Elecon Engineering Company Limited (ELECON) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Alicon Engineering Limited's conference call hosted by MK Global Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance, during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. I now have the conference over to Mr. Abhishek Taparia, MK Global Financial Services Limited. Thank you, and over to you.

Good afternoon, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Chintan Shah, CFO, Mr. Deepak Dalwadi, Head of Care Division, and Mr. Kaushik Patel, Head of Material Handling Equipment Division. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen. Thank you, Abhishek. Good evening and a very warm welcome to Alicone Engineering's Q1FI27 Earnings Conference Call. Joining with me today are Mr. Deepak Dalwadi, Head of Business, Gear Division, and Mr. Kaushik Patel, Head of Business for M&G Division. Our earnings price release and investor presentation have been submitted to the stock exchanges and are also available on our website. We will start by sharing an overview of our business. This will be followed by a detailed review of our financial performance, after which we will be happy to take your questions. Alicon Engineering today stands among Asia's leading manufacturers of industrial gear solutions and material handling equipment. It is built on decades of engineering excellence, deep domain expertise, and trusted customer relationships. In our gear division, Helicon continues to maintain a leadership position in India's organized industrial gear market, offering one of the industry's broadest product portfolios across sectors such as steel, cement, power, and marine. Our material handling equipment division is backed by over 75 years of experience. The division possesses the capability to design and manufacture large, complex, and high-capacity equipment such as wagon triplers, stacker reclaimers, crushers, and specialized conveyor systems. Our key differentiator is fully integrated manufacturing model, where every critical process from drawing, to design, to manufacturing, to testing, to quality control is carried out under one single roof. Today, Elicon sells customers across more than 95 countries through its domestic operations and overseas subsidies. It provides us with a diversified growth platform. With that, I would like to hand over the call to Mr. Deepak Dalwadi and then to Mr. Kaushik Patil to discuss the performance of the GEAR and MAG division respectfully.

Thank you, Chintanjit. The GEAR division, which contributed nearly 80% of our consolidated revenue to 416 CRs during the quarter, delivered a strong performance with revenue growing by 16.3% year on year. The growth was underpined by steady execution of our order book and supported by a gradual improvement in the international market. The international market has accounted for nearly 36% of our consolidated gear division revenue, showing a robust growth of 37.6 YOY. Similarly, the growth momentum can also be seen in our order inflows and our open order book. The consolidated order intake increased 18.8% year-on-year to 570 CRs during the quarter. Moving on to our open order book, which currently stands at 1043 CRs, is up 46.9% year-on-year. Providing strong revenue visibility and giving us confidence in our growth trajectory over the coming quarters. This demand shown in across key user industries. However, the major key contributors were from Power, Steel, Cement, and M&G. Specifically, the power sector has contributed approximately 27% of revenue in the form of a large single order, which was mentioned during our Q4-F526 concourse. As we look ahead, the business environment continues to remain encouraging. Enquiry activity has been healthy, and order inflows are showing steady improvement across both domestic and international markets. Demand across our key user industries continues to strengthen, providing greater visibility for rest of the financial year. We remain confident in gear division's ability to build on this momentum and deliver sustainable growth going forward. With that, I would like to hand over the call to Mr. Kaushik Patel, head of our Mattel Handling Equipment Division, who will take you through the performance of MHE business. Thank you.

Thank you, Deepakji. The MHE division recorded a marginal decline in revenue during the quarter, with revenue moderating by 2.9% year on year. Peace, watch. Primarily on account of project execution delays. Nevertheless, the underlying business momentum remain encouraging. Our healthy order book and improving order inflow provide the strong visibility for the quarter's ahead. During the quarter, order intake witnessed a significant growth of 38.1% year-on-year, reaching Rs. 185 crore. The order intact was primarily driven by the strong demand from power, cement, followed by port, reflecting the continued investment momentum in these key end-user industries. Our open order book stood at Rs. 475 crores as of June 38, 2026. Reflecting a 18.8% increase compared to the corresponding period last year. These indicators reinforce confidence in the division growth trajectory as project execution with the space. We continue to see encouraging inquiry activity across the key sectors. which provides confidence in the medium-to-long-term outlook for the division. We are pleased to say that the MSE division has secure overseas order worth approximately Rs 21 crore in port industry, reflecting the growing acceptance of our capability in international market. With that, I would now like to hand the call back to Mr. Chintan Shah, who will take you through Elicon's financial performance in greater detail. Thank you.

Thank you, Kaushik Bhai. I will now briefly review our consolidated financial performance for the quarter. Before I begin, I would like to highlight that all year-on-year growth comparisons are based on Q1 FY26 adjusted performance. The Q1 FY26 numbers have been adjusted to exclude the impact of Rs. 25 crores towards arbitration award, the additional Rs. 10 crores towards arbitration claim settlement, both recorded under other income. And also excludes the one-time exceptional income of Rs. 80 crores arising from the unrealized mark-to-market gain on the reclassification of investment, which was recorded below PBT as exceptional income. All these three income of 25 crores, 10 crores, and 80 crores respectively are pre-tax numbers that we have excluded. For the quarter ended June 2026, Alicom reported consolidated revenue from operation of Rs. 521 crores. This represents a healthy year-on-year growth of 11.9% over adjusted revenue of 465 crores in Q1 FI26. This performance was primarily driven by the gear division, which returned to a stronger growth trajectory during the quarter. During the quarter, our revenue mix witnessed a shift. Our overseas business contributed Rs 151 crores, which was approximately 29% of consolidated revenue. It reflects the improving momentum across our international markets, while the domestic business environment remained relatively muted. Despite a spike in input cost due to geopolitical tensions, our consolidated EBITDA remained resilient and grew by 3.9% year-on-year to Rs 109 crores. EBITDA margins remain stable and sustainable at 21%, reflecting the strength of our business model, disciplined cost management, and continued focus on the operation efficiency. Profit after tax stood at Rs 70 crores, with a margin of 13.5% registering a growth of 2.3% year-on-year. Our consolidated order intake increased by 23% year-on-year to Rs 755 crores from Rs 614 crores in the corresponding quarter of the previous year. Our consolidated open order book also strengthened significantly, rising 36.8% year-on-year to Rs. 1,518 crores, providing a healthy revenue stability for the quarters ahead. Now, moving on to the divisional performance, I will begin with our gear division. In gear division, we delivered a stronger quarter with revenue increasing to Rs. 416 crores, up by 16.3% year-on-year. This reflects healthy execution and sustained demand across all our key markets. EBIT grew by 14.7% year-on-year to Rs.75 crores. Despite higher input costs during the quarter, we maintain a resilient EBIT margin of 17.9% through discipline, cost management, and operational efficiencies. Moving now to MHE division, MHE division reported revenue of Rs.105 crores during the quarter compared to adjusted revenue of Rs.108 crores in Q1-FI26. This represented a marginal decline of 2.9% year-on-year. As highlighted earlier, the moderation in the revenue was primarily due to temporary delays in the project execution. Ebit for the quarter stood at Rs.27 crore, declining by 25.3% year on year. This was largely due to sales mix during the quarter coupled with the increase in the input cost and delayed execution of few critical orders. The underlying fundamentals of the division remain strong and we are confident of the amateur business regaining the momentum in the coming quarters. The strength of our order pipeline, the healthy order intake, and robust inquiry levels provide us with a strong visibility and confidence for the quarters ahead. Moving on to our overseas business, we delivered a strong performance during the quarter. This was supported by improving market conditions and gradual easing of geopolitical tensions. Overseas revenue increased to Rs. 151 crores from Rs. 124 crores in the corresponding quarter of the previous year. This registered a year-on-year growth of 21.9%. The momentum was equally encouraging on the order front. Overseas order intake grew by 63% year-on-year to Rs. 194 crores with Rs. 21 crores contributed by the MHE division. Our overseas open order book is now strengthened significantly. It has increased by 73% year-on-year and it has reached Rs. 256 crores as of June 30, 2026. This provides healthy visibility for the future growth in this market. Moving on to balance sheet and capital allocation, we continue to maintain a strong balance sheet with a net cash position of approximately Rs.700 crores. We also remain committed to our previously announced capital expenditure program of approximately Rs.400 crores over FI26 to FI28. The capex program remains on track. As we progress through FY27 and complete our first quarter, this is the time for us to provide full-year guidance. Given the ongoing macroeconomic uncertainty and limited near-term feasibility, we are targeting to have a low double-digit consolidated revenue growth while maintaining the EBITDA margin as we had it in the last year. This is supported by healthy order book, strong inquiry pipeline, and discipline execution. We remain confident in our long-term growth prospects. With that, I would now like to open the floor for the questions.

Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Shubhi Gupta with Renetra Acid Managers. Please go ahead.

Good afternoon, sir. So, my question is that our MHE division margins fell this quarter. So, I wanted to understand how much of that is from product mix change and how much is from the higher costs. My second question is that our 29% of our revenue is coming from international markets. So I wanted to understand, does this business carry a higher margin profile than the domestic business?

Yeah, so coming back to the margin decline, there are three factors which have contributed to margin decline when it comes to energy business. One is the shift in the sales mix. Second is the input cost increase. And third is overall revenue degrowth. Our data suggests that it's almost 2.5 to 3% margin decline is because of the input cost increase. Almost 3% margin decline we see is because of the change in the sales mix. And the rest of the 3% we see the balance is declined because of the lower throughput

volume for the quarter for the energy division.

Coming back to the export market, we do have slightly higher margins on the products that we supply to the export market, and we continue to see that margin profile for the coming quarter also.

Sir, what should be the sustainable margin for MHE division going forward?

We are seeing a 22 to 24% EBITDA margin for M&G business for the year as a sustainable margin.

So just one more last question. So I see that we have a few patents that we have applied for. So just wanted to know what are the commercial prospects for the same.

We have these patents which we have applied for but we would not like to openly discuss the kind of markets that we are targeting and the segments we are targeting as of now. So, we will remain silent on that.

Sure, sir. Thank you.

Thank you. The next question comes from the line of Pala Subramaniam with Aryan Capital. Please go ahead.

Sir, thank you so much for the opportunity. Sir, on the international revenue side, it's grew 82% this quarter. Could you talk about which other geographies majorly contributed for this growth? Also, you can talk about the Middle East impact on the international revenue side. Is there any specific end markets within Middle East regions like oil and gas and infra driving this weakness? And when we can expect a recovery in Middle East side?

Right. So, bulk of the growth that we see right now in this quarter has come from Middle East as well as U.S. And both these growth we have because some of the orders which were on hold in Q4 last year, because of the improvement in the macroeconomic conditions, the hold has eased out. And so we have started doing the dispatch. This is number one. Number two, if we look at the open order book, as well as the nature of and the quantum of the inquiries, we also see that both these regions need witnesses a stronger traction. What was your next question?

In Middle East, which are the specific end markets, like oil and gas, and such, which are the things we are seeing, weakness, and...

Cement. Mainly, it's cement and mining and minerals.

Yeah, so goodwill related to 2010-11 Benfeller Raticon Europe Accusations for NPRD. That balance sheet is around 102 crore in FI 25. It's reduced to nil in FI 26. Also, tax deduction of GBP 1 million remains over five years in the UK DD. So I'm trying to understand, like, does this goodwill impairment have any cash tax impact, or it was purely a non-cash accounting charge, whether we can expect any future tax benefits from this return, and is there any changes in our future acquisition strategy?

So I will break your question into two parts. One is the tax impact on the goodwill and secondly on the acquisition strategy. In the year ending on 31st March 2026, we did the impairment of goodwill, but we did the impairment in the consolidated financial statement. The goodwill which was recorded as an asset in the local books of accounts in European entities. There is a tax deduction which is available and we have been claiming on a yearly basis by way of amortization. So the accounting impact of the impairment of goodwill is purely non-tax. There is no tax impact of this impairment of goodwill. There is a marginal amount of goodwill which is now left as a book value in a European entity that we have it, and we will continue to advertise over the balance years, which are like three to four years now. Coming back to the acquisition opportunities, we are not actively looking for any acquisition opportunity in European region, especially where the opportunity demands significant investment in a manufacturing setup. So this is what we can communicate right now.

Okay, sir. So, on the thirdly, small questions. On the defense side, if you are taking order, it would take execution of at least two to three years, while other sectors, it may be less than a year. So, I'm trying to understand what is the working capital cycle difference between defense and other sectors. Is there any upfront investment required on the defense side?

Yes, so we have done the investments over the last three to four years, where we have kind of created a dedicated, not just the manufacturing setup, but also the business and operating vertical for the defense. In terms of working capital cycle, naturally, if we have an execution timeline over two to three years, the working capital for that particular business will have a higher number of days. But that being said, what we are communicating is that the total order that if at all we receive, we will execute for over two to three years. So, within those two to three years' time, we can always plan our manufacturing in line with the dispatch schedule and try and see how we can keep our working capital at the minimum level. So, in the past also, we had similar execution of the orders where working capital was, you know, increased by 15 to 20 percent compared to overall gear division that we had. So, this is how we see it right now. But at the same time, with the margins slightly higher in those kind of orders, we'll be able to absorb the cost of the working capital interest for that particular business.

Got it, sir. Thank you.

Thank you. The next question comes from the line of Raj Shah with Renam AMC. Please go ahead.

Yeah. Am I audible?

Yes, I am audible. Please go ahead.

Yeah, thank you. Thank you for the opportunity. So, my first question was regarding the margins. As you mentioned that in MHE, there have been two, three reasons why margins have declined. But on console level also, if we see, there has been a decline in gross margins. So, if you may explain within years why there was no margin growth despite having revenue growth?

Yeah, so within GEAR, the margin growth has not happened because whatever growth that we could see that has been dragged by raw material price increase at the GEAR business also. And that is the reason it has slightly lower margin or maybe I would say it's the same margin percentage in GEAR compared to last corresponding quarter. At the same time, what we see is that in a clear business, for the full year, last year, we did an EBIT margin of about 18.8%. Right now, we are at 17.9% EBIT margin. So, we are hopeful that we will be able to regain the margin loss that we are seeing it right now. Similarly, for MHC, if you look at, if we compare for the last corresponding quarter, then yes, there is a margin decline. But we also had published over the last year the results on MHC division and categorically stated that Q1 was a quarter with the exceptional margin because of the couple of orders that we had it. So if you look at MHC division for the full year FY26, we had EBIT margin of 24.7%. So against that, we are at EBIT margin of 25.6%. So which is broadly in line with what we were expecting for this quarter and this year going forward. I hope this answers your question.

Got it, got it. Secondly, on the revenue growth, I was not able to understand if our order book is up by 37%, our order inflows are up by 23%, I think we are running on record order books now, then why are we guiding only for low double digit revenue growth?

I'll tell you what happens with this. This quarter Q1, and again the way we see Q2, we see the quarter with high input cost. And we are not talking about minor increase. We are talking about significant increase in the raw material price. So with this kind of increase in the price, the time taken for converting the inquiries into order has significantly increased. And that is even if we had a good order book in Q1, we ended up with a very high order book. And we could not convert the order book into the revenue. So this is number one. Secondly, in the Q2 also, we are seeing that we will pick up, the market will pick up, but it will still gradually pick up. So we are expecting Q2 also with the improvement, but not that stiff. So Q3 and Q4 is what we are expecting to improve significantly when it comes to market acceptance of the stable light prices.

Okay, got it. And within the material handling, you mentioned that there is some, even in the press release, that there is some execution-related temporary moderation that you are seeing. So, can you go little specific in which kind of orders, is there any large order where you are seeing some kind of delays, and by when do you see the pace increasing to the normal?

Yeah. Yeah, yeah, in MHE, yes, there are, I think, two big orders we have. In fact, in MHE, let me give you the update, all the products are customized, and the major business we are getting it from power sector. In fact, what two orders I am talking about, those are related to power sector. So, normally, design engineering taking much time. In fact, in this particular case, in fact, we were expecting to get our design engineering clearance, I think, in the beginning of quarter, in month of April itself, but somehow, we could not get success. So, design engineering taking much time for end customer. We are not directly relying with the end user. It is through the main contractor who are taking complete EPC. So there are number IRK and that is the reason it is taking time. But of course, over the period, I think in quarter two, yes, we will see some progress on it. And we will get good amount of revenue in Q2 from those others.

Okay, got it. Lastly, for these gears, can you give us a break-up of Catalog and Engineer products?

Sorry? CPP.

So, for the Parter Catalog product,

given the revenue match is 54%, for the Catalog product, and for the Engineer's product, it is 46%.

Okay, okay. Thank you. I will get back in.

Thank you. The next question comes from the line of Abhijit Singh with Systematic. Please go ahead.

Yeah, thank you for the opportunity, sir. Sir, first question, could you give us the take of the geographies in terms of the export revenues for the full year?

Will year means you are seeing guidance to be broken into respective geographies?

No, sir. This year, FI26 export revenue to be broken down into geographies.

Okay, FI26 to be broken down into geographies. Okay, so almost 66 crores we had it from Middle East. Almost 102 crores we had it from Radycon USA. UK contributed again 102 crores. We call it Bachelors Europe Group where we had 171 crores and Singapore about 22 crores.

Sir, and in terms of the commodity price impact on our margins, sir, have you taken any price hikes in any of the segments?

Yes, so most of the orders that we have accepted in Q1, these are with the price increase. And the moment we have the orders acceptance, we have a back-to-back strategic tie-ups with all our key raw material suppliers where we lock the raw material prices.

Right. I'm just trying to understand why in the MHE division we have seen a larger impact compared to the gear division. What are the dynamics that play out that bring out new differences?

So MHE as just we discussed, right, it's purely an engineering business. There is no EP and CP. In GEAR, we have an EP+, where more than 50%, close to 50%, 54% comes from a catalog project, and in catalog products, we have a price list, which is refreshed on every one-month basis, right? So imagine a business where 55% of the revenue comes, where the prices are always almost a latest crisis. And that's how you have 50-60% of the impact is saluted. The second is the EP business where we have also had the raw material price locking, which we had done it. Right? So that's how the impact in the EP business is also reduced. When it comes to MHE. What happens is that it is a business which involves a lot of customization and it includes working at a project level. So, when we are talking about the conveyor build system, the wagon triplers, the crushers and everything, it is installed in an integrated way at the particular client's location, right? So, there, even if we try to lock the raw material, there are also other components than the raw material, which includes our delivery cost, which is like fuel cost, packing material cost, so and so forth. So, these are the reasons where we are seeing that there is a price increase impact, which is broader in material handling equipment division versus what we see in a gear business.

Thank you, sir. And lastly, sir, you mentioned that we have seen a large impact on the commodity front. But given our reasons, I would assume that impact would be not as large, maybe. So what would be the language, the bomb increase in the cost, in the bomb cost?

So, it all depends upon the product to product, because, see, some of the, so if I look at, if I break down our key raw materials, which are like steel, where we see 5 to 7 percent increase in a particular grade where we are operating, some of the bearings we have about 6 to 7 percent increase, fabricated gear case in a case-to-case basis we do procurement from outside is about 7 percent increase. And the tooling is also about 6 to 10%. So, the combination of these materials can change the bomb cost, but on an average basis, I would say there is a 5% increase the way we see as on today is a bomb cost increase.

Thank you, sir. Thank you for answering the questions.

Yeah. Thank you. The next question comes from the line of Pratik Khotari with Unique PMS. Please go ahead.

Good afternoon and thank you. So my question is specific on the India or the standalone business in gears. I mean, if you look at last few quarters, the growth there has not been very high. I mean, close single digits. While the order book etc has been building out, so if we just call out, I mean, this has some legacy orders which are not going through, customer is asking something because earlier our execution also used to be very quick, just something about here what by the winning orders, the order inflow also is very strong, but the execution is not happening.

Yeah, so if we look at couple of events which have happened last year, I will be able to relate it more with the last year. See, last year we had a good start in Q1, but immediately from Q2 onwards we had the tariff from US side. That event significantly impacted the order pipeline that we had. And the Q4 event which happened between US and Iran. So, two major events which have happened, gear division. Typically, gear division compared to MHE. MHE has a long lead time and so whatever orders which we receive from MHE, we are able to convert in the gear which is not the case. I mean, if you look at CP itself, catalog product, which is on a monthly price list basis, that also goes down. We are not able to grow it the way we want it. And so is the EP. So even in the current quarter, even if we are sitting on a very healthy order book for the gear division, A bulk of the order has been received in May 2nd part in the June and that is why we have not been able to convert these orders into the kind of the revenue that we would like to see. And that is the only reason we were like we are having with the open order book of 1000 crore plus. During the quarter itself, if you look at the quality of orders, we received the order for 27% for CP business and 73% for EP business. So that speaks about the volume drop and the huge order book that we have on hand.

And on this segment's margin again, so like, yes, while you compare it to last year, so those 18 odd percent, but this same segment used to report 24, 25, 26 percent margins. I mean, one party understand this depreciation and the call, I mean, the KPEX that has gone through and hence slow. The level on this standalone gears, it's, it's materially lower than what it was two, three years back. And just to supplement this, we called out that EP order book, like you said, this quarter has been strong, last quarter also we had called out EP has been strong, exports should be stronger. So why only match last year's kind of margins? I mean, and do we ever go back to those numbers that we saw for three, four years in mid-20s?

I think our immediate focus is on the current year, where we are giving a guidance, where we are saying that we will be able to reach back to the margins that we had in the last year. If you ask me, loosely speaking, we should be able to maintain 24% margin, EBITDA margin for gear division. So, 1% above the current level, about 18.8% is what we had in the last year. We should be able to somewhere around 19 to 20. 20% on an average is what we are waiting at EBIT level margin per year. That is how we see right now for a year plus one year from now.

And lastly, it's on exports from India, right? So for last three quarters, we have seen material distillation in exports. I mean, last quarter, we called out the war and hence we couldn't ship out things. Again, this quarter, I mean, it's down 35 odd percent. I'm saying exports from India, which is sub 30 crores now. If we just talk about what is happening there, because this was a large focus area for us, we are focusing on OEMs, exporting things from here.

So, at an organization level, we look at the total exports rather than the exports from India. The reason is we also have set up the SMD centers, multiple SMD centers outside of India. So the whole reason of setting up these SMB centers is to have the customers connect and customers proximity. So that's how we are seeing it. Nevertheless, when it comes to exports, we are expecting a growth from now. In terms of the overall growth, we will see a double-digit higher percentage growth at least for this year when it comes to exports.

And fair to assume this, the assembly centers, if you are, these are all purely assembly, right? The main manufacturing happens here in Anand.

Yeah, but there are certain parts in those assemblies which are locally outsourced also because it is not cost effective for us to transfer from this location. So there is a lot of value addition which happens from those assembly centers.

Correct, correct. No, fair enough. Thank you and all the best.

Thank you. The next question comes from the line of Prolin Nandu with AWS Public Alternatives. Please go ahead.

Yeah. Hi, team. Thank you for giving me the opportunity. Just on this, again, the year part, right, the mismatch between revenue growth and the order book growth and your guidance for the whole year, right? So, you mentioned that, you know, there is a price inflation which has took place. Now, last year also we called out that there have been some delays and the orders are more back-ended. So, when you think about the tenure of the order book or in what time this order book will convert to sales. So, how was it one year back? Where is it right now? And from a point of view of the customer, right? Like, let's say, for example, he's building a large factory. Now, he's not going to stop his capex for 5%, 6% increase in the gear cost, right? So, all these delays that you talk about, the whole idea is that our product is so small in the overall scheme of things that such costs should be easier to pass on, right? Especially in the gears part. So, is our understanding wrong in how, in the quality of our product or where it goes in the entire factory or, you know, entire apex or, you know, the industrialization cycle? And also, has the tenure of the execution of order book increased significantly versus what it used to be historically?

So coming back to, I think I will divide your questions into multiple parts. One is what your observation about average bomb cost increase of 5% and our gear portion in the overall capex population of the customer. Your observation is correct, but the problem that we have is A large part of our business is rooted through PSUs. And typically, PSUs are dependent on many factors. The fiscal budgets released by the government and the fund allocation and all are not. We have a dependency on sectors like thermal power, cement, and the steel. And all the three segments are dominated by many PSU sectors. And therefore, any macroeconomic conditions or even the conditions at our own economy level disturbs the capex plan, and which in turn, you know, delays the kind of the projections that we see for the clear business. So this is number one. Number two, if I look at the quality of order book today, Almost 1,050 crores order book we have, open order book for GLEO division. Out of that, we see almost 160 crores of the order book, which are beyond FY27, which is in line with typically the kind of order that we receive on year-on-year basis. We do not see any major shift in this kind of timelines. So, I hope I am able to answer your question.

No, so I want to, you know, double check, double click on this, right? Steel, cement and power, right? In some sense, while I agree that in power, it's lots of CSU, but in steel and cement, most of the CAPEX is done by private sector. And what is our share in, you know, what is our share of the business which is coming from?

So, I'll give you an interesting story, right? The large part of cement industry is growing because a lot of initiatives on infrastructure is taken by government. So, cement is dependent on a couple of things. One is the infrastructure, and secondly, you might have heard about... Government building a lot of dams across the Chinab river. There are four to five projects large scale which is going on since last one and a half year. So a lot of factors like this drive the expansion and the cement industry and also the steel industry and that in turn drive their capex plan and our growth plan.

Okay, understood. Is there any competitive intensity which has gone up, right, which is taking us longer, right, for us to pass on the price increases? In any segment, do you see heightened competitive intensity? I am talking about the gear part of it, right, in a way. Anything that you want to call out, some of the MNCs are putting local plants here, right? So, is that any which way is affecting our competitive position and our ability to pass on the increase in prices?

So, there are two events happens. Whenever there is an abnormal price increase, the market works towards the corrections and then towards the acceptance. We have seen Q1 as more of a corrections and Q2 is more of, we are seeing Q2 as more of an acceptance. Now, let us take an example of what I am trying to convey. Whenever there is a steep price increase, the customer gets the quote, and whenever the customer gets a quote, he would like to revalidate as much as possible. So, there will be always few players in the market who will be sitting on with the higher inventory. Higher inventory at a lower price or at the historical prices. And therefore, the customers will try to squeeze Alicon as a company by taking the advantage of some of the competition sitting on the higher inventory. So, typically, whenever there is a price increase of this kind of scenario happens, the market works towards the correction, where the inventory level gradually goes down, and every player in the market will then end up with a similar level of prices for their inventory. So, we are moving through that phase. In Q2, we are looking forward to have the acceptance phase. When it comes to the competition landscape where some of the multinationals are putting their facilities and doing expansion, I have Mr. Deepak Dalwari to focus more on that. So, Deepak ji, can you please add on that?

Yeah, actually, for this kind of competition and for the gear being a product, for the catalog product, it's the manufacturing cycle is two to three months. And for engineering product, it's four to five months. So even in the competition, whatever orders are on hand, we are taking and protecting the price. But for the new projects, definitely there will be a price pressure from the MNCs and all the competitions. But it's a strategic call we are taking. And at the same time, we are the preferred suppliers to all our industry segments. Being quality and having infrastructures, which can produce at a very quick time compared to the customers. So, being preferred suppliers, we can take care of the price, and at the same time, we are competing with the MNCs, even though if they are offering at a competitive price.

Thank you. One last set of questions, right? On the export side, now, you know, our relationship with the OEMs have increased, right, in terms of number of OEMs we have relationship with, right? When do you think is the time to monetize these relationships, right? Because Europe, in some sense, is going through the whole, you know, cycle of increase in defense spending, some increase in, you know, industrial cycle as well. So are we seeing more near-term opportunities to monetize some of the relationships that we have with OEMs on the export part?

So, as you rightly said, even in the previous few questions, we said that we have grown in In the Middle East as well as USA, we are expected to grow in both these regions based on the earlier signs that we see based on the inquiry in the open order book. In the European market, we are still expecting the traction to happen. Based on the early feelers, it looks like two quarters minimum that we see for the European market to bounce back.

Thank you so much, management. All the very best.

Thank you. The next question comes from the line of Karvit Goyal with Serini Alpha. Please go ahead.

Thank you for the opportunity. Most of my questions are answered, but I still wanted to get more clarity on the demand side. Two things are there. Number one is the international market, where the dairy situation is more clear now as compared to last year, and government has signed many FTAs now, specifically with the European, and domestic side of it, we are seeing steel, power, defense, shipbuilding, all are doing well. I also want you to put some color on sugar, how you are seeing the outlook on their own. So, considering all these things and also the order books that we are getting, That, again, is not making sense from our perspective, because demand environment is good, and what I understand is for company in a good demand environment and capability like you people, right, you have been working here for so long time, and the kind of capability and the kind of market share do we have, why we are not able to reach the fruit from this?

You see, when we look at the lower double-digit growth percentage, we are doing that projection for the full year of FI27, where we have already lost Q1, and Q2 also, as of now, as we speak, we are seeing improved traction, but not that significant improved traction. In fact, there are too many variables which are still... If you look at last 48 hours event itself, the intensity between U.S. and Iran again has picked up. So these kind of things are still not giving us enough comfort for the full year guidance. And this is the reason we are a little conservative in the numbers that we have. And we want to be conscious in whatever communication and expectations that we set for our shareholders for the year.

Okay, and regarding the pass on, like previous participants also raised this question, 5% increase for our kind of company should not be a big problem in passing on, isn't it? Like, are you really facing some challenges even in the domestic market in terms of the competitive intensity that you people are not able to pass on the same? Is that the situation right now?

So as you rightly said, and as I explained in one of the questions earlier, that the Q1 we see as a quarter with consolidations, where some of the players in the market were sitting on the inventory with a very traditionally historical low cost, and so we had a steep competition. But nonetheless, given the legacy that we have, the 75 plus years of experience that we have now, the proven track record that we have, we still carried a significant competitive age and we have been able to get the orders. And this is the reason that we have the high order books to start for the upcoming quarters.

Okay, and what is the update on the defense side of it? We were expecting some orders there and also from the shipbuilding side of it, sir.

So, there is no significant update in last 90 days. So, whatever guidance we had, the update that we had in the call that we had given in April versus today, there is no significant movement. The same update.

Yes.

Okay, and how's the outlook on sugar side of it after this ethanol blending is getting further traction? So, how are you looking from the perspective near to medium term?

See, so far sugar sector is concerned. This year the monsoon has again, I mean, the prolonged and the, it's not a good rain situation what we are experiencing. So, so far sugar cane crop is concerned, the sugar season is not anticipated the good traction. But we are hopeful that if ethanol idea and ethanol is working well, then again the sugar plant can be expanded and we can have a better traction from the sugar. But as of today, because the rain is not as expected, so sugar is muted actually.

Okay, okay. And, sir, are we looking to get some certifications in, like, aerospace kind of area? Means, is it a possibility going ahead?

No, so far in aerospace, still, we are not so deeply working on it.

The next question comes from the line of Web of Meta with Axis Mutual Funds. Please go ahead.

Hi, sir. Thanks for taking my questions. While we have given low double-digit growth for FI27, my question was from long-term and medium-term perspective. We might not be able to give exact guidance in terms of numbers, but what are our aspirations for the team, given the fact that we are doing significant KPIX around 400 crore till FI28? And so, secondly, with regards to that, I would want to understand the split of KPIX between gear and image division, if you can provide the same. Yeah, so coming back to the lower single digit growth for these FY27, they say it's a conservative and as the things improve, we might even revisit in the next quarterly call that we have. This is number one. Number two, when it comes to now the midterm guidance, We had set the target of reaching to 5000 crores in a top line by FY30. That target looks challenging but still achievable for us. Given the fact that we are targeting a couple of large inquiries from marine, given the fact that we are targeting expansion in Export territories and given the fact that we are still sticking to our capex plan, what already has been committed and we are further evaluating other capex which will seek the board's approval in a near future's time. So this is the midterm guidance that we would like to stick to.

Sure, sir. Thanks. And a split between MHE and GEAR division?

We are expecting GEAR to take a larger role. The kind of re-validation that we have done internally for the numbers that we would like to achieve by FY30. We expect GEAR to be almost 75% of the total revenue in F530, and almost 24-30% for MAG for the overall revenue in F530. And when we say GEAR, GEAR will also include the marine business.

Got it. Thank you.

Yeah. Thank you.

Thank you. The next question comes in the line of Sanjay Lala with Bakshti and Risa. Please go ahead.

Yeah, hi, sir. Thank you for the opportunity. Sir, my first question is on, so, you know, the last quarter you said that 77 crore revenue would be shifted to Q1 FY27. So, you know, the gear division which we see the growth is largely because of last quarter deferment of revenue or is there something else attached to that?

Yeah, so this quarter, we had the revenue carryover of the last quarter, as you rightly said, and at the same time, what happened is that during the quarter, since we had delayed receipt of the orders and also... You know, clearances from the customer. This quarter also we have FGs which were like 70 crores, which we could not convert into the sales. And let me tell you, these all FGs were dispatched before 38 June, but because of the India AS compliance that we have to do in terms of the cutoff for the sales, we could not do the revenue recognition because the timeline for those goods to reach to the customers and conversion of title from us to the customers, That criteria, we could not meet it. And again, as I said, it is just because the delayed clearance from the customer and delayed receipt of the order, which typically happen in the later part of the quarter.

So, my another question would be, you, in the last quarter as well, and the last year as well, you said that, you know, this Naval Gearworks project has an impact of 1 or 2% due to learning and manufacturing cost. So, are these costs now largely behind us going forward? How do we see, you know, gear division margin? Because as you know, MSC division margin, you rightly said that it's roughly around 22 to 24% you are expecting. But is there any, you know, ballpark number or range expectation for GEO division margin? Is there any?

So, let me break your questions into multiple parts. The first part is about the cost that we had where there was an impact on the margin for one or two percent when we were executing one of the naval orders. I think that order was way back and that order has already been executed. The reference to that cost came because we were discussing on the anticipated large orders. And there was a question on whether we will have a good margin on those orders, or we will have a margin similar to what we had in the executed order. So we responded that the first of the kind order that we had, it was more of, we had a lot of learning, a lot of engineering back and forth, and so we had a lower margin compared to what we were targeting. And if we receive the similar orders, we will have an edge because we already have our own curve of learnings, we already have the detail engineering done for the similar products that we have supplied. So this is one. In terms of the margin guidelines for the gear, we expect the gear emitters to be in the range of about 24%. So this is how we would like to make this.

And so, my last question would be, you know, in the last year, we said that Q3 onwards, you are accepting some order from Naval or Defense probably, if I'm not wrong. So, the 1,000 crore order book, which you guys mentioned in the last year, is that timeline attached to that or are we seeing some difficulty going forward?

So, in our guidance on in our call for the Q4 last year, we stated that these orders, the inquiry of these orders are likely to be released in Q4 of this year. So, as on today, we maintain the same communication.

Okay, sir. Thank you. Thank you so much for listening.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

So, thank you all for your participation and continued support. As we discussed, the gear division delivered a strong start to the year, driven by healthy demand and execution, while the MHE division continues to be supported by a strong order pipeline despite a relatively softer quarter. This is supported by a robust order book, strong balance sheet, and continued focus on operational excellence. Based on this, we remain well positioned to pursue sustainable growth and create long-term value for our stakeholders. We appreciate each of you for your continued support and continued interest in Alicon Engineering and look forward to speaking with you again next quarter. Thank you and have a good evening.

Thank you. On behalf of MK Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.