Q2 25/26

Oct 28, 2025

Summary

H1 sales and profits declined amid delayed projects and gas-market share losses. Management targets ~15%+ FY26 sales growth, supported by large orders, new products and manufacturing work; core margins are expected at 18%-20%.

Ladies and gentlemen, good day and welcome to Kirloskar Pneumatic Company Limited Q2 FY 2026 post-earning conference call hosted by Antique Stock Broking Limited. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this 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 Amit Shah from Antique Stock Broking Limited. Thank you, and over to you, Mr. Shah. Thank you, Rina. Good afternoon, everyone. On behalf of Antique Stock Broking Limited, I welcome you all to Q2 FY 2026 post-earnings conference 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, Chief Financial Officer of the company. I would request Mr. Srinivasan to give us the opening remarks, post which we can open the floor for Q&A. Over to you, sir. Thank you, Amit. Good evening to all of you. Let me say greetings for the Diwali festival season. May the festival of light bring us all a brighter and clearer future. Thank you all for joining the call today. I know there has been a significant level of disappointment, and I think we have a strong reason to explain what we have done and how we are going to do better going forward. I have with me Mr. Ramesh Birajdar, the Chief Financial Officer, who will be able to explain the numbers. And of course, I have Mr. Jitendra Shah, the Company Secretary and the Chief Compliance Officer. Before we proceed with the business updates, can I request Jitendra to read out the disclaimer statement, please. Thank you, sir, and good evening to all. 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 judgments 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. Thanks, Jitendra. So let me proceed with the business updates. We had a quarter that was challenging on all fronts, in order booking, in sales, as well as in execution, making it a rather poor H1. For the first time in many years, our order booking, sales, and profits were lower than the corresponding period of the previous year. Sales in H1 was at INR 665 crores as against INR 706 crores of the previous year. Most of the execution challenges came from package to be shipped, both in refrigeration as well as packages for the CNG stations. Domestic market was muted with various uncertainties causing delay in project clearance and approvals. Export sales at INR 31 crores was also lower than the INR 43 crores of the previous year H1. Order booking was most impacted due to the underlying uncertainty and churn, particularly in the oil and gas space, and this left us with an order book of INR 1,667 crores as on 1st October as compared to INR 1,624 crores on 1st April 2025, significantly below our plan. The mitigating factor in all this has been the finalization of a couple of large orders which will utilize our unique manufacturing capabilities that we had recently set up. We will book these orders in Q3. We also expect that some of the delayed decisions will now be cleared giving us the much-needed order bank for the next year. We gainfully utilized this period of uncertainty to commercialize many of our IPs. The Tezcatlipoca centrifugal compressor has quickly established itself as a product to beat in its space having crossed the 100 mark. We now have an order of 115 compressors this year and of which we have done about 88 of them so far. We still have 27 to go. JanusD range of specialty motors and our new screw compressor as well as the Tyche semi-hermetic compressors have both had successful launch. We should see them scale up in the next quarter. Our subsidiary company, Systems and Components, where we have 35.26% holding, too had a muted quarter. Sales was about INR 9 crores and they became profitable for the first time in many quarters. We expect them to grow from here with increased market presence and support from the parent. The net working capital was at INR 202 crores. This is significantly lower than the INR 316 crores the same period last year. This is on the back of strong receivable management and significant advances from the customers. CapEx spend was at about INR 28 crores. We expect to have a total CapEx spend of INR 90 crores during the year. Free cash generation from operations in H1 was INR 143 crores. Now let's discuss the results by product lines. The air compressor business had two bright spots The Tezcatlipoca centrifugal compressors, as well as the reciprocating compressors for CO2, which is co-generated in the ethanol industry. There was a general slowdown in the finalization of orders across industries, except cement and metal. With our new JanusD-based screw compressors coming to the market, we expect to take market share in the next couple of quarters. Refrigeration compressor and systems. The refrigeration compression segment was also running at two speeds. The large projects were running slow, plagued by uncertainty, while the food and consumption-driven business was booming. Here, our Khione packages were the star, winning orders across pharma, dairy, fisheries, concrete casting, et al. The ammonia reciprocating compressor continued to rule the cold chain and ice plant space. The Tyche semi-hermetic compressor was a new kid on the block, immediately taking market share from imports. We expect this to scale up rapidly and take most of the 1,000-plus compressors that are currently being imported from Europe. In a significant move, the board cleared filing an application under the Production-Linked Incentive scheme for entering the commercial air conditioning space with our unique Zephyros C system. The commercial air conditioning market in India is over INR 5,000 crores, and we expect to address a significant share of this with our efficient and economic solution. This will be a completely Indian product. Once approved, we will commission this project in 18 months. Gas compression system. The oil and gas sector globally has been going through a period of unpredictability that has come from multiple reasons: technological changes, energy transition, as well as geopolitical uncertainty. As a company, we have learned to work with all this. We offer upstream, midstream, and downstream compression packages, CNG distribution systems, biogas packages, hydrogen packages, et cetera. Yet with all this, both order intake and execution remained a challenge in H1. We continue to get orders for packages, CNG stations, and booster stations, but clearly this has been slowing down quarter-on-quarter for nearly two years now. We don't see this improving in the next quarters either. The only redeeming feature in this space has been the pickup of export orders for CNG packages to the MENA region. Both biogas and hydrogen are still to scale up to any significant value. Export has never been a part of our strategy to grow in this phase of our growth. Consequently, we are not impacted by all the churn in this space. We expect to have about the same export of last year. That's about INR 124 crores. The tie-up with PDC Machines in offering comprehensive solution for hydrogen and other difficult to handle gases has helped us to win a couple of packages. With changing priorities in the U.S., India and Asia seem to be a more attractive market for hydrogen packages, and we expect to see more activity here. The O&M service business continues to grow with the installed base growing. However, we did take a hit of INR 2 crores as write-offs on account of bad debts in this quarter. Outlook for H2 FY 2026. The industrial activity in India has slowed down in several sectors, and it does impact both the demand as well as sentiments. CapEx spend, except in few government-led sectors, is still very hesitant. Yet in all this, there are some clear areas of investment and growth. Domestic consumption, as well as a secular trend of localization of supply chain. The two strategic choices that we made a couple of years back stand us in good stead. One, focus on domestic market and look to export only after we pick up size. Two, manufacture in-house as much as we can using technology as a differentiator. We have finalized a couple of large orders based on our manufacturing capabilities. With the new launches and this manufacturing capability-led business, we expect to more than catch up in H2. We will deliver a strong double-digit growth this year and will do even better in FY 2027. The commercialization of various IPs like the Zephyros C and entering the large commercial air conditioning market should ensure that our aspirational growth targets will be met. I will request Mr. Ramesh Birajdar, the CFO, to take you through the financial aspects first. Thank you. Ramesh? Thank you. Good evening, everyone. I trust you must have reviewed the Q2 and H1 FY 2026 financial results, which are published promptly on the BSE and NSE website following our board meeting. A comprehensive presentation detailing these results is also available on the company's website. For your convenience, I would like to provide summary of our performance for the second quarter as well as the first half of fiscal year 2026. Sales of Q2 FY 2026 were higher compared to Q1 sales of our current year. Sales at INR 370 crores, it registered a growth of 37% compared to Q1 sales of INR 272 crores and compared to Q2 FY 2025 sales of INR 431 crores. The H1 FY 2026, the sales were at INR 650 crores compared to INR 706 crores of H1 FY 2025. Other income for the Q2 FY 2025 was at INR 6.8 crores, which is almost alike INR 6.2 crores in Q2 FY 2025. While other income for H1 FY 2026 at INR 15 crores, which is higher than H1 of FY 2025, which is of INR 10.6 crores. Material cost for Q2 FY 2026 was at 52.1% compared to 51% in the corresponding quarter of the previous year. For H1 FY 2026 and H1 FY 2025, it remains the same. This is due to better product mix, package sales of our air conditioning and refrigeration division in Q2 FY 2026. The split between the packages, which is around 33%, and the product of 67% orders contributed to maintain the material cost at a reasonable level, and we expect material cost to remain same in the remaining period of the year. ERE increased to the extent of increase of manpower and impact of salary revision from April 2025. During the year, deserving employees were granted increments aligned with the prevailing industry trend. As a result, the H1 cost for FY 2026 stands at INR 97.4 crore compared to INR 87 crore in corresponding period of FY 2025. There is no interest cost relating to any borrowing either for Q2 or H1. As a result, the company is a debt-free company. I would like to state that company has a net cash and cash equivalent position of INR 424 crore as on 1st October 2025. During H1 FY 2026, the company incurred CapEx of approximately INR 29 crore and paid dividend of almost INR 42 crore. No big change in depreciation. It is aligned with the asset addition. Regarding other expenses, we observed a mix of both fixed and variable costs. There has not been any significant variation in the level of expenditure during the current quarter compared to the previous one. The strategic investment made by the company in installing solar systems at all our locations is now yielding the benefits. This is evident as the power costs have remained consistent despite increase in the activity at our Nashik location and Plant 2 in Saswad. EBITDA at 17% in Q2, which is up from 15.7% in Q1 of FY 2026. For H1 FY 2026, EBITDA is INR 109 crore at 16.4% compared to 20% in H1 FY 2025. PBT of INR 57 crore at the rate of 14.8% for Q2 FY 2026 against INR 92 crore in Q2 FY 2025 at the rate of 21%. PBT of INR 94 crore for H1, while PBT of INR 128 crore in H1 FY 2025. Higher profit in H1 FY 2025 was despite the sub large package in Q2 FY 2025. Consequently, PAT is showing a similar trend in Q2 and H1. PAT, that is profit after tax, in both Q2 and H1 with the PAT reduced from INR 94 crore in H1 FY 2025 to INR 71 crore in H1 FY 2026. Company issued 17,700 equity shares in H1 under its employee stock option program. Previous year, 68,200. Consequently, paid up share capital increased marginally as compared to the beginning of the year. Basic EPS for H1 FY 2026 is at INR 10.98 as against INR 14.57 per share in FY 2025. With over 91% of revenues coming from our compression segment, it remains the only reportable segment, and the segment profitability in Q2 is at 20.3% and in H1 at 19.5% as against 25.6% in Q2 FY 2025 and 23.1% in H1 FY 2025. Company has an order book of over INR 1,667 crore as against INR 1,624 crore at the beginning of the year. Capital employed in the compression business reduced by INR 78 crore, reaching to INR 258 crore at the end of H1 FY 2026 compared to INR 333 crore at the start of the year. We have regrouped, rearranged the financials wherever it is necessary. We have published the consolidated income statement, which now includes the newly acquired company Systems and Components. Comparable financial details will be available only after completion of full year in the reporting cycle. Now this forum is open for discussion with our esteemed investors. Amit? Anyone out there? We cannot hear you. Mr. Amit Shah? Rina, we can open the forum for the session, Q&A. Okay. 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 touchtone 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 Priyank Chheda from Vallum Capital. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Sir, just on the business scenario, versus the 23rd July, when we had a call for the last quarter, you called out for INR 500 crores of sales in Q2. In fact, if you see the business environment has improved since then. What would be the key factors that you would want to point out for the performance, which has been way below than your own internal targets? Yeah, thanks for this question, because I think this is an important question to answer. We have three reasons why we think the business has not performed to the level it should have. One, there has been a structural change that is happening in the process gas business. Particularly in the gas distribution side, we seem to have lost market share in terms of the CNG packages and the boosters. We seem to have not got enough clearances, and we always thought that's because the site's not getting ready. I think it's more than that, and that's the reason also when I said that we did take a hit of whatever old payments that we didn't make, because I believe there is a clear downtrending in this sector where they have all gone down to cheaper products, and they are acceptable to them. First, there is a sectorial change, and there we have to look at how we can make ourselves more competitive. That is the first one. That is our poor call judgment of what is happening in the market. The second one is there is definitely a hesitancy in terms of giving clearances. I gave an example of Tezcatlipoca. We had an order for 115. About 27 are still under manufacture, which means really we are not getting enough clearances or drawings, approvals to even complete the packaging. 88 have been delivered, and out of that, only 46 have been commissioned. The rest of the 42 are just lying at site without even commissioning. Which means while we say the business environment is better, it is not really showing up in terms of project execution. Even where you push and deliver to them, the projects are not getting started, so they are all spanning at site. Overall, there is definitely a slowdown in project execution. That is the second one. The third one is new projects or projects is where bulk of the changes or lack of clearance is happening. If you look at general engineering, consumption-driven space, where we look at, let us say, air compressors, the demand is reasonably okay. So the general consumption-driven things, there is some activity going on, nothing big has changed. That seems to be happening. Here is our market share as it is very low, 5%. And there we seem to have getting orders. It is not that there is no orders there. So that it seems to be running okay. But a clear, big difference, I would say is, one, process gas system not doing as well for us, so there is a loss of market share. Two, we definitely have a slowdown, particularly in project execution. That is probably hurting us more than what it would hurt others who are driven by consumption-driven business. Very clear. And for this, maybe the suggestion has been floated around it, the three segments which we report, which is air and gas. If you start giving out the quarterly revenues right upfront in the presentation, it would answer one of the few turning points that you are trying to highlight. Thank you for that. My second question is on the new launches. I think we have high hopes on Tezcatlipoca and Khione packages. So would you want to just highlight in terms of how has been the sales over last 6 months on these new launches? And when you highlighted on the Tezcatlipoca where 42 are lying at your site, would it be fair to say that- No, at customer site. Shipped and not delivered. Okay, at the customer site. Okay, but the revenue has been booked for 80, right? Out of 115. Everything that is built and shipped out, the revenue is booked. 88 have been shipped out, and that's been booked. Okay. Got it. The question was on in overall, the new launches and their performance over the last six months. Yeah. Like I said, the Tezcatlipoca clearly is a winner. It is probably the industry standard now. People have accepted it as the product to beat. We can only see as projects happen more frequently and more products get cleared, this will scale up. We talked of first saying that this is a market of about INR 300 crores or so. I believe it can be even bigger and more and more market share will come from this product. There is only at the moment four range that we make. We make A-2100, 3,500, and 7,000. We do not address the full range of centrifugal. We will try and increase that during the next batch of production. That is broadly what we will do on Tezcatlipoca. KPCL has got well established across all the industries. We talked of pharma, dairy, fishery, and all these are picking up, so KPCL packages also will continue to grow. We will expect to do at least about 50 packages this year. Got it. One last question before I come back in the queue. The order book for the last quarter of last year, September, is somehow I think has got restated to 1,624 versus the last year it was 1,780, so maybe a clarification on that. Sir, on your side, would you like to revise the guidance for FY 2026 and beyond? Maybe there are interim jumps, but would you want to restate that starting FY 2027 or starting next quarter, how should we think of the performance versus the original guidances that you are giving us? Thank you. Yeah. As far as the guidance is concerned, as far as this year is concerned, we will get to very near a 15%+ growth for the full year. You will see in between Q3, maybe the growth is even higher because we had last year a poor Q3. For the full year, we have taken definitely about 15% growth on top line and correspondingly because the business ratios have not changed, the profits will also grow by and large about 25%, 30% based on whatever we do this year. And on the order book which has got restated- Order book has not got restated. Order book INR 1,624 crore is the correct, which is at the beginning of the year. So INR 1,624 to INR 1,667. This is the sixth month of the period what I given to you in the presentation. So INR 1,600 is the correct, which is starting, that is the opening order book as on 1st April 2025. But your concern on order booking overall still remains. See, I must clarify that while we are giving you the total orders on hand compared to last year, we expected to book significantly larger number of orders in Q2 compared to what we actually did. We are not happy with our current position, and we expect some larger orders to be finalized in Q3. As I speak, I know that there are some big orders that are pending, but it's not in my hands, so I will still not talk about it till it's done. Thank you. Thank you. The next question is from the line of Rishabh Shah from BugleRock PMS. Please go ahead. Hi. Thank you for the opportunity. Sir, my question is, in the previous years, we had guided that our exports will be in the range of 15%-20%, but we haven't crossed a bit or 10% for many years. We just wanted to know what gaps were left from our side that we couldn't achieve our targets, and any process in place to fill those gaps so that we can reach our target. Mr. Shah, I think, in the last at least, four, five years of all our calls, you'll see we have been saying export is not our focus area. We will try and be even a global company operating primarily out of India and Indian market in this phase of our growth. We will talk of export being important once we come to a significant size and scale. We always said that export will never go beyond double digits. It's single digits. It'll be around seven, eight to 10, and that's where we are. I think there could be some mistakes in understanding. I'll repeat again, export is not a strategy for us at the moment. There are only few markets that we export to, and that is largely the Mena region and Southeast Asia. The best export we did was INR 177 crore. Last year it was INR 124 crore. We have always been saying that we will do about the same this year as well. Okay. All right. Next question is what percentage of revenues come from the aftermarket sales since it is a very high margin business. Are we taking any steps to further increase aftermarket as a percentage? Here again, I will sorry, but I will clarify. We have been saying in several calls, aftermarket margin and original product margin for us is about the same. We do not do any very special pricing on spares, et cetera, compared to other competitors who predominantly sell import-dependent capital goods. Consequently, they have to make their margin only on spares and service. Our margins are about the same on both. The second thing is we said sales and service combined is about 15% of our total turnover, and that broadly remains the same. That has not changed either. Okay. Sir, next question is on, we have said that the refrigeration side of business is 100% all imports, and it is a INR 3,000 crore market. Any steps on that side to gain maximum market share because INR 3,000 crore only for refrigeration is a huge market for Kirloskar Pneumatic. Let me again clarify. The refrigeration and air conditioning as a segment what we report is today predominantly refrigeration. We do very little or almost no air conditioning at all. Almost all of it is refrigeration business. The segment that we say where the refrigeration, air conditioning business consists of broadly industrial refrigeration, commercial refrigeration, and comfort refrigeration or air conditioning. Now we have not been in the last one, which is the comfort space, which is where air conditioning predominantly falls. The Indian market for air conditioning is roughly INR 25,000 crore. It has got three parts. It has got the domestic air conditioning, it has got the commercial air conditioning, which is open circuit, and then there is a commercial air conditioning which is run by what is called as variable refrigerant flow systems, which is what we see as the split air conditioners, et cetera. Today we are for the first time proposing to enter the air conditioning market, which we have never entered before. And we are offering the Zephyros C system for this space, and we are doing it by a unique process. We have still not announced it, so I would like to stay with that. The patents have been filed, but let the PLI get approved. A unique process by which our Zephyros C would offer zero global warming potential and zero ozone depleting potential. This will be one of the most efficient systems. We have several patents around it, and this will address roughly about INR 5,000 crore of the INR 25,000 crore market. Okay. Just last question in terms of cost structure, how different would be our cost structure as compared to our competitor, let's say Atlas Copco? That is a very difficult question to answer because, see, we compete with the company you mentioned in many sectors. In the air compressor business, our actual cost structure-wise, we should be much cheaper than them because they still import at least the key parts of the air compressors from abroad. If you look at the stenthy, we make 100% here, and they would import a significant part again. I would say that if you look at purely on cost structure, we should be significantly cheaper. Okay. Fine, sir. Thank you. I will get back in touch with you. Thank you very much. The next question is from the line of Abhijit Singh from Systematix. Please go ahead. Yeah, thank you for the opportunity. I hope I am audible. Yes, sir, you are audible. Yeah. Sir, the first question is on the centrifugal compressors. Sir, if I didn't hear it wrongly, the market right now in India is about INR 300 crores. I would like to understand, first of all, why do I use the centrifugal compressor versus with the old traditional technologies of reciprocating and screw? Which particular sector this market consists of majorly? Let's say in the next five years, do we see this market expanding substantially? That's my first question. Okay. Just as a quick clarification, centrifugal compressor is used in all application where you need large volume of air, which is free from oil. This is a dry, clean air where it is used in large volume. Industries that use it, pharma, metal production. Then you look at tire industry, carbon black. Quite a few of them. Textile spinning industry. A whole lot of them use large volumes of clean air without oil. This is a very popular machine. It is used extensively where you need very large volume of air. In many cases, as you start becoming bigger and bigger, companies will go more towards centrifugal than the other ones because the lifetime cost of running this is significantly cheaper than either the screw or the reciprocating compressor. This is the way you will go if you can afford it. That's the kind of a requirement that we're talking of. Now, the Indian market, I believe, is now more like INR 500 crore-ish. It's not 300. It should be more going up. We are a late entrant. There have been several other suppliers who've been importing and selling this in India. They have a local presence, but most of the compressors come from abroad. Ours is a completely indigenously designed, patented, built product in India. It probably has the lowest cost of ownership among all the products available in India. Like any other new capital goods, it takes time for people to be convinced. They don't just get convinced by looking at it or seeing it or even trying it out. They will buy it, use it for some time, see its reliability, see its maintenance cost, and see how well it runs. We have crossed that 10% threshold. Now there is a faster conversion. We win more orders now than we do one year back. We expect to become something like a dominant player in this in the next year or so. All right, sir. And, sir, this INR 500 crores that you are talking about is the overall demand in India, including the imported and the produced within the country? Yeah. Almost everything is imported except what we make. Okay. So we are the only player manufacturing this in India? Complete manufacture, only us. Rest of them import either most of it or a significant part of it. Right. My question was to understand the relative penetration. Let's say in India, the market is INR 500 crores. That would mean less than 10% of the overall market or less than 5%, including all air, gas, refrigeration. If you compare the penetration of this product, the centrifugal compressor technology in India versus some of the advanced manufacturing countries like China, Germany, et cetera. Is there a significant scope to increase this penetration significantly in the next five years? Hard question to answer. General question is, if you ask me over a period of time, this will go towards at least 20% to 25% of the market. There are still smaller areas where other compressors will be used. There will be specific areas where you need higher pressures, where you would still be reciprocating compressors. There are some application-specific needs where the other ones will get used. This at best can go to about 20%, 25% of the market. Understood. Sir, second thing is on the air conditioning segment that we've entered into. Could you please talk about the product, like INR 5,000 crore market TAM out of the INR 25,000 crore overall air conditioning market. What is the specific focus area here, and how do we see this market to grow going forward? See, the air conditioning market in India is growing. I gave you the current market, as you see from the reports. We are entering only a niche in this. We are entering the commercial air conditioning space, which is cooled from packages, larger packages, and where you have cooled water piped, and then air handling systems within the premises. This is a range of product. It is not the full air conditioning, where you would have a variable refrigerant flow system. You could have so many other ways of doing it. We are only addressing a segment of the INR 25,000 crore market, where we believe we have a unique offering, which probably would be the lowest cost of ownership, lowest cost of operation, and 100% indigenous India made. Right. This is like a new segment for us completely. We haven't had this That's right. We're not having revenue coming from That's right. in the previous. That is right. All right. Sir, thanks a lot for all the answers. I will come back in case. Thank you. The next question is from the line of Amit Anwani from PL Capital. Please go ahead. Hi. Thanks for taking my question, sir. First question on the commercial AC, where we are venturing into. More clarity, if you could provide on the INR 5,000 crore market. What is the competition? Is this established market, and how we want to venture into that? Second thing, is it domestic import, how we would like to penetrate? Is it distribution-led, tender-based? Third part would be, what are the use cases, user industries, whether this will be for the commercial buildings or industrial. Some more color if that would help. Finally, on the 18 months project timeline, would you require more CapEx, more investment on the products? Some more fine print on this would help. Okay. The first thing is, Zephyros C is a KPCL. Several patents around this offering that we have. We are careful about the actual design till it is fully launched. It's not commercially launched. We have still a couple of more patents to file. We have filed the PLI application for setting up a large scale plant. In the meanwhile, with our existing plant, we have made a couple of Zephyros, which are being put to use in our own, let's say, within our control areas, within our control to test out its efficacy, test out its various parameters, et cetera. We are quite hopeful and eager that we will be able to place it in the market in two speeds. First is, with or without PLI, our own manufacturing can take it up to a particular level. At least come to a stage of doing a few hundred packages, and that's the first one we will do. Parallelly, filing a PLI is to take it to a much larger scale, where we can go for a few thousands at a time. It's a much bigger project when we do that. Both will happen simultaneously, and that's also the way we're planning it. As far as the market itself is concerned, if you go to any report or record on air conditioning, the Indian market for air conditioning, if you go by segment, it's split between domestic and commercial, and then industrial. Air conditioning alone. If you look at it, about 55% is domestic. We are not addressing it. Then there is about 35% is commercial, which is what we're planning to address. Then there is, of course, the industrial part, which we're not again addressing. In the commercial space, there are three products which are currently available. Two or three products. One is what is called the display air conditioner kind of a thing. Then we have the variable refrigerant flow type, and then there's a cool air circulating system, et cetera. Our product is positioned to be among the most efficient in this space for medium-sized operation. If you're running a small mall, you're running a large wedding hall or a restaurant or a smaller space, this will probably be the most efficient, most economic air conditioning system. This is an entry level decision. As we enter, as we perfect it, as we develop more variants, we will look at what other adjacencies that we can address, but that's too early for us to talk. Our estimate initially is we are focusing on about a INR 5,000 crore opportunity, and we are trying to place a product which will be technically superior, offering a lower cost of ownership, both in terms of CapEx as well as OpEx. Sure. By any chance, we will be working this, offering this product in data centers also? At the moment, the first phase, no. Data center would I would put it in terms of more critical application specific. Maybe in the second phase we may try, but at the moment, no. Understood. If you ask me an extreme case where this can work beautifully would be if you are looking at eventually India moves into district cooling kind of an air conditioning requirement. A version of it I have created will probably be the best one to run for district cooling. Right. Second question, sir, for the gas process and systems, where you highlighted that we lost market share also on the CNG side. Would you be comfortable to share the volumes number? I think in the peak we did about INR 220 crore to INR 240 crore revenue from CNG side. I think we Yes. Sorry. We have come down by 50%. Okay. By revenue. By volumes also? Yeah. When you say that we are losing, is it losing the market share? Is it because of the pricing? Obviously, the volumes are coming down since market is coming down, but what is the reason for losing the market share? Initially, our explanation was that people, they were placing orders, they are not lifting as per. We thought it is largely because the sites are not ready, and they are not giving clearance and et cetera. We realized that it was not getting new orders. Clearly, we are not competitive enough in the current scenario, which means the newer entrants are offering much, much lower overall price, which includes the equipment price and the five-year operation and maintenance contract combined. Because these tenders are given out based on the initial quote as well as the five-year O&M, operating and maintenance. Where they seem to be doing things that we would hesitate is that they offer an operating and maintenance price, which is quite unreliable. It does not work. How they manage within that is, it is Indian ingenuity at best I can talk of. Clearly, that is not what we will do. What we have to find a way to handle this is we will have to come with a superior technical solution, which will allow us to still be competitive. There is some more work to be done around this product and the way it is positioned. Structurally, we are not competitive in this space at this moment. Right. Sir, finally, on the guidance. Now the ask rate would be more than INR 1,200 crore revenue for the H2 and versus more than INR 900 crore last year. Almost 30%, 33% plus, which we want to achieve in H2. The kind of commentaries which I understood, there have been challenges in 2Q, and we are expecting challenges in some areas to continue. What gives us confidence and in which areas are we confident that the revenue will come back very strongly so that we are able to do more than INR 1,200 crore revenue in H2? Okay. More than INR 1,200, let me take it quarter by quarter. We have a clear target for Q3, which should be half of what you mentioned. At the moment, I have packages and large orders under execution, which should get me that number. By January, I think we will see that the rest of the balance number to do will be not so big. Right. Sir, on margins, operating margins will be able to maintain 17.8% operating margin we did in FY 2025, and we were guiding there would be some improvement. Now seeing H1, are we expecting full year margins to be similar to last year or lesser than that or better than that? No. In the last year, FY 2025, Q2 was an abnormal operating profit or operating margin because of the dispatch of the large packages. In the Q2 FY 2025, in the earning call we said this is the abnormal profit we got because of the dispatch of large packages. But directionally, what we indicated to our investors that between 18%-20% margin from our core business will be maintained. We are still confident that we will maintain the operating margin for our core business between 18%-20%. That is sure. Sure. Lastly, if I can squeeze this, you can provide the breakup of revenue between air, gas, and refrigeration for H1 and what was the year-over-year growth in each of the segments? Yeah. We used to say that gas is roughly used to be 45%, came down to 40%. It is probably now down to about 30%-35%. The refrigeration is about 35%+. The rest is about 20%, which is the air compressors and others. What really you- That is for H1? Yeah. That's what has happened. The gas has come down, and that has been taken up by refrigeration and a little bit with the others. Our bigger challenge is going to be after we finish the year, we will have to see this others, which is about 9% can go higher than 10%. Which means that's what we said, we're going to utilize a little bit of our manufacturing capability to execute projects. We have orders in that space. That should give us some extra revenue. We're picking up some big orders in that space as well. We will see a shift reduction in gas space, more or less same or improving in the air conditioning space and improving further next year with the Zephyros C project as it comes in step by step. Air will remain at about 20% and there will be others which will probably go beyond 10%, which will include a lot of the manufacture that we are doing now. That's the way it's going to be. Margins overall guidance remains. We will be at about what we said, around 18%-20% going towards 20%. That'll not change. If you see actually the numbers in the first quarter, we did take an LD booking of about almost about INR 14 crores in the first six months, which is unusually high because all the projects that we completed, we completed the last shipment in the first or second quarter, we booked the entire LD. This money doesn't go away completely. They all keep coming back after a lot of discussion, negotiation over the next couple of years. It goes on to a big battle, and then you get back half of it or so. This half year, now margins, don't look at it, you will see overall margins will balance out by end of the year. Thank you, sir. Wishing you all the very best, and thanks for answering my questions. Thank you. Thank you. Thank you. The next question is from the line of Sahil Sanghvi from Monarch Network Capital. Please go ahead. Yeah. Am I audible? Yes, sir, you are audible. Yeah. Thank you for the opportunity. I just want to clarify the split that you have given. Gas, you said 30%, refrigeration 35%, and air would be 25%, is it? Is that correct? It doesn't add up though. About 20%. No, no, about 20%, and like I said, the others is now scaling up. Okay. So others is what exactly? Sorry. The others, historically had a little bit of the gears and transmission that we used to make. Okay. It is predominantly repurposed to meet our internal requirement of centrifugal, but still we make some transmission gears, loose gears, that is growing. Plus, we are putting our manufacturing facilities that we have set up for doing work for others. Got it. That seems to be. That is why when I say we are picking up some big orders, most of them seem to be coming on this, which is job cycle. I am executing not a project, but I am doing some manufacturing for others, and that seems to be picking up much faster than anybody expected. With all this, I did put it out in my first opening comment. The two things that we said, do more internal manufacturing and look for exports on a significant way after some time. So the second one is doing very well, more manufacturing. Got it. My second question is more to understand the challenges in the refrigeration side, because in the starting comment of yours, you said that we have challenges in both refrigeration and gas packages. If you can elaborate a little bit more on what are the challenges on the refrigeration side, and how do we aim to manage those? I mean, last quarter, you did comment on some of the Khione packages also are not picking up or the issues with the Howden compressors. If you can just highlight on the challenges over there and what we will do to resolve it. As far as refrigeration packages are concerned, large packages which use Howden compressors, the Howden compressors are available. That is not an issue now. But these packages, most of them get commissioned very near the shores, around the sea coast, both east and west coast. Most of my large customers have been hugely delaying, hesitant in taking these large packages, and they are running at least between 3-6 months behind. As these packages go out, the billing will happen. There is no manufacturing issue. Their site work is still going on, and I expect that the site work will get completed and our packages will leave. Got it. Khione packages are selling well. I do not know whether I shared in one of my presentations. We have now proven solid examples and establishment with dairies, with fisheries. Fisheries, in spite of whatever is happening on export front, they still be picking up this. Dairies are picking up. Food processing industries, people who make potato French fries and all that, a lot of them are picking up. So Khione is selling well. Right. Last question would be, just to understand the kind of pickup that we have done on Tezcatlipoca. Can you give us the number of the units sold in, say, last year and the previous year? I mean, just to get some relative understanding. The first year, it was hardly anything, 10 or 12 or 15. I do not even have the exact number. We never crossed triple digits till this year. Last year? This is really the biggest number that we are getting. Got it. Last year would be what, 40, 50 or more than that? Much even less. 45 or 40. Okay. Got it. Thank you so much for the opportunity, and all the best, sir. Thank you. A reminder to all the participants, please restrict yourselves to two questions. The next question is from the line of Kunal Sheth from BNK 361. Please go ahead. Yeah, hi. Good evening, sir. Thank you. My first question is relating to the gas compressors. You mentioned that we have lost some market share there. What is the kind of price gap that we currently have with the newer players who are currently eating into the market share? Kunal, I have a question. What is this 361? Sir, we have been taken over by 360 ONE Wealth Management, so we are now a 361 company. Okay. Now I will answer your question. So thank you for answering mine. Okay. Kunal, it is like this. And why we sort of missed this also comes from the same reason. When you look at the package price to package price, let us say a CNG gas station with a motor or an engine that we deliver to the online stations where there is gas pipelines, the package price is not too much of a difference that we see, particularly in the boosters and others. The big difference comes when tenders are being commissioned or given out. They include along with this a five-year O&M contract. Now, people are putting out prices for this five-year O&M contract that is completely unmanageable. You cannot run an O&M at that price. So obviously you have to be very clever in a very negative way to manage in that kind of a pricing. We are not sure how they do it. We have some anecdotal references, how they are doing it, et cetera, and clearly that is not what we would do. So we have to find a way to deal in this business in a better way. Now, that is the reason why we are neither getting clearance for commissioning, nor are we getting new orders. Now, while this is happening, we also wanted to revalidate our product efficacy. Is our product good, or we have to do something deeper in the product itself? We had, in the first six months, significant shipment. I mean, whatever 33, 35 crores we shipped, a large part of it all went as CNG packages to the MENA region. And some of them have been commissioned and they are working well. So it is not that we have a bad product. We have a business case that needs to be reworked and better, let us say, understanding has to come in. We will see how to handle this. Got it, sir. But sir, would you believe that with the current guidance that we have given for the next two quarters of the current year, is assuming the current market share in the gas packages? Yeah. I have fully digested now. There is no more holding back on the gas. Gas is more than compensated by what you will see coming up new on both refrigeration and other manufacturing. We have fully digested the gas market share, and we are not taking anything outstanding out of this. January, we will see that the numbers are there. Sure. My second question is relating to the new segment that we are getting into, refrigeration. Air conditioning. Yeah, air conditioning. Early days, but any sense on what can be the size of this business, say, three years down the line? If everything goes as per plan. I will go back to the same thing we said when Tezcatlipoca we did. It is a new engineered, patented design. We are doing things which others have not done. Even today, India imports almost all its compressors. It does not matter who, foreign companies, Indian companies, all the air conditioning and home refrigeration compressors are still imported. There are some people who are trying to build it, but almost even today, almost all of them are imported. We are going to put an Indian-made compressor with an Indian refrigerant into a complete green package, which will be the lowest cost to own and operate. We are opening new spaces. Our view is that we should first get this in, sell for the first six months. The market size is at least INR 5,000 crores. If we crack it and get a 10% market share, then this is another Tezcatlipoca. You cannot stop it. Everybody will jump into this, and then it is a whole new game altogether. I would talk more about it after we crack this market. But I believe we have an absolute winner with us, and when we see our own product working in wherever we are testing, it just evolves me. Sure, sir. Thank you so much, and best of luck. Thank you. Thank you. A reminder to all the participants, please restrict yourselves to two questions. The next question is from the line of Kush Nahar from Electrum PMS. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. So couple of questions. So first, the new segment that we are entering, could you elaborate more on the competitive landscape in terms of who are the existing players who are supplying these products, and what would be your moat in order to displace them and win the new orders? And just secondly, I think in the presentation, we have mentioned that we have won an order for the first time in the hydrogen segment. So if you could elaborate more in terms of the opportunity and when do we expect this segment to scale up in terms of revenues? Okay. I will take the second one first. We have put out quotations of almost more than 1,000 crores for various hydrogen packages. The two orders that we won gives us a lot of positive energy simply because for the first time, we are going to have an end-to-end. That means they will just take water and electricity, produce hydrogen, bottle it, and put it into the vehicle, which will have. Most of these vehicle will all be with a fuel cell. They will convert this hydrogen back to electricity and run the mobility. This is a joint project with the oil companies. They are going to own it and run it. The fact that they start this and they work with us allows us to be a critical part in this value chain. As this value chain grows, it may not become the biggest mode of transportation, but this will be a mode of transportation, at least for the heavy vehicles, buses, trains, et cetera. We would get embedded into this value chain. So we are very happy with this, and we are happy to work and set these two stations up. So let us see, hydrogen is even today largely a subsidy-driven business. So we will have to wait and watch in terms of priority, how much people would ride this with the current scheme of things. But we are in this value chain, so that is the first as far as the hydrogen is concerned. The second question you asked is on the air conditioning. See, air conditioning, you know all the big names. I mean, there are foreign companies, there are two large Indian companies. Most of them have a play in the commercial air conditioning space. All of them are extremely well-entrenched, but all of them have a few common things. Almost all of them import their compressor, number one. Number two, all of them use refrigerant, which has a very large number of either ozone depleting number or a global warming number. I am putting out a refrigerant which is zero in both. It is the greenest of refrigerants possible. We have several advantages. We are, at the moment, still not clear or made up our mind on the path that we will take. We may decide initially to do the product, do the installation, do everything. But later we may still partner with somebody. We may only do the product and allow others to do the installation and the site work, maintenance, et cetera, or do a mix of both. Let this evolve. We will do it in two steps. First step, get the product as acceptable and established in the market, then we will scale up on the marketing side. Does it answer your question, please? Yeah, sir. Thank you. Thank you. Thank you. The next question is from the line of Eshwar from iThought PMS. Please go ahead. Hi, sir. Thank you for taking my question. The question I had was, what are the CapEx plans in the coming three years? What is our current utilization levels in our various verticals and the peak revenue we can achieve through the current capacity? Okay. This is a question that we have tried to answer several times. I will try again. We spend on an average about between INR 70 crore to INR 100 crore on CapEx. This includes capacity increase and largely capability building. For the last two, three years, most of our CapEx has gone into creating in-house manufacturing capability that are unique, which allows us to have a cost position which is competitive, as well as to bring in the entire value chain within the company to the largest extent possible. We will continue to travel on this. As far as the PLI scheme is concerned, we have filed for an application to put up a very large capacity to make Zephyros C. That is the PLI program. We do not know. After we negotiate and agree, then we will decide. That will involve a significantly larger CapEx than our usual CapEx. As far as capacity utilization is concerned, we say that we are running at about 70%. We definitely have capacity to get the next year's growth always. That is how we plan. The capacity utilization should be at about 70%, so there is headroom for the next year's growth. Understood, sir. Got it. Next question I had was, last quarter, we had some supply chain issues because of our partner in the Which impacted our order intake and finalization. We also said that we would slowly be mitigating this through introducing our Khione compressors in the smaller packages and subsequently scale them up to the larger ones. How has that panned out, sir? Have we won any orders the Khione series so far? Like I mentioned, the Khione is the Howden compressors. Yeah, the Khione has taken off. We are building packages now at the lower end, and customers are extremely happy with its performance as well as its reliability. Howden is itself come back in a better shape than what they were, after the transaction that happened at their end. They have been delivering products, but they are still again in the midst of another transaction because their parent is being again bought by another company, et cetera. So, the longer term stability would mean a certain level of development by us, which we will continue to look at and work on. Understood, sir. My final question, sir. The compressor which you mentioned, the refrigeration compressor for which you applied the PLI scheme for, and at- Sorry to interrupt. Mr. Eshwar? Yes. We have to proceed ahead. Yeah. Since let me just squeeze this last question in. I just wanted to understand what stage The next question is from the line of Abhilasha Sathana from Quantum. Please go ahead. Yeah. Thank you for taking my question. Most of the questions are answered. Just on the order inflow, you said that there have been few orders which have got delayed, and you expect them to get through in Q3. What is the visibility on that? What are you estimating when you feel that the orders will come through? Because we are also seeing some structural challenging in terms of some of the industries, as you are highlighting. This is my first question. Going forward, when you are guiding for FY 2027, in that guidance, are you also taking this commercial refrigeration product, which you are awaiting the clearance and the commercialization? Okay. With your permission, Abhilasha, I will quickly answer Eshwar's last one because I do not want him to feel disappointed. Yeah, sure. What you asked for the air conditioning business, the Zephyros C as a product is an established product for another area. We are repurposing it for air conditioning purpose. We have patents around it, and we have now done the full configuration of the factory, and we are now running tests within our premises. This is an established thing. It's not only AI. That's as far as we should be concerned. Abhilasha, your questions. First question you mentioned is on- Order booking. Order booking. We have some big orders that are coming in. We have finalized all the negotiation, and they have cleared it, and they have to just sign and give it. They are saying will look after Diwali. I don't physically have the order in my hand, but I believe it's been done. Once that comes, we will have enough orders to feel reasonably confident about the next year's number. We've been looking at next year. Whatever orders we need for this year, we are almost there. We know what we're going for the rest of the two quarters, where we by and large have key orders with us. The routine orders, what we call the sales and service, is an ongoing thing. We are clearly having an order visibility for the year-end number. We are looking at how it is going to pan out for the next year, and we have orders. Sorry to interrupt. Your voice is getting a bit crack. Is it? Okay. I'll speak. Can you hear me now? Yes, sir, we can. Okay, fine. Just distance yourself from the mic a little bit. Okay. The question is answered. Abhilasha, can you hear me? Yeah. Yes, sir. We can hear you now. Okay, go ahead. Okay, sir, that was my question. Yeah. Thanks. Mr. Abhilash? I am good with my question. Yeah. Okay. Thank you. The next question is from the line of Bala Subramaniam from Arihant Capital. Please go ahead. Good evening, sir. Thank you so much for the opportunity. Sir, my first question, I think we are launching A-800 compressor frame very soon. I just want to understand what are the specific market and customer segments for this frame compressor, and how does it complement the existing A-2100 to 7,000 range compressors. Sir, my second question, what are the structural delays from European suppliers which is impacting refrigeration package finalizations? Is there any active program to dual source or indigenize these critical imported components to de-risk project timelines? Okay. On the first question, the A-800 is almost done. We are still now running trials inside the factory, and we will probably start selling the first product. Wherever dry screws are now used, be it in pharmaceutical industries, food processing industries, some amount in the power stations, etc. Wherever dry screws are used, they can be much more comfortably replaced with the A-800. It is a small centrifugal compressor. 800 denotes CFM, cubic feet per meter of air. This is a small machine, very efficient, dry air by definition, and it is ideal in the place of a dry screw. Cost would be pretty much comparable, but the operating cost will be significantly lower. It is a range that doesn't exist in India so far, and so we are trying to replace an imported product, which is a dry screw. Once we launch the product and scale up, then we will talk about what all market it can take. We believe it should be about at least 100 numbers in a year. That is as far as the A-800. Now, the second question that you asked is on. Sorry, what was your question, Bala? The second one. Difference between the A-800. Okay. Sorry? Difference between 800, 3,500, 7,000. Yeah. That is only the CFM. So A-800 is only 800 CFM. The other ones are much larger. Okay, got it. Sir, what are the structural delays from European suppliers? Okay. The European suppliers. Sorry, I wrote it. Okay. Howden supply, we explained already, that is now behind. They are now better off. They are supplying reasonably on time, so we seem to be okay. At the lower end, we have already placed the Khione packages that are running well, and so that will continue to scale up and grow. So we are addressing it quietly. See, partnerships are to take us through both good and bad times. We cannot respond or react by quarter, so we will do things in a nice way. Okay, sir. Thank you. Thank you. The next question is from the line of Dhawan Shah from AlfAccurate Advisors. Please go ahead. Yeah. Thanks for the opportunity, sir. My question, I have just one question, and that is on the order inflow side. You mentioned that there are some large orders which are going to come in the third quarter. Can you share the size of those orders? I mean, it would be in the project side of the ref business, but what could be the potential size of one order, and how many orders are you expecting incrementally in Q3? Because we are running at roughly INR 300 crore kind of the order inflow run rate since last three quarters. Yeah. We have been running very much behind our plan for order booking, particularly considering what are the targets that we have for sales for next year. We are deeply worried. What we expect in Q3 is we should book orders significantly above INR 500 crore, INR 600 crore. That's our target. There are a couple of big orders, which is about half the size of the total years, so this INR 600 crore that we talk of, that we have seemed to have finalized. We have not got the orders on hand. Let's have it on hand, we'll talk about it. The visibility for us this quarter is important that we get at least about INR 600 crore plus of orders, and we expect we'll do that. Understood. Yes. Thank you. Thank you. Ladies and gentlemen, we will take that as the last question for today, as I would now like to hand the conference over to management for closing comments. Yeah. To all of you for patiently hearing us out, I know it's a complex business, and we probably disappointed all of you this quarter. We hope that we will have strong numbers when we come the new year, January. Most of all the uncertainty that comes out of both geopolitical changes and structural changes in our business have been digested. We have several new happenings that's good and happening as far as we are concerned, and hopefully, we will have a strong H2 to complete the year in a positive note. Thank you very much. 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.