Elgi Equipments Limited (NSE: ELGIEQUIP) Q3 2025 Earnings Call dated Feb. 11, 2025
Corporate Participants:
Jairam Varadaraj — Managing Director
Unidentified Speaker
Analysts:
Unidentified Participant
Presentation:
Operator
Company. I request Mr to take us through the presentation, giving an overview of the financial performance and then we shall begin the Q&A session. Over to you, sir. Thank you.
Jairam Varadaraj — Managing Director
Thank you. Thank you,. Good morning, everyone. A pleasure to be with you. I will spend the first few moments reconciling our performance with relationship with — relative to the past year and then give you a general overview of the business and then open it up for questions. So let me go straight into the EBITDA reconciliation for the 3rd-quarter of the current year. So it looks like it’s a disappointing quarter, but I would like to explain this to you.
There’s been a large increase in fixed costs to the extent of 15% and that’s primarily one-time expenses, there was an increase in transport cost because of the Red Sea problems and all that, but they are beginning to taper off. So I don’t expect that to be a continuing issue. We had some issues with warranty of provisioning, it is also one-time. So most of the increases that we’re talking about are one-time. So that’s one part of it. So I’m quite confident that going-forward, we will be reasonably good.
As far as the sales growth is concerned, we lost a bit of revenue because the GST portal went down in the last four, five days of December. So we lost a bit of revenue and the cut-off. We couldn’t — we had the invoices ready, but we couldn’t ship and as a consequence, the revenue fell over to January. In addition to that, we had some sluggish performance in portables across the world. In India as well as the portable business in Europe, Australia and the US, particularly in the US where we had a steep fall in the portable business in the 3rd-quarter compared to the 3rd-quarter of last year.
So we are — the growth in our fundamental businesses have been quite positive. So I — this is not any concern for me at this point in time. Moving forward, just as a sales highlight, we have grown in every region, I would say even North-America because North-America had the portable losses because of — and the portable business, it’s an infrastructure issue. And overall, the markets are down by almost 40% 45%. So the industrial business in North-America has done well.
It’s grown and our distribution business, which had issues because of our ERP, it’s — we are well past that. It’s behind us and it’s beginning to grow. So all the regions have grown except Australia, where the markets are quite sluggish at the moment. Moving on, so this is a snapshot. Revenue has grown by 3%, whereas our PBT is lower for the reasons that I explained to you. Compressors are continue to remain the largest. The ratio between automotive and compressors remains almost the same. Similarly, India versus the rest of the world, the split in our compressor business remains almost the same.
Yeah. So if you look at the consolidated financials, we — the PAT is better than last year, I mean, sorry, slightly lower than last year. Year. But year-to-date, we are still better than last year and we hope and we are very confident that we will have a very strong 4th-quarter. Moving on, our cash position has been extremely strong this quarter and it will continue to grow. We have got — we have put some very strong controls over our working capital, primarily our inventory, which went a little out of control post the COVID, post the Red Sea issues, there was a lot of chaos.
We couldn’t get the right ratios of inventory planning. All that is now beginning to get reined in. So we expect in the 3rd-quarter — I mean, the 4th-quarter, the cash position would be even better than this. I would like to talk about two developments in the company — in the company, which are pretty significant and then we’ll open up for questions. So one is a revolutionary new technology that we have launched. We hope the products will start coming out to the market within the month-in India and within the next six months globally. So this is a revolutionary technology and I will try my best to explain it in as simple terms as possible.
So if you look at a typical compressed air system, on the left-hand side, you see the compressor and the pressure vessel that acts as a buffer. And then on the right-hand side, you see various user equipments that have different levels of demand. Now just visualize, it’s like an air-conditioner when more people are in the room, the air-conditioner comes on and when the temperature starts dropping, that air-conditioner cuts off. So it’s very similar to compressed air, the various equipments will come on and off in terms of their demand for air compressor. So this is how it typically works.
So what happens when you have a fixed speed compressor, your demand will fluctuate like this. So the machine will cut in, cut out, cut in and cut out. So this causes a lot of instability that has an impact on the energy efficiency of the compressor as well as the quality of the machine. So today, we supply a compressor with a variable frequency drive, which is like an inverter, the inverter ACs, but that also is not without its own instability. It does have instability because it speeds up and speeds down. But more importantly, it’s 30% more expensive and there are reliability issues on the electricals.
So what have we done? Our technology is pretty simple, but very deep at a science level, we recirculate the air and recover. So what happens is the compressor works constantly at the same speed, but the demand, the flow to the customer or the end application varies depending upon what the actual demand is. So this is the real innovative part of it. And this is accomplished by having a system which has two valves and our own controller that controls these valves where we recover excess air, which is not required and recirculate it into the system, thereby we save a lot of energy and the machine is stable.
So the net result of that, right? So if you look at a fixed speed compressor, a compressor with VFT and what we call as our stabilizer, if you see it, there is absolutely flat operation. The reliability and the energy efficiency goes up pretty significantly. So this is an actual field condition where we had installed the machine. These were the kinds of hourly fluctuations that were happening before we installed our system. And this is the flat thing that happened after we installed with this particular customer.
So this is the testimonial from the customer, which is pretty dramatic. So the customer saving close to-4 lakhs and This compressor itself is going — it will cost maybe about 7.5 lakhs. So in two years with just this device, the customer will get the money back on the entire compressor in two years’ time. And so this is quite a powerful technology that we have launched. The second one is we’ve been talking about the lower-tier low-cost compressors coming from China and our plan to develop it. We have developed a range of machines. And in the next financial year, we will be launching them. They are far more reliable than the Chinese machines and extremely competitive from a cost point-of-view and far better in performance in terms of efficiency. So these two — these two are changes and shifts in-product and technology is going to be a pretty significant game-changer for us. So I wanted to share these two before we open up for questions. So thank you again for your patience. Thank you very much for being present. Now we can talk about any questions that you may have.
Questions and Answers:
Operator
Thank you. Sure. Thank you,, sir. Participants, please use the raise And option or you may drop your question in the Q&A box. We’ll wait for the queue to assemble for a couple of minutes and then we will probably take the first question. Thank you so first question we have is from the line of Mr Harshit Patel. Harshad, you may unmute yourself and go-ahead with your question.
Unidentified Participant
Hi, thank you very much for the opportunity, sir. Sir, my first question is on our US and Europe markets, I think despite the macroeconomic challenges in Europe, we have still posted a very decent top-line growth over there. So what is enabling this? And second, are we on-track to breakeven in both these geographies in FY ’26? I think Europe we will breakeven for the first time in this new expansion plan and we were supposed to again turn profitable in the North American market.
So if you could update us on this, please?
Jairam Varadaraj
Sure. So Ashit, thank you so much for the question. Yes, the economy in Europe has been challenging for a long-time, but things are slowly — I think it hit the bottom and it’s slowly coming back. That’s one reason why we are growing. The second reason is we have created a lot more focus in our market — in our go-to-market. There is very deliberate actions being taken to identify very strong distributors. We have brought potential channel partners to our plant, showed them what we are capable of doing. So there has been overall deliberate steps that we have been — we are doing and we will continue to do to grow the business, grow our share in the business. So that’s one part of what that’s the reason why we are growing.
Yes, we are on-track to breakeven this year. So I’m not very concerned about it. It was a concern last year, but this year, I’m not concerned about it. As far as North-America is concerned, like I explained to you, all our businesses are doing well in terms of growth and profitability, except our portable business.
Now the portable business is a very infrastructure-related. It’s extremely cyclical. If you look at it two years ago, last year and the year before, we had some record revenues in our portable business. And as a consequence, both Rotair, which is a supplier for our portable business in the US and the US portable business did exceedingly well. Now the market is down about, 30% 40%. So correspondingly, our revenues have come down too.
So that barring that, I think all our businesses are doing well.
Unidentified Participant
So sir, this portables business in the North-America, what percentage of our North American revenues it would be?
Jairam Varadaraj
Our portable business would be in a peak time was close to let me guess about trying to think close to about 20%, 15% to 20% of our revenue. And today it is probably less than 10%.
Unidentified Participant
Understood. But then combining all three businesses, portables, distribution as well as industrials in US, we will still make some profits this year. Would that be right understanding?
Jairam Varadaraj
No, we will probably just directly work.
Unidentified Participant
Okay, understood. Sure. Sir, my second question is, could you highlight how our market-share has progressed in various categories in the domestic market in the last three to four years? So how in screw both oil-free as well as oil lubricated and centrifugal. So which are the categories where we have gained over the competition where we are stable? And if at all, we have seeded some ground in some of the categories. So if you could highlight on this aspect, that will be very helpful. Thank you.
Jairam Varadaraj
So I don’t want to give very specific numbers, Hakshit, but I can give you directionally something. As far asset is concerned, it is a very commoditized business. So we have not increased any share, nor have we lost anything. So we’re just kind of holding our share in that business, but there is a huge number of unorganized players when we are really evaluating what our strategy should be to be able to get and be a significant player there. We are not ready yet.
As far as the screw compressor market is concerned, if you take the bottom tier, which is really the very low-cost imports from Chinese. If you exclude that, our market-share has grown, yeah, this year. Yeah. If you include that in the total market, our market-share actually has dropped, right? Now with the new product that we are bringing in, we will be able to enter the bottom of the pyramid and we will be able to grow our share of the overall business. Oil-free, we continue to hold our share in India. Centrifugal, we are hardly a significant player.
Unidentified Participant
I believe we had a tie-up with the Korean company and our machines were in the field testing. So any progress on that by when we can expect launching our own machines in this deal.
Jairam Varadaraj
So strategically, our launching our own machine is not a priority. We have other products like vacuum that we are focusing on. Once we are able to — once we get to the — finish up the other priorities, we’ll get there. In the meantime, we will continue to partner with Hanba.
Unidentified Participant
Thank you. Understood. Perfect. Thank you very much, sir, for answering all my questions and I’ll get back-in the queue.
Operator
Thank you, Harshit. Sir, next question. Next question is from the line of Mr Chetanya. Chetanya, you may unmute yourself and go-ahead with your question.
Unidentified Participant
Hello. Thank you. Thank you, sir. Good morning. My question is on the — am I audible?
Operator
Yeah. You are.
Unidentified Participant
Yeah. Okay. So my question is on the after-sales market-share. I think 15% if my numbers are correct, 15% to 20% of our business is from the after-sales business that we provide. So any indication on when are we expecting to increase that if at all? And I think margin also in that front, it will be helpful. Thank you.
Jairam Varadaraj
So our after-share — aftermarket share in India is quite healthy. There is opportunity for maybe a couple of more percentage growth. So that we continue to do. Our aftermarket percentage outside of India is as a percentage is very low and that’s normal because aftermarket as a percentage of revenue grows only when your installed-base becomes a certain size. And we are beginning to build that size and we are growing the aftermarket every year-on year-on-year, but you will not see that 30%, 35% till such time the installed-base has become quite large.
Unidentified Participant
Okay. So any indication on when that can happen for like three to five years down
Jairam Varadaraj
Sir, you can’t predict it because you have to look at growth of market-share of the products, right?
Unidentified Participant
Okay.
Jairam Varadaraj
And it will continue to grow along with that.
Unidentified Participant
Yeah. Okay
Unidentified Participant
, got it. Also, in the recent — the update I read that you guys are targeting to be one of the top three players in the world by the next 10 years. So what are our strategy in that terms that any particular product focus as we all know that on the R&D front, LG is very, very-high and very focused. But on that front also, if any roadmap sort of what are the thoughts in terms of the increasing that market-share?.
Jairam Varadaraj
So our strategy is on products and markets. We are focusing on the lubricated pistons, lubricated screw and oil-free screw a strategic focus for growing the business and we are focusing on key geographies, which is Australia, Indonesia, Thailand, India, Europe and the US or North-America. So these are the markets where we are strategically focusing. What we mean by that is disproportionately allocating our time and resources in these markets for these three-product categories. So that’s really our strategy. So if you look at our investment in technology, what I just explained to you, both the products, both the technologies and both the technology as well as the product, it is pertaining to rotary screw complex.
So if you look at the markets that we are talking about and the products that we’re talking about, they will constitute close to 60% of the overall opportunity worldwide, right? So that’s a pretty significant opportunity and we are focused on that.
Unidentified Participant
, got it. Also, in the recent — the update I read that you guys are targeting to be one of the top three players in the world by the next 10 years. So what are our strategy in that terms that any particular product focus as we all know that on the R&D front, LG is very, very-high and very focused. But on that front also, if any roadmap sort of what are the thoughts in terms of the increasing that market-share?.
Jairam Varadaraj
So our strategy is on products and markets. We are focusing on the lubricated pistons, lubricated screw and oil-free screw a strategic focus for growing the business and we are focusing on key geographies, which is Australia, Indonesia, Thailand, India, Europe and the US or North-America. So these are the markets where we are strategically focusing. What we mean by that is disproportionately allocating our time and resources in these markets for these three-product categories.
So that’s really our strategy. So if you look at our investment in technology, what I just explained to you, both the products, both the technologies and both the technology as well as the product, it is pertaining to rotary screw complex. So if you look at the markets that we are talking about and the products that we’re talking about, they will constitute close to 60% of the overall opportunity worldwide, right? So that’s a pretty significant opportunity and we are focused on that.
Unidentified Participant
Got it, got it. Thanks. Also, is there any impact of the new tariff regime that’s going on in the US if at all, are we in any kind of that particular event that’s going on?
Jairam Varadaraj
Sorry, I didn’t get your question.
Unidentified Participant
The current US administration after coming up to Trump, there has been an increase in tariffs across the multiple industries on. So are we as an industry or a company, do we fall in that particular category in any way as of now?
Jairam Varadaraj
Even during the earlier regime, Trump regime, when there were duties imposed, compressors were not in that category. So we don’t expect it. So even if it comes, those are business challenges, those are not going to be game-changers, yeah.
Unidentified Participant
Got it. Understood.
Jairam Varadaraj
So we got to understand something. Even if 10% there is a tariff increase, our rupee has depreciated by 10% as well, right? So it’s not just — it’s not a one-sided kind of a thing. It’s a larger, so multiple factors involved, yeah.
Unidentified Participant
Okay. Got it, got it. Thank you. Thank you so much for taking my questions.
Jairam Varadaraj
Thank you.
Operator
Thank you,. Next question we have is from the line of Ritwik. Hi, Ritwik, you may go-ahead with your question.
Unidentified Participant
Yeah. Hi, good morning, sir.
Jairam Varadaraj
Good morning,.
Unidentified Participant
Yeah. Sir, few questions. Firstly, you mentioned one-off expenses in Q3, INR4 crores and INR18 crores. So safe to say that majority of this is non-recurring?
Jairam Varadaraj
Yes. Yes. So I said transport is one area where there was a significant increase primarily because we were catching-up on some inventory shortfalls. And as a consequence — and combined with that related increase in transport costs, but they are coming down and are — with our cutting back on our inventory down to normal levels, our shipments also are going to be less. So I don’t expect that to continue to recur. I told you warranty provisioning was done, that is accounting provisioning that had to be done. So that is there. And a few other things that are all one-time, nothing that is of significant. Sorry, okay.
Unidentified Participant
Got it. Thank you. You. And sir, second question is on the stabilizer opportunity that you mentioned. You know, is there any product like this in the market or this is an innovation by —
Jairam Varadaraj
It’s nothing. This is the first time we’ve got a patent which is global, yeah.
Unidentified Participant
Okay, sure. So globally there is no products like this.
Jairam Varadaraj
No.
Unidentified Participant
Okay. And you mentioned that there will be savings of INR4 lakhs per annum. So that would be on the power cost or the savings will be on the power cost.
Jairam Varadaraj
This is purely power cost, but there are a whole host of other savings that are there. We have not really listed that out. But this is something that the customers actually experienced.
Unidentified Participant
Okay. And how many pilot testing you would have done for this so-far?
Jairam Varadaraj
You’ve done a few 100 machines and plus thousands of hours in our own factory.
Unidentified Participant
Got it. And what would be the cost of this stabilizer?
Jairam Varadaraj
I don’t want to talk specifics, but let’s say if the variable frequency drive is 100, this will be 5.
Unidentified Participant
Okay. And sir, sorry, just a few questions on this. So can we sell the stabilizer to the existing installed-base?
Jairam Varadaraj
Yes. There are two versions of the stabilizer. There is a light version and a heavy version. The heavy version has to be fitted from the factory, but we can give a kit for retrofitment, whereas a light version can be fitted on the field as well. And the light version can be fitted even in competitors motion.
Unidentified Participant
Okay. Okay. Okay. So, sir, what kind of opportunity opens up and what is — hello? Yes, sir. Am I audible?
Jairam Varadaraj
Hello.
Unidentified Participant
Yeah. Am I audible, sir?? Yeah. Sir, am I audible?,
Jairam Varadaraj
Can you hear me? Hi,, sir, we can hear you. We can hear as well. Hello. Go-ahead, sir. We can hear you.
Unidentified Participant
Yeah. Sir, I can hear you. Can you — are you able to hear me?
Jairam Varadaraj
Hello? Hello.,
Unidentified Participant
Sir, you can hear me?
Operator
Yeah. Yeah, yeah. Go-ahead.
Unidentified Participant
Yeah. Yeah. So when we are taking this product.
Jairam Varadaraj
Can you hear me?,
Operator
Sir, I think there is some problem with your audios.
Unidentified Participant
I think hello, I’m good to hear us.
Jairam Varadaraj
Hello? Hello. Can you hear me?
Unidentified Participant
Yes, sir, we can hear.
Unidentified Speaker
Yes, sir. Yes, sir.
Unidentified Participant
Yeah. Yeah. So sir, on this stabilizer, when we are taking it to the customer, what kind of feedback are we getting in terms of installation and what kind of conversions are we seeing?
Jairam Varadaraj
No, not we — like we just launched a technology that we haven’t got the product out on a regular basis. Like I said, within the next one month is when we’ll be putting it into the field.
Unidentified Participant
Okay. So what kind of market opportunity size this opens up because you mentioned.
Jairam Varadaraj
So right now, if you look at it, 25 to 30 in India, I’m speaking, 25% to 30% of the compressors are VFT. So the 65% to 70% of the customers want the advantages or the energy-saving of a VFT, but they don’t want to make that investment because they have to spend 30% more. Now that entire 75% is a huge opportunity for us to present significant savings in energy cost, right, where you recover the cost of the compressor itself, not just the investment in the device, the cost of the compressor itself, you get back-in a couple of years. So that’s huge, yeah.
Unidentified Participant
Right, right. This is interesting. Okay, sir, as you more question, I’ll get back-in the queue.
Operator
Yeah, thank you, sir. And next question we have is from the line of Manish. Manish, you can unmute yourself and go-ahead with your question. Manish?
Unidentified Participant
Yeah. Yes. Very good morning, sir. Hope you’re doing well.
Jairam Varadaraj
I’m well. Thank you.
Unidentified Participant
Yes, sir. Couple of questions. First on the low-end compressor, which you were referring to, which probably is seeing a lot of competition or a lot of input from China. If you can just provide perspective as to what could be the size in terms of volume and the value, which is going — which probably is getting disrupted in terms of market opportunities.
Jairam Varadaraj
So we believe that the total market size at the low-end from the Chinese is about 6,000 to 7,000 machines a year in India, yeah. And the market — the Volume — the value-wise it’s very difficult to make an estimate, but roughly, I would say it’s about each machine is probably around 2.5, INR3 lakh. So to about INR200 crores is the size of that market, right? We’re not playing in that market, yeah. So for us to aspire to get INR50 crores INR60 crores is not unrealistic, yeah. So that’s only one part of the story. The other part of the story is, there is a general shift globally for low-kilowatt machines. This — what I’m talking about, this 6,000 machines that are coming into India are all low kilowatt. They are not the high-kilowatt machines. They are all lower than 30 37 kilowatt and it’s in that range. But we are also seeing a global pattern of customers wanting to shift to lower kilowatt on lower kilowatt machines to cheaper machines, not really worried about energy efficiency. Now these are all low-duty cycle applications where customers don’t want to pay a premium. So this product that we have made is a global product. It is not just an India product, the certifications, the standards, this can be sold anywhere in the world. So we are building a much larger opportunity for the future.
Unidentified Participant
So how cheap would it be like, say, today if you would have a product and if China — if there are imports from China, how cheaper would it be, right? And in terms of performance-wise also, that also matters, sir matters.
Jairam Varadaraj
But from a cost point-of-view, it’s about 40% 45% lower-cost. And from a performance point-of-view, it’s about 15% lower than specific efficiency.
Unidentified Participant
Correct. And in India, like typically where would this application? You did mention that low-duty cycle application, but in — typically like which industries or which market
Jairam Varadaraj
That’s across it cuts across it cuts across all — it is not specific to certain industry. Let’s say there is a — you typically if you look at it as spinning mill, which is large, 25,000, 30,000, 50,000 spindles will look for an efficient machine. But let’s say there is a spinning unit which has got 4,000 or 5,000 spindles, right? They are — they are more capital start and they are not worried about this additional cost of energy because their overall cost is low because it’s only 5,000. So it’s not just one industry, but it cuts across certain a characteristic segment across all industries. Yeah.
Unidentified Participant
Okay. Okay. And sir, on our new product on the stabilizer, right, what could be see like if existing machine, existing compressors need to get retrofitted and so what could be like time involved and potential cost incurred for — and what would be the downtime? So is it worth for that someone who is operating on a daily basis to properly take this electrofitment and do it? That was the first question. And like what would be the potentially market opportunity you see for you in next three to four years
Jairam Varadaraj
So in terms of retrofitting in the field it’s only a few hours. It won’t take more than that I’m talking about retrofitting the heavy version, which means there is a big significant the removal of our errand and fitment of a new errand, right? So that’s a few hours of work. So it’s not a big downtime. The retrofitting of the light version will be probably less than an hour, right? So that’s from a downtime point-of-view. From a cost point-of-view, it depends on the size of the machine, right? Smaller the machine, lesser the cost, larger the machine, more the cost.
So I don’t have one number to give you, which says this will be the cost. So if it’s a 22 kilowatt, it will be different, 45 kilowatt will be different. But the point here that you need to understand is for a new machine compared to a VFT, if VFT cost 100 more, this will cost five. Or a new application. So across this logic capitalized for all kilowatts. But for retrofit, you can’t apply the same logic because we are removing a big part of one part of the compressor and fitting another one. Yeah.
And as far as the opportunity is concerned, like I said, if you take a total market size of, 30,000 or 35,000 compressors in India, only 25% are BFT, right? So close to, 22,000 23,000 machines are running without BFT because the customer doesn’t want to pay that money for the additional money, which is 30% of the cost of the compressor. Now what we’re going to give is a fraction of the cost, but the same functionality, not only the same functionality, but a reliability factor, which is night and day difference, different, yeah.
Unidentified Participant
Okay.
Jairam Varadaraj
So this is a huge value proposition for the customer.
Unidentified Participant
And sir, on other expenses, sorry, I probably missed that earlier. This INR4 crores was pertaining to freight one-time and INR18 crores was for warranty, am I right?
Jairam Varadaraj
No, I did INR4 crores. It is what transport is about INR5 crores, right? And warranty is about INR2 crores, yeah.
Unidentified Participant
Okay.
Jairam Varadaraj
Then there is a whole host of small, small things like building, repair and maintenance, which are all-in — it is a timing issue, right? It’s not something that is going to get repeated.
Unidentified Participant
And you did mention in your initial remarks, just last question.
Operator
This may be the last — yeah, last question?
Unidentified Participant
Sure, I’ll come back. Yeah. How much sales we would have missed because of downtime of the portal?
Jairam Varadaraj
It would have lost about nothing about INR150 million, INR15 crores.
Unidentified Participant
Okay. Okay. Thank you, sir. I’ll come back-in the queue.
Operator
Thank you, Manish. Next question we have is from the line of Mr Bhavin Vithlani. Bhavin, you may unmute yourself and go-ahead with your question.
Unidentified Participant
Thank you. Good morning, Jay.
Jairam Varadaraj
Hi, Avin. How are you?
Unidentified Participant
Very well. Thank you. Hope all well at your end.
Jairam Varadaraj
All good. Thank you.
Unidentified Participant
Thanks. So this question is more on the — the India market and we were just adding the revenues of all the India players and LG’s India revenue and we saw from 2019 to now, it’s gone up from about INR6-odd I thousand crores to INR11,000 crores. This includes services. What I want to understand is some of the market internals, how are you seeing the share of oil-free move-up within that, how has LG moved up in terms of market-share for the oil-free, how has the centrifugal move-up and within that, how has LG moved up in centrifugal?
Because I think the Chinese is something where as you come — as your company graduates, I think that’s something you will have to leave it and the focus has to be in the higher-margin products like oil-free, centrifugal, etc. So just want to get the perspective a little bit on the higher-level on the market size and how has LG been able to capture incremental market on a slightly longer last five-year basis?
Jairam Varadaraj
Yeah. So let me take it category-wise. So if you look at oil lubricated screw, let me start there. Oil lubricated screw compressors. There are two segments, the premium segment and then there is the discount segment where the Chinese are playing. Now if you take the combined market-share, we have lost market, but primarily because of the low-end. In the premium segment, we have held our market-share, but in this year, we have grown it, right?
And we hope that we are confident that we will continue to grow it in the coming years, not only because of our new technologies that I talked about a stabilizer, but also because our enhanced go-to-market presence and strategy. So that’s on the lubricated. Now in the lubricated stuff, we believe we have a lot of depth and expertise of Compressors. So we can’t just say, oh, the Chinese are coming in with cheap machines and therefore, we should — we should vacate that space. We need to use our technology and our capability to come up with a product which at a quality level is at an LG standard, but from a price point-of-view to a customer’s expectation from a Chinese machine, performance also to LNG standard. Now, it took us about a year and a half to engineer that solution. Now when we engineer it, we have the ability and the right to win in this segment. So we’re not going to vacate that and run away, yeah. So that’s on the lubricated screw. On the oil-free in the last five years, the market has grown. Our share of the market has growing. Absolutely, it is growing. So I’m very confident that our presence compared to five years ago, we have a much more stronger presence and a growing presence in that segment. So centrif, if you will, like I explained, it is not — we are representing and there are challenges on delivery, there are challenges on pricing. To the extent that we are able to meet the customers’ requirement on pricing and delivery, we are able to play in some way. So strategically, we are not there in that market. Besides that compared to the rest, the oil-free and the oil lubricated screw, that’s a relatively small market. So we’ll get there, but one-step at a time.
Unidentified Participant
Okay. So if I just have follow-up. I think we had the product-related challenges earlier on-the-water well, which we have now been able to mitigate. So I mean if you — along with that, so we just want to understand how has LG’s market-share moved up because in our view, it has moved up, we want to understand whether we are correct or not because the gaps in-the-water well in and in the oil-free segments that you have bridged the market-share, let’s say, five years ago versus today and how do you see it going-forward?
Jairam Varadaraj
In water well, see water well is a cyclical business, like right now, last year was a phenomenal year. This year is down, right? Now our share of the market continues to grow, but the size of the business goes up-and-down depending on the cyclicality of that — of that segment. Net-net, if I have to average out what is our share of the market, it’s somewhere around 40%, right? We think that’s where our share of the market is. Is there an opportunity to grow that? Yes. But you know, see, it’s going to — in terms of the impact on our business, it’s going to be incremental because the overall market is shrunk at the moment.,
Like I explained to you, Bhavin, it’s — we are growing market as long as it continues to grow, we will grow. And we have some exciting products there as well. It’s too early to talk about it. Once we have that trend, our ability to win more also goes up. Yeah.
Unidentified Participant
Sure. Just last question on — given the way we have seen the budget and the overall when you talk to your customer side, on a three-year basis, if you were to hazard a guess on the growth in the domestic market, what would that be
Jairam Varadaraj
I will talk about steady-state as well as the non-steady state. On a steady-state basis, we should be able to under current circumstances, current market conditions, anywhere between 9% to 10% growth is possible. In a — with the introduction of our stabilizer technology and the low-end product, I think adding another 3, 4 percentage points to that growth is not unrealistic.
Unidentified Participant
Yeah, yeah. Thank you so much, and thank you so much for taking my questions.
Operator
Thank you. And next question we have is from the line of Mr Vipul Kumar Shah. Vipul, you may unmute yourself and go-ahead with your question. Vipul I think there’s some technical letter that next question we have is from the line of Mr Amit Anwani. Amit, you may please go-ahead with your question.
Unidentified Participant
Hi, sir. Am I audible?
Operator
Yes, sir.
Unidentified Participant
Thanks for taking my question. My first question is on the low-end product which you highlighted and you said both the products incrementally can bring 3%, 4% extra growth. I wanted to understand this low-end Chinese product, are we going to cater to the US market? Is there any Chinese low-end there? And are we not going to face any competition because I understand I think also talked about a kind of low-end product, correct me if I’m wrong, is there a comparison between these two products and which specific markets we are first going to target.
Jairam Varadaraj
So our first target is the Indian market because that’s really where we are seeing a significant presence or influx of the Chinese machines. So that will be our focus. But we also — but the product is ready to be sold-in most of the 50 cycle markets. As far as the 60 cycles which the US, right now, we don’t see as much of that behavior in the US market as we are seeing, let’s say, in Australia, in Southeast Asia and probably in some markets in Europe, right?
So we will — we’ll take a measured progression, but India will be our first book.
Unidentified Participant
Sure. Second, on Europe, you highlighted we are expecting a turnaround. Any further investment required there? If you could highlight us with respect to kind of manpower distribution or any other aspect where we will be doing more capex in Europe and what could be the peak revenue we are targeting from Europe in next two, three years, yeah.
Jairam Varadaraj
So we are not — see this — Europe was an incubation that started six years ago. Yeah. We invested upfront and we declared that we are going to. We have completed all that. So we have gained traction in the market. Now it’s a time to produce profits, right? And we will begin to see that from the next financial year onwards.
In terms of growth, I would say low double-digit is what is possible. But with these new products that we have, we could realistically expect a lot more.
Unidentified Participant
Sure, sir. Thanks for taking my questions. Thanks.
Operator
Our next question, we’ll have it from the line of Manish. Manish, you may unmute yourself and go-ahead with your question.
Unidentified Participant
Yeah. Thank you so much, sir. On continuing on the Europe operations and probably when I’m looking at last year’s annual report. So the subsidiary level at Belgium was probably a loss of nearly INR50 crores. So when we are talking of breakeven, sir, are we probably looking at EBITDA level breakeven or level breakeven? Breakeven and do you expect that PAT level losses to come down? And similar observations were for even our US operations where if you probably look at all the two, three entities, we had reported PAT loss. So just if you can clarify on both aspects.
Jairam Varadaraj
So our breakeven is at an EBITDA level, Manish. Now the only reason why we have a PAT level loss in Europe is because of the interest cost that is there. And today with — with tighter controls over our working capital, we expect progressive reduction on one-hand, cash generation and on the other hand, progressive reduction in our working capital. Net-net, the capital employed will start coming down and therefore, the interest is going to come down as well.
The same thing with the US, right? If you look at it, we have a huge portable inventory because we expected the market to continue, but it just kind of no all of a sudden. So we have that inventory that was shipped from. So all that is getting tightened now and we have capital employed because of that for which we’re paying interest and the US interest rates are pretty high compared to Europe. So all this will come down.
Unidentified Participant
Okay. So, okay, this only factor which is probably — but sir, that amount doesn’t seem to be quite large in terms of the interest outgo, if you probably look at — if I probably look at your consolidated interest outflow
Unidentified Participant
, which probably nine months is just INR22 crores and where-is the loss,
Jairam Varadaraj
Anish, consolidated, we are earning interest in India, please remember that. We have surplus cash-in India and we are earning interest in the treasury operation.
Unidentified Participant
But that is anyways reflected in other income, sir, which is INR41 crores in nine months. Interest expense is INR22 crores. And so I’m just — maybe if you can clarify that interest expenses net of the income or
Jairam Varadaraj
I need to get back to you. I don’t have those numbers in front of me. We can take it offline and I can explain it.
Unidentified Participant
Because even in the first-nine months of the current year, probably we see that at EBITDA level, there is probably a slight decline in the margins for our international operations on a rough-cut calculations. But probably at PAT level, it is very marginal profit. So just wanted to get your perspective as to how should
Jairam Varadaraj
We take that offline and we can give you the details on it.
Unidentified Participant
Thanks, sir. Thank you so much. Thank you so much.
Operator
Thank you. Participants, if there are any other questions, you may please use your raise hand option.
Jairam Varadaraj
There was one person, Salil, who had raised his hand, but I don’t know whether he has disappeared.
Operator
Yes, sir. So I couldn’t see his hand up again, and that’s the reason I had to
Jairam Varadaraj
Okay and Vipul of course, continues to have his hands up.
Unidentified Participant
Can I ask one or two more questions, sir?
Jairam Varadaraj
Sure.
Operator
Once again, Manish, we’ll just check with in case if his line is audible, otherwise we’ll allow you to ask., do you have a question to ask to Mr? You may unmute yourself and go-ahead with the question I don’t think so. Vipul is around, sir, but Salil happens to have come in. Hi, Salil, you may unmute yourself and go-ahead with the question.
Unidentified Participant
Thanks. I’ll
Jairam Varadaraj
Hear you, Saleed
Operator
Hi.
Unidentified Participant
Is this any better?
Jairam Varadaraj
No
Unidentified Participant
I’ll come back-in queue.
Operator
We have a question from Utam Kumar. Uttam, you may please unmute yourself and go-ahead with the question.
Unidentified Participant
Yeah. Am I audible?
Operator
Yeah.
Unidentified Participant
Yeah. Good morning, sir. Thank you for taking my question. Sir, firstly on the domestic market, just want to get further understanding with regards to, are we seeing any challenges from any particular sectors? Is there any kind of slowdown in infra side or all these sectors doing well. Just give more color on that.
Jairam Varadaraj
So the Indian market definitely is exhibiting signs of slowing down. There is no doubt about that. But it’s not something that I would get worried about. It’s not like a significant, but there are signs of customers delaying decisions, the number of inquiries coming in or the rate of it has come down. So these are signs that things are slowing down a bit. And you can see it. The automotive sector in most parts is beginning to slow-down. Some of the infrastructure like cement and all that are slowing down. So it’s part of the game. I mean, it will cover and go.
Unidentified Participant
All right. Sir, second thing with continuation to that is, are we seeing a more aggressive kind of move by the competitors in the domestic market? And also could you just throw some understanding on pricing? Have you taken any price increases or have we lowered down lately?
Jairam Varadaraj
Yeah. We have not increased our prices, utam. We have kept our prices constant. Competition continues to be as intensive — intense as before, there is no. I wouldn’t say there is any specific resurgence or surge in competitive intensity. We are all aggressive and fighting, which makes it interesting in the market, but I would not call-out anything that is concerning.
Unidentified Participant
Okay. All right. Sir, and final question is with regards to — I think in 1Q of the financial year, I think we were talking about the go-to strategy in the domestic market and we are also broughting some consultants to do it. So any update on that how things are progressing? Has that been able to gain some market-share?
Jairam Varadaraj
Yes, of course. So like I said in one of my commentary that we are looking at growing our share of the market. We have already grown a little bit this year and we’ll continue to see the — that process giving us that growth in the next years as well. And that’s the result of our go-to-market initiatives that we have done.
Unidentified Participant
All right. So just a bookkeeping question on the capex spend. So how much have you spent for the nine months and what is the capex guidance for the next financial year?
Jairam Varadaraj
Let me see if I have those numbers in front of me. I don’t think I have the numbers, but we have probably spent around from a cash point-of-view, maybe about INR60 odd crores.
Unidentified Participant
For the nine months,
Jairam Varadaraj
Our new projects, nine months, our new projects we have budgeted about 250. So the new buildings, that will happen part of it in the 4th-quarter and then into the next year.
Unidentified Participant
Great, sir. Thank you so much.
Operator
Next question we’ll take from the line of Mr Prathamesh. Prathamesh, you may please go-ahead with the question. Unmute yourself and go-ahead with the question..
Jairam Varadaraj
Let’s go-ahead.
Operator
Yeah. Salil, you may unmute yourself and go-ahead with the question.
Unidentified Participant
Thanks. I hope this is better now, sir. Can you hear
Jairam Varadaraj
Better now.
Unidentified Participant
Okay. Sir, on this new product, right, the patent that we filed. So if you can give us a sense of how tight the — it is and in terms of protection against competition coming in and trying to offer something similar in some pockets or in some markets.
Jairam Varadaraj
Well, it’s a tough question to answer, Salil. When we make a patent, we make it as watertight as possible, as wide as possible and as deep as possible. But there is always an opportunity for somebody to challenge it and then we need to figure out a go to a court of law and try and find out. But the most important thing is the — one is the patent, the other is how effectively you’re able to make it understand the why of the technology.
It is not about just having some valves and some software algorithm, but it is more at the level of science that you have to understand to get the result, right? So that science part is not necessarily revealed in the patent, right? So those are some un — the scientific pieces that we retain to ourselves. So I’m reasonably confident that we have a pretty strong position.
Unidentified Participant
Okay. So if I understand this as a layma and what you’re saying is that all the concept might seem simple, but we just had a stabilizer to compressa, but the engineering behind it and the price at which you deliver is something which not everybody could replicate irrespective of the.
Jairam Varadaraj
Absolutely. Absolutely.
Unidentified Participant
This is very heartening to see this product, sir. All the very best. Thank you.
Operator
In the rest of time, we’ll take one last question from Prathamesh. Yeah. Prathamesh, you may just unmute yourself and go-ahead with the question., you have the permission to unmute yourself and go-ahead. Please unmute.
Jairam Varadaraj
I think he’s posted the question on the chat. So it says need to understand about exports as we understand except for, all other subsidiaries manufactured in India and distributed in rest of the world. However, the standalone exports and related-party sales do not match. So want to understand the accounting procedure following for the same.
So Pratmesh, the — yes, the more — the industrial machines are all made in India. So when we do sales from the standalone exports has two components. Sales to independent distributors, like for instance, some distributors in Southeast Asia, some distributors in Latin-America, some distributors in Africa, some distributors, even in Middle-East, they buy directly from us. So that is also booked as exports from in the standalone.
And the standalone books also has exports to our subsidiaries, which are related markets. So they will never match, right? And it will fluctuate because when it is a matter of inventory management between — in the subsidiaries. So when the inventory starts going down, the revenues are coming down, the standalone Revenues to subsidiaries. And we are in the middle of controlling that inventory. Therefore, there will be a reduction.
Unidentified Participant
I think that is what we have right now, sir., would you want to give a vote of thanks before we end this call?
Unidentified Speaker
Yes. Yeah, before just one question, if you can provide some more insight tie-up with that inform for vacuum products, how has been the progress and when we see that commercialization so thanks for bringing that up.
Jairam Varadaraj
Congratulations. So we have completed the technology transfer, our team has visited, brought it in. The indigenization has started. So from April, May onwards, we will have completely Indian made products into the market. So that’s on the product side. On the organization side, we have assembled the sales and service teams. They are already in contact with customers. We have already started gaining one-off orders in the market. So we expect to see next year as a full-year by which we’ll be able to come back and report our performance of market.
Unidentified Participant
Any revenue targets, sir?
Jairam Varadaraj
Not yet,, not yet. It’s — our metrics right now are to look at the distributor appointment and OEM connects, yeah.
Unidentified Participant
And this will be more India specific, right, sir?
Jairam Varadaraj
Sorry.
Unidentified Participant
More India-specific markets, they are trying.
Jairam Varadaraj
Yes, it will be India, India-like markets, neighboring, that’s it.
Unidentified Participant
Right. Great. Okay. That’s it from our side, sir, any closing comment you want to make?
Jairam Varadaraj
Thank you very much. I think Manish has got a question again.
Unidentified Participant
Hello.
Jairam Varadaraj
So we can — so thank you very much. Sorry?
Unidentified Participant
Yeah. Just probably I’ll take two questions, sir. One is on the
Operator
Money –, we might have to-end this call because we have already crossed our time limit. You can take it offline with the team and Mr?
Unidentified Participant
Yeah, sure. I’ll do it. Thank you.
Jairam Varadaraj
So thank you very much, Kamalesh and Asian Market Securities for organizing it. Thank you for your continued support on that. And thank you everyone for your time and your insightful questions and I look-forward to speaking with you during the investor analyst Meet in February this month and also our call sometime in May for our 4th-quarter and annual results. Thank you very much and I look-forward to.
Unidentified Participant
Thank you.
Unidentified Speaker
Thank you.
Operator
Thank you so much, sir. Thank you all the participants