Q3 24/25

Feb 3, 2025

Summary

Q3 revenue rose 73.67% YoY and net profit 74.44%, while staffing and input costs pressured margins. A INR 300 crore-plus expansion targets 5–6x capacity, with sampling in April 2025 and full ramp-up over the coming years.

Ladies and gentlemen, good day and welcome to KRN Heat Exchanger and Refrigeration Limited Q3 FY 2025 results conference call, hosted by Dolat Capital. As a reminder, all participants online will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kapil Yadav from Dolat Capital. Thank you, and over to you, sir. Thank you, Shagufta. Thank you so much. On behalf of Dolat Capital, I welcome all the participants on this call and thank the management of KRN Heat Exchanger Limited for the opportunity to host this call. For today's call, I have with me the management side, Mr. Santosh Kumar Yadav, Chairman and Managing Director, Mr. Sonu Gupta, CFO. With this, I now hand over the conference to Mr. Santosh Yadav for the opening remarks, then we will have a question and answer session. Thank you, sir, and over to you. Yeah. Good afternoon to all. Thanks to Saneth for today's call. Our CFO will give the brief, and then I will answer the question answer. Thank you. Good evening, everyone. It is my pleasure to welcome you all to KRN Heat Exchanger and Refrigeration Limited Q3 and nine months FY 2025 earnings conference call. I truly appreciate your time and interest in joining us today. The world around us is changing rapidly with raising demand for energy-efficient cooling solutions, increased investment in data centers, and push towards electrification in key industries like railways and automotive. At KRN, we are not just adapting, we are driving this change. Our relentless focus on innovation, expansion, and customer-centric solutions is enabling us to build a strong and resilient business capable of delivering sustained growth. Expanding our horizon, a transformational leap. One of the most exciting milestones in our journey is our transformational capacity expansion in Neemrana, Rajasthan. This INR 300 crore plus investment under our subsidiary, KRN HVAC Products Private Limited, is progressing at full pace. With civil work nearly complete and machinery trials underway, we are on track to begin sampling production in April 2025. This plant is more than just an expansion. This is a game changer. With a six-fold capacity increase, we are not only strengthening our core HVAC and refrigeration business but also entering high-growth sectors like railway electrification, heavy automotive, and industrial cooling. Once this facility is fully operational, we expect to generate peak revenue of 5x to 6x of current level. Our exports have been growing steadily, increasing from 9.57% to 14.68%, and we are actively expanding into Europe and North America. With the global shift towards China Plus One strategy and favorable trade policies, we see significant opportunity ahead. Our entry into the bar and plate heat exchangers will further enhance our reach both in domestic and export markets. We are closely tracking the government PLI scheme for white goods, where our subsidiary company applications refer to the Committee of Experts. Management is hopeful for final shortlisting. This will provide a substantial boost to our earnings and accelerate our growth plans. Alongside this, we are driving margin expansion through advanced coating and manufacturing efficiencies to enhance durability and cost savings. Solar energy adoption at our upcoming plant to reduce power costs. Export-driven growth, which offer higher margins than domestic sales. Government incentive under Rajasthan RIPS 2024 policy, enhancing profitability. Now turning to our financial performance. I am pleased to share that our relentless focus on execution and the growing demand for our products have translated into strong results. In Q3 FY 2025, we achieved a revenue of INR 116.36 crore, reflecting a 73.67% year-on-year increase. Our EBITDA grew to INR 15.81 crore, up 34.76% year-on-year, while net profit surged to INR 13.73 crore, making a 74.44% year-on-year growth. For the 9-month FY 2025 period, our total income is INR 205.88 crore, growing 32.96% year-on-year, with net profit rising to INR 38.01 crore, an increase of 39.02% year-on-year. These results reaffirm our strong momentum and the effectiveness of our strategy and initiatives. At KRN, we are building for the future with a major expansion underway, a growing global footprint, and a relentless focus on innovation. We are confident in our ability to create long-term value for all stakeholders. I would like to express my sincere gratitude to our employees, customers, and investors for their continued trust and support. Thank you, and I look forward to an engaging discussion ahead. I request to open the floor for question and answer. Thank you, sir. 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 Preet Ranawat from Avendus Capital. Please go ahead. Yes. First of all, congratulations for the numbers. I have seen a trend, like in the share of evaporator coils increasing and condenser coils share in the revenue decreasing. Is there any particular reason for that? No, I think in earlier call also I said like that, for us evaporator and condenser almost like same product for us. We just add the product portfolio then by condenser or evaporator. If same customer sometime ask the condenser and some evaporator or maybe vice versa. That is why as a manufacturer, for us is both same part. So no particular reason for that. Yes. No. Okay. So another question. Are we seeing increased adoption of bar and plate heat exchangers in data centers or in comparison with that's why we are starting in the new manufacturing facility? No. This data center cooling, our existing product will be like grow, but for bar and plate application is different. So first application in bar and plate is like electric loco and off-road vehicles and then earth movers or like compressors or lift trucks. So these are application for bar and plate like as a oil cooler. But for data center, our existing product as a heat exchanger will grow. Okay. Last question. So how much of the MOU which was received from the Rajasthan government will be reflected in the financials? Could you give a timeframe? No. We signed INR 1,000 crore MOU with government, and we will try to meet this INR 1,000 crore in next five year. Okay. Next five. Okay. Yes. All right. Thank you. Thank you. Thank you. The next question is from the line of Shubham from Dexter Capital Advisors Private Limited. Please go ahead. Yeah. Hi. Am I audible? Yes, sir. Yes. Yeah. Hi. Thanks for the opportunity and congratulations, Santoshji, for a great set of numbers. I had a couple of questions here. The first question was, what was our volume growth this quarter, and what is our current capacity utilization rate? The total volume, in term of consol, maybe HVAC also includes. Our standalone KRN Heat Exchanger. What is the total numbers? Give me a moment. Sure. 116. So standalone is reflecting like KRN Heat Exchanger and consol reflecting including HVAC. HVAC, phase one is already started, so that's why total numbers is 116 and- So volume growth is 116%, is what you're saying? Year on year basis. Total. Okay. So basically, and our capacity utilization levels this quarter? KRN Heat actually we almost on the peak, so there is no more further available capacity. KRN HVAC, phase one we started, so there is some spare capacities available. So basically what I was trying to ask was, on our condenser and evaporator coils capacity, what I believe is it is the same as last year. The March ending FY 2024. Our capacity is similar for those, because our subsidiary, KRN HVAC, it is to start commercial production from April 2025. Would that understanding be correct? KRN HVAC has two phases. First phase already started last year with same product, and phase second will start from April. Phase second. For phase one, what was the product that was started for phase one in HVAC? It is the same product, heat exchanger only. Same. What would be the total capacity for evaporator and condenser coils, including both our standalone and HVAC? As of now, total capacity, like we achieved is maybe 85%-90%, including HVAC. You can see if I club totally, only 5% or 6% we can increase till April. In April, we will going to add new facility for both heat exchanger and as well as other product. The question was basically on our March 2024 ending financials, right? Was there a significant capacity increase between these 8 months due to which you are able to increase our revenue by 70%? What was the main reason behind our 70% increase in revenue this quarter for year-on-year? There is two reasons. One, we added HVAC as a fresh entity. Secondly, we added some machine also in KRN Heat Exchanger. You can say we did some line balancing, that's why we were able to increase some turnover. Understood. Also, sir, just last question. I will again join back the queue. Basically, for the bar and plate heat exchanger as well as the oil cooling units, are we doing any testing with our customers? Basically, I believe loco manufacturers would be our key clientele here. Are we doing testing for those products with them? Yes. Testing is there almost 6 to 8 months. We already got the tender from BLW for 10 piece as a development order. Okay. Now we are waiting for their visit to us, and after their visit, we will supply two proto as a trial. They will trial almost 6 to 7 months, and then we will enter in the main phase for bar and plate heat exchanger. It means our bar and plate facility is almost ready for production. We already made some proto as well. Now we are waiting on government side. They will visit and we will offer two proto, and they will test 6 months, and then we will enter in main phase. Meanwhile, we will do other, this compressor and then JCB, lift trucks and off-road vehicles. We will align with these clients and we will try to achieve some production from them. Sure. Understood. Thank you. That would be from my end. Thank you, sir. Thank you. The next question is from the line of Amit Rajput from Ritz Capital. Please go ahead. Hi. Am I audible? Yes. Yes. Thanks for the opportunity, sir. Sir, almost all of the questions were being answered, and I have just two questions left. First is your revenue guidance. As of we have completed three quarters in this year. So what will be the range of revenue will be closing FY 2025? This running quarter, almost same, or maybe we will try to increase 5%-10% on last quarter. Okay. Because our capacity almost full. My last question regarding the debt side, you have said that you have signed MOU with the Rajasthan government regarding INR 1,000 crore, and I guess you have raised around INR 362.42 crore from IPO. Rest of the funding, you will be doing through debt? As of now, first we will start our this existing facility with this 300 plus investment, and then we will review after six months our internal profits or maybe from working capital from bank. That we will decide after three or four months. When will your capacity be operational? If you could give me the date or month. As I said, this bar and plate is almost ready, but other facilities, some construction work is pending and machine has not arrived, some machine is coming. So fully we will try April end as a proto sample manufacturing. Then we will need 4-5 months to set all things like people training, quality system, customer visit. So mass production, we will start in second half of next year. Okay. That's all from my side, sir. Thank you. Thanks for answering all the questions. Thank you. Thank you. The next question is from the line of Manasi Neni, who is an individual investor. Please go ahead. Ms. Manasi, I would request you to unmute your line and speak, please. Can you hear me? Yes. Yes. Yeah. Actually, most of my questions are answered. Just one question is, government has announced a big boost for the nuclear energy in this budget. If KRN has any plan to enter this as heat exchangers are used in the nuclear energy also. Actually, we are manufacturing all type of heat exchanger. Including, we are going to add heat exchanger with SS tube as well in new facility, SS tube. We will have to study this nuclear requirement, what type of heat exchanger they need with material. For sure, if it's in our range, then for sure we will add this as well in our portfolio. Is it possible in future? Yes. As of now, we don't have any specifications, so in deep we cannot comment, but sure we can make if in our range. Yeah. Okay. Thank you so much, sir. Thank you. Thank you. The next question is from the line of Richita Karke from iWealth. Please go ahead. Hello, sir. Very good evening. Sir, my question was mainly on the gross margins for the quarter. We have seen quite a dip. What was the reason for the same? Actually, what we analyzed is there is two reason. First is our employee cost increased because now we have almost 850 people against last quarter we were 700. Because now we hired 150 manpower for our new facility, so they are under training because we have to train them before shift to our new facility. This is a slight increase. Second small portion is, actually earlier, China government on mainly this copper and aluminum, they are giving subsidy almost 13% to their manufacturers. I think two months back, they take back that facility. Then they increased the price, and compared to that, this Malaysian and Thailand Vendor also increased. This is the slight impact on us on this last quarter. Actually, we passed over personal in next quarter. From 1st of this January, we already passed this impact to our customer and slightly different this USD to INR conversion also. I club these three reasons, then it is slightly down. Sir, just to follow up on that. In the earlier call, we have mentioned that we usually book the contracts on one quarter prior to that, and we have an inventory for two months. Even after that, would we face this kind of disruption on the margin side? No, 1 month impact will be there. If 2 months inventory we can keep, so 1 month. That's why. But if you compare man and cycle, then raw material side, like this USD to INR and raw material is very thin. But reason is there. And sir, other than that, do you get your order book? What kind of order book do you have currently? Order book, we have always rolling type. Secondly, your first question, I remember I said, but that is this China, their 13% duty. That in fact, we are not aware because the first time they did. This actually not covered in our contract now. They did first time, so we have to pass on when our price will renewal on 1st of January. This LME portion and USD to INR, of course, we covered in last quarter, but this China anti-dumping or maybe this incentive they take back, that's not covered. And your second question, order booking. Actually, we have order booking continue with rolling actually, because we do regular production based on customer requirement, not project-based actually. Okay. And sir, when we say that in the next 3 years, that we should reach our peak revenue in terms of the CapEx that we are doing. So what gives us this confidence, sir? Do we have any kind of soft commitments that are in place or we've done the testing of our products with these clients, and we are just waiting for the manufacturing to start so that we can start supplying to them? Just wanted to understand a bit on this. No, actually, what you said, it is almost all reasons. Some of customer, we have soft commitment and some of customer, we already they approved our sample. Just, we are waiting to, for new facility to start in mass production. Also we will add some new customer as well. In recent, like this month, like in February, we are doing 2 exhibition, one in the U.S.A. and second in India, like Bangalore at REFCOLD, and third in March, we are doing in Germany for ISH. That we will add new customer. We will increase our demand from existing customer and then some customer we are waiting for to just start. If I club these all 3, 4 reasons, then there is a requirement actually. Just one more follow-up on that, sir. These customers, how big are these customers would be for us? Who we have already done testing for and from whom we have already received soft commitments. How big are these people? They are quite big. Even one customer is, you can say, they are buying heat exchanger compared to our existing top line. Maybe 4 times they are buying from other country or maybe other supplier. They are quite big. Even some of more than INR 100 crore and some of around INR 50 crore or INR 60 crore in a year requirement. How much of this do we expect to acquire from them? If their demand is so much, how much of it can we take? What is the pie that we can take? Actually, base story is like that. When we started our facilities or facility, we started one floor, then we add second, third, fourth floor. So it means our, this existing facility is the optimized facility. When big customers who came to this facility, they can just by themselves, they cannot meet our big requirement. That is why we are coming with big facility, almost 6 acres. When they visit this facility, they can see by their, with like, okay, they can meet from there our requirement in term of building, machinery, layout, and everything. Based on that, actually, many soft commitment or many visits already happened. We are working on that, and then it will for sure, when they will start, we will meet their quality standard with delivery and quality, and then slowly they will increase the requirement. Okay. Got it, sir. Understood. Thank you so much. Thank you. The next question is from the line of Shivkumar Prajapati from Ambit Investment Advisors. Please go ahead. Yeah. Thank you, sir, for having my question. First of all, congratulations for such a great set of numbers. My first question is on the revenue front. I think we are operating at the optimum level since last 2 to 3 quarters. This time it is around INR 111 crores. Is there any change in product mix or something that made us to reach this level? Because hardly INR 90 to INR 95 crores of revenue was expected. Can you repeat again question? Yeah. So sir, actually we are operating at the optimum level since last two to three quarters. Is there any change in the product mix or high-value product being sold this quarter that made us to reach this INR 110 crores of revenue this quarter? No, our old customers will remain the same. Of course, their requirement is increased, then also is added value in our system. Also we added one or two customers from North America. They gave us some big orders, that's why we're able to increase that. Also, honestly, unable to provide to all customers, some of the new customers are just in queue. Mm-hmm. Okay. Sir, my second question is on other income. I see the other income is too high in comparison to other quarters. Could you please throw some light on this? Other income is, I think two parameters there. One is our incentive from government, and second, interest cost, because we receive money from IPOs, and then we receive some FD amount interest. Okay, sir. My next question is on this North America and Europe. You are planning to expand in these regions. Do we have any competition, or competitors operating over there that we may face any challenges? No, actually, competitor, one is from Europe and one is from North America, but some of them are operating in Mexico maximally. Now for us, it is good news that I think U.S.A. put the duty 25% on Mexico as well. For us, I think now we can easily compete to Mexico and Canada vendor as well, if they want to supply in U.S.A. Chinese, actually, our company is not really Chinese earlier also, now not, but we have to compete to European and North America manufacturers. We can easily compete very easily. Even they can get almost 10% of their bottom line of saving if they receive our product. Okay. Sir, post this regime change in U.S.A., do we anticipate any challenges after Trump coming in over there? No, for us, I think it's better that it's there, because earlier we have some threat that some of manufacturers have shifted their facilities in Mexico, especially. Then they are manufacturing in Mexico and supplying to U.S.A. because Mexico also labor cost is quite low compared to U.S.A. For us, I think Trump, first day he put duty on Mexico as well as Canada. For us, I think it's better chance compared to Biden. Great. Sir, my last question is on the Indian geography. I think more than 40% of our revenue comes from Rajasthan state, which is obvious that we operate over there. Sir, any strategy to expand in other states? Because I believe the other states hardly contribute around 10% each. What's the strategy to penetrate in Indian markets? Yes, actually, we are thinking to open one facility for South India, but it's still under planning. So fully in the next six months we will conclude on same and then we will update. Okay, great. Thank you so much. Best of luck. Thank you. Thank you. The next question is from the line of Amit Rajput from Ritz Capital. Please go ahead. Mr. Amit, I would request you to unmute your line and speak, please. There has been no response from the current participant. We will move on to the next participant. The next question is from the line of Preray Gandhi from Numeric Research Lab. Please go ahead. Hello, sir, and thank you for this opportunity. I just wanted a few clarifications with respect to the new facility. Sir, in April, that new facility will be operational or will we be just laying the bricks for that? What will be the current CapEx involved with respect to that new facility? What does that new facility inculcate? This new facility, actually, there are total four sheds, one, two, three, four. Two sheds are almost complete. The third shed will complete by this month end, and the fourth one will complete next month. Shed one and two, already machine we installed, like bar and plate. We also made some proto and we received one proto order from government as well. Secondly, all sheds we will complete in March end, and that's why you have said April end, we will be able to make proto complete. Then office block will be slightly delayed, it will complete maybe July or June end. We have four weeks, maybe totally five club, and four weeks we have problem with this GRAP also because we are in NCR. Actually, this facility-wise, we said our total production volume will increase by 6x compared to existing facility, and mass production will start from second half of next year. Second half. Perfect. Thank you, sir. Thank you. The next question is from the line of Yashvanti from Cogent Invest. Please go ahead. Thank you so much for the opportunity and congratulations for the great set of numbers. Just one query, why we are seeing a dip in the EBITDA margin? Ma'am, can you repeat again? Your voice is not so clear. Okay. Am I audible now? Yes, please. Yeah. I just wanted to understand what has gone wrong or why our EBITDA margin has shaded from around 17% to almost 13% for this quarter. Percentage I have to calculate, but actually, if compared to the last quarter to this quarter, there are only two, three things is what I said. One is our employee cost increased because we have hired 150 people for new facilities. They are under training. Secondly, some impact for one month for raw material, because earlier China giving subsidy to their vendor. If they export, then they receive 13% of the total amount. Almost two months back, they already take back that facility. That is why they are able to increase their price, and suddenly they increase other country price as well. So that slightly impact on us on raw material price. Okay. The rest is the same. When do you expect all these issues to settle down, the labor, other costs are contributing, and when we can go back to our earlier margin of around 17%-18%? Raw material price, of course, we already passed to our customer from 1st of June, but this 1st of January. But this employee cost, still we will have some maybe next four to five-month problem with HVAC, because we have to hire people, we have to train them until we start mass production. Okay. Can you just shed a light on the competitive landscape in the HVAC and HVAC&R industry? And how does we differentiate ourselves? What are our moat or the competitive advantage as compared to our competitors? Can you repeat this question again? Your voice is breaking. Yes. Actually, I just wanted to understand how is the competitive landscape and what are our moats or our competitive advantage that differentiates us from others. Now I got your thing. Actually, if you see, as on today, our maybe gross profit is around INR 70 crore of KRN Heat Exchanger, actually. It means last six year we invested only INR 70 crore and we have seen profit this year around INR 350 crore like that. This new facility, in first go, we are investing more than INR 300 crore plus, and we are adding new product as well as existing product. It means this new facility will be the latest facility with latest machinery, latest technology, including like, we are importing some machine from Europe, even from U.S.A., from Japan, even from China. As of now, you can see as a professional heat exchanger manufacturer, maybe we will be the largest facility in India, other than OEMs. Okay. Based on investment, of course, the result will also come, and we will call to our all customer as well as our export customer. Based on facility, I think, if I compare to my competitor and our distance will be quite long. Okay. When these new capacities are coming up with the investments which you are putting it in the facility? The new facility, like April, we will start sampling for all product, and then mass production will start from second half year of next year. Second half of year. In that case, what kind of a growth you project for FY 2026 on the top line and the bottom line basis? That exact number I cannot give you, but like- Ballpark number in terms of the percentage growth you can say? Actually, six months we will have very less number, but for 6X, one capacity mass production. If I add all product, then for sure growth will be there. Okay. Sir, in your opening remarks you mentioned that once this new capacity is coming up and it is operational at a full capacity, you will see around 6 to 7 times turnover which you had reported, and which is your current turnover. What is the industry growth driver you are seeing currently? Likewise, have you seen any demand or the product expectation from your existing clients or the new verticals region-wise you are expanding, you can see some demand growth for that. I mean, you are expanding the capacity, but then how it is getting suffice or meet the demand? Yeah, I got your question. So actually there is three, four parameters. We are increasing our capacity, including other products as well. It means existing products or other products. We are adding 4 to 5 new product as well. So total we are expanding 5 to 6x. Secondly, our existing customer growth is there. 25% to 30%, we are receiving growth from their side. Even especially data center, its growth is more than 30%. Secondly, we will add some domestic customer to whom we are not supplying now. Secondly, we will add export customer to whom we are not supplying now, or maybe we will supply just some samples only. They are waiting for mass production. It means if I conclude from domestic existing customer, then domestic new customer, then export existing customer and export new customer. Then fifth one is new products. If I club all things, then we will able to reach 5 to 6x next fiscal year. Okay. Just now you said that you are not able to meet the export demand which is currently there, or you are not supplying to the export which is currently there. You said the capacity was the constraint for it? Yes, existing, we do not have capacity actually. For export actually, whatever we are supplying, we are supplying since three, four years. They are growing, so we are also growing. But new customer, we are unable to supply because of capacity constraint. Okay. How much is current export contribution to the revenue, and for this expansion, where do you see going forward? Can you repeat this question again? Yeah. What is your current contribution coming from the export? How much in the revenue, how much export accounts for? Now percentage around 20% of total top line. Shortly we will try to make more than 50%. Okay. So domestic with the existing plant and the new plant, it will contribute around 50. Again, export existing and the new region, the new plant, it will be contributing towards 50 in the five to six times the revenue growth. Am I understanding it correctly? Yes, correctly. Yeah. Just quickly, last two question. You might have mentioned, I might have missed out. What are our current order book and the executable period? Order book, we have not like that. We have rolling. So one of maybe customers, they are making their machine maybe 100 piece in a month. So they give me forecast maybe for 2 months and for PO for 1 month only. So each month is rolling. So we have to supply to what they are making. So based on our order book always there. Okay. What is our current working capital cycle, sir? Can you repeat this again? Your voice actually very less. Okay. What is our current working capital cycle? Current working capital cycle. 90 days roughly. 90 days roughly. Okay. Yes. Okay. Thank you so much, and wishing you the best for the coming quarter. Thank you. Thank you. The next question is from the line of Mithun from Shiva Advisors. Please go ahead. Hi, sir. Just wanted to understand your current capacity and how is that going to change in the next six months or a year time once you put up this new capacity or some rights issue also, you have subscribed to your subsidiary. You could just take us through that CapEx plan and how capacity will change. Existing our one capacity in KRN Heat Exchanger and second capacity in KRN HVAC phase one. These both capacity we are almost full. Phase second of KRN HVAC, we will start like proto from April end or May early. Then for our existing product, of course, we will pick the capacity very quickly. But for other product, we have to go through the customer approvals or proto testing and like that. That is why we are claiming our mass production will be starting second half year of the next year. Total capacity, if we compare to existing, we are targeting 5 to 6x of top line. Sorry, five to? Five to 6x. Okay. Of the current capacity? Yes. That will be ready by when? Trial will be ready by April end, but for mass production, second half year of next year. Your existing products capacity is going by how much and new products is how much? If new product, we added five new product and one existing, so if total, like half and half maybe. We can say existing will be three time and three time will be other product. The other product is the first time you are making it? Yes, but they are also heat exchanger actually, not different line. Only this line of business. Customer is almost same and product is also heat exchanger. You are saying 5x to 6x of the current capacity, meaning you can do five times the revenue of FY 2025 or? We are assuming or we are planning to achieve in next three financial year start from April. Sorry, I do not understand it. 2025 result and extra year results, we have assumed that we will multiply by 5 times in a coming 3 year time. Okay. These products that you are manufacturing, the end consumers would be which of these companies? Because you mentioned these orders are based on the requirement of the client. If there is a demand shortage or something, would there be a problem that you would face? No, it is a B2B business. Whatever part we develop for some of customers, we are supplying 100% to them. If they are asking some new development, then of course, we are taking time. Secondly, we unable to add new customer or new part number due to capacity constraint. How much would your top few clients contribute, or top 5 clients in terms of orders or revenues? Top three, I don't have in tips, but its total top 10 contribute 80%. Top 10 contributes 80%. The top three would be how much? Top three, I think, maybe roughly it's around more than 50%. Top three, is it? Yes. Right. I am just trying to Like top one is our Daikin, so they contribute almost 25%-30%, and then Schneider, so 15%. That is turning 50% around. I understand. I am just trying to ask you, for example, if Daikin or one of your clients sees an issue in terms of demand, then what happens, is my question. Because you are putting up so much of capacity. As of till now, we are adding two new customer each month. This is our average actually. As of now, it is not, seems to us that their demand will reduce. However, if reduced, then we will add new customer as well. We are working on both verticals now. Got it. So it is mainly the AC industry. There is no other industry that you are targeting? Just HVAC&R. Heating, ventilation, air conditioning, and refrigeration. Okay. So this includes all commercial side, like automobile, machine conditioning, metro, train, then data center cooling, power plant coolings, then heat pumps, then swimming pool heat pumps, and then Got it. VRV. Yes, all. Understood. Thank you. Thank you. The next question is from the line of Ajay Surya from Navai Corp. Please go ahead. Yeah. Congratulations, and thank you for the opportunity. Sorry to interrupt, Mr. Ajay. I would request you to please use your handset. Am I audible? Yes. Yeah. My question is, sir, on the margin. Sir, if I look at our past financials, even before FY 2022, the gross margins were around 20%. But in last couple of years, the gross margins have suddenly moved up to 29%, 30%. Wanted to understand what has changed in the industry which has led to the increase in the gross margin. Also, sir, in the current quarter, we have seen a dip in gross margins. Sir, going forward, how should we look at the gross margins? First, actually, when we started business, we started with small OEMs or aftermarket clients only. That time, our margin is slightly very thin. Then we asked the OEMs to visit us, or we adopted to start with them. Then we have on board big B2B customer or even export also we started from second year. Then we have order from big clients or export side. Now we are not working with small OEMs or maybe an aftermarket. Then you can see that we are able to increase after three years. Now we are on same level. This particularly is slightly down because of this, one reason is our manpower cost increase because of our new facility. We added more than 150 people for new facility. So now we are giving the training to them to shifting before them. That is the reason. Sir, but also wanted to understand, because we are also expanding such rapidly and hugely, like 3x capacity expansion. Sir, what is the capacity expansion that is happening across the industry? What gives us the confidence to, we will be able to maintain the margins going forward? No, this capacity, I think I already replied confidence. Secondly, about margin, actually, new facility, of course, next 6 months, we will have some heat from manpower cost. But after 6 months, we will have three to four region to able to sustain the margin. So first, number one is we will increase our export size, so our margin is slightly good compared to domestic and export. Secondly, our electricity cost will be very less because we are putting solar. No, sir. My question is, because in last call also we mentioned that roughly we have a market share of around 20%-25%. We are now expanding 3x in the existing products. Is there now capacity expansion done by other players, like any other competitor who is expanding? Just wanted to understand how is the capacity expansion happening across our peer group? How are they looking at the going forward demand? Are they not expanding? Just wanted to know more on that. No, honestly, about peer, we cannot comment if they are expanding or not. But for us, we can see the visibility in the market, we can see the demand, that is why we are expanding. Peer, we cannot comment. Secondly, about industry, of course, everybody is growing. You can see new HVAC hub in city. Everybody put their facility there, like Daikin, Voltas, Havells, Blue Star, all. Industry growth is there. Like OEM, of course, they are expanding, but our competitor, we are not much aware. We cannot comment on that. Secondly, confidence, I think that question I already answered, why we are expanding. Got it. And sir, last question on, we are now moving into bar and plate heat exchangers, which we will supply to locomotives. Sir, I got to understand, it is a tendering process for which we will have to build and get the orders, right? Sir, wanted to understand, because to when we will have to build L1 or be the L1. How will the gross margin differ from our existing product and in bar plate? Yes, you are right, there is a bidding process. We got the 10 number for AG Proto development under bidding only. What we studied compared to raw material and the heat or maybe gross margin. If we compare to our existing gross, margin is better. Even L1, if we last two or three year which we study, margin is better compared to an existing, if we compare two L1 prices. Got it, sir. Got it. All the best for future. Also wanted to ask, can we have a plant visit arrangement to know more about the company? Yes and the expansion plan? Yes, that is I am requesting to all. This is the best idea. Honestly, if you see our facility, we are making the world's best facility. This will be the largest facility for our product in India as well as South Asia. You can connect with our IR agency, Mr. Sunil. Then you can plan. We are near to Delhi Airport, around two hours from Delhi Airport. Of course, you are most welcome to all, you can visit us. Okay, sir. Thank you and all the very best for the future. Thank you. Thank you. The next question is from the line of Hardik Gandhi from HBMG Shares and Securities. Please go ahead. Hello, sir. Am I audible? Yes. Yes, we hear. Thank you for taking my question. Nice to talk. Nice numbers for this quarter. Just wanted to ask a few questions. At first, there was a dip in the export numbers. We said that there is a huge demand on the export side, but on a consol basis, there was a dip in export numbers. Can you help with that? Actually, as of now, we are exporting to our existing client only. Last, we added one customer from North America only. Now we are accepting orders from there only. It means that we are unable to start mass production to new clients. There is, maybe if you compare to whatever order we receive, we achieve the delivery for same. Secondly, December end, there is some delay of one or two weeks because of this Christmas festival. Then we dispatched in the January month. If you see the January month, our export will increase for sure. Understood. Makes sense. Sir, second thing is, we received a PLI for roughly INR 140 crores, and along with that, we have an MOU with the Rajasthan government. If you can just help me understand the economics of it, how will it help us? This Rajasthan government, actually, there is no impact on commercial side. They just signed the MOU under INR 1,000 crores for next five year. We can invest in Rajasthan, and we give the employment. This is it. Secondly, there is another policy called RIPS, Rajasthan Investment Promotion Scheme. This policy is there. We can, it's 2024 policy, year 2024. There is a provision we can receive 1.4% to 1.6% of the top line for next 10 years. Whatever we will do the top line, our government give the incentive or subsidy for 1.4% to 1.6% and for 10 year. Secondly, about PLI. PLI, actually, we applied, and then they forwarded our application of the COE, this Committee of the Expert. They called us this Monday only. Just brief about our product or our company. Fully, they will announce the final result, maybe one or two week. If we will receive the PLI, then there is some calculation, so I don't have much idea on that. They will give 6% to 4% for next three year on the top line of the production or incremental on the last year. This we will maybe more brief on in next call. For how many years, sir? This one. Actually, they started this PLI before two years. I am not sure they will consider as say from fresh or from as an expansion. If they will consider as expansion, they will give us three year, and if they will start from zero, then it is five year. That rule is not clear as of now. Once we will receive the approvals, then same application, we will receive this thing also. Understood. For RIPS, that was 10 years, correct? RIPS is 10 year. Actually, RIPS also, there is two options. We will choose option, this for 10 year. There is 1.4%-1.6% of top line for 10 year. But if we receive as GST deposit, and then we can claim, that is for seven year. We will choose this top line one. Understood. This will be added to the other income or how will this be accounted for? It will be other income. Understood. The last question is on the gross margin front. I will not ask all the previous questions. I just wanted to know from you, what would be a good approximate blended gross margin or EBITDA, whatever is comfortable, going forward we can assume on the products. I understand for the next two quarters, we have pressure from the employees because we are training them and other things because of the production ramp-up. I am asking you after nine months period or a year from now that once all the things are normalized, what would be a good gross margin? I got your point. Actually, as per my personal opinion, I think I replied reason of that why we can able to increase. If I include all these three, four reasons, we will able to increase 1%-2% on adjusting. Okay, perfect. 1% to 2% on adjusting. Yeah. Thank you so much, sir. I hope to see you in the plant visit, and all the best. Thank you. Thank you. The next question is from the line of Lakshya Agrawal from Growthspire Ventures LLP. Please go ahead. Hello, sir. Thank you for taking my question. I had just one question. You had earlier mentioned that the fluid and seal, it is a fin-tube heat exchanger. It is something which is required in the data center. If you could help me with what percentage of revenue do we get from in this current year? Because FY 2024, you had mentioned that it was 7% of our revenue. And what is the anticipated revenue going forward in the next two to three years? Actually, we didn't prepare that data, so unable to answer. However, there's one thing I can tell you, this increasing is in good condition. So maybe if you give your maybe guide, we can prepare and then we can forward to this data. But it is increasing, for sure. Okay. Sure. I'll reach out to the IR for the same. Yes. Secondly, what could be the margin profile? Is it similar to what the existing products we have or for this, the margin profile is different? Actually, it depend on customer and product type. So we have cost sheet, actually customer-wise. So, if one customer, we already freeze the cost sheet. Now whatever product will come, then same cost sheet will follow. If we will add new customer and if export, then of course, we will slightly charge more compared to domestic. So it depend on customer and of course, product, and then volume also. If they need one piece or multiple. So something like that, actually. Okay. And currently, which are the customers to which we are supplying this product? We have almost three to four customers. They are using our product in data center application. Okay. If it will not be any problem, can you mention names of these three to five customers? I can mention only one, Schneider Electric. Mainly we are supplying to them for data center cooling. Yes. Okay. Do we also have a product mix in terms of how much of the total revenue do we have currently of the evaporator and condenser coils, or is it something which needs to be prepared? That also need to prepare, but honestly, there is no meaning of condenser and evaporator because both product for us is same, our manufacturing is same, and only for application customer-wise is different. If still you need, we will provide. Okay. Sir, thank you. All the best. Thank you. Thank you. The next question is from the line of Satish Bhandari from CJ Shah Family Office. Please go ahead. Hi, sir. Thanks a lot for giving me the opportunity. One question is on the revenue side. Like you suggested, we would be able to do 6x in three years. Wanted to understand the bridge for the three years. Once we get to 6x, what could we expect for 2025 and 2026? If you have some rough numbers that you can maybe guide us through. Actually, numbers, I think we unable to provide, but total, we will try to achieve. Maybe on the capacity side, how much of the capacity we will be able to utilize. Of the total 6x capacity that we are thinking, how much each year would we progress on the utilization path? Roughly, I can give you idea like that, we will start the proto from early next financial year, and then mass production will enter in mid of the year, and then full capacity we will try to achieve next 3 year. Then same percentage you can calculate. Basically, sort of a linear growth in terms of utilization growth. Yes. Actually, we will add new customers. Some customers will need approvals and especially for new products. Of course, we will have less effort to increase our growth in our existing product. But for new product, firstly, we will start the 4 small OEMs and then still after market, and then we will enter into it. Right. Like we mentioned that from mid of next year, we would be able to enter mass production. Yes. Now looking from there, we do have some soft commitments and a few customers whose demand we are not able to fulfill right away. How much of the demand would be available right away, say once we get into mass production. Of the 6x capacity, how much, say 1x or 2x we would be able to supply right away, and rest we would need to grow? That percentage, maybe we have to make the procurement, and then we can tell you. Secondly, like we already hired our domestic sales head, now we are hiring some more people. Now we are going to customer for each product, and there's some customer also, they visited and some maybe will visit in coming 8-12 months. Based on that, we are doing meeting with all of customer and then we are showing our facility. Of course, soft commitment is there, but we cannot give the wrong commitment to market. First we will have complete data, then we will let you know. Understood. Sir, last question on the margin side. Just wanted to understand, like you mentioned, there's a cost sheet kind of a structure. Does it work on a cost-plus margin model, or is there sort of fixed pricing and then it changes? If it is a cost-plus margin model, then ideally we would want to have a fixed margin in our mind that this is something we want to make. What is that percentage? No, we have all type of customer, some maybe running mass production, big customers, some have small quantity, some maybe special application. Based on customer or based on application, we have customer base and then their cost sheet is fixed. If we fix one cost sheet with one customer, then if we will add new product, then of course, same cost sheet will follow. Other than the domestic cost sheet we have different, and for export, of course, we have different. Based on that, we already confirmed our margin will slightly increase compared to our existing margin in coming years. Right. This cost sheet, it is revised once Sorry to interrupt, Mr. Hennessy. Your voice was not clear. I would request you to please repeat your question. This cost sheet is revised, say, on a monthly basis, or once there are changes, then only we intimate the customers on the revision in price? No, we have some of customers like one month average, but very less. But mainly 95% customer, we do average change quarterly basis. It means we change our price with the existing customer four time in a year. All right. Thank you so much. Thank you. That will be from my side. Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Kapil Yadav from Dolphint Capital for closing comments. Thank you. Santosh, you would like to make any closing remarks? Then we will No, I think from my side, all okay. I am again requesting to all to visit us actually, so you can see our facility, what we are building up, and then based on that, maybe your 90% of question, of course, by default, will answer. Rest of we will answer during the visit. So if possible, connect with Kapil or maybe Sunil, and then make a plan in group, maybe five to 10 people, and visit us. It shows good for us. Thanks a lot, sir. Thank you very much. And all the participants, thank you very much. If any questions will be unanswered, do let us know. We will provide offline sessions with the management. And thank you, Santosh. And thank you, CFO sir, for taking out time for this call. Thank you. Thanks a lot. Thank you, everyone. Thank you. Thank you. On behalf of