Ladies and gentlemen, good day and welcome to GMM Pfaudler Limited Q1 FY 2022 Earnings Conference Call. As a reminder, all participants lines will be in 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Priyanka Daga from GMM Pfaudler Limited. Thank you, and over to you, ma'am.
Thank you, Faizan. Good morning, afternoon, and evening, ladies and gentlemen. A very warm welcome to all of you into the Q1 FY 2022 Earnings Call of GMM Pfaudler Limited. On this call, we will be referring to the earnings presentation that has been uploaded on the stock exchange and also available on our website. Hope all of you had a chance to go through the same. Before we begin, I'd like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning these risks is on slide number two of the presentation that was shared earlier during the day. From the management, we have with us our Managing Director, Mr. Tarak Patel, our CFO, Mr. Manish Poddar, and our CFO of International Business, Mr. Alexander Poempner.
Referring to the agenda given on slide number three, we will start the presentation with an overview of the quarter from Mr. Patel. Over to you, Tarak.
Thank you, Priyanka, and good evening to all the participants. Let me just quickly take you through the presentation and give you an overview of both the India as well as the International business. The India business has shown tremendous resilience. We've had a strong improvement in both revenue and profitability. Our order intake across all verticals remains very strong, especially driven by heavy engineering, where we've had significant inroads made into the oil and gas and petrochemicals segments as well. We've also been very pleased with the Pfaudler International business. The turnaround is happening much before expectation, and this is being driven by the turnaround in both Germany and China. Mavag business continues to outperform. The current backlog at Mavag is close to about CHF 38 million. Significantly higher than what it used to be and significant amount of order intake.
In terms of the integration process, we have now completely handed over the whole integration process to our internal team. We are now working with the local geographies and local offices to extend the operational excellence, the cross-selling, and the low-cost sourcing models so as to increase market share and profitability. I'm happy to report as well that you will see now some of the impact of the synergies coming into our bottom- line as well. We are very happy also with the order intake, which shows and gives us good visibility for this financial year. Our outlook for this year remains very positive, not only in India but also globally. Most of the Pfaudler facilities are now booked, now we are looking at adding CapEx in certain areas so that to free up some capacity.
We believe that the chemical and pharmaceutical market in the geographies in Europe and in the U.S. especially will continue to invest, and we see a lot of growth coming from there. In terms of our GMM Pfaudler [audio distortion] , we had some disruption due to COVID. This is very good. We are currently now running both Karamsad and Hyderabad at full capacity. The Vatwa facility is kind of operational. We are two days operational, and we expect two more days to come online shortly. We ordered two new furnaces, one for Hyderabad and one for Gujarat. We now believe that that will also help us free up some capacity and kind of have more capacity.
Like I mentioned to you, we got a significantly large order from L&T, close to more than INR 100 crores worth of heavy engineering business from LLP for the oil and gas and the petrochemical segment. That puts us in a very good position for heavy engineering. The great thing about this order, it comes perfectly in time so that the Vatva facility which we have acquired, the new order will be manufactured there. We've also been rated by ICRA, a subsidiary of Moody's, as [ICRA]AA- (Stable), [ICRA]A1+. Just to give you a quick update on the numbers. In India, the revenue grew by 31%, INR 130 crores to INR 171 crores this quarter. EBITDA is up 80%, INR 24.3 crores to INR 43.7 crores. The order intake has improved significantly, up by about 120%. The order intake during this quarter was close to INR 290 crores.
The current backlog compared to previous year same time has increased by 60% to be about INR 500 crores of backlog currently on our books here in India. Like I mentioned to you, gives us great visibility for the future. A quick update on the international business. Pfaudler International has shown improvement both in revenue, profitability, and order intake. Germany and Interseal are stronger and improved profitability and robust order book. Germany, obviously, the facility there has gone from loss-making to positive, close to $1 million of EBITDA. That is a significant improvement there. Mavag business, like I mentioned, has significantly outperformed. We recently received an order for CHF 8 million. The largest customer in the market is taking their backlog of CHF 38.5 million.
Please bear in mind that this company's revenue last year was CHF 15 million, so it has maybe 2x its revenues already in their backlog. NORMAG, Italy, U.K., Benelux, also on track. We're seeing a strong recovery in the U.S., and we are now in the process of adding some capacity in Brazil so that we can cater the growing U.S. market. China also has turned around and has made a good start this quarter and has turned profitable. Again, slight improvement in execution is the focus there. We also now have a commercial strategy in place so that we want to increase market share. International results, if you compare, I mean, obviously, we can't compare Q1 with Q1 of this financial year, but looking at pro forma numbers, there's a 23% improvement in revenue, 29% improvement in EBITDA.
Order intake is up by 37%, and order backlog is up by 37%. In terms of consolidated results, again, not including the PPA impact, which I'll speak about in a little while, the revenue is up 257%, EBITDA up 80%, order intake is up 378%, then order backlog up 340%. Again, not right to compare Q1 and Q1 because last year we didn't have Pfaudler as part of our business and this year we do. Still, it goes to show that there's improvement in all our fronts. In terms of the income statement numbers, like I mentioned to you, India standalone is INR 171 crores with about INR 43.7 crores of EBITDA, which comes to about 26% as a percentage of revenue.
Pfaudler standalone is about INR 408 crores of revenue with about INR 40.6 crores of EBITDA, which is about a 10% EBITDA margin, significantly higher than what we had guided towards. Obviously, the final impact of PPA, which is a -INR 46.5 crores. If you look at it, the INR 43.7 crores of EBITDA coming from GMM standalone, +INR 40.6 coming from Pfaudler, which gives you about INR 84 crores, -INR 46.5, which is the PPA impact. Again, it's a non-cash impact. It's an accounting entry, this is the last quarter that this PPA impact will reflect in our books. Next quarter, we will not have any further PPA impact, you can straightaway add this number back. There are some intercompany eliminations, hence we get a total of INR 561 crores of revenue and the EBITDA of about INR 35.9 crores, which is about 7%.
Then obviously, PBT and PAT are negative, and that's mainly because of the impact of PPA. Again, non-cash, does not affect the cash flow, and from next quarter, again, it won't be there. Just a quick update on integration efforts as well. We've made a good amount of inroads, both in terms of operational excellence, value sourcing, and cross-selling. We are in the process of launching some products here in India. Similarly, we've used the Pfaudler network to sell Indian-made products into European, U.S., and Southeast Asian markets. We are also looking at implementing some of the manufacturing excellence projects that we have had here in India to some of the global facilities as well. All in all, we are quite happy with the performance, especially of the international business, which has turned around quicker than expected.
With the backlog that we have in hand, we expect this year to build on the momentum and really come out with a good performance this year. India obviously remains very strong, and we will build on India performance. Now with the new capacity coming in, the new backlog lines are also coming online, we expect the India growth story to also to continue. With that, I don't have any more points that I would like to make, and we will then open it to Q&A and answer any of the questions that you may have. Thank you very much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star 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. Reminder to the participants, anyone who wishes to ask a question may press star one at this time. The first question is from the line of Amandeep Singh from Ambit Capital. Please go ahead.
Yeah, thanks for the opportunity. Firstly, on the domestic business, we saw a sequential decline of 10%, and you mentioned that it would be largely led by the COVID impact. Can you help us understand how would be the segment-wise revenue stack up during the quarter between glass-lined, HE, and PP for the standalone business, and how does this compare with the last quarter?
Sure. I would just kind of caution you, the manufacturing company of Q4 is always a very big quarter for all manufacturing companies, it will be kind of unfair to compare Q4 with Q1. In any case, yes, there is a slight decline because of COVID, but anyway, our Q1s are always a little bit lower. In terms of breakup, I think Manish Poddar can provide that.
I think we've talked, we are now doing more technology systems and services from a breakup standpoint. That is getting in line with the international business that we wanted to cater to.
I don't want to see it.
Can you give systems breakup?
If you can see slide number 14 of the presentation, that has the segmented overview. Which talks about technology systems and services on a standalone basis. 91% of our revenue came from technologies business.
Technologies, again, just to clear your mind, is basically any equipment that we manufacture. All our [PMG] glass-lined, everything is going to technology. After-sales is obviously the services part of the business, the spare part, and then the systems which any time we combine into a large kind of a complete unit.
Sure, Tarak, I got that point, but this breakout would be helpful if possible. Secondly, you mentioned about order backlog of CHF 38.5 million at Mavag. Can you help us understand the delivery timeline for this? How would this affect the domestic PP segment given the outsourcing?
Right. I think most of our PP segments here are now geared up for the capacity that we now send to Mavag. Obviously, Mavag has been successful because they have a low cost source here in India, which makes them much more competitive in the European and U.S. market. Obviously, this number of CHF 38.5 is significantly higher than anything that they could do in Switzerland. We have two thought processes here. One is we're going to kind of free up some capacity in Karamsad by moving some of the PP work to Vatwa, because Vatwa we have seven sheds. We're now going to use all seven in the short- term. Some production will move there. We will then have more space available for Mavag-related work here in India.
What we're planning to also do, Amandeep, is we are going to use the U.S. now. U.S., the Rochester Pfaudler facility is also kind of large, and we will use that to finish some of this filtration drying work for Mavag, and we will use that to kind of free up some capacity as well. It's a two-pronged approach. Obviously, we want to increase our revenue. If we have such a strong backlog, it's important that we kind of work as much as possible to make sure that we can bring it down as soon as possible.
Sure, Tarak. That was really helpful. One more if I could squeeze in. In the previous phone call you mentioned about coming back with the updated guidance, given the few acquisition including HDO tech in place. Any update on that?
I think we're still some time away from that, from forming up the strategy and long-term strategy and plan around that. Give us probably a couple of more quarters and then we'll be able to. Your question was more again, around Vatwa, right?
Yeah. On the FY 2024, the consolidated guidance with [Divi's] you had mentioned and given the better than expected turnaround happening and also including the Vatva facility. Any updated numbers on that or we can wait a couple of quarters for that?
Yeah. Vatva, to be honest with you, we started up much quicker than expected. I was actually planning it in maybe Q2 or early Q3. Because of the large orders that have come in, we need to ramp- up and have the capacity available immediately, and that's why we've done that. I think from a guidance standpoint, let these two quarters see. This is the 1st quarter that we are consolidating fully. Next quarter, the PPA part also goes away. You will get a true idea in terms of what the numbers are. I think maybe by six months in this calendar year we'll try and look at maybe if there is any requirement and how we are tracking towards the final for the performance. We'll try and give you some kind of update on the guidance.
Sure, Tarak. That's really helpful. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Dhaval Shah from Girik Capital. Please go ahead.
Hello. Yeah. I have a question with regards to the opportunity size, which you have mentioned in the annual report. The domestic opportunity size coming to around INR 74,000 crore over FY 2020 to FY 2023. We did around INR 640 crore of revenue last year in the standalone. How should we understand that how will this convert for us in terms of our top- line over next two to three-year period?
The calculation that we normally will use is we will continue to grow at a similar rate that we have been. Luckily for us, the glass-lined industry itself has been growing at a good pace with the investments coming in in agrochemicals, specialty chemicals, and pharmaceuticals. We believe that this market will expand, so we have a bigger market to participate in. Currently we have market share close to 50%, if not more. That's the thumb rule that you can take. Having said that, we have also kind of entered into new markets such as oil and gas, petrochemicals, which are growing at much faster rates and also much, much bigger. Even a small kind of size there, even taking maybe a few big orders, be it INR 200 crore, INR 300 crore of the order intake.
I think you can, as a rule of thumb, India will continue to grow at a similar rate for the next three years that we have been enjoying for the last maybe few years. I think that's what you can hope for, and I think the markets are there. The investment will continue from what we are seeing, the pipelines and the kind of inquiries that we have on hand. We don't believe that either of these segments will slow down in the foreseeable future.
Got it. This would include the PLI opportunity, or is it excluding this?
No. We've not really factored that in. If that comes in, obviously that's a bonus. Whatever government policy or changes that will happen that will promote further manufacturing here in India or more investment coming in, that would be just bonus on top of what we have currently calculated. Obviously being bullish, that's why we've kind of acquired a new factory, so to free up capacity in Karamsad and then adding two new furnaces. I don't see any reason why there should be any kind of slow down in terms of growth when it comes to GMM Pfaudler standalone.
Got it. Sir, if I can ask one more question. With regards to the expansion, and the opportunity which we see in the Western markets, you mentioned the Europe and the U.S. There, our product configuration will be premium to what we are selling in India, with regard the similar portfolio which we'll be selling here. Would that have some sort of premium edge to it?
In terms of the basic equipment, it's very similar. The glass that we use here in India is the same as the glass they use there. Obviously, there could be more bells and whistles there. Equipment might be more sophisticated compared to what an Indian buyer would buy, but that's the only difference. There's nothing that we cannot manufacture here that they are manufacturing. That's the only difference. They do have some kind of smaller technologies in different glasses that we don't make here in India, but we can import it and kind of coat it over here. Otherwise, there's no real change. That's why the idea of using India as a low-cost source, and maybe this is a good time to talk about some of the successes we've had. We had a certain order in Spain.
We had a certain order in Russia where the customer would not have bought from Pfaudler because of the price point. Now, having access to India, Pfaudler was able to sell Indian-made equipment in these geographies, and get market share and at good pricing as well. Similarly, we are currently working on a very large project in the U.S. as well, that we believe that the Indian-made equipment will be a right solution for the customer there.
Thank you. Mr. Shah, may we request that you return to the question queue for follow-up questions. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants at the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead.
Yeah. Very good evening, Tarak a nd everyone.
Hi, Sandeep.
The first question is pertaining to the margin, sustainable margin levels in Pfaudler International as per your earlier guidance of that FY 2024, 16% consolidated, gave a back calculation of roughly around 12%-13% margins. However, you delivered 9.5% in the current quarter, which has come in earlier than what we were expecting. Would you think that these 12%-13% margins can be further exceeded over a three-year period? Or would you still maintain similar guidance for International business margins?
Sandeep, I think this is the first full quarter for Pfaudler International, probably a bit too early to say that this 9.5%-10% EBITDA margins are more sustainable. I think we need to test this number for another two, three quarters.
I think, Sandeep, I think we'll just jump in here and kind of add, if orders were the problem, we would've been a little bit more conservative. The good thing is that order is already in. We are not scrambling for orders. The focus really shifts to execution, if we can get the momentum going in the execution, there's no reason why these numbers are not only sustainable but they may be even probably improvable. Maybe Alex can jump in and kind of give you a little bit of color on the international business and what he expects the margin profile to be.
Yeah, happy to do so. Thanks, Tarak, and hello, everyone. In fact, we are really happy with the performance of the International business. In fact, you are right, we are doing better than we had stated guidance for before. From the margin perspective, which is especially driven by the faster turnaround of the German business and also other improvement measures, and we already see the results earlier. The margin definitely went up, and also in the future. We're still under the COVID crisis in certain jurisdictions. Nevertheless, if this now comes more or less to the end, we also see there another push to the margins, another improvement potential. We are really happy with the performance here- to- date and also positive for the outlook.
Got it. Second question is on pertaining to, you mentioned in last conference call, that there is a particular African country where you want to make a mark, where low-cost products are more acceptable and Pfaudler does not have a share there. If you can update on that, and also if you can parallelly give us the CapEx guidance for this year. Those are my last questions.
Right. On the markets where Pfaudler is not very strong, Spanish market, some European, Eastern European, Russian market, Southeast Asia, are areas that definitely India can be leveraged, and we are leveraging India already. China, obviously, there is a good potential there to improve the Chinese business as well. We have now a factory which has double the capacity. We believe that China is definitely a growth area for us. These are the kind of low-hanging fruit that we have. In terms of CapEx, there is a new furnace that we'll be adding in Brazil. That's about $400,000. There is a good backlog now in the U.S., and Brazil needs to ramp- up because Brazil is a low-cost source for the U.S. market, and the U.S. market are investing.
In India, like I mentioned to you, we've already approved two CapExes for two new furnaces, one in Karamsad and one in Hyderabad. This was done last board meeting. Besides that, we have no other significant CapEx plans. I think this has put us in a strong position. Then obviously, moving the HE business out from Karamsad gives us that additional capacity in glass-lined in Karamsad.
Thank you.
Thank you.
Mr. Tulsiyan, may we request that you return to the question queue for follow-up questions? Thank you. The next question is from the line of Utsav Mehta from Edelweiss AMC. Please go ahead.
Hi, good evening, Tarak. Thanks for taking my question. Could you just give some sense on the operating cash flows that you've done in this quarter and where the working capital at a consolidated basis would be?
Cash flows have been consistent, and it's very healthy. Also, there's some increased investment in regard to inventory, one, due to the higher backlog that we have, order backlog. Also we need to safeguard ourselves on a back-to-back basis for the procurement of these key parts. Like Tarak mentioned earlier, this cash expense of INR 46.5 crore of PPA impact also gets into the cash flow for us. We are pretty much comfortable. Of course in the next quarter we'll formally be sharing the cash flow input. From a debt picture perspective, we have a debt equity ratio of 1 and the net debt to EBITDA on a consolidated basis as well is at 1. We are on and on at June-end. We're very comfortable from a cash flow perspective.
Okay. Could I just request the gross debt number? Second part of my question, Tarak, this is the second quarter in a running that the standalone business has done close to 25% or 25%+ margins. Do you believe that this sort of a number is sustainable or is there some element of benefits of your raw material prices or inventory gains baked into this and therefore it should revert to 20%-21% back again?
I don't think so. I think that we can sustain these margins on two or three fronts. One is that we would add a significant amount of Export business now that we are part of the Pfaudler network and we are leveraging India. We will be doing probably close to maybe 17%, 18%, 20% of export business every year. That will definitely help the margin profile. Like I mentioned to you, we've also going to ramp- up our Intercompany business. The stuff that we will send to Mavag because of their backlog will kind of increase as well. Then with the Vatva facility and the large flow through of orders going through that, I'm sure there'll be some absorption as well. I'm not too crossed about, possibly, numbers for this year.
In the glass it's pretty easy to pass on these price increases to our customers because they buy raw materials all the time. Glass is not the only equipment they buy. They buy [centrifuges] , they buy heat exchangers. They take those metal prices into account when they budget their expenditure. All in all, I believe that we can sustain these margins for this financial year. On the debt perspective, your question, Utsav, the gross debt is at $73 million. Cash in hand is $30 million. Net debt turns out to be at $43 million on a global basis.
Wonderful, gentlemen. Thank you so much.
Thank you.
Thank you. The next question is from the line of Jayveer Parekh from Sunidhi Securities and Finance. Please go ahead.
Hi, Tarak. Great commentary. I just had a clarification question on the PPA. For next quarter, the entire INR 65 crores will go away or just the changes in inventory, not the INR 46.5 crores?
Right. Hi. Good evening, Jay. This is Manish here. 46 goes off on the COGS side for the next quarter onwards. It was 92, 46 in the previous quarter, 46 in the next quarter. In this quarter, that is Q1. That is off. The amortization of intangibles, which is at INR 18.8 crore this quarter, will be INR 17.8 crore in the next quarter, and thereafter it will be INR 6 crore per quarter for Q3 and Q4, and after it will be at INR 5.5 crore per quarter.
Right. That's very helpful. Thank you much.
Thank you.
Thank you. The next question is from the line of Shanti Patel from Shanti Patel Investments. Please go ahead.
Sir, my question is, taking into consideration all these factors, what will be the return on capital employed and return on equity as on 31st March 2022?
Return on capital. Kindly appreciate that future guidance we will not be able to share with you, but currently, we are running at a ROCE of 15%.
Yeah, we have got more or less monopoly type of products. Correct? The competition is not that much. Return on capital and return on equity should be much, much higher than what it is.
From a margin standpoint, I think we have been running at 25+% on the domestic market, and now International business is there, which does lower our percentage per se, but then it gives us more dollars on only absolute terms. We need to appreciate from that perspective that, from a percentage perspective, it may go down on a global basis, but in absolute terms, it's going to nearly double in coming quarters.
Sir, I will repeat. You told return on equity is 15% or return on capital?
Return on Capital Employed is 16%.
Return on equity?
Return on equity, I'll have to check. I'll come back to you on that. In terms of coming back to our numbers, pre-acquisition numbers, we have targeted internally a three-year period by where the ROE and ROC will come back to those numbers. Obviously, there will be a little bit drop in the numbers because of the acquisition, a little bit of a downturn, at the end of the day, it will be the silent period of the company. Eventually, once things settle down, we should be able to come back to the original numbers.
Thank you. Mr. Patel, may I request that you return to the questions queue for follow-up questions? Thank you. The next question is from the line of Srinivas from Rockfort Consultancy. Please go ahead.
Good evening, sir. In the PPT presentation on page number 13, Profit Before Tax is INR 18.1 crore.
Page number 13, 18 point. Sorry, can you please repeat?
181 million, and the tax is INR 118 million.
Right.
Such a high tax.
Would you like to jump into this? This is basically the additional tax provision that we have to make in this quarter, probably U.S. and regarding the amortization. Do you want me to explain that?
No. The tax amount on INR 181 crore profit, tax cannot be such high, no?
I agree that this is the deferred tax amount on INR 181 PBT. You are seeing a tax impact of INR 118, which is considerably higher. The percentage is of average 25%. That is where I'm saying we had an additional tax impact on account of deferred taxation due to the timing differences. That's why I just wanted Alex to explain this further, probably from the U.S. piece and maybe on the amortization of the intangible timing differences.
Next quarter any tax provision will not be there?
On a consistent basis, sir, the tax impact would be approximately 25%.
Okay. In this quarter it is more.
This quarter it is more on a individual, in a country basis in U.S., there were some additional tax calculation difference due to the timing difference of the intangible amortization.
Okay. My second question is, Tarak just mentioned that we have ordered two new furnaces, one for Karamsad, one for Hyderabad. When do you envisage the commencement of these furnaces?
Hyderabad furnace, we should commission by Q4, so we should see commitment in Q4 output in Hyderabad, and most likely Karamsad will be for Q1 of next year.
Okay. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Amar Maurya from AlfAccurate Advisors. Please go ahead.
Thank you for the opportunity.
Yes.
Sir, couple of bookkeeping questions. I don't know whether you would be able to share that. What would be the India revenue this quarter?
Like we mentioned earlier that we need to change the segment that we have been reviewing because Pfaudler has been reviewing monitoring technology systems and services, while Indian entity has been reviewing basis the glass lining, heavy engineering, and the PP divisions. We have decided that going forward, we should be reviewing basis technology systems and services. Services being the aftermarket business, gives us a separate monitoring. Gives us where the focus is with, which is the high margin area, which you will see in slide 14. The International business has got a substantial share, but the standalone business does not have that share. That's the piece that we want to enhance. 91% of technology, services, systems and services of 10% basically segmental breakdown. Going forward, we intend to monitor the same segments.
Okay.
Sir, for ease of use, maybe to help you transition to this new segmental breakdown, we have given the FY 2021 business segment detail classification on page number 18 or slide number 18, where we have given our FY 2021 revenue breakdown. The traditional breakdown which you were used to, how does that transition into technology services and segments. This will help you kind of transition your estimates going forward.
Okay, going forward now this is the new standard which we'll be following, right?
Absolutely. Yes.
Sir, what would be the order book for Mavag?
Order book, as mentioned currently at this point of time in mid-August, we are at CHF 38.5 million. Order backlog.
Yeah. INR 38.5 billion, right?
million.
Swiss franc. Okay.
That is by 70, whatever if you do 70, 80, about ₹240 crores.
Okay. Sir, about the capacity expansion, I believe Hyderabad facility that 400-500 GMM capacity would be operational by Q4, right?
Sorry, can you please repeat?
I assume the Hyderabad capacity expansion, when it will be commissioned? It will be commissioned in Q4, as per the plan.
It will be in Q4. This year we started Hyderabad. We had a full- year, the Hyderabad performance has been also excellent. That's what we were really waiting for, to really see if we can ramp- up to a specific momentum, and then we can add more capacity. We have done that quite well. We've already broken all the records that the last company had kind of done there in terms of monthly output, number of units, revenue. By the time this new facility and new furnace comes in by the end of this calendar year, we would then have ramped- up our fabrication capacity so that we can then have the additional output as well.
Thank you. Mr. Maurya, may we request that you return to the question queue for follow-up questions. Next question is from the line of Ronak Vora from OHM Advisor. Please go ahead.
Hello.
Mr. Vora. Hello.
Sir, two questions. Firstly, the employee cost in the Indian operations has increased on a YoY basis from 15% to almost 20%. Is it because of the Vadodara facility?
There are two reasons for that. Yes, one is on the account of Vadodara facility, we have to hire, upskill on the employee strength, A. B, as you would expect, we have the annual appraisal cycle going up. March was the base bill, so that's the second reason.
Okay. Secondly, on a sustainable basis, what kind of tax rates can we see in the Pfaudler business? Currently you said that because of U.S. it was a bit higher or because of intangible assets amortization.
You will be looking at 26%.
26% for the Pfaudler business, correct?
For the international, yeah, Pfaudler International business.
Okay. Tarak, one question for you. Sir, currently the business is going fantastically for Pfaudler with the whole order ramp- up and everything. How do we see the business turning out in the next three years? Can we say that at least it can grow 50%?
I don't like to commit on numbers right now. We're still kind of getting the hang of this business, understanding the business, kind of getting the momentum going. I would just point to what we have done with Mavag. When we bought Mavag, it was a $5 million, $6 million company in terms of revenue. Today, it's closer to $20 million and can ramp- up to $25 million. That grew 3x , 4x . I think if we have the right strategy in place in terms of using and leveraging low-cost countries, which we are doing already, we're looking to add and grow products that are profitable in our technology base, which we are doing. If we look at really improving the production on the site, because like I mentioned to you, the orders are there. We're not worried about orders at all.
This is really a good situation for this company to be in, because the last thing you want is to take over a company and then worry and scramble for orders that are low prices and low margins. That's not the case with us. We have a fair amount of backlog across all geographies. The pricing and the margin profiles all look very good. Really the focus across all factories is really to get the momentum of manufacturing going and really push out as much product as possible. If we can do that, I believe that this year you will see good amount of improvement. We've been obviously conservative, and we are seeing things turn around much quicker than expected. I believe that there's a lot more that we can expect from this company.
There are a lot more synergies, and I'm personally very pleased in the way things are going, and I think things can still look a lot better.
Thank you, Mr. Vora. May we request that you return to the question queue for follow-up questions. The next question is from the line of Vipul Shah from RBL Equity. Please go ahead.
Yeah, hi. Just one for Manish. What would be the net debt sitting in Pfaudler?
The net?
Net debt.
Global it is with.
No, I just want Pfaudler.
It's INR 350 crore.
That's not net, no? That's gross.
Yeah. That's gross, yeah. INR 348 - INR 90. INR 148.
Yeah, INR 148 crore.
INR 148 is the debt sitting in Pfaudler. Can you just share what is the net debt with GMM plus Mavag?
GMM plus Mavag, we are at INR 160 +INR 48, gives me INR 180. Yeah, INR 170 crore.
That's the debt at GMM plus Mavag debt, and INR 148 is the net debt at Pfaudler. Thanks. Thanks a lot. Appreciate it.
Thank you. The next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead.
Yeah, thank you for taking up the follow-up question. Two questions from my side. One is the order book that you are sharing. Just want to check whether this constitutes only the technology piece or does this also constitute the services piece also?
It has all orders. Obviously, it will be heavy on equipment because the services have much shorter lead time than there is still in the scope of booking more. Currently, the orders we are currently maintaining and the group consolidated order number is what? INR 1,000, INR 2,700 odd crore, right?
Yeah. INR 1,700.
Yeah, INR 1,700 odd crore at the end of Q1 FY 2022. That is the group level order backlog.
Right. Second question was pertaining to this Vatva facility. I mean, the company that was operating this plant prior to you did good peak earnings of as high as INR 800 crore-INR 900 crore. Should that be the number that we should consider as peak output that this facility can deliver once all the facilities are operational?
No, I think that number is the company that upgraded the last of INR 450 crore. Of this plant. [audio distortion]
Sandeep, I think this is only a plant being acquired, they may have other plants as well. That number may be something different. I think Tarak mentioned earlier that something like INR 450 crore or INR 500 crore of turnover is something what we can expect in the long run from Vatva facility. HDO did INR 180 crore or INR 185 crore at their peak. That was five years ago when the metal prices were literally less than half of the current prices.
Understood. All right. Thank you so much.
Thank you. The next question is from the line of Nilesh Meena, individual investor. Please go ahead. The current participant has left the question queue. The next question is from the line of V. Surendra, individual investor. Please go ahead.
Hello. Good evening, sir.
Yes, go ahead.
Sir, I want to have more information on this, our Vatva plant, the present status of the Vatva plant.
We have taken control of the Vatva plant a few months ago. We now have a team of people there. We have contractors in place. We've also moved some of our orders from Karamsad to Vatva. Manufacturing has started in full swing there. Over the next few months, you will see more orders coming in to Vatva, and we will be using the Vatva facility to manufacture more heavy engineering equipment.
I have one question, sir. What is our revenue in the Mixion business in this quarter?
Like we mentioned, we have stopped monitoring on B2B earlier this segment. We may be talking about technology systems and services again. Like Priyanka mentioned earlier, to help with transition, there is a slide number 18 in place to get to the new numbers or the new segment.
Okay.
Having said that, I think all our product lines have a strong order backlog. One is not heavier than the other. That's why we've been able to maintain our profitability as well. Across the board, we are booked now in Mixion, in proprietary, in heavy engineering and in glass-lined, and that's why we've been able to sustain our profitability.
Thank you, sir.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
As I mentioned earlier, yes, the business looks very promising in India. Business obviously continues to do very well, double-digit growth, and we have a very positive outlook for this financial year. With the new investments coming in, I think that puts us in a good position for next year as well. The focus will be obviously on execution, but also kind of building a backlog for the next financial year. Globally, also, like I mentioned, very happy and pleased with the turnaround much quicker than expected. I think that will give a big boost to many of the people who were wondering how the Pfaudler International business would perform. I think the only way now is obviously up.
I think with the kind of synergy that we're going to work on, that we're building in place, I think that we have a bright future ahead of us. Obviously you'll see some of this kind of flowing through in the next few quarters, which will give you a much better idea in terms of how the businesses are performing. I do appreciate your time and thank you for logging on, and look forward to talking to you again next quarter. Thank you very much. Thank you.
Thank you. Ladies and gentlemen, on behalf of GMM Pfaudler Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.