CG Power and Industrial Solutions Ltd (CROMPGREAV) Q1 FY23 Earnings Concall Transcript

CG Power and Industrial Solutions Ltd (NSE:CROMPGREAV) Q1 FY23 Earnings Concall dated Jul. 27, 2022

Corporate Participants:

Natarajan Srinivasan — Managing Director

Ramesh Kumar N — President – Industrial Business

Susheel Todi — Chief Financial Officer

Mukul Srivastava — President

Analysts:

Renu Baid — IIFL Securities — Analyst

Rahul Gajare — Haitong Securities — Analyst

Ravi Swaminathan — Spark Capital — Analyst

Unidentified Participant — — Analyst

Ankur Sharma — HDFC Life — Analyst

Mayank Chaturvedi — Equirus — Analyst

Rajiv Gupta — RBC Financial Services — Analyst

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Harshit Kapadia — Elara Capital — Analyst

Shanti Patel — Shanti Patel Investment Advisors — Analyst

Pradeep Raghunathan — Arohi — Analyst

Aniket Shah — Motilal Oswal — Analyst

Unidentified Speaker —

Bhoomika Nair — DAM Capital Advisers — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the CG Power and Industrial Solutions Limited Earnings Conference Call hosted by DAM Capital Advisors. [Operator Instructions] [Operator Instructions]

I now hand the conference over to Ms. Bhoomika Nair, from DAM Capital Advisers. Thank you, and over to you, ma’am. Thanks, Vivien. A warm good evening to everyone. On behalf of DAM Capital, I would like to welcome you to the Q1 FY 2023 earnings call of CG Power and Industrial Solutions Limited. We have the management today being represented by Mr. N. Srinivasan, Managing Director; Mr. Susheel Todi, CFO; Mr. Ramesh Kumar, President, Industrial Division; and Mr. Mukul Srivastava, President, Power Systems. I’ll now hand over the call to Mr. N. Srinivasan for his opening remarks, post which we’ll open up the Q&A. Over to you, sir.

Natarajan Srinivasan — Managing Director

Yes. Thank you, Bhoomika. Good evening, ladies and gentlemen. Let me first extend a warm welcome to you for the Q1 earnings call. I am Srinivasan, Managing Director of the company. I would like to again introduce my colleagues who are with me on this call. Ramesh Kumar, President Industrial Division. He takes care of Motor Sunrise business. Mukul Srivastava, President, Power Systems, he takes care of the transformer and TR Business. So, Ranjan Singh, who takes care of our railways business not with us today. He’s traveling. Susheel Todi, CFO of the company is with us. So Varadarajan, who is the company’s secretary and also in charge of Legal, he’s also with us.

I want to – the company performance, all the businesses of the company performed very well in this quarter. Sales and profit before tax – profit before tax before exceptional items for the stand-alone company for Q1 FY 2022, 2023, the highest in the last 26 quarters, contributed by growth of – in all the business divisions. Aggregate sales for the quarter were higher at INR1,559 crores, recording a growth of 63% year-on-year and 11% quarter-on-quarter.

Q1 of last year, of course, was impacted by COVID lockdown to that extent, the figures are not comparable. Profit before tax was INR1655 crores at 10.6% of sales in Q1 FY 2023 as against INR73 crores, 7.6% of sales in Q1 of FY 2022 and INR131 crores, 9.3% of sales in Q4 of FY ’22. Margins were higher due to cost-saving initiatives in procurement increase to productivity and reduction in finance cost on account of repayment of term loans.

Return on capital employed on an annualized basis for Q1 of FY 2023 was at 39% as against 24% in Q1 of FY 2022. Free cash flow generated for the quarter was INR70 crores. Now, I want to set segmental performance in industrial systems. Aggregate sales for the quarter were higher at INR1,106 crores, recording a growth of 61% year-on-year and higher by 15% quarter-on-quarter. Profit before interest and tax was at INR153 crores, 13.8% of sales in Q1 of FY 2023, that’s again INR64 crores, 9.3% of sales in Q1 as FY 2022, and Rs. 135 crores, 14% of sales in Q4 of FY 2022. Margins were again higher in Q1 of FY 2023 compared to Q1 of FY 2022 due to improvement productivity and cost-saving initiatives.

Unexecuted order book for this division as on 36,022 stands at INR1,959 crores, which grew by 16% compared to INR1,691 crores as of June 30. 2021. More on to Power Systems. Aggregate sales for the quarter were higher at INR423 crores, recording a growth of 17% year-on-year and 1% quarter-on-quarter. Profit before interest and tax was at INR40 crores in Q1 of FY ’23 as against INR28 crores in Q1 of FY ’22 and INR27 crores in Q4 of FY ’22.

Margins were sequentially — were higher sequentially, but lower year-on-year. Q1 of FY ’22 margins were better due to execution of certain export orders with higher margins. unexecuted order book at the end of June 30 June — on the end of June 30, 2022 was INR1,713 crores, which grew by 43% compared to INR1,197 crores as impacted June 2021. Good demand were observed for transformers and sites to consolidated performance.

Consolidated results include the performance of operating subsidiaries at USA, namely QA in corporate and in Sweden, Germany and Netherlands, which are drives and automation companies in Europe and other nonoperating and holding subsidiaries, Q1 performance, sales for the quarter for the — I mean, Q1 consolidated performance sales for the quarter were INR1,665 crores as again INR150 crores in Q1 of FY ’22 and profit before tax before excess liters were INR172 crores as against INR71 crores in Q1 of FY ’22.

Some of the key events in — during this quarter, tube investments Sainte exercised its option to subscribe to the INR8.5 crores equity share by paying the warrant subscription money at INR55 crores. There are no further warrants outstanding as on 30th June 2022. Tube investments, now holds about 58.05% of the equity share cut the company. Two, the company prepaid the remaining term loan of INR100 crores outstanding out of approvals. And as of note, term loans have been paid in full.

India ratings have upgraded the company’s long-term rating from AA minus to AA staple and formed the short-term rating to A1 Plus. The Board of Directors of the company will approving the business plan have also approved a capital expenditure program of INR210 crores to be implemented in the current financial year. The capital expenditure will be spent in expansion of debottlenecking, modernizing the existing facilities, including then apart from that, Aman will also be spent on research and development, information technology and environment and EHS, environment, health and safety.

Out of the INR211 crores, motors and drives will get about INR80 crores, about INR32 crores will be spent on railways. INR88 crores ill be spent on power and remaining will be on other initiatives I just mentioned unaudited financial statements with detailed notes are available as part of the stock exchange filing and also in the company’s website.

Between myself and my colleagues, we’ll be happy to answer questions. Thank you.

Questions and Answers:

 

Operator

Thank you. [Operator Instructions] The first question is from the line of Renu Baid from IIFL Securities. Kindly proceed.

Renu Baid — IIFL Securities — Analyst

Yes. Hi. Good evening team and congratulations for strong performance. My first question is basically broadly to understand how has been the demand outlook. Last quarter, we had a bit of mixed comments on certain pockets of slowdown from the industrial segment on motors and some segment of the market. So if you can share some inputs in terms of how has been the end market demand outlook so far? And are we seeing any signs of slowdown or the broader capex momentum remains fairly strong from an end market perspective? That’s the first question.

Natarajan Srinivasan — Managing Director

So we have given you the unexecuted order book and we continue to get order inflows of order book. Therefore, we don’t see any immediate slowdown in any of the business segments.

Renu Baid — IIFL Securities — Analyst

Sir, any qualitative comments on the end markets, say, on the Industrial segment, short-cycle businesses, rail market. That would be helpful.

Natarajan Srinivasan — Managing Director

Ramesh, do you want to say something on the end markets?

Ramesh Kumar N — President – Industrial Business

Yes, yes. See, actually, there is a little bit of a sentiment issue in the market. That is because of the rise in commodity and down in the, I mean, again crush of the commodity. Otherwise, there is no much problem as far as demand is concerned. So I don’t foresee any demand or recession going forward.

Renu Baid — IIFL Securities — Analyst

Okay. Secondly, what has been the kind of price hikes that we have taken on the Industrial segment for motors portfolio? And do we think now that commodity prices started to ease out, there could be further transmission of these cost savings to the customers? Or how do we look at the pricing side?

Ramesh Kumar N — President – Industrial Business

So I think we have to wait and see. So last year, as you know there were four rounds of price revisions. So substantially once the — once it is confirmed that prices are going to cool down and then relatively, they are stable, then there will be no difficulty in passing on some of the cost increases. Whatever we increase today we are going to reduce. But further, we have to be absolute clear. It cannot be momentary. It has to be stable and it has to be realized. Then at that point of time, I mean the entire industry will take a call.

Renu Baid — IIFL Securities — Analyst

Right. And one last question, if I can add on. Broadly, if you see from the margin side, you have done reasonably well, you’ve highlighted of certain cost savings from productivity and cost reduction initiatives. Can you throw some more input in terms of specific initiatives in the kind of results that we started yielding both in terms of working capital, lean management and the operational initiatives that you’ve taken in Europe?

Natarajan Srinivasan — Managing Director

So I will not be able to give specific details, but I can tell you, one is I told — we have been saying that we are looking at — we are implementing a lean program with sites of a consultant that is giving us some benefits. We have also been working on procurement efficiency and various modes of procurement that is also giving us some benefits. Third is actually, as our financial position improve, we will be able — we have been able to negotiate and then pay where possible and quicker and optimally. We are taking 60 days. We can pay sometimes in some cases, 30 days, some cases are down cash. So these things are now possible, based on all this, you are seeing impact. So that’s all I can say.

Renu Baid — IIFL Securities — Analyst

Got it. Thanks much, sir. All the best. Thank you.

Natarajan Srinivasan — Managing Director

Thank you.

Operator

[Operator Instructions] The next question is from the line of Rahul Gajare from Haitong Securities. Kindly proceed.

Rahul Gajare — Haitong Securities — Analyst

Yeah. Hi. Thank you for the opportunity. I’ve got two questions. And the first question is on the motor business. Could you give us a sense about how much of the market is solved with imported motors? And which category of motors are normally imported — that is and connected with that, how is the competitive intensity in the motor? That is the first question.

Natarajan Srinivasan — Managing Director

See, the imported is — and there is a very little direct import. See direct import, if I consider, maybe about INR1,120 crores is the import. But there is an indirect import. What I mean is that the motors will come with the equipment, okay? So if I add all that, it will be about INR3,000 crores is the import in India as on today.

Rahul Gajare — Haitong Securities — Analyst

And the competitive intensity?

Natarajan Srinivasan — Managing Director

The competitive incentive is there already, because we are never — we have always been the leaders in motors. So we are far ahead with our competition. So that will always be there. And then we’ll have to fight it out.

Rahul Gajare — Haitong Securities — Analyst

Sir, the second question is on the railway business. Could you give us an indication of the total revenue from railway in both industry and power in the current quarter? And how does it compare to Q4? Because Q4, you indicated that you had the highest quarterly revenue coming from rail. And also connected with that, how is your market share moving in the overall railway business?

Natarajan Srinivasan — Managing Director

So I think we just report only as one segment as intertribal both for motor and railway. So we don’t share the details relating the value separately, number one. Secondly, it will be very difficult to compute and then say the market share, because the railways have got several segments. So we are manufacturing only traction motors, electronics related point machines, etc. So the railway is actually several — and then these several segments and there is no official — there is no official at — what is the market share for each of the products, which are the company by railway. So we can’t give you this day. We don’t have the statistics.

Rahul Gajare — Haitong Securities — Analyst

No, no. But you did indicate that last year was your highest ever revenue coming from railways. So some qualitative sense on how the first quarter has been vis-a-vis the fourth quarter, last year?

Natarajan Srinivasan — Managing Director

Qualitatively ask me, we have done well in railways. They’ve done well.

Rahul Gajare — Haitong Securities — Analyst

Got it. Thank you very much. I will come back in the queue.

Natarajan Srinivasan — Managing Director

Yeah. Thank you.

Operator

The next question is from the line of Ravi Swaminathan from Spark Capital. Kindly proceed.

Ravi Swaminathan — Spark Capital — Analyst

Hi everyone. Thanks a lot for taking my question. My first question is with respect to the motor market, your rough sense on how the motor market would have grown in this quarter? Would we have gain market share? What are the top four sectors which are driving the growth for both LED and speed motor which you can give you thought process on this?

Natarajan Srinivasan — Managing Director

See, the exact figures, I won’t be able to share right now because it is not yet published, but we are anticipating a growth of almost about something 8% in the quarter which has gone now. And the infrastructure and especially this oil and gas, and ethanol, the pharma these are the industries which are doing very well. So that is adding up to the growth. Even HP, water and wastewater is doing very well.

Ravi Swaminathan — Spark Capital — Analyst

Okay. So if I do this 7% to 8%, which is 2.7 growth? Or is it like — because Y-o-Y, you have grown industrial system has grown at 55%. So

Natarajan Srinivasan — Managing Director

We cannot compare Y-o-Y because last year, if you see 1.5 month, it is almost like close condition. So it is not the right comparison. If you compare with the quarter 4, I think we are somewhere around 11% to 15%. So that’s how the — compares

Ravi Swaminathan — Spark Capital — Analyst

So the industry would have grown at 7%, 8% and we would have grown at 11% to 15%.

Natarajan Srinivasan — Managing Director

Yes yes, right

Ravi Swaminathan — Spark Capital — Analyst

And that 7%, 8% would be revenue growth and not volume growth.

Natarajan Srinivasan — Managing Director

Volume growth. And generally, the industry is measured in volume growth, not in the value because value growth will be more in April, the prices have gone up. Commodity prices have gone up and then realization also

Ravi Swaminathan — Spark Capital — Analyst

Sure. Sure. And my second question, so basically, any status update with respect to the Vande Bharat orders, I mean how is it likely panning out? What kind of orders can come in over the next 12 to 24 months? And also the power systems export initiatives, how would this likely panning out [Indecipherable]

Natarajan Srinivasan — Managing Director

So Vande Bharat, as you know, we have got one trial order, which will be executed over a two-year period. Current tender of whatever government has announced for 210 cities for construction of the entire full train, not merely the engine part, the entire full train. — electrification not daily one was elected, what we got fully the electric part. So this — over and above this, how much they will come. Anyway, in this tender we are not eligible. Eligibility criteria is that only those who have already have experience of having built and run such trains can participate. So we are not qualifying for that. So any further tenders in what form, it will come, etc. At this point, there is no clarity.

Ravi Swaminathan — Spark Capital — Analyst

Okay, sir. And with respect to the export initiatives with power for basically.

Natarajan Srinivasan — Managing Director

No, initiatives are always there. But as I pointed out earlier — so we have to gear ourselves up to go full earlier, even the — our Kanjurmarg factory itself had exported transformers for INR1,000 crores. So right now, we are still whatever orders are there. We are making slow progress, slow and steady progress. But still we have to just gear ourselves up before we go full out in exports.

Ravi Swaminathan — Spark Capital — Analyst

Got it, sir. Thanks a lot. I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Janak Vora [Phonetic] from Janak Limited. Kindly proceed.

Unidentified Participant — — Analyst

Sir, my question is what is the status of CGO’s property at Worli?

Natarajan Srinivasan — Managing Director

No, CGO properties — earlier this property was mortgaged to the bankers. And then we have cleared out the loan and then we have taken possession of these properties with us now. That is the current status.

Unidentified Participant — — Analyst

So that is lien is listed, but there was some dispute for the lease renewal with the authority. So whether that has been resolved

Natarajan Srinivasan — Managing Director

No that is — lease renewal we have given an application. So that is being processed because of its own procedural thing, it is taking time. But otherwise, we are not seeing any disputes. It’s a procedural delay that is taking place.

Unidentified Participant — — Analyst

And sir, are we planning to sell CG power and how and we have that worli keep the register office to Chennai?

Natarajan Srinivasan — Managing Director

There is no such idea to my knowledge as of now.

Unidentified Participant — — Analyst

And sir, second question is, since CG Power has posted now quite stellar returns, INR130 crore consolidated profit, why there is no mention of any dividend because we are — dividend stalled since last seven years, last CG Power has paid dividend in 2015. And now since CG Power has restored part of its past glory, is not the time to offer something through the loyal shareholders who stood behind CG Power in its suffice time?

Natarajan Srinivasan — Managing Director

For the year ended March 31, 2022. Still, there are some debit balance in profit loss account, unless and until that loss is wiped out, we will not be eligible to pay any dividend.

Unidentified Participant — — Analyst

No, but 2022…

Natarajan Srinivasan — Managing Director

Under Company’s Act, it is not possible to declare any dividend at this point of time. ’22, ’23, depending upon the profits and depending upon the portion, the Board will consider the appropriate time.

Unidentified Participant — — Analyst

This is like, I am one of the 249 shareholders who are holding nominal capital more than INR two lakhs in CG Power. So, on behalf of them, I would like to request consider the management, at least some special dividend, some approved dividend of last seven years to celebrate the restructuring and recapitalization and like revival of CG Power?

Natarajan Srinivasan — Managing Director

So we’ll convey this request our Board of Directors. The board only can take in decision.

Unidentified Participant — — Analyst

That is like something you should think of like those loyal shareholders who are holding more than like two lakh nominal capital and since years. So these are something like employees they’ve got all their areas, everything like creditors are paid, only shareholders are remaining now?

Operator

Mr. Vora sorry to interrupt. Sir. we request you to please join the question queue back again.

Unidentified Participant — — Analyst

Okay, sir. Thank you.

Operator

The next question is from the line of Ankur Sharma from HDFC Life. Kindly proceed.

Ankur Sharma — HDFC Life — Analyst

Hi, sir. Good evening. Thanks for your time. A few questions. Actually, before that, just a small request, you normally give out the press release over the last few quarters with your order book and other segments or numbers. So it would be great to have that as well. I think this quarter, we did not see that. So that was one?

My question really was on your order backlog. So, when I see the number for Q1, about INR3,600-odd crores, which is actually flattish on a Q-on-Q basis. So even in Q4, your order backlog was around the same number, which also if I get it right, implies that your order flows or your order book given the quarter may not have grown maybe in the high single digits at best. Is that the right number? Am I missing something here? Or is that correct that the orders booked in the quarter would have been maybe mid- to high single digit?

Natarajan Srinivasan — Managing Director

So first is in the press release that we have released and which we have filed to the stock exchange, we have given details of unexecuted order book as on 30th of June 2022 for each of the businesses. So, second to your question, I think order flow is healthy because unexecuted order book and this actually, whatever we execute and then that gets eliminated, only the balance that can be there. So right now, from the order book, you can see for the next two, three quarters, at least Q2 and Q3, we are fully covered in generally. Some may be executed in Q4 also. So, order book — order inflow has been quite healthy.

Ankur Sharma — HDFC Life — Analyst

Okay. Any number you can share, sir, if you have it handywhat is that..

Natarajan Srinivasan — Managing Director

It is there in the – in the press release, you can see we’ve been filed with the stock exchange. It is there — segment which we have given the number.

Ankur Sharma — HDFC Life — Analyst

Okay. Sir, second, just coming back to the earlier question, in terms of exports out of your power systems business, how much would that have been during this quarter? And how do you see this scaling up? Because if I remember before or maybe a couple of years back, exports should be a fairly sizable number on the power side. So how are you looking at it going forward?

Natarajan Srinivasan — Managing Director

Yes, I don’t have the current quarter export number. So whatever orders are profitable that we are executing. It’s not a question. We are also applied for several overseas standards. And then there is also a lot of demand in the indigenous side both for the power transformer as well as to the distribution transformer. Orders have to be basically profitable and then the customer has to be worthy of being service because we don’t want to get our money to get stuck — so that is how we are approaching the market.

Ankur Sharma — HDFC Life — Analyst

Okay. And just a last one on this would be, would you just kind of split out your revenues between on the power systems side, between the power transmission distribution utilities versus industrial consumers?

Natarajan Srinivasan — Managing Director

We don’t share the data, sir.

Ankur Sharma — HDFC Life — Analyst

Okay. Great. Not a problem. Thanks so much and all the best.

Natarajan Srinivasan — Managing Director

Thank you. Thanks.

Operator

Thank you. The next question is from the line of Mayank Chaturvedi from Equirus. Kindly proceed.

Mayank Chaturvedi — Equirus — Analyst

Yes. Hi, good evening, everyone. And congratulation for the set of numbers, sir. I have a couple of questions on the Power Systems segment. First one would be in FY ’22, we commissioned 400 kv substation on a basis under the EPD division. So is this one of the legacy project that is putting pressure on the power systems margins and what could be the EPD order book that has led to be executed currently. [Indecipherable].

Natarajan Srinivasan — Managing Director

EPC?

Mayank Chaturvedi — Equirus — Analyst

Engineering Project Division. EPD

Natarajan Srinivasan — Managing Director

So I think that is a very insignificant part of our business. We don’t have big orders to execute. So there is nothing for us to report on that side. Very negligible and insignificant traders solely we have.

Mayank Chaturvedi — Equirus — Analyst

Okay. Thanks, thanks. And sir, on the capex side, we do guided for INR90 crore capex for the Power Systems segment. So would this largely be towards the relocation of the consumer facility?

Natarajan Srinivasan — Managing Director

No, no.

Mayank Chaturvedi — Equirus — Analyst

Sir, are we…

Natarajan Srinivasan — Managing Director

So various existing facilities, upgradation of facilities, modernization, there are some automation. So balancing facilities of only the facility is currently at Bhopal and as well as at Malanpur. Only these are the areas where we are investing.

Mayank Chaturvedi — Equirus — Analyst

So are we actively relocate that consumer facility? Or what is your phases on that?

Natarajan Srinivasan — Managing Director

So I will not be able to answer because the earlier facility which they wanted to relocate in the process, the many of the capacities got cannibalized. So exactly it will be difficult for us to, at this point or time to reconstruct or visualize what is hold that has to be reconstructed, etc. So because of that, we will not be able to — I’ll not be able to commit on that just now.

Mayank Chaturvedi — Equirus — Analyst

Sir, that’s really outcome [Phonetic]. Thanks.

Operator

Thank you. The next question is from the line of Rajiv Gupta from RBC Financial Services. Kindly proceed.

Rajiv Gupta — RBC Financial Services — Analyst

Yes, I had two questions. One was — if you could give some flavor on the consumer product. This is about two quarters back, I remember, right, there was a comment from the management that we will get back to the original demerged consumer product very fast. That was one question. The second question was on stock options. What has been the company’s policy on stock options? And what was — what, if at all? And what has been the strike price? Who — at what general level are people entitled to stock options? And what’s the policy there? Thank you.

Natarajan Srinivasan — Managing Director

So the employees at the senior level, key managerial personnel, vice presidents and presidents are eligible for stock option under the scheme. Last time, the senior management team were given a stock option, which will invest over a period of four years. The strike price was around INR157. So that is your question number two. Question number one, I will ask Mr. Ramesh to answer.

Ramesh Kumar N — President – Industrial Business

Yes. See, actually, we had four different consumer products demerged. And now we have already launched two products. So once we establish ourselves, maybe then we will think it over about the balance when we will be able to launch the other products. Is that your question answered?

Rajiv Gupta — RBC Financial Services — Analyst

Well, really partly. If you could give us some flavor in terms of how do you look at the market, in terms of — I know you will not give me specific numbers or specific projections. But in terms of how important it will be in the next three years, in the overall CG Power portfolio today in terms of percentage of turnover, etc. Just a little bit of more flavor, if you can be a little — if you can be —

Natarajan Srinivasan — Managing Director

It would not be possible to —

Rajiv Gupta — RBC Financial Services — Analyst

I know. I’m not asking for numbers, but in terms of how significant or is it a very high priority stuff? I’m not asking you for a specific number.

Natarajan Srinivasan — Managing Director

Every businesses we are operating are priority, sir. Every business is priority. Consumer business is definitely a priority. But we are just totally new. Therefore, we have to take measured steps. It will take some time for us to grow this business.

Rajiv Gupta — RBC Financial Services — Analyst

Okay. And are you expecting any problems with the brand names, any confusion in the market with — between CG and your elsewhere demerged company there? Are you — how are you facing that?

Natarajan Srinivasan — Managing Director

So we have no problems. We are not experiencing any problems.

Rajiv Gupta — RBC Financial Services — Analyst

All right. Thank you so much. Thank you.

Operator

Thank you. The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors. Kindly proceed.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Very good afternoon. Am I audible?

Susheel Todi — Chief Financial Officer

Yes.

Natarajan Srinivasan — Managing Director

Yes, sir. Proceed.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

So my half year’s complement to the management team for transforming a very fast state of affairs. And I’m confident that CG Power will be emerging as a study in many business schools of the way this company has transformed this year. So my sincere compliments to the team. With that — so I would basically pick a thread from the previous question about the consumer side of the business. So as a shareholder, I would request a little more understanding about how the customer is receiving the CG brand or the consumer products.

Because there is a complete new distribution network, there’s a completely new setup that has to be created, because the first while has gone with demerged company. And you mentioned that out of the four product lines two have been introduced in the market, which I understand like science [Phonetic] is one of them. So some color is very much required, and I hope you will oblige us.

The second question is on the broader EV deck or the EV — that the whole group, other TI and you are an important component of TI, I can very proudly say now, so — is being taken. So what is it that CG Power is doing on the EV side? You mentioned about some motors, etc, that we are working on, on the EV side, so that understanding is what I request for.

Natarajan Srinivasan — Managing Director

Yes. So, actually, the CG brand is well-known brand in the market. So, we are introduced as a CG brand only. And we already have motors and commercial motors, which goes to the consumers. So, the entering into the CG brand is not an issue for us, and that is the reason we have reentered all these products, and then we are going with that brand only. We don’t have any other problem as for us consumer products.

Ramesh Kumar N — President – Industrial Business

Customer response has been good for the products we’ve introduced. Customer response and dealer response have been quite good.

Natarajan Srinivasan — Managing Director

Yes, quite good.

Ramesh Kumar N — President – Industrial Business

So, as regards to the question on EV, I have understood your question correctly, our intent is CG is predominantly — we know the manufacturer of motors quite well. So, we would like to position ourselves to manufacture motors for the electric vehicles for which we are currently working in a development stage. Until such time, this development is completed and product is approved and product is shown to some OEMs, etc, we will not be able to share any information. Certainly, we are interested in this area. Therefore, we are working on this particular business.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Thank you so much. In fact when you mentioned about the capex side, the INR2,211 crores and speed up into the various segments, I was actually hoping to hear something basically being focused towards the EV, which I did not hear. That’s why I was trying to kind of get a clarity that on the focus towards EV. And your words about the consumer side of the business is, I think, very reassuring because the company itself will continue to be a very strong brand. So, kind of, directly competing with them and getting the dealer interest and all very sure. So, that’s the good side. So on EVs are like no capex on nothing, so maybe that is why I was having some query about.

Natarajan Srinivasan — Managing Director

The existing facilities are adequate to manufacture, design and develop prototypes for EV motors also. So, whatever we — while have not specified, whatever additional incremental facilities that will take on the requirements for these purposes also.

Manish Dhariwal — Fiducia Capital Advisors — Analyst

Thank you so much. Thank you so much and all the very best.

Operator

Thank you. The next question is from the line of Harshit Kapadia from Elara Capital. Kindly proceed.

Harshit Kapadia — Elara Capital — Analyst

Thanks for giving me the opportunity and congratulations for very good numbers in the challenge times. Just one question, sir. I just missed your data on capex. You had mentioned a breakup in terms of its segment you are doing capex. Can you please repeat?

Natarajan Srinivasan — Managing Director

The INR80 crores are motors and drives, INR32 crores are railways, about INR85 crores were power — I mean, IT, R&D, etc.

Harshit Kapadia — Elara Capital — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Shanti Patel from Shanti Patel Investment Advisors. Kindly proceed.

Shanti Patel — Shanti Patel Investment Advisors — Analyst

Good afternoon, sir. I wanted to know how much capacity utilizes and we have achieved till today? And secondly, what will be the approximate region owned capital employed in next one year?

Susheel Todi — Chief Financial Officer

So the first question, if you ask me how much of capex we have spent so far, is there…

Shanti Patel — Shanti Patel Investment Advisors — Analyst

Not capex, capacity utilization. How much capacity we are utilizing at our plant today?

Natarajan Srinivasan — Managing Director

So it is running between, sir, 70% to 80%, sir, all across our different plants.

Shanti Patel — Shanti Patel Investment Advisors — Analyst

Okay. And the second one was whether we will be able to maintain the — how much savings should be there in respect of loans that we have repaid, because as I understand, now there is no loan all term on SEBI is repaid. So what will be the saving on that account?

Susheel Todi — Chief Financial Officer

So we’re almost saving around INR45 crores to INR50 crores on account of repayment of this term loan for the full year.

Shanti Patel — Shanti Patel Investment Advisors — Analyst

Full year INR45 crores, right, if I’m not wrong. Okay. Thank you very much, sir. Thank you.

Operator

Thank you. The next question is from the line of Rahul Gajare from Haitong Securities. Kindly proceed.

Rahul Gajare — Haitong Securities — Analyst

Thanks for the opportunity again. Sir, I understand that CG Power has been well-received in the South market as far as the consumer products are concerned. I wanted you to discuss your experience in the South-end further market with respect to the consumer products? That’s the first question.

Natarajan Srinivasan — Managing Director

Sorry, can you repeat your question?

Susheel Todi — Chief Financial Officer

South market..

Rahul Gajare — Haitong Securities — Analyst

Experience in South market.

Natarajan Srinivasan — Managing Director

Yeah. South market experience is good, because consumer — generally South market contributes almost 40% for consumer, and we are a very strong brand in South also. Our experience so far has been good, and I think we are also doing in the same lines of the market demand South in our overall percentage.

Rahul Gajare — Haitong Securities — Analyst

Okay. So after South, which is our other region, which you’ve done well?

Natarajan Srinivasan — Managing Director

Eastern north.

Rahul Gajare — Haitong Securities — Analyst

And how much would that contribute to approximately?

Natarajan Srinivasan — Managing Director

Percentage wise, the South will be about 40%, 45%. And the rest is between North and East. West is we are yet to start in a big way, West we are in a post-outreach.

Rahul Gajare — Haitong Securities — Analyst

Okay. So that’s the first question. Sir, if a parent company has set up a separate EV mobility business, to reenter, 3-wheelers and tractors, can you indicate how does CG Power and PI Electric plan to work together in the larger scheme of EV business for the next couple of years, some thoughts on this business, please?

Ramesh Kumar N — President – Industrial Business

So there is no agreement between TA and CG. TAS got its own plans on mobility. If — for example, if — for any of their businesses, maybe, for example, let us say, tractors or 3-wheelers, etc. If they invite some tenders for a supply of motors, we will also participate. If it is any specific product development, we can develop. So everything will be an obsolete. So it has to make commercial sense for TA. It has to be a commercial sense for CG. So as of now, there is no fixture understanding between both the companies, but business inquiries do come. When they send the business inquiries to various people, we also get and we respond, we compete with as any other company.

Rahul Gajare — Haitong Securities — Analyst

Okay, sir. Thank you very much for the answer. This is very helpful.

Operator

Thank you. The next question is from the line of Pradeep Raghunathan from Arohi. Kindly proceed.

Pradeep Raghunathan — Arohi — Analyst

Hi. I just wanted to ask — so you mentioned the breakup of capex that you had in mind, but could you also tell us what kind of capacity will we have? So right now, we’re running at around 70%, 80% capacity. What is the incremental capacity that would be generated by this additional capex?

Natarajan Srinivasan — Managing Director

So actually, no, what will happen, this amount will be spent on, what is called as debottlenecking. There will be sectional imbalances or there will be some modernization. We, on count of that, maybe have more additional 15% to 20% capacity will get released.

Pradeep Raghunathan — Arohi — Analyst

Helpful. And secondly, on the growth initiatives, you mentioned on consumer and EV both, you mentioned then there is a meaningful update. Could you tell us how are you looking at this in terms of when this would be something which you could share, let’s say, one, two, three quarters down the line?

Natarajan Srinivasan — Managing Director

Regarding?

Pradeep Raghunathan — Arohi — Analyst

The consumer business as well as the EV business.

Natarajan Srinivasan — Managing Director

So, I think they are all at a development stage, unless and until some plants are rectified and then finalized, we will not be able to any share any data.

Pradeep Raghunathan — Arohi — Analyst

I appreciate that. My question was actually, is there some sort of a milestone where you would be able to then be able to share data around what’s happening?

Natarajan Srinivasan — Managing Director

As of now, unless and until, as I said, there is — we are just working on that on the EV side. We are working on the development of motors and other products actually. As and when it comes to set and safe, only I’ll be able to. It can take three months. It can take six months. It can take nine months. Similarly, on the consumer side, we have launched whatever products we have launched, then that is actually will continue. Newer products are in the drawing board. So therefore, as of now — as and when the only the plants are finalized we’ll be able to share.

Pradeep Raghunathan — Arohi — Analyst

Got it. Thank you. Thank you for the time.

Operator

Thank you. The next question is from the line of Aniket Shah from Motilal Oswal. Kindly proceed.

Aniket Shah — Motilal Oswal — Analyst

Yeah. Thanks for the opportunity, and congrats on the good set of numbers. I had two, three questions. So, first on the margin side, you’ve done a decent job this quarter, and I’m assuming this quarter would have been the peak quarter on raw material cost for you. Given the fact that we’ve seen decline in raw material prices, should one now assume that given most of your contracts are fixed price contracts, you should start seeing improvement in margin going forward?

Natarajan Srinivasan — Managing Director

Pardon. Can you repeat?

Aniket Shah — Motilal Oswal — Analyst

Given most of your contracts are fixed price contracts, and this quarter, you would have seen a worse raw material costs, and we have seen raw material costs coming down across the board. Should one assume margin expansion going forward?

Natarajan Srinivasan — Managing Director

So, I think this was discussed earlier in one of the questions. If the prices continue to fall and then, if there is a substantial drop, customers both and consumers will expect us to reduce the price and cost of the benefit. Because the prices that we are now — at which we are selling actually last financial year, we increased the price four times because of the increase in prices. So, margin expansion cannot be taken for a grant in that way.

Aniket Shah — Motilal Oswal — Analyst

Got it. And if you can also highlight what are the white spaces within the motor category where we would be targeting now, if you can qualitatively give some comments on that? There will be certain category where you would have very high market share, certain category in motors where you would — you present, like, for example, EV motors, which you highlighted earlier, but would there be more categories like EV motors where you would be targeting?

Natarajan Srinivasan — Managing Director

Ramesh, do you want to answer that?

Ramesh Kumar N — President – Industrial Business

So, I think in LT Motors, generally, we hold a large share. But every product, whether it is LT motors or FHP motors or LIM, large industrial motors, every product, as and when we get good inquiries, and we want to increase our market share, we are working on it. As far as EV is concerned, as I said, it is still at a very development stage. So therefore, our priority is to all the segments of the matters, which we are manufacturing, everything is — actually is a growth area for us.

Aniket Shah — Motilal Oswal — Analyst

Sure. And one question, running an older plant, which we currently had in CG versus you — if you had to go for a greenfield plant today, would the margin be far more different than what it is today in their existing older plan?

Natarajan Srinivasan — Managing Director

So I think it has got a different implication, when you put a new plant, there will be a lot of initial expansion costs, there will be a high depreciation. There will be high level of investment due to automation, etc. There will be plus and minuses. We have to see because 70% is material cost. So in our business, 70% to 75% is material cost. So the play is actually, if you remove depreciation only maybe about 20% in which how much you can play. So old depreciated plants have there on advantage, newly set up plants will have different advantage. Both will coexist and both will have a different markets to serve.

Aniket Shah — Motilal Oswal — Analyst

Got it. And if I may squeeze in one final question on Vande Bharat opportunity, would it be possible for you to quantify the size of opportunity that you can address, for example, if one train would cost INR100, what is the size of opportunity for you within that INR100? Thank you.

Natarajan Srinivasan — Managing Director

We can clearly say the — as I said earlier, one is the entire train. The current tender for 200 trains actually resolved for the entire train. So that, I think, for which we are not eligible. Earlier they just only the electrics that part alone was even a tender on which we have got awarded for one development order about INR37 crores, INR38 crores. So that is entirely — we will supply and procurement since it’s a development program, which will be executed over a period of two years.

Aniket Shah — Motilal Oswal — Analyst

Sure. I’ll come back in the queue. Thank you.

Operator

Thank you. The next question is from the line of Shrey Jay [phonetic] from Quest Investments. Kindly proceed.

Unidentified Participant — — Analyst

Hello. Thank you for the opportunity. So slightly new to the company so far do you from an if any. So from my understanding, we are not present in the low-voltage switch case segment, but that segment seems to be quite big from what I understand the INR25,000 crore market. So just wanted to understand why are we not present there? Okay. So we’ve not been done in the past, but do you see any entry in the future?

Natarajan Srinivasan — Managing Director

So Mukul can answer that.

Mukul Srivastava — President

See, as CG, we used to have a low-voltage switch gear business till the year 2000, which was sold off. And then over a period of time, our energy has got focused on developing the high older switch gears right from 3.3 kilo to 200. We will say segment per unit cost of the dual item is very low. And — it has its own interclass in terms of handling the business. I mean, but more so on market expansion sales center rather than technology. So over a year, over the last 20 years, we have focused more on technology-oriented, high ending of the product. So as of now, we do not have any plans to be entering into the lower

Unidentified Participant — — Analyst

Okay. And sir, anything on the HVDC transformer — because I think there also, we are not present, but the other categories were there?

Natarajan Srinivasan — Managing Director

Yes. HVDC is one area. But in India, still the HVDC contributes to around less than 15% of the total market. I think we are coming from a low base. We have ample of opportunity to grow in the areas where we already present for so many years. And that is where we are trying to strengthen and consolidate our position. Maybe in the coming future, we might think of a HVDC but as of now our hands are really full with the existing portfolio of the perk we have.

Unidentified Participant — — Analyst

Okay. Okay. Thank you. Sir, the other question is now since most of our subsidiaries were done with selling them. So just wanted to understand, did we get the technology from those companies? Or that also goes away and we have to do anything to start from scratch?

Ramesh Kumar N — President – Industrial Business

See on the overseas company mostly which were on the transformer and [Indecipherable] side, we already have absorbed the technology whatever they could offer, and we have been upgrading the technology, especially in the segment of the HV AIS, which is now we’re up to 25KV and we are working on 400KV. As far as the other AIS which gets are concerned, we are already self-sufficient in India. Our plants are doing well. On the transformer side, we have been done in the business for so long. So we — actually, we are fully sufficient on in those areas.

Unidentified Participant — — Analyst

All right. And sir, just last question. So now that we’ve completed the turnaround and all of that is over. So in terms of management guidance, not specifically numbers, but in terms of the category that you see you could start looking into which offers a great runway for the company in terms of growth for the next three years to five years?

Natarajan Srinivasan — Managing Director

So it is too early to think of the existing businesses can be still, there are a lot of work to be done, and they can be still grown. So therefore, it is too early to think of anything else we have not been thinking in those directions.

Unidentified Participant — — Analyst

Okay. Okay. All right. And sir, just last bit on the green and renewable energy side hydrogen side. Do you think a company has any strengths to cater to those, kind of, segments?

Natarajan Srinivasan — Managing Director

So anything in those areas if it has anything to do with power systems are motor, certainly, we are well-positioned to serve in those industries.

Unidentified Participant — — Analyst

Okay. All right. Thank you so much for that answer.

Unidentified Speaker —

Thank you.

Operator

The next question is from the line of Rajiv Gupta from RBC Financial Services. Kindly, proceed.

Rajiv Gupta — RBC Financial Services — Analyst

Yes. Thank you for taking my question again. Just wanted a flavor of what kind of capex on the consumer product business do you envisage in the next two financial years in terms of ramping up? Also, what are the products we have launched, that must be in the public domain, so I’m assuming there’s no confidentiality there. And what are the products which are about to be launched on the consumer protect business?

Natarajan Srinivasan — Managing Director

You want to answer the products?

Susheel Todi — Chief Financial Officer

Yes. See, we have launched fresh water pumps for both the domestic agriculture and a little bit in industry. And we have launched the complete range of fans, ceiling fans, table, pedestal and exhaust and everything, the compete range of fans. So as of now, these are the two products and we are — right now, we started off with the contract manufacturing. So maybe going forward, we will see how — what is the capex we are going to invest on that. Right now, we’ll not be able to tell you on that.

Rajiv Gupta — RBC Financial Services — Analyst

All right. Thank you very much.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Bhoomika Nair for closing comments.

Bhoomika Nair — DAM Capital Advisers — Analyst

Yes. I would just like to thank the entire management for answering all the queries and particularly on the participants are well. Thank you very much, sir for giving us the opportunity and wishing you all the very best.

Natarajan Srinivasan — Managing Director

Thank you, Bhoomika. Thank you both of you. Thanks for your support.

Susheel Todi — Chief Financial Officer

Thank you.

Ramesh Kumar N — President – Industrial Business

Thank you.

Natarajan Srinivasan — Managing Director

Thank you.

Operator

[Operator Closing Remarks]