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Ador Welding Ltd
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Welcome to the investor meet of Ador Welding. Today, we are joined by Aditya Sir, our MD; Mr. Suryakant Sethia, our CFO; and myself Shirish. Mr. Harish Ledwani, who is also MD of Ador Fontech has also joined us from Bangalore. So if you have any questions, you can also ask him. So we'll start with the presentation, which will be given by Aditya sir. Then we can start the Q&A session.
All right. Good afternoon, everyone. Thank you for taking the time to attend. We have a short presentation, we'll go through it. Mr. Ledwani is on the call. However, this is primarily an Ador Welding call. It's just that since the companies are going through the process of merger. We have asked him to also to be there in case there's anything relevant that needs to be discussed at that time.
However, this call will be primarily from the Ador Welding perspective. I'm going to run through a presentation fairly fast in terms of the data and stuff and then leave it open to any questions that might arise. This is not just going next and anything.
Now you can.
Now, this is working.
This is our disclaimer.
Disclaimer is up. So I presume most of you would have studied the results. I think this is fairly straightforward in terms of what we had in the third quarter. More important part being in terms of the expansion in terms of margin, which is what was something that we've been focusing a lot on and trying to drive that all together. In terms of general demand, it still remains to be quite robust and no indications of anything deferring from what we saw in terms of Q3 and all of that. And I think the budget, most of you will know much better than me, seems to be outlaying the CapEx that should be fairly positive for us as well. Fairly standard again in terms of the margin percentages and all of that, that we talked about the last time, we had a call in terms of how we need to keep working on improving all of those and the return on capital employed.
Working capital, of course, tracking all of that as well as what are the main concerns that come up and how we are making sure that we manage the working capital cycle, especially with the growing part of the businesses in all the verticals taking place at the moment. I think you have to admit some one. Okay. Segment-wise performance, this gives you an overview in terms of the consumables and the sort of growth rate and all of that, that we've been -- sorry, this is going to -- consumables, gives you an overview of exactly what we've been talking about this is a key driver of the business and what we've been looking at tracking on that account as well as the results of that basis.
If you remember in Q2, we had talked of the inventory hangover that did hurt from that perspective and most of that has sort of evened itself out and now is on the right path in terms of the margin percentages. Civilian equipment, as we keep making the effort to grow this -- the margin results more and more and as the CapEx outlay is good. We're seeing a lot of demand coming in from that area. We are focused on ensuring that these towers sort of start moving a little bit more upward as well as the margin comes closer to where it was approximately a year ago.
The last thing I wanted to highlight, which was important is the Ador International business. As I've mentioned before, this has been a key focus area in terms of driving the business, and we're starting to see the results. There's a lot of opportunity that's sitting over there, and I'm very happy to say that the team is delivering on that and seems to be robust going ahead as well, especially in select key markets that we have gone into.
The flares & process equipment division, a lot of questions always come over here. We're starting to see the turnaround, starting to bear fruit over here. And going forward, for the next few quarters based on the order book we have, based on all of the cleanups that have been done, all of the execution that's happened we feel more confident in terms of the margin percentages, the working capital requirement as well as the sales that will come going ahead from here.
The merger, just to give a quick overview is the application has been filed with NCLT. And hopefully, it won't take too long I don't have a guesstimate on it right now, but you all will be aware exactly how long these things normally take in NCLT, and we are following the due process accordingly. These are some of the new products we've had, some of them more focused in Make in India a range of products as well as on certifications and all of that, that have been going on.
And now I'll leave it open to question answers because I know most of you would have gone through this already, and we'll take questions one by one in terms of everything in that account. So thank you very much for that. All right, go ahead.
So one by one we'll be open for questions. So I'll read out the guidelines first. Due to the timing constraints, we would be limiting a maximum of 2 to 3 questions per participant. Please be quick and precise with your questions. I will stress that it is a very important point because we won't have much time. Please avoid asking questions already answered or covered in the presentation. [Operator Instructions] The end time of meeting will be at 5:30 p.m. in respect of number of questions pending, and I request you to please adhere to this time line. Just to be clear, this call will be recorded for compliance purpose.
You could take off the sharing of the presentation, let's keep it open to questions and all of that.
So the first speaker for today is Mr. [ Viraj Mehta ].
Congratulations, Aditya. A couple of questions. Can you break up the growth in terms of volume and realization for 3 months and 9 months in consumable division?
Okay.
That was the first question. Second, if you look at the segmental margins of the consumable division, they look significantly higher than our historical margins. A, do you think there is any one-off in these margins or it is just operating leverage helping us in this business?
The third question is regarding the EPC order that we got from -- not EPC, but basically the...
Flares.
Flares orders that we got from ONGC. A, is there any contribution from that in this quarter? And what is the revenue you see from that business in Q4 and next year? And generally, if you would just guide us a little bit in terms of volume and revenue growth you see for FY '24?
Okay. Thanks, [ Viraj ]. Let me quickly try and answer a few of these. So if you recall, I think I would have discussed it at the end of Q2 as well that the volume growth because of Q1, because of what happened with the entire steel prices and everything like that, that happened in Q1, volumes are actually [ dipped ] in terms of Q1. We just kind of got it back on track in terms of Q2. We are having volume growth at the moment. Q3 did see volume growth versus the year before. I think the volume growth would have been in the region of 7%. 7% is what we were looking at in terms of volume growth in the last 3 months.
And we sort of see that going forward as well from whatever I can see. I don't like to take a very long-term view, especially based on volatile [indiscernible] supply chain, all those other things you all know about. But I think that seems to be self-sustainable going forward. So we're kind of buoyant by that and kind of happy to have seen that.
The margins in consumables is not a one-off. It's what I consistently expect at a level that we should see going forward. That's what we've been trying. I've been telling you guys, have been telling when we had an analyst meet, everything like that, that we did understand where the concerns were and had to follow a step-by-step process to get ourselves back up there. So the operating leverage is playing a game plus we are able to understand the learning curve in terms of how steel prices are moving, stuff like that and how we price ourselves in the market. So we are trying to ensure that is consistent. It's not a one-off.
ONGC revenues have not yet started. They will start from this quarter and they will start from this quarter at about, I would say, about 7%, 8% of the order value should be in this quarter itself. And then moving forward, most of it, 80% of it -- 75% to 80% of it should be over the course of next financial year and then leading the balance into the term after that. So you will start to see that kick in from Q4 onwards, it hasn't yet started. I'm not going to give you a guidance per se for next year, we're in the middle of figuring out our numbers for next year and a lot of it depends on steel consumption, volatility, all of those different factors. But we do expect there to be the sort of volume growth that we are expecting -- seeing at the moment and would sort of be a baseline level that we'd be looking at going forward. I hope that answers some of your questions.
Yes, it does. Anything on equipment, would you like to add some color? How is it doing? Are you seeing newer products introduction?
Yes, we've got a few products that are coming in. We've got a few large scale orders that are coming in from large customers as well. Challenges in supply chain have been there. Are easing, not yet eased, are easing. So that also helps a little bit. The order book is kind of decent. The market is good for it at the moment, and we have to keep running with it. We're also seeing the Ador International market pick up a little bit for that. So all in all in general, okay, not bad, not bad.
Our next speaker for today is Mr. Jaisan.
Yes. So just wanted to know -- to the earlier participants -- well in terms of traction in the equipment segment. How are we looking at it? And just wanted to know what is the percentage of imports, sir, in this full equipment segment, ballpark number?
So just to give you an overview, we are the largest Indian manufacturer of welding equipment, a very, very large chunk of it is imported. As per our data 80 odd percent would be imported. And we play a very significant role in the domestic market, and we believe that's a very big strength of ours. It has its own challenges, of course, and -- but we strengthen the product accordingly, strengthen our supply chain accordingly. And I think over time, simple Make in India story and sort of the preference towards it will definitely keep playing a role that's our long-term opinion of it. We don't want to just be trading in it. We want to be manufacturers if we are to have the strong technology, parts that we do.
If you look at the technology, we sort of play around with what we call like a technology pyramid in the welding equipment space. I say we are in the mid segment, if you were to divide the pyramid, we fairly play in the mid-segment. There's the top end of the pyramid, which is very driven by European or Western companies that are very strong in that. And I think we don't fiddle-faddle too much with that. We have a certain product range and the customer base for it, but we don't eat into that market too much at the moment. The low end market, which is catered from imports as well as the mid segment market has imports. But the low end of market, we imports some part we can play in. We, again, pick and choose where it makes sense to do it. But the mid-part which is quite a strong -- middle belt has a lot of opportunity. So our game plan is to keep working on that. But imports is a very, very significant part of that market.
Okay. Sure. Sure. And I just would want to know, of course, this has been -- the CapEx cycle is on an up move, and this is fairly broadly known from a consensus perspective as well. Just wanted to know in terms of -- we, of course, cater to a host of industries. So just wanted to know, in terms of subsegments, where are you looking at a lot of traction on the ground?
So like -- it's the same answer pretty much to what I said last meeting is also that the general infra, the heavy engineering, railways is playing a very strong role. A lot of fabrication sort of work that's going on, it seems to be good. So I think those are the very big drivers of what we're seeing. I'd say, general infra companies are definitely doing it and railways, I would say I have the highlights in terms of that. Then the rest of it keeps playing out then you'll have your oil and gas and then you'll have your cements, in fact, there's a lot of cement expansion talk that is going on where we see that going forward to be a big role for us in the next financial year. In fact, we're expecting cement expansion to play a good role for us as well.
Steel expansion has been announced a little bit of that should play a role going ahead. So I think it's generally in that part. And the easiest way rather than me tell you is if you just look at how steel consumption is happening because we follow that, that's probably better track than the welding industry is, will give you a fair perspective of that.
Sure. Sir, this volume growth which you mentioned was 7% for the last 3 months. Is that right? Did I get the number right?
Yes.
3 months is more...
3 months is approximately 10% to 11%. Sorry, 10% to 11% for the last few months.
So 10% to 11% for the last quarter. And I think 9 months, are you saying it 6% to 7%.
Nine months, it's flattish because of Q1. Q1 was down a bit. 9 months, it's fairly flattish. 9 months is fairly flattish.
For the last 3, 4 months is better -- if you ask me in all our meetings right now, we don't look too much beyond before July because from the period April to July, things were just very, very volatile. So we study data now mainly from August till January to get a sense of what is happening. So that's more relevant data to us.
So 10%, 11% is what is good for this quarter.
Yes, I don't want to get into the math. We're -- all right on that account sort of on that, yes. But I think yes, I would say 7%, 8% is a little more, sort of ballpark.
Sir and just wanted to know, I mean, you did mention that, of course, we are targeting the mid segment in the equipment sector -- in the equipment segment, so just wanted to know, of course, ESAB is a large player there and has a significant market share [ edges ] as well, advantage over us. So is there anything more we can do in that segment to basically scale up that equipment base?
I won't comment on them in any way, but there is scope for us to keep increasing our equipment base for sure. I think there's a leveraging opportunity that will come through the merger as well. There is service opportunity leverage that will come I think it's just a question of the preference for a robust Indian-made product is definitely coming out. I think there were supply chain issues that are also getting ironed out, so that should help a lot going forward. So that's it. I mean, primarily from that account.
Okay. And lastly, just wanted to know this from the FPED segment perspective, you -- of course, you won a large order. Any more orders in the pipeline? How are you looking things on that front?
Yes. So it's very simple. I think it'll come on a lot of people's mind, it's very, very simple and important to understand the FPED market for us is -- yes, we do have a few more things that are being tracked and a few more things that are hopefully, going to come about quite soon. They're not going to be the INR 130 crore, INR 140 crore orders, which is what we talked about. It doesn't need to go always in that range, it can be the sweet spot of between INR 10 crore to INR 30 crore and sort of make sure our margins are correct. Our working capital is correct. All of that is being followed correctly.
We expect revenue to grow quite significantly next year, and we definitely need to build up the order book for the year and after that to keep taking it forward as well. So I think we're on track for what we want to do there. There is no plan to say "I want to go 5x over here." There's a plan that says, "okay, I've got to grow it step by step using this base order that we have now to take us there and execute that order correctly, make sure we get the margin we're projecting on that correctly." So that's the way we're looking at it at the moment. But I think we've got -- the pipeline is encouraging. It's definitely encouraging.
So the next speaker for today is Mr. [ Duane Deshna ].
So the first question is -- so I mean, if we look at the journey in the last 2, 3 years, we have kind of streamlined a lot of things, both at operational level, financial level, everything. So now -- and the economic environment is in our favor. And so are we aspiring for slightly higher growth than, let's say, 12%, 15% growth?
And pertinent question to that on the consumable side is that how easy or difficult it is to take market share because if you want to grow at a higher pace than market, then we need to take market share, is it a fair possibility? And what are we doing to take higher market share?
Okay. So One is -- so let me try and answer this, but I'm not going to be as specific as you want me to be, but I'm going to try and answer it as best possible. Yes, we do want to outperform the market that's very much exactly what we are geared towards and what we're working towards. So everything we do is about how do we outperform in terms of what the market growth rate is. So there are 2 or 3 things that need to be kept very well structured to make that happen. The key product lines that drive the market growth have to be sort of your distribution has to be well set up for it, the product approvals and all of that have to be in place.
So we've been driving a lot of that, and that's the sort of traction we are seeing in Q3 and going forward, a little bit to be helping in that front. So I think we will see consumables sort of have the opportunity to outperform a little bit. And we've been encouraging that a lot to happen from that angle.
To take market share or not is a very subjective question in an industry where you don't track it that closely, and there are very few publicly listed companies. It's not only us versus the other public listed company. We have other competitors who are privately listed as well. So it's also easy for me to keep jumping up and down and say, "Yes, we grab this and we grab that." It's a question of what do we see steel consumption moving at? How are we growing that all together? Where are the markets and the pockets in which we are kind of outperforming, where are we underperforming? So it's a very vague kind of thing, but you can definitely say that the ambition and drive and the processes we are putting in place is towards outperforming that.
Got it. Got it. It's very helpful. And second question on export. I think in the presentation, you showed that quarter-on-quarter, export is actually doing very well. So we are already at quarterly INR 18 crore kind of a run rate, which I think is a fantastic number. So I mean, we are almost -- on a full year basis, if you look at it, it's INR 70 crores, INR 72 crores, we are kind of inching towards that number. So next year, are you saying that even on this year basis, we can grow at 50%, 60% on this year's base, whatever it might be.
Yes. We should grow -- we should end up this year growing at approximately 60%. I think by the end of it, when we clock it out, we should be at about 60% growth versus last year. And I think the base is still small enough that you can still be talking of 40%, 50% growth in terms of that. Yes.
So the next speaker for today is Ms. [ Saloni Hemnani ].
So my first question is regarding the flares division. So last to last quarter as it was mentioned in the PPT that the orders in hand are INR 31 crores, which has increased from INR 31 crores to INR 134 crores. So currently, what is the order in hand in flares? And I would like to understand more on the execution time line when it comes to these -- this division specifically?
So I presume the number you're referring to is prior to our call because this order came in, in June. This order came in June, July. I presume you're referring to prior to that. In June, July, we managed to get a flare order from ONGC at Uran, which is pretty much a very interesting order for us to take forward. That order being a large order is INR 130 crores or whatever it is INR 120 crores is approximately anywhere from an 18-month sort of up down -- 18 to 24-month type of execution from July of '22 with the bulk of it happening over next year.
Typically, these orders vary, as I said, they can be in the sweet spot of INR 10 crores to INR 20 crores, INR 10 crores to INR 30 crores. And we have a few more lined up that are specifically quite soon. They could range anywhere from approximately a 4- to 6-month cycle in terms of execution. With the larger ones obviously being more.
Okay. I'm aware that this question has already been asked for this con-call, but I would still like to understand in layman terms, basically, the distinction between how we are trying to prevent what used to earlier happen in the project engineering regarding the stretching of the working capital. So why exactly have you reentered into this? And how is it different basically from...
So I'll rewind a little bit. I'm not -- it's not -- the first notion is, I mean, to tell you it's not a reentry. So let me step back a few paces, and you'll have to bear with me while I tell you the story, and hopefully, that will make sense. The first is with the project, and we've always been as a company in the flares business. Since the 1980s, it is a division that's been there. It's a very tiny division, it was just doing flares. What happened is sometime in the last -- between the years of 2014 -- 2012, '13 and 2018, '19, it started moving towards an EPC or project engineering business, where we started taking on contract jobs that were not only flare engineering-oriented, they were jobs that were beyond flares, and you were doing sort of EPC kind of work.
And as I mentioned in previous calls, it wasn't enough engineering work in it. It was more just execution kind of work. So our working capitals will get loaded up. The margins would be thin and sort of inflating revenue in a certain sense. I wouldn't say inflating, it's not the right word, you were working towards a revenue model rather than you were working towards the metrics of bottom line and working capital and stuff like that.
In September 2020, when we changed things, and we decided to relook at it and we weren't happy as a Board with the direction in which it was going, we basically said that this division first needs to clean itself up and needs to stop doing just this top line heavy and cash intensive work and needs to go back to its roots of doing engineering-related work, which primarily is in the space of flares and process equipment. Hence, we renamed it all from the project engineering business, which is very generic to going flares and process equipment work.
We built a new team and then sort of looked at it as a very design and very value-addition sort of oriented division. It then cleaned itself up. We had to clean up a lot of the stuff that you all would have seen in the prior financials and all of that. And then we said, "okay, let's go back to the drawing board and see what are we good at? What can we pick up step by step." And that's where we started bidding approximately, I would say, sometime in March, April of '21 or Q1, let's say, April to June of Q1, we started getting assets together and saying, "Okay, now what are the projects we want to look at. What are the flare-oriented work that is going to come our way, what is the process equipment work where we are adding engineering value, coming?" And then we started with the bidding cycle and that happened and then we bid for the projects that you are seeing like one of them that has come in.
So it's sort of reentry at all. It's basically just a cleanup process that says go back to where you're strong in that regard. The order that came in July of 2022 is 6 months or 8 months of work leading into it. So we had been on it for some time. And now going forward, we remain very committed to it because it's a good opportunity. I think we can do it correctly. It will require a capital outlay, but I think it can be done correctly given our engineering value addition in it. I hope that helps in some way.
That does. So my last question is regarding the exports division where you are mentioning that there's a lot of traction. I just wanted to get an understanding on what is basically in this export division, like INR 18 crores of export this quarter included exactly the equipment part. So which segment is being more focused on the exports?
Welding consumables and welding equipment. And welding consumables will account for approximately 85% of that sale, 10% to 15% would be on the equipment front.
Our next speaker for today is Mr. [ Chandresh Malpani ].
We can't hear you so you have to be a little louder.
Am I audible.
Yes. You are now, okay. Yes, you can go ahead.
Yes, and congratulations on the good set of numbers. So basically, sir, I want to ask on the flares division. So on Q1, we achieved 13% margin. Q2, we achieved [indiscernible] this quarter, we achieved again 14%. So what is the steady-state margin from this segment, which you are looking at?
I think Q3 is a good base reference to use, and we're going to build on that.
Okay. So believing that we have a big project in hand. So any steady-state margins that you can give us?
I can't give you an exact number on that, but I can give you a sort of indication, Suryakant will know better than me.
So Gross level -- gross margin is around 20% -- 20%, 22%.
What we are looking at here.
Okay. Okay. And sir, secondly, the 9 months run rate has been INR 542 crores. So where do you see closing this year? Basically Q4 being the strongest amongst the quarters?
So I don't give guidance. I will tell you that, like I answered in my own way there is some level of growth that is expected that happened in Q3, and I expect a similar level of growth to lead through to Q4.
Sir, that was the last speaker for today.
All right. I think you have someone else who has just added in. Okay. We'll hang on for 5 more minutes if there's anything else, otherwise we can...
And we have one speaker Mr. [ Ankit Gupta ].
Congratulations to Aditya and entire team of Ador for very positive numbers. Aditya, on the opportunity on the flares side, what will be the -- how big will be the opportunity for the kind of projects that we have received from ONGC, let's say, something like the mountable flare stack. So what can be the -- how big is this opportunity? And how recurring is this? You're saying next year we'll have a large base of FEP contributing at least INR 120 crores, INR 130 crores kind of top line. So how do you see -- and you're saying you want to grow on that. So if you can talk about the kind of opportunity which is available to us on this segment?
So firstly, so Ankit there's 2 things. One is that, that number that you mentioned for next year is a little bit higher than what I had initially indicated. So just keep that it's a little bit lower than that in reality. Having said that, look, it's not a question on the opportunity. One is you have the domestic market, which is going through a lot of its own capacity addition and stuff like that, that comes up but this division is not only about what is the market opportunity. It's also about what is getting built up and then taking orders that fit into our framework of how we want to do things.
So besides flares, what a flare basically does is it treats affluent gas. So it's basically in a pollution control system from that. So with that, there is many synergies that align along to flares in different ways, and there's a lot of work going on to reduce emission norms and all of that. And there's a lot of design capability we have internally to keep dealing with that sort of stuff, which leads in the process equipment part of the space.
I don't think market size is an issue. I think market size for the types of orders that we want to do, build up our track record, get our engineering correct is what matters. And if we're looking at it, as I keep saying, we have no desire to go for x in this division. We have no desire to suddenly have massive upward cycles and stuff like that. We want to just do it on a very steady state level. The market is definitely there for what we want to do as per our requirement at the moment. So I'm quite comfortable with that in terms of market capability.
There's also a market that exists abroad in the Middle Eastern and stuff that right now, we're just staying away from a little bit, but it's not to say that, that opportunity will not be looked at as we strengthen ourselves in the Indian market more with delivery.
Sure, sure. And on the overall industry growth, the kind of CapEx cycle, which is happening and expect it to grow further over the next few quarters or in the medium term at least. How do you see the industry growth happening on the consumables side, let's say, for FY '24, given how the other industries or your customers are doing currently?
I think it's fairly in line with what you are seeing in Q3 and maybe a little bit up and down on that. But I think that's a fairly good indicator.
Our next speaker for today is Ms. [ Nitika ] Shah.
Hello, am I audible?
Yes, go ahead.
Yes. Sir, I just wanted to take it further from what the last participant said. About the -- when you say that you will grow ahead of the industry, just a fair idea about what the industry growth will be? And how do you feel that how strong is the CapEx cycle this time.
So -- and one more thing is like, I mean, will be benefited by the PLI scheme? And how is that panning out? And you see any kind of hiccups to the CapEx cycle in view of what the world scenario is just now?
Thanks. I wish I could answer all your questions. I don't think I can, but I'll try. Look, I don't -- I can't give you a supply side estimate of what the market growth rate is except to keep looking at the indicators regarding steel, steel consumption and the other players in the market. That's the only thing I can tell you, I don't have any other data that we look at. And I think the estimation is that it's pretty much along the lines of what you're seeing right now. So I'm going to stay away from answering that question of exactly what I see as the market cycle -- as the market growth rate. But like I said, those other indicators should give you some help over there.
Your second question was with regard to the CapEx cycle. The CapEx cycle seems to be strong at the moment. There's -- but this -- it's very hard to look beyond 6 months -- 5, 6 months simply because of what the last 15 months were, so it's very hard to keep saying that "Oh, it's going to keep running robust." There are many factors that could play a role in there. Global liquidity, all of those sort of things -- global supply chain, anything else that could come in. But as of now, we have seen for the last -- since July, August, a fairly good and positive step-by-step movement upwards. And what I can see for the next few months is it seems to be in line and on track. Beyond that, I don't know. I don't have an answer beyond that.
I do know that we are planning for the much longer CapEx cycle and we are working towards that. But it would be hard for me to confirm that, that's going to happen for sure. Is that okay?
Yes, yes.
I'm sorry, I can't precisely answer your questions but...
Our next speaker for today is Mr. [ Dhawal ] Shah.
Yes, I was -- I want to understand as you mentioned, there are many players in India in the business which you are in. If you could help me understand how everyone is stacked up in terms of the sizes. Like, for example, we are at a quarterly run rate of around INR 180 crores, INR 190 crores, consumable and equipment combined. So Ador is at a certain market share or a certain place, the market leader, and there are other many other players. So how is everyone placed in terms of -- and how different are each of them in terms of the sizes? Like your next competitor would be where from you? You are in a INR 180 crore, INR 190 crore the next will be at INR 150 crore, INR 100 crore. I just want to understand broadly.
Yes, I think you'd have -- so my understanding of the market is there's the 2 larger players who sort of are at the levels we are, which are public figures in that regard, so you can always get that. Then I think you have a host of -- I would say approximately 3 or 4 players who are approximately anywhere about 30% -- 25% to 30% smaller than us in that regard that which will come -- about 3 or 4 key players would be in that market.
And product basket for some of them, I don't think it's as varied as ours and the other large players is but a fairly good product basket as well at least 60%, 70% of that product basket may not be as varied throughout. And then below that, you'd have another round of players who would be 40%, 50% of our size -- 40% of our size or 50% of our size, that would also be there. So yes. Again, depending on the more restricted sort of product lines, a little more [ trade ], stuff like that yes.
Got it. Got it. And in terms of product basket compared to the market leader, how -- what is yet to be filled up, where is the gap?
We don't have many gaps. It's okay. As I keep saying to people it's our product gaps is not a big issue. I think we are pretty much 85%, 90%, it's fairly similar in that regard. I don't think that's a big concern. Some by virtue of being a global leader and being an MNC and stuff like that, which is obviously natural which we can't always tackle head on, but I don't think it matters to a very large degree in the Indian market, at least not yet, I don't feel it is.
Got it. And given the focus of government on Make in India and you being the only supplier of equipment in India. In any of the government-related projects, is there a requirement to source locally?
There is definitely some favorability that does come here. We are seeing some favorability come that's happening for I think all Indian players in various different spaces, not only welding and there is definitely a push towards it as long as you're able to meet the technical and commercial requirements. It's not just [ blatant ]. So you can't just disregard that. But yes, definitely, we are seeing that a little bit, yes, for sure.
Okay. Okay. Okay. And if, say, the third or the fourth player, which you said is 25%, 30% smaller to you. If they were to roll up their sleeves and become aggressive, they would be able to penetrate the market with newer products or pricing? What would be your sense?
No. The game plan is primarily pricing. So I don't think that will -- you can't keep changing that game. I mean, that is the game that allows the next level of players to come in. So I don't think that can keep affecting everything. There's a certain -- I mean thing that's there. I think it's also demands -- scale matters in terms of your distribution capabilities, scale in terms of your manufacturing capability, being able to ramp up across, having the full product basket. They all matter a lot in that regard, brand value, of course. So those things matter a lot. Having said that, they've grown well also in the last few years or whatever it is and they've also grown down a certain path.
So they're also establishing their own way and they'll have their strategies to do that. I don't get into that too much. I don't want to comment on that more than that.
Our next question is for the question from Mr. Shakik.
Hello? He's there or not there?
He was there on the call, he also raised his hand but he's not there now.
All right. Do you have anyone else? And we can come to them if required.
Our next question is for a follow up question from Ms. [ Saloni ].
Hello? Are we admitting everyone? This problem happening. Asking to be unmuted. I don't think they're being placed in the room correctly. I think you have to relook in that something. You try unmuting yourself please Saloni, might help you. You can type it in the box, if you want, we can answer it.
Yes. I was trying to unmute myself, yes. So my follow-up question, sir, is on the flares division. Just wanted to understand the bidding system. Is it the lowest bidder? And basically, how does it work trying to get the order in place?
It depends on customer to customer, and there is a bidding system that would take place. But you have to meet certain technocommercial requirements as well. And when you're dealing with PSUs, I mean not much to do with flares only. But in terms of most product lines, there is obviously commercial bidding that matters in terms of being lowest or not. So yes, it does. But you not only deal with the PSUs, you deal with private customers as well. So both of those come into play.
And sir, depending on the order size, what kind of capital outlays are basically required in flares?
So I think if you're asking specifically about the Uran project, I think we have a max exposure level of approximately 35 to 40 is what we capped out the entire max exposure, peak exposure level is what we mapped out and we should be well within that. I think hopefully, we should be there. So in general, that should give you a ratio that matters a little bit.
All right. Sir, just a final confirmation from your side. Just wanted to understand in terms of the margin profile, is it fair to assume that the consumable will always be leading the segmental margins with around 15%, 16% followed by equipments and then flares or because we are being aggressive in flares division, can we expect higher returns coming from that segment?
So I think we've got to a base level in terms of consumables that we're kind of good with and you can build on that a little bit. Equipment has a little bit of potential to pick up and depends a lot on the CapEx cycle. I think flares, you should see an improvement from that as well. That's the way we're looking at it. So -- in summation, we should have -- all 3 should be little to -- deliver a little bit better in this economic environment.
So I can assume equipment being the third with flares coming in the second in terms of value addition in your returns?
I would resist answering that question, if you don't mind.
Our next speaker is Mr. [ Dhawal ] Shah. It is a follow-up question.
Just a very basic question, given I'm a little -- fairly new to understand the business of your company. If you can explain me and help me understand what exactly is the flares division and what is it about?
Okay. So the flares division is basically through process industries, such as oil and gas or steel and stuff like that, there is basically emissions of certain gases that happens, primarily, it could be like sulfuric acid, H2SO4 type of thing or sulfur, that sort of stuff, nitrogen-sulfur based in terms of its emission. That needs to be controlled. You can't let that out in the atmosphere. So what you normally would do is you flare it through a certain technology, and we work on that flare. If you ever look at a refinery, or any of these other things that I mentioned, you'll see a flame burning somewhere that flame is coming out of a tip that hopefully, we've made. So that's basically it.
So it will also be a lot used in chemical industries as well?
Yes, there is. And there's a lot of what I was sort of leaning on earlier in terms of the complementary products that will come into the chemical industry as well.
Okay. And you were also mentioning about some -- and then the subordinate process equipments also -- you were mentioning something about process equipment, what was that? I did not...
Process equipment basically means that when it comes to heat exchanges, any other process equipment we're not restricted in terms of flares but similar type of process equipments where you're treating something or doing something like that is also what the division works on.
Okay. So you provide the engineering.
Design, engineering, yes, fabrication of those kind of things, correct.
Yes. Okay. So there you might be buying it from someone and then doing the fabrication along also doing...
Most of what we will do today, 95% of what we will do today is where we do the engineering and the design as well. As I said, that's where the value addition comes. So there's a lot of stuff that comes our way that we don't take simply because it's not got enough value addition.
So we have a follow-up question from Mr. Jaisan.
Actually, just one question I had as Andor Fontech is also there on the call. I just wanted to ask in terms of an outlook. So Andor Fontech is mostly the refurbishment and repair of products. So how is the outlook for them in this current scenario? Just wanted a general sense of the outlook.
Fairly, it's fairly robust as well. I mean the outlook is there. I don't think you can see a bigger necessarily growth as you would in a conventional fabrication sort of business. But at the same time, there is definitely opportunity for growth over there as well.
Okay. And -- just -- I mean in terms of the flares equipment, you said, we have a small division doing heat exchanges and other equipment as well. So do we -- just wanted to ask, I mean, so GMM Pfaudler is also a company which does these things I mean, of course, probably we might be at a small level, but do we compete with them also in this product?
So we don't particularly compete with them. It's a different sort of market that we work on. But there's -- yes, it's slightly different than that.
One investor Mr. Akshay has asked one question on the chat box. How long will it take for the merger to happen between Ador Fontech with Ador Welding?
How? How?
How long will it take for the merger to happen -- Ador Fontech with Ador Welding.
So as we've said the application has been filed before NCLT, and we sort of -- in their hands at the moment, we've got an indicative time line that we would like to see it. I'm very, very hopeful we'll close everything in this calendar year. So that's basically where we are.
So one question from Mr. [ Akshay Kothari ].
Sir, just wanted to know in this flares division, would there be opportunity on the FGD side as well?
Opportunity on the sorry, what is FGD? I didn't understand that, sorry.
Flue-gas desulfurization, which is COP 2026 guidelines, refineries are bound to follow that guidelines?
Okay. So we I would not say we're very into that entire thing. But I mentioned earlier, there are certain ancillary product lines, very related to flares that might come into that part of it. But yes, we could be in that -- in a small way from that angle. But no, not -- the fact that I don't know exactly what you talked about, I presume means it's not exactly on our radar at the moment.
So Aditya sir that was the last speaker for today.
Okay. Is there anything else or anyone else? Thank you so much for taking the time. We really appreciate it. We've been advised to try and do this every quarter, and we will keep doing that every quarter and keep driving it. And thank you for taking the time to attend.
Thank you.
Thank you.
Thank you.