Kirloskar Brothers Limited (NSE: KIRLOSBROS) Q3 FY23 Earnings Concall dated Feb. 13, 2023
Corporate Participants:
Sanjay Kirloskar — Chairman and Managing Director
Alok Kirloskar — Managing Director
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Chittaranjan M. Mate — Chief Financial Officer
Analysts:
Mahesh Bendre — LIC Mutual Fund — Analyst
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Pratik Kothari — Unique Portfolio Management. — Analyst
Vikram Rawat — East Lane Capital — Analyst
Himanshu Upadhyay — o3 Capital — Analyst
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Riddhesh Gandhi — Discovery Capital — Analyst
Viraj — — Analyst
Manish Goel — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Kirloskar Brothers Limited Q3 FY ’23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Kirloskar, Chairman and Managing Director, Kirloskar Brothers Limited. Thank you and over to sir.
Sanjay Kirloskar — Chairman & Managing Director
Thank you. Good afternoon, everyone. On behalf of Kirloskar Brothers Limited, I extend a very warm welcome to everyone for joining us on this call today. I’m sure you’ve had an opportunity to go through the financial results, which have been uploaded on the stock exchanges and the company’s website. You must have seen the numbers standalone, as well as consolidated, as well as the order book.
So I thought, I would ask Alok and Rama to speak the international and domestic businesses, following to which Mr. Mate will make a short presentation. Thank you. Of course, I’ll be available for the question and answer session. Thank you.
Alok Kirloskar — Managing Director
Hello, thank you. Overseas operations reported a good performance in Q3 FY ’23, healthy revenue growth, as well as improvement in operating profit margin. The company’s Thai, U.K. and African business have shown resilience over the last few months amid multiple uncertainties and in fact have gone from strength-to-strength. That business stood at inflection point and we are expecting the business to do better after the changes that we’ve made in the last year.
The company’s focused efforts in developed markets in water, fire and industrial, and services, have helped us get more regular business rather than be dependent on large product jobs coming from oil and gas. That said, there has been an uptick in oil and gas market, and more new orders have been booked in the sector compared to the last few years. That said, those orders are not reflected in the sales as yet. We expect those orders just sitting in our order book will come into sales over the next few quarters.
There has not been any major high-value product sales in the year-to-date sales of international companies. It’s mostly been regular daily business. The company’s framework services business has picked up pace and is witnessing increased adaptation by the customers. The South African business has signed major framework contracts for services in the power and mining sectors. The Thai business has signed services in the steel and offshore oil and gas sector and British business has continued and signed on more companies and chemicals, water and oil and gas space.
The company is able to — is well positioned and is able to build up this business going-forward. The order book position, just from a point of interest for KBIBV companies opening in January 1st 2022 was about GBP52 million and the opening order book position on the 1st of January 2023 is about GBP84 million. There are new projects coming up in the pipeline and as we have focused on developing standard business or regular business, we are now pushing or dewatering Autoprime products so that we can further build another layer of base business to the company, which will help give consistent performance.
With this, let me invite Mr. Rama Kirloskar, Joint M.D., KBL and M.D. KEPL to take you through the performance of domestic companies.
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Thank you, Alok. On the domestic operations side, we see an improving demand for our made-to-order and engineered-to-order products. The market is also picking up for our retail segment. We continue to invest in modernization and productivity improvements at our plants in Dewas and Sanand continue. We expect to reduce lead times for delivery to such productivity improvement and ensure no sales losses. We have launched many new products including numerous energy efficient pumps and we’ll continue to do so in the subsequent quarters.
We continue to be the only player in the retail segment with IE4 and IE5 motors, which are the most efficient motors available in the market. Most of our retail competitors offer IE2 motors at most. As all of you are aware, the company recently launched APOEM program aimed towards reducing our turnaround time continues to gain momentum from the dealers and distributors. We expect this program to propel growth going forward. The government in the recently announced budget has focused on increased capital expenditure, which augurs well for the company’s products in the agriculture, water and oil and gas sectors. We firmly believe that with the sharp uptick in the government and public capex, the growth of the private sector capex will follow. Major private expense — capital expenditure is expected towards data center, healthcare, energy and industrial.
The company is putting extra effort to reinforce the presence and expanded product offering for these sunrise sectors. Growth in public and private capex cycle is expected to aid the growth for the domestic business.
Now coming to the domestic subsidiaries, Karad Projects And Motors Limited continues its healthy growth pace. KPML revenue grew by 11%, while PBT grew by 6% nine months FY ’23.
The company is well on track to turn around The Kolhapur Steel Limited, which is witnessing a sharp growth in revenue, as well as production. With this, let me invite Mr. Chittaranjan Mate, our CFO for the financial performance highlights.
Chittaranjan M. Mate — Chief Financial Officer
Good afternoon. Thank you, Rama. Before I share my views on the financial performance of the company, please note that during Q3 FY ’23, one order of the company has crossed threshold for recognition of revenue as per rules that follows consistently. Consequently, there is a favorable impact the INR31 crores on profit before tax during the quarter and nine months ended on 31st December 2022.
Let me start with consolidated financial performance highlights, starting with Q3FY ’23. Our topline grew by 23% year-on-year to INR957.5 crores. EBITDA grew by 160% year-on-year to INR153 crores while EBITDA margins expanded by 787 bps to 16%. Profit-after-tax grew considerably by 308% year-on-year to INR88.9 crores. EBITDA, because of the impact of revenue recognition [Indecipherable] INR31 crores would have been INR122.1 crores, that is 12.8% margin, 8.1% of previous year and the growth of 107% in value terms on year-on-year basis.
Now coming to nine months financial performance, topline grew by 24% year-on-year to INR2,606 crores. EBITDA grew by 91% year-on-year, to INR268.1 crores while EBITDA margin improved 362 basis to 10.3%. Profit-after-tax grew by 240% year-on-year over INR135.1 crore. EBITDA without the impact of revenue recognition listed above of INR31.3 crores. would have been INR236 crores, that is 9.1% margin as compared to 6.7% margin previous year And it’s a growth of 69% in value terms year-on-year basis.
Now coming to standalone performance, Q3 FY ’23 revenue stood at INR611.9 crores as compared to INR521 crores, a growth of 17% year-on-year. This contributed approximately 60% to consolidate turn over. EBITDA was at INR79 crores, a growth of 115% year-on-year while EBITDA margin expanded by 584 basis points to 12.9%. PAT from Q3 at INR44.6 crores, which is a growth of 148% year-on-year. And on nine months performance, revenue stood at INR1,745.9 crores as compared to this INR1403.1 crores, which is a growth of 24% year-on-year, which contributed approximately 67% to the consolidated revenue.
EBITDA was at INR156.9 crores, a growth of 65% year-on-year while EBITDA margin stood expanded by 290 bps to 9%. ESG for nine months FY ’23 stood at INR73 crores, which is a growth of 79% year-on-year. This is all from our side. We can now begin question and answer session. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions]. My first question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Mahesh Bendre — LIC Mutual Fund — Analyst
Hi, sir. Hi sir, thank you for the opportunity. Very impressive performance. Sir, one clarification is, that we said that we have received INR31 crores of benefit at PBT level because of threshold level in one of the projects were achieved. Has this happened in domestic business or international business?
Sanjay Kirloskar — Chairman & Managing Director
First question, for domestic business.
Mahesh Bendre — LIC Mutual Fund — Analyst
Okay, okay. Sure, sure, and sir, the margins have been very significantly gone up. I mean — so what could be normalized margin, one could see from both domestic and operating export side.
Sanjay Kirloskar — Chairman & Managing Director
I think we have consistently maintained that and all the investors felt that margins will be improved. We expect that these margins will raise consistently over a period of time. So effort that has been put in by the entire team, that’s resulting in this performance.
Mahesh Bendre — LIC Mutual Fund — Analyst
Because sir, operating performance for even international business — our margins, our operating margins are showing it around 21%. So just trying to understand, is there any one off item in the international business as well?
Alok Kirloskar — Managing Director
No, there’s not been any one-off item, I mentioned that when I was speaking that, it’s just the main daily business. The service business continues to creep up and become a larger share of the overall portfolio. And I think the main difference is that the other businesses have — health business got breakeven. I think in the past, someone had asked this question that there is so much service business not coming to the [Technical Issues] mainly because at that time, the service business was compensating for the regular business, which was not performing as well. But as the regular business, which is our baseline business, starts getting over the breakeven, then we get that effect in the business engine.
Mahesh Bendre — LIC Mutual Fund — Analyst
So, these margins are sustainable going forward?
Alok Kirloskar — Managing Director
You are asking in the context of international or domestic?
Mahesh Bendre — LIC Mutual Fund — Analyst
International.
Alok Kirloskar — Managing Director
Yeah. I mean the margins you have to also see that what you’re seeing is nine month margins. They don’t exclude — they exclude our first quarter. And from the international business, the third quarter of KBL, which is the quarter that just passed is their last quarter and then the first quarter. So I mean, I would look at it from an annualized point of view rather than just a nine-month point of view, that’s what I would say to you.
Mahesh Bendre — LIC Mutual Fund — Analyst
Okay. And last question that you mentioned that at the beginning of the last year, we had order book around — for the international business was around GBP52 million and now going to GBP88 million. So do you think execution will be very strong over next few three to four quarters?
Alok Kirloskar — Managing Director
I mean, yeah. I mean, like I mentioned in the opening that GBP52 million, which roughly translates into INR520 crores last year and this year, the opening order book is about GBPR84 million, which roughly translates into INR840 crores. So, yes. I think, definitely there is no pressure for them to deliver. And there will be some — hopefully some in and out businesses as well.
Mahesh Bendre — LIC Mutual Fund — Analyst
Sure, thank you so much.
Sanjay Kirloskar — Chairman & Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Renjith Sivaram, Mahindra Manulife Mutual Fund. Please go ahead.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Yeah, hi, sir. Congrats on good set of numbers. Sir, if I look at your threshold recognition, so the cost [Technical Issues]
Operator
Sorry to interrupt you Mr. Sivaram. The audio is unclear from your line. Please use your handset.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Yeah, I’m using handset only, Is it audible now? Hello?
Operator
Yes, sir.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Yeah, so in this INR31 crores crores of additional, which you’ve told, the cost till the threshold will be booked in the previous quarters and now we are booking the profit, that’s how it works, right as per the accounting standards?.
Sanjay Kirloskar — Chairman & Managing Director
Yes. As per the accounting standard, when the percentage of completion exceeds 25%, whatever it takes by the company, that time we book pro-rata income also. Earlier, only cost was booked, cost and equal amount of revenue.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, so in the previous first quarter and second quarter, the corresponding cost [Technical Issues] book and this quarter. the margins are also booked, right? So how much of —
Sanjay Kirloskar — Chairman & Managing Director
As well as the pro-rata margins would be booked in subsequent quarter.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay and how much is pending now, what percentage of this is over?
Sanjay Kirloskar — Chairman & Managing Director
That we cannot disclose because it is a — because disclosing margin on that, margin percent on that order.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, this is one off order, right?, like it won’t repeat, right?
Sanjay Kirloskar — Chairman & Managing Director
Yeah, we believe its a one-off order.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, And sir one more thing, sir, noticing your presentation is that the standalone order intake has shown a PBT INR485 crore compared to [Technical Issues] last quarter and INR624 crore last year same quarter. So why is that reduction in order intake?
Sanjay Kirloskar — Chairman & Managing Director
If you see the trade, last year Q3 was INR624 crores, then it went to INR721 crore, came down to INR596 crores, again INR814 crores. Basically, part of our business is adjustment to stop, so their order booking is not there. And there is [Technical Issues]. It depends on the pace of order finalization by the customers. Inquiry would be there but the time which they take for finalizing, accordingly there will be ups and downs quarter-on-quarter.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
So it’s [Technical Issues] I should read it more [Technical Issues], probably structurally the dates will come back in the fourth quarter, is that right?
Sanjay Kirloskar — Chairman & Managing Director
Yeah, normally as you use funnel. order funnel and like Mr. Mate said it depends on when customer timelines.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, so probably it will be — it might com back in the next quarter, is that reading right in our understanding?
Sanjay Kirloskar — Chairman & Managing Director
So yeah, I hope so.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, And, sir, is there any forex impact in your international margins in this quarter? How much was that if you can quantify?
Alok Kirloskar — Managing Director
Yeah. I think there is a forex impact in the nine months, and we have recovered some of that impact, may be I think 20% of that impact is recovered in the third — in this quarter. But year-to-date, what’s the nine months, there is still quite a significant forex impact.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, sir how much was the impact for the nine months?
Sanjay Kirloskar — Chairman & Managing Director
Approximately INR25 crores.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
So INR25 crores of your nine month profit in the overseas subsidiaries is kind of impacted?
Sanjay Kirloskar — Chairman & Managing Director
Accounting standards, the loss book under the head forex loss was INR25 crores, but while expecting the goods and realizing, we got some benefit of increased sales realization. So I won’t say the entire INR25 crores was the Forex loss. Part of it is already recovered through increased revenue.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, so for this quarter, there was a recovery in ForEx — this quarter Q3 FY ’23.
Sanjay Kirloskar — Chairman & Managing Director
Yes.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
How much was that?
Sanjay Kirloskar — Chairman & Managing Director
Roughly, INR10 crores.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, so roughly INR10 crores is the kind of gains that we got in this quarter. But despite that your margins are little healthy, that means structurally you believe that things are falling in place.
Sanjay Kirloskar — Chairman & Managing Director
Yeah.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, okay. That’s happy to hear. And in terms of this irrigation projects, we are hearing a lot of announcement that at least from the government and from some of the large companies like L&T, so in that market, what is you’re overall feasibility, Are we seeing good or we final decision happening on because you have a good product there. Are you still able to maintain your market share there. What’s your overall thoughts in irrigation market?
Sanjay Kirloskar — Chairman & Managing Director
Whether irrigation, water supply or power that we have explained earlier, out of the total number, the amount that is announced by the government, roughly 1% to 1.5% in what is the the pump content in any large project. And we remain the preferred supplier of choice as far as large players in this market are concerned.
I think I’ve also explained that we take the orders on our terms, which is advanced in the total credit. So even then, the supply on a monthly basis ten plus large pumps. And largely this design is more than a megawatt to 1.5 megawatt.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay. Got. And sir and lastly on the the small pumps business what’s your overall feel in present market. Are you seeing good demand and do you believe the trend will continue in the small pumps. And anything on the pricing, if you can say like pricing, have you taken any pricing action and market share?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Yeah, I’ll answer that question. So, the market is picking up as far as the retail segment is concerned. We have not increased our prices and we don’t foresee any price increase as of now. But we do see that there is a lot of healthy booking from customers. So that should not be a problem going forward.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, and what will be our utilization level small pumps?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
It would be anywhere between 65% to 70% utilization.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
And how much of an increase in that has happened over the last one year?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
How much of an increase in —
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Utilization in the small points?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
No, I think it’s gone from around 55 to 70.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay. Sure, thanks I’ll join for further questions. Thank you.
Operator
Thank you. The next question is from the line of Pratik Kothari from Unique Portfolio Management. Please go ahead.
Pratik Kothari — Unique Portfolio Management. — Analyst
Hi, good afternoon and thank you. Sir first question again on international. I mean after gap of two years, we have seen the margins that we are in profitability? Are you looking at this more like and is this just a quarter three phenomenon or how should we read into this numbers?
Alok Kirloskar — Managing Director
Pratik I would look at the nine-month number and also as you know, generally I’m not making a forward looking statement here, but generally the first quarter in any company tends to be a little slower. And what is – what you’re looking at I never look at the Q3 number at all in here. I look at the nine months and then consider what the Q1 would be like. So that’s really how I look at the numbers, if you want to look at the international holistically.
And, but I would say that the main, like we’ve said earlier, there is no major job that’s gone through. In fact, just to put it in context SPP as an example used to do GBP25 million just in oil and gas revenue in its peak days back in 2013, 2014. That is lowest, we did GBP4.5 million. Last year, we did GBP7 million. So we actually closer to the lower end than to the higher end. So from that point-of-view, I would say that it’s basically all the other businesses that like we’ve been saying we’re trying to develop and stabilize the baseline of the business and that’s really what’s really kicking in.
Our services business anyway had picked up and we’re touching 35% to 40%. But the services business in away was cross-subsidizing all the other businesses. So now that, I think most of them are back over breakeven, you get that effect that you see in the numbers. And I think it’s actually more visible in our South Africa business where we are at 50% service business.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Fair enough. Sir, just one clarification on this project, you mentioned that the test process 25% completion against your book. So this would be, I recurring in the future also, right, or this is one-off and this is done?
Sanjay Kirloskar — Chairman & Managing Director
Pratik let me clarify, this is not a turnkey project, the way we were undertaking earlier. This is our order development, order mix long delivery period. So as for accounting standard we follow POC. And yes in subsequent quarters, there would be impact, but it won’t be in such a leaps and bounds of 25%, and like that. Because it would be a slow impact.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, so any light that you like to throw. What kind of development order is this? Fr whom, bank or some of the [Technical Issues].
Sanjay Kirloskar — Chairman & Managing Director
We can’t disclose.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, fair enough. And sir, last question on the standalone part. Have you seen, I mean, we spoke about the cyclicality in terms of orders that we get, but in terms of decision making, the confidence on down, any color you would like to throw on that?
Sanjay Kirloskar — Chairman & Managing Director
So, I believe but these things happen year-on-year. There’s nothing abnormal that we have seen.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Good. Thank you and all the best, sir.
Operator
Thank you. The next question is from the line of Vikram Rawat from East Lane Capital, please go ahead.
Vikram Rawat — East Lane Capital — Analyst
Yeah. Hi, thank you for giving me the opportunity. Sir two, three questions from my side. One thing is on the overseas side, the margins which you are now saying on a sustainable basis would be around 9%, which comes on nine-month basis for our future, is that correct?
Sanjay Kirloskar — Chairman & Managing Director
And I think what I just said earlier was that, you’re seeing it as a nine-month basis. Effectively in these numbers, the first quarter of KBIBV is not included. As just mentioned that traditionally first quarters are not always the strongest quarter of most companies. They are not making any any forward-looking statement on that. But, but I think we should factor that in when we look at general margin rather than just looking at second third and fourth quarter of the company.
Vikram Rawat — East Lane Capital — Analyst
Okay, so probably it will be somewhere between the 5% to 7%. Is that the correct assumption if I will kind of this quarter?
Sanjay Kirloskar — Chairman & Managing Director
Yeah. I mean it’s right. Yeah. I do want to make a prediction on it.
Vikram Rawat — East Lane Capital — Analyst
Okay, because we don’t have the fourth quarter or last year first quarter number calendar year. Okay, and second on our domestic side, can you just highlight what is the inquiry pipeline on a MTO and ETO deal and what was it last year? Hello, hello.
Operator
[Operator Instructions]. Mr. Rawat, please repeat your question.
Sanjay Kirloskar — Chairman & Managing Director
Mr. Rawat sorry, I was answering your question. And I think one other thing is that one should consider it from a 12-month point of view.
Vikram Rawat — East Lane Capital — Analyst
Sure, thanks. Thanks for that. Another question on the domestic side, so can you just highlight what is the inquiry pipeline on an MTO and ETO order side currently outstanding, and what it was one year back?
Sanjay Kirloskar — Chairman & Managing Director
You want to know the inquiry pipeline?
Vikram Rawat — East Lane Capital — Analyst
Yes.
Sanjay Kirloskar — Chairman & Managing Director
We don’t have the numbers just now.
Vikram Rawat — East Lane Capital — Analyst
Okay, no issue. And can you also highlight how is the working capital and the the net cash position in the book or net debt?
Sanjay Kirloskar — Chairman & Managing Director
On domestic side, I would say that we are cash positive.
Vikram Rawat — East Lane Capital — Analyst
Okay. Thank you, that’s it from my side.
Operator
Thank you. The next question is from the line of Manish Goyal from ThinkWise Wealth Management. Please go ahead. Mr. Goyal your line is in talk mode. Please go ahead with your question. Mr. Goyal please unmute your line from your side if muted. As there is no response from the current participant, we’ll move on to the next question from the line of Himanshu Upadhyay from O3 Capital. Please go ahead.
Himanshu Upadhyay — o3 Capital — Analyst
Yeah, congratulations on good set of numbers. Am I audible?
Sanjay Kirloskar — Chairman & Managing Director
Yeah.
Himanshu Upadhyay — o3 Capital — Analyst
See I had two questions, okay. So the first was, after a very long period of time, we are seeing that capex cycle recover, okay. And last time was 2002 to 2010, okay. How different is this cycle versus the previous one? And is this come, intensity of competition similar or you think the intensity of competition is less or more. And scope to increase the pricing, especially on the industrial side of the businesses. Can you give me some of your thoughts, of current cycle that we just started, how it has been.
Sanjay Kirloskar — Chairman & Managing Director
See capital, capex cycle is quite strong, certain parts of the business, whether steel industry or industry building in construction. And I think in all these areas, we see very strong — I mean, people are coming to us asking for products, etc. And what was the other question? Right price?
Himanshu Upadhyay — o3 Capital — Analyst
Right price, actually we are doing consistently over the last year and luckily, I think the commodity prices are softening. So, we’ve been able to hold on to prices. And third question was about the competition. I think competition is still there. I mean there is no — there are many more players who have come in and would be coming in from outside, but picking up inside India and competing with us, that is not a mission. Okay. And the second thing is on the order group accretion in the domestic market, the type for accretion we are seeing for other capital goods, let’s say our boiler turbines, we are not seeing that much in our case, okay. Even when we look at our foreign subsidiaries like Alok mentioned, there has been at 60% growth in KBIBV is booked in last one year, okay, opening order book. And so which you have INR600 crores what I see is currently INR900 crores, consol minus standalone. The standalone, the accretion is much lesser, okay. It has grown by 10%. So what am I missing because what we are seeing is pretty strong growth in order books across the place. And even in our own outside India, book it is pretty stronger. On the standalone entity, it has not seen that much traction, accumulated book [Technical Issues], where are we missing something? Can you give some lights on it — light on it?
Sanjay Kirloskar — Chairman & Managing Director
No I think number one, it’s a question of timing. Number two, I think you’re looking at just one quarter, don’t look at it quarter-per-quarter is all I can say.
Himanshu Upadhyay — o3 Capital — Analyst
See, I’m not talking about quarter. But let’s say Q3 FY ’22 versus Q3 FY ’23, the cumulative order book growth under standalone is 10% okay. And if we look our consol minus standalone, the INR600 crores has come to something like INR900 crores, okay. In one year, what we can see is accumulation is much stronger. But on standalone, we are not seeing. And this is similar in [Technical Issues] like other companies also, we are seeing 30%, 40% order book growth. And our cumulative order book growth is some 10%,that was the way I was looking at it.
Sanjay Kirloskar — Chairman & Managing Director
Lets look at next quarterly what happens.
Himanshu Upadhyay — o3 Capital — Analyst
Okay, okay. Let us see — thank you and let us see for better. Thank you. Okay.
Operator
Thank you. The next question is from the line of Ravindra Nayak from Sunidhi Securities and Finance. Please go ahead.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Thank you for the opportunity. Sir am I audible?
Sanjay Kirloskar — Chairman & Managing Director
Yeah.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Yeah. Sir, I want to, because you’re the reasons are good, maybe the international operation has been good. Can you please highlight the SPP UK’s performance in this quarter vis a vis the nine month period. You have reported EBITDA of INR34 crores and a sales of INR140 crores. Whereas the nine month period, the INR365.7 crores sales INR30 crores EBITDA. How we will reconcile it? How — what are the change in this business. That is question number one. Secondly, about, what is your contribution from the services in the standalone business for the nine months, and how it is growing nine months and also how you are expecting the service business to grow the standalone business. Thank you.
Sanjay Kirloskar — Chairman & Managing Director
Good question. I think what’s — when you mentioned that, I think we should look I mentioned it earlier also, we should look at the company’s when you’re saying nine month, it is excluding our first quarter. And usually in most engineering companies, the fourth quarter is stronger. So I would say that’s probably why you’re seeing the effect.
Yeah, so if you look at it last year to this year, I would say the difference in margin is only coming from the fact that the company’s main businesses, which are fire, water, dewatering, transform oil pumps, all the other businesses also have, are doing doing better and all of them are above the breakeven point. Like I mentioned last time, that ensures that earlier base costs are taken care of and then we have the service business, which obviously has been growing over the last few years. It’s touching between 38%, sometimes 40%.
So you get that multiplier effect because now that additional profit that that’s generating is coming directly to the bottom-line and not cross-subsidizing any of the other businesses. So I would say that’s why you’re seeing that effect. I think, I mentioned this earlier to someone else as well.
Does that answer?
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
SPP UK is actually the service business has improved, that is why we are seeing a better margin in SPP UK or it is subsidy we can do get?
Sanjay Kirloskar — Chairman & Managing Director
Yeah. So that’s what I was saying. It’s not the service business has jumped up significantly. The service business has been growing and we’ve been saying this quarter-on-quarter that last two years in fact that is up from 12% and up to 38% to 40%. But people would ask me why is it that we can’t see that, and the answer to that is that the other businesses were not having that level of order book and so they were not covering all their costs, which is the regular product businesses.
Last year, we’ve seen slowly the rise in the other businesses as well because, they have been focusing on various areas. And they managed to make a slow, slow breakthroughs of standard business, which is our fire pumps, which is our water pumps, which are our transfer oil pumps and I’ll do the cross breakeven point in their respective areas. The profitability which was there before as well of the service business has now just come down to the bottom lines. That’s what I’ve been saying.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Okay. Worry is that there is say the last six months, for the six months, you have a loss in EBITDA, loss in this business SPP UK. And this quarter, it has completely turned around with a significant profit So whether it is for some Forex impact because the pounded is also appreciated into the rupee. So you have reporting the currency into rupees. So how should we reconcile the Forex part and also the service part, that is my worry.
Sanjay Kirloskar — Chairman & Managing Director
I think what Mr. Mate mentioned earlier that we actually have a negative Forex impact in the nine months number. But, but you’re right, I mean the currency has depreciated and there is some impact in terms of store — multiplier factor from the depreciation. But I don’t think that is very significant from last year to this year.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Okay, okay.
Chittaranjan M. Mate — Chief Financial Officer
But pound to rupee [Technical Issues] almost same, it had dip in between but again recovered.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Okay, okay. So what are the service business and the standalone business. What is the contribution of service in the total business in nine months and also how you are looking at the service business going ahead?
Sanjay Kirloskar — Chairman & Managing Director
You’re talking in which business, the international business or the standalone business.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
No, no, standalone business.
Alok Kirloskar — Managing Director
In the standalone business also, the service business has been slowly increasing. But I think we should also appreciate that it’s different markets. I mean in countries like India, I mean I’ll just give you example, many refineries or power plants, they service their own products, while overseas you will appreciate that because of lack of labor, usually the service is outsourced to other companies. And there is no domain local maintenance team that the company — that the company that one service is having for on its pipe set, So, the model is different. So in India it tends to be more spare parts focused, while overseas we are focused on developing the the maintenance contract, three and five year maintenance contract with these companies, like oil companies, like chemical companies, like water companies. And then supplying not just the spare part, but the actual service which is retrofit, refurbishment, upgradation, all kinds of other services on the base of just of the service contract that we have. And we only include the three to five year service contracts in what we call our baseline business because there we have an agreement of an offtake amount rather than it just being one off service agreement with some customer who want some pump repaired.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Okay, okay. So is there any chance because if you compare with your competitors, Indian competitors KSB and also the other competitor WPL. so the gross margin for them, it is around you can say 50%, but yours is 40% currently. So whether it can go up to that level or it is very difficult to achieve to that level?
Sanjay Kirloskar — Chairman & Managing Director
I think what we’ve been saying consistently is that we will be working on ensuring that our margins are equal to or better than our competitors.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Okay, okay. And can you give the way you have presented in the PPT made to stop — to order, engineered order and project. This segment for the nine month or in the quarter itself, is it perceived is possible?
Sanjay Kirloskar — Chairman & Managing Director
Are you referencing to a chart which is there as part of our presentation.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Yes, yes. You have that this segment of made to stock, made to orders difference segment. So is it possible to give that for the nine months and also for the quarter?
Chittaranjan M. Mate — Chief Financial Officer
So, not only we present in annual basis, [Technical Issues]
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
So it’s not possible.
Chittaranjan M. Mate — Chief Financial Officer
Yeah, Page 23 of our presentation. Yeah.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Hello.
Chittaranjan M. Mate — Chief Financial Officer
Yeah. And coming to
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
So is it not?
Chittaranjan M. Mate — Chief Financial Officer
Margins for comparing international company, and if you see consolidated results of KBL, there also you will see, we are around 49% for nine months at 51% for the quarter. Because standalone [Technical Issues] not compare with [Technical Issues], but if you see, our consolidation, those are close to 49%.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Yes sir. It is comparable on a consolidated basis fir international P&L.
Chittaranjan M. Mate — Chief Financial Officer
Yeah.
Ravindra Nayak — Sunidhi Securities and Finance — Analyst
Okay, understood. Thank you sir, thank you very much.
Operator
Thank you. [Operator Instructions] The next question is from Riddhesh Gandhi from Discovery Capital. Please go ahead.
Riddhesh Gandhi — Discovery Capital — Analyst
Hi, sir, just to triangulate nine months and I am sure adjusting for effectively this impaired revenue, which came in this quarter so the impact of incremental revenue for which there is no related expenses this quarter is about INR30 crores odd, is it?
Sanjay Kirloskar — Chairman & Managing Director
Say that again, again.
Riddhesh Gandhi — Discovery Capital — Analyst
No. I said the amount which effectively we have recognized as revenue which we don’t have the corresponding expenses in this quarter is about INR30 crores or is it?
Alok Kirloskar — Managing Director
I won’t say there is no corresponding cost, I would say that the margin has been recognized for the first time after crossing threshold. And that margin has been INR31 crores, due to the cost and revenue, which was booked but margin was not booked. But as per the accounting standard after crossing the threshold, we have started [Technical Issues] margin
Riddhesh Gandhi — Discovery Capital — Analyst
So, let’s put it another way, we are effectively slightly overstating revenues in PBT in Q3. But we have — we have actually understated it in the first half. So if we look at nine months of revenues, kind of profitability will be adjusting for this order effectively. Is that right?
Alok Kirloskar — Managing Director
I won’t say it understated, it is as per the accounting standard.
Riddhesh Gandhi — Discovery Capital — Analyst
Yeah, I’m going talking about in terms of just — so I’m not saying that that we are doing anything which is in the quarter as per accounting standards. I just want to understand the economic accounting of this so that we can understand how we should be looking at it as you normalize as the run rate if you will of the PBT.
Alok Kirloskar — Managing Director
Yeah.
Riddhesh Gandhi — Discovery Capital — Analyst
Okay. So I would have ideally been higher by INR30 crores and the Q3 would have been at low occupied INR30 crores at the PBT level, is that accurate in my understanding?
Alok Kirloskar — Managing Director
No, no that is not accurate. Because of the job on this happened only in Q3, certain states, otherwise we would have recognized in H1 only. The progress of this order costs are certain stage only in Q3 or not crossed that stage in the half year.
Riddhesh Gandhi — Discovery Capital — Analyst
Okay. So then, just wanted sir, how does the accounting exactly if you could maybe just have us run through this so we understand it more granularly, but primarily to understand the run rate at which the company is on a normalized basis?
Sanjay Kirloskar — Chairman & Managing Director
I won’t call it run rate. Basically for long delivery period, there is a separate method of recognizing revenue, which is called percentage of completion.
Riddhesh Gandhi — Discovery Capital — Analyst
Okay.
Sanjay Kirloskar — Chairman & Managing Director
And there is a threshold, which is defined by accounting standards, income tax guidelines and companies regulations. On crossing that threshold, over and above recognizing cost and equal amount of revenue, company starts recognizing pro rata margins, which are anticipated on these order and which is audited.
Riddhesh Gandhi — Discovery Capital — Analyst
Okay.
Alok Kirloskar — Managing Director
So we crossed that threshold in Q3. So we have recognized that margin in Q3. And in future, it would — the recognition of revenue and margin would depend on the progress happening in each quarter.
Riddhesh Gandhi — Discovery Capital — Analyst
Got it, okay okay.
Chittaranjan M. Mate — Chief Financial Officer
This is like I explained an order which is a long-term order. And we will be delivering parts of it over a period of time. We can’t tell you exactly when we will be delivering the next slot. But whenever it does, the both — now that we’ve crossed 25% both the revenues and margin will be recognized together. Until now, we could not recognize the margin, because we have not crossed a threshold, which has been defined in the accounting standards.
Riddhesh Gandhi — Discovery Capital — Analyst
Got it, got it. So the question is, if we were — if we have to then look at your nine months account, is that a more accurate reflection of what your PBT is, than if we just look at Q3, if I can?
Sanjay Kirloskar — Chairman & Managing Director
Yes, if you say nine months, yes, that would show correct cumulative position.
Riddhesh Gandhi — Discovery Capital — Analyst
Got it. Alright, alright. And the other question is, with regards to going ahead so I mean even adjusting this, — we’ve had a great quarter both from a revenue angle and effectively addition of profitability angle as well, we are — so we have been able to hit about I guess the 11% EBITDA marginal level. So is that something, which we expect, we should be able to maintain going ahead?
Sanjay Kirloskar — Chairman & Managing Director
The point about EBITDA margins for the future. I think it will be a futuristic scene, but as our CMD sir has been stating in earlier meetings also, our endeavor is always to cross double digit EBITDA margin. That is our effort, but really it will happen, it still is not possible to give any prediction.
Operator
Thank you, Mr. Gandhi, may we request that you return to the question queue for follow up questions. [Operator Instructions]. The next question is from the line of Viraj from [Indecipherable] Partners. Please go ahead.
Viraj — — Analyst
Looking at FY ’24, so how will you figures are going to look like. Are you expecting any incremental growth?
Sanjay Kirloskar — Chairman & Managing Director
I don’t know whether we are allowed to answer questions.
Viraj — — Analyst
Sir, just an overview of your operations, it would be nice.
Sanjay Kirloskar — Chairman & Managing Director
Well, we are preparing for growth.
Viraj — — Analyst
Yeah.
Sanjay Kirloskar — Chairman & Managing Director
I think the country is also preparing for growth, so, yeah.
Viraj — — Analyst
All right. And how much is the cash we have at the end of Q3.
Sanjay Kirloskar — Chairman & Managing Director
This would it become unpublished information because we are supposed to publish balance sheet only half yearly and yearly. So what we have not published our balance sheet position, I cannot disclose at the moment.
Operator
Thank you, Mr. Viraj maybe-
Sanjay Kirloskar — Chairman & Managing Director
We’re controlling working capital basically, that’s what I can.
Operator
Thank you, Mr. Viraj may we request that you return to the question queue for follow-up questions. The next question is from the line of Manish Goyal, an individual investor. Please go ahead.
Manish Goel — — Analyst
Yeah, thank you so much. So two questions, one for Alok and one couple for Rama. So Alok, just on the SPP, you did mention that our order book is going from GBP52 million to GBP84 million. So is it that now as you were discussing earlier that this is more short cycled in nature and it implies that we should be booking revenues at more than regular intervals than to a calendar — quarter four calendar year phenomenon?
And also if you can also have — like that aftermarket or maybe framework context now be winning more contracts so do we see revenue contribution increasing? And always we we’re a product company in SPP as well. So why is it that we probably saying that the services business was cross-subsidizing the product business earlier? Thank you.
And I have question for Rama as well. I have to come back after that.
Alok Kirloskar — Managing Director
Manish I’ll answer your second question first, because I’ve not really fully understood your first question. So I may ask you to explain it, but. Your second question is that, that we’re a product business, that is correct. And that’s why majority of the sales is products, more than 50%, in fact 60%, maybe a little bit more than 60% also is products. But, the product business, as you know, SPP is heavily dependent on oil and gas and I give the benchmark numbers that the lowest we have done in 20, I think 2017 was INR4.5 million and the highest we did in oil and gas was close to INR25 million in about 2014.
So and this year, we did INR7 million in the whole calendar year, which is Jan ’22 to December ’22. So it’s closer to the lower-end of the scale, right. So I mean, that business has to be offset by other businesses to grow to be able to cover all the fixed costs. And so that business effectively was — that role was taken over by other businesses like industrial fire, which grew but you know from 25% to 4% or 25% to 7% is a big drop. And obviously, while we cut costs significantly and we’ve cut one-third of the staff — one-third of our workforce, not the staff– one-third of our workforce to cover the costs we still managed to keep the topline more or less the same through all kinds of productivity efficiencies.
So I would say that even after that, it was difficult for the other business to make up that gap immediately and it takes some time as you guys who we’ll appreciate has taken a while actually for us to cover all that difference in revenue in other businesses. But as they have covered that difference, we are able to now ensure that they are also profitable, but of course, the real profit comes from the aftermarket which of course is coming now to the bottom line rather than like it did in the past where it was basically covering all the other costs of the business because to have the aftermarket business, you obviously need a new product business because unless you’re installing products, you’re not probably going to get just the aftermarket like that.
Our strategy as you know has been you identify areas where our pumps are there even if the population is small, approach the customer and then try and get a service contract on not just our pumps, but all the pumps. And that’s really how we’ve been entering that business. So I would say that — I hope that answered the second part of your question. Can you explain to me what your first question was because I did not understand it.
Manish Goel — — Analyst
Right now, we are focusing more on the standard product business and services linked to a longer cycle. So I presume that in our order book also now that portion of standard products would be higher than probably the larger size orders and what it implies is that the execution would be faster than the long-cycle products.
So that means we will have a more even out revenue bookings during the year or how should we read into it. And may be if you can also give us your perspective like this is quite a historical high order book for us in SPP. And if you can broadly give us a sense of the broad breakup from the segments, which you discussed?
Alok Kirloskar — Managing Director
Yeah, Manish, I think our CMD also mentioned the same to me that we got evenized sales through all the quarters, because otherwise, even in the goodyear, SPP used to be loss making in first and second quarter and then it would breakeven in third quarter and do well in the fourth quarter. So our objective also has been the same that we try and even out quarter-on-quarter. And you’re right, I mean it’s slowly happening where we are slowly trying to even it out quarter-on-quarter.
But I cannot commit to that this year because like I mentioned, there has been an uptick in the oil and gas business. And generally, we are well-placed in many large jobs coming up. So, based on that, I wouldn’t say that is the case maybe in the near future. But definitely, that is our objective that with the service business, where we have agreed offtakes, we try to even out the sales and though the sales quarter-on-quarter and through the year so that we are more stable as a company.
Operator
Thank you, Mr. Goel, may we request that you return to the question queue for follow up questions. The next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Mahesh Bendre — LIC Mutual Fund — Analyst
Hi, thank you for opportunity. Sir, you mentioned that around 20 I think INR31 crore benefit we received at the standalone level, because of the changing threshold level for the one of the projects. So if I strip aside from the standalone business, our standalone margins are around 7.4%. So is it the right way to look at?
Sanjay Kirloskar — Chairman & Managing Director
Actually this is a genuine margins. So there is no need to reduce it. If at all you want to compare it, yes, the standalone margin for nine months which is at 7.1%, it would go down to 1.5%.
Mahesh Bendre — LIC Mutual Fund — Analyst
Okay, okay. Sure, sure. And one question to Alok. I mean if I look last four quarters for international operations. I mean if I look at all the subsidiaries and if you remove the, the foreign exchange gain, I mean then the margins are around 11.5%. So is it the margin we look at for international business?
Alok Kirloskar — Managing Director
How are you looking at it, because it actually has been — if you look at 9 months, there has been a loss on Forex. So I’m not sure how you’re looking at it. Because you’re taking the first quarter in from KBL’s last quarter, when you say four months?
Mahesh Bendre — LIC Mutual Fund — Analyst
To December, fourth — last consecutive four quarters.
Alok Kirloskar — Managing Director
So yes, I mean, if you’re including January, from January ’22 to December ’22, then that would be the margin, but I’m not sure that number is correct. I need to get it checked whether — what you’re comparing is correct from January ’22 to December ’22.
Mahesh Bendre — LIC Mutual Fund — Analyst
Or at least double-digit margin possible and given the uptick in the product business and the servicing business?
Alok Kirloskar — Managing Director
I mean, nothing is impossible. But as we are trying like — we have been managing to get to double-digit margins everywhere. And I think like I mentioned last time, the international business has to have that mix of services, because finally, the margins generated there will be compared to the Indian cost of capital. So it has to make sense from an Indian point of view as well. So I think that’s definitely in our sights and it’s something that we want to achieve.
Mahesh Bendre — LIC Mutual Fund — Analyst
Sure, thank you. Thank you so much.
Operator
Thank you. The next question is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund. Please go ahead.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Yeah. Hi sir, just on the small term business, I’m just trying to understand because some of the
Operator
The audio is unclear from your line, please check.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, hello. Is it clear now? Hello.
Operator
Yes, sir.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Yeah. so in the small pump business, like we are seeing some of the farm related, irrigation related that small pumps but submersible pumps through — companies are doing well. So, for us [Technical Issues] that portion has been showing good growth and traction?
.
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Yes, we do sell submersible pump sets in our retail sector as well and we have seen growth. And we do see healthy growth in both submersible, as well as mono blocks.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay. And in the other portion of the small pumps, have we seen market share gains or we believe that the overall market has seen such kind of growth?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
No, we have been continuing to grow. I think you can see from our numbers, I believe it says we have grown by around — by around 13%.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
While the market growth would have been?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
We believe the market growth is less than that. It’s around 10%.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay. So we would have had some market share gains?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Yes.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay. And any expansion which has — now that we have 70% utilization, so probably — is there –are we looking at expanding any of our portfolio in the small pumps?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Expanding the product portfolio?
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
No, in terms of In terms of — I’m sorry, we could not hear you. Capacity expansion, any capacity expansion on the cards?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Yes, we have already started and we are gradually doing that every year.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, that is the-
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Debottlenecking or modernization to enhance productivity.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
It would be a CapEx of how much?
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
I don’t believe it should be a substantial CapEx every year.
Renjith Sivaram — Mahindra Manulife Mutual Fund — Analyst
Okay, okay. Sure. thanks, all the best.
Alok Kirloskar — Managing Director
Thank you.
Chittaranjan M. Mate — Chief Financial Officer
Thank you.
Operator
Thank you. Ladies and gentlemen due to time constraints, we’ll take that as the last question. I would now like to hand the conference over to Ms. Rama Kirloskar for closing comments.
Rama Kirloskar — Joint M.D., Kirloskar Brothers Limited & M.D., Kirloskar Ebara Pumps Limited
Thank you all for joining us on this call. For any queries, please feel free to reach-out to us or our Investor Relations consultant Strategic Growth Advisors. Thank you.
Operator
Thank you. [Operator Closing Remarks]