacted profitability in this quarter. On the input cost front, we were enjoying the benefits of steel prices and steel plates that were procured at lower prices a few quarters earlier. However, now we are consuming plates procured at much higher rates. We were also hit by a one-time increase in gas prices in Gujarat during this quarter. On the ramp-up cost of Vatva and Hyderabad, these are essential investments to scale up the operations and for our new areas of growth. As revenues grow, we will see the benefit flowing through. We expect the current profitability to continue for the next couple of quarters. However, we are beginning to see a commodity prices taper and we may see the benefit flowing through to our bottom line. Order intake in India Business continues to remain strong with an increase of around 39% for nine months. The backlog of India Business is currently also at an all-time high of INR 568 crores, which is around 46% higher than the previous year. Some order highlights during the quarter. We got our first micro reactor order from a pharmaceutical company, a large glass line order from Bangladesh, a large Mixion order, and then we got a large heavy engineering order to the tune of INR 50 crores, which will really help us push and grow the heavy engineering business. Momentum on the integration front also continued with the launch of Interseal ace5000 in India. We have now installed 11 Interseal, and we now expect more orders in the near future. The new furnace in Brazil is operational. The one in Hyderabad will be operational in about two weeks. We expect the new furnace in Gujarat to be operational by June 2022. Further, under value sourcing, we regularly supply components made in India to our European entities. We have also recently started a stock and sales program where we will stock vessels in Europe. The first order for these equipment, 24 number of equipment, have already been placed, and the manufacturing has already started. The group's new brand architecture is also ready, and we will be launching that shortly. In spite of the challenges faced during the quarter, the China, the power shortage, the energy cost increases in Europe, the higher input cost in India, we have still managed to grow both revenue and profitability on a year-on-year basis. The credit goes to the multiple teams across the company whose hard work and determination has led to this performance. We are confident that we continue with this performance, and we will end the year on a high note. I now hand over to our CFO, Manish, to take you through the financial performance. Thank you, Tarak. Good evening, everyone. Select pages of the consolidated numbers. During Q3 of FY 2022 on a YoY basis, the revenue increased 218% to INR 642 crores, and we clocked in EBITDA of INR 82 crores versus INR 42 crores in the corresponding previous year. Profit after tax, excluding the non-cash PPA impact, also increased 85% YoY to INR 43 crore versus INR 23 crore last year. On a nine-month basis, both top line and bottom line exhibited similar growth. For standalone business, during the Q3 FY 2022 on a YoY basis, revenue increased 26% to INR 209 crore with a flat EBITDA of INR 38 crore. PAT was down 12% YoY to INR 12 crore. Lower margins during the quarter were a function of a few things. One, the full cost impact of higher steel prices during the quarter. The weighted average cost of steel plate was lower during the previous quarter, and as we consumed the initial quantity on account of the past inventory of lower plate. As we progress through the year, the full impact of the new prices in the inventory has come in, therefore impacting the material cost. Secondly, higher gas prices during the quarter also impacted the margins. We had a one-time impact of some INR 2.5 crore on the higher gas cost. Similarly, the third piece is on the ramp-up with the higher admin cost at Vatva to enable future growth. We are adding resources in this facility, cost of which is not yet fully absorbed due to the lower scale of operation. This is visible in the employee benefit expenses, labor cost, and other expenses. On a nine-month basis, top line grew 30% YoY to INR 586 crores and EBITDA increased 31% YoY to INR 133 crores. PAT stood at INR 75 crore with a 17% growth. Annualized EPS, if we adjust for PPA, stands at INR 96 per share YTD December. This is YTD December performance on an annualized basis, versus INR 66 per share in FY 2021. Kindly note this excludes the share of the minority interest. Currently only 54% of the Pfaudler International profits are being included in this EPS. If you take that at 100%, another INR 20 can be added to the EPS. Also, we are happy to inform that CRISIL has reaffirmed our rating to AA- with a stable outlook, which is equivalent to a low risk. This was done this morning only. Priyanka, back to you. Thank you, Manish. With that, I would like to now open the call for questions. Happy to answer any questions that you may have. Thank you. Thank you very much. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Salil Desai from Marcellus Investment Managers. Please go ahead. Hi, Tarak, Manish. Priyanka and Alexander. One question I had, maybe Alexander can help answer this. Can you give us some idea on, you know, how the working capital cycle typically is in the international business? If you could break it up, you know, into the three, four main components of inventory, receivable, payables, and if customer advances are a significant part of it. Salil, if you recall in Q2, which is H1 performance, we had shared a detailed presentation with regard to the working capital cycle, including the negative advances numbers. There's not much of a change here with regard to those numbers over the three months. From a working capital perspective, the DSOs stand at something like 43 days, and DIOs, net of excluding advances, also stand at something like 20 to 23 days. Maybe Alex is on the line, right? Yeah. Alex, you would like to respond to these questions? On specifically on the international business, right? Specifically on the international business, yeah. Yeah, I could confirm what Manish just said, that in fact there's not much fluctuation in our working capital. Nevertheless, we launched several improvement measures, and therefore I think through the guidance we gave in the presentation last year, we see improvement so long term. To give you an idea regarding values, and I'm talking now in USD, we are inventory-wise in a range of, let's say, $60 million -$65 million. We have receivables of in the range $30 million-$32 million. Yeah, I think these are the key you're looking for. Payables we are a little bit lower than receivables in the area of close to $30 million. Does that help? Yes. Thank you very much. Thank you. Next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead. Yeah. Hi, good evening, everyone. Firstly, congratulations on this set of numbers, given the cost pressures that we have seen. Firstly, if I would like to check if you'd like to give a guidance for annual growth for next year, given the kind of order inflow ramp-up that we have seen in the first nine-month period. What kind of growth can we expect in India, further international as well as Mavag business separately if you can guide for? Right. I think, Sandeep, you know, India continues. You know, we grow around 25% + here in India. This year in Europe as well, we are growing at about 25%. We are currently working on. You know, I had spoken earlier about the strategy meet that was planned in December, which got postponed. We do plan to come out with guidance, revised guidance in terms of both revenue and profitability for the next few years. Even in terms of, you know, what we plan to do and what are the different areas where we plan to grow and how we plan to grow. A little bit more granular, a little bit more in detail. I would just request that, you know, just hang in there for a month or two. We are kind of working on something, and we'll come back with something that's a little bit more concrete and structured rather than giving you a number right now. I think I am comfortable to say that on a yearly basis, you know, even though we've seen a decrease in profitability here in India, we pretty much are confident that we will maintain a similar level of profitability. On a full year basis, we'll still be around the 20% mark, EBITDA mark. As you said, Pfaudler has done extremely well. They are now at a 10% mark as well. Those two numbers look very, very possible. In terms of the backlog that we have and the execution that is happening, I'm quite confident that we can end the year on a good note. Okay. Second question is pertaining to strong inflows. Of course, you gave some color on various inflows coming from two things. You know, when we had given the Sorry, your voice is breaking, Tulsiyan. Sorry, Sandeep. Can you say that again? We lost you for a second. Yeah. My question was pertaining to the growth drivers for the international inflows. When we had acquired Pfaudler International business, we had guided for a 5%-6% kind of a long-term CAGR where the industry grows at. But the inflows seem to be indicating the growth is much higher than that. If you can give more color why such a sudden jump in the inflows, what we are seeing right now, and what could be a sustainable growth going forward? I think from an overall standpoint, obviously, when we acquired Pfaudler, we acquired at a good time when obviously business was, you know, not doing that well. We managed to very quickly bring in order intake and, you know, got the factories up and running quickly. I think one of the areas that we are seeing this improvement coming is both China and Germany have now reached and pretty much operating on full capacity, right? I mean, we are obviously looking at improving and increasing capacity and output, but these two factories were obviously not doing that well, and we were in the process of moving from an older facility to a newer facility. I think these two facilities definitely add to the revenue improvement. Also many of the strategic initiatives like, you know, sourcing from India as well as new products like Acid recovery, Interseal, those have done quite well. Then lastly, the U.S. market has done quite well. Brazil and the U.S. both have done quite well. That's why probably we're seeing a double-digit growth rate of an international business, which obviously people thought would be growing at a much slower rate. I mean, to be honest with you know, this quarter the international business kind of makes up for the slower growth rates here in India. All in all, we've been quite happy that acquiring this global business mitigate some of the risk that we had with being only an India-centric company. Yeah, Alex, you wanna add something to this? No, no. This is fully correct. I think we gave as guidance last year, the highest single-digit growth. Currently, we significantly overachieved. We overachieve in all regions. Europe is doing strong. In China, we already said after the setup of the entity is growing fast on revenue and order intake size, but as well as the U.S. Nevertheless, what should be considered, we are doing well on the technology order intake and the systems, which are big projects. However, the service business, which we also have strong in our international business, this is currently lacking. It's doing, it's growing, but it's by far not growing as fast as the technology business. There we still have improvement potential also from the margin side. Regarding the profitability, what Tarak Patel mentioned, and Germany is one of the key growth driver. The turnaround of that site is more or less completed, and therefore, we see a big jump in profitability and also expect further improvements going forward. Now, what should be the sustainable growth here, going forward? This year we agreed the growth was good. Going forward, should it go back to that low single-digit, mid-single-digit growth or? I think let me say, we keep the outlook that we gave, and as Tarak mentioned before, we come with a new guidance in the coming months. I think I would or we would like to leave it there and do not want to now adjust already our growth projections. Got it. One last question, if I may squeeze in. On the South Asia business, two quarters back, you had given an update that there would be introduction of products you don't have a major presence because of the pricing differential of glass-lined reactors that Pfaudler makes in those markets. If you can give an update on that and what is the progress on that. Have you got any orders from that region? Yeah. We've had about three large wins in Southeast Asia. We've had a couple of systems orders and some glass-lined business as well, so that's progressing. Obviously we would have wished that we could have traveled into these Southeast Asian countries a little bit more. Unfortunately, the borders are closed, and they're quite strict about it. Again, it's a long-term strategy of ours to grow this business. It will take some time, but we are definitely making some headway. Okay. All right. Thank you so much. Thank you. Thank you. Before we take the next question, I'd like to remind our participants to limit their question to two per participant. If time permits, you may join the queue for any follow-up. Our next question is from the line of Utsav Mehta from Edelweiss AMC. Please go ahead. Utsav, are you unmuted? Hello? Please unmute your line and proceed. Yeah, sorry. Hi. Am I audible now? Yes. Yeah, Utsav, go ahead. Yeah. Hi. Tarak, thanks for taking my questions. I wanted to understand our gross margins a bit better, because if I recall correctly, last quarter, we said that. I mean, you've seen the worst of the steel price inflation probably two or three quarters ago, right? Last quarter we said that now we've repriced most of our new orders that have been coming in. I'm also looking at international, where gross margins have expanded, whereas in India they've contracted. If you could just help me understand the dynamics behind all of this. Yeah. Utsav, if I may, take that and, maybe, Tarak can then, supplement on that. You're right. We had taken price increases earlier in the three to four quarters back as well. What has happened is there's a lag of where the price increase benefit came in immediately, rather relatively earlier, and the full impact of the price increase of the material has come maybe a couple of quarters later. Take for example, we were buying steel at, say, INR 60 a kilogram, and over a period of time it increased to INR 80 a kilogram. Initial quarter, your weighted average would have been something like 70. Now, as INR 60 stock gets depleted, you actually come up and you come to a realistic picture of 80. Now, as the prices go taper down in, hopefully, in the near future, the margins should improve thereof. I think just one point to add here. The only difference in strategy in terms of procuring steel plates, when the prices are lower, we procure large quantities. We, you know, we procure maybe two quarters worth of plates at one time. But now with the volatility in the steel prices and the higher steel prices, we kind of only procure what we really need. As soon as we're seeing this coming down, we'll try and mitigate or reduce the timeframe or the lag between actual using of these plates so that we get the benefit as soon as possible. Go ahead. Similarly, if you see Vatva facility, now, obviously at the current run rate, the full cost absorption is also not happening, whether you talk about, you know, labor cost or the overheads as well. Overall profitability also gets impacted. Although materially, material cost, of course, we know, from a weight perspective, heavy engineering per se is not as profitable as a glass-lined equipment business. Understood. The second part of my question was, I mean, will we see similar dynamic play out in international, where right now we're enjoying some benefits which could taper off later? No. I think when you look at the international business, you look at three major areas. One is obviously the U.S. The U.S. has not been affected at all by energy. I mean, the price of steel has gone up, but I mean, they have been able to pass it on quite well. However, U.K. and Germany have been hit by higher energy costs. Hopefully, those will start reducing. China had a short-term impact of shortage of power, but that has been fixed and, I mean, did not have a big impact at all. Going forward, you know, we believe that the 9%-10% EBITDA margin range is still possible for the international business. We don't see a significant impact on material costs impacting because the orders that have been taken have been taken with the new prices in mind. Alex, you wanna add something here? No, no. In general, I can confirm that this above 10% margin is definitely something we should also see the coming months. We feel, especially with the energy costs in Europe, what Tarak mentioned, and this will have an impact on margins in the short term, but definitely will remain above 10% with further upside potential, especially with the growth potential in our service business. Also, if I may just add one more thing, kindly appreciate India business is heavily dependent upon OE business, so original equipment business and the- glass line. The glass line business. The services portion, you know, unfortunately, is a very much smaller 5.57% of the total business per se. Therefore there's a full flow impact of material on the India P&L, vis-à-vis when you go to the international business, they have a 45% of services business, so which doesn't really get impacted much by the raw material prices. I think just to add to this, I think more from a future and, you know, what we are planning to do to mitigate these increases, we are actively looking at cost reduction measures. We are looking at internal controls as well as renegotiating contracts with our suppliers to make sure that we have much more efficient the procurement. That's something we are working on already. On top of that, we're trying to increase our exports as well as our service components, because obviously they are more profitable. We have a clear plan in terms of how do we look at increasing profitability, and these are all internal controls. On top of that, if you see material prices taper off and come down, then that is the additional benefit that will flow through. On the second front, when the two facilities, namely Vatva and Hyderabad, have significant improvement in revenues next year because they will significantly grow, you will see some fixed cost absorption there, which will also help profitability. I think we are in a strong position. I don't think there's anything structurally wrong with the business that, you know, has resulted in lower margins. I think this is a one- or two-quarter event, which we really could not control, especially the gas price increases, is a one-time price increase. We will do our best to try and mitigate some of these cost increases so that we kind of maintain and improve profitability. Understood. I appreciate the detailed answer, Tarak. I'll just close off with just asking for the debt and the cash number on both consolidated and standalone basis at the end of the quarter. Debt, there is no fresh debt. The partial repayments of debt have happened from March to December, and we stand at INR 525 crores of debt and Consolidate. Consolidated and INR 300 crores of cash. On India basis, we have some INR 42 crores of debt included in this INR 525 numbers. Can you just repeat the standard or the consolidated debt number, please? I just missed that. Consolidated debt number is INR 525 crore. Cash in hand is cash equivalents is INR 300 crore. Understood. Thank you so much for your time. I appreciate it. Thank you. Our next question is from the line of Ravi Naredi from Naredi Investments. Please go ahead. Thank you very much, Tarak Patel-ji. You are doing exceptionally well. My point is this order backlog, INR 2,067 crore and international order book INR 1,589 crore. Total order book is INR 3,500 crore, right? No, no. 2,067, the Naredi-ji includes INR 15 order of the international business. Total is INR 2,067. Okay. That was confusion, so I want to clear it. Sir, why international margin is low versus Indian margin? I think the international business historically has been lower because their labor costs and employee costs are definitely much higher than in India. What we are trying to do here is to really increase the size and scale. With the same number of employee base, if we can grow the revenue 2x or 3x, then you will see the employee cost as a percentage of revenue come down. Just to give you an example, when we bought our Swiss company in 2008, it had 38 employees and it was doing a revenue of $7 million. Today also it has 38 employees, but does a revenue of $25 million, right? Right. If we can double or triple the revenue of the international business, then the employee cost will come down. Right. Very intelligent thing. CapEx plan for quarter four and financial year 2023. There is no new CapEx plan. Like I mentioned, we have the Hyderabad furnace coming in in the next 10, 15 days, so that will be definitely a capacity boost for us. We also have a new furnace coming in Gujarat, which will come into production sometime in June or July, which is going to also help us because it's a large furnace. 80,000 liters will give us capacity both for the Indian market, but also to export to our parent organization. It'll be a very timely CapEx that we will add. Besides that, there is no other significant CapEx that is planned for this financial year. Next year, we will probably think about it a little bit more in detail, but I don't see significant CapEx next year. I think next year we will probably use all the CapEx that we have made and all the investments that we made and really try and grow the revenue. Thank you very much. All the best. Thank you. Our next question is from the line of Shrinivas from Rockfort Consulting Please go ahead. Good evening, all of you. Tarak bhai, question is for you. One of the interviews you mentioned that there is a large order from U.S. Whether it is included in this result or whether it will be factored in March quarter. No, it will be all shipment will happen in Q4. There is no shipment that has happened this quarter. The U.S. order is going to be shipped in Q4, I mean, of this financial year. You will see that playing through in Q4. Q1. Q1 a little bit, but they have also increased the quantities in that order, so they have actually added more quantity. That U.S. order will continue into Q2 and maybe Q3 also. Yeah, that's a good order, and that will definitely help improve profitability not only in India but also in the U.S. business because the order was taken by the U.S. organization. Okay. My second question is whether you have shifted entire production of proprietary products to your Vatva factory or you have- No. The proprietary products remains in Karamsad predominantly. 90% of it is, but we had moved some small equipment that, you know, we needed extra capacity and Vatva had it. I think as a long-term strategy, Vatva will be pure HE and proprietary products will be made in Karamsad. Okay. Thank you. That's all. Thank you. Thank you. Our next question is from the line of Vivek Gautam from GS Investments. Please go ahead. Yes, sir. Sir, I just wanted to know about a lot of industry dynamics question. If India has cemented its place of becoming the international chemical manufacturing hub for the world, or are there still threats from China and other countries? What about the concerns on the environment and pollution and the fire incidents which happened, sir? I would not say that we have taken over the leadership position, but I can definitely say that the chemical market in India is growing. There is new investment coming in. Today, you know, during the board meeting, we had made a presentation, and we had listed out all the companies that are planning investments over the next maybe one or two years, and there's significant investment coming. Many of you know also about the recent IPOs and people and companies that have raised funds, and these funds will be reinvested. Like I mentioned, there's a China Plus One strategy. There's a contract manufacturing strategy. There's also backward integration to reduce dependency and volatility on a product that people buy. All in all, I think the India chemical industry does look quite positive, and we have... I mean, I could count on the top of my head the number of inquiries and new projects planned in the next two to three months, and they're quite large, and they're quite big. I don't see an issue there. I still believe that China is going to revive. China will come back. Today, I think there is definitely a reduction in global supply of chemicals. I think during the pandemic, there were many companies that downsized and shut down. Today, you see an increase in higher chemical prices only because the supply is limited, but the demand is still high. I would see over the next few quarters people investing and building capacity. The concerns on the pollution and the fire incident, I'm sure not, unfortunately, which is increasing in India. What is that? Yeah. I think that's something that could work well for us. I think one is when safety norms kick in and, you know, people want to set up good manufacturing facilities, and they try and buy equipment and, you know, technology from reputed companies. That could be definitely a benefit for us. The other area that we could add value is in terms of acid recovery, right? Acid recovery is definitely something that companies will become much more conscious about because it's becoming an environmental issue. There were recent examples where people had disposed of chemicals and obviously they were not disposed of correctly. In the future, people will look at kind of, you know, cleaning up these products within their facilities rather than just kind of, giving it to a third party, which in turn could spur new business for us when it comes to acid recovery. How are we placed in ANFD, sir, and what is the opportunity size over there? In ANFD? Internationally, domestically, and our recent international acquisition is helping us in the sale of more of our products to export. Yeah. ANFD in India, we are definitely not a big player. We focus on really the high-end market of spherical dryers and kind of you know clean ANFDs and sterile ANFDs and things like that, containment applications. We are a big supplier to our Swiss company, which currently has a backlog of close to CHF 30 milion to CHF 14 million. They are nearly booked out for two years. The focus there is obviously that the European business is quite strong, but we want to break through in the U.S. market. One of the focuses now is to grow the Mavag F&D business line in the U.S. market. The good thing about the U.S. market, it is ASME, and it is something that GMM can supply directly. Most of the equipment that we will end up selling in the U.S. market will be manufactured here in India. How is the opportunity size for the ANFD filter, sir? India as well as abroad. I would say that I don't have the numbers off the top of my head, but the Indian market could be around maybe INR 300 crore mark, I would say. Okay. Yeah. Then in Europe, maybe about $60 million-$70 million and maybe another $30 million in the U.S. These are just, you know, kind of broad level numbers, so don't hold me to them, but this is probably a thumb rule that I can give you. Excellent work you're doing, sir. Keep up the good work, sir. Thank you very much. Thank you. Thank you. Our next question is from the line of Rohan Dalal from Museum Capital. Please go ahead. Yeah. Hi, good evening, sir. Most of my questions have been answered. Yes. I just wanted to understand that, you know, you had mentioned last quarter about the chemical orders which were doing well, and you touched upon that in the previous participant's question. You also mentioned that the larger pharma companies are not really participating in the orders as much, and it's just the smaller pharma companies. Yeah. Could you give us a sense of how you see the demand dynamics evolving from a near-term perspective, what are your thoughts? Also from a little longer term, maybe a three-year perspective. I know of our big pharma customers, they have been pretty subdued in terms of investment. Divi's, for example, has kind of held any kind of CapEx in the short term. But what we are seeing now is definitely people taking interest in terms of the PLI scheme. We've seen a large inquiry coming for fermentation reactors from Hyderabad, where they will make benzene. That is really driving. There's a list of everything, about 10 or 12 different companies who've signed up for this, you know, kind of investment through the PLI scheme. Again, like I mentioned to you, the smaller guys have been investing. The guys who are, you know, kind of supplying into the bigger pharma guys have kind of doubled their capacity and improving or increased their products to that. Again, pharma is something that has not really taken a lot of aggressive investments recently. I personally think that the next couple of quarters you will see something. I think Aseem, do you wanna add something here? No, I think you've covered it. Ashok something? The pharma business is, like Tarak mentioned, subdued. We're expecting cycle of CapEx in the big pharmas also to take off soon. We know that Divi's have plans to sort of start the expansion of API products. Most of them are now concentrating on the production after the API, so in fact finished products, and they're not going back to API. We think that thing will change and we'll start seeing traction in the They've all acquired land and all of them have huge parcels of land. Yeah. I know that even Aurobindo has, for this benzene, 300 acres lined up. They're starting the civil activities now. They're starting the inquiry. Even Divi's had unit III in Kakinada kind of thought about, but they haven't actually gone down to actually releasing orders or having anything concrete. Yeah, we do expect something to come in the next financial year. The PLI thing that he talked about, what he talked about was the fermenters. Apart from that, they also have PLI scheme for the key starting materials, which is not bio type of products, they're chemical products. We'll start seeing action in that as well once the projects are formed up. My follow-up is that, so it's not impacting your schedules and your targets? No. In terms of current backlog, you know, we are in a very strong position. We also know of large orders that are being planned in the next maybe two or three weeks. No, from a capacity standpoint, we have no problem in terms of, you know, execution. We have enough of orders coming in. You know, for us also what happens is when it's chemicals, the sizes are much bigger. We have definitely a large backlog in the bigger sizes, which is 16,000 and 20,000 and higher. But pharma, once it starts picking up, you'll get much more of the smaller sizes, which we also need. I think it'll be a good mix to have, but it's not affecting any short-term revenue or growth possibilities for us, no. Got you. Just one comment from my side is that, you know, just the meeting that you all had with the 46 key management personnel, you know, we would like that, you know, you can share that at the earliest. Thank you. Rohan, we didn't actually have the meeting in person. We actually had to cancel it because of the third wave. We had an online town hall. We will be sharing some kind of documentation. You know, we are creating a new story for ourselves. You know, obviously one year of integration is completed. We can't keep integrating. I think integration, the efforts will continue, but there's clear strategies around market share improvement, cost reduction, sourcing from India, new markets, M&A opportunities. I think we're gonna put something down. We are already working on it. I think over the next few months, we will be able to share something with the group that gives you a clear idea of what and where we wanna be in the next three to five years. Right. Can we expect this to be a much more advanced version of Project Apollo? Yeah, I think so. I think it'll be more granular in nature, so I think, you know, we can't keep harping about integration. I think integration is done and dusted. We have a good team. These processes are now set. It's like pretty much on autopilot. We push it, obviously, we review it, but there has to be other growth areas. There has to be other areas of improving profitability, adding new technologies and products. All those things will fall into that document which will be shared with the group. Sure. Thanks, Tarak and team, and all the very best. Thank you, Rohan. Thank you. Thank you. A reminder to our participants, please press star and one if you wish to ask a question. Our next question is from the line of P. Sachdev from Albatross Capital. Please go ahead. Yeah. Hi, Tarak and the team. Congratulations on great set of numbers in a challenging cost environment. Most of my questions have been answered. Great. Just wanted some rough estimate on the capacity utilization across various plants at Pfaudler. I think maybe Alex would be in a better position to answer that. Alex, what is the current capacity utilization around our main facilities, namely Germany, Italy, China, U.S., and Brazil? They are highly utilized, we have to say. As said, we grow so fast, and we grow faster than originally anticipated. Yes, they are at the high end of utilization. Yeah. I think the problem is not having capacity right now. That's why we are adding capacity in Brazil. We are also adding some capacity and new equipment in the U.S. Again, also from a standpoint of motivating the local teams, I think, you know, we've not invested and Pfaudler has not invested in these facilities for quite some time, so people are quite motivated. Germany and Italy obviously are brand-new facilities, and China is as well. I think we all would prefer that at some point we increase the output, but right now the focus is really to stabilize the business and ship out as much as possible. Obviously Q4 is an important quarter for us, so the focus is really on execution, and then we'll probably spend some time looking at operational improvements and how we can kind of get more output from the same capacity. Okay. Would really appreciate if you could put a statement or a slide, you know, on the optimum capacity, on the optimum turnover that you can achieve, you know, post this capacity expansion, you know, as and when you come out with a revised vision guidance. Sure. We can do that, and I think it'll be helpful also. We worked out some numbers also across for our Vatva facility as well, which is a new unit, Hyderabad, and then for the rest of the company. We'll try and put something together as part of the documents, where we are and where we can go with the current setup. Great. All the best. Thanks for your support. Thank you. Next question is from the line of Harshal Sethia from AUM Fund Advisory. Please go ahead. Hi, sir. Congratulations on a good set of numbers. Going ahead, I have two questions. Firstly, has our Vatva facility started? Sorry, we missed that. Harshal, we lost you. Yeah. Has Vatva facility started? Vatva facility has started. We have also moved quite a bit of the orders to Vatva. There's some work that's happening in Karamsad and some in Vatva, but I think about 80% of the work has now shifted to Vatva. We started the operation partially in Q1 itself this financial year. Both HE is being run this year in both the operations, both places, one at Karamsad and at Vatva. It's a transition period. I think by end of Q1, we should be in good position to completely transition into Vatva for HE business. Okay. Can we say that Vatva should be at full capacity by Q1 or maximum Q2 of 2023? Okay. I'll put it that entire HE production for GMM Pfaudler will happen through Vatva in Q2, starting Q2. However, capacity. Achieving full capacity will obviously take time because we as we know, you know, to reach INR 450 crore of turnover, will obviously not happen in the next financial year for sure. I think you want to add something? Yeah, I'll just add. I think, you know, as we exercise our Vatva facility, you know, the factory is ramping up, and that will continue to happen in the next financial year, after we transfer completely to Vatva. You know, Q3, Q4, we'll continue to ramp up and, I think the following financial year is when we expect to be at full capacity. We do have some overall thoughts around what the actual tonnage this facility can ship out. We've done some internal calculations. We also know about what is the right mix between carbon steel, stainless steel, and exotic materials, so we can maximize revenues and profitability. We are quite aware and conscious of that. Then on top of that, can we improve and do any of the operational improvements that can further improve this business? All in all, I think Vatva will really show its true colors next year. The order backlog remains very strong, and the only thing that we really need to focus on next year is the execution part of it. Okay. Second question, sir, I had was, you know, we always plan of, you know, making India the whole manufacturing base and shipping out the equipment globally across all our facilities. You know, looking at the freight cost environment and, you know, the way it the prices have run up, like, dramatically high. How do we, you know, counter these timelines? Are we actually, as of today, you know, shipping out products from India to, you know, other countries? We are, you know, most of the contracts that we have. I mean, all of the contracts that we have are mainly ex works, so that, you know, the customers will end up paying for the shipping. The entire U.S. order, for example, is ex works. At the time when the equipment are ready for shipment, we will get a quotation from the local supplier, the shipment guy, and then we will give it to the customer, and then he would directly deal with them. For our internal consumption, for our internal transfer, yes, you know, this will be an issue. Again, we have time, and in spite of the logistics, higher logistics cost, there's enough of benefit of sourcing from India. The landed cost after paying the higher logistic prices, it's still very lucrative and very profitable. Harshal, just to- Sorry. Sorry. I'll just add one thing to what Tarak said. You know, ultimately the higher logistics costs are transitory in nature. In about six months to a year, we would expect that these would settle down. For us, this is a long-term strategy that we are, we think will work out for us well. Okay. You know, a follow-up on the same. Are we seeing any delay in orders of, you know, picking up from the Indian facilities by our global customers? No, I think in most cases, they are actually pushing us to kind of shift faster. In spite of the, I mean, the USA, the order for example, is on a fast track, you know, the project and we have regular reviews, and they would be more than happy to pick it up even before schedule. I think most of these plans have been planned. There is no slowdown in terms of customers wanting the facility, I mean, the equipment. They would rather have it quicker than later. Okay. Sir, one more if I can. You know, are we seeing like, you know, people, you know, better margin from global customers compared to our Indian clients? Export orders are always more lucrative, Harshal, compared to the Indian market. The Indian market is a good market, is a volume-based market, but yes, export business gives us definitely higher margins. Okay, sir. Thank you. Thank you. Next question is from the line of Rohit Ohri from Progressive Shares. Please go ahead. Hi, Tarak Patel and team. Your press release speaks about launches of some new products. What are these related to, and which segment are you looking at? New product launches. We are obviously looking at Interseal in a big way. That was a launch that was planned for in, you know, last quarter, which we now did. We have installed 11 Interseal in India. They are working quite well. The customers are quite happy with them. Hopefully that will lead to further orders. The Interseal is something that we are quite focused on. We believe it's a great product, and hopefully that will add to both revenue and profitability. Plus, it comes with obviously a good aftermarket business as well. That's always a good thing to have. We also have Acid recovery. Again, that is something that we've been working on. We did get a large order. There are a few plans for Indian companies to set up asset recovery plants. We are actively pursuing those opportunities. Again, asset recovery plants are based around glass- lined equipment, so it's a natural kind of complementary product for us. These are the two main areas that we are focusing on here in India. You seem to be expanding the sectoral bandwidth. Any thoughts as to do you see any opportunities in green hydrogen and related equipment manufacturing? All good things to think about. I don't think we will say no or yet to any of them. I think there are definitely opportunities available, but I think we have to be a little bit careful in terms of how we can link it back to our product and what we are, what our strengths are, right? Yes, we are looking at different things right now, and if there's something that, you know, obviously would be something futuristic but could kind of come in quite handy, we will, you know, think about that. I think currently we have enough on our plate, but we will keep thinking about and keep evaluating opportunities in the green energy segment, you know, having an ESG kind of a glass, which is more environmentally friendly, and things like that. Okay. My second question is related to the pension liabilities and the pension obligations. What is the current obligation that we have on a yearly basis, if you can share that? Pension liabilities, Manish. Sorry. Pension liabilities they currently stand at something like INR 450 crore outstanding as of December 31st. Not much of a movement, as we already have alluded that there is, it's a fixed closed pension plan. No new additions are happening. The movement primarily happens on account of actuarial valuations, and there is something like 25+ years of payout period. It's naturally progressing in that direction. Okay, sir. Thank you. Thanks a lot. Thank you. Our next question is from the line of Jason Soans from Ashika Stock Broking. Please go ahead. Yes, sir. Thanks for taking my question. I would just want to know from the standalone order book, obviously it will be bifurcated into Glass-Lined Heavy Engineering and Proprietary Products. Could I have a, you know, a segmental breakup of this, if possible, of your standalone order book? Broadly, if you see, GMM standalone, we have INR 570 crores of order backlog. INR 200 crores of GLE, 240 on account of HE, and PP is another 120. INR 240 crores is HE and PP is INR 120, right? The balance will be GLE. 200 is, yeah, GLE. 200 is GLE. Okay. Mavag in the other thing in the international business, your order backlog is given, so basically PFI order backlog. The total order backlog minus the PFI will be the Mavag order backlog. Is that right? No, no. 568, we said is GMM. No. What I meant is, of course, in the international results, the order backlog stands at INR 1589 crores. You had mentioned that 1281 is PFI, so the balance would be Mavag. 307 or 308 is Mavag. 307 or 308 is Mavag. Okay. Sure. Yes, right. Okay. Yeah. I just would want to understand. I was just looking at the results, and yes, I did mention I read some comments on the purchase price allocation. I just would want to understand it a bit better, if possible. I understand there are some impacts and they are non-cash. How would we read into those? Sorry, I didn't get PPA? PPA. PPA, if you recall, quarter four last year in Q1 this year, we had something like INR 46 crores per quarter of PPA allocation, which is basically, once you acquire a new business, there are intangibles being created and the existing order book, the profitability thereon is not allowed to be routed through the P&L. Although the cash, the revenue comes to you, but the margins thereon does not accrue to the new management because that is assumed to be, you know, the efforts of the previous management, just to oversimplify, you know, it and from an accounting perspective. That number has substantially reduced. Now, last quarter, we had something like INR 18 or INR 19 crores of amortization of intangibles. This quarter, we have INR 6.5 crores, and I think next quarter onwards, we'll have something like INR 5.5 crores of amortization happening on a quarterly basis. That will continue. It is a non-cash item as we earlier alluded to. However, because we get a tax benefit on account of lower profitability, it net impacts us on the positive side from a net tax saving and a positive cash impact. Right. That this is real cash flowing through which you have mentioned in your release, actually. Mm-hmm. That's right. Okay. Sure. Okay. Okay. Just one final question. I would just want to ask you. So basically on a standalone basis, GMM has historically posted margins of around 24%-25%, right? Obviously after the Pfaudler acquisition, which had margins of around 7%, now it's around 10%. And your Mavag acquisition also has margins around 13%-14%. So would just want to know, I mean, obviously, domestically in the filtration and drying equipment market, your positioning is not that strong. So just would want to understand what is your strategy going towards for strengthening your foothold in the filtration and drying equipment market as well as when you go globally, what will drive margins further? I think in India, the filtration and drying market is a little bit commoditized, so I don't see margin profiles there to kind of be in line with what we plan to do as a group. I think we don't want to compete in the low-end, low margin, the F&D business. We definitely want to focus on the high-end, the ANFDs, the sterile equipment, the containment facilities and things like that. We also have enough of backlog in Mavag, where we are manufacturing components for them. 80% of the material that is manufactured for Mavag gets manufactured here in India. And then the final 20% of finishing and testing and instrumentation and automation gets done locally. It's a win-win situation for us. Our focus today is really to cater to Mavag. On top of that, if we make a breakthrough in the U.S. market, all the production for the F&D business in the U.S. market will come from India. From an F&D standpoint, our focus is definitely on exports, and I think that will continue. We don't want to really increase market share here and go after orders at low margin. As a group, obviously, there are significant things that we are working on. We're working on sourcing components from India for European entities, which has started and is doing quite well. We regularly supply nozzles, steam plates, we supply other components that are then used by the European entity to reduce their costs. We also look at certain markets, lower price markets like Eastern Europe, Southeast Asia, Spain, some parts of South America, where GMM Pfaudler will export directly. We have obviously cross-selling, so where we can bundle different products together. These are all different areas that we are working on. Lastly, on top of that, we also look at our internal cost structure, the efficiency improvements, operational excellence. All these things are going on, and that's why you already see in a very short period of time, like I mentioned, one year since we acquired this company, and we've already shown significant improvements in revenue and profitability. 25% growth of the international business, which is, you know, as many of you had asked that how do you and why do you wanna acquire something which is growing at a 5%-7% range? We had mentioned that there are opportunities available, and there's no reason why we can't really go and capture additional market share and grow or continue our growth journey. I think, from that standpoint, we're quite clear in terms of what we wanna do. Some of these things take time. I think we have a good foothold, we have a good foundation, and we just need to build on it. Sure, sure. Just one last or just from a company understanding perspective, I would want to ask you. Obviously GMM on a standalone basis has a proprietary products division, right? Is the main purpose of that division to supply you know make equipment here and you know transported back to Mavag? Is that how it plays out? I mean, just would want to understand because proprietary systems where you have here at Karamsad, it also has the same business model. Yeah. In proprietary products, we have filtration and drying. In filtration and drying, about 70%-80% of what we do is basically sent to Mavag. These are basically the vessel body, the leg, the mantle, the drive unit, all that stuff gets made here locally. It gets sent there, then Mavag will work on it. They will add all the wiring, the instrumentation. They will do the local testing, the FAT. The customer will come there. He will see the local equipment. It's a kind of a win-win situation where the customer gets the best of both worlds. He gets obviously a cost advantage, but at the same time he gets completely European kind of finished equipment and a local European guarantee as well, and a local European face to which he can communicate with, right? I think that is the strategy here. F &D is one portion of PP. Yes. Thank you. Ladies and gentlemen, due to the time, we'll be able to take one last question. That is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead. Yeah, hi. Thanks for taking up the follow-up. Just two questions on the capacity. Firstly on the glass-lined capacity in India, in EU terms, where do we stand now? After the current furnaces that you have mentioned will come online in Hyderabad as well as the Gujarat facility, where will it move to? No, sorry, we didn't get that, Sandeep. Can you repeat? Capacity in EU. EU capacity, I think we are currently at 2,400 here. About 400. 400 odd there. Yes. We will give you new guidance for the next financial year with the new Hyderabad facility coming here. Obviously, it won't have a huge impact in Q4 because it'll be a month and a half basically that we'll get to use it. Next year we should ramp up the EU capacity, both by the investment in Hyderabad, plus the new large furnace that will come into play in our current facility. For proprietary products, if one were to measure your capacity, how do you look at it? Maybe in volumetric terms or absolute value terms? I would say it'll be around the INR 150 crore mark. I think that's something that, you know, we can look at. I think anything over that, we would probably need to add a little bit of capacity. Like I did mention to you, we had space available in Vatva. If we still have that space available in the near term and we're not using it, then we could dedicate that to the proprietary product business. Again, the proprietary business has also done quite well. Like we were mentioning to you earlier, this entire fermentation piece, which is really, really important and which is really gonna come up now in the next few quarters, all those agitators is something that we can build here. We have the expertise. These are very large agitators. Technology is very, very important because these are, what's the power rating, Ashok? 930 kW. 930 kW, right? A lot of technology goes into power saving, shaft sizing, all those things are something. If that kind of picks up, then we can use Vatva as well to make some of these agitators. Very large in size, but we've been talking to a lot of customers who are very, very interested in using our Mixion agitators for their fermentation applications. If INR 150 crore is the capacity, you did INR 144 crore revenue in PP last year. You don't have headroom to grow there, right? No, I don't think we did 144. Did we do 144? We did. Yeah. We did INR 144. Yeah, last year we did INR 144. I think at this time we are like INR 120 already. Okay. We should be- Maybe around the 200. I was just saying a number. 175. Yeah, INR 175-INR 200 could be there. Again, PP is an area that, you know, we are a little bit cautious with because one, you know, unless we have the right margin profile, there's no use just expanding. We would rather expand where we have more control, where we are the market leader, like glass-lined equipment. So that's like an easy low-hanging fruit for us. If Mavag needs additional resources, which, you know, they will need at some point, then we will look at adding a little bit more capacity here as well. Obviously, Sandeep, you choose your battles. I think, there's enough to do in on the glass lining front. Of course, Heavy Engineering Vatva is coming up with Project Apollo coming up. Obviously, we need to prioritize the growth areas. Thank you. Before I hand over for closing, we have a few questions lined up in queue, and we will be taking one question from each participants. Our next question is from the line of Pritesh Vora from Mission Holdings. Please go ahead. Hello. Can you hear me? Yeah. Yeah, go ahead. Yeah. You are in the. I just want to look at three, four, five years down the line. I mean, not look at the current order. When do you think this cycle turns around and do you see a steady state of orders coming in even three years down the line? What do you see? Because you are the barometer of the chemical industries and pharmaceutical industry. Where do we see the growth coming up from which industry now, for next two to three years? Where do you see the orders coming up? Good question. I think in the short term, there is definitely visibility both here and in the international markets. International markets, when I say the international markets, I say Europe and U.S., both have been very, very active in the last six to nine months. How long does it continue? I think probably another six months to a year, you will see investment. We are booked out, like I mentioned to you, $40 million in Mavag. All our Pfaudler units have two to nine to 12 months of order backlog. Currently, the industry cycle is definitely on the up. You know, there will be definitely investments coming in. What we do hope is that even if the market were to slow down at some point, there would be a high install base of GMM Pfaudler or Pfaudler-made equipment. That would obviously create a recurring business, a very sticky recurring business in aftermarket and parts. That's something that we can always focus on. We also have diversified. Besides this glass-lined, we have, you know, filtration and drying, we have Mixion, we have heavy engineering. Some of these go into the same markets, but some of them also go into, let's say, oil and gas, petrochemical. There is risk mitigation strategy. Like I said, being a global company today, let's say if India were to slow down, there could be a resurgence of, let's say, investments in Thailand, for example, or let's say Africa. You can always pick and choose, but, you know, again, we have to be careful that we don't over-create capacity. We keep continuously watching our cost. We don't have a very high fixed cost. One of the things that we will look at doing over time as we move production to India is to probably look at rationalizing some manufacturing internationally. There are no plans of that right now, but as a good business strategy, this is something that we will have to look at. I think for the current short-term period of about three years, I don't see too much problem in terms of business coming in. Maybe if I may add, what Tarak mentioned, this has to be seen especially globally. The service business, it is the aftermarket business. This is for the international business is a higher margin, the better margin. This will be the future business based on the current strong sales. This is 40% of the international business. This will be an ongoing growth driver, which will be based on the current sales of the OE glass line business. Thank you. Our next question is from Deepak Narnolia, from Aditya Birla Sun Life Insurance. Your line is unmuted. Request you to please unmute your line and proceed. Yeah. Hello. Am I audible? Yes. Yeah. Good evening, sir. I had one question on your profit margin. Probably you have discussed this in the past also, but I just wanted you know some light on that. Your standalone margin you had been reporting 24%-25% kind of margin increase last three quarters. Your gross margins are somewhere around 44%-45%. All of a sudden, it has increased. I remember you had been maintaining that you know you would be making this kind of margin in the India business. What has happened? Something has surprised you? Or like if commodity increase has happened, then was it not known to the management, something like that? Yeah, that's a good question, and I'm glad that people keep track of what I say. Yes, I did believe, and I think it was more from a yearly kind of number. We still believe 20%+ is something that we can maintain as a standalone number in terms of EBITDA. There was a one-time cost of the gas price increases which were not considered. Obviously, that has had an impact. Two, I would say, would be the investments really that we are making in both Vatva and in Hyderabad that have kind of impacted profitability also in this quarter. Definitely there has been an impact in steel prices. Currently, we were enjoying steel prices which we had bought few quarters ago. We were consuming those. As Manish said that as we start consuming the newer plate, our kind of weighted average cost went up and we saw a kind of a decrease in profitability. Now, to be honest with you, 25%, 27% EBITDA margin was obviously something that, you know, was probably not sustainable. I think around the 20% mark is something that we do aim to do. Glass lining obviously is a little bit more lucrative for us, and I think we have maintained the margins there. With the export business coming in also, we believe that glass line will continue to improve, and we do believe that once the steel price begins to taper, you will see some improvement. Like I mentioned to you, yes, you know, it's not a structural change in the business. It's more of a short-term impact due to material prices. I don't think we will be the only industries which are impacted by such costs. I think it is probably something that will happen across the board. Now we need to kind of really focus on how do we bring it back by looking at our own efficiency improvements. Do we have levers available? Do we have buckets available where we can start working on to make sure that internally also that we are very cost-conscious? Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you. Thank you, everybody, for joining us. Stay safe, and we look forward to speaking to you during our next investor meeting. Thank you once again, and good night. Thank you. Thank you very much. Thank you, ladies and gentlemen. On behalf of GMM Pfaudler Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect.