Jash Engineering Limited (NSE: JASH) Q2 2025 Earnings Call dated Nov. 14, 2024
Corporate Participants:
Siddesh Chawan — Associate Vice President, Investor Relations
Pratik Patel — Chairman & Managing Director
Dharmendra Jain — Chief Financial Officer
Analysts:
Sagar Tanna — Analyst
Unidentified Participant
Amit Kumar — Analyst
Tej Patel — Analyst
Sahil Doshi — Analyst
Salil Desai — Analyst
Presentation:
Siddesh Chawan — Associate Vice President, Investor Relations
Good evening, everyone. I’m Siddesh Chawan from Ernst & Young Investor Relations, and I would like to welcome you to the Jash Engineering Q2 FY ’25 Earnings Conference Call. [Operator Instructions]
Please note that this conference is being recorded. The recording will be made available on the website within the day and transcript of the call shall be made available subsequently. To take us through the results and answer your questions, today, we have the top management of Jash Engineering Limited represented by Mr. Pratik Patel, Chairman and Managing Director; and Mr. Dharmendra Jain, Chief Financial Officer.
Before we begin, I want to remind everyone about the Safe Harbor related to today’s earnings call. Comments made during the call may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risks that will cause future results performance or achievements to differ significantly from what it is expressed or implied by such forward-looking statements. After the end of this call, if you need any further information or clarification, please do get in touch with me.
With that said, I will now hand over the call to Mr. Pratik Patel. Over to you, sir. You’re on mute, sir. Sir, you’re on mute. Your microphone is on mute. Yeah.
Pratik Patel — Chairman & Managing Director
Good afternoon, everyone. Thank you for sparing your valuable time and attending this investor conference. First of all, I would like to wish you all a very happy and prosperous new year. I hope that in new year, our results bring good fortune to everyone.
With that, I would now like to start the presentation. To most of the investors who are — already have attended similar presentation, they are aware of what all we want to say. But for those who have started relationship recently, we’ll just like to highlight some of the details about the Company. We are a manufacturing company making equipment for water, waste water and for industrial use. We are headquartered at Indore, but we have six plants, manufacturing unit, four in Indore, one in U.S., and one in U.K. We have around 1,075 employees. We are principally, prominently exporting most of our products as well as supplying within the country. All these products, which we manufacture, have to be approved — pre-approved by the user. And for that, you need approval from all the municipalities as well as cities worldwide. And we have fairly good approvals available today worldwide.
Next. We have grown from — this is our 51st year. We have grown over time, either through technical collaborations with good companies worldwide or by acquisition of companies, so as to be in a position to use their approvals and use that to supply our products. So, this chart shows our approval — this chart shows our various acquisitions, which we have done on the way and various main incidents, which has been useful in this Company achieving what we are today.
Next. Over the years, we have acquired various companies like Sureseal for water hammer control products; Shivpad for treatment process equipment; Mahr Maschinenbau for screening technology as well as for brand; Rodney Hunt in America for technology as well as brand as well as for its plant; and recently, the Waterfront in U.K. to tap the growing U.K. market using the Waterfront brand. Waterfront was finally acquired by us in 2024 April, but the agreement was signed in 2023 and that’s why 2023 is shown here.
We have six manufacturing facilities, as I’ve already told you. And these six manufacturing facilities can easily contribute to around INR800 crores in manufacturing revenue. We are — in addition to these facilities, we are putting up two more new facilities this year. When I say this year, this would be commissioned in financial year ’26. These facilities would — one would be in Chennai and another would be at SEZ Pithampur. And once these two facilities have come online, our capability will increase to INR1,000 crores.
We are company which rely a lot on manufacturing in-house, because we are not in mass production, we are in custom engineered products. Having facility in-house helps us in meeting varied requirements of the client as well as delivering in time. And so, we have invested in a wide range of facility, which are unparalleled in our industry.
Just to give an overview of the products which we make, the Company’s principal product is water control gates, which contributes significantly to our revenue. We are among the leaders in the world in this line. We make water control gates, heavy fabricated gates. We also make screening equipment, coarse as well as fine screening equipment, screening conveying equipment. We make knife gate valves, which we also export significantly; special purpose valves for water hammer control and related aspects of water business. We also have a very strong range of bulk solid handling valves. Along with these products, we do process equipment, which is coming from Shivpad range, and equipment to generate renewable energy using low heads of water. We also do screw pumps for flood control, and we do disc filters for producing very high quality of water after treatment of sewage.
Recently, we have signed with Invent of Germany to offer in India a complete range of secondary treatment equipment, comprising of aerators, diffusers, mixing and aeration equipment, decanting equipment and turbo blowers.
All the range of products which we make are used in various aspects of water, waste water as well as sea-water, and in industries. Most of our equipment are going into water intake systems, storm-water, water and waste water treatment plant, irrigation systems, as well as in industries which are large plants such as power, paper and pulp, petrochemical or chemical and steel plants.
As I said before, water control case is our main business and main product. It contributes 49% of our revenue. Thereafter, we — come screening equipment, which contributes close to 22% of our revenue. Then, the valves, including the bulk solid valves as well as knife gate valves and water hammer control valves, which contribute 10% of our revenue. And finally, 9% of revenue comes from process equipment and pumping and generating equipments.
This Company is primarily now an export-based company, with more and more business coming from outside India. Presently, we do close to 60% of revenue outside India. And we are fairly spread everywhere in the world. We are in Europe, in USA, in Middle East, in Far East as well as in India. The revenue in every geographical area varies from time to time based on where projects are more or where projects are less. But we are in — this shows that we are in many areas worldwide.
As I said before, you have to be approved to be in this business, and we are approved by most of the clients, most of the consultants in India and also outside India. And that is one of the reasons for our sustained growth and good performance.
Coming to the financial performance of the quarter as well as for the half year, I would like to inform that we have had significant growth in our revenue in most of the operating companies, such as Jash Engineering, Shivpad, and Jash USA, Rodney Hunt. In Jash Engineering, we have had a growth of 73%, in Shivpad, we had growth of 133% in revenue, and in Rodney Hunt, we had growth of 49% in revenue. There has been improvement in PAT of Jash as well as in Shivpad. However, the PAT of Rodney Hunt has deteriorated, but I assure you this is momentarily, because in the next quarter, we are achieving significant revenue growth, which would improve the PAT performance of Rodney Hunt.
The consolidated, we have increase in revenue of 61% as compared to last year same period. And in gross profit, we have had — and gross margin improvement by 59%. EBITDA has improved by around 13% compared to last year. And we have seen profit before tax growing by around 272% and profit after tax growing by 212%. This shows the consolidated income statement. As you can see from the PAT margins, we are — quarter-by-quarter, we are showing improvement in our performance, and we expect to carry this forward in the coming quarters.
This is the consolidated balance sheet. Next. Coming to our business outlook, our order book position is quite strong. It stands at INR873 crores as of 1st of November. So, we have had significant dispatches taking place in October, and that is why the combined order position has come down in the months of November. It used to be around INR950 crores-odd, which is now INR873 crores because of significant dispatches, which has taken place in America in the month of October. In the month of October in America, we have achieved revenue in excess of $9 million.
Our consolidated order pipeline continue to remain strong. We have already negotiated orders worth INR27 crores and further orders worth INR57 crores are under negotiation in November. We hope that the order book will always remain strong based on what we have been seeing, type of business opportunities we are facing worldwide. And so, we have no concern on this aspect.
At the beginning of the year, I had projected a combined revenue of INR675 crores, as against INR522 crores, which we had achieved last year. Close to — this is close to, I would say, 30% growth. From the performance of H1, I would say, it looks that we are on line to achieve this turnover of INR675 crores. And if everything goes in our favor, then we can surpass this as well.
At the end, I would like to say that the results for first half has been quite significant and has shown improvement at — in all major financial parameters. The revenue grew by 61% and the profit after tax has grown by 212%. This strong performance, which is growth in revenue as well as growth in profitability, makes me confident to say that our yearly projected revenue of INR675 crores would be met. At the same time, we will be able to ensure EBITDA margins between 21% to 23% and PAT margins between 12% to 14%.
Coming on to Rodney Hunt, I’m sure that when you saw the — see the first-half PAT, it would be seen as a concern, but I assure you that everything is progressing well, and we are in line to achieve revenue of — in excess of $33 million in Rodney Hunt as against $26 million-odd [Phonetic] achieved last year. In fact, in the month of October, as I said before, we have already achieved more than $9 million revenue in Rodney Hunt, so that the total yearly revenue at the end of October is close to $19 million, $20 million.
I have also pleasure in informing that the integration between Jash and Waterfront is going smoothly, and we are now putting processes, systems in place, which will ensure that the operation of Waterfront is done in same way we do at Jash and also at Rodney Hunt. And in view of this, I’m now quite confident that Waterfront also, we would be as successful as we are in case of Rodney Hunt. The only difference between Waterfront and Rodney Hunt would be that Rodney Hunt, beginning three year to four years were painful. This would not be so at Waterfront. We don’t expect to have same level of pain at Waterfront.
Coming to other aspects, I would like to inform that we are refocusing our efforts in Middle East, and — so as to grow faster in that market, as well as we are now trying to enter new markets. We have been quite successful in Vietnam. And now, we are expecting business in Cambodia also. So, we are always on the look out for new markets. This year, we are refocusing, as I said, in Middle East and in Southeast Asia and Far East. In Southeast Asia, we are — in South Asia, we are looking at Indonesia as a major market for us, followed with Vietnam and Cambodia, in time to come.
Finally, I would like to say that our new plant in Chennai is progressing well, though it is delayed by a few months, but it’s progressing well. And we will be commissioning this plant in next year. As well as in Pithampur, we have started ground-work on the new plant for SEZ Unit 4. And these two, we hope to commission in next financial year. With these two plants coming online in FY ’26, we would be in a position to ensure that by financial year ’28, we can double our revenue to INR1,000 crores. When I say double our revenue, I’m comparing with our revenue last year of INR525 crores-odd — INR522 crores to INR1,000 crores in four years time.
As you can see, we are continuously improving our market capitalization, and we also have a good investment by our employees in the Company. As of today, 231 employees have ESOP in the Company out of 350-odd staff. So, this augurs well for our future because they are committed to the Company.
With this, I would like to bring this presentation to an end, and I would like to take questions from you.
Questions and Answers:
Siddesh Chawan
Thank you. We will now begin the question-and-answer session. The first question is from Sagar Tanna [Phonetic]. Please unmute yourself and go ahead.
Sagar Tanna
Thank you, sir, for a detailed presentation and outlook. You mentioned about a JV or some technology tie-up for diffusers, decanters, blowers, etc. Can you give more details about this? And what is the kind of market size that we expect in this product category?
Pratik Patel
So, Sagar ji, whenever we start a new business, it is, on the first few years, is little bit difficult. Invent has the best technology in the world. Unfortunately, they are also costliest in the world. To sell costly products in India takes a lot of patience and time. And we have been investing last one year on that. These products have huge potential. We have already got preliminary orders for these products. The orders are not significant, they’re to the tune of around INR2.5 crores, INR3 crores. But it is a beginning. We expect once all these products are kicking in well and are established, we expect these products to bring anywhere between INR25 crores to INR50 crores to our revenue.
Sagar Tanna
So, is this a technological tie-up or joint venture, or just an import distribution kind of arrangement?
Pratik Patel
This is a joint venture as well as technological tie-up.
Sagar Tanna
And sir, this INR25 crores-odd that you are seeing is largely for the domestic market. Is that correct?
Pratik Patel
Exactly. INR25 crores to INR50 crores, I would say, but the potential is much higher. But because this is a premium product, how successful we would be able in mass marketing, I cannot assure today. So, as time goes and as contribution of Indian production to the total price increases, we will know how competitive we would be and how successful we would be.
Sagar Tanna
So, where are these products used and who are our competitors, major competitors in these products?
Pratik Patel
So, most of the competitors are not from India, they are from outside India. They are like Xylem, or — I would say, mostly, products — these products are — competitors are outside India. And we hope to indigenize these products in time to come, so that we are competitive.
Sagar Tanna
But sir, how large would the market be currently today in India for these products?
Pratik Patel
It’s more than INR300 crores, INR400 crores.
Sagar Tanna
INR300 crores, INR400 crores. Got it. Thank you so much, and all the best.
Pratik Patel
Yeah. Thank you.
Siddesh Chawan
Thank you. The next question is from Mr. Naveen [Phonetic]. Please go ahead.
Unidentified Participant
Pratik sir, congratulations on very strong execution. My first question is regarding the operating margin. Apart from the operating leverage, are we seeing any impact of the lower raw material prices on our margin?
Pratik Patel
See, I would say, lower raw material prices doesn’t affect our margins much. It helps, but it is the order mix as well as criticality of the project, which guides the margin. As I have been telling all the time, critical projects help us in getting higher rates, better rates from our clients. And the raw material, if you see actually, is, I would say, only around 30% to 35% in the total price of the product. So, in 30% to 35%, if there is a deferential change of 10% to 15%, it does not affect greatly. So, the improvement which you see is on account of better product mix, higher margins on sales, and third, higher revenue.
Unidentified Participant
Understood. The second question is, how is our bid pipeline looking? And are you seeing any slowdown in the bid activity?
Pratik Patel
There has been no slowdown. You see, one, two months, there may be some changes, okay, because it all depends upon in which month, in which country projects have been awarded or not awarded. But if you chart our order inflow, you will observe that it is always on the upside. It’s going up and up. So, we don’t see basically any major hiccups in our order book.
Unidentified Participant
What are you expecting us to close this year in terms of order book?
Pratik Patel
As I said, our order book is close to INR850 crores on 1st of November. And if we do our — meet our projected revenues for the year, which is INR675 crores, it means that we have — we will deplete close to INR400 crores from that INR850 cores, to reach something like INR450 crores. In the next four months, we expect to achieve additional order book of INR450 crores to INR500 crores, to close the year between INR850 crores to INR1,000 crores.
Unidentified Participant
Thank you, sir. That’s all from my end. I’ll get back in the queue.
Siddesh Chawan
Thank you. The next question is from Mr. Amit Kumar [Phonetic]. Please go ahead.
Amit Kumar
Congratulations on the great set of numbers sir, and I have couple of questions. First is the, what is the market size of water control gates in India and the world? And what is our share in India? This is my first question.
Pratik Patel
So, the first question, market share of our Company must be more than 65%, 70%. The complete market in India, I would say, between INR200 crores to INR250 crores.
Amit Kumar
And global market size?
Pratik Patel
Global market is very big. Only in America, it is close to $200 million. I would say, in the English speaking world, where we can go and compete, it is at least $0.5 billion.
Amit Kumar
$0.5 billion marketplace. Okay.
Pratik Patel
So, in U.K., it is close to GBP50 million to GBP60 million. In America, is $200 million. And in rest of the English speaking, like Canada and Middle East and Southeast, etc., is another INR300 crores, INR400 crores.
Amit Kumar
And how do you make the capacity? Like, is it an MTPA or units, like, if you could give some insight?
Pratik Patel
There is no measure for capacity. You can make 2,000 gates of 500 mm size, and you can make three big critical gates of three-meter size and the value would be the same. So, capacity in our case cannot be calculated on the basis of units.
Amit Kumar
Okay. And second is, like, EBITDA, there’s a lot of fluctuation in EBITDA. In first quarter, I can see 4.5% EBITDA margin, now it’s 20%, and that’s very good. So, I just wanted to know, can we maintain this EBITDA 20%, if you can give some insights on this?
Pratik Patel
I think I informed that we will be — at the end of the year, it would be between 21% to 23%. If you see our EBITDA last year was also on consolidated basis, close to 19%. So, you should not go quarterly. First quarter is always weak, second quarter is strong, third is stronger and fourth is strongest. That is how our type of industry perform. So, you cannot compare on quarterly basis, though I’m sure every investor likes to do that. But being the type of business we are in, type of industry we are in, quarterly comparison would be a little bit difficult. But if you see last year, we ended with EBITDA between 19% and 20%. And this year, we are targeting between 21% and 23%.
Amit Kumar
And what was reason in Q1 for lower EBITDA for raw material, high raw material costs or some other reason?
Pratik Patel
Lower revenue.
Amit Kumar
Okay. Okay, sir.
Pratik Patel
The cost — the fixed cost remains same in our type of company. So, in the last quarter, the revenue will be nearly 40% of the turnover, revenue — total annual turnover. So, the EBITDA will definitely improve then, whereas in the first quarter, we have 10% of the annual turnover. And so, the EBITDA goes down.
Amit Kumar
Okay. And do we have any dependence in raw materials, on China, or any country or nothing?
Pratik Patel
No.
Amit Kumar
Thank you, sir. Thank you.
Siddesh Chawan
Thank you. The next question is from Mr. Tej Patel [Phonetic]. Please go ahead.
Tej Patel
Yeah. Thank you so much for the opportunity. Sir, my question was on the U.S. business. I mean, we are probably majorly into gates for the U.S. business and our gates majorly go into dams, right? So, I’m just trying to understand what is the policy there, which is driving this huge capex and huge order inflow for us? And if you could probably give a name of the policy of the bill that is driving this growth. And do we have — I mean, does it have any impact of leadership changing there, or do you see this capex going on?
Pratik Patel
So first of all, Trump makes no difference to the policy. The BABA Act in America has already been passed. So the BABA Act says that by 2029, 65% — up to 2029, 65% of the contribution has to be coming from America. We have a plant in America, and so we can easily produce and supply equipment compliant to BABA Act. BABA is Build in America, Build for America.
After 2029, 95% of the equipment has to be produced in America. So the industry has four years to five years to ramp up production capacity within America, so that they can supply up to 95% after 2029. However, this BABA Act applies only to product, which are — projects, which are funded by Washington. If a city is doing independent funding, they don’t need the funds from Washington, they don’t have to comply to BABA Act. So this act is not universal. This act applies to few cities, who need fund from Washington.
Coming to your question about how Trump coming affects us, well, it may affect, we don’t know. But as I said, we already have manufacturing facility in America, and we are growing that manufacturing facility. We are expanding in America also in ’26. And in ’27, we aim to put up a new plant in America to address requirement after ’29. So I am not too much concerned about that.
The market in America is not driven by any act. When you say it is dam, no, we don’t do only for dams. Dam is around 20% to 25% of our total revenue. Other than dam, we do water, wastewater treatment plant, pumping stations, and this is our major revenue. And this is going to happen, irrespective of whether population is there or not there because America has not for last 20 years invested on its own infrastructure.
Tej Patel
Got it. Got it. So sir, I was — what I was trying to understand, this major capex which is probably going on in the U.S. is properly that — I mean, another bill about $11 million to $12 million bill that they pass for water. Is it that only, right?
Pratik Patel
Yeah.
Tej Patel
Okay. Okay. Got it. And sir, my another question was, I mean, as you already said because of lower offtake in U.S. the first quarter is generally negative there. But sir, if I look at the standalone numbers, the margins are quite amazing, and let’s say 28%. So I just wanted to understand, being the nature of the business is same, right? But why the offtake in America starts, let’s say, after Q2 or — but in India, it probably starts from Q1 to Q4, where the American business start picking up after Q3?
Dharmendra Jain
It depends mostly on the projects. But if you see internationally, most of our projects are operating in the same manner. So our offtake not only in America, in India or in Southeast Asia or in Middle East, everywhere is low in quarter one.
One of the reason is wherever the financial year ending is quarter four — is March, everyone is targeting to supply as much as possible by March. And so, the next quarter after March becomes weak because it is like we have done so much and now it’s a relaxing period for everyone, in decision-making, in doing the inspection and so on. So quarter one always is historically weak, quarter two improves, but in quarter three and quarter four, we achieve maximum revenue.
As I said, only in the month of October, we have achieved revenue more than $9 million in America, which is equal to six months revenue. Was it produced in October? No, it was produced in September and before. So you cannot base that there would be uniform every year, every quarter. It will not be because of the type of industry we are in.
Tej Patel
Got it. Got it. Got it.
Siddesh Chawan
Tej, I will request you to get back in the queue. There are other participants, who are in the queue.
Tej Patel
No,, no, no.
Siddesh Chawan
Thank you. The next question is from Mr. Sahil Doshi. Please go ahead.
Sahil Doshi
Hi. Hi. Good afternoon, sir, and thank you for the opportunity. My question pertains to Rodney Hunt. You had said in the last call that there were certain orders, which were lower margin. So is that impact largely over now? Or could you illustrate a little more on that?
Pratik Patel
No, that impact is not over. That is an order, which would be under execution till June ’25. So we have done, I think, around 30% of that job.
Sahil Doshi
Understood, sir. Sir, we were hopeful that if we get to Rodney Hunt, margins should come to around 10%, 12% or more. So when do we envisage given this play because H1 has also been muted relatively and even you are carrying certain low-margin orders? So are we confident of achieving this number in this year?
Pratik Patel
Low-margin order totally pending is $6 million out of an order book of more than $40 million. So last time also I told it is not a point of concern for us. In fact, if you see like that, the Tata projects of Nuclear Power Corporation of India, which we are doing also is a negative. Not low margin, it’s a negative job for us. And we have done major part of that job this quarter. And still, we have shown very good performance.
So it depends upon what is the quantum of low margin or loss-based job in your overall order book position and when is it going to be manufactured. If it is going to be manufactured over one year time, it loses relevance because you will have only 5% or 2% or 3% lower margin jobs to be executed in one year time. And so, the intensity of loss or intensity of problem coming on account of that is spread over one year.
Sahil Doshi
Understood. Understood. Understood. Right. So just to get a clarity here in terms of Rodney Hunt directionally, sir that 10%, 12% margin aspiration is likely to be maintained, right? Is that correct?
Pratik Patel
Definitely. So we are — as I said, in October itself, we did $9 million to $10 million. So in September, we did $10 million and in October, we did $9 million to $10 million. Okay? We are now looking at revenue anywhere between $33 million to as high as $36 million. In comparison to last year, we did $26.5 million, $26.7 million [Phonetic]…
Dharmendra Jain
$24.6 million.
Pratik Patel
$24.6 million. So you can imagine that we are looking at a quantum jump in revenue.
Sahil Doshi
Right.
Pratik Patel
When you achieve a quantum jump in revenue, definitely, your overheads will whittle down — will go down significantly. And when the overhead goes down significantly, the profitability improves and increases. We still are not very happy with what we are doing in America. We have a lot of ground to cover. But the fact is we are improving year-by-year, quarter-by-quarter. I can assure you, last year, we did around…
Dharmendra Jain
10%.
Pratik Patel
10%?
Dharmendra Jain
8% to 9%.
Pratik Patel
8% to 9% PAT. And we have already achieved 8% to 9% last year. And this year, we hope to improve on it.
Sahil Doshi
Got it, sir. Very well appreciated that. Sir, just the second question is more on the large orders, which we were hopeful in the USA. Just wanted to check on the status of that and some of the other large orders, which you had committed in Hong Kong and other geographies?
Pratik Patel
The first order has already come in October. The second order is expected to come in December. Most of these orders are in the pipeline, and they will come.
Sahil Doshi
Sure, sir. Thank you so much, sir and best wishes to the team, sir. Thank you.
Pratik Patel
Thank you.
Siddesh Chawan
Thank you. The next question is from Dikshant Mulchandani [Phonetic]. Please go ahead.
Unidentified Participant
Hi. Congratulations on great improvement, sir, in our margins, and I understand that we are focusing on having more presence in U.S. And as we are making sure that we have some more — so much more of relevance in U.S., could you paint us a picture of who is our ideal client? I ask this…
Pratik Patel
All EPC contractors.
Unidentified Participant
So EPC contractors that is?
Pratik Patel
Yeah.
Unidentified Participant
Can you — can you just give us some sort of color into what is this guy building? Why I’m asking this, the context is that is he building a dam for a power project? Or are they focusing more on maybe like water conservation? Or is it more for refining water, cleaning water to make sure that their drinking water is better?
Pratik Patel
It is uniformly spread. So it could be water conservation or retaining water, holding water. It could be for industrial application. It could be for water, wastewater treatment plant and so on. I have no control over who will get the project and who will place the order, okay? So this wide variety of projects are going on.
Presently, the Kansas City project, which is a big project we are doing, they are creating a — manufacturing a flood barrier to isolate the complete railway system when flooding takes place, okay? Similarly, we are doing some other projects, where they want to isolate the cities from flooding taking place. So sometimes it is for critical infrastructure, sometimes it is for cities, sometimes it is for flood control, sometimes it is for seawater ingress prevention and so on. So it all depends upon varied applications of the client and needs of the clients.
Unidentified Participant
Got it, sir. Sir, just to expand a little bit on this. U.S. has been known, especially the West and East Coast to have flood issues, and that’s a great opportunity also for us. But which are the cities or states that we are really focusing on U.S. because as we have seen from your prowess of execution that you guys are really focused on U.S. right now, and I see that [Foreign Speech]. So what is it that we are really focused on right now from a larger picture perspective two years to five years down the line?
Pratik Patel
We cannot differentiate between cities or East or West, etc., etc. It all depends on which city has money, and which is coming with projects, okay? New York City is one of our strongest client, as is the state of Texas and state of Florida.
With Trump coming in, I am quite hopeful that infrastructure would be his priority. He has been telling on and again that American infrastructure is in dumps. And it is true because we have seen countries like India building better infrastructure than America in many aspects of the society. So I’m sure a lot of investment would be happening.
It all depends upon how strong each individual entity is, like each city is. Depending on that, they will spare their funds for projects. And whenever they spare their funds and the projects come, we’ll bid for it along with the contractor and try to get such projects.
Unidentified Participant
Got it, sir. Sir, just one final question. I know that we have been focusing on this. But is the larger idea to be sort of into the clean water tech business as well? Do we — are we going to focus more on water purification contracts or businesses? I understand that it’s not in our hand.
Pratik Patel
We supply equipment, we don’t do projects. So if such a project is coming where they need equipment and if we have those equipment, we’ll supply. But we are not interested in doing any turnkey projects. We are not an EPC company. We do not have core competency in that, and we don’t want to enter that.
Unidentified Participant
Got it, sir. Thank you so much, sir. Thank you so much. Best of luck to you and the team.
Pratik Patel
Thank you.
Siddesh Chawan
Thank you. The next question is from Mr. Dilip Sahoo [Phonetic]. Please go ahead.
Unidentified Participant
Yeah. Pratik bhai, am I audible?
Pratik Patel
Yes.
Unidentified Participant
Yeah. Pratik bhai, on the application of our products, which is essentially wastewater and storm water and seawater from sea level change, particularly from U.S. and Southeast Asia, Singapore, Hong Kong perspective, do we have all the equipment product lines that is required to give a comprehensive solution that is, are we well equipped? That is question number one.
Pratik Patel
Well equipped to manufacture? Yes. Do we have all the products? No.
Unidentified Participant
Okay. So those gaps in terms of not immediate future, but in, say, next two years to three years’ perspective, do you think filling those gaps will be a part of our agenda, right?
Pratik Patel
It is part of our agenda. But I would tell you like this that the gap exists in products, which are more mass production type, which are more batch production type. And as you understand, wherever there is mass production, margins would be less. So most of our gaps are in batch production and mass production type of products, where — which are of comparatively lower margins. And we would go into those products only if we see that we can maintain our margins, and we can take these products out of India, where margins would be better.
Unidentified Participant
Understood. Understood. So we had — in around a year back, I think we were discussing this. We had a couple of acquisition targets to fill in some of the gaps. So is it kind of progressing?
Pratik Patel
It did not work out. We have no problem in acquiring company if the rates are okay. But if they are looking at valuation same as Jash, how can I acquire them?
Unidentified Participant
Thank you, Pratik bhai, and hope for a better good H2.
Pratik Patel
Thank you.
Siddesh Chawan
Thank you. The next question is from Mr. Salil Desai [Phonetic]. Please go ahead.
Salil Desai
Good evening, Pratik bhai. Pratik bhai, a couple of questions. The first was maybe Mr. Jain can answer this. First one is, sir, debt levels have gone up from March till now. So any reasons why you needed to borrow money when there’s cash on books?
Dharmendra Jain
No. Actually, the [Indecipherable] production is totally higher, say, in the September to December because our third quarter and fourth quarter is higher sale. So our accumulation of stock increases during that time. That’s why the utilization of working capital increases.
Salil Desai
Okay. So by March, this should again normalize. Is that what…
Dharmendra Jain
Yeah. Definitely.
Salil Desai
All right. Great. Sir, second question is on Rodney Hunt. I’m not sure if I understood this right. The first half loss is higher than last year because of these legacy orders or that is not a concern, but some other reasons led to…
Pratik Patel
It is legacy order also. And at the same time is that we have had problems in getting people because we have a lot of orders for make in America, but we don’t have enough people. And so, to get people, we have increased our salary, as well as wages in Orange, Massachusetts, where the manufacturing plant is. So it is a combined effect of everything.
Salil Desai
Understood. Right. And finally, again, on a project-specific profitability, the NPCIL margins you said are on the negative side. This is, again, because what you’ve taken it as the first set of orders in this application, maybe you want to build some market there? Or how do you think of doing — taking on some of these orders?
Pratik Patel
So let’s talk of NPCIL order. We took at around INR50 crore order, which is a loss of INR10 crores to INR15 crores, okay? It was not planned to be at a loss of INR10 crores to INR15 crores. But once we started…
Dharmendra Jain
Maybe 13% [Phonetic] loss in there.
Pratik Patel
Yeah. So ultimately, I think we’ll see around 13% loss in that order. The reason for that loss is that we had not envisaged the problems we’ll face doing a job with NPCIL, where at every stage, their involvement is there. So we had not considered cost accordingly anyway.
The reason we took that order was because NPCIL has huge plants. And this order also, we had bidded initially at a higher price. We had lost. They had placed the order on someone else. He could not execute. So they came back to us.
Salil Desai
Okay.
Pratik Patel
And we did it only to prove that we are better than everyone in India. We are a different type of company. If we commit, we’ll do it at any cost and our quality would be better. They understood it, they have appreciated it.
And that’s why out of the INR120 crore order, which we had lost, we got first INR50 crores and now we have got another INR20 crores. And a few days back, Tata Projects and NPCIL team was here, and they are asking us to do more of that job. So we have proved our point, but now we are not doing the future jobs at losses.
Salil Desai
Understood, sir. Great. Thank you very much.
Siddesh Chawan
Thank you. We will take the next question from Mr. Pritesh Jain [Phonetic]. Please go ahead.
Unidentified Participant
Congratulations, sir, on good set of numbers. My question is more related to the rising sea level issue. In the previous con calls, you had mentioned that we are going to expect some order from Singapore side. So any clarity on that side?
Pratik Patel
We have given our preliminary offers. See, the projects will start coming from ’26 and they expect to complete the projects in the next 20 years. So everything would not move so fast. I had given you a projection of what type of potential exists because of rising sea water level, but the projects are not going to come before ’27 or ’28.
Unidentified Participant
Okay. And my second question is more related towards solid waste management sector. So can you throw some light on that? What is the current update on that side?
Pratik Patel
Yeah. So we have done the initial development of the products required for that. India has a big solid waste handling issue. We are in a mess. And if this country has to really do the Swachh Bharat Abhiyan, a lot of solid waste management plants have to come all over India in every city. And some of our clients are diligently working on it, and we are supporting them. So they are now waiting for — they have given their bids. They are waiting for orders to come. Once the order comes, they will be working with us to execute these orders.
Unidentified Participant
Okay. Thanks, sir. Appreciate it.
Siddesh Chawan
Thank you. We will take the next question from Mr. Sumit Chaudhari [Phonetic]. Please go ahead.
Unidentified Participant
Am I audible?
Pratik Patel
Yes.
Unidentified Participant
First of all, congratulations, sir, for this kind of number. My first question is in FY ’24, our — more than 60% of our revenue come from water control gates and this quarter also. So we are not pushing other products?
Pratik Patel
It’s not like we are not pushing other products. This is our principal product approved worldwide. So if the projects are coming, mentioning our name, I would do it. It is not that we are not doing other projects [Phonetic]. Other products also revenue-wise are increasing year-by-year. But the growth in water control gates is higher.
Unidentified Participant
Okay, sir. Thank you, sir.
Siddesh Chawan
Thank you. We’ll take a follow-up question from Mr. Tej Patel. Please go ahead.
Tej Patel
Yeah. Thank you so much for the opportunity again. Sir, I wanted to get your idea on — I mean, we have supplied gates, bigger type of gates for U.S., especially that goes into dams. But now looking into the recent opportunity for hydropower and PSP coming up, I mean, I don’t know if — I mean, in terms of capability, I think, yes, we are capable of building those gates in India, and you also got flood control gates in, let’s say, Singapore or U.S. coming in.
But then are we supplying those bigger gates, flood control projects in India as well? Because — so I just wanted to get an idea, are we planning to supply those big gates to PSPs, hydros and the flood control projects? Because I think one order we got for PSP probably two months back for Xylem. So if you just can throw some light on are you willing to participate in those kind of projects?
Pratik Patel
We will not say no. If it is a private contractor. We will not say no, if there are margins. We do not focus on Indian markets because the problem is about margins. So if in such projects, there are respectable margins, then we are willing to do. If a contractor thinks it is a fabricated product, anyone can make it and is going to talk on a per kg basis, that’s not our business. So wherever criticality is there, wherever technology is involved, wherever someone is willing to give a price for technology, we would be interested to do business with him.
Tej Patel
Okay. Why I’m asking because the recent hydro, let’s say, the gates, which goes into PSPs and hydros, I mean, those players are making like quite decent margins. So for the same reason, I was asking because you also got an order from Xylem, right, for PSP.
Pratik Patel
We will do once — if we see that we are getting margins and if we see that the projects would get completed in a fixed time frame, we will definitely be interested.
Tej Patel
So sir, have — I mean, are those orders — any pipeline on those projects?
Pratik Patel
I cannot tell you offhand, like this, we are working with many clients. Now at what level they are, I would not be in a position to reveal today.
Tej Patel
Okay. Okay. No problem, sir. Got it. Thank you.
Siddesh Chawan
Thank you. Okay. We will take our next question from Mr. Gopinath [Phonetic]. Please unmute yourself and go ahead.
Unidentified Participant
Yeah. So thanks for the opportunity and just I have a couple of queries, sir. The first question is, if you see the last four quarter — four months orders, every month, I think we are receiving around INR45 crores. So are you expecting the same flow or are you expecting some more orders in the coming months?
Pratik Patel
So Gopinath ji, it is like this. We may get for three years, three months or four months, INR40 crores, INR50 crores worth of orders every quarter, every month. And all of a sudden, we’ll get another month of INR70 crores, INR80 crores or INR90 crores or INR100 crores worth of orders. This will happen whenever any big order comes from any part of the world in that month.
So for example…
Unidentified Participant
Got it.
Pratik Patel
For example, we are expecting a very big order from Technip in America. That order is worth more than INR50 crores, INR60 crores, single order worth INR50 crores, INR60 crores. If we get that order in that quarter, not only around INR30 crores, INR40 crores of general orders are there, the INR50 crore order is also or INR60 crore order is also added up. So in that month, particular month, the order booking will go up to INR80 crores, INR90 crores. So this will happen two times to three times in a year. It all depends upon what is our capacity to take orders, whether we are willing to take the risk, whether we want to take such an order and so on.
So in the month of October, we have taken an order in America, which is more than INR30 crores, so it has just come in, I think, in the first week of November. So in the month of December, when you see my order intake of November, it may be more than INR60 crores, INR70 crores. So every month, we cannot say — it is not a commercial product or consumer item, which is sold every month. Some month, it may be more, some months, it may be less.
Unidentified Participant
Yeah, understood. Thanks. And the follow-up question is, for FY ’25, we have given a guidance for INR675 crores. And next year, maybe for ’26, right, maybe around 20%, something like if you go by CAGR of 20%. But by FY ’26, ’27 itself, we will be around INR1,000 crores. So just want to understand if we get some big orders, so we will be able to execute those orders with our current capacity, even if we have additional INR200 crores, so that will make us to INR1,000 crores, right? So in case if we get some big orders. So how that — how the plan?
Pratik Patel
So first of all, someone before asked me what is — how many units you can produce in a year. So in our type of business, in the same infrastructure, which I have currently — existing infrastructure, also, I can produce INR1,000 crores. I don’t have to build two plants. The reason we have to build plants is clients place order on us and when the product is ready, they don’t take delivery, blocking scarce space under cranes in plant.
So one of the reasons we need spare capacity under cranes is because a lot of time, we have equipment, which is ready to ship, but the client is not willing to take because of various reasons. So even today from the existing manufacturing capacity, it is possible for me to achieve INR1,000 crores. So if we get business and if people are willing to take away deliveries fast, we have no problem at all. We can do it. Even we can do it in ’27 or ’28, we can do it, no problem.
Unidentified Participant
Sure. Sure. Got it, sir. Thanks. And I just want to give one final thing. So actually, I used to — I’m an individual investor, I used to attend different type of conference calls, but the way you speak, the transparency and the genuinity, really, I would like to appreciate, sir.
Pratik Patel
Thank you.
Siddesh Chawan
Thank you. That was the last question. I will request Pratik sir, for the closing comments.
Pratik Patel
So thank you, once again, everyone, for patiently listening me out. Thank you for telling me that we are transparent. Well, we are honest. Whatever is there, it is on the table. We don’t try to hide anything. And we try to be as lucid as possible in our replies. However, if we have not met anyone expectation on their query, you can write to me or you can write to Dharmen or you can write to E&Y, and we’ll be glad to reply or explain in detail. Thank you.
Siddesh Chawan
Thank you. Thank you, everyone, for joining us today. If you have any additional questions, as Pratik sir said, you can reach out to us any time. We wish you a good health and look forward to seeing you again in the next quarter. Have a good day.
Dharmendra Jain
Thank you.
Pratik Patel
Thank you. Thank you, everyone.