Kirloskar Oil Engines Limited (KIRLOSENG) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Kirloskull Oil

Engines Limited 4Q F526 earnings conference call. 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 and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Shah from Antique Stock Broking Limited. Thank you and over to you, sir.

Thank you, Sagar. Good evening, everyone. On behalf of Antic Stock Broking Limited, I welcome you all to 4QF526, four-term call of Kirloskar Oil Engines Limited. To discuss the results, we have the senior management team of the company, represented by Ms. Gauri Kirloskar, Managing Director of the company, Mr. Rahul Sahai, CEO of the company, and Mr. Sachin Kejriwal, CEO of the company. I will hand over the call to Ms. Gauri Kirloskar for her opening remarks, post which we can open the floor for Q&A. Over to you, man.

Yeah, thanks very much. Good evening, ladies and gentlemen. Thank you for joining us today. On the call today, we have Rahul Sahai, CEO at Coel, Sachin, the CFO at Coel, Kiran, CHRO, and Farah, Irani, Company Secretary. Joining us from ARCA, we have Rizzi Gangarg, CFO. I would like to start this year-end investor call with a thank you to all our investors, especially those who have placed their trust and confidence in us over the last four years or more. I remember discussing growth, specifically sustainable growth, when we began this journey. As business cycles fluctuate between favorable and challenging, there will always be spurts of growth followed by periods of lull. What matters most is how we build an organization capable of leveraging favorable circumstances while remaining resilient during a downturn. Such an approach is not a quarterly race. It is a multi-year marathon. It requires managing various cycles and building for the future, all while overseeing day-to-day operations. I have always believed that growth must be sustainable. It cannot come at the cost of profitability or for the sake of short-term benefits. At a consolidated level, we achieved 22% growth in revenue. We are now amongst the top 10 manufacturers in the world by volume in the industrial and power gen space. We sold over a million pumps last year, and our international business crossed 1,000 crore rupees in gross sales. Our domestic business grew 21% year-on-year, while international business grew 37% in growth sales. While various factors influence our monthly and quarterly movements, our focus remains steadfast on long-term sustained growth. At a standalone level, the company achieved its highest-ever quarterly sales in Q4, reaching Rs. 1,522 crore, a 24% year-on-year growth. This resulted in full-year net sales of Rs. 5,604 crore, representing a 25% year-on-year increase. In Q4, the domestic business grew 26%, while the international business grew 10% compared to the same quarter last year. Our PowerGen segment grew 32% over the previous year. On a quarterly basis, PowerGen grew 30% year-on-year. To put this in context, Q4 is traditionally a strong quarter for us, so delivering this level of growth is a significant achievement. Our market share has improved significantly across all nodes. In our high horsepower segment, where our market share was negligible a couple of years ago, we are now approaching double digits. While the overall annual diesel generator market grew 18% to approximately 1,79,000 units, including telecom, Coel grew by 41%, selling upwards of 50,000 units in FY26. Our industrial segment grew 22% annually, generating revenues of 1,444 crore rupees. Construction, mining, and railways have been our primary growth drivers. The growth in our construction segment tells an interesting story. As you all know, in January of 2025, there was a mandatory emission standard shift from CEVBS 4 to CEVBS 5. So emission changes represent both an opportunity to acquire customers and a risk of losing them. In this segment, customer acquisition is a long-drawn process involving technical alignment, product fit assessments, and often engineering tweaks to ensure our products integrate seamlessly with the customer's equipment. This involves type approvals and proto-testing, a joint effort that typically takes 18 months or more. Despite these complexities, we grew 24% in this segment in Q4 compared to the same quarter last year. Our construction segment specifically grew 44% year-on-year, validating the strength of our products under the new emission standards and the capability of our engineering teams. We have incorporated a new subsidiary called Kirloska Advanced Systems Private Limited. We believe there is significant potential in advanced technology, particularly to serve key accounts in sectors like defense. Beyond our traditional engine business, we see a systems integration opportunity where we can leverage our engineering capabilities. This requires focused effort, which is the rationale behind this new entity. On the aftermarket side, we grew 15% annually and 20% quarterly. As mentioned in previous calls, our journey over the last four years has been to transition from a parts provider to a complete ecosystem manager. We are improving our share of annual maintenance contract, or AMC, customers, and leveraging our service channels to offer allied products and whole goods. This shift in perspective is yielding clear results. Kirloska Fluid Dynamics grew 10% domestically and 13% internationally this quarter. On an annual basis, the business grew 6% domestically and 36% internationally. As this is the first full quarter for the consolidated entity, we saw reasonable growth with exports outperforming. However, I believe there is still significant headroom for growth. Regarding our international business, I have always maintained that growth must be built sustainably. To become a strong brand globally, our products, channels, and service processes must be fit for the market. There is a fundamental difference between exports and being international. Exports involve manufacturing locally and shipping to a country to sell through an agent. Being international means building a genuine business in that geography, hiring locally, setting up comprehensive offices, and evaluating local manufacturing or assembly where it's viable. Our gross international business grew 33% in Q4 over the previous year's quarter, and 37% over the last fiscal year. We remain committed to our strategy of focusing on specific regions to build this business with patience and sustained effort. At ARCA, our five-year strategy centers on a deliberate pivot towards retailizing our book. To ensure sustainable growth, we prioritized building the right foundational structure, ranging from onboarding the right talent and selecting markets to building seamless digital journeys and prudent risk guardrails. We scaled from 34 to 137 branches in fiscal year 26. Our strategy focuses on local market depth, operating only in regions where we have the established infrastructure to provide direct, high-touch service to our customers. Our AUM grew 10% to 7,947 crore rupees, with net interest income rising 11% to 266 crore rupees. Even with significant investments in the secured retail business, FY26, Profit After Tax, remains stable at 69 crore rupees, similar to FY25, Profit After Tax, the four extraordinary items. While we are in full execution mode, asset quality remains robust, along with prudent leverage and capital ratios. In summary, we are progressing well against our goal to be a $2 billion company by fiscal year 30, and our numbers indicate that progress. We are very excited about our future. We believe that there is much more that we can do, and the opportunity is real. Our last year's performance is a reflection of the inherent strengths that we have at Coel, our leadership, our engineering, our people, and the strength of our partners. Meaning our suppliers, our channel partners, and most importantly, our customers. I will stop here and request Sachin to give an update on Q4 and the full-year numbers. Thank you.

Hi, good evening, everyone. Thanks, Gauri, for the update. I will give a quick overview of the financial performance for a standalone and consolidated business. The results and the presentation for today's call has already been uploaded on Exchange and our website. Q4-FI26 was a period of remarkable growth, setting a new benchmark for quarterly sales. The strong performance was broad-based with significant double-digit growth in both domestic and international markets. The fourth quarter of fiscal year 26 was a record-setting period for Kirloska Royal Engines, achieving the highest ever quarterly sales of 1522 crores for the standalone operations. Registering 24% growth year-on-year. With this strong performance, we close the full year with standalone net sales of 5,604 crores, that is 25% growth year-on-year. Coming to the financial performance overview, I will start with standalone performance first. For the quarter, Net sales at 1,522 crores for Q4FI26 versus 1,225 crores for Q4FI25, 24% increase year-on-year. EBITDA at 193 crores for Q4FI26 versus 152 crores for Q4FI25, that is 27% increase year-on-year. EBITDA margin at 12.6% for Q4FY26 versus 12.3% for Q4FY25. There has been improvement by 30 basis points. Net profit from continuing operation at 118 crores for Q4FY26 versus 92 crores for Q4FY25. 28% increase year on year. Now moving to the full year performance. Net sales at 5,604 crores for FI26 vs. 4,481 crores for FI25 i.e. 25% increase year-on-year. EBITDA at 737 crores for FI26 vs. 552 crores for FI25. 33% increase year-on-year. EBITDA margin at 13.1% for FI26 vs. 12.2% for FI25. So there is a growth of 90 basis point in EBITDA margin. Net profit from continuing operation at 464 crores for FI26 versus 343 crores for FI25. 35% increase year on year. Net cash position net of debt and including treasury investment stands at 552 crores. Please note numbers reported are for continuing operations only and excluding exceptional items. Moving to working capital, our working capital position continues to remain healthy, with payables at approximately 60 days and receivables at around 41 days. Inventory levels stood at approximately 48 days, which improved from 66 days last quarter. Supported by disciplined working capital management led by improved inventory and receivables efficiency. The overall cash conversion cycle has continued to be maintained within a disciplined range, supporting overall liquidity and operating flexibility. In the interest of time, I will break down this performance for the quarterly numbers. You can refer to our earning presentations for full year performance numbers. So, coming to the further breakdown of the standalone sales for the quarter, COIL standalone sales post the restructuring were at 15-22 crores, that is 24% crores year on year. This strong momentum was backed by double digit growth across all business units. So within B2B, PowerGen was at 708 crores, that is 30% increase year on year. Industrial was at 371 crores, 24% increase year on year. Distribution and aftermarket was at 281 crores. Which is 20% increase year on year, and international business of B2B was at 162 crores, that is 10% increase year on year. Now looking at consolidated performance for the quarter, the revenue from operation at 2116 crores for Q4 FY26 versus 1749 crores for Q4 FY25, that is 21% increase year on year. Net profit from continuing operations at 162 crores for Q4 F526 vs. 111 crores for Q4 F525 i.e. 47% increase year-on-year. Let us have a look at consolidated segment performance for the quarter now. B2B segment revenue for the quarter was at 1557 crores which is 25% growth year-on-year. The segment PBIT was at 152 crores, reflecting 35% increase year-on-year. B2C segment revenue for the quarter was at 339 crores, which is 11% growth year-on-year. The segment PBIT was at approximately 42 crores, that is 16% increase year-on-year. Financial service segment revenue for the quarter is at 221 crores, reflecting 8% year-on-year growth. The segment PBT was at 28 crores, i.e. 157% increase year-on-year. Please note number discurs here represent containing operations only and before exceptional items. To conclude, I would like to sincerely congratulate the entire co-ed team for their contribution to the strong performance. The progress we have achieved this year is a reflection of the collective commitment, resilience, and execution capability across the organization. As we close this financial area, we are now preparing ourselves for the next set of milestones in our 2B2B journey. Our approach will continue to be steady and disciplined, staying focused on our long-term goals, taking one step at a time, and remaining agile as we navigate the evolving business environment. Now, I would like to open the floor for Q&A. Thank you.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.

Ladies and gentlemen, we will wait for a moment while the question queue assembles. Your first question comes from the line of Jitu

Punjabi with M-Investco Capital Advisors Private Limited. Please go ahead.

Hey, Gauri, Rahul, and team. I think tremendous performance and very satisfying to see the way you guys have scaled up and managed to get to this place. So congratulations on that. But my first question really is that, you know, the export site numbers seem very strong. Question is, can you give some level of attribution to help us understand where is that growth coming from and to your thoughts on sustainability of that? I've got a second question I'll ask after we talk about the first one.

Hi, Jiku. So, thank you for the, you know, for the input and really appreciate that. On the international side, so our fluid dynamics business has done extremely well last year. So, seen tremendous growth. As we've been explaining over the quarters, our game plan is deeply structural for each region. So we take a deep look on where should we play, how do we succeed in those markets, what is the regulatory environment. So there is a lot of ponderance before we make decisions to commit to a market. And once we do, then the entrenchment is fairly sustainable. So, the way I would answer the question is, do we think this is sustainable? We would believe that this is sustainable. In fact, there is a lot more work that is still underway. And if I look at the split, PowerGen continues to be a very big opportunity on the international side. We continue to be focused on that. And this time around, we've seen significant success on the pump side as well as on the PowerGin side in the 1,000 plus crores and grosses.

Thank you so much.

I really appreciate that.

The second question is really, can you talk a little bit about the market share gains in the high horsepower segment? Specifically ask for numbers, but I'm just more color on what's happening there and especially OptiPrime. How is that shaping up and what does the order book look like? And one more linked question broadly is with the war and potential fuel price hikes and all the other stuff, can you just, again, tell us what do you think are any of the challenges that you expect in the environment? It's for our business over the next six, nine months.

Right. So, Jitu, just on OptiPrime and our HHP focus, if I look at the way we've progressed over the last one year, we are already making strides, I would say significant strides, whether it is OptiPrime or HHP. So, we have sold units. Up to 3,000 KVA now. So, all of that is already underway and we have actually sold a few hundred OptiPrimes last year. So, that has been extremely encouraging for us as the management team as well as the teams within the organization. And we do believe that, you know, the moment we enter a particular node or market, and definitely domestic first. We have an opportunity to succeed there, and the HHP segment in PowerGen has been... Not very different. So we do believe that we will continue to grow stronger there. As far as the current geopolitical situation is concerned, we may see short to medium term, you know, structural changes play out. I think we are keenly watching out for the macro environment. But what I can assure you is whatever happens won't be specific or unique to us. I think if there is a larger macro play that happens, or if there is, you know, there's something that happens, then we may face some headwinds, but we may also see tailwinds in the form of, you know, rebuilding of infrastructure in those respective regions. The good news for us is that, look, we committed to the Middle East market a few years ago, and we are present. So each time, I mean, once the rebuilding process starts and as and when it starts, we are present there to address that growth in the market.

Thank you very much, and good wishes as always. Thank you. Thank you.

Thank you, Jitu.

Thank you. My next question comes from the line of Ankur Perival from Access Capital. Please go ahead.

Yeah, hi, team. Thanks for the opportunity and congratulations on a strong set of numbers. My first question is on the R&D and the overall product development side. Now, glad to hear your earlier comment on OptiPrime picking up very well. But just on that bit, are there any more products that we are working on over the next, let's say, one to three years, which can drive the growth further up? Or maybe even variants of the existing ones, which can see a ramp up, you know, over the coming years.

So, I may not be able to give out information about the product launches and the engineering development, but what I can say is that we are deeply focused on key customer segments and their requirements, and we are fully geared and equipped to develop the products that the market requires.

Okay, let me rephrase my question. So, you did mention we are selling units up to 3,000 KVA. So, the incremental focus is on going beyond 3,000 KVA as well, or within 3,000 KVA, our portfolio is reasonably placed and we believe, you know, there is no further new product investment required there.

So, we have the capability to address nodes even beyond 3000. What I did mention was where we have actively sold units. We have capability, as you are aware, we are executing order of nuclear power cooperation, 10 units. Each unit is 6.3 megawatt genset. So, we do have the capability to address larger units. I was just talking about the routine products.

Okay, sure. That's helpful. Second bit on, you know, very strong growth on the industrial side for us. How is your, what is the growth outlook across industrial as well as distribution revenue going ahead? While till now the growth, you know, as in the initial comments we highlighted, was led by construction. But are these the key segments which will drive the growth further ahead as well, or there could be more sub-segments that we will look to ramp up?

So, our guidance, overall, we remain committed to the 2 billion guidance, and industrial and aftermarket have an important role to play as we move and progress towards the 2 billion milestone. As you are aware, on the industrial side, we have multiple segments. There is a game plan in place for each of those segments. Depending on the year and the cycle we are in, some of those segments will do better than others. But I wouldn't be able to call out anything more than that at this point.

Okay, fair enough. And just last question, from, you know, the company's investments into the subsegments in terms of, you know, having the people, the teams, the network in place, are most of the investments there, we have already invested there, and now we just need to see the ramp up and the execution part, or there could be some more, you know, investments which are required?

As you're aware, the situation does change quite a bit. So we may make decisions to hire more people depending on the circumstance. So it's hard to really comment on that. But yes, there is a significant amount of infrastructure as well as network already established that we are fully leveraging at this point.

Okay. Thank you for all the answers and all the rest.

Thank you. The next question comes from the line of Jason Sons with IDBI Capital. Please go ahead.

Yeah, thank you so much for taking my questions. First, I had a clarification. I just joined the call a bit late. Ma'am, Gaurimam, did mention that the whole, how much the industry grew and the volumes. Could you just repeat that? I mean, just for, you know.

Yeah, sure. So, you want me to repeat that bit of the commentary? Yes, the industry, yeah. Yeah. While the overall annual diesel generator market grew 18% to approximately 179,000 units, including telecom, we grew by 41%, selling upwards of 50,000 units in this fiscal year.

Thank you so much, ma'am, for that. Yeah, that's very helpful. Now, I just also, my next question just pertains to, I mean, we saw good growth on the PowerGen side, 32% and 22% on the industrial side. Just wanted to know if you could just help us with the volume growth as well for both these segments. I can just do for the entire year.

I think Dauri's kind of answered the volume part of it. So, what exactly is the question?

Yeah, I just wanted to know, I mean, so, PowerGen segment grew by 32% for 26, and Lustrin grew by 22%. Now, I, and there's a CPCB element and all those things. So, I just wanted to, you know, have a breakup with the volume and the price growth, if possible.

Yeah, we won't be giving that here.

Oh, sure, sure. Okay. And actually, last time around in the last annual call, you did mention the HHP sales numbers. Would that be possible? I mean, would it be possible to have that number for 26?

So, yeah, that number we don't usually give out. So, I'm sorry, we won't be able to share. I think the qualitative on HHP, we did share right in the beginning of the call.

Yeah, yeah. Okay. And I also saw the announcement with regarding to the capacity augmentation at the Kagal plant. Now, you've mentioned some CAPEX as well for that. Now, considering that, could I, you know, basically what CAPEX do we envisage for 27 and 28 going ahead?

So, you must have read this stock exchange disclosure, so we are investing close to 1400 crores on that, so that will be our capital allocation for this next two years. For both of you. Yeah, okay.

Okay. And just lastly, I just wanted to understand, this time around, you know, there have been, you know, the Middle East crisis and things like that, the gas crisis as well. Any short-term disruptions during the quarter? Did the company face any short-term disruptions during the quarter?

No, nothing specific.

Okay.

Okay. Sure. I'll join back to you for further questions. Thank you so much.

Thank you. The next question comes from the line of Mihir Manohar with Trust Mutual Fund. Please go ahead.

Yeah, thanks for giving the opportunity, and congratulations on a great set of numbers, very strong numbers. Wanted to understand the JPEX-T addition side, I think the 50,000 engines that we are expanding for Kakaal. So, I mean, should we consider that coming or based on second half after 28? Because in 2024, we had mentioned it coming within three years. So, when should we expect that 50,000 engines? to come on stream.

And the second question was on the 20,000 engines capacity expansion that we are announcing. Now, here we are mentioning about 1,400 crores of capex versus for 50,000 machines, it was 700 crores capex. So, are these on the HHP side?

I mean, why a higher number for machine, capex for machine? So, just one second.

Yeah, so that's a good question. So we announced the 700, like you mentioned, and that's coming online by April of next year. And it's 50,000 engines. That was about, you know, enhancing our lines and adding new lines in the existing plant. So that's why you saw that kind of investment. Now for this 1,400 crore investment that we're taking on over the next two years. For 20,000, it's because it also includes a new building, of course, at the same site, so there's no land acquisition at all, but it includes a new building and, of course, completely new lines and equipment.

That's because of the building which is involved.

Sorry? Does that answer your question?

Am I audible? Yeah, okay, so that's because of the building involved. It's not the case itself for a higher SHP machine or a typical higher category of machine. That's not the case.

It is also for higher machines. It is also for higher machines, but it involves all of this, all of these things. So, you know, we're seeing, as you can see from the results, we are seeing traction in international markets. We are seeing traction in the high horsepower segment as well as OptiPrime. So it is for those kinds of engines.

Second question was just on the YZAC side.

I mean, you know, a lot of data center capacities coming at YZAC location. If you can provide some clarity as to are we getting inquiries specifically pertaining to this location and how strong are these inquiries from the call around that will be able?

So, look, we are engaged with different kind of customers, and there are inquiries from all over. I wouldn't say Vizac is any different from that. At this point in time, however, it's hard to comment on that.

Understood. Sure. That's it. Thank you very much.

Thank you. The next question comes from the line of Tina Virmani from Motila Loswal Financial Services. Please go ahead.

Hi, thanks for taking my question, and congrats, Gauri, Rahul, and the team for a great set of numbers once again in the quarter. My first question is related to the margins. So we have seen very good growth and very good growth in revenues across divisions. I wanted to understand when can we start witnessing the operating leverage gains? Because you had mentioned in the past that you were investing in the sales channel network, educating your... The distribution network and everyone on the new and the higher HP products. So are these investments done or which is leading to, let's say, the higher other expenses which we have seen in this year. So are these investments done or they are more to be done in the coming quarters? And when can we see actually the reduction in these other expenses which can drive your operating leverage gains? So that's my first question.

Hi, Dina.

So, look, each of the nodes, the KVA nodes, have their own associated margin profile. So, overall, what we share is a composite number. No, uh... What you would see is that there is absolutely no margin deterioration and we have seen in certain nodes, we've seen operating leverage also kick in. The way I can answer that question right now is A lot of the investments are made, but as you're aware, we've kicked off this new capacity enhancement investment, so there is a lot of traction that we also are receiving on the international side for which we are gearing up for, and we probably will see larger operating leverages kick in soon.

Okay, so that can start panning out maybe from FY27 onwards.

Yeah, I mean, that is our full intention is to maximize an operating leverage, yeah.

Understood. And my second question is related to your coverage in business. You have mentioned that you are growing very well in the HHP side with growth in your OptiPrime and the other HHP ranges. How do you see the growth in the non-HHP portfolio for FY27 and going ahead? Like, how do we see this segment to grow going forward, given that we already have a very high base for the industry also, as well as for Coyle also?

I mean, it's going to be hard for me to give an outlook, but what I can certainly say is that, look, we will continue to strive our best and focus on our core bread and butter business, which is LHP. So that certainly will remain a big focus area as we look to unlock new avenues, especially on the projects and HHP side. So we are very committed to the LHP business.

Understood. So this will grow in line or maybe a little better than the industry growth for this year also, FY27.

We will certainly try for that.

Okay, okay. Just lastly, on the cost side, like we have seen higher RM prices across the board for the entire industry. Do you see that the market is strong enough for absorbing any kind of price hike if industry participants were to take any kind of price hike for RM pressures?

Look, I think each company has its own, you know, strategy, so it's hard for me to comment, but I think some of the material cost inflation is such that it's going to be hard for players to absorb all of it themselves. So some of it will certainly get passed on to the market.

Understood. I'll come back with the following questions. Thank you so much.

Thank you. The next question comes from the line of Suraj Malur with Catamaran. Please go ahead.

Hi, thank you very much for this opportunity. Of these 1,400 crore petreys that we have announced, is it fully new or is there any replacement amount involved in this?

Yes, this is fully new capex, nothing the replacement.

Got it. And the 700 crore capex that is underway, so the current gross block I assume would be around 2000 crores. So is this understanding correct that this 2000 crore gross block would become plus 700 and plus 1400, so roughly like 4000 crores after 2-3 years? Yes.

Once we complete the capex.

Got it. So that 700 close, nothing is included in the current DOS plugin. No, no, no. Got it. And if you look at the amount, like, is the new capacity of this current 20,000 engines that is announced, is this primarily HHP? Because the amount is huge. If you look at the current capacity of 1,35,000 and the current loss plot, the proportions don't add up. Like, the increase in engine capacity is just 15%.

So, Gauri has already answered that. So, it's a combination of both. So, we are investing in the building and existing capital facility. Plus, in larger CAPEX, we'll go towards the building HGV Capacity Announcement.

Sorry, sir. The line for the current participant has dropped from the queue. We'll move on to our next question. The next question comes from the line of Amit Anwani from PL Capital. Please go ahead.

Hi, thanks for taking my question. I just saw the press release on the Netherlands subsidiary. So, if you could elaborate more, I think you have highlighted about some heat engines and ice engines. As a product plus some energy transition products, I just wanted to understand what we're trying to achieve with this subsidiary in Netherlands.

Yeah, sure. So, you know, given international is a very big component of our five-year goal, it's just important for us to structure ourselves efficiently as we're growing to create value for our stakeholders. So it's in line with that.

Right.

So, a second question on the data center, just wanted to understand in terms of a capability and $2 billion coal, how much we are factoring it in terms of... The data center growth addressable market in terms of higher nodes in the data center, some color definitely would help. And how has been at least the growth in the past, the targets for growth from the data center piece that will help?

Sure. So... Look, I cannot give out how much we are factoring in the $2 billion from a data center segment contribution standpoint, but the response that you receive is quite encouraging. We remain committed to the segment. We do believe that we have a unique proposition for the data center segment, and we are hoping that we get more traction as we move along, but we have seen successes even in the last year.

All right. Lastly, you did highlight it about the CAPEX and the international lag will also is something which you're considering while doing this CAPEX. Could you elaborate more which markets and nodes you're actually trying to address with this CAPEX? Anything which is there to understand in terms of any particular markets and nodes you're looking for?

It's focused on HHP markets in power chain mostly. So, that will be the key theme of the capital deployment.

Any particular geographies we are looking at initially?

So, at this point, we can't give that out, but of course, the capacity is being set up for, you know, whole-of-coil to use, yeah, for across the board.

It's for across the board, so it's not that we're only setting up the capacity for a specific geography. It would be for any demand that we see across our market.

All right. Thank you. Thank you so much for asking. Thank you.

Thank you.

Thank you. We will take our next question from the line of Mr. Suraj Malu from Catamaran. Please go ahead.

Yeah, thank you very much. Sorry, I got dropped off. So my question was on the proportion, like the KPIs that we have announced, like roughly double of the current gross block, including the 700 and 1400. So what is the asset term that we can expect on this gross block?

So, Suraj, Sachin will answer the question on Assetons, but I think you dropped off, and what he was saying is, and what we had mentioned before as well, was that the difference in 700 and 1400, even though one is 50,000 engines and one is 20,000, is because this one includes a new building as well at our existing Kaga land. And it's for the high horsepower engine. So, I just wanted to make sure that you heard that, and Sachin will answer the second part of your question.

So, Suraj, asset and will in the range of 4 to 5 depending upon the nodes.

Understood. On the total waste, right, including the land and everything for 2100 meters. Okay, yeah, thank you very much.

Thank you. Your next question comes from the line of Palak from MIV. Please go ahead.

Hi, am I out of the booth? So, my first question is on the short-term margin. So, with all the commodity, inflation situation, are we comfortable that we will be able to sustain this level of gross margin? And second question is that I think that a lot of, I think approximately 40 to 50 percent of our export revenue is from the Middle East market. So what was the impact on this quarter and the next quarter, what we are expecting? And the last question is that can you give us the proportion or the contribution of HSP to our PowerGen segment?

So, on the last question, it's been asked before on the call as well, but I'm sorry, we're not going to share that breakup, Pala, on the HHP bit. On your first question on raw material inflation, I think we're in a pretty sort of turbulent period or perhaps going to be entering a pretty turbulent period. And I think every effort will be made for us to focus on our long-term growth and maintaining our margins and keeping them sustainable. But, you know, as we know, it's a turbulent period, and hopefully that only remains for the short term. I think, you know, in terms of the demand drivers in our industries, we do feel that they are remaining strong. So we feel we're in a good position. And it's not anything that we're going to go through in an isolated way. On your second question, which was on Middle East, I think what you said was 40 to 50% of our international revenues are from Middle East, and have we seen any impact, right?

Yeah, correct.

So, in the last quarter, we've not really seen any impact. It's going to be hard to comment on, you know, this quarter, the subsequent quarters, but in the last quarter, we haven't really seen impact.

Also, just last question. So, considering the current energy crisis situation, are we seeing the demand on the gas-powered power generators? Do we have a strong portfolio in that segment?

Look, we have a pretty strong portfolio across the board, something that we would back, and every demand and every opportunity that comes up, we will go out and strive to meet that demand.

And I think what I would add to Raoul's comments is we've developed engines that run on different fuels. And it was defined in our technology tracks about three years ago. It's in our investor materials, where we've talked about developing internal combustion engines that run on gas, or ethanol, or methanol, or blends of hydrogen, etc. So if there's demand that picks up for any of these alternative fuels, then we are ready to address that.

Have you seen any pickup in the inquiry for this specific segment?

Which market are you talking about?

I mean, the ultimate engine power generator.

I would say that there is nothing meaningful to talk about as far as this conversation is concerned. We are obviously hopeful, but nothing meaningful at this point.

Okay. Thank you. Thank you.

Thank you. Before we take the next question, a reminder to all the participants, you may press star and then want to ask a question. Your next question comes from the line of Parekshit Kandipal from HDFC Securities. Please go ahead.

Hi, Gauri and Rahul. Congratulations on a great quarter. Hope I'm audible.

Yeah, you're audible.

So, my first question is on, I mean, this year we have seen a substantial increase in copper prices, and now this last quarter we have seen almost 15% increase in pig iron prices. So, have you taken any price hikes already for this collection? So, if you can vacate between the copper and the pig iron, because pig iron is a recent phenomenon. So, just your views on that.

We won't be able to comment on that because it pertains to this quarter.

What about copper? Because copper has been rising throughout the year. So, last financial year, have you taken any price ideas?

So, when, as and when there's raw material price, I mean, we continuously evaluate our pricing policy, and we take price increases at regular periods. Yeah. Yeah, that's where we are.

So, can you quantify how much price I.B. have taken in FY26?

No, we can't.

Okay, sure. Second question is on HHP science. So, is this engine, it will be localized by an early manufacturing written house, especially on the HHP portfolio? Yeah.

It's developed by our own engineering teams and it's completely localized.

Okay. Just one question on the needle and investments that you're doing. I think you mentioned about gas turbines, transformers, energy storage solutions. So is it the research which we'll go into and the product rollouts will happen in some years? So how does one look at this? Which comments that you have given on the background of the research you're going to undertake on this?

We couldn't hear your question very clearly. Sorry, could you just speak a little more clearly?

Yeah. So in the announcements on the incorporation of the new entity in Netherlands, you have given a brief background about the businesses which will happen in this. So there's a mention of gas turbines, transformers, energy storage solutions, including batteries. So, just wanted to understand a little bit more, is this new business line, will we do manufacturing here, or is it in a very initial stage, can we do some more color on these new articles?

Yeah, so look, we have outlined our technology paths, and there is a focus on You know, different combustion technologies also, but there's nothing significant to speak about at this point in time.

And I think, you know, you're also referring to the format which is disclosed, and that's the incorporation of a company. Usually when we define that, it includes everything that we could possibly do doesn't necessarily mean that we will do it. If we're looking at the power system space, it can involve a range of technologies over time, which is what we're trying to address in the description. It may not be where we are today. Does that make sense?

Yeah, that's true. Transpiration, so it may happen when it happens, what you're saying.

Exactly, exactly.

This last question on the Pahuj and Gavin News, so if you can give us some color on what was the data center contribution on, and how are you looking at the journey from Colo to, so what's the presence in Colo right now, Edge, and how are you looking to get into the hyperscale, hyperscalers?

Yeah, so I think in some sense that question is leading. But yeah, so we are present in Edge and Colos, and we are solely also making our presence in hyperscalers too. It would be premature to give out those contributions at this point in time. So I would reserve my comments there.

But will it be single digit, double digit, only double digit, any color, at least on the contribution of everything on the PowerGen revenue base?

I mean, we certainly strive for double-digit as far as contribution is concerned, but, yeah.

Thank you. Thank you. I think that's good.

Thank you. The next question comes from the line of Saurabh Baria with Oak Lane Capital. She's overhead.

Yeah, hi. Am I audible?

Yes, sir.

Hello. Yeah, perfect. Yeah. Congratulations, Gauri Rahul, Sachin, and to the whole team. My question is, actually, of course, you have not commented on the new products, etc. But I want to understand from you, like, in terms of R&D, you know, how as a percentage of sales it is going up for us? Or if you could talk about, you know, any patents, etc., in terms of number of patents, you know, which are increasing for the company or not. And why I'm asking this is I came across this, you know, latest patent, which was on maybe hybrid generators. And of course, Rahul's name was there. So it's quite encouraging to see, you know, CEO of the company and is there on the patent. So, maybe some thoughts on how R&D and new products will come together, if you could show some like that.

So, maybe we'll talk about R&D as a percentage of sales, maybe, Sarchil, if you can.

So, Sarno, R&D as a percentage of sales is roughly 2% on the revenue side and 2% on the capex.

So, is there any increase there? I mean, to say, year-on-year, are you putting more effort there?

Yeah, yeah. So, it's steady at 2%. But with our sales, quantum is going up. So, R&D expense is also going up because we are making the same rate of 2 and 2 and up percent.

Okay. And second, I think Gauri at the start of the call commented that, you know, international is now more than export. So, does it mean… Can Oscar, America's portion of business is doing well, if you could comment on that, because we've been in, you know, America for quite a long time, and after, of course, Middle East, how the traction is happening there.

No, no, so, I didn't say international was more than export. I was just saying that the way we look at our business outside of India is what I call international rather than export, just the difference between the two, say, business models. Export is when you make locally and when you ship out to like an agent or a distributor and you're just, you know, you have no presence there yourself versus an international business, which is what we are trying to build, which is we first understand each market very deeply before we decide how we're going to enter. And then we actually have to invest in capability and people and possibly set up, you know, some sort of... Manufacturing there, perhaps, and then we're deeply entrenched in that geography. So, that's what my commentary was about. So, I'm not sure I understood your question.

I was trying to understand, I mean, to see how Kirloskar America is doing now. Like in this year, has it done well then, you know, other regions? Because of course, we'll have to wait for annual report for it to come. But if you could give some qualitative color, how that is done for you?

I think this past year, Kiloskar Americas has been, I mean, there's a lot of effort that we are putting into the Americas region. But at this point in time, you may not, I mean, there's nothing meaningful or significant to discuss at this point in time. Sure. And very lastly.

Yeah. Okay. I'm thinking, and very lastly, in terms of single engine, can you tell us, like, what is the exact size of single engine you are selling right now? Like, I know Opti-Prime series is there, which can take you to, you know, 3000 and all, but in terms of single engine, what is the maximum capacity you are selling?

So, like our nuclear power execution is? Single engine 6.3, like basically around 8000 KVA, 6.3 megawatt. Okay, and but let's see. Sure, and then for data center, etc. For data centers, right now, we go up to 1650 in single engine, and obviously we are on track to increase that as well.

Perfect. Thank you very much. All the best to the team. Yeah. Thank you.

Thank you. We take our next question comes from the line of Prateek Srivastava with Nuresh Wisdom. Please go ahead.

Yes, thank you sir and ma'am for the opportunity for taking my call and again wish you, you know, congratulations again on the very great set of numbers. Today, there is some problem with this conference line. I'm not sure the moderator is seeing that, but calls are getting disconnected. I'm not sure if any question on ARCA's asset quality was taken. But in Q3 call, the GNP numbers were 1.2. The NNPA was 0.3, correct? Can you please provide what are the updated numbers as of today for GNPA and NNPA on ARPA?

Ruthi, are you there? Can you answer?

There. So, yeah. So, the GNPA number for ARCA as of 35th March 26th is 1.2, so it remains at the same level, and NNCA also remains at the same levels of December, which is 0.3%. And in absolute terms, the GNPA has actually come down.

Oh, great. Great to share that. The other question was on the order value. I guess Rahul sir mentioned that in last Q3 call. This was the order around the nuclear NPCIL and the marine order. I guess the combined order at that point was 798 crore. The execution was two-year timeline. Any update on the execution of this order and are we on track?

The NPCIL order execution is by 2029.

Okay, okay, and is there any update? Are we, is there like any, are we actively working on it, or we have got to start any kind of, you know, color you can throw in the execution timeline?

Yeah, yeah, all the teams are actively working very hard. We're actively working very hard on it because the execution is absolutely critical for us to, you know, do on time, and it gets tracked on a regular cadence. It's, you know, project managed, and we are on track to deliver it by the timelines that we have committed to.

Got it, got it. And do we have any quarterly revenue recognition in this order?

I mean, as the billing happens, yes, we will recognize revenue.

Okay, but that hasn't started happening yet, right? Yeah, okay. Okay, thank you. Thank you, ma'am, for the answer. And again, all the best, you know, for your continued future. Thank you.

Thank you, Prishis. Thank you.

Thank you. The next follow-up comes from the line of Jason Sons with IDBI Capital. Please go ahead.

Since it's 8 p.m., could we request that this is the last question, please?

Sure. Yeah, yeah. I'm just finding two questions. You did highlight some segments which are contributing to the growth in industrial. Now, for the same thing I just wanted, which are the areas of strength for PG, for PowerGen, and some areas of strength, any weakness in certain areas, just some qualitative color on demand for the PG segment?

So, look, we take a lot of pride in the fact that we can offer solutions that are practical to our customers. So, I mean, if there were weaknesses, we would certainly try and plug those weaknesses over a period of time. So, we are focused on, you know, focusing on our high horsepower customers that remains a consistent focus. So, I think I wouldn't be able to comment more on that right now.

No, actually, I wanted to say in terms of segments, it's not that the portfolio I meant in terms of, let's say, residential or hospitality or certain segments. That's how I wanted to approach the question in terms of industry verticals.

Yeah, I mean, so it's actually, I mean, it's actually pretty broad based. So it becomes pretty hard to, you know, answer it like that, but it's pretty broad based. Okay, okay, sure.

And just finally, the 14 billion capex, the peak revenue potential, what can it be? And in how many years can it be? Some broad color on that. So 14 billion, what's the peak revenue potential? And how many years you aspire to eventually reach it?

The capex which we have announced is 1400 crores, and what we are targeting to complete the capitalization in the next two years. So from therein, the revenue will start kicking in our BNM.

Right, yeah. So what could the peak revenue be for that?

So at the asset turn of 4, you can calculate it will be close to 5,600 crores.

Sure, sure, sure, I'll say 10 or 4, fine. Sure. Thank you so much for answering my question. Thank you.

Thank you. Ladies and gentlemen, we will take that as a last question for today. I now hand the conference over to the management for closing comments.

Yeah, thank you very much for all your compliments to the team, and thank you for your interest in the company.

Thank you. On behalf of Antiques Talk Broking Limited, that concludes this conference. Thank you everyone for joining us and you may now disconnect your lines.