GMM Pfaudler Limited (NSE:GMMPFAUDLR) Q3 FY23 Earnings Concall dated Feb. 03, 2023.
Corporate Participants:
Priyanka Daga — Deputy General Manager
Tarak Patel — Managing Director
Manish Poddar — Chief Financial Officer, India Business
Aseem Joshi — Chief Executive Officer, India Business
Thomas Kehl — Chief Executive Officer International Business
Analysts:
Utsav Mehta — Edelweiss Asset Management. — Analyst
Sandeep Tulsiyan — JM Financial — Analyst
Salil Desai — Marcellus Investment Managers — Analyst
Jonas Bhutta — Aditya Birla Mutual Fund — Analyst
Bhavesh Mehta — Jeetay Investment Pvt. Ltd. — Analyst
Venkatesh Balasubramaniam — Axis Capital — Analyst
Ronak Vora — AUM Fund Advisors — Analyst
Rohit Ohri — Progressive Shares — Analyst
Jaiveer Shekhawat — Ambit Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to GMM Pfaudler Limited Q3 and Nine Months FY ’23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note, that this conference is being recorded.
I now hand the conference over to Ms. Priyanka Daga from GMM Pfaudler. Thank you, and over to you Ms. Daga.
Priyanka Daga — Deputy General Manager
Thank you, Niraj[Phonetic]. Good afternoon, ladies and gentlemen, a very warm welcome to all of you into the quarter 3 FY ’23 earnings call of GMM Pfaudler Limited. The earnings presentation was uploaded on the stock exchanges last evening and is also available on our website. Hope all of you had a chance to go through it. From the management we have with us, our Managing Director, Mr. Tarak Patel; our CEO of International Business, Mr. Thomas Kehl; our CEO of India Business, Mr. Aseem Joshi; our CFO of International Business, Mr. Alexander Pompner; and our CFO of India Business, Mr. Manish Poddar. We will give you a brief overview of the performance of the company, after which we will get into the Q&A.
Before we begin with the overview, a brief disclaimer. The presentation which we uploaded on the stock exchange and our website including our call discussions that is happening now contains or may have certain forward-looking statements regarding our business prospects, and profitability, which are subject to several risks and uncertainties. Actual results could materially differ from those in such forward-looking statements.
I will now hand over the call to Mr. Ptel to provide an overview of the performance. Over to you, Tarak.
Tarak Patel — Managing Director
Thank you, Priyanka. Good afternoon, everyone. I am pleased to report another good quarter, driven by strong execution across geographies. Our overall performance remains on track and we are confident of meeting our FY ’25 guidance. In terms of financial performance this quarter, we reported revenue of INR792 crores, which is a growth of about 23 odd percent. And EBITDA of INR118 crores, translating to a growth of 43% with an EBITDA margin of 14.9%.
I would like to also highlight here that the two one-time exceptional items. One is on the basis of inventory provision, where we — we’re actually going to supply a large reactor from UK to China and the application of this export license was rejected by the UK or the government, obviously, we have taken the most conservative approach and provided for the entire order. However, we will be reapplying for this — the export license, and there is a good chance that this export license will come through, and obviously, at that point of time, we would then provide for this in the positive manner.
The other option for this equipment is obviously to sell it to somebody else. And if this export license is rejected again, we would then look at selling to somebody else or then finding another way where we could probably remove the glass and then send it to China. So, there are multiple options there. The other one is for the acquisition-related expenses. Again, one-time and that is to the tune of about INR8 crores.
The PAT was also impacted by a one-time mark-to-market forex loss. This is a non-cash item and obviously, in the first two quarters, we had a forex gain, but in this quarter because of intercompany loans, we had a forex net loss. In terms of our business performance, our shipment and order intake for the year is ahead of plan and the outlook remains positive. Our technology and services platform are seeing good traction across geographies and our systems business and the opportunity pipeline remained quite strong.
The order backlog as it stands today is about INR2,247 crores, which gives us about six to nine months of revenue visibility. We’ve also done a large stock in sale order had been fulfilled. 24 vessels have been shipped to Germany. Out of the seven have been sold and a re-ordering of new equipment are in process. At the same time, I would still like to mention that commodity and energy costs do remain a concern. However, we are working on cost-control measures across geographies and hopefully, that will help mitigate some of these costs.
In terms of other updates. We recently as of this morning, completed the acquisition of Mixel France SAS and it’s fully on subsidiary Mixel as a Data Company Limited in China — in France and in China. The total consideration for this was about EUR7 million. Our Mixel had a revenue of EUR13.2 million between EBITDA margin of about 12% and the backlog and the business visibility remains quite strong. This is a good acquisition for us. Has it helped us improve our mixing that portfolio gives us access to new industries and new technologies.
Lastly, I would also like to make a statement regarding the recent liquidity events. DBAG is a responsible shareholder and has been a strong supporter of our business and management team since 2014. The lock-in agreement was between Patel family and DBAG. So, that DBAG would not exit until the successful integration of the Pfaudler International was completed. This was estimated to be around three years, but as many of you know, we actually outperformed and completed our 2020 guidance one year ahead of plan and it was hence decided that it was the right time to start of DBAG divestment.
The recent liquidity event and sale of nearly 17.3% stake held by DBAG to high-quality investors shows that the strong demand and interest in our business, the Patel family is now the largest single shareholder and has continually increased our stakes since 2020. Further, we have also agreed to purchase an additional 1% in the business from DBAG at a price of 1,700. Regarding the balance stake of DBAG, it will be sold to the right set of investors at the right time.
At this point of time, I would like to now pass on this to Manish, our CFO of the India business and he will take you through the numbers in more detail. Thank you.
Manish Poddar — Chief Financial Officer, India Business
Thank you, Tarak. Good afternoon, all. We start with the consolidated numbers. The revenue for Q3 of FY ’23 stood at INR792 crores, a decent 23% growth Y-o-Y. EBITDA margins stood at 15% at INR118 crores. This is a 2% increase in the margins Y-o-Y. PAT also is up Y-o-Y. However, in the current quarter, we were hit by a couple of exceptional item was INR22 crores. First one was the inventory provision of INR14 crores as Tarak explained, this was a GLE equipment shipment plan from UK to China, because of the intention of the export license we could not ship it out. And therefore we — because until the review of providing 100% of the booking protocol.
The second exceptional item was on the legal costs on the recent acquisitions and the Edlon Sales Bank proposed up INR8 crore. Apart from these two exceptional items, we also had a forex MTM loss of INR18 crores, which is a noncash item on the [Technical Issues]. This is on the Indian loans in Euro. And as you know, this quarter, Euro appreciate it. So, hence this liability and the result in [Indecipherable]. Again, there is a non-cash item.
And based on the YTD performance revenue stood at INR2,300 crores, up 26%. EBITDA stands at 14.5% at INR385 crores, up 3% margin Y-o-Y. PAT also standard at INR199 crores up 2.5% last year. Therefore, you will observe that we are on track to achieve our guidance for FY ’25, which is INR3,700 crores of topline and INR630 crores of EBITDA.
Over to you Priyanka.
Priyanka Daga — Deputy General Manager
Thank you, Manish. Niraj, we can now open the line for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Utsav Mehta from Edelweiss Asset Management. Please go ahead.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Hi team, good afternoon. Thank you for taking my questions. First one, what is the gross debt as it stands currently, and how much of that is in foreign currency?
Tarak Patel — Managing Director
Utsav, Hi. The gross rate stands at INR800 crores, and INR400 crores is in international business, which is obviously all in foreign currency, local currnecy in those countries. And another $5 million of ECB which is here in India. Apart from that, we, of course, have some $25 million of cash to net debt [Technical Issues].
Utsav Mehta — Edelweiss Asset Management. — Analyst
Okay. And this excludes the employee liabilities, right? Pension liabilities.
Tarak Patel — Managing Director
Yeah. This is the total intake. This is the only the debt to the bank.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Okay. I just wanted to understand, the INR18 crore foreign currency translation loss on an international debt of INR400 crores, that’s almost 5% for the quarter.
Tarak Patel — Managing Director
Okay. Okay, so this is not on the bank and debt. This is an intercompany loan, a legacy zone out of the previous — once we acquire the business from DBAG. This is a loan from a Euro entity to a dollar entity. The loan is in euros. So, why the debt gets knocked off, as we consolidate between that loan received and the loan paid.
The forex fluctuation gets impacted because there’s other entity have to be included. Therefore, we see what you would have seen in Q1 and Q2, we had a positive impact of INR20 crores to INR22 crores each quarter because the euro depreciated. This quarter euro appreciated. Therefore, there is a loss of INR18 crore. This is not — INR400 of PFI intake.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Okay, sorry, how much was the gains that were booked in the earlier quarters?
Tarak Patel — Managing Director
INR22 crores plus INR22 crores something like INR44 crores in H1 of this year. So, maybe [Speech Overlap] add about the nine months, we have seeing positive, there is gain [Speech Overlap] INR24 crores to INR25 crores of net gain is still there.
Utsav Mehta — Edelweiss Asset Management. — Analyst
And that gain is other income, is it?
Tarak Patel — Managing Director
This fits of the reality center fees fit in the other income.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Perfect. Great. I just…
Manish Poddar — Chief Financial Officer, India Business
Sorry. Just to conclude this point. So, therefore, you see the net — the other income for nine months is INR37 crores versus INR5 crores the majority of that is as Tarak mentioned is [Technical Issues] that we have.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Okay, great. Tarak, you guys have given sort of a guide post in terms of the EBITDA that you want to achieve, but I also wanted to understand this INR800 crores of debt, sort of, what is the target in terms of bringing this number down and how will you go about achieving it over the next three years?
Manish Poddar — Chief Financial Officer, India Business
Yeah. Hi, Utsav. So, we have a plan in place. So, the actual number is not INR800, because we have cash on hand as well. So, it’s lower than that. However, we have a plan to be debt-free by FY ’28. However, we believe that it will be sooner than that. We do have some small acquisitions lined up, but nothing significant. So, most of the cash that we will generate now and our cash generation is — we have a track record of generating good cash flow. So, I think over time, you will see that the debt numbers will reduce significantly. And we obviously have a plan to remain below the one-time EBITDA to debt, and hopefully, towards lower until we acquire obviously the 46% held by DBAG very recently and that we made this new acquisition in Mixel. But I think over time, you will see that the number we started a new will come significantly below the one-time month.
Utsav Mehta — Edelweiss Asset Management. — Analyst
So, from this INR800 crore number, should I assume will be a peak number from thereon and it should decline?
Tarak Patel — Managing Director
Yeah. So, I think that is around where we will be. I don’t think this number could have increased significantly at all if anything, you see it going down over time.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Okay, wonderful. And one last question from myself…
Tarak Patel — Managing Director
But just to clarify net-debt today is how much?
Manish Poddar — Chief Financial Officer, India Business
Minus INR300 crores net-debt to be something like INR500 crores.
Tarak Patel — Managing Director
Yeah. To INR500 crores, because we have cash on hand because net-debt is about INR500 odd crores.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Understood. One last question from my side. At the Analyst Meet, you had mentioned that high-cost inventory, especially in India will be sort of done by the second quarter and in the third quarter itself you will start seeing some benefits of that. But the standalone business in India this quarter is shown sort of 50% gross margin and 15% EBITDA margin. So, I just wanted to understand how this number will trend over the next few quarters.
Tarak Patel — Managing Director
So let me just start by saying that, you are absolutely right, we were hoping for some impact, positive impact of metal pricing reducing and the whole inventory actually moving out. But again, this quarter we had a very large shipment of one, a big job for heavy engineering, so there is a significant change in product mix. The India team Aseem and Manish are both working on improving our — the margins here in India. Obviously, material costs still remains a concern. They have still about twice the amount was about 12 to 18 months. It was — there have been significant increases, we try and talk on as much as we can to customers.
The heavy engine business, like you know, is definitely not as lucrative as the glass lining part of the business and the product mix itself is having an impact on margins, but we do believe that we have taken some actions over the last few months where the order intake in Heavy Engineering, obviously is more profitable. We are working on increasing prices in the glass line business. Our — the property product is obviously did quite well. So, we do have a plan that over the next maybe few quarters we will start seeing an improvement in margins.
Maybe Aseem, you want to jump in and just kind of talk a little bit more about what really impacted the Q3 margins here in India and how do you see them going forward.
Aseem Joshi — Chief Executive Officer, India Business
Yeah, thanks, Tarak. So, yes, So I mean Tarak covered most of the points. I think I’ll just elaborate on heavy engineering, a little bit. As you know, this is a line of business that is really activated this year given the backlog we had in the last three to six months, as we have shared earlier, there’s been a lot more selective about the kind of order intake in the business. ANd I’m happy to see the change in the margin in the backlog profile as [Technical Issues] we ship.
So, we expect the benefits of that to come really in following financial year. And at the same time, filtration drain. and systems business, both continue to ramp up as well as the mixing business continues to ramp-up very nicely. And we started to see positive little there.
I think Manish will just add a couple more points.
Manish Poddar — Chief Financial Officer, India Business
So, Utsav, just to give you a perspective, heavy engineering was more than 25% of the business this time in this quarter. So, therefore, you see this [Indecipherable] in the Q1, sorry Q3 standalone numbers to INR276 crores vis-a-vis INR256 crores in Q2. And on top of it, the major order that we had INR100 crore order that we had INR30 crores were shipped out this quarter in Q3.
And we expect the balance lift over of something like INR20 crores to be shipped out in current quarter Q4 and then we are done with that big order where it was really margin-dilutive. We did go to something like 1% of material reduction impacted positive impact in our P&L. However, this was more than done by the higher share of the heavy engineering business. If we actually take out internally, if you take out — when we did the calculation if we take out the heavy engineering business, the rest of the business — the rest of the standalone business stands at 20 plus percent EBITDA margin. And therefore, so…
Tarak Patel — Managing Director
And maybe just look add-in terms of business strategy, we also kind of taken a relook at heavy engineering, we are kind of thinking of reducing our exposure there, keeping the revenues to a smaller number while filling the factory with other products like mixing like preparatory, and hopefully, that will help us also kind of improve the margins coming out of the new facility in the backlog.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Is there a difference in the working capital between — sorry, last question. It was just a follow-up to this one. Is there a difference in working capital between the HE business and Glass Lining business?
Manish Poddar — Chief Financial Officer, India Business
Yes. It does consume significantly higher amount of working capital, both on the inventory, and on the receivable side, simply because on the inventory side, demand cycle is that much larger longer. Yeah, so long as — GLE would have normally three months manufacturing cycle, HE may grew from six months to nine months as well.
Utsav Mehta — Edelweiss Asset Management. — Analyst
Got it, got it. I’ve taken up too much of your time. Thank you so much.
Tarak Patel — Managing Director
Thank you.
Operator
Thank you. [Operator Instructions] Next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead.
Sandeep Tulsiyan — JM Financial — Analyst
Yeah. Very good evening. I just following up on the margin question on international side. I think when we had guided originally to improve our margins, it was somewhere about 16%, the expectation was that, although we will maintain standalone margins around 20%, there will be a significant step-up in the International margins, which has kind of played out in the first nine-month period. So, I just want to understand where all do further see scope of improvement in International margins from this 12.7%, what is reported in the current quarter or do you think largely all of those improvement plan has materialized, and this is where our strategic margins would sustain?
Tarak Patel — Managing Director
So — Hi, Sandeep. Yeah, I think the International business today is in par with our India business. In the past India business was accounting for nearly 70% odd of our total profit, while today the International business is nearly as big and as strong as the India business. So that’s definitely a very kind of a heartening situation for us. We also see that this margin in the International business will continue. Some of the new acquisitions that we’ve done will only help us kind of improve and maybe grow this margin as well. One of the recent acquisitions that we’ve done with Mixel, again mixing is a business that we really are focusing on. We are trying to create mixing as one of — a new kind of business line for us. Again, because one, it’s very much — it really has good margin. It’s a technology play that really helps our customers improve, let’s say batch time, heat transfer, reduced power consumption. So it’s really becoming more and more popular. Again, you don’t have too much competition again. And it’s a very — it cross sells with the glass line very well. So across the board, it ticks all the boxes. It opens up a wide new set of industries, metals and mineral, water, waste treatment, cosmetics, food and beverages, besides chemical and pharma. So mixing for us is something that we really want to focus on. We really want to create a brand — a global brand, where we can really be one of the top three players in mixing globally, and that’s what we’re working towards. We are looking at some small acquisitions that would help us reach this kind of size and scale. And hopefully, that’s something that we can announce shortly. But generally in International, the acquisition that we’ve made will only help us improve the margins. Hydro Air Research again has done quite well. They’ve seen significant order intake, again a very kind of good technology product, again with high margins. The services business has started growing again high margin. Interseal is doing quite well, again, very high margin. So overall, we are quite confident that the international business margins should sustain. You will also note that now internationally in Europe, especially in Germany, we are now seeing prices of the gas and electricity coming down. So that’s only going to have a the positive impact. We’ve already taken cost reduction measures. For example, we have gone down to a four-day work week in Germany, which has helped us. So we are working on a lot of different things, but generally to answer your question, yes, I do believe the International business will continue to perform and maybe even do a little bit better. We have our CEO of International Business here with us today. So maybe he want to jump in and say a few words on this.
Thomas Kehl — Chief Executive Officer International Business
Yes, thank you very much. I’ll start with on International business. It is going quite well. We’re seeing a very strong order intake and the inquiries are still at a very high level and we don’t see any projects being postponed or [Indecipherable] for our customers in marketplace. And as Tarak said, we have taken a lot of actions, countering the cost increases in material and energy prices. However, the overall energy consumption and the cost of energy is less than 5% of the total revenue, but the impact is foreseeable and energy prices come down now will positively impact us, because the current margin already includes higher energy costs that we have seen absorbing. And so far, we are looking into — let’s say good share of foreseeable future on this part. So overall, business internationally seems intact, all [Indecipherable] costs, and good business activity, a lot of activity is going on in [Indecipherable] in order intake, especially in the service side.
Sandeep Tulsiyan — JM Financial — Analyst
Understood. No, that’s quite elaborative. Thank you so much for that answer. Second question that I have was on these acquisitions that we had done in India, that especially the De Dietrich facility, the Hindustan Dorr-Oliver facility. If you could give us some color, how those acquisitions have panned out in terms of ramp-up in production? What are the capacity utilization rate that these manufacturing plants? Where are they in terms of what you envisioned three years back to the scale and size that you can grow these businesses, which you acquired, a bit more color with some quantification should help over there?
Aseem Joshi — Chief Executive Officer, India Business
Sure. So this is Aseem, I’ll take this one. There are two acquisitions that we’ve done in recent times in India, the De Dietrich plant in Hyderabad and the HDO, Hindustan Dorr-Oliver plant in Vatva, Ahmedabad. We’re actually very pleased with the way both these facilities are ramping up. First the plant in Hyderabad, this is the glass lining plant. The idea was to be able to be local to the Andhra Pradesh-Telangana belt, where we have a key set of customers. I’m happy to report that, over the last two years, we have ramped-up production to a point where, we were roughly 2.5 times what that plant had achieved in the past, in terms of revenue output. So we’re very pleased with the way that developed. And we continue to ensure that our processes are standardized, streamlined and work just like a GMM Pfaudler plant. At the same time in our Vatva facility, which is a heavy engineering factory, again that’s ramped-up very nicely. And while we have had the margin diluted issue related to the order, the production itself has come up very nicely. And so from operations standpoint, we are quite pleased with the way this factory has done for us as well. Tarak, anything to add?
Tarak Patel — Managing Director
Yeah, we’ve added a furnace in Hyderabad. The new furnace in Hyderabad where we’ve expanded capacity there. We’ve added some factory space as well. We also are manufacturing from agitators — metal agitators for Mixion in Hyderabad. We’ve also manufactured new product in Vatva. So we’re really using all the real estate as much as possible. We also at the same time just commissioned our big, big furnace here in Karamsad, 80,000 liters. We have received six orders for 80,000 liter tanks. These are the biggest vessels that can be made in India and the timing was perfect. Just when we started this plant — this new furnace, we actually got these orders for CPVC project. So timing was good and we do have the capabilities now to make super large vessel here in India.
Operator
Thank you. Sandeep, may I request you to come back in the question queue for a follow-up question.
Sandeep Tulsiyan — JM Financial — Analyst
Sure. I will. thank you.
Operator
Thank you. [Operator Instructions]. Next question is from the line of Salil Desai from Marcellus Investments. Please go ahead.
Salil Desai — Marcellus Investment Managers — Analyst
Hi, team. I have a question. Manish, if you can help me understand this. If I look at EBITDA in the International business, this is the number on Slide 21 of your presentation, this is about INR71 crores odd, right, which is the International businesses — EBITDA, right. And if look at the EBIT in the overseas business, I’m assuming these are like-to-like comparison and the EBITDA is close to INR14 crores odd, INR14.15 crores. The part of the different obviously is depreciation, which I did —
Manish Poddar — Chief Financial Officer, India Business
Sorry, Salid we can’t hear your very clearly. Can you maybe just slow it down a little bit and speak up a little bit, so we can hear you a little bit more clearly.
Salil Desai — Marcellus Investment Managers — Analyst
Sure, sure, I’ll do that. So I think the EBIT in the International business is INR71 crores — sorry, the EBITDA is INR71 crores and the the EBIT in overseas business, which is part of the segment results is some INR14.15 crores. So I’m just trying to see how do we get from INR71 crores to INR14 crores? I saw some depreciation could be about INR20 crores odd, but if you could help understand the rest of the bridge, it would be really helpful? This seems like a pretty large difference?
Manish Poddar — Chief Financial Officer, India Business
Right, so Salil you’re right. So if we start with the segmental EBIT — EBIT of INIR14 crores in Q3, so from that we add another inventory provision of INR14 crores, we add legal cost — exceptional legal cost of INR8 crores, so that’s that INR22 crores. Let me add this FX on the intercompany loan of INR18 crores. So, INR14 crores plus INR22 crores, plus INIR18 crores, makes it INR54 crores, right?
Salil Desai — Marcellus Investment Managers — Analyst
Okay.
Manish Poddar — Chief Financial Officer, India Business
So that’s the basic construct of this Q3, and likewise if you see like-to-like, Q2 of EBIT states INR69 crores, right. Now, INR69 crores had a INR22 crore FX gain, right. So that INR69 crores minus INR22 crores actually makes it INR47 crores on a like-to-like business business performance. So Q2 EBIT adjusted would be INIR47 crores, Q3 adjusted EBIT will be INR54 crores.
Salil Desai — Marcellus Investment Managers — Analyst
Okay, alright. that helps. And the next question, Tarak, this is for you, now, when you said that since you have some more acquisitions, some planned or thought off. You’re looking to add, products, geographies, if you can just explain how — I mean, how much more they need to acquire before say the portfolio you think is the complete or…
Tarak Patel — Managing Director
When you say part of our strategy, so when I spoke about mixing and mixing becoming a business, a standalone business that we really want to focus on. With the Mixel acquisition, we have now presence in Europe. Mixel has a factory in China. So we have a presence, automatically in China and through our Mixion Business line here in India, we have business here in India. So, India, China, Europe taken care of, that leaves on the Americas as the place where we don’t have a presence, so that’s something, that is in the same space as mixing So, we want to kind of combine these four geographies and have a global mixing platform, where we can go out and we can sell or we can brand under one umbrella. We have one focused portion. We’ve actually just hired a person who is going to take over as the Head of the Mixing business for the company eventually. So we’re giving mixing of focus and the ability to grow. Like I mentioned to you, the market side of making it much, much bigger than glass line. It’s a technology play to high margin business. It’s something that involves a lot of simulation, software technology, proven track record. So, companies who have supplied equipment in the past, that automatically qualifies you with large oil and gas project, license the project. So it really opens up a really wide range of application in that end and the industry that we can cater to. It’s very much complementary to BlackLine [Phonetic]. It’s also very important today that companies are looking at ways to reduce bad time power consumption, include heat transfer, improved product quality and yield. So, mixing has become a more very, very important part of their efficiency improvement program, right. Most of these Indian companies have 300, 400 reactors, but if you can reduce the power consumption of each reactor from let’s say 25 horsepower to 15 horsepower, you have tremendous saving would be possible. So mixing is something we are focusing on. A Mixel acquisition was the first step. We have something planned as well, something smaller, something not too large. Again, our size of acquisition are not that big, it is between $5 million to $10 million range, but some of these acquisitions can double or triple in size, very quickly. And our eventual goal is mixing it to be, at least in the top three in the world and that would put us in the $100 million to $150 million mark. And that will happen eventually in three to five years from now and that’s what we’re aiming for.
Salil Desai — Marcellus Investment Managers — Analyst
Understood. Great. Thank you so much.
Operator
Thank you. Our next question is from the line of Jonas Bhutta from Aditya Birla Mutual Fund. Please go ahead.
Jonas Bhutta — Aditya Birla Mutual Fund — Analyst
Hi, team, just a question on — just trying to put in place the commentary to the numbers. So basically, what we’ve seen is in the last two quarters, our order intake has sequentially declined from a peak of almost INR990 crores odd down to INR770 crores. But on the other hand, we also heard your comment where you said inquiries seem to be still robust. So should be sort of — how should we think about this in terms of — is this largely a timing issue where client seem to be taking longer or you are seeing genuine slow down while people seem to be talking to you, but there is a general slowdown happening particularly in Europe?
Tarak Patel — Managing Director
So while this is a combination of multiple things, generally business environment is the [Indecipherable]over the last maybe two quarters. I think the Ukraine war, the global inflationary issues and problems going on. But the the inquiry still continue, maybe the time they take finalize has kind of increased. But we are seeing again some kind of a reversal in those trends. We have over the last quarter seen significant project here in the glass line part of our business here in India, like I mentioned to you. Yes, we’ve seen some slowdown in the systems business internationally, but the opportunity pipeline remains strong. We do expect some large orders to come in, in the fourth quarter. Luckily for us, we have a large backlog in most geographies, six to nine months, in some cases even more than that. So that gives us good revenue visibility. We also have the ability now to kind of target some orders, which usually — or earlier we could not target, now with India being part of the global sourcing program, we have been busy to enter new markets like Eastern Europe, Southeast Asia, some parts of Spain and Africa. So there is a lot of opportunity available. But generally, we have also been kind of selective in terms of what we take and I think one of the things in India especially that we’ve done is the kind of been predictive both in AG [Phonetic] and in glass line. But glass line has picked up last month and we expect that to pick-up as well. I think the other thing to keep in mind is, well we said last couple of quarters, we had a large order from heavy engineering, but because of the large backlog that we have in that business, new orders will take some time because we already have [Indecipherable]for nine months. So we expect orders in AG to come in the next few quarters. And with Mavag for example [Indecipherable] has a backlog of close to nearly 15 to 18 months. So generally, the activity is there, they’re still finalizing new orders. So there is activity going on in Europe and in the US. India is also picking up. Maybe Thomas you want to add something on what you’re seeing in Europe and in India?
Thomas Kehl — Chief Executive Officer International Business
Yeah. So looking at the European and American activities over that before, I think they are quite normal on a high levels there. Demand is not really slowing down. I think we have seen the last couple of years and slightly overly the situation, that is coming back to a normal situation. So the decision-making, partly the customers are not slowing down, more than they have to be before. They were extremely fast over the last two years and that couldn’t add. So we are not concerned about order intake, about these demand that we see in America at this point.
Manish Poddar — Chief Financial Officer, India Business
Yeah, I think we are seeing as Tarak mentioned a lot of activity, especially in the [Indecipherable] order book there is actually growing on the glass line there particularly. Pharma continues to remain somewhat subdued. Overall, they’re pretty satisfied with the way the glass line [Indecipherable] decision.
Jonas Bhutta — Aditya Birla Mutual Fund — Analyst
Got i. And just from a — given that we don’t have too much of a history of how order book used to behave for PFI before it came in, given that we’re sitting on a backlog of about INR20 crores to INR50 crores odd, and even if we sort of conservatively grow our sales next year by about 10%, we’re talking of roughly 3,300 kind of number. With this kind of backlog, what kind of order intake that you think that we’ll have to pull-through, so that we can comfortably sort of reach at least 10%? So you know it typically order book-to-sales coverage 0.7 x or there seems to be on the lower side, just from a historical perspective?
Tarak Patel — Managing Director
No. I think on historical perspective, I think this is record order books. They used to be much, much lower. In India, obviously we do try and start the year with at least half the order book of what the year is targeted. So let’s say, for example, if we have a INR1,000 crore revenue target, we should have at least INR500 crores of revenue on-hand. So from that standpoint, half — half the revenue — sorry — half the order backlog is already on our books. We will book new orders in Q4. Also what you probably don’t consider in this is sales and services. These are ongoing and these are short delivery items and get booked continuously. So that will only add to it. So, I think we are quite comfortable from a order backlogs endpoint, that why I mentioned, we have about six to nine months of visibility. We won’t have any kind of urgency in terms of building in orders or dropping prices [Technical Issue] pricing. We know the large orders in the pipeline we know large projects here in India that are There currently happening. We have good projects on hand in Europe as well. So overall, I think we are in a strong position, but like there is cyclicality in the market. There will be ups and down. But our recurring backlog gives us a strong kind of to base to build on.
Jonas Bhutta — Aditya Birla Mutual Fund — Analyst
Got it. And the last one that I had was on margin. So you mentioned that the heavy engineering piece still has a legacy order book of INR20 crores to INR30 crores, which probably will get executed in the fourth quarter. So is it fair to assume that the fourth quarter margins of the standalone piece would sort of is to the Q3 or there are levers there also, which you think will help us better margins there?
Tarak Patel — Managing Director
So, obviously we are looking at internal measures to reduce costs, but I would stick with the current margins that we have been delivering. Obviously, there will be new orders coming in. But again, metal prices again have kind of stabilized now. There has been some talk that it might even go up. So we have to be a little bit careful. But I think we definitely have opportunity to reduce cost internally, Aseem and Manish are working on that. There is currently a procurement activity going on with the help of a consultant to look at large contract and to find ways and to find more efficiently. So all those things will be ongoing, but right now, I don’t want to really give you or change that number from last quarter. We do always try — and next year hopefully we have some actions in place, where we can see some improvement in margin during the India standalone numbers.
Jonas Bhutta — Aditya Birla Mutual Fund — Analyst
Sure. Thanks a lot and all the best.
Operator
Thank you very much. Next question is from the line of Bhavesh from Jeetay Investments. Please go ahead.
Bhavesh Mehta — Jeetay Investment Pvt. Ltd. — Analyst
Hi, sir. Can you hear me?
Tarak Patel — Managing Director
Yes, loud and clear.
Bhavesh Mehta — Jeetay Investment Pvt. Ltd. — Analyst
I just wanted to understand on the valuation front. So can you just give me a brief on the valuations, what we like acquired the pending — the remaining 46%, which we acquired on [Indecipherable]?
Tarak Patel — Managing Director
Manish?
Manish Poddar — Chief Financial Officer, India Business
Valuation of the 46%. So. I think we have a detailed presentation penned out for this — at the time of acquisition. And it compares, all about the — I think both the EV EBITDA multiple at [Indecipherable]. That was the valuation multiple effect, that’s what we’re looking at.
Bhavesh Mehta — Jeetay Investment Pvt. Ltd. — Analyst
Okay, okay. And just on the 2014 DBAG win?
Tarak Patel — Managing Director
DBAG was acquired in 2014. They acquired the Faudler Group. I’m not sure at that point we could, it was done directly with another company what DBAG ended up saying, I have no idea. That’s something that is not in the public domain and that was done between NOV, who is an American and DBAG. Not sure of those numbers. But the — the 2020 numbers as well as the 2022 numbers, both have been compared and they are on our website, you can have a look and all the details in terms of EV valuation multiples are all part of that presentation.
Bhavesh Mehta — Jeetay Investment Pvt. Ltd. — Analyst
Okay, okay. And just one other question, that in the chemical side, are we catering to only, like — is there any segment which we are not catering to other than like agro and specialty chemical? Is there some another sector or profile?
Tarak Patel — Managing Director
So obviously agro-chemical and specialty chemicals are the big ones. We also do guidance for glass line equipment. In pharma, we do API, basically bulk drugs and API. We don’t do formulations. There are certain applications like chlorination. Anytime you use chlorine, you can’t use glass line because it reacts to glass. But besides that, all major applications in chemical and pharma — sorry and one [Indecipherable] chemical, agrochemical and specialty chemical, will require some kind of glass line equipment in the plants.
Bhavesh Mehta — Jeetay Investment Pvt. Ltd. — Analyst
Okay. Okay. Thank you. Thanks a lot.
Tarak Patel — Managing Director
Thank you.
Operator
Thank you. Next question is from the line of Venkatesh Balasubramaniam from Axis Capital. Please go ahead.
Venkatesh Balasubramaniam — Axis Capital — Analyst
Yeah, I actually had one question for Manish and one question for Tarak. Now, firstly, Manish, last year, if you actually see the fourth quarter results, fourth quarter last year, effective tax rate was almost 60% odd in the fourth quarter. Are we expecting similar level of effective tax rate in the fourth quarter? This is a question for Manish.
Manish Poddar — Chief Financial Officer, India Business
So, hi Venkatesh. So effective tax rate for the organization stands at 27%, however, there have been fluctuations on the positive and the negative side through the quarters as we’ve seen. There have been deferred tax reversals and this was credit till last quarter as we saw. And similarly, this quarter it will —
Operator
Sir, sorry to interrupt you.
Manish Poddar — Chief Financial Officer, India Business
Hello, can you hear me Venkatesh?
Venkatesh Balasubramaniam — Axis Capital — Analyst
Yeah, I can.
Operator
Venkatesh, may I request you to mute you line from your side when you’re not talking because there is a lot of echo from your line. Sir, you may go ahead now.
Manish Poddar — Chief Financial Officer, India Business
Sure. Similarly, if you see for the current quarter Q3, you have a PAT of INR19 crores reported number and if you add 27% of normal tax rate, you add up — give us INR5 crores of taxes. And then the forex MTM that we spoke about, that, it in crores, so that will give you — that will obviously is non-tax deductible. So that’s a INR6 crore impact and rest are the minor deferred tax accruals and deferrals and because of that we come to the number that we have.
Venkatesh Balasubramaniam — Axis Capital — Analyst
Okay. The other question is to Tarak. Now, obviously you are planning to buy 1% from DBAG fund and I believe that you need some regulatory approval. So what exactly is this regulatory approval, which are waiting for? And when does this come to, that is first part of your question and when will this happen, this 1% stake purchase? Secondly, I guess when you actually buy from DBAG, it’s an inter se purchase, so it doesn’t trigger an open offer. So, does it also mean that when the next round of — the remaining 13% odd percent of DBAG, whenever that come to the market you will be looking to buy more? Because if you don’t buy from them and you buy from the open market, it might end up causing an open offer. So are you thinking about increasing a stake even further in the next round? So if you could provide some color on that, that would be useful?
Tarak Patel — Managing Director
Sure. So, Venkatesh, let me start off first with the approvals required. There are three approvals required UK ________00:44:40_____, French ______ and Italian _________. Both of these are — these three approvals are only getting triggered because we are crossing the 25% mark, when we acquired this 1% stake from DBAG. Those applications have already been made and we expect that and the CCI approval to come sometime in the mid of March. So we expect those transactions to be completed in the March month — end of March, something like that. When we acquired this 1%, we will crores from 24.2% odd to 25.2%, so we would have crossed that threshold after crossing the 25% mark threshold we can then free from the market, we can buy from the market to any more acquisitions of shares will not trigger any open offer, because we brought that 25%. Do I plan to buy more from DBAG? Obviously, when that time comes and where DBAG is looking to sell that stake, we will think about it, but right now, my first goal was to cross the 25% mark. I’ve also mentioned in the past and yet as the dominant demoter, we would like to be somewhere around the 28% to 30% mark. If that is possible, I would like to do that. Timing, I’m not really sure, but if there is an option to buy something from DBAG, sure we’ll consider it.
Venkatesh Balasubramaniam — Axis Capital — Analyst
Okay. Thanks. Thanks for those answers. All the very best.
Tarak Patel — Managing Director
Thank you.
Operator
Thank you. Next question is from the line of Ronak Vora from AUM Fund Advisors. Please go ahead.
Ronak Vora — AUM Fund Advisors — Analyst
Hi, sir. When we say are full with order book of six to nine months, what kind of capacities do we have in hand currently as in what kind of utilizations are we are and where can we reach?
Tarak Patel — Managing Director
So I would definitely see that in our India glass line business, we are not at full capacity. India has a backlog of about six months. So there is definitely potential to kind of improve the capacity in India and take more orders like I mentioned to you. Orders have been between choosing and picking orders carefully to make sure that we do a good margin business. But in Europe and the other geographies, we do have a higher capacity utilization and I think the order backlog, there is much stronger. They have about nine months in most of the glass line factories, so there the the utilization rates are much higher. I also mentioned that we have kind of reduced — we’ve taken some steps to reduce costs in Germany, where we’ve gone to a 4-day work week, but yet still are producing the same — the amount of equipment. So, there the utilization has actually improved. We are also working on a global operational excellence program. So we have seen significant improvement in our China facility. China is really an area we want to grow market share. We have brand new facility there. We have new furnaces there. They just recently also finished manufacturing 140,000 liters glass line vessels, which is the first time that has been done at the Group. So we have really big plans for the China facility and hopefully market share in China can increase significantly.
Manish Poddar — Chief Financial Officer, India Business
Just to add, as I recall from our Investor guidance that we give, we do not expect to make any significant capex for our guidance of INR3,700 crores. We actually think that we should be able to do something like INR4,000 crores to INR4,500 crores out of the current capex, so that answers the question.
Ronak Vora — AUM Fund Advisors — Analyst
Basically, currently your gross block which is at [Indecipherable] crores can do INR4,000 crores to INR4,500 crores of top line correct?
Manish Poddar — Chief Financial Officer, India Business
Yeah.
Ronak Vora — AUM Fund Advisors — Analyst
Okay.
Manish Poddar — Chief Financial Officer, India Business
Of course, there will be maintenance capex throughout as we mentioned in the guidance period, in our guidance presentation as well. So you should expect that 2.5%, 3% of capex in our requisite.
Ronak Vora — AUM Fund Advisors — Analyst
Yeah, yeah, that’s and just getting rough, because I don’t want ballpark this time. Secondly, you said that India is under utilized. We are picking orders, is it something because — the pharma industry, India has been dull. The chemical has been pretty load shedded. It is something that there are lack of orders in the market, which is leading to just six months of order backlog?
Tarak Patel — Managing Director
No, it’s the combination of multiple things. I think one is that most of our furnaces in Gujarat are on gas. So we try not to use use the gas [Indecipherable] and use it at what rate basis, to be claimed in June, the gas which is at the lower prices. So, we don’t need to over kind of extend and use this on is as 24/7. So we’ve been a little bit cautious about that.
Let me now have the Hyderabad facility, which also has capacity, like you rightly said, there has been a little bit of a slowdown when it comes to pharmaceutical, but then the agrochemical and specialty chemical sectors are making up for that shortfall. Right? So there are large projects in the pipeline, PI industries, and PP 12 and 13 is coming. SRF just announced a new agrochemical, basically putting a TPVC project. These are all large reactors, Deccan Fine Chemicals is expanding as well. So, there is no shortage of orders, expansions are happening, India will continue to invest in chemical and pharma. Obviously, in the past, earlier on, maybe if you look back 10 years, pharma has got nearly 60% of our glass line business, today only account for 30%. So, pharma has definitely slowed down because we replaced by chemical, hopefully, pharma will start coming back and that will also add more orders coming into the market and it will definitely be more business [Technical Issues].
Ronak Vora — AUM Fund Advisors — Analyst
Okay. thank you.
Operator
Thank you. Next question is from the line of Rohit Ohri from Progressive Shares. Please go ahead.
Rohit Ohri — Progressive Shares — Analyst
Hi, Tarak, and team. Two questions. The first one is related to this holding of Pfaudler IMC. So, is there any binding clause or binding agreement or contract? Because we had more of these contracts in the past for three years. So, are there any more contracts or are they willing to extend it going forward?
Tarak Patel — Managing Director
And also, there is no contact in place, but again, I mentioned that DBAG is a responsible shareholder. We will only sell and they will only sell when the time is right. And with the right set of investors. So, again there is no specific timeframe. As and when the demand is there, the right pricing, the right side of investors, we would like to do the transaction and obviously be private-equity investors, they have a financial timeframe will be announced since 2014 is already now nearly nine years. So, the timeframe is probably at the end of the timeframe. So, when we find the right solution for them, I’m sure they will be — looking to exit and at the right time.
Rohit Ohri — Progressive Shares — Analyst
And if you can just share that, what is the timeline, if it’s like September or October or?
Tarak Patel — Managing Director
So, I can’t really say any timelines right now. There is no specific timeline. Again, it’s all dependent on — of what happens in terms of the demand, the interest level. So, as I said, at the right time to the right set of investors, we will then plan that scale accordingly.
Rohit Ohri — Progressive Shares — Analyst
Okay. My second question is related to the split if you do the segments and sub-segments. We see that the standalone and international have been reducing in terms of the percentage for technologies. And on the same hand, the systems and the services is going and it is reaching slightly more towards the north side. So, any guidance you would like to give on this? Or will this trend continue with technologies becoming slightly weaker and assistance services going was a not?
Thomas Kehl — Chief Executive Officer International Business
This may be — Tarak and Aseem and Thomas can explain it. To give a perspective, our technologies is growing naturally slower than systems and services because systems services are the new businesses that — also it all related, because ultimately the [Technical Issues] 200.
Tarak Patel — Managing Director
I think, you said — Manish, thank you. The co-operations that we have high market shares in all the regions. Therefore, we grow consciously with the markets, we are not gaining market-share enterprice. We are making selective decisions on what orders we take and what orders we not tend to take. And the other segments, our [Indecipherable] segments where we are investing and also in — and those are the segments where we are looking for growing pie, and getting this is a piece of the pie and there naturally as Manish said well, the growth rate through the expected are significantly higher.
Rohit Ohri — Progressive Shares — Analyst
Okay. So, these — So, this contracts…
Operator
Rohit, I’ll request you to come back for a follow-up question.
Rohit Ohri — Progressive Shares — Analyst
Okay.
Operator
Thank you. Next question is from the line of Jaiveer Shekhawat from Ambit Capital. Please go ahead.
Jaiveer Shekhawat — Ambit Capital — Analyst
Hi team. Thanks for taking my question. One question, if I remember right, I mean, the previous call you had mentioned that the reason why you’re not participating, especially in the kind of orders that your domestic competitor usually gets into is because these are on the lower end of the F&D. Now when I look at their margins, whether be the gross margin will be EBITDA margin, they seem much better despite having the higher mix of that lower-end of F&D. So, could you just help me understand and probably provide a perspective as to how probably they are able to make better margins, despite being on the lower end?
Manish Poddar — Chief Financial Officer, India Business
I’m not sure what you’re speaking about. But in terms of glass line, obviously, we are the market leader. In F&D, [Indecipherable] we are definitely not the market leader and we focus on the high-end of any kind of Precision and Drying which required technologies that what we really focused on. I don’t have access to — I mean I have access to my competitors numbers. I don’t really know how and why those numbers are the way they are.
What we can do tell you is that being a market leader, we drive price, price is important for us and we make sure that we will only do business in the glass line segment at a price that makes sense to us, as the price we did and we do command a premium when it comes to glass line, because of our quality and high-technology, even in the F&D business that we do, we have specific products like the spherical like glass lining in FDs like BTD again very specific, really kind of critical. And hence, again, the margin profile there significantly better and that’s what we really focus on.
Jaiveer Shekhawat — Ambit Capital — Analyst
Got it. Sure, that’s helpful, thanks a lot.
Operator
Thank you very much. I now hand the conference over to Mr. Tarak Patel from GMM Pfaudler for closing comments.
Tarak Patel — Managing Director
Thank you very much everybody for joining the call. Have a nice weekend. And we will talk to — after our Q4 results. Thank you very much.
Operator
Thank you very much. On behalf of GMM Pfaudler Limited that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.