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Ladies and gentlemen, good day, and welcome to the CG Power and Industrial Solutions Limited Earnings Conference Call hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors. Thank you, and over to you, ma'am.
A warm good evening to everyone. On behalf of DAM Capital, I would like to welcome you to the Q1 FY '23 earnings call of CG Power and Industrial Solutions Limited. We have the management today being represented by Mr. N. Srinivasan, Managing Director; Mr. Susheel Todi, CFO; Mr. Ramesh Kumar, President, Industrial Division; and Mr. Mukul Srivastava, President, Power Systems. I'll now hand over the call to Mr. N. Srinivasan for his opening remarks, post which we'll open up the floor for Q&A. Over to you, sir.
Yes. Thank you, Bhoomika. Good evening, ladies and gentlemen. Let me first extend a warm welcome to you for the Q1 earnings call. I am Srinivasan, Managing Director of the company. I would like to again introduce my colleagues who are with me on this call. Ramesh Kumar, President, Industrial Division. He takes care of motors and drives business; Mukul Srivastava, President, Power Systems, he takes care of the transformer and switchgear business. So Ranjan Singh, who takes care of our railway business is not with us today. He is traveling. Susheel Todi, CFO of the company with us. Mr. Varadarajan, who is the company secretary, who is also in charge of legal, he's also with us.
I will move on to company performance. All the businesses for the company performed very well in this quarter. Sales and profit before tax, the profit before -- before exceptional items for the stand-alone company for Q1 FY 2022-'23, the highest in the last 26 quarters, contributed the growth of -- in all the business divisions. Aggregate sales for the quarter were higher at [ INR 1,559 crores ] according to a growth of 63% year-on-year and 11% quarter-on-quarter. Q1 of last year, of course, was impacted by COVID lockdown. To that extent, the figures are not comparable. Profit before tax was at INR 165 crores at 10.6% of sales in Q1 FY '23 as against INR 73 crores, 7.6% of sales in Q1 of FY '22, and INR 131 crores, 9.3% of sales in Q4 of FY '22. Margins were higher due to cost-saving initiatives in procurement, increase to productivity, and reduction in finance cost on account of repayment of [ term ] loans. Return on capital employed on an annualized basis for Q1 of FY '23 was at 39% as against 24% in Q1 of FY '22. Free cash flow generated for the quarter was only INR 70 crores.
Now I move on to segmental performance. In industrial systems, aggregate sales for the quarter was higher at INR 1,106 crores, recording a growth of 61% year-on-year and higher by 15% quarter-on-quarter. Profit before interest and tax was at INR 153 crores, 13.8% of sales in Q1 of FY '23 as against INR 64 crores, a 9.3% of sales in Q1 of FY '22, and INR 135 crores, 14% of sales in Q4 of FY '22. Margins were again higher in Q1 of FY '23 compared to Q1 of FY '22 due to the improvement in productivity and cost-saving initiatives. Unexecuted order book for this division as on 30th June 2022 stands INR 1,959 crores, which grew by 16% compared to INR 1,691 crores as of 30th June 2021.
I will move on to product systems. Aggregate sales for the quarter was higher at INR 463 crores, recording a growth of 17% year-on-year and 1% quarter-on-quarter. Profit before interest and tax was at INR 40 crores in Q1 of FY '23 as against INR 28 crores in Q1 of FY '22 and INR 27 crores in Q4 of FY '22. Margins were sequentially -- were higher sequentially, but lower year-on-year. Q1 of FY '22 margins were better due to the execution of certain export orders which has [ its high ] margins. Unexecuted order book at the end of June 30, 2022 was INR 1,713 crores, which grew by 43% compared to INR 1,197 crores as of 30th June 2021. Good demand was observed for transformers and switchgear.
On consolidated performance. Consolidated results include the performance of operating subsidiaries at USA namely [ QEA Incorporated ] and in Sweden, Germany, and Netherlands, which are drives and automation companies in Europe and other nonoperating and holding subsidiaries. Q1 performance, sales for the quarter for the Q1 consolidated performance sales for the quarter were INR 1,665 crores as against INR 1050 crores in Q1 of FY '22. And profit before tax before exceptional items were INR 172 crores as again INR 71 crores in Q1 of FY '22. Some of the key events in Q1. During this quarter, Tube Investments of India exercised its option to subscribe to the INR 8.5 crores equity share by paying warrant subscription money of INR 55 crores. There are no further warrants outstanding as on 30th June 2022. Tube Investments now holds about 58.05% of the equity share [ cost of ] the company.
2, the company prepaid the remaining term loan of INR 100 crores outstanding out of approvals. And as of now, the entire term loans have been paid in full. India ratings have upgraded the company's long-term rating from AA minus to AA stable and reformed the short-term rating to A1 plus. The Board of Directors of the company while approving the business plan has also approved a capital expenditure program of INR 210 crores to be implemented in the current financial year. The capital expenditure will be spent in expansion, debottlenecking, and modernizing the existing facilities, including them -- apart from that, the [ amount ] will also be spent on research and development, information technology and environment, and EHS, environment, health and safety. Out of the INR 211 crores, motors and drives will get about INR 80 crores, about INR 32 crores will be spent on railways. INR 88 crores will be spent on power and remaining will be on other initiatives I just mentioned. The unaudited financial statements with detailed notes are available as part of the stock exchange filing and also on the company's website. Between myself and my colleagues, we'll be happy to answer questions.
[Operator Instructions] The first question is from the line of Renu Baid from IIFL Securities.
Congratulations for strong performance. My first question is basically broadly to understand how has been the demand outlook. Last quarter, we had a bit of mixed comments on certain pockets of slowdown on the industrial segment on motors and pump segment of the market. So if you can share some inputs in terms of how have been the end market demand outlook so far? And are we seeing any signs of slowdown or the broader CapEx momentum remains fairly strong from end market perspective? That's the first question.
So we have given you the unexecuted order book, and we continue to get orders [indiscernible] order book. Therefore, we don't see any immediate slowdown in any of the business segments.
Sir any qualitative comments on the end markets, say, on the industrial segment, short-cycle businesses, rail market? That would be helpful.
Ramesh, do you want to say something, on the motor side?
Yes, yes. See, actually, there is a little bit of a sentiment issue in the market. That is because of the rise in commodity and in the -- I mean, again, crash of the commodity. Otherwise, there is no much problem as far as the demand is concerned. So I don't foresee any demand or decision going forward.
Okay. Secondly, what has been the kind of price hikes that we have taken on the industrial segment for motors portfolio? And does this thing now that commodities started to ease out, there could be further transmission of these cost savings to the customers? Or how do we look at the pricing side?
So I think we have to wait and see. See last year, as you know, there were 4 [ types ] of price admissions. So substantially once the, once it is confirmed that prices are going to cool down and then relatively, they are stable, then there will be no difficulty in passing on some of the cost increases. Whatever we increase only, we are going to reduce. But provided, we have to be [careful]. It cannot be momentary. It has to be stable and it has to be realized, then at that point of time the -- I mean the entire industry will take a call.
Right. And one last question if I can add on. Broadly, if you see from the margin side, you have done the [interval], you've highlighted of certain cost savings from productivity and cost reduction initiatives -- can you throw some more input in terms of specific initiatives in the kind of results that the strategy yielding both in terms of working capital management and the operational initiatives that you've taken here?
So I will not be able to give specific details, but I can tell you, one [ is I told ] -- we have been saying that we are looking at -- we are implementing a lean program with the assistance of a consultant, that is giving us some benefits. We have also been working on procurement efficiency and very modes of recruitment, that is also giving us some benefits. Third is actually, as our financial position improves, will be able -- we have been able to negotiate and then pay wherever possible in a quicker span. Earlier, we were taking 60 days. We can pay sometimes in some cases 30 days, some cases down cash. So these things are now possible. Based on all this, we are seeing the impact. So that's all I can say.
[Operator Instructions] The next question is from the line of Rahul Gajare from Haitong International Securities.
I have got 2 questions. And the first question is on the motor business. Could you give us a sense about how much of the market is served with imported motors and which category of motor are normally imported? That is -- and connected with that, how is the competitive intensity in the motors? That is the first question.
See, the imported is that -- there is a very little direct import. See direct import, if I consider it maybe about INR 1,000 to INR 1,200 crores is the import. But there is an indirect import, what I mean is that the motors will come with the equipment. Okay. So if I add all that, it will be about INR 3,000 crores in the import in India as on today.
And the competitive intensity?
[See] competitive intensity is there already because we have never -- we have always been the leaders in motors. So we are far ahead with our competition. So that will always be there, and then we'll have to fight it out.
Sir, the second question is on the railway business. Could you give us an indication of the total revenue from railways in both industry and power in the current quarter? And how does it compare to Q4 because Q4, you indicated that you had the highest quarterly revenue from railway -- and also connected with that, how is your market share moving in the overall railway business?
So I think we just report only as one segment at interest, both for motor and railways. So we don't share the details related to railways separately number one. Second [ reason ], it will be very difficult to compute and then say the market share because the railways have got several segments. So we are manufacturing only traction motor, electronics, relays, point machines, et cetera. So the railways actually brought several of these -- [ several systems ] and there is no official version of what is the market share for each of the products which the company [indiscernible] by railways. We can't give you this way. We don't have the statistics.
But you did indicate that last year was your highest revenue coming from railways. So some qualitative sense on how the first quarter has been vis-a-vis the fourth quarter last year quarter?
Qualitatively, if you ask me, we have done well in railways. We've done well.
The next question is from the line of Ravi Swaminathan from Spark Capital.
My first question is with respect to the motor market. Your [uptrend] on how the motor market would have grown this quarter? Could we have gained market there? What are the top 4 main sectors which are driving the growth for both LT and HT motors, if you can give your thought process on these figures?
See, the exact figures, I won't be able to share right now because it is not yet published, but we are anticipating a growth of almost about 78% in the quarter, the quarter which has gone now. And the infrastructure and especially this island gas and ethanol, the pharma, these are the industries which are doing very well. So that is adding up to the growth. Even HT, water and wastewater is doing very well.
Okay. Sir, the 7% to 8%, is it sequential growth? Or is it like -- because Y-o-Y you have grown -- industry system have grown at 55%. So...
Okay, we cannot compare Y-o-Y because last year, if you see one and half month, it is almost like close condition. So it is not right comparison. If you compare with quarter 4, I think we are somewhere around 11% to 15%. That's how [Technical Difficulty]...
So the industry would have grown at 7%, 8% and we would have grown at 11% to 15%...
Yes, yes.
[Technical Difficulty] and the 7%, 8% would be revenue growth and not volume growth.
It is volume growth. Generally, the industry is measured in volume growth, not in the value, because value growth will be more in April, the prices have gone up, commodity prices have gone up and then realization also has gone up.
Sure, sure. And my second question, so basically, any status open with respect to the Vande Bharat orders? How -- I mean, how is it likely panning out? What kind of orders can come in over the next 12 to 24 months? And also the power systems export initiatives, how would it likely planning out in the [Technical Difficulty]
So Vande Bharat, as you know, we have got one trial order, which will be executed over a 2-year period. The current tender of whatever government has announced for 200 twin cities for us, construction of the entire full train, not really the engine part, the entire full train. Electrification, the early one was elected, what we got was only the electrics part. So this -- over and above this how much they will come, [ anyways in this sector ] we are not eligible. Eligibility criteria is that only those who have already have experience of having built and run such trains can participate. So we are not qualifying for that. So any further tenders in what form, it will come, et cetera at this point, there is no clarity.
Okay, sir. And with respect to the export initiative to power so basically...
No, initiatives are always there. But as I pointed out earlier, so we have to gear ourselves up to go full power. Earlier -- our consumer factory itself had exported transformers for INR 1,000 crores. So right now, we are seeing what our orders are there, we are making slow -- for the slow and steady progress. But still, we have to just gear ourselves before we go full out in exports.
The next question is from the line of [ Janak Vora from Janak Limited ].
Sir, my question is, what is the status of CG House property at Worli?
No. CG House property, earlier this property was mortgaged to the bankers. And then we have paid off the loan and then we have taken possession. This property is with us now. That is the current status.
So that is [lean] is lifted, but there was some dispute for the lease renewal with the authorities. So whether that has been resolved?
So that is a lease renewal we have given an application. So that is being processed because of its own procedural thing it is taking time. But otherwise, we don't -- we are not seeing any disputes. It's a procedural delay that is taking place.
And sir, are we planning to sell CG Power and CG House at Worli, and shift our registered office to Chennai?
There is no such idea to my knowledge as of now.
And sir, second question is, [CG Power] posted now quite stellar returns, INR 130 crores consolidated profit. Why there is no mention of any dividend because [your] -- dividend started since last 7 years. Last CG Power has paid dividends in 2016. And now since CG Power has restored part of its past glory, is it not the time to offer something to the loyal shareholders who stood behind CG Power in its toughest time?
For the year ended March 31, 2022, still there are some debit balance in profit loss account unless and until that loss is wipeout, we will not be eligible to pay any dividend. So, this year [Technical Difficulty] under the companies act, it is not possible to declare any dividend at this point of time. '22 and '23 depending upon the profits and depending upon the position, the Board will consider the appropriate time.
This is like I am one of the 249 shareholders who are holding nominal capital more than 2 lakhs in CG Power. So on behalf of them, I would like to request -- to consider the management at least some special dividend, from accrued dividend of last 7 years to celebrate the restructuring and recapitalization and like a revival of CG Power.
So we kindly will request our Board of Directors. The Board only can take a decision.
[Technical Difficulty] Like something you should think of like those loyal shareholders who are holding more than like 2 lakh nominal capital and since years, -- so these are things like employees, they have got all their areas, everything, like [indiscernible]. Only shareholders are remaining now.
Sorry to interrupt, sir. We request you to please join the question queue back again. The next question is from the line of Ankur Sharma from HDFC Life.
Two questions. I think before that, this is a small request, you normally give out this press release over the last few quarters with your order book and other segmental numbers. So it would be great to have that as well. I think this quarter, we did not see that. So that was one. My question really was on your order backlog. So when I see the number for Q1, about INR 3,600-odd crores which is actually flattish on a Q-on-Q basis, so even in Q4, your order backlog was around the same number. But also, if I get it right, implies that your order flows or your orders booked during the quarter may not have grown maybe in the high single digits at best. Is that the right number? Am I missing something there? Or is that correct that the orders would be in the quarter would have been maybe mid to high single digits?
So fast in the press release that we have released and which we have filed to the stock exchange, we have given details of unexecuted order book as on 30th June 2022 for each of the businesses. So second to your question, I think order flow is healthy because unexecuted order book and this actually, whatever we execute and then that gets eliminated, only the balance that can [deserve] right now from the order book, you can see for the next 3 quarters, at least Q2 and Q3, they are fully covered in generally. Some may be executed in Q4 also. So order book -- order inflow has been quite healthy.
Okay. Any number you can share, sir, if you have it handy?
It is in the press release, you can see, we have filed with the stock exchange. It is there, segment-wise we have given the number.
Okay. Sir, second, just coming back to the earlier question, in terms of exports out of your power systems business, how much would that have been during this quarter? And how do you see this scaling up? Because if I remember right, before or maybe a couple of years back, export should you have a fairly sizable number on the power side. So how are you looking at it going forward?
See, I don't have the current quarter export number. So whatever orders are profitable that we are executing. It's not a question. We are also applying for several overseas standards. And then there is also a lot of demand in the indigenous side, both for the power transformer as well as to the distribution transformer. Orders have to be basically profitable, and then the customer has to be worthy of the service because we don't want to get our money to get stuck. So that is how we are approaching the market.
Okay. And just last one on this would be, would you kind of split out your revenues between -- on the power systems side, between the power transmission distribution utilities versus industrial consumers?
We don't share the data, sir.
Okay. Not a problem.
The next question is from the line of Mayank Chaturvedi from Equirus.
Congratulations on a good set of numbers, sir. I have a couple of questions on the Power Systems segment. My first one would be in FY '22, we commissioned the 400 KV grid substation on a turnkey basis under the EPD division. So is this one of the legacy projects that is putting pressure on the Power Systems margins? And what would be the EPD order book that is left to be executed? EPC, Engineering [indiscernible]?
This is a very insignificant part of our business. We don't have the orders to execute. So there is nothing for us to report on that side, very negligible and insignificant orders only we have.
And sir, on the CapEx side, you guided for INR 90 crore CapEx for the Power Systems segment. So would this largely be towards the relocation of the consumer facility?
Various existing stabilities, upgradation of facilities, modernization, there is some automation, so balancing facilities of only the facilities currently at Bhopal as well as at Malanpur. These are the areas where we are investing.
So are we yet to relocate that consumer facility or what is your thesis on that?
So I will not be able to answer because the earlier facilities which they wanted to relocate in the process, the -- many of the capacities got cannibalized. So exactly it will be difficult for us to at this point of time to reconstruct or visualize how that will be reconstructed, etcetera. So because of that, we will not be able to -- I will not be able to commit on that just now.
The next question is from the line of Rajiv Gupta from RBC Financial Services.
Yes, I had 2 questions. One was if you could give some flavor on the consumer product? This is 2 quarters back, if I remember right, there was a comment from the management that we will get back to the original demerged consumer product very fast. That was one question. The second question was on stock options. What has been the company's policy on stock options? And what was -- if at all? And what has been the strike price, who -- at what general level are people entitled to stock options? And what's the policy there?
So the employees at the senior level, the key managerial personnel, Vice Presidents and Presidents are eligible for stock option out of the scheme. Last time, the senior management team was given stock option, which we invested over a period of 4 years. The strike price was around INR 157 so that is the question number 2. Question number 1, I will ask Mr. Ramesh to answer.
Yes. See, actually, we had 4 different consumer products when we demerged and now we have already launched 2 products. So once we establish ourselves, maybe then we will think it over about the balance when we will be able to launch the other products. Is that your question answered?
Well, partly; if you could give us some flavor in terms of how do you look at the market in terms -- I know you will not give the specific numbers or specific projections. But in terms of how important it will be in the next 3 years in the overall CG Power portfolio today in terms of percentage of turnover, etcetera? Just a little bit of more flavor if you could give. I'm not asking for numbers, but in terms of how significant or is it a very high priority stuff? I'm not asking you for a specific number.
We are operating at a priority sir. Every business is directly -- consumer business is definitely a priority. But we are just totally new. Therefore, we have to take measured steps. It will take some time for us to grow this business.
Okay. And are you expecting any problems with the brand names, any confusion in the market between CG and your also demerged companies -- how are you basing that?
We have no problems. We are not experiencing any problems.
The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors.
Am I audible?
Yes.
So my heartfelt compliments to the management team for transforming a very sad state of affairs. And I'm confident that CG Power will be emerging as a case study in many businesses school, the way this company has transformed this year. So my sincere compliments to the team. With that, sir, I basically took a thread from the previous question about the consumer side of the business. So as shareholders, I did request a little more understanding about how the customer is receiving the CG brand on the consumer products, because there is a complete new distribution network. There is a completely new setup that has to be created because the first [indiscernible] has gone with the demerged company.
And you mentioned that out of the 4 product lines 2 have been introduced in the market, which I understand, fans is one of them. So some color is very much required, and I hope you will [ abide that ]. And the second question is on the broader CG debt or the EV initiative, as a whole group, other TI and you are an important component of PII and can very proudly say now so is being taken. So what is your stat CG Power is doing on the EV side? You mentioned about some motors, etcetera, that you're working on, on the EV side so just that understanding is what I request for.
Yes, yes. So actually, the CG brand is well known brand in the market. So we are introduced as a CG brand only. And we already have motors and we have commercial motors, which goes to the consumers. So the entering into the CG brand is not an issue for us, and that is the reason we have reentered all these products. And then we are going with that brand only. We don't have any other problem as far as consumer products is concerned.
And customer response has been good or the products we introduced -- customer response and dealer response have been quite good. So as regards to the question on EV, if I have understood your question correctly, our intent is -- CG is predominantly -- we know the manufacturer of motors quite well. So we would like to position ourselves to manufacture motor for the electric vehicles for which we are currently working in the development stage. Until such time, the development is completed and product is approved and product is shown to some OEMs, etcetera, we will not be able to share any information. But certainly, we are interested in this area. Therefore, we are working on this particular business.
In fact you mentioned about the CapEx, [indiscernible] and the setup in the various segments. I was actually hoping to hear something basically being focused towards the, which I did not hear. That's why I was trying to kind of get a clarity on the focus with EV and your words about the consumer side of the business is I think very reassuring because for the company itself will continue to be a very strong brand here. So kind of directly competing with them and getting the dealer interest and all of it is very reassuring. So that's the insight. So on EV there's no CapEx so nothing to maybe [indiscernible].
So the existing facilities are adequate to manufacturers in design and develop prototypes for EV motors also. So whatever we -- while we have not specified what our additional incremental facilities that will take care of the requirements for these purposes also.
The next question is from the line of Harshit Kapadia from Elara Capital.
Congratulations on good numbers in the challenging time. Just one question, sir. I just missed your break on CapEx. You had mentioned a breakup in terms of the segment level CapEx. Can you please repeat?
INR 80 crores on motors and drives, INR 32 crores for railways, about INR 85 crores for Power, rest of it all -- I mean, IT, R&D, etcetera.
The next question is from the line of [ Shanti Patel from Shanti Patel Investment Advisors ].
I wanted to know how much capacity utilizes we have achieved till today? And secondly, what would be the approximate return on capital employed in next one year?
So the first question, if you ask me how much of CapEx we have spent so far.
Not CapEx, capacity utilization. How much capacity you are utilizing at our plant today?
So it is running between 70% to 80%, sir, all across our different plants.
Okay. And the second one was whether we will be able to maintain the -- how much savings should be there in respect of loans that we have repaid because as I understand, now there is no loans, all term loans have been repaid. So what will be the savings on that account?
So we are almost selling around INR 45 crores to INR 50 crores on account of repayment of this term loan for the full year.
Full year, INR 45 crores, right?
If I'm not wrong.
The next question is from the line of Rahul Gajare from Haitong Securities.
Thanks for the opportunity again. Sir, I understand that CG Power has been well received in the South market as far as the consumer products are concerned. I wanted you to discuss your experience in the South and for the markets with the consumer products. That's the first question.
Sorry, can you repeat your question? Yes, south market experience is good because consumer generally -- south market contributes almost 40% for consumer, and we have a very strong brand in South also. Our experience so far has been good and I think we are also doing in the same lines of the market demand of South in our overall percentage.
Okay. After South, which is the other region, which you've done well.
East and North.
And how much would that contribute to -- opportunity?
Percentage-wise, the South will be about 40%, 45% and between North and the East. West is we are yet to start in a big way.
Okay. So that's the first question. Sir, the parent company has set up a separate EV mobility business to enter 3-wheelers and few factors. How does CG Power and TI electric plan to work together to -- in the larger scheme of EV business over the next couple of years, some thoughts on this business.
So there is no agreement between TI and CG. TI has got its own plans on mobility. For example, if -- for any of their businesses, maybe, for example, let us say, tractors or 3-wheelers, etcetera if we invite some tenders for the supply of motors, we will also participate. If it is any specific product development we can develop. So everything will be obsolete. So it has to make commercial sense for TI, it has to make commercial sense for CG. So as of now, there is no future understanding between both the companies. But business inquiries do come. When they send to business inquiries to various people, we also get and we respond. We compete with any other company.
The next question is from the line of Pradeep Raghunathan from Arohi.
I just wanted to ask -- so you mentioned the breakup of CapEx that you have in mind. But could you also -- could you also tell us what kind of capacity will we have? So right now, we're in at around 70%, 80% capacity. What is the incremental capacity that would be generated by this additional CapEx?
So actually, no, what will happen this amount will be spent on what is called a debottlenecking. There will be sectional imbalances or there will be some modernization. On account of that may be more additional 15% to 20% capacity will get released.
And secondly, on the growth initiatives, you mentioned on consumer and both you mentioned then there is a meaningful update. Could you tell us how are you looking at this in terms of when this would be something which you could share, let's say, 1, 2, 3 quarters down the line? The consumer business as well as the EV business.
So I think they are all at a development stage -- unless and until some plans are certified and then finalized, we will not be able to any data.
And I appreciate that. My question was actually, is there some sort of a milestone where you would be able to then be able to share data around what's happening?
As of now, unless and until, as I said, there is -- we are just working on that. On the EV side, we are working on the development of motors and other products, actually. As and when it comes to ship and say fully, I'll be able -- it can take 3 months. It can take 6 months, it can take 9 months. Similarly, on the consumer side, we have launched the -- whatever products we have launched, then that is actually will continue. Newer products are on the drawing board. So as of now, as and when the only the plan for finalists will be able to share.
The next question is from the line of Niket Shah from Motilal Oswal.
I had 2, 3 questions. So first on the margin side, you've done a decent job this quarter, and I'm assuming this quarter would have been the [ full ] quarter and raw material cost for you. Given the fact that we've seen decline in raw material prices, should one now assume that given most of your contracts are fixed price contracts, you should start seeing improvement in margins?
Pardon. Can you repeat?
Given most of your contracts are fixed price contracts, and this quarter you would have seen the worst raw material costs, and we've seen raw material costs coming down across the board. Should one assume margin expansion going forward?
So I think this was discussed earlier in one of the questions. If the prices continue to fall and then if there is a substantial drop, customers, both and consumers will expect us to reduce the price and pass on the benefit because you know the prices that we are now -- at which we are selling actually last financial year, we increased the price 4x because of the increase in prices. So margin expansion cannot be taken for granted that way.
Got it. And if you can also highlight what are the white spaces within the motor category where you would be targeting now, if you can qualitatively give some comments on that? There are only certain categories where you would have very high market share, certain category in motors where you wouldn't be present, like, for example, which you highlighted earlier. But would there be more categories like EV motors where you would be targeting?
Do you want to answer that?
So I think in LT Motors, we rolled a large share. But every product, whether it is LT motors or FHP motors or large industry motors, every product as and when we get good inquiries and we want to increase our market share, we are working on it. As far as EV is concerned, as we said, it is still at a very development stage. So therefore, our priority is to all the segments of the motors which we are manufacturing. Everything actually is a growth area for us.
Sure. And one my question, running an older plant, which you currently had in CG versus you -- if you had to go for a greenfield plant today, would the margin be far more different than what it is today in the existing older plant?
So I think it has got different implications. When you put a new plant, there will be lot of initial expansion costs, so there will be high depreciation. There will be high level of investment due to automation, etcetera. There will be plus and minus. We have to see because 70% is material cost. So in our business, 70% to 75% of material cost. So the play is actually if you remove depreciation only maybe about 20% within which how much you can play. So old depreciated plants have that one advantage, newly set up plants will have different advantage. Both will coexist and both will have a different market to serve.
Got it. And if I may squeeze in one final question on Vande Bharat opportunity. Would it be possible for you to quantify the size of opportunity that you can address, for example, if one train would cost INR 100, what is the type of opportunity for you within that INR 100?
No, no, no. We can clearly say the, as I said earlier, one is the entire train. The current tender for 200 trains actually is all for the entire trend. So that, I think, for which we are not eligible. Earlier, they just only the electrics that part alone was given a tender on which we have got awarded for one development order at about INR 37 crores, INR 38 crores. So that is entirely we will supply and procure and since it's the development project, which will be executed over a period of 2 years.
The next question is from the line of [ Shrey Jain ] from Quest Investment.
Sir, I'm slightly new to the company, so pardon me for my [indiscernible] if any. So from my understanding, we are not present in the low voltage switch gate segment, but that segment seems to be quite big from what I understand the INR 25,000 crore market. So just wanted to understand why are we not present there? Okay. So we've not been done in the past, but do you see any entry in the future?
So [indiscernible] can answer that.
See, at CG, we used to have a low-voltage sister business till the year 2000 we which we sold off. And then over a period of time, our energy got focused on developing the high order switch gates right from 3.3 KV. Now related segment per unit cost of the dual item is very low, and it has its own integrates in terms of handing the business also on market expansion phase rather than technology. So over a year, over the last 20 years, we have focused more on technology oriented high-end of the product. So as of now, we do not have any plans to be entering into [indiscernible].
Okay. And sir, anything on the HVDC transformer -- because I think there also, we are not present, but the other categories with?
Yes. HVDC is one area. But in India, still the HVDC contributes to around less than 15% of the total market. I think we are coming from a low base. We have ample lot of opportunity to grow in the areas where we already present for so many areas. And then here we are trying to strengthen and consolidate our position. Maybe in coming future, we might think our HVDC. But as of now, over hands are full with the existing portfolio of what we have.
Okay. Okay. The other question is now since most of our subsidiaries were done with selling them. So just want to understand, did you do the technology from the companies or does that also goes away in your [indiscernible]?
See, on the overseas company, most of which were on the transformer side, we already have absorbed the technology, whatever we offer, and we have been upgrading the technology, especially in the segments of HGI, which is now we have to and we are working on 400 KV. As far as the other areas, which are the confines already self-sufficient in India. Our real plans are being there. On the transformer side, we have been there for so long. So we -- actually we are self-sufficient in those areas.
All right. And sir, just last question. So now that we've completed the turnaround and all of that is over. So in terms of management guidance, not specifically numbers, but in terms of categories, any other category that you see you could start looking into which also is a great runway for the company in terms of growth for the next 3 to 5 years?
So it's just too early to think of the existing businesses can we still -- there are a lot of work to be done and they can be still growing. So therefore, it is too early to think of anything else. We have not been taking in those directions.
Okay. And sir, just last bit on the green and renewable energy and hybrid, do you think a company has any strength to cater to those kind of segments?
So everything in those areas, if it has anything to do with power systems or motors, certainly, we are well positioned to sell those industries.
The next question is from the line of Rajiv Gupta from RBC Financial Services.
Just wanted a flavor of what kind of CapEx on the consumer products business you decide in the next 2 financial years in terms of ramping up? Also, what are the products we have launched, that must be in the public domain so I'm assuming there's no confidentiality there? And what are the products which are about to be launched on the consumer product business?
See, we have launched fresh water pumps for both the domestic agriculture and a little bit in industry. And we have launched a complete range of fans, seeding fans, stable, pedestal and exhaust and everything, the complete range of fans. So as of now, these are the 2 products. And we are -- right now, we started off with the contract manufacturing. So maybe going forward, we will see how -- what is the CapEx is on that. Right now, we would not be able to tell you on that.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Bhoomika Nair for closing comments.
Yes. I would just like to thank the entire management for answering all the queries and particularly all be participants as well. Thank you very much, sir, for giving us the opportunity and wishing you all the questions.
Thank you, Bhoomika. Thank you, both of you. Thank you for your support. Thank you.
Thank you. On behalf of DAM Capital Advisors, that concludes this conference. Thank you for joining us. You may now disconnect your lines.