Ladies and gentlemen, good day and welcome to CG Power Q2 FY 2026 earnings conference call hosted by IIFL Capital Services Ltd. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. Now I hand the call over to Ms. Renu Baid.
Thank you. Very good afternoon, everyone. On behalf of IIFL Capital, I welcome the management of CG Power to discuss the Q2 earnings conference call with us. We have the senior leadership team with us, represented by Mr. Amar Kaul, Managing Director, Mr. Susheel Todi, Chief Financial Officer, Mr. Marais Nel, E V P, Drives and Automation and International Motors Business, Mr. Gaurav Makhija, Vice President, Switchgears and EPD Business, Mr. Ajay Jain, Vice President, Transformer Business, Mr. Chidambaram Balakrishnan, Vice President, Railway Business, Mr. Jatinder Kaul, EV P, Motors Business, and Mr. Sriram Rangarajan, EVP , Head Consumer Products Business. I would now like to hand over the call to Mr. Amar Kaul for his opening comments. Thereafter, we can start with Q&A. Thank you and over to you, sir.
Thank you, Renu and team. Good afternoon, everybody, and welcome to the CG earnings call. Let me start with the summary of results. We have delivered a strong performance for the quarter and half year ended September 2025, underscoring sustained high double-digit growth and the early impact of strategic transformation initiative and practicing discipline execution excellence. This is another quarter-end H1 performance with all-time high standalone revenue as well as profit before tax, after accounting for exceptional items. Further, we have improved our PBT margins by almost 90 basis points sequentially and 230 basis points year over year. This demonstrates our continued efforts and focus on improving our margins over the last couple of quarters.
Our Q2 sales grew at 17% year over year, order intake grew by 32% year over year, and profit after tax improved to 38% year over year, making it one of the strongest quarter performances in recent times with a positive leverage. Further, orders remain robust with the backlog strengthening at INR 13,568 crores, underpinning the multi-quarter visibility. As I go deeper into Q2 standalone performance, the sales for the quarter were at INR 2,649 crores, 17% year over year. Profit after tax was a growth of 38% at INR 307 crores versus INR 223 crores in Q2 last year. Return on capital employed for the quarter was 34%, and order intake for the quarter was INR 4,210 crores, which is about 32% growth year over year. Unexecuted order backlog as of 30 September 2025 was INR 13,568 crores.
As I go deeper into the segment-wise performance, let's start with industrials. The aggregate sale was INR 1,395 crores, which was -2% year over year. This was primarily driven by few project deferments in the railway segment, and profit after tax also was muted due to this, which was at 9.7% of sales and INR 35 crores versus INR 166 crores. Margin change due to price realization challenges was in the railway business as well as the order deferment leading to lower operating leverage and some impact due to the rise in the commodity prices, which could not be fully passed on. Despite this, pricing discipline, cost optimization initiatives, operational productivity gains helped us partly cushion this impact, and focus remained on high margin recovery through cost optimization initiatives, pricing, and improving the product mix.
Order intake for the quarter was INR 1,567 crores, which if I offset it with one large order which we had in Q2 of last year, the order actually intake was about 13% up year over year. If you look at from apple to apple here, it was minus 10%. Moving to the power systems, the performance continues to be pretty strong with the continued margin expansion focus and the backdrop of robust demand and disciplined execution. Sales was INR 1,254 crores with a sharp rise of 48% year over year, supported by steady execution rhythm. The profit PBIT was at INR 260 crores versus INR 149 crores last year, which is 310 basis points margin expansion, primarily driven by better price realization, resilient demand trends, as well as the improved operating leverage.
Order intake for the quarter was INR 2,643 crores, which is 81% growth year over year, and unexecuted backlog towards the close of quarter was INR 10,474 crores, which is 104% higher year over year. With this, we conclude the deep dive into the standalone performance, and I will now move to the consolidated numbers. Aggregate sales for the quarter was INR 2,923 crores at a growth of 21% year over year. Profit after tax was 30% up at INR 284 crores versus INR 220 crores last year, same quarter. If you see the margin improvement, which was driven primarily by the strong power performance, it was partially offset by the strategic investment in increasing our talent pool of the senior personnel and technology people in CG Semi as well as in Axiro, which is our semiconductor business. Return on capital employed for the quarter was at 31%.
Order intake for the quarter was 45%, which is at INR 4,772 crores, and unexecuted order backlog as of 30 September was INR 14,953 crores, which is 88% up. Some of the notable events for the quarter, CG Semiconductor, a subsidiary of CG, opened a new factory in Ahmedabad, which is called G1. This marks the first step into the semiconductor capability and supporting the company's goal of becoming self-reliant while also serving the global markets. The G1 facility will operate at a peak capacity of half a million units per day. Capacity and G2, which is the main plant, which is a large plant just three kilometers away from the current facility, under construction, expected to be closed by the end of next year or early 2027. Once operational, G2 will scale up to the capacity of about 14.5 million chips a day.
Both put together, the capacity will be almost 15 million chips a day. In terms of employment generation, both these facilities will be employing about 5,000 direct and indirect jobs in the coming years. As you know, CG Semi is eligible for capital assessment assistance from the scheme under the setting of outsourced semiconductor assembly and testing by India Semiconductor Mission, ISM, as well as MATI. We got that approval on March 8, 2024. The approval covers a five-year period for financial year 2024-2025 to 2028-2029. Total project cost of INR 7,584 crores. The central government assistance of INR 3,501 crores and the additional state Gujarat government support, which is equal to 40% of the central government assistance, is about INR 1,400 crores. The fiscal supply agreement was signed on January 17, 2025, and the trust and retention account agreement was signed on September 15, 2025.
The last one that I have is that the board of directors today approved another greenfield expansion for switchgear business for an investment of INR 748 crores net of taxes. This expansion is proposed to constrict the expected increase in the demand of medium voltage and EHV circuit breakers, instrument transformer, GIS in the domestic market, as well as will cater to the export market. With this, I will conclude my opening remarks. Unaudited financial statements with detailed notes are available as part of the stock exchange filings and are also available on our company website. Thank you for listening in, and over to you, Renu, for Q&A.
Thank you. 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 their headsets while asking a question. In order to ensure the management is able to address questions from all the participants in the conference, please limit yourselves to two questions per participant. Should you need any follow-up question, you may rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ankur Sharma from HDFC Life. Please go ahead.
Yeah. Hi. Good afternoon. Thanks for your time, as always. I had two questions on the industrial segment. First, you know, within that, on the LT Motors side, and I know you've been highlighting that the market has been a little subdued in the last few quarters. If you could just tell us, you know, again, how was Q2 and what are the trends we're seeing in Q3? Are we seeing any signs of growth coming back? If not, what steps are we taking to kind of improve market share there? I understand we already have a 40% kind of market share there. The first question is on the LT Motors side. Second, on the railways, you know, where you highlighted some project deferments this quarter, if you could talk about that, you know, is that kind of behind us?
Do we expect, you know, that revenue kind of start flowing in from Q3 onwards? Yeah, those are my questions. Thanks.
Yeah, thanks, Ankur, for the great question. First one on the LT Motors side. Actually, if you tell me, I'm pretty happy with the progress made by the team there. We are doing much better than the market. If you look at the market, EMA data, the market was a little better than what it was previous quarter. From negative zone, it has come to kind of flat. In terms of, as we say, you know, we don't give the exact numbers, but I can tell you that our order input was in double digit, which itself is a great beginning point. Even our sales was single digit, but on the positive side. Even the profitability is also improving. The team is doing a good job in terms of our CGX execution excellence, working on these areas that we can control on. Pretty positive on how it is moving forward.
Coming to your second question of railways, I think there was a delay in terms of shipments, which actually hampered for almost a month. It started around the middle of last month. Whatever we could ship out in the 15 days' time is what came up. Everything obviously could not be shipped out in time. That's what it is. It's only a shift between the two quarters. Last but not the least, if you see the pressure was also a bit off from the commodity inflation. Obviously, everything didn't pass on to the customer. Also, as you know, PVC is not in the same quarter. You know, it goes in a couple of quarters here and there.
Got it. Great. Okay, let's move to it. Thank you.
Thank you.
Thank you. The next question is from the line of Nitin Arora from Axis Mutual Fund.
Thank you, team.
Please go ahead.
Thank you, team, for the opportunity. Amar, sir, first question is on the semiconductor. You've been articulating that, and certainly, we have seen whosoever has started a semiconductor, the Indian company, you are the one which is scaling every quarter very fast. Can you give us a little roadmap to us that, you know, given that you've already done INR 230, 235 crores kind of a semiconductor revenue, how we should build in, you know, this year or next two years? I don't want the exact number, but how the scale will go up. Obviously, you are apportioning a lot of cost, which is also hurting the overall EBITDA of the company as well. How one should look at that, you know, trajectory improving, if you can throw some light on that?
Second, apart from the new CapEx, which you have highlighted in this quarter, going ahead with that CapEx, can you also throw some light on how the CapEx and how's the timeline of the current capacity, which was about to get commissioned? Are we on track on that? In terms of newer inquiries and newer order inflows, if you can give some color, because there's a lot of disbelief coming, especially in the investors, that there is going to be a slowdown. Government will give a lot of approvals to Chinese players to come and do transformers in India. These are some of the things which are going on. If you can throw some light on that, that would be helpful. Thank you, Amar, sir.
Sure. I think good questions. Coming to the semiconductor piece of it first, yes, it's a long game that we are in. I'm pretty excited to be in this industry. To your specific question on the short term, if your question is specific to what revenue will we generate in the current year, from Axiro, which is our subsidiary, I think it should do approximately $50 million. That is approximately about INR 450 crores, which is very much on track with what we had projected for. CG Semi, as you know, is a long lead item, so it will take some bit of time. Yes, exciting times sitting in that area. If I go back to your question on the CapEx thing that we have currently, which we have been working on, I think all the projects are on track for our transformer division.
We had a plan to expand from 15,000 MVA to 40,000 MVA. That has already been done on 1st of October. Our capacity has enhanced. Even got the approval from Power Grid Corporation, I think up to 35,000. The next phase will come in next month to take it further jacket up. All those investments are reaping the benefits that's coming in. Regarding this new facility, as I said, this will come for the switchgear expansion, which we approved today in the board. Of course, things today after board's approval, we'll start working on it, and we'll get there.
The inquiry pipeline, sir, in this business, do you think government can allow the Chinese players into the, you know, in the transformer? That's what, you know, going round and round these news is.
I think it's a global market. Whether Chinese players come in or not, it's a global market. What we have to be prepared for is becoming efficient and become cost-competitive. I think that's what everybody needs to work on, and that's what our focus is. I'll not get into what the government will do. Whether Chinese will come in or not, important is how do we become operationally efficient? Even if Chinese or anybody comes into the country, we are as good as anybody else or better than them. I think that's what our focus is on.
How is the inquiry pipeline?
Sorry. Coming back to your other question on the inquiry pipeline, I think it's very, very strong. In fact, today, if I look at my inquiry pipeline as of end of last quarter, the pipeline is almost 85% of last year up.
Great to hear that, sir. All the best, team, for the future.
Thank you.
Thank you. The next question is from the line of Umesh Raut from Nomura. Please go ahead.
Yeah. Hi, team. Congratulations for the strong set of ordering flows. Thank you for this opportunity. My first question is pertaining to railway business, where we are consistently facing few realization challenges. I wanted to have some idea about what is happening in the railway business in terms of competition, whether that is impacting our profitability, or is it pertaining to legacy contracts? That's where we are losing out on some profitability because of raw material volatility. Hello? Hello. Am I audible?
Hello? Yeah, Mr. Umesh Raut?
Yeah, am I audible?
Yeah, you're audible. Just a moment.
Sure.
The management line was dropped. The management line is reconnecting. Kindly wait. Okay, the management line is reconnected. Sir, please go ahead.
Hello. Can I repeat my question? Hello?
Yeah, yeah, we can hear you. Can you? Is that Umesh?
Yeah, I'm here.
Yeah, Umesh. Go ahead.
My first question is on the railway business side, where we have consistently now faced this price realization challenge. I just want to understand whether this is because of execution of legacy projects, which we have taken a few years back, or is it because of competition that is impacting on our margins?
Yeah. I think the railway business, yes, of course, the challenges are there. As you know, this is a typical tendering business. What you take, these orders are at very thin margins. The PVC clause that we have with the railways actually happens on average of the three different. There's a formula for that. It takes at least one or two quarters till it comes back. You may not have that impact in the full quarter. Second is, unlike other businesses where if there's a commodity inflation, we can quickly and cash adjust our pricing and, you know, find a way to mitigate that risk. Whereas this business, it takes a bit of more time. I think it's more of a patience game, but we are very, very sure about coming out of this situation as soon as possible.
Got it. My second question is on the export side. We have seen a lot of new hiring taking place at a senior level for international markets, at least in the media, since the last few months. I just wanted to understand what is your strategy on the export side to ramp up the industrial product offering and what kind of order pipeline you are anticipating in the exports, especially what are your plans in the U.S. transportation infrastructure market?
When you say you're seeing the news for hiring of senior personnel, do you mean to say it's for CG or somebody else?
CG, Emerson, and even on some of these newer industrial product offerings on the drives side. For the U.S. railway market as well, we have done one collaboration, and I think you are working out with a new marketing team as well in the various other geographies.
Right. No, I think that because the exports, of course, is one of the key pillars for us, and we are gradually taking on it. You know, it's like foot on the gas and foot on the brake kind of a thing. On one side, as I have been talking about in the last few quarters, we are upgrading our manufacturing capabilities to make sure the standards are at par with the global standards. On the other side, we are expanding in different markets in continuation to what I had spoken before, from Southeast Asia to a bit in Europe, in Africa, to Morocco, and a bit in the U.S. Those expansions are happening because that's where we are developing the channel. It's a balance of business development and also the capacity expansion and upgradation to make sure we are at par with those markets. Yes, that's a journey.
It'll keep happening in that direction.
Okay. Okay. My last question is on the inorganic opportunities, as you have raised funds in the recent quarter. I just wanted to understand where you are exploring these opportunities.
Yeah. I think before I answer your second question, in continuation to the previous question, the initial results that we are seeing for our H1, our exports in absolute terms versus H1 of last year, we are almost 20%- 25% up. It's showing some bit of results on the pipeline, but yes, that's not a kind of, you know, it'll happen on its own. We have to keep working pretty hard on that. Coming back to your second question in terms of capital allocation, yes, as I said, one is our own capacity expansion, as you looked at approximately INR 750 crores that we have taken the board approval for today, is for our internal, you know, managing the day-to-day business. The second is also the potential M&As that will keep happening.
Our strategy team is always on the hook to keep looking at the candidates for potential. It'll be across CG as well as semiconductor. That's what we are actively looking at.
Philip Gora meeting this quarter. He's the person I'm going to meet next.
Thank you. The next question is from the line of Saif Sohrab Gujar from ICICI Prudential AMC. Please go ahead.
Yeah. Thanks for the opportunity. First question is on the coverage part. G.G. Tronics had an order for around INR 500 crores-INR 600 crores from CLW on November 24, right? On that order, where are we in terms of the execution versus the original timeline? Just to that, have we received any other follow-on orders of smaller quantum?
Yeah. On coverage, I think we are almost on track. I would say there's a delay of about a month, month and a half. Hopefully, I think there are only two last approvals pending. Hopefully, by the end of December, we should be in a position to get all this cleared out and start the shipments. Yes, after that, we have received a couple of more orders, INR 150 crores, and I don't have the exact numbers. That's for both the station coverage is also what we received the orders for.
Okay. Thanks. Second, there's a bookkeeping part. In the balance sheet, the other intangible assets have increased from INR 263 crores to INR 427 crores. Any specific thing for that? What has caused this?
We recently did an NGO acquisition. In those acquisitions, this business actually is relating to more in the design business. What we got is more about IP and other things. That's got accounted during that acquisition site.
Sure. Okay, and all the best.
Thank you. The next question is from the line of Atul Tiwari from JP Morgan. Please go ahead.
Yeah, thanks a lot, and congrats on a good set of numbers. On your transformer business, this capacity expansion from 15,000 MVA to 40,000 MVA that was achieved on 1st of October, is it fair to assume that this incremental 25,000 MVA as of now is 100% unutilized, and it will be utilized over a period of time?
No, not really. I think if you look at the order backlog that we have, you don't wait for this capacity to get ready. You're taking the orders because today, if you see the lead time for these power transformers, customers are willing to give the orders up to 24 months from now. That's the way capacities are getting booked. In fact, the new plant that we are setting up, we have started actually looking at booking orders for that as well. Not in a big way, but gradually that's happening. It's a demand and supply kind of situation balance that we are doing. Coming to your question from 15,000 MVA to 40,000 MVA, I would say almost most of it is being taken care of.
Okay. Sir, I mean, right from, say, for example, this month, we can see an annualized output of 40,000 MVA because you have already orders in hand. Is that the?
That will be this month, or what did you say?
I mean, because the plant is already on 1st of October, right? We are in the 1st.
When I say from 1st October onwards, it will be at proration capacity. Yes, it will be at 40,000 MVA prorated for the year.
Prorated for the year. Yeah, yeah, yeah. For the next phase of expansion, I think I believe it's from 40,000 MVA to 65,000 MVA, right? When does that come online?
This is 40,000 MVA, and the new plant which is coming up is 45,000 MVA.
Okay. By when will it be online and functioning?
As per the plan, that is 2027, 2028, but the way we are executing, I think we'll be much ahead of the target. The moment we have better visibility, we will let you guys know.
Okay, thank you. Thank you.
Thank you.
Thank you. The next question is from the line of Sumit Kishore from Axis Capital. Please go ahead.
Thanks for the opportunity. My questions, the first one is you mentioned that the inquiry pipeline is quite strong, up 85%. Specifically for power systems, we are seeing that the award of interstate PVC project to transmission utilities in the first half of FY 2026 has been slower than the previous year so far. Do you think that this poses any risk of slowdown in award of power transformer, HV switchgear contracts for electrical equipment suppliers in the coming quarters relative to the past fiscal? The second question is again on exports, where exports were about 8% of consolidated sales in FY 2025. You mentioned that the growth has been 20%, 25%. Given your consolidated is also 21%, I'm assuming export percentage in sales has not changed much.
Could you also speak about the mix of exports presently, broadly color on how much is in industrial systems and power systems, and which areas do you expect to scale up in exports over the next two to three years?
Yeah, sure. Good question. What I'll do is let Ajay, you're on the call. Why don't you take that question for transformer? After that, Gaurav, you can answer for switchgears.
Yes, sir. Regarding the inquiry pipeline, the pipeline is strong. The decisions have been slow. Yes, you are right. That is because a lot of projects now are getting awarded or getting allocated to these states. There, the decision-making is slow. As far as we are concerned, we don't see any slowdown in the order booking because PSUs are still placing orders at a very fast pace. Power Grid and then the power sector, this power generation sector is also opening up. We don't foresee as such any slowdown in this area.
Okay, that is because the lead time is already so high. If there is capacity, it will get booked.
Yeah, that is one thing. Second is transmission projects. Yes, if there is a slowdown in the transmission projects, the power generation projects are picking up at a very fast pace in the thermal space now.
Okay. Thank you. Thank you, Ajay. Thank you for that question. I think very similar to what Ajay mentioned, largely switchgears follow what the transformer gets in the loop there. I think very similar. I think we have seen a consistent higher demand for switchgears. I think your question was both for EHV, EHV, and also followed by the medium voltage business for us as well. There has not been any sort of a shift towards a lower demand for this business.
Okay. My second question was on exports.
Exports, we have been studying till now, but with the increased capacity, we will be focusing more on exports for this business sustainability thing. We are participating in more and more projects and tying up with the state utilities abroad. Exports will see a bigger push and a more % share in the order input and revenues in the coming years.
Is our understanding right that in your overall exports, the share of industrial systems will be higher for motors and drives versus what is it in its overall mix for power systems?
Sorry, can you repeat your question?
In exports, typically, the share of industrial systems exports for motors, drives, etc., will be higher as compared to what exports is for power systems.
I think, Sumit, you know it pretty well. You know, we don't give the split by details of each business, and the numbers that you talked about are higher. We are positive on quarter over quarter for most of the businesses.
Got it. Thank you, and wish you all the best.
Thank you.
Thank you.
Thank you. The next question is from the line of Bhoomika Nair from DAM Capital. Please go ahead.
Yeah. Good evening, sir. Thank you for the opportunity. Just wanted to spend some time on the IS segment. We've seen after a very long time a decline in revenues, which you mentioned has got to do with the deferment in some railway orders. Would it be possible to kind of call out that amount which has gotten deferred to the next quarter? If you can also just talk about how the demand scenario is between HT and LT motors. We are also taking a price hike out here, about 5% as you mentioned in the previous quarter. How is that kind of playing out? If you can just give some qualitative comments on motor and motor demand split between LT and HT, particularly post the price hike.
Thanks, Bhoomika. On the railway side, the question is specific to, yeah. I think specifics we are not giving. As I said, you know, approximately 15th of September onwards, we started our shipments, which was deferred for almost more than a month or so. We covered some bit of it, but balance will come into this quarter. I think that information should be good to get a feel of it, what it looked like. Coming back to your motors, on the motor side, the demand, I think the demand is fairly strong. I think in terms of inquiry pipeline, especially on the HT motors, which I'm pretty positive about. JK, why don't you talk about it on the motors demand?
Thanks, Amar. Thank you. Thank you for the opportunity. Bhoomika, a very valid question. The rough estimate, the first question you asked is what is the split between the LT and the HT. LT is far more higher, far more higher than HT. There are a lot of big projects that are coming in the HT. If I have to give you a rough estimate, it will be around 80/20 types of ratio between the LT and the HT piece of business. The second part of the question, what you asked, is that the price increase that was implemented earlier there in the month of July is coming up well. It's being received well in the market, and we have got good results out of it. We have been able to, it has compensated our copper and steel prices.
I also want to call out that many of our other friends also have increased their prices. This is a common factor that is there in the industry.
Okay. Thanks. This basically means that the margin should kind of bounce back into the third quarter once the revenues normalize and the full benefit of the price hikes takes place.
I will not be forecasting what it will be for the next, as you know, we don't give the guidance on that. As I mentioned, I'm pretty comfortable with the motor side of the business, the way it is bouncing back. Yes, we have to see the good days ahead.
Sure. Lastly, if I could also just ask about the progress on the EV motors category, how is that progressing? Where are we on that?
I think the progress has been still slow, but I'm looking forward to some exciting days ahead. Just pause for a few, a couple of days more, and I think we should come back with some more information.
Sure, sir. Okay, thanks for all the best.
Thank you. The next question is from the line of Ravi Swaminathan from Avendus Spark. Please go ahead.
Hi, sir. Thanks for taking my question and congrats on a good set of numbers. My questions are related to the power segment, trying to be slightly more granular. Can you give a kind of a broad overview as to individual subcategories, how they have grown during this quarter or half year? Like power transformers, distribution transformers, switchgears, have they grown at the same pace, or are there differences in growth? Similarly, in terms of either revenue or order and order book breakup, how the order book is across categories like renewables, coal-based thermal, industrial applications, and even breakup like power grid, ACB, private export, any sense on that?
See, of course, as you know, that we don't give the breakup of each business and subsegment details. The orders that we have received, it's cutting across most of the sectors, you know, whether it's power, power within power. There are a couple of orders that I remember are from renewables as well. It is for the data center. It cuts across from transmission, T&D. It's cutting across most of the segments that you can think of. It's not a one particular segment that I would say we are into.
Understood, sir. In terms of growth across power transformers, distribution transformers, and switchgears, is there any big difference between growth, or is it similar growth in all these categories?
The only thing I can share right now is power is leading because as we get into mega distribution, 400 and 765 kV. Those are the more and more inquiries on that. Others are also catching up very fast. Good news is everybody is into high double digits.
Understood, sir. In terms of momentum of orders, are we seeing more orders from the generation side or transmission side in the power side?
It's across T&D.
Understood. Final question with respect to capacity utilization of the switchgear facility. You had mentioned that the power transformer facility is running at almost full capacity. What is the number for the switchgear capacity?
Switchgears is also at about 85%- 88% right now. The expansion that we had undertaken last couple of quarters back is also getting executed in parallel. I would say as we progress in the next few quarters, we'll come down to probably 75%- 80% and again bounce back to 80%- 85%. That's where we are operating at.
Understood, sir. Thanks a lot.
Thank you.
Thank you. The next question is from Harshit Patel from Equirus Securities. Please go ahead.
Thank you very much for the opportunity, sir. In the power systems business, we have outgrown many of our competitors in the last two, two and a half years. What are the factors which have enabled us to gain market share? Is it more about us being ready with the further capacity?
Sorry to interrupt, sir, but your voice is muffled.
Hello, is it audible?
No.
Hello, am I audible?
Yeah.
Yeah, sure. My first question is on the power systems business. We have outgrown most of our competitors in the past two, two and a half years. What factors have enabled the market share gains for us? Is it more about being ready with the further capacities when the competitors were not ready?
Harshit, I wish I had one answer for you. It's a combination of many things. What is important is our execution excellence, which is CG Edge. You can look at our website. I think that's what we are practicing every day, every in. Keep compressing the cycle time, go faster, double the speed of what anybody else can do. I think that's what the team, both Ajay and Gaurav from the power sector, are practicing day in and day out, and that's what they are executing. It's a combination of many things. If it was so simple, then everybody would have done it.
Understood, sir. Secondly, could you throw some light on our association with Flender for expanding our U.S. business? If you can explain the nature of our agreement, whether this is more of a contract manufacturing agreement for them or something else, that will be very helpful.
Yeah. I think this agreement is more for because in the U.S., we see this big opportunity. If you had to get into the local market in the U.S., most of these OEMs, they first ask for what happens tomorrow if I have a problem in my motor. You have to have somebody ready now. If there's an issue or repair is required, somebody is there to service it at the drop of a hat. If you start organically today to set it up, I think it'll take us a couple of years till we have that infrastructure. The first step into the game is to have a partner who is reliable and can do a lot of it. They do, you know, we have seen their facilities. They are pretty equipped across North America to do that. That's the kind of association that we have.
It'll be kind of joint. It's a win-win situation for both of us. They get the business in terms of repair and remanufacturing facility, and also, we get even warehouses when we send the motors from here.
That's good, sir. Thank you very much for answering my questions. All the very best.
You're welcome. Thank you.
Thank you. The next question is from the line of Renu Baid Pugalia from IIFL Capital . Please go ahead.
Yeah. Thanks. Team, I have just one question related to power systems. While the cycle has been doing pretty well in terms of profitability and capacity expansion, strategically, from the perspective of building capabilities and expanding portfolio, can you highlight what are our thoughts in terms of broad basing a product mix beyond switchgears and transformers into new products segment, which could be next generation beyond the current cycle? Thank you.
Very good question, Renu. If you, I think, of course, as we go deeper into even, let me touch a bit on switchgears and we'll let Gaurav talk about it. It'll be a combination of existing product portfolio that I talked about and also a bit of power electronics. It'll be a combination. Gaurav, why don't you touch on that?
Yeah. I think thank you for that question there. I think it's Amar, right? He mentioned it's a mix of the existing portfolio. Today, beyond only switchgears and circuit breakers, we are also into the larger 765 kV bushings, both OIP as well as RIP. That's something that CG is the homegrown solution that we have produced. Largest new product towards the existing portfolio that we have. Amar touched upon power electronics. Secondly, also about the green solutions. Moving from SF6 to SF6 free is some of the critical work that the teams have been doing across the factories of Nashik as well as Aurangabad from an innovation standpoint. Yes, I think there's a clear focus along with a strong pipeline of new product developments that's getting discussed across switchgear for both the units now.
Where are we with respect to the GIS portfolio on the technology side? Also, does the company have any plans to get into power, as in our reliability solutions like STATCOM or so?
Amar, you want me to take that question?
Yeah. Go ahead. Take it, Gaurav.
Okay. I think the first point that you did raise about the technology, yes, on the GIS piece, we should be proudly coming out with a complete make-in-India solution for about 400 kV GIS in the next fiscal year. I think that's a very proud moment for CG to have a full homegrown solution coming out of the Nasik factory there. Yes, we should be playing very strongly in the GIS segment in the future growth years as well. Coming on the STATCOM, I think the way Amar mentioned, there is always an eye on looking at both organic as well as inorganic conversations around technology acquisitions there. Yes, there is a thought as well as the right actions around that technology piece as well.
Thanks, Makh, and best wishes, team. Thank you.
Thank you. The next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead.
Hi. Am I audible?
Yes.
Yeah. First of all, thank you for the opportunity. My question is that as per CEA's data, India has missed their power transformer installations materially for the first half of this year. Does this pose as a risk for us as it will take longer for our order to convert from backlog to sales? Will it impact the growth rates in the future and the margins? My second question is that with our power transformation capacity coming online to 85 GVA in the coming years, what would be an expected mix of sales from global and local markets to maintain a healthy set of capacity utilization?
Ajay, can you take that?
Yeah, I can take that. For the increased added capacity, what we are planning in our new plant, we are planning to have around 35%- 40% of the revenues coming from exports. This is important for the business sustainability point of view also. From the current capacities also, as of now, the exports are around 10%. It will grow to around 20% in these because we cannot locate the domestic segments as of now.
Also, my first question on the execution delays from power transformer installations, how would it impact our conversion from backlog to sales?
As of now, all the developers, they are taking the supplies. Whether in case there are delays in their projects, even then they are supporting us by taking the deliveries and storing the transformers near to the locations because of the supply constraints. They know that if the project is delayed, if they are not taking the deliveries, then these transformers because of standard CS specifications can get diverted to other places. In the long run, I have a feeling with the kind of focus the government is having, the right of way and this land acquisition. Both things will catch up and there won't be any delays in the long run. Yes, because of one more reason is because of heavy rains also, there were some delays this year.
Understood. Thank you so much. All the best.
Thank you.
Thank you. The next question is from the line of Aditya Mongia from Kotak Securities. Please go ahead.
Good afternoon, everyone, and thank you for the opportunity. Congratulations on a very strong set of numbers. I have two questions. The first one is on the semiconductor piece. I wanted to get a sense from you, especially.
I think the voice is slipping, Renu.
Is this any better for you all?
Yeah, now we can hear you.
Great. The first question that I had was on the design business. The Axiro business will do about $50 million in revenues. How would you be thinking through this business from a three to five-year perspective, both from an exports perspective wherein revenues are coming in today, and obviously from a domestic perspective, how would Axiro aim to make a larger impact than right now? Hello?
Yes. Can you repeat the question?
Yeah. The question that I had was that while a lot has been spoken about the OSAT business, I just wanted to get a better sense of how the company is thinking through the design business, which is the CG Semiconductor business. From the current top line that is there of about $50 million, how would the scale-up happen both from an exports as well as a domestic perspective? Thank you.
Yeah, I think it's a good question. As you would appreciate, this is just the beginning of it. We didn't just buy this company to stay at that level. We have much larger plans. That's what keeps us awake at night in terms of strategy. Where do we go from here? More and more acquisition, complementing, hiring more people, more tech people to make sure it goes in the long way. Right now, it is for a radio frequency business, but we are also thinking of expanding into other technologies as well. A lot to come. Just be a bit patient to keep hearing from us on that.
Got that. The second question that I had, maybe the design part we can discuss later more. On this, just a bookkeeping question on the power systems business. Of the INR 10,000 crores backlog which is there, what would be the average execution period? Would it be closer to 1.5 years or two?
Total backlog that we, I think, even the last order that I would say will get executed after 24 months. It doesn't mean that we have to wait for 24 months. We can do it much before. Yes, customers are placing orders up to that duration.
Is that representative of the entire order book? Just trying to get a sense. Would INR 10,000 crores be executed like INR 5,000, INR 5,000 crores over the next two years or just trying to get a better sense?
That's what I said. One of the orders that I see is going up to 24 months. We are filling up in between as well as we are opening the capacity. Something will be 12 months, something will be 18 months, something will be 6 months, depending on if it's a distribution transformer, can go in 6 months. If it's a 765 kind of a transformer, will take 18 months. It'll be along the portfolio, it'll keep varying.
I'm glad that those are my questions, and all the very best to you.
Thank you.
Thank you so much. The next question is from the line of Priyesh from Mahindra Manulife Mutual Fund. Please go ahead.
Hi, sir. Good evening. Thank you so much for the opportunity and congratulations for a good set of numbers. Sir, just two questions on the semicon part related to what Aditya has asked. First, if I've heard correctly, we are expecting revenue of around $50 million in FY 2026 in the current fixed fiscal on Axiro. While if I recollect, it used to do around $56 million, $57 million. Is it that these businesses are taking time to scale up or we are waiting for CG Semi to actually come in to have a synergy between these two businesses?
I think what you have to appreciate is, I think if I remember the numbers, they're almost same level as last year, was about $55 million, $56 million. This year, if we are doing $50 million with the acquisition, getting the people up and running, getting the whole infrastructure done, and you are reaching that stage, I would say the team would have done a fantastic job.
Sure. The second question is, while we reported around INR 22 crores EBIT loss in the same segment, just if you can, please break it down between CG Semi loss and Axiro profits. Thanks.
Axiro is at a break-even level. They are not making any loss at this point of time.
Sure. Thank you so much, sir, for answering all those questions. Thank you.
Thank you so much. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Renu. Please go ahead, ma'am.
Sure. I just conveyed my thanks to everyone for participating in this call. I just wanted to check if management would like to make any closing comments.
No, thank you. Thanks for listening to us and enjoyed all the conversation and the relevant questions. Thank you. Stay tuned with us. Look forward together to grow and see the exciting times. Thank you so much. Cheers.
Thank you.
On behalf of IIFL Capital Services Ltd., that concludes this conference. Thank you for joining us, and you may disconnect your lines now.