Kirloskar Oil Engines Ltd Q4 2024 Earnings Call Transcript

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

Question: Amish Kanani - JM Financial PMS - Analyst : Congratulations of very good set of numbers. My question is, is it possible in the B2B business to get some kind of flavor in terms of, you know, the volume growth versus value growth. We've seen quite a bit of value growth there. And we have the CPCB-IV transition. Is it possible to understand how much was this due to price increases of the new products versus the volume growth? And provided there was a volume growth in underlying business? That would be very helpful. Thanks.

Question: Amish Kanani - JM Financial PMS - Analyst : Okay. And this is as a basket for the whole B2B or does this mostly have no mistake?

Question: Amish Kanani - JM Financial PMS - Analyst : Okay. So this will include some -- will it include the international business growth as well or it will be largely the domestic growth, or B2B?

Question: Amish Kanani - JM Financial PMS - Analyst : Okay. And sir, is it possible to have any chance to get the number for this year because there was the sense that because of the price increase, the volume may not have come? So the consumers are probably buying the higher value-added nonpolluting products but maybe volume wouldn't have come. But given the strength in the underlying businesses that we cater to, real estate and infrastructure, I was wondering whether the demand in volume terms also remains strong? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2024 / 10:30AM, KIRO.NS - Q4 2024 Kirloskar Oil Engines Ltd Earnings Call

Question: Amish Kanani - JM Financial PMS - Analyst : Okay, sir. So can I say in the context that no major price increase has resulted in a good volume growth? And in that context, is it possible to give us some sense what happens after the June thing?

Question: Ashutosh Garud - Ambit GPC PMS - Analyst : Hi. Congratulations for a good set of numbers. I just wanted an outlook on the margins going ahead given that we have clocked 17% to 18% kind of EBITDA margins in the last three to four quarters? That is one. And second, I wanted some color on the debt on the balance sheet? How do you think the debt will look like, let's say, one year down the line? And what kind of interest costs are you building in going ahead? Thanks.

Question: Ashutosh Garud - Ambit GPC PMS - Analyst : Okay. No, I didn't get your answer for the debt level, ma'am, if you can just repeat it. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2024 / 10:30AM, KIRO.NS - Q4 2024 Kirloskar Oil Engines Ltd Earnings Call

Question: Ashutosh Garud - Ambit GPC PMS - Analyst : Okay.

Question: Ashutosh Garud - Ambit GPC PMS - Analyst : Okay.

Question: Ashutosh Garud - Ambit GPC PMS - Analyst : Thank you.

Question: Mahesh Bendre - LIC Mutual Fund - Analyst : Hi. Thank you so much for the opportunity. Ma'am, you just mentioned about the natural gas gensets, and we already sold quite some volume in this quarter. So how is the product compared to traditional diesel engine in terms of performance and pricing?

Question: Mahesh Bendre - LIC Mutual Fund - Analyst : Okay. Sure. And sir, a lot of investments are going in data centers now. So have we introduced a product in that category? And what is the prospects in that segment?

Question: Mahesh Bendre - LIC Mutual Fund - Analyst : Sure. And last question, what is the CapEx plan for the current year and next year?

Question: Mahesh Bendre - LIC Mutual Fund - Analyst : Okay. And so what could be that absolute number, ma'am?

Question: Mahesh Bendre - LIC Mutual Fund - Analyst : Okay. And this is for expansion of the facilities?

Question: Mahesh Bendre - LIC Mutual Fund - Analyst : Sure. Thank you so much, ma'am. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2024 / 10:30AM, KIRO.NS - Q4 2024 Kirloskar Oil Engines Ltd Earnings Call

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Hi, everyone. Congrats for a good set of numbers. Just wanted to get some sense on the demand scenario in the current quarter, quarter one of FY25 as to how is the inventory status of CPCBII now? And how is the traction coming in along for CPCBIV, even prior to the implementation from the month of July? So how do you see quarter one of this fiscal panning out in terms of PowerGen for demand?

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : So how is the inventory status of CPCBII, is there any -- is there enough inventory of CPCBII to last till June in the system? Numbers for KOEL, but generally for the industry.

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Okay. So you expect the demand for CPCBII to remain till June and there is sufficient inventory to cater to that demand?

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : And then if you start shifting towards CPCBIV?

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Okay. My second question is related to the other expenses, which are down in the current quarter. So is it more to do with the performance of B2C division where we are seeing some kind of improvement in the margin for B2C and that's the reason other expenses are down or any specific reason is there for lower other expenses?

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Yeah. So in the quarter four of FY24 for stand-alone business, when we see overall other expenses as a percentage of sales, it is down to around 14.7%. And when we compare the same number for 4Q of FY23, this number is 15.4%. So even though absolute amount would have increased, but as a percentage of sales (inaudible)

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Okay. So what is a sustainable number going forward with this level of nearly 14.7% or so, is the -- it looks to be the sustainable number going forward as volumes improve?

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Okay. Got it. If I may ask one last question, and then I'll join the queue again. My another question is related to exports. You've seen a very good traction in export numbers in the current quarter and even for the full year. So what's the strategy to increase exports from the current levels because as per your strategy plan, your target is still higher on the export front? But how do you plan to take it to those -- or how do you plan to grow export numbers further from the current levels in terms of geographies, in terms of nodes? Or is it something that you're targeting something inorganic to meet the current targets which are given in the strategy plan?

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Got it. So would there be any kind of elongated growth also would you be tableting to meet the targets given in strategy?

Question: Teena Virmani - Motilal Oswal Financial Services Ltd. - Analyst : Sure. I'll join back in the queue.

Question: Sagar Gandhi - Invesco Asset Management (India) Private Limited - Analyst : Yeah. Hi, Gauri and team. My first question is on your thoughts on three things. First is volume growth once CPCBIV kicks in? Second is, how do you see realizations different for CPCBIV versus CPCBII? And third is given the experience of CPCBI versus II 10 years ago, we saw realizations dropping significantly when this transition happened or when this transition kicks in? So how do you see this realization decline from four to two over the next two years?

Question: Jeetu Panjabi - EM Investco Capital Advisors - Analyst : Yeah. Hi, Gauri. Hi, rest of the team. Great numbers. Very satisfying to see this. So two questions. Can you talk a little bit through the export side, what are the trends you're seeing? What's driving the growth? I know it was part of the plan. And do you think that from here, there will be an acceleration over the next 12 to 18 months. What's the broad thinking there? The second question I had was on Arka. So we've crossed the INR 5,000 crore book size. And just love to hear what's the thinking there? And how do you see things from there going there?

Question: Jeetu Panjabi - EM Investco Capital Advisors - Analyst : So just on that, you're seeing the growth trends there are promising, and the order book and the discussions are all very positive. Is that fair to assume?

Question: Jeetu Panjabi - EM Investco Capital Advisors - Analyst : Okay, super. Thank you. Good wishes as always.

Question: Bharat Sheth - Quest Investment Advisor Pvt. Ltd. - Analyst : Hi. Congratulation Gauri and the team on good set of numbers. Gauri, we had a plan to enter in the US market to grow there. So can you give some color on our journey to enter in US market? And what -- how do we see that market in the next five years? So Gary, we had a plan to enter in the US market to grow that. So can you give some color on our journey to enter in U.S. market and what how do we see that market in next five years?

Question: Bharat Sheth - Quest Investment Advisor Pvt. Ltd. - Analyst : Okay. Yes. And Gauri, now second thing, you said that we are making huge investment next year also particularly to develop a new product in R&D. So can you give some color to what are the white spaces on today and where this kind of investment is required? And how that will take our company over the next few years?

Question: Bharat Sheth - Quest Investment Advisor Pvt. Ltd. - Analyst : Okay. Great. I mean can keep one more question?

Question: Bharat Sheth - Quest Investment Advisor Pvt. Ltd. - Analyst : If you can give also now color, our user industry, how -- if you can give you a number of or tracking order, which are growing much faster and how much our product is there? And do we have any white space in that industry? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2024 / 10:30AM, KIRO.NS - Q4 2024 Kirloskar Oil Engines Ltd Earnings Call

Question: Bharat Sheth - Quest Investment Advisor Pvt. Ltd. - Analyst : Our user industry, like the data center, tower, right from an online industrial and then marine side also?

Question: Bharat Sheth - Quest Investment Advisor Pvt. Ltd. - Analyst : Which is growing much faster and do we have any kind of a white space in --

Question: Bharat Sheth - Quest Investment Advisor Pvt. Ltd. - Analyst : Rahul, I mean, to answer that question, what kind of opportunities are there? And how do we --

Question: Salil Desai - Marcellus Investment Managers - Analyst : Thank you. No, I was a little curious to understand. You mentioned that 20% of your genset sales are in the CPCBIV+ category. So what kind of customers who are today buying CPCBIV when there is no pressing need for them to do so? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2024 / 10:30AM, KIRO.NS - Q4 2024 Kirloskar Oil Engines Ltd Earnings Call

Question: Salil Desai - Marcellus Investment Managers - Analyst : I see. Okay. All right. So more recent orders are likely to be --

Question: Salil Desai - Marcellus Investment Managers - Analyst : All right. And given the typical production life cycle, should it be over by now? I'm not sure why we have to wait till June for selling only CPCBIV because you wouldn't take really 9, 10, or 12 months to deliver a product, right? So in that sense, all new sales from, say, April 1 onwards should ideally be all CPCBIV. Am I missing something? Or is there a nuance on this, too?

Question: Salil Desai - Marcellus Investment Managers - Analyst : Understood, right. And just one more clarification. You mentioned that next year, you may see volumes being flat, but because you are in a position that the product is certified, there could be market share gains. Is that -- did I hear that right? I understand it right?

Question: Salil Desai - Marcellus Investment Managers - Analyst : All right. Thank you so much. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2024 / 10:30AM, KIRO.NS - Q4 2024 Kirloskar Oil Engines Ltd Earnings Call

Question: Mayank Chaturvedi - HSBC Mutual Fund - Analyst : Yeah. Hi, team. Thank you for the opportunity. Just a clarification on my end. Did you some ways so that you expect the realization of CPCBIV to be similar to CPCBII is earlier? (inaudible)

Question: Mayank Chaturvedi - HSBC Mutual Fund - Analyst : Yeah. Hi. Just one clarification from my end. Somewhere I hope that you expect the realization of CPCBIV+ to be similar to CPCBII. So can you elaborate? Because I think earlier, you were expecting 35%, 40% price hike between, I mean, depending on the various notes. So if you can elaborate on that?

Question: Mayank Chaturvedi - HSBC Mutual Fund - Analyst : Okay. Got it. Thanks for the clarification.

Question: Sagar Gandhi - Invesco Asset Management (India) Private Limited - Analyst : Yeah, I'm sorry, I dropped off during my last question. So I didn't hear your thoughts on realization drop once the competition kicks in after the CPCBIV launch. So if you can throw some light there?

Question: Sagar Gandhi - Invesco Asset Management (India) Private Limited - Analyst : Sure, sir. So I have one more further question and that is related to Kirloskar end usage contention that we've been doing and contention on the similar businesses within group companies, especially related to the Farm business. Can you give clarification for these two points? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 09, 2024 / 10:30AM, KIRO.NS - Q4 2024 Kirloskar Oil Engines Ltd Earnings Call

Question: Sagar Gandhi - Invesco Asset Management (India) Private Limited - Analyst : Okay. And my last question is on import content on CPCBIV versus CPCBII?

Question: Sagar Gandhi - Invesco Asset Management (India) Private Limited - Analyst : 3%. CPCBII was 3%?

Question: Mohit Pandey - Macquarie Group - Analyst : Yeah. Thank you for the opportunity. My first question is just a follow-up. So when you're down the line, is there scope for this import content to go down further? And in that sense, is it there proper margin expansion? That's the first question.

Question: Mohit Pandey - Macquarie Group - Analyst : Okay, sir. Very clear. And secondly, on the data center offerings, just wanted to understand if you are planning to invest in further new products for that market? Or you think current offerings are sufficient to gain market share in that particular segment?

Question: Mohit Pandey - Macquarie Group - Analyst : Okay, sir. And last -- just last question. So in the initial remarks, I think you mentioned that with the CPCBIV products gaining traction, that opens up avenue on the export side. So just wanted to understand. So without a regulatory push similar to what is there in India, do you think there will be absorption of the higher prices in the export market or the high priced product typically for CPCBIV product?

Question: Mohit Pandey - Macquarie Group - Analyst : Yeah, those are my questions. Thank you so much and wish you all the best.