Sir, good morning, everyone. On behalf of Asian Markets Securities, we welcome you all to the Q4 and FY2025 Earnings Conference Call of Elgi Equipments Limited. We have with us today Mr. Jairam Varadaraj, Managing Director, representing the company. I'll request Mr. Jairam to first take us through the overall finances for the quarter and for the year, and the business updates to be followed by Q&A session. Over to you, sir. Thank you.
Thank you very much, Kamlesh. Thank you, Asian Markets Securities, for hosting our Q4 call. It is always a pleasure for me to be with all of you, and thank you very much for taking the time to go through this presentation with me. As always, I will focus on the Q4 results and then give you a sense for how the business is and what the challenges are, some sort of view of how we look at the next year, and then we will have a Q&A session. Now, let me go through the next. This is starting with the reconciliation of EBITDA. Considering the current operating ratios and cost structures, considering that sales grew by almost 15%, our EBITDA should have been about INR 1,724 million. Against that, we did about INR 1,500 million.
The primary reason is increase in employee cost, and there was a significant increase in other expenses, some of which I will explain to you. Most of the increase in other expenses is one-time in nature. We took one is the increase in variable cost, which is not captured in our contribution, where contribution is only at a material cost level. Close to about 25% is the increase in the variable cost associated with the increase in volume. We cleaned up some of our books in India, in other parts of the world. We cleaned up some inventory, and we cleaned up some receivables, not so much as a loss, but as a prudent accounting thing. That is to the extent of about INR 80,000,000, we did that. This is not just for the quarters, for the whole year.
Going forward, we'll try and first of all, I don't expect it to continue this way. Second of all, we will do this on a quarterly basis so that there are no year-end shocks that we can see. These are one-time in nature that I don't see anything happening significantly. We have a CSR, which we do depending on a given year. Normal, as per law, it's 2% of PAT, but actually, we do 4% of PBT in a given year, depending on our project. Our project for educating very poor children has moved forward, and it is progressing well. As a consequence, we are increasing our contribution this year towards that. This is really the reason why the fourth quarter is not as it should have been. As far as the fundamental ratios of the business are concerned, they're pretty sound.
Moving forward, if you look at the revenue profile, except Southeast Asia, all the other regions have grown for us at varying levels. India has done very well for us. North America is coming back. Our industrials are very strong. Our medical business is very strong. Distribution operations, which was most hit by the issue with our ERP, has stabilized, and we look forward to a positive number there. Portables is more a market structural thing. For three years, there is a big growth, and since the last couple of years, there has been a significant, almost a 30-40% drop in the market, and we are feeling the effect of it. We expect this portable to remain subdued in the current year as well. Europe has finished quite strongly in Q4, but I'll come back and talk about Europe.
Australia is also coming back from significant challenges post-COVID and a few years after that. Middle East has done well for us, and Brazil has done well for us. Moving forward, if you look at our revenue highlight, we have grown 15% over the previous year in Q4 of last year compared to Q4 of this year. Overall, I think it's been good, and PBT growth has been also pretty strong considering the revenue growth. Our profitability ratios remain quite strong. The split between automotive and compressors remains pretty much the same. Automotive had a very strong year, but the compressor business also had a strong year, so the balance between the two remains.
There's been a slight shift between India versus the rest of the world as far as compressors are concerned for the quarter because India had a very strong fourth quarter, and the corresponding increase was not there in the other parts of the world. There is a 2-3% shift, but I don't see this as a permanent thing. It'll come back. This is our consolidated financials for Q4 as well as for the full year comparing it with the prior year. Overall, we have done well. Profitability could have been significantly higher, but for the one-time expenses that we have voluntarily claimed certain expenses just as a prudent accounting, the reported numbers are a little lower than what we would have otherwise liked it to be. Overall, a good story. Our net cash position also has been quite strong.
We're generating close to 97%-98% of our profit we are generating every quarter. We have put in very strong processes for receivables control that is beginning to show its impact. We are working on a very large project to bring in better controls over the inventory worldwide, and I expect to see good results coming out of it in the second and third quarter of this year. The cash position will continue to improve in the company. This is really what I wanted to say as far as the performance is concerned. Going forward, I think as a business, obviously, the tariff is something that everyone keeps talking about. We started off with 26%, which is a pretty challenging number to manage from a cost point of view. It's been reduced down temporarily to 10%.
We don't know where it'll finally land, but we have done some scenario. At 10%, we have done some cost calculations. Some of our cost reduction initiatives that we started almost two, three years ago are bearing fruit now, and that's going to help us. One of the biggest aspects of that cost reduction initiative is our motor plant. This financial year, close to 85-90% of our motors globally will be manufactured by us, and that's going to give us a significant advantage to be able to absorb the impact of the tariff without any compromise on profitability in the U.S. market. Obviously, it's going to help us with profitability in the other markets, but I'm not talking about that. When we analyze what could all be the possibilities where tariff could land, I think the best-case scenario would be 10%.
I think the way we are reading it is the U.S. government is not going to remove 10%, although for some countries, they seem to have done. Assuming that's our best case, 10%. If we look at import of compressors from the U.S. into India, that is currently about 16.5%. Assuming they are going to make it, in the worst case, reciprocal to that same percentage, in this range, we are pretty much okay with all the cost reduction initiatives. We can sustain our current pricing and our profitability. That's the good news. We are not too worried about the challenge because of tariffs from our pricing point of view. Now, the rolling global economic impact of tariffs and the impact on other economies are going to be significant depending upon where it finally settles down.
Europe was already fragile, and it was recovering after the Ukraine war and all those issues, and we were beginning to grow slowly. We have broken even last year. Now, there is going to be a challenge in Europe, and we do not know how it is going to be. So far, the indications continue to be positive, but we need to anticipate if the U.S. takes a very strong position on tariffs against the EU, that could be a big impact. We will have to wait and see. We have got some thoughts and initiatives that we have kicked off. We are not going to be able to see the results of those initiatives this year, but in the medium term, in the next couple of years, we should be able to moderate for that impact that we anticipate as a consequence of that.
Overall, I think we are in good shape, and we are hoping that India continues to maintain its story and the results. We have got some exciting new products. The stabilizer has gone into the field in terms of pilot test machines. Multiple machines have been put there. Very good results. Our machines for competing with the Chinese imports are already working in the field, and we are confident that by the third quarter, both these products will be out in the market full-fledged. Our earlier initiative called Project Everest for increasing our share of the market is going very well, and we are beginning to see the result every quarter, and we continue to expect that performance to continue. India will be, assuming the economic structure remains solid, we will have good growth in India, and we are confident of that.
The US is going to come back because it really hit the bottom, so we're confident that it'll come back from the past. Europe is a question mark. At the moment, it is still showing signs of positivity. Australia is coming back. Overall, I think we should have a good 2025, 2026. I will stop here, and then I will wait for your questions to further clarify our performance and our future. Thank you very much.
Sure. Thank you, sir. Just as a mandatory announcement, participants may use your raise hand option to be part of the Q&A queue. Also, participants who are on unclear line may use the Q&A or the chat option to put your questions forward. I'll wait for a minute, sir, before I take in the first couple of participants who've come in so that the queue can assemble. Yeah.
The first question I have is from the line of Harshit. Harshit, you may unmute yourself and go ahead with your question.
Hi, sir. Thank you very much for the opportunity. Sir, first question is on the US market. Could you explain how was FY2025 for us in terms of profitability? Were we able to break even in this market? Given your 10% tariff as a base case, how will our profitability look like for FY2026?
All right. Barring the one-time cleanup cost that we did on inventory and receivables even in the US, besides other parts of the world, Harshit, the operations was actually profitable, right? US has, from a loss in the prior year, actually become profitable on a steady-state basis.
Now, for 2026, assuming 10% tariff, like I explained to you, we will be able to absorb that 10% without any impact on our profitability because the savings that we have from our motor plant and a few other initiatives that we kicked off almost a couple of years ago for cost reduction is more than enough to absorb it. Like I explained to you, up to about 16%, which is the reciprocal tariff, and assuming that US imposes the same reciprocal tariff and we're not able to arrive at any understanding, we should still be able to do it. If they move to 26% like they originally did, then there could be we need to make a decision in terms of either increasing prices or finding other ways.
As we speak, all our competitors in the US have already brought in the condition that there is going to be a surcharge for tariffs, not only the foreign companies but also the local companies. Everyone is going to be impacted in some way or the other by the tariff.
Understood. Out of US overall industrial compressor consumption, what is the share that they manufacture in US itself, and what they procure from countries like China, India, maybe some amount from Europe? Could you give some flavor on that? I'm just trying to assess how much is that import dependence and whether they will be able to manufacture more compressors in-house or not.
It should be looked at at a compressor level, Harshit. It should be looked at at a component level, right?
Even if you take a company like Ingersoll Rand, which has a factory in the U.S., quite a few of their components are imported from all over the world, right? Whether it is India, whether it is China, whether it is the EU, right? Ingersoll Rand, in one of their calls, has said that the estimated annual impact because of tariffs is $150 million. It is very difficult to make an estimate exactly how much of it is going to impact which company, right? Almost every company has a significant import content in their manufacturing activity in the U.S.
Understood. Just lastly, on the vacuum products front, could you share the update for the last quarter? I think you had elaborated previously on our localization plan. Our sales team was in a build-up stage. We had already started receiving the orders.
Where are we right now, and how do you foresee FY 2026 to pan out in this business? The plan is progressing as per our schedule. The full sales team and service team is in place. Our localization is progressing well. Almost all the products that we wanted to, the parts have been developed. We wanted to localize the parts that have been developed, so we are progressing as per schedule there. Sales, we can't give you a specific number for sales, but the growth has been good. Really speaking, compared to the overall numbers and the standalone basis, they are very, very insignificant. Moving well.
Understood. Perfect. Thank you very much for answering my questions and all the very best.
Thank you. Thank you, Harshit.
Moving on, sir, we have the next question coming from the line of Ravi. Ravi, you may unmute yourself and go ahead.
Hi, sir. Very good morning. Congrats on a good set of numbers. Thank you. My first question is with respect to the standalone or the India business. In terms of outlook and demand across various subsegments, how it is panning out? Last couple of calls, you had mentioned that there seems to have been some bit of dip in inquiry levels. Has there been a recovery in terms of inquiry? Your thoughts on how India business is likely to pan out?
Yes, I think I mentioned that inquiries are continuing, but the finalizations are getting delayed. That is continuing. Inquiries are still healthy. There is no problem, but there is a wait-and-watch approach. Excuse me. There are certain industries that are progressing well, like textiles, for instance. They're coming out of a very, very bad couple of years.
There is overall positive impact with or without tariffs because there is an issue in Bangladesh. There is an issue in China. There is a certain positivity there. Sectorally, there is good stuff happening. Overall, I think there is no concern in India yet, but it is early days to figure out what the tariff impact is going to be. Yeah. Yeah. Is there a possibility, or is there a very high likelihood that the revenues can grow in double digit, or you would expect the entire India business to grow by a high single-digit kind of growth? Assuming India remains whole economically and there is no impact of tariffs globally, I expect India to grow double digit, but I would probably say low to mid double digit.
Understood, sir. In terms of mix and profitability, how to think about it?
At a standalone level, we are at kind of a lifetime high of around 21% in terms of margins. The mix, if you could give a broad contours of what is the mix in terms of, say, the piston compressors and the screw compressors, and how is it likely to change after sales service?
Yeah. I do not want to get into the specific breakup of products, Ravi. That would be too competitively sensitive. Right now, if you look at the profile of our India business, the shift in profitability is going to come from the mix between products and aftermarket, right? The profitability shifts within products is not going to materially alter. It may be a quarter-on-quarter kind of shift in variation, but shift in product mix stuff. If you annualize it, by and large, it is at a stable structure.
The real shift in the profit structure will come when the aftermarket starts moving up, and that's one of our initiatives to really improve it, right? We will continue to work on it. That's really the logic of this business. The logic of this business is to sell machines so that you are able to get a steady stream of aftermarket, which is more profitable than selling just equipment. We are on track there, right? You have seen that shift happening in India over the last probably 10 years.
Understood, sir. Yeah. Thanks a lot. I'll come back to it.
Thank you, Ravi.
Sir, the next question is from the line of Mr. Khush. Khush, you may unmute and go ahead with your question.
Yeah. I'm available, sir. Thank you for the opportunity.
Sure.
Sir, just a couple of questions, sir.
One, it was more on the industry side. I know that we are more on the air compressor side. If you can elaborate something on the industry, for example, what kind of imports are we facing today in terms of % or quantities, and how are we placed for our India business, and who our competitors are, and do we see the shift of India sourcing more locally rather than imports, any BIS regulations, etc.? My second question was on a consolidated basis. What kind of revenue targets are we coming up with? What kind of revenue growth and sustainability margins on a consolidated level going ahead in the next three years?
Yeah. Let me try and answer your first question. In terms of import content, we are probably the only significant player that has the highest local content, right?
What we import to make our compressors is less than 8% of our total manufacturing, I mean, our buying content, right? It is a very, very small part. As far as our competitors are concerned, they also manufacture, the significant ones. They also manufacture or at least assemble in India, and their percentages are significantly higher than ours. There are the third category, which are fully finished machines that are coming in primarily from China. We think that the size of that market is anywhere between 25-30% in volume terms. They sell primarily on the low end of low-kilowatt machines, not in the high-kilowatt. What we have done is basically our standard machines, the performance and cost points are significantly higher, and we cannot compete with the cheap machines coming in from China.
What we have done is developed a range of machines which are comparable in terms of performance with the Chinese machines, but quality is to our standard, right? We have not compromised on our quality, but just looked at lower performance. That is a segment that seems to be evolving all over the world, and we want to use India as an opportunity for us to respond to it. I think we have done a great job because initially, when we looked at the prices, it looked almost impossible. As we went deeper and more granular into understanding what exactly those machines were delivering, we were able to almost meet those price points. We are quite optimistic about taking on a big share of that 30% where none of the players are really playing because the prices are ridiculous. That is where we are.
In terms of giving you a guidance, I would not do that. I would wait for the next investor conference. Right now, five years ago, we gave a guidance about our top line, $450 million, and the EBITDA of 16%, and the return on capital employed of 30%. We will be able to achieve these numbers in 2025, 2026. That is really what I can give as a guidance now. Next investor call, I mean, investor meet in February, we will renew our forecast for the next either three or five years.
Right, sir. Thank you for the detailed answers. I just want to ask a question on the competitive end. Will Elgi wish to enter other segments apart from air compressors? Because I think one of our comps is into other segments too, like refrigeration, gas, etc. Yeah.
We have consciously stayed away from refrigeration and gas. We explored that opportunity many years ago. It is not that there is no opportunity there, but we found that the opportunity in air is significant enough for us to focus on that. That is what we are doing. In terms of adjacencies, we have already launched our dryers, which is a pretty significant market. It is a great product that we have developed that is in the market already. It is not only in India, but it is global. We are expanding the range of our adjacencies by either looking at acquisition opportunities for specific adjacencies or in-house development of these adjacencies, which is really what our growth path is going to be.
Right, sir. Thank you.
Sir, the next question we have is from the line of Manish. Manish, you may please go ahead with your question and unmute your mic.
Yeah. Thank you so much, sir. I hope you're doing well.
Hi, Manish. I'm well. Thank you.
A few questions, first on the guidance. We're probably looking at a 10% growth on a consolidated basis. Does it imply that international would probably grow single digits in the financial year 2026? Also, related question, sir, is on the margins front. If India continues to do well, and then we are guided for almost a percentage improvement in margins, we still do not see a significant improvement in international margins. This was the first set of questions.
Okay. Yes, if you look at our numbers in 2024, 2025, and the projected number that we had given five years ago, $450 million, that roughly converts to about a 10% growth. You're right. That is the general direction, Manish.
In terms of the split between the two, I expect India to contribute a little bit more than the rest, but that's on a very conservative basis considering the current situation with the tariffs and especially Europe. As per our expectation, without all these concerns about tariffs, assuming the whole world comes back to a normalcy, we expect all the regions to grow as much as India in terms of double-digit growth. This is a conservative view. As far as profitability is concerned, we were already hitting close to 16% even this year, Manish. It is just that one-time expenses and cleanup that we did that rocked up EBITDA. What is going to happen is that is not going to get repeated in next year. Therefore, we are quite confident that we'll be able to hit those numbers.
Okay.
No, sir, I was probably looking more on the international side of the margin profitability improvement. We already achieved even in Europe and in the US as well. Hopefully, the US should do well. I am thinking from a point of view that you are guiding for a conservative 16%.
Yeah. Rather that we are conservative under conditions of uncertainty, Manish.
Yeah. Yeah. Okay. Sir, how is the progress on the competition order for railways for Siemens? How is railways business picking up? Have we made any more breakthroughs in Metro Rail with probably references from supply to Siemens?
The railway business that Siemens ordered that we won, we have supplied. Our Prime Minister inaugurated the first locomotive.
If you actually see the video of that locomotive running on the tracks, you will see in the undercarriage of the locomotive a device with a red band. That is an Elgi machine. That red band is our better band that is there on all our machines. That is really our Elgi machine. These machines have been validated, tested, gone through all kinds of high temperature, low temperature, vibration, and everything. Now they are going into the field. This is the start of the Siemens business. Overall, railways is a business. It is not a big contributor, but it is something that we have always been strong on.
We have not had any big breakthroughs yet in the Metro, but there are good strong conversations that are going on with global OEs because if we do not get homologated globally, it is very difficult to supply in the Indian Metro market. There are some strong conversations that are going on. With our experience developing, the machine that we developed for Siemens is an outstanding experience in terms of customer expectations and our ability to fulfill it. We have learned a lot from that. With that capability, we are quite confident that we can get into those relationships. That is more a five-year journey rather than an annual journey.
How do we see the ramp-up for the Siemens business exhibition? I believe recently, in their analysis, they said that probably in a couple of months, they should be able to start commercial production.
Even they are going through homologation of their locomotive.
I think we will see some movement of the business during the third and fourth quarter of this year. I think next year, we will see more of a significant improvement in that model of compressors and locomotives. We are still going through some uncertainties as to there are budget allocations, and that is a function. All that is there. Yeah. Yeah.
On the motor side, you did mention that this year we will be almost meeting internal requirements to the extent of 80-90%. In terms of capacities, how are we positioned? Is our plan fully in terms of desired capacity? How is it positioned? Yeah.
We started the investment in that a while ago, but unfortunately, we were let down by the first supplier of the machine, and then we switched to another supplier. Unfortunately, the supplier was from China, and we got the equipment, but they could not come and install it because visas were not given for Chinese. Now that has opened up, and the machines are getting installed. We are quite confident that we have the capacity. That is not an issue.
Okay. Thank you very much, sir. I will get back to you. Thanks, sir.
Thank you.
Thank you, Manish. Next question I have is from the line of Vipul. Vipul, you may unmute yourself and go ahead. Vipul? I think he had some technical issues, sir. Probably what I will do is I will take a couple of questions from the chat window first.
First question was around Siemens, which I think you've already answered. The second question is, "Hi, sir. If you could point out the reason of why there was a higher growth in revenue and profitability in this quarter." The second part of the question is also, "How is the stabilizer product doing? Have we received any revenues from it in Q4, or is it still in early stages?"
See, typically, there is a hockey stick always in Elgi and in India in the last quarter. That's one of the contributors for the increase in the revenue. The second is Europe did very strongly for us in the fourth quarter. That was a significant contribution. U.S. also, by virtue of both the industrial and the medical business, did very well in the fourth quarter. It's a combination. It's not one particular thing.
It's a multiplicity of things that contributed to the last quarter thing. But that's always been a hockey stick there. Stabilizer, like I just explained, multiple machines are out in the field. I expect to see a full launch during the third quarter. And third quarter, we will start to see some numbers.
That is what we have in the chat, sir. The next question I'll take is from the line of one second. Samyab Jen. Samyab, you may unmute yourself and go ahead with your question.
Good morning, sir. Just one question from my side. We see that on a consolidated basis, the gross margins are at an 11-quarter low. So I understand that some part can be attributed to the one-time cost that you had. But if you could throw some light, like what was the reason for the lower gross margin, that would be helpful.
When you are referring to gross margin, which profit level are you looking at, Samyab?
The material margins after reducing the raw material cost.
Material cost, our contribution is actually good compared to the previous one. I'm not able to connect with exactly your question.
Sir, it's 49% in quarter four versus 51% in the previous year. Yeah. I'm taking all the raw material cost, purchase of finished goods, etc., to compute these gross margins.
Yeah. Some of the expenses that we have taken hit is inventory. When you take it on inventory, it affects your material consumption, right? It's only that. Otherwise, business as usual, margins are quite constant and healthy.
Okay. It's just the one-time impact that has impacted.
Yeah.
Yeah. Got it, sir. Thank you.
Thank you, sir. We'll try the line of Vipul again.
Vipul, can you unmute yourself and go ahead with your question? Hi, Vipul.
I think he seems to have continuing on that issue.
Yeah. Sir, we will move ahead with one second, sir. Not being able to see the queue. Yeah. Next question, we will take it from the line of Premdoshi. Prem, can you unmute yourself and go ahead with your question? Hi, Prem. Seems to be a problem again here, sir. What I will do is I will take Ravi again. Hi, Ravi, can you unmute yourself and go ahead with your question?
Yeah. Hi, sir. Thanks for digging up this follow-up question. I am looking at kind of the numbers, console minus standalone, and looking at the subs number and taking it as a proxy for our international business. In terms of profitability.
Ravi? Ravi? Ravi, you moved on mute again. Could you please unmute yourself? Yeah. Yeah.
Yeah. Now, am I audible? Yeah. Yeah. Yeah. You're audible. Please go ahead. With respect to that international profitability, I mean, it has been in that range of 6-8%, high single-digit range. We have been, I think, investing on employees, fixed costs, etc., across geographies. In terms of those investments, which we have been doing across years, is it likely to taper off in the next few years, which can start contributing to operating leverage for you from an international business angle, both in terms of headcount and the associated infrastructure investments?
Yeah. If you look at the profitability of the international business outside of the rest of the world business, what you're saying, what the arithmetic you're doing is correct. I mean, notionally correct.
You're taking the console profit and minusing the standalone profit, and you're saying pretty much there is very little left. The fact is there is a profit in India, which is reflected in the standalone business on the sale from India to these subsidiaries, right? That's one level of profit, which is not readily visible, and it's not something that we would like to make a big disclosure on. Okay. That's one part of it, but that's not the significant part. If you look at if you go back to the post-COVID year and you look at before our LN implementation, ERP implementation in the US, if you look at that arithmetic, the US contribution was pretty significant. There is no reason why it cannot come back to the same levels, right? We are working on two things.
One is to grow the top line. Towards that, we are focusing on only investing in revenue-producing roles, and we are trying to, through shared services and offshoring some of the overhead processes, reduce the overheads in all these locations all over the world. That is an ongoing exercise. In the next couple of years, we will see some significant reduction in overheads by virtue of this process. Through a combination of both growing the business, investing in revenue-producing roles, and offshoring some of the overheads that are there, we are structurally correcting some of these businesses so that we are able to eliminate costs and improve profitability.
Understood. Got it, sir. Yeah. Thanks. Yeah.
Sir, I'll take the next question from the chat. Prem, his mic was not working, so he has put up. Sir, what is the guidance for the consolidated revenue growth?
We are eyeing for FY2026, both conservatively and aggressively. This FY, we had a revenue growth of around 9%, and there is a better outlook going forward. Is there a better outlook going forward for the same?
Prem, to answer your question, I think I answered it in the context of somebody else's question. We have given a guidance for 2025-2026 as part of our five-year guidance that we did five years ago. We are quite confident that we will hit that. I do not want to get into aggressive and conservative, but that is really our projection, which is $450 million of top-line revenue, 16% EBITDA, and 30% return on capital employed. We are confident that we will hit these numbers. Now, yes, we have grown about 9% this year. Will next year be better than this?
Again, I don't want to put anything on the ground because there's a lot of uncertainties at the moment with respect to the U.S. tariff and its impact, the rippling impact on the various economies of the world. Assuming everything comes back to a steady state, nothing negative, and India continues to be a good story, we should be able to do this minimum, do this same growth as last year.
Sir, the next follow-up question from the chat is, does Elgi have any role to play in Indian defense manufacturing moving forward, moving to India? And are the products already there in offering or set to be introduced for the defense manufacturing industry?
Now, we don't make anything that is directly relating to defense, but we supply a lot of our compressors for defense units in their maintenance.
Plus, the joint venture, Elgi Sawa, is a big supplier of compressors for submarines, aircraft carriers, and destroyers, frigates. We are one of the largest suppliers through the joint venture company.
Sir, I'll take it from the line of Mayank now. Mayank, you may unmute yourself and go ahead with your question. Mayank?
People seem to be having difficulty unmuting and speaking. I don't know why. Mayank spoke earlier, did he not?
I think so, sir. He did. It was a follow-up question. Sir, I'll take the next question again from the chat window. Sir, how much of the revenue is after sales, and will that rate continue going forward, or is there a chance of improvement after sales in maintenance contracts?
There is a big difference in the after sales as a percentage in India versus the after sales percentage in the rest of the world, primarily because the after sale is a function of the installed base. The installed base of machines is more in India and less in the rest of the world. This is a progressive increase that happens in Asian. When you install machines, your aftermarket keeps growing. Now, having said that, in India, our aftermarket would be close to—I do not have the number readily in front of me, but I am making an intelligent guess. It is about 27%-28% of our revenue in India. In the rest of the world, we are probably around 13%-14%, right? In both these percentages, we have to keep improving as we progress through the life cycle of the operation.
I mean, we get more and more machines installed, then there is more and more aftermarket coming in.
Yes. I'll try Vipul one last time in case he's able to do it. Hi, Vipul, can you unmute yourself and go ahead with your question? I don't think he's able to do that. Sir, that was probably the last question on the line and in the chat window.
Hi, Jairam. Yeah. Just one question from my side, Jairam, about Europe. Can you elaborate in terms of the strategy, how it is working? Are we on track to have a break-even achievement in this year, FY2026, and the incremental cost that may come towards the ramp-up that we had planned as per our earlier strategic plan? Please. Thank you.
Sure, Kamlesh.
Now, to answer your question, except for some one-off things like our tax consulting that we had to do, we have broken even in Europe, Kamlesh, this year, as we anticipated. Like I said, the last quarter growth was quite strong in Europe. The only caution here now is the tariff. Other than that, we are on a pretty strong wicket, right? We are watching the situation very carefully. We are not going to invest anything more, right? What we are going to do is, in response to any—if there are any challenges, we will look at cost structure changes, not in terms of this willy-nilly reduction in cost, but structurally change the business to see what is the appropriate structure for the new reality and then bring the cost down to that reality, right?
This is something that we are going to watch very carefully in the first quarter.
Okay. Great. Okay. Thank you very much, sir. Any closing remarks you would want to make?
Nothing specific. I think overall, we are in good, exciting times, some uncertainties, but the company is on a stable platform and wicket. We can continue to grow from here. We expect, as the growth happens, we are quite confident that there will be no surprises in terms of achieving the profitability that can come from that growth. Yeah. Again, I want to thank Kamlesh and his team and Asian Markets Securities for hosting and all of you for participating in this call. Thank you very much. Thank you, sir. Thank you. Thank you. Thank you so much, sir. Thank you.