Elecon Engineering Company Ltd (ELECON) Q3 FY23 Earnings Concall Transcript

Elecon Engineering Company Ltd (NSE:ELECON) Q3 FY23 Earnings Concall dated Jan. 30, 2023.

Corporate Participants:

Kamlesh Shah — Group Chief Financial Officer

P. K. Bhasin — Head, MHE Division

M. M. Nanda — Head, Gear Division

Analysts:

Binay Sarda — Ernst & Young LLP — Analyst

Pratik Kothari — Unique Asset Management LLP — Analyst

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Himanshu Yadav — Nuvama Wealth Research — Analyst

Anish — Girik Capital — Analyst

Naysar Parikh — Native Capital — Analyst

Sanjaya Satapathy — Ampersand Capital Limited — Analyst

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Dipen Shah — DS Investments — Analyst

Ankit Babel — Subhkam Ventures — Analyst

Suhrid Deorah — Paladin Capital Management LLP — Analyst

Gunjan Kabra — Niveshaay Investment Advisory — Analyst

Unidentified Participant — — Analyst

Chinmay Kabra — Emkay Global Financial Services — Analyst

Manish Goel — — Analyst

Presentation:

Operator

Ladies and gentlemen, good morning and welcome to Elecon Engineering Company Limited Q3 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Binay Sarda from Ernst & Young. Thank you, and over to you, sir.

Binay Sarda — Ernst & Young LLP — Analyst

Thank you, Michelle. Good morning to all the participants on the call and thanks for joining this Q3 FY ’23 earnings call for Elecon Engineering. Please note that we have mailed out the results and the presentation, and — as well it has been uploaded in the stock exchanges. In case if you have not received the same, you can write to us and we’ll be happy to send it over to you.

Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risks that could cause our future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements.

To take us through the results of this quarter and answer your questions, we have with us the management of Elecon Engineering, represented by Mr. Kamlesh Shah, Group CFO; and Mr. Narasimhan Raghunathan, CFO. Mr. Kamlesh Shah will give a brief overview of the quarter gone past and then we’ll open the floor to Q&A session.

With that said, I’ll now hand over the call to Mr. Kamlesh Shah. Over to you, sir.

Kamlesh Shah — Group Chief Financial Officer

Thank you, Binay. Good morning, everyone. Ladies and gentlemen, a warm welcome to our Q3 FY ’23 conference call. I hope you all have had a chance to go through our results and presentation. We are pleased to report healthy financial performance during the quarter and we expect the growth momentum to sustain in the coming years.

The global economic activity is witnessing a downturn amidst high inflation and resulting tighter monetary policy due to Russia’s invasion of Ukraine, which has led to increase in energy process. Despite global economic slowdown, the Indian economy continues to show hard resilience to global shocks on the back of strong government capital spending and pickup in the manufacturing activity. World Bank has recently raised India’s FY ’23 GDP forecast to 6.9% from 6.5% earlier, as the domestic economy is well positioned to weather global slowdown compared to most other emerging economies. Nevertheless, we continue to monitor the external situation and have been taking appropriate measures to streamline our cost structure and mitigate the overall impact due to rise in input cost. Despite global economic headwinds, we remain confident of the growth prospects and retain our consolidated revenue target of this INR2,000 crore by FY ’24.

Discussing the Q3 FY ’23 result at a stand-alone level, the total operating income increased by 63% Y-o-Y to INR304 crore compared to INR186 crore in the corresponding quarter of the previous year. The EBITDA on an absolute basis increased by 112% Y-o-Y to INR71 crore as compared to INR34 crore during the corresponding period of the previous year. This translates to EBITDA margin of 23.4% in Q3 FY ’23 compared to 18.1% in Q3 FY ’22. We closed this quarter with a net profit of INR48 crores as compared to INR16 crores during the corresponding period of the previous year, reflecting an increase of 206%.

Coming to consolidated financials of Q3 FY ’23. The operating revenues increased by 43% Y-o-Y to INR389 crores as compared to INR272 crores in Q3 FY ’22. EBITDA increased by 69% Y-o-Y to INR89 crore versus INR52 crores in Q3 FY ’22. The EBITDA margin stood at 22.8% in Q3 FY ’23 as against 19.2% in Q3 FY ’22. The consolidated profit after taxes increased by 99% to INR63 crores for Q3 FY ’23 as compared to INR32 crores in the corresponding period of previous year.

Return on equity increased to 20% in nine months FY ’23 compared to 14% in FY ’22 while return on capital employed increased to 23% in nine months FY ’23 compared to 18% in FY ’22. Current ratio improved to 2.1 in nine months FY ’23 compared to 1.6 in FY ’22. Net debt to equity has come down to zero, while working capital cycle has reduced to 81 days as compared to 91 days in FY ’22, due to our focused approach in bringing down receivables. We would like to inform you that the Company had a net cash position of INR66 crores, and outstanding retention amount stood at INR66 crore as on December 31, 2022.

Coming to the INR60 crore-plus arbitration awards, customers have shown interest for amicable settlement, which is a positive development. We continued to witness healthy demand across our end users’ industries despite headwinds in the global economy, which resulted in stronger order intake, worth INR1,023 crores in the gear business and INR177 crores in material handling business during the nine months FY ’23 at the consolidated level. As on December 31, 2022, orders on hand in the gear business is INR563 crores and in the MHE business, the order on hand is INR157 crores.

Now coming to the new product development initiatives, Elecon continues to widen its product portfolio by leveraging its unmatched technological know-how and R&D capabilities. We have designed and developed high-speed gearbox which finds its users in steam turbine, compressor, and blower, and has a domestic market size of around INR70 crore per annum. The Company has also enlarged its Planetary gearbox product portfolio and introduced Central Drive Planetary Gearbox for the cement industry, having domestic target market of around INR50 crores per annum. We are pleased to announce that Elecon Engineering was awarded as one of the top 10 gears and gearbox manufacturers by Industry Outlook for our unwavering focus and dedication to achieve excellence in quality and delivery.

We continue to explore opportunities to establish ourselves as a preferred supplier to OEMs in European market and invest in global brand building exercise. The Company will continue to focus on expanding its global footprint and enhance its market penetration in existing geographies, which is likely to increase our overseas revenue and result in the next leg of sustained growth for the Company. As such, we remain confident of increasing the share of overseas business revenues to 50% of the total revenue by FY ’30. Also, Elecon continues to strengthen its leadership position in the domestic market with its unwavering focus on new product development.

In line with our ESG commitment, 70% of the energy is currently generated from renewable sources and over 85% lighting sources have been converted to energy-efficient LED. Our facility comprises of around 4,000 square meter unused land which has been developed into a green belt area. And the Company today boasts of 60% green campus. Among other environmental initiatives, the Company has reduced uses of wood by almost 40% by adopting nailless packaging, employed rainwater harvesting solutions to conserve rainwater and built sewage treatment plants to reuse sewage water. As part of social engagement, Elecon has been undertaking various health-related initiatives such as blood donation camps, health activities for community, Health Heart Walkathon and health and safety awareness programs in nearby valleys. The Company continues to promote sports activities and provide necessary food support to society by undertaking activities such as food distribution for needy, support to weaker sections of society, organizing education program, and initiative for special person.

Inclusiveness is the core of whatever we do, and the Company continues to promote sustainable supply chain and has been strengthening the cause through business partner meet, dealers and channel partner meet. We continue to build sustainable workforce by ensuring health, safety and empowerment of our employees, nurture leadership skills through our Leadership Development program and inculcate a culture of continuous learning.

With that, I thank you all for listening in and we will be happy to address your specific queries about the business going forward. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] We have the first question from the line of Pratik Kothari from Unique Portfolio Managers. Please go ahead.

Pratik Kothari — Unique Asset Management LLP — Analyst

Hi. Good morning and thank you. Sir, my first question is, in our MHE segment, the order inflow and order book seems to be going very strong. So some qualitative highlights if you can share?

Kamlesh Shah — Group Chief Financial Officer

Yeah. Now I think this quarter we got a good inquiry and we received an order also. And that will continue. But our focus is on supply of materials and after-sale services. These orders are all related to the supply of materials, mainly. There is no order related to the EPC work.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay. In the presentation, we have mentioned about half of this inflow has come from power. So anything specific here?

P. K. Bhasin — Head, MHE Division

So basically this is…

Kamlesh Shah — Group Chief Financial Officer

We have Mr. Bhasin, who is heading our MHE division, and we also have Mr. Nanda, who is heading our gear division. I think, Pratik, Mr. Bhasin will give an answer to this. Yes.

Pratik Kothari — Unique Asset Management LLP — Analyst

Sure. Thank you.

P. K. Bhasin — Head, MHE Division

Yeah. As you are aware that we are not taking any EPC contracts, so we are only engaged in supply of equipment. We also would be giving supervisory services. And power, we have certain orders, which have come to our way, that is taken in one or two wagon tippler orders.

Kamlesh Shah — Group Chief Financial Officer

So, actually we are having a dominating position in power sector, particularly for MHE division which is there. So as a part of the replacement and upgradation requirement of the customers from power sectors, these orders are there for us.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay. Sir, this is not this three new thermal power plants which are yet to come up, which you have mentioned in the presentation? This has nothing to do with that, right? This is just a replacement of older power plant.

Kamlesh Shah — Group Chief Financial Officer

Correct.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay, sir. So this is an additional opportunity that we see? We have some inquiry pipeline, etc., for the new power plant?

Kamlesh Shah — Group Chief Financial Officer

Yeah, it is there. So we are evaluating that — all the inquiries and wherever, I think, we find suitable to — as per what the present in our strategy it is there we are going to participate for that.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay, fair. And sir, given what your target that we have shared for next year of INR2,000 crores. Just qualitatively how are we prepared to achieve this in terms of — we did speak about new products that we have developed in terms of new geography, new clients. Anything that you can highlight how are we moving in that direction?

Kamlesh Shah — Group Chief Financial Officer

Yeah. Mr. Nanda, I think, from gear — who is heading the gear will just give an update for that also.

M. M. Nanda — Head, Gear Division

Yeah. You see, basically, we will be continuing our order intake from the core sectors where we are already very prominently working like steel, sugar, cement, power, more so on the FGDs where we are. And selectively for our spare business also will be coming from the power sector as a matter of fact. Then material handling also. These are the area what we’ll be looking for. Apart from that, we will be also targeting the new product, which has been highlighted already, mentioned by Kamlesh bhai in his opening remarks and all that — on that. And then, of course, we will be also focusing on marine business basically. We are developing some new prototypes to be ready for certain overseas who is sourcing it from us. Apart from that, there are some projects that are also lined up from the Indian Navy, that also we are trying to target. So all this will be adding up to the numbers what has been projected as a matter of fact. Yeah.

And in addition to that, export also will be our focus area, which we are really going to look at it and we’ll be looking at how we are going to do it. From OEM business, we’ll be targeting more from here. That will also help us to really get more on that. Yeah. Thank you. Anything else you want to know?

Pratik Kothari — Unique Asset Management LLP — Analyst

Sure, sir. Last thing on gears again. One, what was the export number this quarter? And second, the order inflow seems to have slowed a bit. We used do about INR100 crores a month, INR300 crores a quarter. Seems to have been down to about INR200 crores on the stand-alone part. So anything to read into this?

M. M. Nanda — Head, Gear Division

See, primarily we have — these numbers are not really as you already noticed, but we have a big plan as far as the exports are concerned. We are trying to deploy our own team out there at various locations. Apart from whatever we have, our entities there that is going to help us. But in addition to that, we also support them. Our own people are going to be positioned there at various locations. In addition to that, we are also targeting some of the — some segments like South Africa, as well as Australia where we see lot of potential. In South Africa, we are looking to position our own office as a matter of fact to really help us on that. We are already trying to take some help from Australia. So all this will be adding up. What action we have taken will really increase our numbers going forward on that.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay. And what was the number this quarter?

M. M. Nanda — Head, Gear Division

INR30 crores.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay, great. Thank you, and all the best, sir.

Operator

Thank you. We have the next question from the line of Shubham Agarwal from Aequitas Investments. Please go ahead.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Yeah. Thank you for the opportunity. Sir, my first question. So recently, two weeks back I think Railways came out with a — so there was a news from Railways that they will be ordering multiple wagon tipplers. So, sir, I wanted to know whether we will benefit out of this? And if so, what is the opportunity size because of this plan?

P. K. Bhasin — Head, MHE Division

This wagon tippler, Railways have come out with a new specification. Earlier specifications were very stringent, 140 ton each wagon tippler. Those sort of wagon tipplers are not there in the market. Nobody manufactures, neither people can give the coal with that wagon. So they have revised the specification and it is aiding us. Whatever designs we have got, they will be getting the new specifications of the Railways.

Kamlesh Shah — Group Chief Financial Officer

So if any opportunities will come up from the wagon tippler from Railways that will definitely be under this revised norms. We find ourselves qualified for participating.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. So all in all, it’s some time away before this opportunity comes in, right?

P. K. Bhasin — Head, MHE Division

Yeah.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. Sir, secondly, I wanted to have a clarification on page number — so financial guidance where we have given for the consolidated number. So for the last quarter, we are giving EBITDA guidance of INR84 crores, which is lower than what we have reported this quarter. So any specific reason why we are giving our guidance or tapering our guidance for the Q4?

Kamlesh Shah — Group Chief Financial Officer

Generally, this is an engineering sector and capital goods sector you can say, book mixed. So generally, Q1 and Q3 are comparatively lower because, in Q3, number of holidays are there in terms of Diwali and Christmas and somewhere they also are consuming their available leaves. So generally, if you see historically, the Q3 numbers are generally lower.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Correct.

Kamlesh Shah — Group Chief Financial Officer

Q2 and Q4 are always healthy if we compare on a quarter-on-quarter basis also. We are confident that whatever the guidance we have given, that will be achievable for us.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

So that’s why the question, because I think this page mentions Q4 guidance as INR84 crore and our Q3 number EBITDA is INR89 crore, and because historically Q4 has been a better quarter, I wanted to know why we are reducing our guidance for Q4.

Kamlesh Shah — Group Chief Financial Officer

We have maintained our guidance what we have given at the beginning of the year. Anything better will come, definitely it will get reflected on an actual liability [Phonetic] basis.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. Okay. And sir, we have been investing a lot in overseas business. I think Mr. Nanda briefly touched upon. But I wanted to know if there is any breakthrough or any update that you would like to share in that we have already hired so many people overseas.

M. M. Nanda — Head, Gear Division

See, all these actions which I just narrated will certainly bring result, but it’s a bit premature as of now to really talk about it. As we really — once we start getting results on that, we’ll certainly share with you on that. Yeah.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Okay. Thank you. That’s it from my side.

Kamlesh Shah — Group Chief Financial Officer

Yeah. I think we are seriously discussing with certain overseas customers who are OEMs also, but once it will get material then only it will make sense for us to talk anything about that.

Shubham Agarwal — Aequitas Investment Consultancy Private Limited — Analyst

Fair enough.

Operator

Thank you. The next question is from the line of Himanshu Yadav from Nuvama Wealth Research. Please go ahead.

Himanshu Yadav — Nuvama Wealth Research — Analyst

Thank you, sir, and congratulations for a very good set of numbers. Two questions. One, if you can give the order book split further? I mean, Gear division, you said INR563 crores. So how much of that is at the subsidiary level? Second, since that part of order book has remained relatively softer and MHE has seen good order accretion. So is it a quarterly thing? And do you expect gear book orders to remain strong in FY’ 24 as well? Some color on that.

And second question is, in terms of the high-speed gearbox, is it something similar to what Triveni Engineering makes? And is it the same market where we will be competing in?

Kamlesh Shah — Group Chief Financial Officer

I’ll just give the numbers related to stand-alone and — stand-alone open order book position. The rest of your questions will be taken care by Mr. Nanda. On a stand-alone basis, my open orders as of December 31 in Gear division is INR497 crore, and in MHE it is INR157 crore.

M. M. Nanda — Head, Gear Division

As for high-speed, you are right, this is identical to what — where Triveni is. But in addition to that, we are also focusing for overseas market as well in addition to the domestic. That’s what we are really going to embark upon.

Himanshu Yadav — Nuvama Wealth Research — Analyst

So, sir, the softness — I mean, 297 [Phonetic] you’re saying. So, are we seeing any softness in order inquiries or some delay by customers in finalizing orders domestically in gear side?

M. M. Nanda — Head, Gear Division

Yes, yes. Yes. In fact, we are already talking to two parties as a matter of fact, which — based on which we really worked out all these plans as a matter of fact, where we have committed supply to be given to them. In addition to that, we are also exploring other opportunities also on that.

Himanshu Yadav — Nuvama Wealth Research — Analyst

No, sir, I meant to understand, I mean, this softness in stand-alone gearbox order book, is it something which is a temporary quarterly thing and you expect it to bounce back, because we are maintaining our guidance of INR2,000 crores, so some color on that side, please? This is my last question.

M. M. Nanda — Head, Gear Division

Yeah, definitely. There is — some softness is there in the — from the customer side. They are sitting on the order waiting for some of the developments and based on that they are going to release the order. That is what it is. So far as the FY ’24 numbers are there, considering our focus, our strategy, we are quite sure and confident that we’re going to achieve the INR2,000 crore numbers what we are giving out.

Himanshu Yadav — Nuvama Wealth Research — Analyst

Thank you, sir. That is it.

Operator

Thank you. The next question is from the line of Anish [Phonetic] from Girik Capital. Please go ahead.

Anish — Girik Capital — Analyst

Yeah. Hi, sir. Good morning. So just one question which is related to the margin. So we did one of the best gross margins among many quarters, which is like 48%. So how do you see the sustainable impact? And like what led to just very good…

Operator

Mr. Anish, I’m sorry to interrupt. I would request you to use your handset to ask a question.

Anish — Girik Capital — Analyst

Yeah. Am I audible now?

Operator

Yes, please proceed. Can you please repeat your question?

Anish — Girik Capital — Analyst

Yeah. Good morning, sir. So my first question was on the gross margins, which we have achieved 48%, which is a very good amount, mainly last few quarters that we have seen. So if you could give some explanation on what led to this kind of a gross margin improvement? And how do you see this, let’s say, for Q4 and the next year?

Kamlesh Shah — Group Chief Financial Officer

So earlier also — in the previous quarter also we think — earlier we are doing our pricing review on a yearly basis, but considering all the uncertainties and the development on the global economies, we are continually reviewing our pricing and that is what is making us able to sustain this gross margin.

Anish — Girik Capital — Analyst

Okay. Can you say this 48% is pretty much sustainable for, say, Q4 and FY ’24 given your strategy around pricing?

Kamlesh Shah — Group Chief Financial Officer

Yeah, it is. Generally, it is sustainable for us. But it may undergo change due to the product mix on a quarter-to-quarter basis, but on an annual basis, yes, it is sustainable for us.

Anish — Girik Capital — Analyst

Okay. And my second question, like we are expecting close to 30% growth in FY’ 24 on a consol. So what kind of visibility are you getting from customers in terms of being able to grow at similar rates even beyond ’24, let’s say, in FY ’25? So how do you expect the growth to do kind of in FY ’25 given the capex cycle that has to come in?

Kamlesh Shah — Group Chief Financial Officer

So far the FY ’24 numbers are there, I think we have put our study upon that. We have also studied the market for this, considering that high inflation in the Western countries and the availability of the supply chain. These both are challenging over there. So under such circumstances, we are finding ourselves more comfortable and confident to enter into the market — OEM market, which we are looking for in Europe, and also further expanding our footprint in Mexico and other part of Southern America and Canada. We are — based on that we are thinking that this INR2,000 crore number is quite achievable for us.

Anish — Girik Capital — Analyst

Sir, my question is for FY ’25, so like you have some kind of an understanding or ballpark that — how are you looking at growth beyond FY ’24.

Kamlesh Shah — Group Chief Financial Officer

After ’24, yeah, it may be — presently it’s too premature to spell out the numbers. But yeah, what the numbers we are looking for, because after achieving INR2,000 crore, the same 25%, 30% growth will not be there. There may be a consolidation process will happen. So my growth during that time will be between 15% to 20% one time. But yeah, it is a ballpark figure, but maybe after sometimes we may be able to foresee how we are going to do this also.

Anish — Girik Capital — Analyst

Okay, sir. I’ll come back in the queue for more questions.

Kamlesh Shah — Group Chief Financial Officer

Pardon?

Anish — Girik Capital — Analyst

I’ll come back in the queue for more questions.

Kamlesh Shah — Group Chief Financial Officer

Yeah. Maybe Q1 of the next year would be more comfortable for us to spell out the number.

Anish — Girik Capital — Analyst

Okay, sir. Thank you so much.

Operator

Thank you. We have the next question from the line of Naysar Parikh from Native Capital. Please go ahead.

Naysar Parikh — Native Capital — Analyst

Yeah, hi. Good morning, and thanks for taking the question. What — I wanted to understand on the capex side. So once we reach INR2,000 crores in FY ’24, what could be our utilization at that level? And what is our capex plans for the next two to three years?

Kamlesh Shah — Group Chief Financial Officer

So, average, we are looking for INR100 crore investment after we reach to INR2,000 crore, because post that we have to have that the future visibility will be more clear to us. And our target for the global footprint and global market share, which will require that additional capex for that.

Naysar Parikh — Native Capital — Analyst

Right. But at INR2,000 crore, what could be our utilization?

Kamlesh Shah — Group Chief Financial Officer

At INR2,000 crore, we are just going to have our utilization to nearly 75% to — between 75% to 80%.

Naysar Parikh — Native Capital — Analyst

Understood, got it. And last time you had mentioned about EV and the fact that you are exploring that. So any progress on that, if you could talk about that bit?

Kamlesh Shah — Group Chief Financial Officer

I think there is no such progress in this quarter. But maybe I think we may talk about that in the next year sometime.

Naysar Parikh — Native Capital — Analyst

Understood, got it. And on the defense and marine, Navy side, obviously, that is — that has been a stronghold for us. So, any expectations of orders or what kind of orders should we — are we expecting or what kind of tenders are we expecting in, say, FY ’24?

Kamlesh Shah — Group Chief Financial Officer

Mr. Nanda will answer for this.

M. M. Nanda — Head, Gear Division

See, there are two areas we are focusing. One is the Navy, where we have the marine area, where we are focusing. We expect almost — there are a couple of projects are all lined up. I know — what is going to materialize, out of that we can expect maybe around INR100 crores next year. And some of the products which we are really trying to develop as a prototype for one of our party who is really sourcing it from Europe, as a matter of fact, there also we expect around — maybe around INR25 crores to INR30 crores business to come in from there. In addition to that, we also have a separate cell, we have really created for land [Phonetic] system, basically, where we are exploring the transmission items, basically, where we can really develop and all. So that process is on, but it’s a bit premature, as a matter of fact, to talk anything on these numbers for that, but as we really come final on that, then we’ll certainly share with you all those details there.

Naysar Parikh — Native Capital — Analyst

Got it. Thank you, sir. Just one last question if I can squeeze in. You were talking — is there — for our export market, besides us growing organic, are we looking at any partnerships or acquisitions? We’ve spoken about that once, but is there any update? And are we looking at something in the near term?

Kamlesh Shah — Group Chief Financial Officer

It’s too premature. And let time to come to sufficiently — let’s consume our capacity available with us. And the way in which the Europe is — European companies are facing a challenge for sustainability, that may create an opportunity for us, for the small companies, which are there in the good market base and the customers, which will help us to explore further.

Naysar Parikh — Native Capital — Analyst

Okay, sir. Thank you so much. I’ll come back in the queue.

Kamlesh Shah — Group Chief Financial Officer

Any acquisition if any in future will not be from the cash and from the borrowings, but it will be strategically within equity swap or other alternate opportunities for us also.

Naysar Parikh — Native Capital — Analyst

Got it. Very helpful. Thank you.

Operator

Thank you. The next question is from the line of Sanjaya Satapathy from Ampersand Capital. Please go ahead.

Sanjaya Satapathy — Ampersand Capital Limited — Analyst

Yeah. Sir, in your opening remarks, you talked about gas price and macro concerns. In fact, most of those — let’s say, gas price, for instance, has fallen quite a lot. So you were far more confident when the prices were much higher than today. I don’t know what really changed, if you can just tell us?

Kamlesh Shah — Group Chief Financial Officer

No, this is the thing which is presently, yeah, we think in India it is there. But at the overseas level, these are still quite challenging for them. Recently, in the Europe also that the gas prices or energy prices has gone up. So we have not found any clarity from that government sources about that, how it will get rationalized over there.

Sanjaya Satapathy — Ampersand Capital Limited — Analyst

And sir, you talked about your March quarter being much bigger than any other quarter because of seasonality, and we have seen that typically it is about something like 10%, 15% higher than the previous quarter, like quarter three, quarter two. Is that seasonality likely to continue this year as well?

Kamlesh Shah — Group Chief Financial Officer

Generally, it is so, because generally Q2 and Q4 for engineering sector is quite better, even for others also. And Q1 and Q3 is generally on the lower side. And that will — I think is a general tendency. If anything happens, something better, that is in an exceptional scenario.

Sanjaya Satapathy — Ampersand Capital Limited — Analyst

No. My question is that, do you have the order book or the order pipeline to really give us a feel about how Q4 will be like compared to the kind of seasonality that you typically see in the past?

Kamlesh Shah — Group Chief Financial Officer

Yeah. We are — that’s what we say, the Q4 will be better than Q3 in terms of the numbers, and we are quite confident to achieve that numbers what we have spelled out. If anything better against that, that will be actualized as and when it has happened. But at least quite sure, we are going to sustain INR1,200 crore at the stand-alone and INR1,500 crore on a consol level.

Sanjaya Satapathy — Ampersand Capital Limited — Analyst

Understood. And sir, last question that I just wanted to understand that in the past your material handling business used to drag you down a bit and that problem has been kind of resolved. So now that it is over, like how are you really looking at bit of a medium-term, your margin outlook? Will it be much better than what you used to see in the past?

And the other thing is that, now that your balance sheet is much more — I mean, there is no debt anymore. So, will you — are you in a position or are you looking for a much more aggressive growth target?

Kamlesh Shah — Group Chief Financial Officer

No, we will still continue the same because still that uncertainty at that PSU level, where I think generally we are catering the business in power sector and otherwise, that is still sustaining. So we don’t want to go aggressive, let it come at the mature level, during that time we’ll do. We have the debt-free and we have that capability, but let’s focus presently on the supply of material and after-sales services. So we are evaluating the opportunities and considering the strategy what we have lined up, we will like to go with that strategy only.

Sanjaya Satapathy — Ampersand Capital Limited — Analyst

Understood. Thanks a lot, sir.

Operator

Thank you. The next question is from the line of Harshil Shethia from AUM Fund Advisors LLP. Please go ahead.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Sir, in the next year when you’re guiding for INR2,000 crores of top line, what kind of EBITDA margins will we be able to do? Will we do like the 23%, 24% which we are doing currently, or will it go to our previous band of 20%, 21%?

Kamlesh Shah — Group Chief Financial Officer

We’ll go with our consol level, our EBITDA margin we are sustaining at 22%, because when we are going for INR2,000 crore, and we also have to strengthen our brand. So there is a cost related to brand building also. And then we are expecting to supply to OEMs. So we will not get the same margin from the OEM compared to what we are getting from the replacement market. So we are sustaining the 22% margin only. If something better is coming up, that will definitely be there also.

Harshil Shethia — AUM Fund Advisors LLP — Analyst

Okay. Thank you.

Operator

Thank you. We have the next question from the line of Dipen Shah from DS Investments. Please go ahead.

Dipen Shah — DS Investments — Analyst

Yeah. Thank you so much for the opportunity. Several questions have been answered. Just a couple of questions. If you could just throw some more light on the marine opportunity which you spoke about in the Gears business, like anything more specific which you can tell us about, what are you looking at and how big the opportunity will be?

And the second question is in the MHE business, we have seen profitability coming back. And so, if you can just give us some more color on that business, whether profitability can further improve from the current levels, or whether we should expect similar kind of profitability in the next year? Thank you so much.

M. M. Nanda — Head, Gear Division

See, regarding marine, as I mentioned earlier, there are a couple of jobs are there, which has already — some projects have already been announced by Indian Navy and Coast Guard. So that — few of them will get materialized year-by-year basis. So we expect, as I mentioned, a job which is getting materialized, based on that the number which I shared with you, basically. So there are many other jobs also which will be also there in the pipeline, which will really happen maybe year after that and following year and all. So that is the way it is. There are good opportunities what we can see in marine, Indian Navy, as well as Coast Guard, which is really there with us. And as I mentioned, apart from that, there are some overseas supplies also will continue to really do, which we are developing for them those models and all that.

Dipen Shah — DS Investments — Analyst

And sir, just to interrupt, anything further on the other defense arms, like we were — a couple of quarters back there was some mention about us entering into defense in a big way. So apart from Navy, the other arms, are we looking at further orders?

M. M. Nanda — Head, Gear Division

Yeah, that’s exactly which I’ve mentioned. We have created a cell for land system, basically, which we are really examining what are the opportunities which we can really convert for us, taking our core strength from utilizing that and all. We are already working on that, but it’s a bit premature as of now to talk about it, but we are already working in that direction very seriously on that.

Dipen Shah — DS Investments — Analyst

Okay. And on the MHE business, the margin picture, sir?

Kamlesh Shah — Group Chief Financial Officer

Yeah. So far the MHE is concerned, definitely that we are expecting there is a little bit improvement in the margin going forward. However, the growth will be — the average, maybe 20% to 25% growth only we can expect because we don’t want to go aggressive and go in the EPC. Though the business opportunities are available, considering the uncertainty of the execution from the customer side, or otherwise, we don’t want to again go in the same loop. So that’s why we are a little bit cautious.

Dipen Shah — DS Investments — Analyst

Okay. Thank you so much, and all the very best, sir.

Kamlesh Shah — Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Ankit Babel from Subhkam Ventures. Please go ahead.

Ankit Babel — Subhkam Ventures — Analyst

Yeah. Good morning, sir. Sir, a couple of questions. You mentioned that you people are in talks with a lot of OEMs in the overseas countries but discussions are at nascent stages. So just wanted to know, now assuming if you succeed in getting tied up with some — any such OEM player, just wanted to understand how big can that opportunity be per customer.

Kamlesh Shah — Group Chief Financial Officer

Yeah, that opportunity is — OEM — because Europe are the world leader for supply of the engineering products and machines and equipment. So, as and when it will get materialized, definitely that will be a breakthrough for us and will create an opportunity to pitch in, in the OEM markets in Europe itself. So we think — but presently it may — even if anything is getting materialized, presently it may be difficult for us to spell out the numbers how big it will be. But whenever it will come, we are expecting that it will be — and it will be also on a ramp-up basis, because we cannot supply from the day one what they are expecting the numbers to go up to the top — at their peak level also. But that opportunity will — definitely will be at least minimum of INR50 crore to INR100 crore.

Ankit Babel — Subhkam Ventures — Analyst

Okay. And what could be the potential number of such customers which you can target, say, suppose in the European Continent, say, in the coming two, three years?

Kamlesh Shah — Group Chief Financial Officer

So, numbers, naturally, I also really to get the numbers — the OEM numbers, but I don’t know how — at least I can be right on the numbers, but what numbers presently, the lineup — because the inquiries are many with whom we are working for, which may be 10, 15. But how much it is getting converted, because my conversion ratio from the replacement market in overseas or in India, we can spell out because with our experience and otherwise. Here, our experiences are very limited, so numbers will be difficult how much inquiry will be converted into orders. But presently, our discussions are going to happen with 10 — nine to 11 customers — OEM customers are there with whom our team are discussing about the business opportunities. Of this, nearly three and four are already visited our factory over here — our facility in India.

Ankit Babel — Subhkam Ventures — Analyst

Okay. So just wanted to confirm, in your FY ’24 guidance of INR2,000 crores revenue, have you factored in some prospective revenue from such new OEM customers?

Kamlesh Shah — Group Chief Financial Officer

Yeah. We have.

Ankit Babel — Subhkam Ventures — Analyst

Is it incrementally everything which — whatever growth is coming is through these OEMs only in your factories?

Kamlesh Shah — Group Chief Financial Officer

We will have a better business from the OEMs, and that will create an opportunity for us for the replacement in the global market.

Ankit Babel — Subhkam Ventures — Analyst

Okay. And you also mentioned that the margins in the OEM business are relatively lower. So could you just give a ballpark idea that, that would be in what range, like 15%, 18%? How much less compared to your existing margins?

Kamlesh Shah — Group Chief Financial Officer

I think it is — Mr. Babel, it is too challenging for me to spell out the numbers now. But definitely it will not be the 22% what we are doing because OEM is much smarter than me also. And the OEM knows the cost better than what I know about my cost. But, yeah, definitely it will be — because we also have our own threshold. Below that we don’t want to go aggressive so far as the OEM market is concerned.

Ankit Babel — Subhkam Ventures — Analyst

Okay. Okay. That’s it, sir. Thank you so much.

Operator

Thank you. The next question is from the line of Suhrid Deorah from Paladin Capital. Please go ahead.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

Yeah, hi. Sir, I just wanted to actually follow on with the OEM question. Currently, your sales in both divisions, you’re selling directly to the customer only, right?

Kamlesh Shah — Group Chief Financial Officer

In overseas?

Suhrid Deorah — Paladin Capital Management LLP — Analyst

No, no, in India, your sales are all direct to the customer, right?

Kamlesh Shah — Group Chief Financial Officer

No. We also have our sales through OEM in India. In India, we are well placed so far as the supply to OEMs are concerned.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

And what percentage of sales is to OEMs today?

Kamlesh Shah — Group Chief Financial Officer

Pardon?

Suhrid Deorah — Paladin Capital Management LLP — Analyst

What percentage of your sales are to OEMs?

Operator

Sorry to interrupt. Sir, we are not able to hear you clearly.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

Better now?

Operator

Yes, sir, please continue.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

What percentage of your sales is to OEMs today versus direct?

Kamlesh Shah — Group Chief Financial Officer

In India?

Suhrid Deorah — Paladin Capital Management LLP — Analyst

Yes.

Kamlesh Shah — Group Chief Financial Officer

Yeah. In India, I think presently we are — just to OEMs we are selling, particularly in the material handling — our gear business through the material handling business side. So — and including the steel and cement, mainly on the core sectors, it is nearly 17% to 24%.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

So about 20%-odd of your total sales is through OEMs today and the rest is directly?

Kamlesh Shah — Group Chief Financial Officer

Yeah, direct.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

So in the export market — as you increase your presence in the export market, it will be through OEM customers it will not be direct sales. That’s broadly your strategy, right, to partner with companies with whom you can increase your market share?

Kamlesh Shah — Group Chief Financial Officer

Correct.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

And these companies are currently sourcing their equipment, their gear requirements from your competitors who might be European companies?

Kamlesh Shah — Group Chief Financial Officer

Yeah, mainly, correct. Absolutely.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

So you’re trying to use your cost advantage to basically increase your wallet share with those customers?

Kamlesh Shah — Group Chief Financial Officer

Not only the — it is not a price war through which we are going. We are going with our quality — sustainable quality and uninterrupted supply. That is the main focus for us, not the prices. So pricing is [Speech Overlap]

Suhrid Deorah — Paladin Capital Management LLP — Analyst

So your competition is European customers or is it Chinese customers?

Kamlesh Shah — Group Chief Financial Officer

Yeah. European customers only — the European suppliers, our [Speech Overlap]

Suhrid Deorah — Paladin Capital Management LLP — Analyst

Yeah, sorry, your competition is European suppliers or Chinese?

Kamlesh Shah — Group Chief Financial Officer

Europe. Chinese cannot sustain so far as these particular products are concerned, gear products. So there is no competition from China as of today.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

So if you look, three, four years out, today your percentage of — from your total sales is about 20% is through OEMs. So three, four years out, what percentage will — could it become?

Kamlesh Shah — Group Chief Financial Officer

Presently the 20%, what we are talking about is in India. In overseas, it will be accessed [Phonetic]. So once it will start, once — one way it will create — will open the doors for the others also for us. So I think it will be — maybe next year will be a better position for me to spell out that how the opportunity will be there in terms of the numbers, in terms of the sectors also of the OEMs.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

Okay, understand. Just one clarification today, export is what percentage of sales?

Kamlesh Shah — Group Chief Financial Officer

Presently, my export as on today is 10% from India.

Suhrid Deorah — Paladin Capital Management LLP — Analyst

Okay, fine. Okay, thank you.

Operator

Thank you. The next question is from the line of Gunjan Kabra from Niveshaay. Please go ahead.

Gunjan Kabra — Niveshaay Investment Advisory — Analyst

Thank you, sir. Thank you for the opportunity. So a couple of my questions have already been answered. One question which I had is that, there are lot of announcements in marine also and in the railways also. So wanted to understand that in which phase of the announcement — from announcement to execution, in which phase do we receive orders, because normally it takes around two to three years to execute a project. In what phase do we come in and we receive orders?

M. M. Nanda — Head, Gear Division

See, you’re right, it takes two to three years, even more than that also sometimes, it takes that. But whatever — we are trying to spell it out. We just mentioned little while ago, the projects which have already been announced quite earlier may not have really been noticed by you people, but they are already there, those projects are there which are getting materialized year-on-year actually, we are talking about on that. So it could take, after the announcement, sometimes three to five years also because, first, the order will be placed on the shipyard by the Indian Navy or the Coast Guard will place the order on the shipyards, and the shipyard will be inviting tenders, and then we’ll be getting the opportunity to supply them. So it takes — even after that also, it takes one, one and a half year to really start supplying and all that.

Gunjan Kabra — Niveshaay Investment Advisory — Analyst

Okay. Okay. And likewise in railways also?

Kamlesh Shah — Group Chief Financial Officer

Pardon?

Gunjan Kabra — Niveshaay Investment Advisory — Analyst

Likewise in railways also?

M. M. Nanda — Head, Gear Division

Railways, it is slightly earlier. In fact, Navy takes a little longer time, as a matter of fact on that.

Kamlesh Shah — Group Chief Financial Officer

Because of the sensitive area, considering the securities and other parameters, it takes time. And it is coming through not directly from the Indian Navy, but their counterpart, which is called the Mazagon Dockyard, Garden Reach, Cochin Shipyard like that.

Gunjan Kabra — Niveshaay Investment Advisory — Analyst

Okay. Thank you so much and good luck.

Operator

Thank you. We have the next question from the line of Shivam [Phonetic] from NovacTech [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hello, am I audible?

Kamlesh Shah — Group Chief Financial Officer

Yes, absolutely.

Unidentified Participant — — Analyst

Yeah. Thanks for the opportunity, and congrats for the results. I just want to ask that what all other regions are we targeting except Europe in the export opportunity?

Kamlesh Shah — Group Chief Financial Officer

No, we are targeting the global — Europe, we are more focused on the OEM market because Europe is the leader in the Western countries to supply the gearboxes. But our presence is global and we are now focused more on U.S., Mexico, Canada and South America also, over and above Europe itself.

Unidentified Participant — — Analyst

Okay. And…

Kamlesh Shah — Group Chief Financial Officer

And also we are exploring an opportunity in Australia aggressively. There their mining activities and others are there which we are creating the opportunity for us to supply the gearboxes over there.

Unidentified Participant — — Analyst

So in the other regions also, it will be through the OEM route only?

Kamlesh Shah — Group Chief Financial Officer

Not necessarily. It may be through distributor route or it may be through OEM. OEMs are generally based out of Europe only, mainly. And so far the other local players are there in the other regions, like in Australia or maybe in Brazil or other countries of South America.

Unidentified Participant — — Analyst

And sir, are we setting up our own distribution branches also in Europe, like to cater the export or it will be directly through India, like no teams would be there of yours?

Kamlesh Shah — Group Chief Financial Officer

We already have that — our branch offices through — under a separate subsidiary in Europe itself.

Unidentified Participant — — Analyst

Okay. In which country do you have the branch offices?

Kamlesh Shah — Group Chief Financial Officer

We have the assembly center in Sweden and a small center in Netherlands, but we have our branch office in France, Germany, Finland, Denmark.

Unidentified Participant — — Analyst

[Speech Overlap] the branch officer are set? Okay.

Kamlesh Shah — Group Chief Financial Officer

Yeah. It is already set. And in fact, we are strengthening the resources by putting more business development and marketing fellow on the — in these branches.

Unidentified Participant — — Analyst

Okay. And sir, on the domestic side, I just joined the call later, can you elaborate on which sectors are you seeing the good demand coming from?

Kamlesh Shah — Group Chief Financial Officer

See, mainly from the core sectors, which are giving — which are dominating in terms of the demand, which is steel, cement, power, material handling division and sugar. These are the five sectors which are dominating, over and above the others are there.

Unidentified Participant — — Analyst

Okay. Can you give me a sectoral percentage of revenue, if possible?

Kamlesh Shah — Group Chief Financial Officer

Presently, I don’t have the sectoral level revenue. But I think we already have given the order intake on sector-wise, so that itself we can consider as the revenue because that absolutely is going to be converted into revenue only. It is there in our presentation.

Unidentified Participant — — Analyst

Okay. And sir, what will be the margins, like, we are expecting in the export business that we are now developing?

Kamlesh Shah — Group Chief Financial Officer

Yeah. Naturally, the margin will be better in the exports, so which is already there. If you see presentation for this Q3 and Q4, what we are — having the guidance of 24% margin. So that has improved the margin from export, which is having the better margin. That is how we can spell out. But giving the exact numbers, maybe difficult at this point of time.

Unidentified Participant — — Analyst

And sir, any elaboration on the OEM margins that will come and the distribution model margins that will come, if you can just give a guidance?

Kamlesh Shah — Group Chief Financial Officer

Yeah. Distribution generally comes through our replacement market, where I think we have the better margin. And OEMs are concerned, yes, because in OEM I’m getting the volume. So when there is a — volume game is there, I think margin will also be — has to come in that line only. But if I’m spreading my fixed cost over the higher volume, and if I’m spreading my fixed costs with a lower volume, naturally that benefit will come to us only.

Unidentified Participant — — Analyst

Can you give a ballpark number for both?

Kamlesh Shah — Group Chief Financial Officer

I don’t know how to spell out. Let me have one — a big chunk of the OEM supplies, then only it will be better, but I think it will be better than 15%-plus margin.

Unidentified Participant — — Analyst

Okay. And the replacement ones will be around 24%, 25% or above that also?

Kamlesh Shah — Group Chief Financial Officer

No, replacement margin is generally between 20% to 22%, that is how it works out.

Unidentified Participant — — Analyst

Okay. Okay, okay. So, thank you so much, sir. Thank you.

Operator

Thank you. We have the next question from the line of Chinmay Kabra from Emkay Global Financial Services. Please go ahead.

Chinmay Kabra — Emkay Global Financial Services — Analyst

Yeah. Hi, sir. I just wanted to know, I missed out. Regarding your branch offices which have been shut up in Europe, Sweden, just wanted to know whether the OEMs will be manufactured in India and then sent out or how is it going to be functioning, if you could just repeat it, please?

Kamlesh Shah — Group Chief Financial Officer

No. We have assembly center in Sweden and we have the small assembly center in Venlo also. So depend upon how that works out. But our idea is the parts will be supplied from India, which we call it as a kit, and it will get assembled in Sweden, and if required by the customer we can — if options are available, it will be preferable for us to supply directly from India only.

Chinmay Kabra — Emkay Global Financial Services — Analyst

Okay. Thank you, sir. That’s the only question.

Operator

Thank you. The next question is from the line of Manish Goel [Phonetic], an Individual Investor. Please go ahead.

Manish Goel — — Analyst

Yeah. Thank you so much. Couple of questions. Sir, if I probably try to get better perspective on the guidance for FY ’24 of INR2,000 crores. If I just look at your outstanding order book, it is at INR720 crores on a consolidated basis, it is still lower than the FY ’22 year-end order book of INR732 crores. And particularly in gears, it is almost down by 7%, 8%. So is it that we are probably looking at very strong order inflow in next few months, which will probably help us to reach that guidance of INR2,000 crores? And if you can just break up that INR2,000 crores between, say, stand-alone and subsidiaries, how it will look like?

Kamlesh Shah — Group Chief Financial Officer

Yeah. Earlier also I said, now, with ways of improvement in our overall production cycle, which has now reduced the production cycle for our standard product, as well as for our engineered product. So because of that you find that the numbers are not there. Generally, you are looking after in ’21 or ’22 numbers, like that. This is one.

So far the other things are concerned, on a stand-alone basis, we are looking for INR1,500 crore turnover for FY ’24, and on consol level, we are looking for INR2,000 crore, that’s how we spell out that.

Third thing in terms of — yeah, we have that orders in pipeline. So that definitely will be there. That plus or minus on a comparison basis will be there also. But so far as the numbers are concerned on actualization, that will be based on what the strength of our products and facilities are there.

Manish Goel — — Analyst

So you are saying INR1,500 crores in stand-alone versus INR1,200 crores. So on subsidiaries, you are expecting INR500 crores versus INR300 crores?

Kamlesh Shah — Group Chief Financial Officer

Yeah, correct.

Manish Goel — — Analyst

So if I probably look at subsidiary order book outstanding, in fact, sequentially, it looks like it has fallen from INR150 crores to INR66 crores. So what gives us that confidence, sir, that we should be able to have that INR500 crore revenue because right now, the order book seems to be quite low?

Kamlesh Shah — Group Chief Financial Officer

Generally, in Q3, order book position is low because of the holidays — Christmas holidays over there and in Europe, and the other part of the Western countries, they are taking the longer leave so far as the Christmas vacations are concerned. The same is also here in India also. In India also we are having — in Q3 we are having the two vacations. One is related to Diwali, which is generally in India it is there. And as well as in the December, Christmas holidays are also there, though, it may be a very limited holiday, but generic — in respective companies employees are consuming their leaves. So that is also giving an impact on the order inflow.

Manish Goel — — Analyst

And sir, would it be possible to give stand-alone order intake number for Q3 and nine months, because till previous quarter you were giving stand-alone numbers and this quarter you have given consol numbers. So can you please share the order intake numbers for stand-alone?

Kamlesh Shah — Group Chief Financial Officer

My order intake for Q3 at stand-alone level was INR200 crore and on consol level it is INR279 crores, in gear. And in MHE it is INR83 crores. So in stand-alone level, our Q3 numbers is INR283 crore for the domestic and on consol it is INR362 crore.

Manish Goel — — Analyst

Sorry, can you repeat the gear sector consol level?

Kamlesh Shah — Group Chief Financial Officer

Gear sector consol, Q3 order intake is INR279 crore. In MHE I said we don’t have the export, so we consider — it’s all domestic and consol, both same, it is INR83 crore. Both put together it’s INR362 crore for Q3, order intake.

Manish Goel — — Analyst

Okay. And sir, in your presentation, where you have given the order inflow breakup our MHE, looks to be some error over there because the total is coming up to 107%. So maybe if you can rectify that going forward and — it will be very helpful.

And sir — so, on margins, you believe that we should be able to improve or maybe maintain the margins because, again, we are seeing commodity prices increasing, and will we have ability to pass on that price increases — cost increases?

Kamlesh Shah — Group Chief Financial Officer

So far what we know you have drawn the attention for the error, let me just check. If it is so, I will correct that also. And so far the margins are concerned, yeah, we are going to maintain the margin what we have already spelt out as a guidance for that FY ’24.

Manish Goel — — Analyst

Thank you so much, sir.

Operator

Thank you. We have the next follow-up question from the line of Pratik Kothari from Unique Portfolio Managers. Please go ahead.

Pratik Kothari — Unique Asset Management LLP — Analyst

Sure. Sir, in recent one of the industry publications there was this mention of two new technologies which have come up. One is the magnetic gear replacing mechanical gears. And also you have motors, who by themselves now control speed and torque and hence you don’t require gears. I mean, I don’t understand too much technicality here, but if Mr. Nanda can speak about the relevance of it, the size of it, the technical aspect of it, please.

M. M. Nanda — Head, Gear Division

See, what you are talking about is the gearless technology we are talking about, but that is very far-fetched. Basically, in some of the applications it may be applicable. Some gearless like lifts are there, you will find it. There are — already using it. But all the applications which are really prevalent as of now, there is nothing to really — obsolescence to happen as far as the gear technology is concerned. It is — can’t be visualized — it can be removed — obsolescence will happen, basically. But the cost is very prohibitive as far as this gearless technology is concerned, basically, on that. And that too, also, where some applications where they can use this technology you are referring it to, but in the application what we are talking about, the steel, sugar, cement, power, we can’t even think about really going gearless.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay. And about magnetic gears, there was a mention about magnetic gears?

M. M. Nanda — Head, Gear Division

Yeah. See, it is coming from the same — on the same front, basically, trying to remove the gear technology. That is how it is really happening. So in the sense, the exact technology which is really there that is getting out of this thing and then going gearless on the other front.

Kamlesh Shah — Group Chief Financial Officer

So present, considering the cost versus the technology, it’s too high cost, it is very costly to replace with the existing technology. So at the appropriate time it will be there. So, our team is also watching about that and we — also our internal systems is also studying about these gear technologies also.

Pratik Kothari — Unique Asset Management LLP — Analyst

Okay. Fair and thank you, sir.

Operator

Thank you. The next follow-up question is from the line of Naysar Parikh from Native Capital. Please go ahead.

Naysar Parikh — Native Capital — Analyst

Yeah, thank you. Just one clarification. When we say — for us overseas versus domestic revenues, right, where is this overseas reported? Is all subsidiary revenue, overseas revenue, just if you can give some clarification there?

Kamlesh Shah — Group Chief Financial Officer

These all — overseas are 100% subsidiary of Elecon Engineering Company Limited. And they are reported under consolidated.

Naysar Parikh — Native Capital — Analyst

And the stand-alone does not have any overseas revenues or exports?

Kamlesh Shah — Group Chief Financial Officer

Stand-alone will have exports. So that export is a part of my overseas business only.

Naysar Parikh — Native Capital — Analyst

Okay. So overseas is basically the 10% exports in your stand-alone business, plus all the subsidiaries, right?

Kamlesh Shah — Group Chief Financial Officer

Correct. Absolutely.

Naysar Parikh — Native Capital — Analyst

Yeah. Okay, fine. Thank you so much.

Operator

Thank you. Ladies and gentlemen, as that was the last question for today, I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Kamlesh Shah — Group Chief Financial Officer

Yeah. Thank you very much for all the participants for showing interest in our Company. And if any questions are there, please feel free to connect to Mr. Binay, who is our IR from E&Y, or Mr. Narasimhan, who is the Chief Financial Officer of Elecon Engineering Company Limited or Ms. Bharti Isarani, who is the Company Secretary of the Company.

Thank you very much, and have a good day to all the participants.

Operator

[Operator Closing Remarks]