Kirloskar Oil Engines Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jason Soans - IDBI Capital Market Services Limited - Analyst : Yeah, thanks for taking the question. Yeah. Congrats on a good set of numbers and thanks for taking my question. My first question is actually relating to just wanted to understand that, of course, we're trying, to go higher up the value chain in terms of the high horse power segment. So I just wanted to know in terms of the response from the Optiprime series. How is it and how is the demand outlook tracking for the Optiprime series?

Question: Jason Soans - IDBI Capital Market Services Limited - Analyst : Sure. And also, just wanted to understand now with the upcoming BS V norms in January 2025, how is the prebuying coming along for the industrial segment, especially for the construction equipment vehicle segment? And also, I just wanted to know in terms of realization growth as compared to the previous emission norms, what kind of realization growth can we look at for those engines? And post that, will margins be in a smaller range of 11% to 12% for us? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:30AM, KIRO.NS - Q2 2025 Kirloskar Oil Engines Ltd Earnings Call

Question: Jason Soans - IDBI Capital Market Services Limited - Analyst : Okay. Sure. Thanks for that. I just wanted to understand from a long-term perspective, also finally, I just wanted to ask you that for Arka fincap, what is the strategy going ahead? I mean, of course, I see there is good growth coming in from Arka as well. But do we look at hive it off into a separate entity going down the line, somewhere down the line?

Question: Jason Soans - IDBI Capital Market Services Limited - Analyst : Yeah. What I meant is ma'am I actually for Arka Fincap, just wanted to know that I know we're seeing good growth coming there, but just wanted to know that from a long term, are we looking to have it off into a separate entity and keep the entity separate? Just wanted to understand from a strategy perspective.

Question: Jason Soans - IDBI Capital Market Services Limited - Analyst : So, thanks for that. And just one last question, if I may squeeze in. For this Optiprime series, of course, we were in the process of catering to the data centers in that segment. Have we acquired the necessary certification from CPCB and EPA? Is that done or is that process still continuing?

Question: Jason Soans - IDBI Capital Market Services Limited - Analyst : Okay. Sure. Thanks. Those are all my questions.

Question: Mihir Manohar - Carnelian Asset Management and Advisors Pvt Ltd - Analyst : Yeah, hi. Thanks for giving the opportunity. Congratulations on good set of numbers. You wanted to understand the power and size. I think this quarter the power and is 34% 35% group. And now if I consider the realization we check more, it is also the of 30%. So, I mean, does it mean that the volume growth during the quarter was muted and some color on that that would be helpful. The second question was on the pricing front dynamic. There is roughly I think around close to one year that the (technical difficulty) So how is the pricing panning out for us for CPCB IV engine, I mean, like over the last six months? Is it holding up or are we giving some discounts over there? I just wanted to understand that.

Question: Mihir Manohar - Carnelian Asset Management and Advisors Pvt Ltd - Analyst : Sure. In terms of data centers, is this 1,500 kVA which is provide, I mean, becoming a product in that particular space? Can you give some color over there as to what could be the revenue for data center in 1H FY25, that would be helpful.

Question: Mihir Manohar - Carnelian Asset Management and Advisors Pvt Ltd - Analyst : Sure. Sure. And just my last question was on the Kirloskar Brothers heavy pumps electrification method which they are applying. So can you just provide some color over that, where is the method trending exactly, that would be helpful.

Question: Mihir Manohar - Carnelian Asset Management and Advisors Pvt Ltd - Analyst : Sure. That's it from me.

Question: Palak Bhanushali - MIV Investment Management - Analyst : So my question is that first, are we still confident of achieving our stand-alone revenue guidance, considering the scenario of Power Gen segment? Secondly, yes, if we are confident, then what are the levers or the factors which is giving us the confidence? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:30AM, KIRO.NS - Q2 2025 Kirloskar Oil Engines Ltd Earnings Call

Question: Palak Bhanushali - MIV Investment Management - Analyst : And second is, do we anticipate any changes in H2 in Power Gen segment? What is the volume growth that you're expecting? And in terms of pricing, will we be able to maintain the pricing since the other competitors are also catching up with the technology and similar case in terms of margin?

Question: Palak Bhanushali - MIV Investment Management - Analyst : Okay. Understood Thank you.

Question: Teena Virmani - Motilal Oswal Securities Ltd. - Analyst : Hi, everyone. Congrats for a decent set of numbers. My question is related to the competitive intensity in key nodes of Power Gen for KOEL. So just wanted to understand, are smaller players or even the bigger players trying to get into the market share of KOEL during -- have you seen any such kind of thing happening in Q2 of FY25 because some of the players have priced their product in such a way that it is much lower than the market rate. So I just wanted to understand and take your views on the same.

Question: Teena Virmani - Motilal Oswal Securities Ltd. - Analyst : So in terms of the ranges, let's say, the low kVA nodes or maybe the mid-kVA nodes up to 400, 500 kVA, have you seen competition from players like Ashok Leyland, Greaves Cotton, or maybe Mahindra Powerol?

Question: Teena Virmani - Motilal Oswal Securities Ltd. - Analyst : Relatively smaller as compared to KOEL.

Question: Teena Virmani - Motilal Oswal Securities Ltd. - Analyst : Okay. So in terms of demand side, do you see that demand in the month of October, and so far in the month of November, has demand remained strong despite these price hikes?

Question: Teena Virmani - Motilal Oswal Securities Ltd. - Analyst : Okay. My last question is on export, sir. How do you see the second half standing out in terms of growth for the export?

Question: Teena Virmani - Motilal Oswal Securities Ltd. - Analyst : Okay. So any traction, which is expected for CPCB IV+ products for exports in the near term, maybe in the next one, two quarters? Or is it still some time away for CPCB IV+ to get accepted in the international markets?

Question: Teena Virmani - Motilal Oswal Securities Ltd. - Analyst : Got it. Got it, sir. Thank you. I'll come back to you for more questions.

Question: Bharat Sheth - Quest Investment Advisors Pvt. Ltd. - Analyst : Hi Rahul. I mean taking forward to this our genset side, our international data center, there is a huge opportunity. So exactly are we doing on that front or are we working? And when do we likely to see kind of a certification which you have replied to a previous participant?

Question: Bharat Sheth - Quest Investment Advisors Pvt. Ltd. - Analyst : And my second question is that, if we look at, I mean, India, a lot of players international, so they are looking at India as a global hub for sourcing diesel engine. So in that play, how do we like to play because once they start sourcing it, so they become also more competitive. So what is our game plan, I mean, for this as well as can you emerge as one of the engine supplier?

Question: Bharat Sheth - Quest Investment Advisors Pvt. Ltd. - Analyst : So when do we expect that we will be in some kind to say maybe down the line three years Kirloskar emerge as a large engine supplier?

Question: Bharat Sheth - Quest Investment Advisors Pvt. Ltd. - Analyst : Yes, high horsepower for international market.

Question: Bharat Sheth - Quest Investment Advisors Pvt. Ltd. - Analyst : Okay. Thank you, and all the best. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:30AM, KIRO.NS - Q2 2025 Kirloskar Oil Engines Ltd Earnings Call

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : Yeah. Thank you so much. I have a question on our B2C business where we have like consolidated LGM five plants into a single location. So maybe if you can just provide some perspective, like what is the CapEx we have done? And are there any more CapEx lined up? And in terms of benefits, what benefits can we see in near term to medium term, both on the revenue growth front as well as margin improvement front? That is the first question. And my second question is also pertaining to Power Gen exports like for developed markets. We have been seeding our higher range, especially in the US with the subsidiary and a recent acquisition for front-end distribution. So like where are we in terms of getting the certification and what nodes we are looking, and when do we really expect the volumes to pick? Thank you.

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : So like if you can just, would you be able to like quantify in terms of what is the margin improvement? Because probably no doubt this quarter, last Q1, we saw a decent improvement in the margins of B2C business. And this quarter, again, it's probably negative. But in what time frame can we see sustainable double digit margins because the competition has double-digit margins in this business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:30AM, KIRO.NS - Q2 2025 Kirloskar Oil Engines Ltd Earnings Call

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : Sure. Thank you so much.

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : Yeah, thank you so much. A couple of questions, one on the balance sheet. We see a very high level of capital work in progress of INR225 crore-odd and as well as maybe INR40 crore, INR50 crore of intangibles work in progress. So what is it pertaining to? What is this CapEx line for? And my second question is on the industrial business. On the domestic what you probably see, this quarter Y-o-Y growth is basically, it's a single digit growth. And sequentially, it has declined by 21% from INR320 crore to INR253 crore. So just want to know like what could be the reason? Where the growth rates have been tapering off, and how do we see it going forward? And what kind of prebuying can we see in the quarter three? And I just want to clarify here that the BS V norms will be implemented from January 1, 2025? And are we like restricted to -- sorry, the dealers are restricted to sell after June 1? Or how is it, the norm, the way we saw for CPCB IV? And my third question is on share of high horsepower revenues in Power Gen, and what do we categorize as high horsepower from what nodes we categorize? Thank you.

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : My first question was a high capital working progress of yearly INR225 crore-odd in balance sheet and in additionally intangibles also working progress of I believe, INR40 crore, INR45 crore. So what is this pertaining to where such large CapEx are still outstanding, and we are not capitalized?

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : But like what is it pertaining to like is it for capacity expansion or what?

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : Okay. My second question was on the industrial revenue, we saw a single digit growth in Y-o-Y and it declined 21% sequentially. So if you can throw perspective, why the growth rate seems to have tapered off and how do we see it going up?

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : No, I'm saying it just saw single digit growth, where we have been seeing in recent past very strong growth. And if you probably look at Q1 numbers, it was INR320 crore revenue. And this quarter, it is just INR253 crore revenue. So how much is it probably because I believe tractors have improved sequentially, and you did comment that construction industries sales too in fact, constructions are doing well. So I presume industrial engines play a fairly strong role over there. So just wanted to clarify.

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : And how do you see the prebuying in quarter three, and if you can clarify that can the dealers sell after Q1?

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : And last question was on the share of HHP revenues in Power Gen and what mode we ideally qualify as HPP?

Question: Manish Goyal - Thinqwise Wealth Managers, LLP - Analyst : Okay, thank you, sir.

Question: Sourabh Arya - Oaklane Capital Management LLP - Analyst : Yeah, hi. Okay. Am I audible?

Question: Sourabh Arya - Oaklane Capital Management LLP - Analyst : Yeah, hi Gauri and team, congrats on decent numbers. The first question I have is on, again, B2C side. There, obviously, in last few quarters, it improved towards from 1% to 2% margin to 8% margin. And I know there are obviously this plant-related stuff, which impacted this margin. But what does it mean? It's again a reset to negative and then there will be a gradual journey towards 8% to 10% or we expect this was kind of a one-off issue and things would be back to 8% to 10% very quickly in next one to two quarters?

Question: Sourabh Arya - Oaklane Capital Management LLP - Analyst : By Q4, okay. That's helpful. Second is, so at standalone company level, there is a reasonable improvement in gross profit margins of the company. Can you explain, maybe Rahul or Sachin, they can explain, that why this improvement is there, and is it sustainable? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:30AM, KIRO.NS - Q2 2025 Kirloskar Oil Engines Ltd Earnings Call

Question: Sourabh Arya - Oaklane Capital Management LLP - Analyst : So this gross profit margin will sustain like this, this move towards 36%.

Question: Sourabh Arya - Oaklane Capital Management LLP - Analyst : Sure. And maybe then lastly, on the export side, so at the start of the year, we had, I mean to say, pretty strong expectations for the export business. While from Q1 to Q2, it has decelerated. Obviously, you commented that in H2 things will be better. But still at the full year level, what should be the expectation from exports? And I understand this South Africa issue, maybe South Africa power situation improving is there, but that would actually continue even going ahead from here on. So maybe that would not be a one-off issue. That is something which is here to stay.

Question: Sourabh Arya - Oaklane Capital Management LLP - Analyst : Why I'm actually a little bit maybe and I would want to ask more is because H2 of last year was very, very strong when we look at it. So would it be, I mean to say, fair to expect growth on those numbers or it would be very challenging. So H1 versus H2 might look good this year, but on a yearly basis, actually, that might be still not good enough to give any growth?

Question: Sourabh Arya - Oaklane Capital Management LLP - Analyst : Okay. That is very helpful. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 13, 2024 / 10:30AM, KIRO.NS - Q2 2025 Kirloskar Oil Engines Ltd Earnings Call