Q1 25/26

Jul 23, 2025

Summary

Q1 sales were ₹272 crore and PAT ₹28.1 crore, with delayed execution weighing on the quarter. FY26 guidance remains near ₹2,000 crore revenue and 18%–20% EBITDA margins, supported by order recovery and new-product growth.

Ladies and gentlemen, good day and welcome to the Kirloskar Pneumatic Company Limited Q1 FY26 earnings conference call hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Shah from Antique Stock Broking Limited. Thank you and over to you, sir. Thank you, Nidhi. Good afternoon, everyone. On behalf of Antique Stock Broking Limited, I welcome you all to one Q1 FY26 post-earnings call of Kirloskar Pneumatic Company Limited. To discuss the results, we have the senior management team of the company represented by Mr. K. S. 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 remark, post which we can open the floor for Q&A. Over to you, sir. Thank you for joining the call today. I know many of you are disappointed with the results and I owe to all of you to explain the results and to assure you that things are not as bad as it looks. On this call, I have with me Mr. Ramesh Birajdar, Chief Financial Officer, and Mr. Jitendra Shah, the Company Secretary. Before we proceed with the business update, let me ask Mr. Jitendra Shah to read out the disclaimer statement. Jitendra? Thank you, sir. 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 statement 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. Thank you, Jitendra. Now let me proceed with the business updates. The financial year FY26 started on a sedate note with distractions on the various fronts. We had global challenges with tariffs, with wars, strife, changing political and trade policies. The whole landscape was confusing. In all this rapidly transforming situation, we remain focused on executing the orders on hand, picking orders selectively that will allow us a definite execution cycle and working on the various projects to in-house manufacture as well as to bring new products to the market. I will share some of this during this talk. It was a period to demonstrate a steely resolve to build a robust business model that can handle the BANI world: brittle, anxious, nonlinear and incomprehensible. Historically, the financial year always starts slowly and this year was even slower. Order finalization, inspection and clearances to dispatch were all impacted due to site availability as well as other distractions. However, this has since started to pick up. As we speak, we are seeing a larger number of dispatches leaving our factories. We are confident that we will catch up on the plan numbers gradually improving in Q2 and definitely coming to plan by Q3. We won several orders for the Tezcatlipoca and we expect this to be the first INR 100 crore order booking of a new product during this year. This is some kind of a record and this gives us a confidence that our new product scale-up will all happen as planned. Tezcatlipoca packages of 2 started seeing strong traction not only in the traditional areas of cold chains and ice plants, but also in industrial refrigeration packages. We will do at least several large packages of this even during this year. We continue to work on in-house manufacture as well as in filing IPs for design and for new products and this process continues right through. Capex execution is continuing as planned with capability building as the key thrust. We will complete the planned Capex of about INR 100 crore during this year. The lost foam casting plant at Nashik is under trial production and this will meet the intricate casting needs of the Tyche semi-hermetic compressor that we launched this quarter. This is being built at Saswad, that is a plant near Pune. We also commissioned the Janus range of specialty motors and this will be built in the Saswad plant for use on the Tyche compressors and other specialty applications. The company focused in these testing times to ensure that the capital is used efficiently. The net working capital of the company was below 12% of sales for the first time. The cash flow that we released during the first quarter was over INR 100 crore. This clearly brings out that there was no push sales by us and it was business as usual. Now let us discuss the business by product line. The clear star of the first quarter was the Tezcatlipoca centrifugal compressors. We started winning not only big orders but repeat orders as well. We expect to hit the INR 100 crore mark during this year. Orders for the CO2 compressors, as well as orders from cement plants, have kept the reciprocating compressor business running smoothly. The sale of standard screw compressors was, however, muted. In a way, reflecting the lower off-take to general engineering applications. Refrigeration compressors and systems. While the interest in Khione screw compressors for dairy chemical plants picked up, they also started now offering these larger packages for the petroleum and oil and gas space. This is a major step forward, and we would see packages getting completed during this year. Order finalization, package inspection, and clearance for the large refrigeration packages, as well as for deliveries of a few critical inputs from overseas suppliers were affected. We see this easing over the next two quarters. The ammonia reciprocating compressor for the cold chains and ice plants were chugging along as usual, with no big swings one way or the other. However, we expect that this will improve dramatically with the increased sale of Tyche compressors during the next quarters as the consumption market in the commercial refrigeration space continues to look good and will pick up even further going forward. Process gas compression systems. This segment is seeing a global churn of a very significant proportion, and we expect to benefit from this going forward. However, Q1 was perhaps the bottom of the curve in terms of sales and order bookings. A couple of major orders continue to elude us on account of this uncertainty. During the course of last quarter, we were on the verge of picking up some very large orders in this space, but they all held up on account of uncertainty in the political situation. However, we see a huge demand for CNG packages from several geographies as the energy basket shifts to natural gas across the globe to meet the growing energy needs quickly. There is an ongoing finalization of packages for biogas and hydrogen. We have picked up several orders in this space. We, however, see a low pace of execution in this going forward as well. Outlook for Q2 FY26. The uncertainty in the global economic landscape is expected to continue at least for the next quarter. This would mean slower finalization and execution of orders. However, the structural changes that are underway are all positive to us. A significant growth in natural gas usage across the globe, strong demand for refrigeration in processing, storage, and commercial space in India, and the trust in local manufacture in key sectors all bode well for meeting our year's target, as well as continuing on our aspirational journey of growth and margins. While we did have a poor start in Q1, and several of you have informed us about your disappointment, let's assure you structurally nothing has got worse. Things are on a slow track for the first quarter, may pick up in second gradually, and we should be back to our planned numbers definitely by Q3. The changes that have happened would only impact us positively as we go forward. Now I'm going to request Ramesh to take you through with the numbers. Ramesh? Okay. Good evening, everyone. The results of Q1 FY26 have been posted on BSE and NSE website for your view. A presentation and detailed income statement showing these results have been also uploaded on our company's website. Let me now summarize the Q1 performance of FY26. The Q1 sales held at INR 272 crore, almost matching last year's level and setting the stage to accelerate the growth in the coming quarters. Other income for Q1 FY26 rose to INR 8.2 crore, up from INR 4.44 crore in Q1 FY25, contributing to total income of INR 282.2 crore this quarter against INR 279.7 crore in Q1 FY25. The increase in other income was driven by higher earnings on investment, dividend, and other miscellaneous recoveries. Material cost to sales in the current period stands at 47.2%, reflecting 1.7% improvement from Q1 of previous year was at 48.9%. This enhancement is attributed to more favorable product mix and enhanced manufacturing of select components. Employee-related expenses stood at INR 49 crore in the current quarter, up from INR 43.1 crore in Q1 of previous year. This increase reflects a modest salary revision implemented at the start of the year and addition of new manpower in Q1. Financial charges are paid to banks for services not related to any borrowing. The company has no loans, neither term loans, nor working capital loans, and it is a debt-free company. Depreciation for the current quarter stood at INR 7.2 crore, down from INR 7.8 in Q1 of previous year, reflecting a depreciation trend aligned with the pattern of asset additions. Other expenses comprising both fixed and variable costs stood at 21% of the sales in Q1 of the current year versus 20.8% in Q1 of previous year. Expenditure levels remain largely stable with no significant variation during the quarter. EBITDA for Q1 rose to INR 44.1 crore, contributing to 15.7% to total income. Margin of 15.6%, that is INR 43.7 crore in Q1 of prior year. Profit before tax for Q1 increased to INR 36.8 crore, with margin of 13.1% up from 12.8%, that is INR 35.9 crore in the same quarter last year, supported by improved operational efficiencies and disciplined cost management. Profit after tax grew to INR 28.1 crore at the rate of 10%, while it was INR 26.9 crore in previous years at the rate of 9.6%. Company has issued 16,100 equity shares during Q1 under employee stock option program. Consequently, the paid-up share capital increased to INR 12.98 crore from INR 12.96 at the start of the year. Basic earnings per share improved to INR 4.33 per share in Q1 compared to INR 4.15 in Q1 of previous year. With over 89% of revenue coming from the compression segment, it remains the only reportable segment as of now. The company has maintained the segment profitability at 19.1% in Q1 in the current year as well as in the previous year, which is directionally, we are in the range of 18%-20%. Capital employed in the compression segment decreased by INR 98 crore to INR 235.6 crore compared to INR 336.6 crore at the beginning of the year. New order booking during the Q1 was close to INR 365 crore. As a result, the company has order board of INR 1,725 crore as on 1st July 2025, while INR 1,625 crore at the beginning of the year. We were holding RoadRailer asset at a redundant value of INR 5.9 crore for the disposal. We have since sold part of this at INR 1.95 crore and there is no further write-down or loss on account of RoadRailer assets. Wherever necessary, figures from the previous year have been regrouped, readjusted to align the current reporting. We have also published a consolidated income statement with our newly acquired Systems and Components India Private Limited, and comparable financial results will be available only after completion of a full year in the reporting cycle. Now this forum is open for discussions with our esteemed investors. Thanks, Ramesh. 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 Ashish Kumar from Ampersand Capital Investment Advisors. Please go ahead. Hi. Thanks for taking my question. I have two questions. First is, are we changing our aspirational target of INR 2,000 crore this year with similar kind of margins as last year? And second question is, last year Q2 was a very high base. We had around 50% plus sales growth and around 22% margin. So how do we see Q2 of this year in terms of growth year-over-year? Thanks. Okay. So coming to the final year's target, we are not changing it as of now. We still believe we should get at least 18% plus growth over last year's number. That means we should be very near INR 2,000. We are not calling it down at all. Hopefully, we should see a scale-up from Q2 onwards. Coming to Q2, we believe that we should be at least doing near about INR 500 crores. So that should take us very near to a 10% growth at Q2 level compared to the last year. Margins would also be more or less similar. You would have seen in the first quarter, operating ratios have not really changed. Our EBIT margin, our cash generation. We have not changed anything in the business model except that the volume of sales and order booking have declined. Nothing else has actually changed. So we will try and catch up. Thanks. That's very reassuring. Thank you. That's all from my side. Thank you. The next question is from the line of Amit Anwani from PL Capital. Please go ahead. Hi, sir. This is Amit Anwani from PL Capital. Thanks for the opportunity. First question, on the, you said, delayed finalization as well as Q1 being soft. Is it possible for you to elaborate, is there any component supply chain restrictions which is leading this disruption currently? What gives us confidence that we will be able to recover gradually and be on plan by next six months? Okay. As far as the delay in execution, it is not coming out of any component that somebody imports and that is not coming. That is not true. We continue to have challenges getting the Howden compressors, and that is not only Howden for us, it is also true with a lot of others who are importing compressor parts, et cetera, from Europe. This has become some kind of a structural issue. It is not a denial as much as a delay. They are challenged, all of them, whether it is us or any of our competitor who import from Europe. All of us are challenged by the companies in Europe going through a structural challenge in terms of their own supply chain. This is something that the industry is battling. It is not a denial of anything, restrictions, et cetera. It is just a structural delay. Whatever was planned for Q1, most of it should go out in Q2 and Q3. We should be okay by that time. This is pertaining to gas and refrigeration both? At the moment, our refrigeration compressors alone come from Howden, and that's U.K., Europe. Rest of them don't come from Europe, so we're quite okay. We make them here. This is also an opportunity, I did mention in my opening call, that it also gives us opportunity now to use in some application, not in everything, the Khione compressors, which is our own patented design. Probably we'll start delivering smaller, let's say, technically challenged projects using these compressors. That also gives us a chance to scale up our internal manufacture. We will see that happening in Q3, Q4. Yes. Are there any plans to mitigate this risk in future? Since I think last year also, this happened with respect to suppliers from Howden. That question is what I answered by saying that Khione is going to come in at the smaller end of the packages. It'll gradually scale up. Sure. Second question on Tezcatlipoca, you highlighted that we'll be using this in industrial packages also. The INR 100 crore target this year is only for products or including the packages. So more clarity on what sizes and packages you'll be using, and you talked about refrigeration and oil and gas, both. So some color on Tezcatlipoca usage in packages. Okay. That's a pretty difficult question to answer. Let me answer like this. Tezcatlipoca is a centrifugal compressor primarily used for air compression. These are standard air compressors used by the metal industry, the textile industry, and several engineering industries which needs large volume of air at moderate pressures. This is scaling up. We are executing larger numbers now, and we will probably book a INR 100 crore order this year. We may not execute all the INR 100 crore. A significant part of it will also get executed during the year. So those are the standard air compressors. Now, coming to packages, refrigeration packages largely run with Howden compressors. If it is for the oil and gas sector, petroleum complexes, ammonia terminals, et cetera. This is where the challenge of deliveries or delayed deliveries will play a role. Packages that are built using Khione and others, which are built by us, will happen in an accelerated manner to compensate for our challenges in having the larger Howden packages going out. As far as the gas packages are concerned, the larger packages, finalization has been the challenge. It is not a delivery issue. Finalization is a challenge because oil sector is the one which is seeing the largest churn across the world. You hear every day about what oil can come where it can go, where the refining happens, et cetera. So there is a large, let's say, political, economic challenge around the oil sector, and that is seeing a lot of churn. This is where some of those big orders that we are supposed to get, some in India, some from the MENA region, are all getting deferred or put on hold. It is also true for execution. This is where the big challenge is, and that's why I said probably the cycle is bottoming out, but we are really at the bottom as we talk of the first quarter. Sure. Sir, you highlighted about the huge demand for CNG for several geographies outside. In last year, we did a very good export number of INR 124 crore. Are we seeing the contribution from export going up for FY 2026? If you could elaborate more on, will it be increased CNG related products for us in the global markets? Any color on this? Yeah. I did mention in the opening comment that the oil and gas sector is seeing a big change, and the large part of the change is since oil has become more of a difficult commodity to move around, set up refineries, taking time, et cetera, more of the energy basket across the globe is getting met on an immediate basis using natural gas. Natural gas moves across sea as LNG. Otherwise, it moves in gas pipelines, and that is where our compressors get to be used. This is a global phenomenon. We picked up significant orders last year for exports. As we speak, we have orders further to execute. We are picking up new areas, new geographies, which are all asking for urgent requirement of CNG compressors. We hope to benefit from this as we go forward. Sure. My last question on Tyche compressors. Any revenue target for this year, and which user industries you're getting traction, particularly for this compressor? Thank you. Tyche is a semi-hermetic compressor. It replaces what is currently imported from Europe. Today, all the commercial refrigeration space, which is, let's say, the cold rooms in a restaurant, the ice boxes, the display panels, a whole lot of things where commercial refrigeration is required, are all met by these semi-hermetic compressors imported from Europe mostly, some from Japan. They're not 100% imported. We have launched the Tyche compressor, completely made by us. There's no imported part in it. The casting is a lost foam casting from our own foundry in Nashik. The motor is a Janus motor built at our own plant in Saswad. They're all integral in one piece. That's why it's called semi-hermetic. This compressor has been tested and launched in an alpha. That is a small controlled area. We will scale up in Q2 onwards. The size of this market in India could be anywhere up to 2,000 compressors which are being imported. That's a fairly large number. Pure compressor business could be anywhere between INR 300 crores-INR 500 crores. Packages included, this will become a much larger market and business. Sure, sir. Thank you so much. Thank you. Thank you. The next question is from the line of Priyank Cheta from Vallum Capital. Please go ahead. Hi, sir. Heartening to see the way you are building up the organization, and one of that way is to launch new products, expand the addressable size. My question is, what would be the sales contribution that you would be targeting from the products that you would have launched in last 2, 3 years or since you have joined? How that sales has reached in terms of any size number that you would like to call out? Going ahead, what would be that target, and what would be, as a percentage of sales or maybe if you want to call it out, which will be from the new product launches? Thank you for your question. I will reframe this a little bit so that it is more relevant to the business context. The packages that we build using imported compressors used to represent almost about 50% of our business five years back. Today, that has gone way below 25%. Rest of it is built almost entirely by our own products. Our compressors, our packaging, and this is scaling up and even getting bigger and better. That is the change that we wanted, to see that we become less dependent on imported compressors. That is moving well. We eventually should come to a stage where the imported compressors and it is very relevant that the imported still continues, because these are all API compliant compressors where even the Chinese still import for critical areas, and there is no global market to have another company making it. Maybe the total world requirement would be about 500 to 700 compressors. It is good that one or two companies make it and we all consume it. But our dependence on that business, we would like to see it go down to less than 20%. To get it down to 25% this year, we will take it down further over another period of time. All the rest is all being built by us in India. Would that get reflected in terms of improved gross margin and EBITDA margin structurally? I am not asking for a year or two. Structurally, how do we see as we get into more in-house manufacturing of compressors and the whole of the packages, where would we settle down in terms of margins or value addition that we do? I think Ramesh has been explaining it well. In the first immediate phase of growth, our margin targets are to take it between 18% to 20% and stay around that. But to scale up in terms of volume and take market share, we do not want. It is a trade-off. If you do too aggressive margin targeting, then you ensure that your scale-up is slower, and then you are able to indigenize much slower. So we have to keep that in mind. We are targeting 2020. Top line growth around 20% CAGR, margin EBITDA around 20%. Perfect. One last question on the screw compressors, wherein our market share is slightly lesser versus the available TAM. I know that there are three sub-segments within that, which is oil-free, portable. How are we positioning in each of these segments, if you can explain, what are the actions that we are taking to scale up the market share within each of the segments? You are kind when you say our market share is low. We are almost insignificant. The two large players in India probably dominate this industry. We have under 5% or even less. We have a full range. We do not have the oil-free. We have the oil flooded screws. We are not very big in the portables that is used in mining water well. We are largely in the industrial area and in specialty screw compressors. We did launch the Aria range as a low-cost compressors. It did not scale up as much as we expected it. We probably will relaunch it during the year with some changes in the way we have been putting it to the market. We will try and build this business. There are quite a few other modifications and relaunches coming up in the screw space. It is a huge opportunity, but with all the technology and investments that we have made over the last five years, we have not met our own internal aspirational targets in this space. We will try and do better going forward. Sorry if I can squeeze in one more question on the refrigeration segment. I reconcile that this market size would be somewhere around INR 1 billion. Which is divided between industrial and commercial. We have Khione packages. We have launched new Tyche compressors also. In terms of available product gaps or available products, are we addressing whole of the market and now only execution that has to be done? Or there are more such new products that we need to fill in terms of addressing the market? The refrigeration compressor business as a whole, not just the compressor, including the packages and the whole refrigeration system per se, is a much bigger market. It includes three buckets. It is the industrial, the commercial and the comfort. The biggest piece obviously, is comfort. Comfort alone would import in India about 1.4 crore compressors every year, and that is what is all under the white line goods, the air conditioning, the refrigerators and a whole lot of things that we do. We are not in that space at all. We are primarily in industrial and in getting into parts of the commercial refrigeration. Commercial, we just have got now launched the Khione about 2 years back. We are now getting bigger with the Tyche launch, which is a semi-hermetic. Again, to start with semi-hermetic, we are launching only the recips. We have to come up with a semi-hermetic screw. We have to come up with a semi-hermetic centrifugal. I think we have still got a long way to go before we can take the market. The only good thing about this is almost entirely everything is imported. Not one compressor in this space is made in India today. Both industrial, commercial and comfort, everything is imported. This is a virgin space for us to scale up and grow. We are building it up slowly. Wonderful, sir. Thank you. I will come back in the queue. Thank you. Thank you. The next question is from the line of Mihir Manohar from Carnelian Capital. Please go ahead. Yeah. Thanks for giving the opportunity. Am I audible? Yes. Yeah. Prasil, wanted to understand that you mentioned second quarter you expect to have INR 500 crore kind of revenue. Does it mean that there's any large package which is sitting in inventory, and you expect that to get shipped or that to out of factory in second quarter? Is there any spill-over from one group to two team? See, it's not just one or two packages. The whole lot of things are happening. Some are moving out, some are continuing to be worked on, some deliveries are still to be coming in. I think it is not just one package story. We have estimated that we should do around INR 500 crore in the second quarter. Order booking, we still have a lot. That's why I said we're still keeping a bigger number for the third and fourth quarter. Okay, understood. What would be the mix of products versus projects, let's say, for order book, which is there as of now INR 70-25 crores and when I say order book one year back, roughly INR 60-80 crores. So what is the products proportion as of now versus what was there, let's say, one year back? The product this year we said we will go. When I say product, it includes the services and spares as well. Packages, the large packages as what we call as projects, I keep it separate. We were 60/40 the other way. We hopefully should get to a 70/30 at least, anywhere between 65% or 70/30 in favor of the equipment and whatever we call as a non-project orders. Okay. So as of now it is 65%. Last year it was 60%. Yeah. We're trying to get bigger than that. Like I told in the beginning, we're trying to take it up to 80% over the next one or two years. Okay, understood. Because last quarter, one of the arguments for a good order book and for us despite 2,000 crores revenue was that our products proportion was a higher number, and that is where we were expecting 2,000 crores of revenue in order board. I am not sure I heard you well. Can you please repeat it? Yeah, sure. The argument was that our products as a proportion is going up, and that is where our order book, the reported number which is there, that is getting more short cycle versus the earlier number being more of a long cycle. Absolutely. So in the transition phase, you will see that our order book does not look as big as it used to be earlier because they are not running as much shorter cycles. This will also catch up. We will normalize it in the next one or two quarters because then you will still see the growth. When we started the quarter, we were sitting with an order book of 1,725. 1,624. At the beginning of this quarter, we started with one- One thousand six hundred and twenty-four 24. So that is about 6% higher than this year. We are at 1,725. As on 1st of July. 1st of July. We really want, but we need to get it up even higher, then only we will be able to execute bigger numbers. Understood. Sure. In your order board, what are the number of booster compressors and number of mother compressors? That is a tough question. I will not know the exact numbers. All I know is that we have both booster and mother stations. Last year, combined, we did about 200+. This year we are hoping to do at least 250+. Let us see. Okay. And 80% will be booster in this? I won't have that as a number. How much it'll be? About 60%-70% boosters, even less. Less than that. Less than that. You take it for the moment as 50/50. Sorry, sir? Take it as 50/50 for the moment. I may be wrong a little bit out of line with this. The total number is roughly about 200 is what we did. I think we did about 50/50. Last question was on the employee cost. The next sequentially quarter-over-quarter, our employee cost is one up from INR 45 crore to INR 49 crore. Is this a bit higher number of employees have gone up? Yes. This employee rate increased or the correction we did from April 1, and additional manpower where we are targeting to achieve the sales, aspiration sales of INR 2,000 crore. With that reference, we hired the additional manpower and the overall increment percentage is in the range of 10%, and the rest is on account of additional manpower. Okay. Understood. Sure. That's it from my side, sir. Thank you very much. Thanks, sir. Thank you. The next question is from the line of CA Garvit Goyal from Nvest Analytics Advisory. Please go ahead. Hi, Yes, sir. Yes, sir. Mihir sir. So my first question is on Q2 itself. You mentioned INR 500 crore target that we are looking at in Q2. What is the number of operating profit margins you mentioned? I think on the margins, I think Ramesh has been saying our margin targets will remain within the range of 18%-20%. So let's keep it there. We will have an up and down a little bit, one quarter going up to 21%, 22%, one quarter staying at 19%. But we will stay within this range for the moment. And that is for full year, right? Yeah. The same. Understood. Sir, in your annual report, we are mentioning this INR 2,000 crore growth target as a medium-term target. Given the challenges in Q1, do you foresee these issues continuing, and should we expect any revisions to earlier guidance going ahead? See, we have talked about this in the beginning as well. This year's target was to get to the INR 2,000 crore mark. We are still confident that we should get to it or as near of that as possible. See, we said we should get even 18% growth, we will be very near this number. We are targeting a CAGR growth of about 20% for a reasonably long period of time, and that's how we are working. The market gives us the kind of opportunity. So like we keep saying, 20-20. Top line growth of 20% and a margin of about 20%. Okay. Give it a margin. Understood. In the last phone call, you highlighted some sector-specific slowdown in the oil and gas and biogas. Do you see any sign of recovery in these sectors as well? Oil and gas, I explained quite a bit. Oil part of it is a little uncertain due to the various changes happening across the globe. Gas part, it seems to be the way out for many economies to quickly get the energy needs met. Gas is happening across the world and we see more opportunities for us in the gas space. The whole sector as for us, we said it has hit the real bottom in the first quarter. It should only get better from going forward. That is as far as the oil and gas sector is concerned. The second question you asked on the biogas side. Biogas is still a lot of excitement and talk about it and projects and hundreds of quotes going out every day, every week at least. Some finalization also happening. But actual number of gas projects that are getting installed and where we are putting in our compressors and commissioning them is still very few, and that's what is worrying us. It will take time. What about the hydrogen space, sir? Hydrogen space is an opposite of it. There also we have a lot of interest, projects, finalization, and some commissioning has also happened. We have to deliver some more projects yet. Our compressors come from PDC of U.S.A. in this case, but packages are built here. Here, the challenge for the industry is the use case is still a little undefined. People have hydrogen available, and they do not know how to use it. There is only two proven process to use hydrogen, either in the diesel refining or in the hydrogenation process for vegetable oil, et cetera. Vanaspati and all that stuff. So there is a use case challenge. In the case of biogas, there is no use case challenge. It is the opposite. Generation challenge. How do you generate biogas from the biowaste? We have two opposite challenges in both this, and the sum total is it is bringing down the actual execution. Understood, sir. Lastly, on the order inflow situation. What kind of situation are you seeing based on the current conversation with your end customers? Going by that, I am not asking for the precise number, but what is the ballpark number for closing order book do we target by the end of this year? This is the most difficult question to answer because like I keep saying, the kind of quotes going out, the kind of discussion happening, nothing has come down. Everybody is still talking about orders. Everybody is talking of even issuing letter of intent, everything. We can talk about it only when it gets into a final firm order with advance. It is still something which is very fluid. First quarter has been not good at all, like I said. Many things which were all hanging around did not actually get consummated into a firm order with an advance. Consequently, we will not take it as an order. There are challenges that are there in this space because of all the uncertainty. Hopefully, it will clear up in the next quarter or so. Got it, sir. That is it from my side, sir. All the best for the future. Thank you very much. Thank you. Thank you. The next question is from the line of Rohan from Envision Capital. Please go ahead. Hello, sir. Am I audible? Yes, please, Rohan, go ahead. Yes. Sir, thank you for the opportunity. Sir, sorry, I am harping back on the same oil-free screw compressor point again. Just wanted to understand, when we relaunch and when we try to recalibrate our strategy, what would we be doing differently this time to successfully penetrate this category? One. And second, sir, how big is the addressable market that we can, in a medium term, into 3 to 5 years, we can really get into in this segment. This was the first part. And second, sir, just, on the order book. Last two quarters, you have seen order book slightly muted. Just your take on that. Thank you. Okay. The question you asked on oil-free screw compressor, we have not launched so far an oil-free compressor. We are working on this, but we have to look at a way to address this market with a variant which is quite different from what is available in the Indian market today. Indian market, we have what is called today is oil-free or all with water, and some of them are water-jacketed. We will have to see what we will come up with this. We have not launched a product for the oil-free market. But if you talk of screw compressors as a whole, this I have explained in the beginning, we are still a very small player. We have several new moves that are coming up. We have a very good product. You all know that when we had this big COVID crisis, we were the only company that could deliver almost about 700 plus compressors in such a short period, that we could deliver 0.5 million liters of oxygen per hour across 15 states in this country, to keep the COVID crisis under control. So we have the capability, we have the product, but there are challenges in the market in terms of competitiveness with a large number of players, particularly two very strong entrenched players. We will address this increasingly with several strategic moves. We will talk about it as we go forward. As far as the order book, what you said, we have already explained that yes, there has been a real bottom end when we talk of last quarter, when the order booking was really at the lowest point. Largely, this is coming out of the oil and gas sector. We believe it has bottomed out, and we should start seeing this going up from Q2 onwards. The proof actually is when I put out my Q2 numbers and say, "This is the order we have booked." You have to bear with us for a quarter, and then we will be able to explain it even better. Thank you, sir, for the detailed answer, and all the best. Thank you. Thank you. The next question is from the line of Ruchita Kadke from Arvel. Please go ahead. Hello, sir. Very good evening. Sir, my question is pertaining to the refrigeration segment. Since you have spoken about the Howden compressors, wherein they are facing some kind of supply chain issues, how much percentage of an order board currently has these kind of compressors? I explained the total packages, which is both Howden and Ariel, which is really what comes for the gas systems combined, is roughly about 25%-30% for the total turnover. Howden would be about half, and Ariel would be about half. Understood. Okay. By when would this issue settle down? That is a real tough one, because like I said, it is not a question of just these names that I mentioned. There are other competitors of mine who too have their parent companies in Europe, and they are getting compressors from there. We are also helping a couple of them to package, and even those compressors are not coming. This supply chain issue in Europe is not specific to Howden. It is with everybody. That is coming out of the way their whole entire supply chain in Europe is being re-oriented, I would say, because they are struggling with their own supply chain. Quite a few of them are getting parts out of Eastern Europe, maybe from Russia, and all of them are now struggling. They also have challenges with China, et cetera. There is a rebalancing or a reinvention of the supply chain in Europe, and that is hurting all of them. Sir, if this does not deescalate, how much do you expect, whatever targets that we have for the year, how much can that get impacted by it? This is a little too easier question, so I will answer this better. See, what we have done in the meanwhile, like I explained, this also gives us an opportunity to try and convince some of our customers to use the Khione compressors wherever it is possible. So we are trying to put Khione compressors in smaller packages, at least to start with, and that will take away some of the uncertainty coming out of any supply chain disruption. We still target to keep to the numbers that we have set up in the beginning of the year. We do not expect to be away from those numbers by very much. Got it, sir. Understood. Thank you, sir. Thank you so much. Yes. Thank you. The next question is from the line of Bala Subramanian from Arihant Capital Limited. Please go ahead. Good evening, sir. Thank you so much for the opportunity. Sir, Tyche is the only semi-hermetic compressor made in India. How do we look at pricing power between us and German and Chinese imports? Tyche competes against European compressors because there is no Chinese imports of any significance in this space. This is largely served by compressors imported from Europe. They today currently have sales offices in India. They import them in large numbers. You can go through the HS codes, you will know the name of these companies, and they are selling them to the assemblers or whoever it is in India. Tyche would be a package builder. Tyche would be going head on against this, and we expect to scale up very quickly. Okay, sir. Sir, under the refrigeration compression side, how does the integration of Systems and Components India Private Limited enhance Kirloskar's capabilities in pharma and chemical side? Is there any synergies in margins or customer acquisition side? Okay. Systems and Components India Private Limited actually package smaller refrigeration packages for chemical, pharma, and other industry. They use compressors other than Kirloskar compressors. They take compressors from Chinese, Japanese, and others and package it. We are not stocked, but we will gradually replace those compressors with Kirloskar compressors, Khione and other things. That is how we see an opportunity to enter the packaging market, which is currently not serviced by us at all. That is what Systems and Components India Private Limited's role is going to be. The first quarter has been brutal. They lost money simply because they completed a hydrocarbon project, for which in our system, as soon as a package is shipped and the order is invoiced, we book the entire LD as a cost immediately, though we have a chance of recovering some of it later. We have done the same with them as well, so they have taken a hit in the first quarter in terms of number. Hope to get better going forward. Yes, sir. Sir, especially on fertilizer and chemical side, we have seen a larger demand for large reciprocating compressors. Is there any cyclical or structural demand in these sectors? You would have been reading, there is a disruption in the fertilizer industry of significance, availability, et cetera. The ammonia terminals have all come in, and our compressor refrigeration packages are all more or less delivered. There are a few that are going out still. There is a certain amount of uncertainty around this industry as well in terms of execution. There is less intent in terms of packages or projects, but the execution is still a little bit out of gear. Hopefully, we should have all of them running during the year. Got it, sir. Thank you. Thank you. The next question is from the line of Harshil Sethia from Singularity AMC. Please go ahead. Sir, can you explain a bit more in detail the commercial refrigeration segment for Tyche? You obviously told that it is currently totally imported. What is the pricing difference between our compressor and a European compressor as of today also? Okay. The commercial refrigeration space is anything that is used in, let's say, in the restaurants, in the display cabinets, in the reefers, in ice boxes, ice rooms. A whole lot of things are all seen as commercial refrigeration space. They start from something like as small as a 15-kilowatt small compressor going up to about 100-kilowatt compressor. Most of them are actually in the box itself. They are very small things that you can connect up. And the ice plant or the builders of these rooms buy these compressors and do all the other things themselves. That is why it is still largely served by imports. These compressors all are imported by the sales offices of the European companies, and they distribute it to the ice room builders or safety box builders, et cetera, in India. The compressor alone, about 2,000 of them are sold in a year. The packages are much bigger. The compressor business could be above INR 500 crores. That is what I said. Ticket size could be anywhere from INR 3 lakhs to about INR 10, INR 12 lakhs. How premium would be the competitor's price? The European guys would be- I cannot really give you a business strategy in terms of how we want to price it because it is still WIP. But definitely we will price it to start with at least much more competitively compared to imports. Okay. Is that margin accretive from day 1 business? We explained that whenever we launch a new product, initially the margins would not be to what we would like it to be. But on an average, as a business modeling, we will get it to the range between 18%-20%. Okay, sir. Thank you. Thank you. The next question is from the line of Eshwar Arumugam from iThought PMS. Please go ahead. Hi, sir. Am I audible? Please go ahead. Okay, sir. Most of the questions I had have been answered. One of the questions I have is, in CNG station installations, the commentary in the last few quarters from us has been that the mother station installations have been not as much as daughter stations. But this quarter, since we are saying that it is 50/50, is there any change in how CGDs are approaching station installations? Are they seeing lesser lifetime costs with mother station installations or something like that? No. I think I should explain this better now. The number of mother stations being allotted or installed is significantly lower than the daughter stations. The booster, as we call the daughter station, the Calana in our brand, is a very small part of our business. But for the general market, we do not participate in all the booster activities. We take a few, we do not take a lot. We only concentrate more on taking the mother station. So our sale could be around 50/50, but that is not an indication of what is actually being allotted or installed by the oil and gas marketing companies. They would sell maybe 80% would be boosters and only about 20% could be the mother stations. Understood. Sir, do you see them moving more towards mother stations? Once the daughter station gets completed, will they be converted into mother stations? Maybe 3, 4 years down the line? I can give you the reality, I can give you my wish. The reality is, I don't think it's going to happen for quite some time, because all of them have a geographic area coverage mandate given, and they would all find a shortcut of simply putting daughter stations to comply with the coverage. My wish is always that since it's a severely suboptimal solution, it doesn't make money for us, it doesn't make money for the oil companies, it doesn't make money for anybody. Eventually, the pipelines will come, and with that, the mother stations will come. That's my wish and prayer, but the reality obviously is not there yet. Understood. Another question I had is, one of our domestic competitors from Tamil Nadu, they have also launched a variant to compete against the Chinese imports, like we've launched Aria. Have you evaluated that product, and how does that product compare with ours? What is our right to win in this particular segment? In the Chinese, if you want to go after the 30,000 odd compressors that come from China, the buyer actually is a guy who looks at the ticket price. It has to be the lowest priced, and that's what he looks at when he buys it. But having bought it, he then expects that it should be as good as any of the other good compressors that the brand builds. Be it my colleagues from South or us at Kirloskar. There is always this expectation differentiation that will come up. At the time of buying, it has to be competitive against the Chinese. At the time of usage and service, they expect it to be another Kirloskar compressor. This is the challenge that we are facing. That's why I said we had to relaunch this with a better understanding of the expectation as well as the pricing. This is a challenge that all of us will face. Understood. Thank you for taking my questions. Thank you, Eshwar Arumugam. Thank you. The next question is from the line of Devesh Kasliwal from Antique Stock Broking. Please go ahead. Yes, thank you, sir. Just wanted to ask on the total addressable market currently after the past two years and the launch of all the three new variants of products that came through. Obviously for the gas packages, it will be almost the same, but for air and refrigeration, how much of the addressable market has increased and what is the current size for us? It's a bit of a difficult question. I'll have to answer it in multiple guesses. The air compressor business in India alone is anywhere between INR 5,000 crore to INR 7,000 crore, at least. That's the air compressor part. The refrigeration compressor, compression systems combined, if I include only industrial and commercial, could be anywhere up to INR 4,000 crore, INR 4,000 to INR 5,000 crore. I've left out the comfort. In the gas compressor compression system, here, nobody buys compressors alone. You have to buy the whole system. That is a business. It could be anywhere, could be a barrier because it's usually driven by Capex. Could be anywhere between INR 3,000 to INR 5,000 crore. Okay, got it, sir. This includes the AMCs. This includes the upkeep and service, because in the gas stations India has approximately about 8,000 CNG stations, could be mother, daughter stations. All of them, almost all of them run on what is called as an operating and maintenance contract. Mm-hmm. Okay. That includes the certain service. Okay, sir. Got it, sir. Thank you so much. We are in a fairly good industry. We are in an industry which has got a lot of headroom for Indian companies to invest and grow. Sir, the incremental part, compared to 2 years back with Khione, Aria, Tezcatlipoca, as well as the new variant that you have launched right now. We continue to, like I keep saying, as we file about 40 odd patents every year, part of it is process, part of it is newer products and designs. So you will have more and more launches coming in. It is not that it is going to end with these four or five. There are a lot more coming in. The addressable market is about this, and we will have to address most of it, which are currently being met by imports, by manufacture in India. Okay, sir. I will frame it in a different way. So what is the targeted rate at which our addressable market is growing with the launch of new equipment? That is a little easy one. So we will target to grow 20% CAGR for quite some time, because that is the headroom that we are creating with these new launches every year. Okay, 20%. Okay. Got it, sir. Thank you so much for this clarity here. Thank you. Thank you. The next question is from the line of Manish Goyal from Thinqwise Wealth Managers LLP. Please go ahead. Yeah. Thank you, sir. Sir, I would just like to continue from the previous participation. So like in refrigeration segment, you mentioned the market size is INR 4,000-INR 5,000 crores. So with launch of Tyche compressors and moving to compression package, and now launching Tyche 3 compressors, and with acquisition of Systems and Components India Private Limited. So would it be like we will be able to address the large part of the market? Or still there are product gaps which we need to fill up? If you can give us that perspective, number one. And number two, now with so much of focus on refrigeration, can it become the largest revenue contributor in probably the next couple of years? That was the first question. I will answer the last question first. We gave a split between air, refrigeration, and gas for the last year and a half of 20, 40. That means we did scale up our refrigeration and scale down our gas. That is what we are saying for this year as well. This may change again. You see, like I keep saying, I believe gas has bottomed out, so if you start suddenly seeing more gas getting organized, then again, the gas will go back to 45 and refrigeration will become maybe 35 at that stage. This will be dynamic, so I would leave it broadly there. I will not change it. As far as what part of it we will address with these compressors, this is just one small part. There are several more compressors required. Even in the semi-hermetic, we will have to come with a lot many versions. We will have the scroll, we will have the screw, we will have the centrifugal. There is a lot more work to do on addressing multiple niches. Suppose we have to have a compressor for the reefers or the refrigerated trucks, that is another model that we have to make. It is not that you have one product and it will address everything. There is a continuous requirement to keep coming up with newer versions, newer products to address all the market. That is what company is working on. Okay. Sir, can we also address opportunity for defense ships, as we have seen a lot of ordering has happened in recent past, and in few years back, we have supplied some refrigeration- I will address this. We are supplying refrigeration, which we call it as HVAC in the case of defense. Heating, ventilating, and air conditioning systems. We will not get into details of what all is there in this, because there is a certain level of secrecy. They are not just refrigeration system. They are involved in this. We are supplying for the Navy. We also have some systems that it is not refrigeration, but it is more on the air side for the Air Force and Army. I will leave it at that. I do not want to get too much into detail, but the whole defense-related business is very important and small for us. Right, sir. On the backward integration, like at Nashik, we have probably set up forging plant now, recently castings, and we have also been doing fabrication and now launch motors. How do you see, like in next couple of years, how much can it probably meet the internal requirement and probably what kind of cost saving we can see? Okay. I will explain it in two parts. First, a small correction, the motor plant is not in Nashik, that is in Saswad. Now what are we doing in terms of backward integration on manufacturing? The first phase of manufacturing has been always to set up unique manufacturing capabilities. These are not very large capacities. Capabilities that will allow us to produce competitive and unique products for our requirement. For example, in a casting, we have been making castings within KPCL as well as the group for more than 40 years. But the lost foam casting specifically for machine tools is a unique thing that we have set up. So it is a smaller plant to start with, prove the concept, and scale up to meet our requirement, and eventually also to supply our competitors and others. That is the way we go. So all our investments of new capability creating in terms of backward integrations are to start with, for our requirement, to improve our cost competitiveness, offer something unique to our customer, and eventually try and scale it up and make it unique for our competitors as well, offer it to everybody. Okay. Thank you. Thank you. Ladies and gentlemen, we will take this as the last question for today. I would now like to hand the conference over to the management for closing comments. Yeah. Let me thank all of you who participated. I know, like I said in the beginning, that this is not a quarter that was in line with our expectation. Having said it, I must also say that in terms of the effort and work that is going on, it still continues to give us the confidence that we will try and get to as near the number as we have started the year with. Going forward, things can only get better. We are not seeing any structural change or anything that is happening that will impact us in any serious manner, either for the year or for the long term. With that reassurance, I would like to say, hope to see you all again next quarter with better numbers and smiling faces. Thank you all for participating. Thank you.