Q3 25/26

Jan 23, 2026

Summary

Q3 sales grew 18.5% YoY, while delayed package dispatches raised inventory. FY26 guidance is INR 1,800–1,850 crore revenue and INR 345–360 crore PBT; management expects 20% growth from FY27.

Ladies and gentlemen, good day and welcome to Kirloskar Pneumatic Company Limited Q3 FY26 earnings conference call hosted by Antique Stock Broking Limited. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Amit Shah from Antique Stock Broking Limited. Thank you, and over to you, sir. Thank you, Pari. Good evening, everyone. On behalf of Antique Stock Broking Limited, I welcome you all to Q3 FY26 hosted earnings call of Kirloskar Pneumatic Company Limited. To discuss the results, we have the senior management team of the company represented by Mr. K. Srinivasan, Managing Director of the company, and Mr. Ramesh Birajdar, CFO of the company. I would hand over the call to Mr. K. Srinivasan for his opening remarks, post which we can open the floor for Q&A. Over to you, sir. Thank you, Amit. Good evening to you all. Let me start by wishing you all a very happy new year. May the new year bring peace, prosperity, and a lot of happiness all around. Thank you for joining this call today. I have with me Mr. Ramesh Birajdar, the Chief Financial Officer, and Mr. Jitendra Shah, the Company Secretary. Before proceeding with the business updates, I would request Jitendra, our Company Secretary, to read out the disclaimer statement, please. Jitendra? Yeah, thank you, sir. Good evening to all and wish you a happy new year. The presentation uploaded on the website of the company and discussion on the financial results during the earnings call may contain statements relating to future business developments and economic performance that could constitute forward-looking statements. While these forward-looking statements represent the company's judgments and future expectations, a number of factors could cause actual developments and results to differ materially from expectations. The company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. Further, investors are requested to exercise their own judgment in assessing various risks associated with the company, and also the effectiveness of the measures which taken by the company in tackling them as indicated during the discussions. Thank you. Thank you, Jitendra. Let me now proceed with the business updates. Q3 is always a short quarter. We had a solid order bank for execution and the plants were running flat to catch up on our sales target. While we internally met most of our manufacturing targets, we could not get this to translate into sales as some of the larger packages were not cleared for dispatch. This meant a lower sales and a higher inventory. The customers have promised to lift these packages in Q4, and we are in active discussion with them as we speak, and hopefully they should all go by February. Order booking picked up. As on 1/1/2026, we have orders on hand of INR 1,939 crore, which is about INR 60 crore higher than the same period last year. But there is one big difference. Last year we had nearly INR 600 crore of large package orders in this. This year however, we have no large package orders in the INR 1,939 crore. This would mean that the sales next year, quarter-on-quarter, will be far smoother than we ever had. Sales YTD was INR 1,054 crore as against INR 1,046 crore, pretty much flat, almost about 2% higher. With the packages ready for shipment, we expect to close the year with the sales between INR 1,800 crore to INR 1,850 crore, nearly double-digit growth. YTD PBT was INR 172 crore, it is nearly the same as last year, about INR 175 crore. PBT for the year should end at least between 20% to 25% higher than the previous year. Order inflow has picked up and will certainly support strong growth next year. We continue to create new IPs. A recognition of this is the fact that KPCL was awarded as one of the top 30 IP-driven corporates in India by CII, along with large industries. As on 12/31/2025, we have filed 106 IPs, and a significant number of them have also been taken up for commercialization. The net working capital was at INR 276 crore. This is lower than the INR 288 crore in the same period last year. This is behind the back of strong receivable management and significant advances from the customers. Inventories, as I mentioned, is still a challenge and we hope this will translate into sales during the next month. CapEx spend was INR 54 crore. We expect a total CapEx spend of about INR 90 crore for the year. Free cash generation from operations YTD FY 2026 was INR 45 crore. This is after the CapEx and the dividend. Let us now discuss the result of our product lines. The air compressor business had a steady quarter, both in new order intake and in sales. The Tezcatlipoca centrifugal compressor continued to shine. We have invested in a couple of more new CNC machines from Japan and Germany to double the capacity in this line to meet the growing demands. The additional capacity will be available from Q1 next year. Refrigeration compressors and systems. The refrigeration compression segment completed the manufacture of the large projects during the quarter. We also commissioned two Zephyros plants as a technology demonstrator, and these plants have been commissioned within our plant to see their performance. Learnings will be used to fine-tune the product for bulk manufacture under the PLI program. We expect to have this clearance during this quarter. The Khione package sales has picked up and it has stabilized across various application areas. Sales of the Tyche semi-hermetic compressor has commenced and is scaling up. The process gas compression system. The oil and gas sector seems to be finally getting out of a state of somnolence. We now see some movement in terms of order finalization. As you know, the whole of last year, there was practically no big orders being finalized in this space. The global uncertainty has impacted this seriously. However, finalizations are slowly picking up, not only in packages but also in the CNG package orders as well as in the boosters. The installation as of now is the lowest in the last five years. We hope to see something better happening going forward. The silver lining in this space has been the significant activity level in the MENA region for the CNG packages, and we hope to benefit from this. We have already installed a couple of orders in this space. We have also picked up a couple of orders for the hydrogen and biogas space, and we expect to complete execution of this in the Q1. The OEM business continues to do well with a growing install base, albeit it is lower than planned, but overall, this segment will remain. The process gas segment will remain flat for the year. Export order booking was on plan. We should be doing a sale of about INR 140 crore this year compared to INR 124 crore in the previous year. Most of the exports have been for process gas business and a significant part of it is in the MENA region. Outlook FY 2026. The global economy is in a precarious state and makes planning exercise a challenging one. We expect to close the year with the sales of about INR 1,800-INR 1,850 crore and a PBT of about INR 345-INR 360 crore. A growth of about 12%-14% on the top line and about 20%+ on the bottom line. While this is below our run rate of the last five years, we expect that we will get back to our targeted growth rate of 20% on the top line and an EBIT margin of 20% going forward. KPCL's focus on building sustainable competitive advantage in our offerings based on strong value chain integration, in-house manufacture driven by unique IPs, and a sharp focus on targeted markets will ensure the predictable and profitable growth path even with choppy market conditions. A committed and highly engaged workforce is a bedrock on which our growth aspirations are built. This was once again reinforced by our winning the Golden Peacock HR Excellence Award during 2025. I would now request Ramesh Birajdar, CFO, to take you through the financials. Ramesh? Yeah. Thank you. Good evening and wishing you a very happy new year. Q3 FY 2026 financial results have been officially released on the BSE and NSE website following our recent board meeting. For your convenience, we have also posted a detailed investor presentation on the company's website, which highlights the current performance trends and key business updates. To assist those who may not have had the opportunity to view results, I am sharing summary of Q3 FY 2026 outcomes. Sales for the Q3 FY 2026 were INR 403.5 crore against INR 340 crore of Q3 FY 2025. Sales for the Q3 also showed a growth by 18.5% over previous year's Q3 FY 2025. Other income for nine months improved by 28% to INR 21.1 crore compared to INR 16.5 crore in the previous year. Total income YTD ended December 2025 was at INR 1,074.7 crore compared to INR 162.5 crore in the previous year. The raw material to sales ratio for the Q3 FY 2026 was better by 3.7% compared to Q3 FY 2025. In terms of percentage, it was 48.1% in Q3 FY 2026 against 51.80% in Q3 FY 2025. However, YTD percentage of raw material to sales has improved by 1.4% in nine months of FY 2026 due to better product mix, selection of the orders and improvement in service business margins. Staff cost, that is employer-related expenses, stands at INR 50 crore in Q3 FY 2026, that is 13.7% of total income against INR 44 crore in Q3 FY 2025, that is 12.40% of total income. This increase reflects annual increments, commencement of operations at our Nashik forging plant and new foundry at Nashik, additional hirings for new products at our Saswad plant. Company has maintained the status as a debt-free company and we, the company still has net cash position of INR 395 crore as on 1st January 2026. Depreciation for the both nine months period for the current year and the previous year is almost same. INR 22.80 crore in nine months of FY 2026 against INR 22 crore in the nine months of previous year. Other expenses are mix of fixed and variable cost and are at INR 212 crore in nine months of FY 2026 against INR 202.80 crore in the previous year. Increase in these expenses are on account of traveling, enhanced level of service business, and expanding activities in our Nashik as well as in Saswad plant. The year-to-date performance for the first nine months of the current year shows EBITDA margin at the same level, reaching 18.2% of the total income to INR 196 crore in FY 2026, compared to 18.6% of total income to INR 198 crore in the previous year. In the ongoing fiscal year-to-date profit before tax, YTD PBT, has reached INR 172.7 crore, constituting 16.1% of total income against 16.6% to INR 175.9 crore in FY 2025. Net profit after tax for the initial nine months of current fiscal year is INR 114.5 crore, that is 10.7% of total income. In comparison to the previous year, INR 130.4 crore, that is 12.3% of total income. The company has issued 42,200 equity shares during the period ending on December 31, 2025 under its employee stock option program, while 93,600 equity shares issued in the previous year during the same period. As a result, the paid-up share capital was increased marginally. Year to date, earning per share for the current year is INR 17.63 compared to INR 20.12 in the previous fiscal year. Exceptional item in the income statement, the implementation of new labour code, which become effective on November 21, 2025. Based on our current assessment, the estimated gratuity provision has increased by INR 18.3 crore. The amount is an estimate and may vary by end of FY26. We are currently awaiting clearer guidance and further regulatory directions to finalize the specific requirement and impact on our year-ending reporting. In line with our dividend policy, the board of directors has approved an interim dividend at the rate of 175% on the face value of INR 2 per share, that is INR 3.50 per share dividend to be paid as per the regular practice. With about 92% of the revenue coming from the compression segment, it remains the only reportable segment. The segment earned a profit at the rate of 21.6% in the current quarter, while in the previous year it was 21.80%. The compression segment is consistently sustaining within the range of 18%-20%. As of January 1, 2026, the company holds an order book of over INR 1,939 crore, marking at 19% growth compared to INR 1,624 crore at the beginning of the year. Segment asset experienced a INR 50 crore increase compared to the previous year, primarily due to increase in inventory. In order to arrive at the capital employed for the segment, current liabilities were reduced. As you are aware that company acquired Systems & Components India Private Limited, situated at Village Badga, near Murbad, Maharashtra. Comparable details for the consolidated business will be provided after completion of one full reporting cycle. Now, this forum is open for the questions from our esteemed investors. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. 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. The first question is from the line of Bala Subramian from Aryan Capital. Please go ahead. Good evening, sir. Thank you so much for the opportunity. Sir, commercial refrigeration side, especially Zephyros AC systems, the market size is nearly INR 5,000 crore for commercial chilled water segment. I think we have a patented zero GWP refrigerant technologies. How is it different from standard refrigerants used by Voltas or Blue Star? How do you look at in this market? What kind of market share we are targeting, sir? Okay. Bala, thanks for your question. See, I will explain our Zephyros concept. Zephyros uses ammonia as a refrigerant. As you all know, there are only two natural refrigerants, which have got zero ozone depletion potential and zero global warming. So we are using ammonia as a refrigerant. This is quite different from what most other companies use. Most other companies use refrigerants like R134a, R32, et cetera. Even the best one, the newest one is R32, which has got zero ozone depletion potential, but its global warming potential is 765 and above. The earlier ones are all 2,600 and above. So these are all Let's say global formulation, the manufacturers in India pay them a license and make them. They cost on an average between INR 2,000 to INR 2,500 a kilo. Their COP, the efficiency of refrigeration, it's much, much lower compared to an ammonia system. That's why we believe ours is not only environmentally friendly, but also far more economical for using. Now, the two questions why this has not been used all along, there are two reasons. There is one, ammonia tends to react with copper. Consequently, if you use ammonia as a refrigerant, then you cannot run it on a semi-hermetic compressor. Semi-hermetic compressor, the refrigerant itself cools the copper winding in the motor. Our patent is around the process by which we use ammonia, but still are able to achieve what is called as a quasi or a semi-semi-hermetic system, by which an alternate material is used to cool the motor windings. Consequently, we get the benefit of ammonia, but also get the benefit of being a near semi-hermetic motor. That's the system that we have developed. That is where all our IPs are on. The second disadvantage, which ammonia was thought to have, is saying that ammonia's use can be seen as, in low concentrations, not toxic, but very high concentration, toxic. So we generally don't bring ammonia into the homes. If you look at all your window air conditioners, which is all there in your offices, et cetera, they are all what is called as VRFs, Variable Refrigerant Flow compression system, where the refrigerant itself comes into the rooms. In our case, we don't use refrigerant coming into the rooms. It is only chilled water. We have mitigated the disadvantages and enhanced and utilized the advantages of ammonia. As a frost system, our IPs are around this space. This will allow us to offer a system which is not only environmentally friendly, economically cheaper, and much more efficient to run and use. The market size, like you said, can be anywhere up to INR 5,000 crore. We will increasingly take market share. In any of these systems, first it has to be established and comfortably used in critical number of applications. Then after that, it scales up very rapidly. We are working on a PLI scheme to get the volumes to be produced. Currently, we can make, with our existing facility, a reasonable number, which is what we will do to deliver a few in the market. As the PLI scheme is approved, we'll really scale up and get volumes. That's a long answer for a good small question. Thank you, sir. Sir, I think customer site delays have impacted installations for nearly three to six months, especially for large refrigeration packages. How the situation currently is improving? Sir, secondly, I think if we are making AC system, whether we have the capacity to make 2030 CFM for RAC compressors. I think right now we are in the progress of A800 frame, 800 CFM. Is there any scope to develop in future? Okay. In the centrifugal compressor, the Tezcatlipoca, we currently start with 2,100 frame and go up to 7,000 frame. The actual CFM it can deliver can be as high as 8,000 plus. But on the lower end, we try and stay nearer to the 2,000 range. But we have a new frame that's coming up, A800, like you said. It is already proto is done. It has been running in our factory for alpha testing. We'll probably launch it in the market before first quarter. That will cover then starting from maybe 600 CFM onwards. This will be the smallest centrifugal compressor available in the Indian market. It will replace a significant number of dry screw compressors as well. This will be a breakthrough, and we hope to have it in the market in the first quarter. Okay, sir. Sir, I think you have missed. I think the whole industry is importing RAC compressors. Whether we can develop those capabilities? I think that's a very small compressors, 20-30 CFMs. Okay. So at the moment, our range of Zephyros starts from 15 TR. You were talking of very small compressors, like 20, 30 CFM compressors. We do not make them for refrigeration, but for air conditioning, we are in the midst of developing a small CFM compressor. It can be very, very small. And this is being done for oxygen. That product will be available in the market from the first quarter. We've not announced it yet, so it will come and then we'll announce it. Okay. Thank you, sir. All the best. Thank you. The next question is from the line of Sameer from Ambit Capital. Please go ahead. Hi, thanks. If I back out the orders inflow numbers from the backlog and sales, it comes out to be around INR 679 crore, which is almost more than 50% of YI. Probably the highest in many quarters. Just wanted to check whether this number is right and this growth is broad-based on any particular market or product you want to highlight. Do you have any target for orders for FY 2026? Okay. See, the big orders have not come from the traditional areas. Like I said during the opening comment itself, we generally get large package orders both in refrigeration and gas. This just did not happen during the entire calendar year 2025, last quarter of last financial year, as well as the first three quarters. We hope to see some order finalization in large packages from traditional markets only from January. We've seen a few coming in, mainly from the oil sector, but we expect more. The bulk of our orders that we have taken this time are, not bulk, a significant part of the orders that we have taken this time are from non-traditional areas, which utilize our manufacturing capacities and capabilities. That would probably drive growth during the first two, three quarters. Okay, thank you. The second one I have is, you talked about the 20% growth and margins is probably the midterm target. Do you see any green shoots to feel confident about, let's say, for FY 2027 or FY 2028? You're talking of EBIT margin? Yeah, 20% growth you talked about, right? Yeah. The 20% top-line growth, see, today, if you look at for the last four, five years, we have been at a growth rate of CAGR, roughly 19%. This year, we are going to be lower. We are going to be probably 10% to 12%. We expect to come back to a 20% growth rate from the next year onwards on the top line. Okay, thank you. Thank you. That was all from my side. Thank you. The next question is from the line of Neeraj from White Pine Investment Management. Please go ahead. Sir, thank you. Sir, just wanted to know color on the orders from the Middle East. Can you tell us how the clients are thinking? Because we have heard about delays in the orders in the Middle East side, and our large value of orders might be delayed or might be coming from that side as well. A color on that side of the end market would be useful. Yeah. The export business for KPCL itself is only going to be about INR 140 crores this year. Last year, it was about INR 124 crores. For us, as a percentage, it has never even crossed double digit. Most of this order, I keep saying, is from MENA region. They are not exactly Middle East. Some of it would be North Africa, and we do not do very large distribution of them. It is few package orders. You are 100% right when you say there is a huge delay in orders, particularly from oil and gas sectors from West Asia. That is true. We do not have any orders from them. Most of it is, for us, from the MENA region. Okay. Okay, got it. Got it. Any guidance on the revenues for this year? I think we said so. It will be INR 1,800 crores plus. Okay, sir. Great. Thank you. Thank you. The next question is from the line of Kunal Sheth from B&K Securities. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Sir, I just wanted to get more light on, in view of our completion of tenure, Mr. Aman has been appointed as the MD. So any particular reason for we're not opting for extension, as well as what would be the pathway going ahead as far as the leadership is concerned? I think this would be probably one of the better managed, organized succession that companies are going through. My tenure here was primarily to ensure a smooth succession. As you know, I came out of a retirement. I was retired already in Kirloskar, so I came in here post-retirement with a particular mandate of developing the next generation of leadership. It was only for a period of three years, and I actually stayed on for two more years. So it's been here five years, and I think it has been one of those very nice succession planning. Every bit of it has been done together. It cannot be more structured, more organized, and I think this will be one of the nicest transfers that happened. He will do far better, far quicker, and far nicer than anything that I have ever done. I think I am extremely happy about the way it has developed, and you people will all see how it goes as we go forward. Sir, but if you can talk more about how involved was Aman for all these years in the business, and if you can talk a little bit about the second tier leadership structure. What kind of leadership in terms of second tier have been developed? What is the structure like? Yeah. Kunal, I had mentioned in my last part of my opening comment on the enablers, which makes us confident about the outlook. The primary enabler, two measures I will give us. One is our employee engagement scores is industry standard. It is even higher than industry standard. We have a score of 86 when manufacturing industry is about 82 or 83. So it is better than industry standard. My attrition rates are below 10%. My IP filing of 106 is averaging more than 40 per year. So in terms of employee engagement, employee productivity, employee measurement, these are all engagement scores coming out of a whole lot of people, all those 900 odd people in the company pulling together and getting into a very productive phase of growth and development. So this is coming out extremely well. And Aman has been intensely part of all this. He brings in a freshness of thought. He has been championing all the newer things that we are trying to put out, and it has allowed him to work on different spaces. He has been reporting to the first-line reportees. He has been learning from the line, and that has been a good development. Yes, he is from the investor family, from the promoter family, but he has gone through the rigors of being trained to take on this role. Having said it, we have also supported him with a whole lot of leadership team around. It is not going to be Aman alone sitting there and fighting the battle. There is a whole lot of team out there. There are 200 engineers and manufacturing specialists, design specialists, marketing teams, and of course, the whole financial, legal, secretarial support teams as well. So I think it is a collective team with a fine young leader who will come in to take it forward from here. Like I said, I am very pleased and happy the way the whole thing has developed. When you people, any of you have a chance to come and visit, you will yourself go around and see whether it makes sense to you or not. Sure. Thank you so much for that, and best of luck for the future years, sir. And thank you for the valuable contribution. Thank you. Thank you. The next question is from the line of Khush from Electrum PMS. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. So a couple of questions. First, since we are maintaining the guidance of around INR 1,800 crore to INR 1,850 crore of revenue, could you elaborate more on what are the reasons? Because this would result in around 35% growth for the quarter. The reason for this is basically the inventory, like you mentioned, which has not been picked up from the factory, or is it some large orders that we expect to execute in Q4? Apart from that, secondly, on the employee expense cost, should we assume that this combined expense of INR 69 crore, INR 70 crore is the new quarterly run rate because of the change in the laws? Post that also, we are confident on maintaining around 19%, 20% EBITDA margin going ahead. Okay, first thing first, the employee cost will remain between 10% to 12% of sales. That will not change. What has changed with whatever is visible at the moment with the new labour codes, the Maharashtra state thing has to be notified yet, are two parts. One is there is a change in the gratuity that will impact, and there will be change on leave encashment and the value of leave encashment that will impact. Our measure of both on a forward basis will be about 0.8% to 1% of the total. It is not very big. In terms of value, we are talking of less than INR 2 crore a year. That is not going to be significant. We will handle it. We can manage it multiple ways with a slightly lower increment or whatever it is. There will be a one-time top-up of gratuity. There could be a one-time encashment of leave that would have to be done, and these are already notified. We have already calculated this one-time top-up to be about INR 18.3 crore on gratuity. The one-time leave encashment could be about INR 1 crore. These are the only one-time impacts. There is no grandfathering allowed, so we are expected to pay for all that is on the book even during the date of transfer as of 21st November 2025. That is the only thing, but I don't think that is going to go without some kind of a challenge. So let there be some clarity because this is all for the past period that we are talking of, this INR 18.3 crore plus another maybe INR 1 crore from leave. That is something that we will have to see. Even assuming this has to be taken, the tax, et cetera, will come up only when you have to top up the contribution. We may top it up not in one go. We may even decide to top it over one, two, three years. There is enough time on this. Short answer for the employee cost is this is important for the employees but not significant for the company to make any material impact on the profitability. That is a detailed explanation on that. The second question you asked is on the third quarter. See, third quarter, if we had dispatched the packages that are ready, it is primarily to two customers, really, and these are large customers. I don't want to mention their name because they are also in private sector. If the site had been ready and if they had taken it, the sale in the quarter would have gone up by more than INR 150 crore. To that extent, I am not going to make it in the last quarter. The last quarter is going to be as of manufacturing dispatch, a very routine, normal fourth quarter like we would have in any other year. There is nothing big that is going to happen. It is going to be a routine, normal fourth quarter for us in this case, and we will get the numbers what we have planned. Right, sir. Sir, just one last question on the gross margin. I think this quarter we have seen around 52%, which is around 400 basis points change compared to last year Q3. What were the major reasons, and will this be the new sustainable gross margins? Last year, December, the quarter three, the percentage for the raw material, it is 51.8% against it is 48.1% for this quarter. What I am saying that it is again the developing the manufacturing capability that is giving the benefit, plus selection of the orders and getting the business only when we can able to maintain the profitability between 18%-20%. Most of this, it is a one-off business where we purposefully took a target to reduce the cost and which is working very well for this quarter. Going forward, this will little bit improve because we are developing our manufacturing capability. This manufacturing capability, they are bringing raw material at the lowest price or the price which we want to build our sales for the compressor. Both put together, roughly we are expecting to reduce 1%-2% further going forward. Right, sir. Sir, just one last follow-up on that. How much would be the service revenue for nine months? Okay. See, I think service and spares, we do not split it. Okay. We generally keep it at 15% of our top-line sales because if you get detailed with that, it will get into a quarter by quarter too much of variation. Right. So we bundle it up and give a number of 15%. Okay. All right. Thank you. Thank you. The next question is from the line of Ajinkya from Kriis Portfolio. Please go ahead. Yeah. Thanks for the opportunity. My question is regarding the Zephyros product. I wanted to understand, we will be supplying only the compressor or in the package we are going to supply the controls and other things as well. What will be our sharing value terms per TR of the CapEx? You are talking of the Zephyros project? Yeah. For Zephyros, the way we are currently thinking is, a significant part of the initial sale will be that we make the Zephyros package and also have to do the installation related things, which is really the air handling systems, the controls, putting it in place. Maybe the first 100, 200 packages. Later, our interest would be to focus only on making the Zephyros packages, allowing the installation related activity, which means the air handling units, site work, piping, et cetera, to be done by a local installer, currently, whoever is doing it. We won't really get into that space. But for them to have the confidence, initially, maybe the first 100 installations, we will do that ourselves. What will be our share in the CapEx, like the per TR, how much we are targeting? Okay. Today, the market price of, depending on, let's say, if you're looking at a 35, 40 TR air conditioning space, we are now calculating around anywhere between INR 35,000 to INR 40,000 per TR. One-third will be with the installer. Okay. Like you said, we will be targeting our capacities at about 15 TR. As far as I understand, ammonia-based systems require a higher CapEx as compared to the traditional one. How it becomes economically competitive with the existing product? Am I getting something wrong here? How is the economic model for like this? Your question is correct. See, the ammonia-based systems costing more is the accepted practice. With our IP, we expect to break that belief, that we can make an ammonia-based system at a price point comparable or cheaper than the current other machines. That is where most of the IP and the manufacturing. Ramesh alluded to it saying that unless we make most of the manufacturing in-house. Today, you look at most of the air conditioning company manufacturers, they are an integrator. They get most things from different people. Almost all of them get their compressors imported. Many parts are made by different people in India or outside, and they integrate it. We would be an exclusive in-house manufacturer of most or almost all of the parts. That's why the PLI scheme. That will allow us a scale and cost advantage, which is quite different from what the current people are doing. We expect to make a fundamental change in the cost structure of this industry by doing all these assets. Yeah. Okay. The last question is, have we worked on the replacing of these copper pipes with the steel pipes and the toxicity issues by ourselves, or we onboarded some technology partners? Because what I can see in the international market, the bigger player like GEA, J&E Hall have done such products, but those are for bigger applications like airports, huge malls. We are targeting smaller systems. So how we did that? Okay. You got it right when you said that the large systems are all in airports, et cetera. The airports and other places have systems where most of it is where cooled air is transferred. They also have water pipeline systems available. We are making several products that will finally be a part of the package. I don't want to get into details of what we are replacing with, because there are several projects that are running within the company and several IPs are being filed on the input material. As you all know that today, the only thing that's growing faster than silver is copper. You'll have to be careful about what copper we want to use where. There are several IPs that we are working around with, and we will talk about it once we are established in these spaces. Yeah. Okay. The last question is, if we get the PLI benefit, what will be the size of the CapEx for the benefit from the government? Any ballpark? Yeah. The PLI application we have filed entails that we have to commit a CapEx of around INR 300 crores, but this includes the CapEx that we have already committed over the last two years. That means for this specific project area, which includes input material, raw material, all combined. We may have to make an additional CapEx of about INR 200 crores, which we will do in the next year and a half. And we have to deliver a sales of at least five times, which we are very comfortable about doing. Ramesh, am I okay? Yes. Yeah. That helps. Thank you, Srini sir and Ramesh sir. Thank you. The next question is on the line of Nipun Sharma from VLS Finance Limited. Please go ahead. Good evening, everyone. My first question would be in two parts. The first part being that, if I can recall that you said in your second quarter conf call that there was situation of general slowdown in the finalization of orders across industries for air compressors. And for the refrigeration segment, you said that large projects were running slow. I know you said this in your opening remarks that the orders are picking up, but I really wanted to know the situation as of now. And the second being that you said that overall, the delays in the approvals or the slowdowns in the project executions were one of the main reasons in quarter 2 that the business was affected. So how is the situation as of now? And are there any chances for it to occur again in the future? Okay. Let me talk about the comments of Q2 and what we have done in Q3. Air conditioning is still running slow. General CapEx commitment across most segments is slow. That has not changed. What we meant, in particular, was the whole of the year 2025, that is calendar year 2025, no major project orders in the oil and gas sector, in the petrochemical sector was finalized, and that is what has created a shortage of large package orders. This is what really happened. This is probably just I am seeing the birth of some change coming. Somebody else also asked a question about Middle East. Yes, even Middle East orders were not finalized. Nothing was happening, or whatever was finalized also was getting canceled. This condition of the economy has not changed dramatically. Like we said in Q2, there are segments or spaces where it is doing well, which is largely consumption-driven. If you look at the cold chains, the ice plants, the food processing units, the dairies, they continue to invest, they are doing well. There are pockets of chemical primarily going to the pharmaceutical and other spaces that are still continuing to invest. These are the areas where our refrigeration, air conditioning packages, still small ones are coming in and we are delivering it. Similarly, true with some hydrogen packages, some biogas packages. These are sporadic. The kind of pace at which we were expecting and at least putting out quotes for orders are just not happening, and that is true even today. The orders that we have picked up to cover up, which is really giving us the hope and confidence of doing numbers next year, comes from non-traditional businesses for KPCL, which is why I said these are not from the compression area, but parts and components of another industry which we are able to make in our manufacturing capability. That is what is driving our confidence and growth for the next year. We hope that the regular traditional orders would also pick up as we go forward. That is okay, sir. Understood. Yeah. Yes. What you are saying is majorly there are project delays in the gas compressors, I mean, in the oil and gas sectors because of the uncertainty. Absolutely. Oil and gas includes petrochemical. There are some large. The two packages that didn't go are private sector, and they are large petrochemical projects. I do not think they even noted the point of order board as on for January. There is INR 1,939 crore, which is the second highest order board in the company history. This order board is more of an equipment side and rather than the large package orders. This gives a confidence that we are getting more business in the future. Yes, sir. Noted, sir. I actually noticed that is why I recalled what your comments from the second quarter. That is why I wanted to know the scenario in this air compressor and refrigeration system thing. Right. Right. Still running slow. Yeah. Okay. Okay. My second question being that your gas compressor segment had been facing headwinds earlier, but now they are, you know, starting to get recovered, recovering. You said in your Q2 conference as well that your segment, you know, share is gradually decreasing. Is that the plan for the future or is there any hope that this compressor will have a revival in the future? Let me explain this gas part of it well. The gas package system has got two components. The upstream, midstream, downstream are packages, and most of them use air compressors, and we do the packaging. This requires projects. Here we are not still seeing any great traction either in Middle East or in India. This is still a struggle. Whatever orders are finalized, most of them we win in India. Once we finalize, we get these orders. Our market share remains very, very high. Middle East, we are among the several major players, so some orders we get, many we do not get. That is the way it is on the gas packages. The second one is the gas distribution business, which is really CNG stations. In CNG stations, there are two. There are mother stations with large packages. There are daughter stations with booster compressors. Here we used to have a fairly dominant position. It was almost a duopoly, at least on the mother stations. This continues to be a partial duopoly. There is a third player now in this. Here, the actual number of packages that have been taken, the CNG stations, is actually dramatically declined. It is probably last year was the lowest in the last five years. New gas stations were not being commissioned, new pipelines were not being laid. While PNGRB had put out a target of at least 2,500 installations overall, not even 1,000 would have happened. There has been a dramatic reduction in new installations coming up. Even though we manage about 1,200 packages across India, we found that this was not growing, and it was at the lowest in the last five years. On the booster side, we are one among many, many players. Most of them are small players. They are the ones who can do anything to get orders. Here we have consciously, Ramesh has said it, we are not interested in playing this game. We have consciously reduced our exposure in this. Most of the orders that are finalized, except few which we took, we were not even there in this spare business. That has also not gone up. Any big numbers have not gone up. Overall, the gas distribution sector, one, did not grow. Actually, it saw a tremendous degrowth. Our positioning has become more clearer, focused on the main stations, and only take boosters selectively, which means our actual sales of gas distribution business is probably at the lowest in the last three to four years. We have never been lower than this. The only redeeming feature is the main stations or CNG packages, as we call, we have now started getting exports which are of significant value for us, particularly from the Mena region. That has been a redeeming feature during this year. Okay, sir. Understood. I have two more questions, if that is fine then. The moderator would decide. I have no role in this. Okay. What are your FY 2026 targets? I know you have talked about INR 1,800 crores. By that, do you expect the fourth quarter revenue to be around INR 745 crores? You have the numbers. No, no. That is the expectation, because I added the first three quarters and then the fourth quarter. Is that the expectation, that it will be around INR 745 crores adding up to total of INR 1,800 crores for FY 2026? We will do INR 1,800 plus for the year. Okay. And the EBITDA margin will be stable at 18%-20%? The guidance. Yes. We have actually given a number itself for PBT. Okay, sir. That's okay from my side. Thank you very much, and congratulations on good numbers. Thank you. Thank you. The next question is from the line of Sahil from Monarch Networth Capital. Please go ahead. What we also discussed last- Sahil? Yes. Am I audible? Yes, sir. Please go ahead. Yeah. Thank you for the opportunity. What we also discussed last quarter is that the delivery and the order finalization for Tezcatlipoca also was pretty slow. Correct me if I am wrong, but what is the scenario around this now? The overall orders for the gas compressor division is steady. It has not improved from what it was in the last two, three quarters. This is a general flow of capital goods in the economy today. We are getting a significant part of the centrifugal orders that are being placed. The Tezcatlipoca as a product is a clear start, and we are winning a significant part of orders that people are finalizing. Most large centrifugal users would already have installations from several large multinational company. For them to make a choice and shift to Tezcatlipoca is a big difference for them, and it is a good thing for us. We are winning orders, we are executing. Even when you execute and ship these orders, we find that the speed at which they are being put to use, what we call as commissioned and handed over, that is still taking time. That means the overall projects generally are running slow across the economy. Right, sir. I get it. Secondly, sir, on Zephyros, I wanted to understand the profitability of, or the margins that we will make. Would it be very much similar to the current numbers? I really think it is too late for a couple of quarters. See, Zephyros is today not even commercially launched. So we will have to talk of it a little later when we have put some numbers and then we come with it. We have got our own targets in terms of where we want to engineer, where we want to launch it, and the target expectation. Like I said, our overall expectation of a 20% EBIT margin will not change. We will have to find a path to get to that kind of a thing with a commercial product of a large volume. So there will be a path towards it. Right. Tyche, what kind of ramp-up can we expect, some timelines or some kind of traction understanding? So I will give you the numbers. India imports about 2,000 semi-hermetic compressors largely from Europe. The Tyche is placed to take this market share, and it will take the share in about 3 year period. Because it makes no sense for people to import in Euro what would be available with probably the same or better performance in India. So it is a path that you will get there. Generally, when you launch, it is a capital good. Any new product you launch, initially there is a tentative conversion, then there is a committed conversion, then there is a current. Just anything that you make, you will sell. So there is a 10%, which we say, then we talk in terms of how fast we can ramp up. We are still at 10%. Got it. Thank you. I appreciate, sir, your term and your contribution to the company. All the very best, sir. Thank you. Thank you. Thank you. The next question is from the line of Manish from Finwise Wealth Managers. Please go ahead. Yes. Thank you so much. Sir, couple of questions. One, as you mentioned that there are no large packages ordered. So if you can just give us a revenue breakup, like how is it for projects and products for the current quarter and for the first nine months. If possible, a comparable number. Just a broad percentage number would help. It was the first question, sir. Okay. Let me put it this way. Let me give you for the full year, because 9 months would also again distort because we are going to ship 2 large packages in fourth quarter. Sure. This year, since we are executing orders of the last year, big packages are still there. Like I said, 2 big packages already ready to be shipped. So here, this year, we probably have about 35%-40% of package business and 5%-10% of overall equipment. Okay. Next year, it will be flipped around the other way, and a large part of it, maybe 65% or 70% will go towards equipment and general items, which are what we call as 12-15 week deliverable items. Only about 30%, 35% would be the packages item. Okay. So that is why it is a far more smoother quarter-on-quarter. You will find it is much more predictable, much more easy to judge this company. Sure. On order inflow pipeline, sir, how do we see going forward? Because the Q4, we will see a very fairly good execution of INR 750 crore to INR 800 crore out of order book of INR 1,900 odd crore, and probably be targeting a 20% growth next year. So which implies a very strong order inflow. Aspirates should be very high in the quarter 4. So what should we expect the year-end order book to be? How should we see and what will drive this order inflow in this particular quarter, sir? See, this is one of the most difficult of periods to predict anything. What we see as a trend is the big orders are not getting finalized. There is an uncertainty in the economy. There is a tentativeness about anybody who is coming and running a project, it will not run stage. So this is going to be there. Three sectors. I will only use that. Three sectors of India have to spend more to their CapEx. Out of INR 11.22 lakh crore that was put out as CapEx last year, and also this year's number has been announced that it is going to be INR 11.54 lakh crore, at least 14% higher than last year. Three sectors have been taking the lion's share, and they are spending all their money. One is Defense, second is Railway, and the third is National Highways Authority. They continue to be the three stars that are spending most of the money. Many of our packages are not going to be. The large oil and gas or the refrigerator packages go to the oil and gas sector or fertilizer. Those have not seen great order flow last year. That is because they had INR 1.56 lakh crore to be spent, and they spent very little of it. Now we see that some waking up is there, some orders are getting cleared in this space now. Similar capital outlay will come up for this year as well. Let us see how this goes. We have lived well, even in a case where very little of the oil and gas sector has been spending money, and we have lived through that year. We expect 2026 to be definitely better than that. We are quite confident with the order backlog we have and the kind of new orders that we are getting. We are quite confident that we will get this 20% plus. Sure. Sir, how much would we say contribution from some of the new products which we have launched in recent past and we are planning to launch? Will we see a meaningful contribution next year as we are targeting double-digit growth? Two things I would like to clarify. What we call as a new product is product launched in the last 3 years. So every year something will go as a new product, then become an established product. So generally, the new products contribution to sales is kept at about 15% and aspirationally 25%, because after that it becomes an established product. For example, for me, next year Tezcatlipoca is no longer a new product. Khione is no longer a new product. So they all have been around for 3 years, then it has crossed the 10% mark, they become a regular product. So you should take it that there will be new launches, new products, like Zephyros will be a new product. New product as a percentage of sale will remain in the band between 15% and aspirationally going towards 25%. Sure, sir. This is an international standard that they follow. All companies, if you look at a 3M or somewhere, they all define new product as product launched and new in last 3 years. Targeted sales generally for them is 25. We are still beginners in this game, so we take it as 15 going towards 25. Sure, sir. One question on the margin, sir. Just wanted to clarify. On the EBIT margins, you mentioned 20% or 25% for next year? It is 20. Currently at 20. Yeah, between Yeah, 20. Okay. Thank you so much. Mr. Srinivasan, would like to thank you so much for taking the company to new heights and creating large growth opportunities for the company, sir. I really appreciate and wish you all the best, sir. Thank you so much. Thank you. Thank you. The next question is from the line of Saurabh from Popline Capital. Please go ahead. Yeah. Hi, sir. Just two questions. The first is, could you explain what exactly this non-traditional order inflows are? Did we use to do similar business in the past? And second, will the margins and working capital, et cetera, be similar to our compressor business or will it be different? Okay. It's an important question, so let me answer. Why I am not using the particular sector to which we supply is that we would not like to disclose the sector. We would like to still allow it to Because let it repeat before we talk. Okay. The product that we manufacture currently are a version of what we would have done before. It's not that it's a completely new product. In the earlier days, it would have been an integration of parts that would have been procured from different vendors and put together for assembly testing. The current way that we manufacture gives us an advantage, and that's why this thing is kind of scaled. Otherwise, you do not get this volume. The current way we manufacture is we do almost everything entirely within the factory, which means we forge, we cast, we machine, we do all the other work. There is a heat treatment, there are so many other things, honing, finishing, grinding, blah, everything, and then we assemble, test the product, and deliver. So this kind of a complete manufacturing capability is not available with too many people in India. That's the advantage by which we have picked up a much significantly different volume of this product. Most of this would have been earlier coming from parts of the world which are not currently easily available to everybody. So that has allowed us some advantage. So we are making this in this form for the first time, but this product itself we are really familiar with. It's not something that we have never done before. And let this stabilize. See, once these things come to a particular shape, it is better to discuss at that stage. I would say that the margins are not going to be any less than the compressor business. Because since we do most of the manufacturing, the margin expectation will be, in fact, higher. Working capital? Working capital in any orders of this nature tends to be higher than normal. For us, since everything is in-house, the quantum of working capital is small, but it takes from cash to cash, it will be a longer cycle. It is almost like a package order. It takes about eight months to have cash to cash. Understood. Secondly, I think in this call we did not talk about the, let us say, percentage growth of key segments. How much air grew, how much refrigeration, and how much gas business grew first nine months. That would be very helpful. Okay. Here I have to take a caveat that this is a very fast-changing ratio. While the absolute growth numbers for me is relatively more predictable, the split between the four segments, the segments we are going to now talk about really is air, refrigeration, and air conditioning, which is now getting voted on really, and then the process gas, and now the fourth segment which is really others, which includes a lot of manufacturing-driven business. The split is definitely going to change going forward, and it will change very rapidly. Once the PLI comes up, the refrigeration air conditioning numbers will shoot up. The others business today is going to be something which will become a reportable segment from first quarter onwards. So I would suggest that the traditional number that you are being given will change rapidly, and we will talk more about it after the first quarter. Sir, in first nine months, how they break? Would it be possible to say? Not first nine. I will give you the full year. I will say for the full year, it will be that the top business will be the refrigeration air conditioning business touching about 40%. The process gas business between 30%-35%. The air compressor business about 20%, the rest is about 5%, 7%, 8%. Okay, this is helpful. Maybe just very lastly, this other segment, will it become structural play for us as in we get success because? I would request all of you, see, we are being as transparent as we can. I would suggest that you give us at least one or two quarters. Sure. Like I said, things are changing. The current state of economy and the speed. The only thing you must appreciate is the organization itself is today so imminently flexible with capabilities that we will not be surprised by any change in the market dynamics. To that extent, we are being far more responsive rather than reactive. We can take things quickly to see that we continue to deliver numbers. But this change is so rapid that I would like to commit something longer term after one or two quarters. I hope you will accept that. Perfect, sir. This is really helpful and really appreciate all the calls and all the insights you gave us over these calls and over all these years. Thank you very much. All the best, sir. Thank you. Thank you. Thank you. The next question is from the line of Eshwar from IThought PMS. Please go ahead. Hello, Eshwar. Eshwar? Eshwar, are you there? We take next one, please. Okay. The next question is from the line of Neeraj from White Pine Investment Management. Please go ahead. Sir, just one question on the new products. If you decide new products in the last four years or so, what was the revenue contribution today for you? I would say roughly about 250 plus 300, somewhere around that range. Roughly about, if you say 300 on 1,800 would be about 15%. 15%-20%. Which is what I kept saying that we are at about 15%. We would love to go take it to about 25%. No, sir. Sir, that is what you said for the products for one year period. But cumulatively for the last- Yeah, new product is what is developed and designed for the last three years. Okay, three years. Not one year, three years. Always new product definition is products developed, launched, sold in the last three years. It is continuously rotating. Got it. Even that does not include the launch of Zephyros, right? At all. Zephyros only sold as of now only few numbers for a trial. Last question on the R&D spending. Is there a way to figure out how much R&D money you have spent over the last few years as a percentage of revenues? Okay, now this is another tough question, and we just went through it in the board. So I will give you a little longer than what you would expect as an answer. See, what is recorded in annual reports, et cetera, as R&D spend generally is about 1%. Okay. There is a reason behind it. I would rather than directly take it as a business spend and spend it because then I am able to absorb my full GST, I am able to do the trial development and just launch it. Today, there is no advantage to specifically categorize it as R&D. I do not get any additional depreciation. I do not get anything. So what I talk of as there is a reportable R&D spend, which most Indian companies will talk of 1% and we can keep arguing being it low or high. As a company, Kirloskar Pneumatic, I look at my design, development, new product application, and R&D combined as what I do towards what is traditionally seen as a research and development activity. I think that we are about 3%-5%. We are not smart. We have been filing at least 40 IPs a year. So I think there is a significant investment. So I would urge people not to read only the reported annual report number, which is more coming out of a reporting requirement. Yeah. Got it, sir. Got it. Actually, that is the reason I asked you, because with so much of R&D products, you should be spending a lot of money, but more This is true with a large number of Indian companies. See, this is something which we have argued out in several forums. Unless there is a real advantage of reporting it as an R&D expense, people just expense it off as normal. Why should I take it? I will take a development, new product development. I will just finish it. Understand. Yeah. Makes sense. Got it, sir. Thank you. Thank you. Thank you. The next question is from the line of Sharps Daweri from Emkay Investment Managers. Please go ahead. Yes, sir. Sorry to circle back on this. In one of the questions you mentioned that there were some packages where some of the private pickup players could not pick up the deliveries because their own sites were not ready. You mentioned also a number of about INR 150 crores. Mm-hmm. Yeah. Hello? Is that correct? Did I hear that correctly? Yeah. It is a little even more. It is about one each. Yeah, go ahead. I am just trying to correlate this. If I look at your raw material purchases number for the quarter, and in fact, you also mentioned about the working capital at the end of the quarter which in fact is lower than like you mentioned versus September quarter also. Ideally, that number should have reflected there, right? See, these packages when we talk of Yeah the two packages that are now ready, not dispatched, I think the work started last year in the third quarter. Okay. So the material purchase, manufacture. Like I said, project orders run anywhere between eight months to 16 months. This order has run the longest. I think it has run almost 16 months now. There you will never be able to correlate a quarter's purchase of raw material to a quarter's inventory, to a quarter's dispatch. That is why till we come to a stage where these long cycle items diminish and become a small part of our business, these numbers become almost, let us say, unreadable and understandable except for the guys who are actually running the business. Okay. And ideally, assuming that there is no untoward circumstances, this would get probably delivered this quarter? Yes, February. Sure. Thank you so much. That is it from my side. Just needed this clarification. Thank you. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the conference to the management for closing comments. Thank you, and over to you, sir. Yeah. Let me start by thanking each and every one of you. I have been with Kirloskar Pneumatic and talking to all of you for over 5 years now. I must thank each and every one of you for your interest, your kindness, your support, your advice, your enthusiasm and many times telling us the right way forward. I enjoyed all the interactions. If ever I have been either too quick in replying or wrong in my replies, my apologies. I really wish all of you well. Do well in your life, do well in all your investments. Make lots of money, be happy. Thank you for all the support you gave me all these years. My successor is a better person, a smarter person, and I am sure he will get all your support and KPCL will continue to do well going forward. Thank you all once again. Thank you. Thank you. Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.