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GMM Pfaudler Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Conference Call of GMM Pfaudler Limited. [Operator Instructions]
I now hand the conference over to Priyanka Daga. Thank you, and over to you, ma'am.
Thanks. A very warm welcome to all of you into the quarter 1 FY '23 earnings call of GMM Pfaudler Limited. The earnings presentation was uploaded on the stock exchanges and also available on our website. Hope all of you had a chance to go through it.
From the management, we have with us our Managing Director, Mr. Tarak Patel; our CEO of International Business, Mr. Thomas Kehl; our CEO of India Business; Mr. Aseem Joshi; our CFO of International Business, Mr. Alexander Pompner; our CFO of India Business; Mr. Manish Poddar; and our Company Secretary and Compliance Officer, Ms. Mittal Mehta.
We'll give you a brief overview of the performance of the company, after which, we will get into the Q&A. Before we begin with the overview, a brief disclaimer, the presentation that we have uploaded on the stock exchanges and on our website, including our call discussions that will happen now, contain [Technical Difficulty] have certain forward-looking statements concerning our business prospects and profitability, which are subject to certain risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements.
I will now hand over the call to Mr. Patel to provide you an overview of our performance. Over to you, Mr. Tarak.
Thank you, Priyanka. Good morning, everybody. So let me give you a brief overview of the quarter that we just completed.
Overall, it's been a very strong quarter for us, both in terms of execution and also in terms of order intake. Both the International and the India business has performed quite strongly. The International Business has performed exceedingly well, both in terms of revenue growth, but also in terms of a significantly higher order intake this quarter. This puts us in a very strong position in terms of order backlog. We have a recurring order backlog in excess of about INR 2,100-odd crores, which obviously gives us good visibility for the next few quarters. Our order intake also has been quite nicely spread over our technology systems and services business. So all in all, all our business lines are doing quite well.
The investment activity in Europe and the U.S.A. is really heartening. We're seeing a resurgence of investment. We see plans and investments coming back to roadshows, and that's driving the growth in the International Business. In India as well, chemicals still need -- still continue to be the biggest sector for us. And going forward, we hope that pharmaceuticals will also pick up.
Our synergies with the International Business is also doing quite well. We've already met the budget in terms of value sourcing from India. And we hope that over the next few quarters, we can increase shipments from India to the rest of the world. Our stock and sales program also is gaining traction. We have a about 25-odd vessels that are being manufactured here in India, and will be shipped to Germany in the next few weeks or so.
We've also seen a major breakthrough in terms of our mixing business. Our mixing business was a small business, about a INR 30 crore business few years ago. We acquired a company in Pune called IMSD and then became about a INR 50 crore or INR 60 crore business. This year, we expect to double that business. We've seen a lot of activity in the fermentation space. So there's a lot of augmentation, penicillin manufacturing that will be coming in Hyderabad and Vizag. And we've been quite -- the technology that we have in mixing has been quite helpful for us in securing large orders in this space as well.
Another good order that I'd like to talk about where we kind of showcased the strength of the group as a whole is a large systems order from China. This entire order will be manufactured here in India, but the process and the technology has come from Pfaudler U.S. and then obviously, the local Chinese sales team have kind of worked together to win this $6-odd million order, which showcases really the strength of our group.
Interseal India also is growing quite nicely. We've added 4 new clients to the Interseal list, and we expect a large order in Interseal in the region of 20 to 25 mechanical seals in the next few weeks. We are also currently working on a large asset recovery project. Hopefully, again, in the next few days, we will have a breakthrough year. And that's something that we've been working on for quite some time. So we expect a bit of success there as well.
In terms of commodity prices, we've seen a cool-off of commodity prices. Metal prices have come down, carbon steel and stainless steel, both have significantly reduced. We should see that impact actually helping us Q3 and Q4 onwards. So that will be nice to see. However, energy cost will remain a -- the concern for us. U.K., Germany and India still have higher energy costs, especially gas prices have increased significantly. So that's something that we are trying to keep our eyes on.
Lastly, we also acquired a small engineering company in Milan, Italy, Hydro Air. Again, very process-driven technology-driven company that will help us enter the adjacent markets as well as augment our capabilities in the space of engineering. So this will be a nice addition to our group. And hopefully, over the next few quarters and years, we will be able to bring the technology to our client base.
With that, I think let's open it up to Q&A, and we will be happy to answer any questions that you may have. Thank you.
Thank you, Tarak. Mahesh, you can open the [ stream ] for the conference call questions.
[Operator Instructions] We have the first question from the line of Utsav Mehta from Edelweiss AMC.
2 questions from my side, both on the India Business. The first one, we noticed some improvement in gross margins in the International Business, but the India gross margins are probably at a multi-quarter low. If you could just explain if this is just purely to do with steel prices and should improve going ahead? Or is there a mix change that we should know?
This is Aseem Joshi. I'll take that question. So yes, Utsav, you're right, our gross margins are lower than previous quarter. It's affected primarily by the higher steel prices, as we indicated with in our last conversation. Tarak did allude to the cooling off of steel prices. And we're seeing that benefit now in steel prices line currently. So we are seeing that by the end of this quarter, that expensive steel would have been flushed out and the newer orders will be converted with [indiscernible] now. So I think it's a transitional problem that we had anticipated, and it will correct itself by the end of the quarter.
And therefore, it's fair to say with the increased execution run rate and improvement of gross margins, the current EBITDA margin should revert to 20% or closer to those levels as you go ahead?
So eventually, yes, we do need to flush out this more expensive steel. But, yes, ultimately, we do expect to convert that towards a normal run rate EBITDA margin.
I think one more point here, Utsav, let me kind of jump in. Also there's a slight change in product mix, heavy engineering by nature is not as profitable as our glass-lined proprietary products business. So as that chunk of that pie of that business increases, you will see a little bit of impact there. But again, our focus is also trying to improve that business and improve the margins in the business, obviously through, let's say, export business, change in MOCs and things like that. But yes, as a general case, the product mix will also have a slight impact on profitability.
Is there a higher mix of HE this quarter?
Yes, definitely.
Okay. Great. My second question, again, on the India Business is that, look, we've seen a very healthy order inflow this quarter. But if you look at the order book year-on-year, it's up only 3% because obviously, our execution run rate is sort of very high. If we have to do around INR 250 crores, INR 300 crores of revenue each quarter, to grow for next year, you will have to clock in INR 300 crores, INR 350 crores of order inflow. Do you think that's -- given the current environment, that's doable? And is it maintainable, INR 300-plus crores of order inflow each quarter?
Yes, I'll comment on this quarter's order first. So we employ a strategy of being very selective in order to make sure that they're accretive for our business. You may recall from last quarter, we had actually lower orders than expected in our glass-lined business because we have had capacity open for orders that we really wanted and those converted in this quarter. So similarly, in this quarter, from [ JV ] engineering side, we've not picked up a lot of orders because again, we can see a few good orders coming and we've held that capacity open for us. So we'll always continue to be selective in the orders that we take. We feel comfortable that we can -- there's enough orders in the market for us to meet our business projections for the year.
Yes. Just to add a few points on that. There is definitely a very strong opportunity pipeline. Like I mentioned to you, here in India, the chemical sector is doing quite well. We have large investments lined up, which will materialize in the next few months. So overall, we are quite confident that we can meet the run rate, and we have enough visibility to make sure that we continue to grow the India Business at a certain rate.
Okay. Okay. And last question from my side. Could you just help us with the gross debt -- net debt number -- gross debt and net debt number at the end of the quarter?
Gross debt, we were at $70 million at a consol level and the cash we had was $38 million. So $32 million is the net debt.
Sorry, can you repeat the cash number, please?
$38 million.
$38 million.
There's also a change in the pension liability because of the increased interest rate. If you remember, when we acquired the Pfaudler Group, the pension liability was in the range of about $70 million. Today, it's come down to about $35 million, all because of the interest rate increases. So that's also a nice positive thing that we've seen this quarter.
So it's down -- sorry, I just -- I can only see the crore number. So it is around INR 490 crores at the end of, I think, last quarter, if I'm not mistaken, INR 400-odd crores. How much is it now?
$38 million. Pension liability stands today at $38 million.
[Technical Difficulty] Mr. Sandeep Tulsiyan, you may go ahead for your question.
Yes. Am I audible?
Yes.
So congratulation firstly on great set of numbers and also reporting strong order inflows. My first question is pertaining to the glass-lined segment. If you could help us give the glass-lined segment order inflow growth that you had in the current quarter because what we had been observing is, although the overall order book was growing, this piece was not keeping up to the pace because the other segments were having a faster growth. So if you could just help us give some more color on the glass-lined specifically?
So glass-lined business had done well across geographies. There were large orders that we won here in India. In China, we've also kind of hit 60% of our budget for the year already in that film orders and also in Europe is where we've seen a strong order intake in the glass-lined business. I don't have the exact number. Priyanka is checking this number, and she'll probably come back to you. But there has been a good growth in glass-lined order intake this quarter.
Yes, just to complement that, the standalone order intake has been something like INR 300 crores. And like Aseem mentioned that we have been conservative with regard to the HE. So that's the highlight.
So glass-lined, in this quarter, we had around INR [ 192 ] crores of order intake in India.
Okay. So out of INR 300 crores of inflows, INR 290 crores was pertaining to glass-lined is what you're saying?
INR 190 crores.
INR 190 crores. Okay. Got it. All right. Second question was pertaining to the PPA impact number, which we disclosed. I think this quarter, we have not separately disclosed that. If you could just help us with that?
So Sandeep, if you recall, on the EBITDA, the PPA impact was only in Q4 of FY '21 and Q1 of FY '22. Thereafter, everything was -- the entire PPA was in the depreciation amortization line. And that number has now been frozen to something like INR 5.5 crores per quarter. So that is the number that you will see consistently throughout. And because it's now not a changing number every quarter and all that, so that's like as normal. So that therefore, that has not been disclosed separately. If you refer to our presentation in Q4 of FY '21, we had given a detailed table of how that will pan out over previous years.
Right. No, that number used to be around INR 7 crores. So I just wanted to get in, in that number. So that INR 5.5 crores is what you see.
You can assume INR 5.5 crores.
And again, Sandeep, that's the noncash item that you would imagine, the depreciation and amortization line.
Third question is on the high gas prices in Europe, particularly. I just want to understand the genesis of the strong inflows that we are seeing in our International subsidiaries. What is driving this? Is it more driven by the competition facing challenges due to higher gas prices and we are scoring because of the Indian factory over here? Or because the overall demand scenario -- rather the demands now itself looks quite positive and robust going forward. So what is exactly -- if you could give some more color on this?
So I think it's a combination of multiple things. Obviously, our offering now to the customer, we are much more flexible with what we can offer. So we have different facilities across the world where we can kind of bring in the right product to meet exactly what the customer wants. We also have, like you said, technology leadership as well as brand recognition across. So I think all in all, I think for the kind of -- it's always the first choice. And if we can kind of come somewhere in the ballpark of what the customer is looking from a price standpoint, I think we usually get the right of first refusal. So from that standpoint and having new facilities in China, in Germany, having those ramping up nicely as well using India as a low-cost source of components as well as complete vessels, that gives us a bit of an edge. But again, having said that, we do believe that the investments that we are seeing in Europe is kind of driven by local manufacturing, local [indiscernible] being created in these geographies. So it's heartening to see that. And most companies -- the companies are now looking at building these capacities in-house so that they don't have to kind of depend on India, China for many of their products. So that's driving a lot of the investments in Europe and in the U.S.
Sure. And one last question, if I can squeeze in is just if you can share the EU-wise, where do we stand in terms of capacity? And what is the utilization [ limits ]?
Yes. So EU-wise, on the India -- at an India level, we have some numbers. We are still rolling out the global EU program. So I can't give you a number for a global EU, but the Indian numbers after we [ negotiated ] last year, now the lead ones have come into Hyderabad, that just came into Hyderabad a few months ago, we'll add to that. And then obviously, we have the bigger permits coming into the current facility sometime in September, October. So that will also increase. But we'll try and share with you the revised new data maybe in the next month or so.
We have the next question from the line of Harshil Shethia from AUM Fund Advisors.
Sir, can you just throw some highlight on our new acquisition? How is it going to help us in moving the whole entire business? Or are we planning to bring the technology in India?
Yes. So this acquisition is really acquiring basically technology process know-how and engineering capability. It's an asset-light model. They don't have any manufacturing. They have 50 employees and everything is outsourced. Their experience and knowledge in membrane technology is something that is a welcome addition to the group. We already have engineering teams that run our acid recovery business, both in the U.S. and in Germany. So this would be a very complementary kind of addition to those group of people as well. One of the problems that this company face in countries like India and China was that they didn't have local manufacturing and hence, they were normally priced out. Now having local manufacturing in China and India with GMM Pfaudler here and then with our factory in China, will obviously give them an edge.
The opportunity pipeline in this business as an engineering company also is quite strong. So we expect to kind of grow this business. They've also entered into nice new markets where they can just provide customers with green technologies in plant-based proteins. They do work on the EV side as well. So all in all, it will kind of extend our product portfolio, will also help us enter into new markets. And like we said, we're always looking to add good technology, new technology, and that's something that we will bring to the table with this acquisition.
Okay. And secondly, it would be very helpful if you could quantify us the whole market size, what kind of growth rate is the market growing at. And are we just a very small company in a big pond or just to get a sense of the whole business?
In this acquisition-related business?
Yes, the acquisition.
Yes. So again, it's a small company. There are the competitors here in India and China localized. But again, here, it's a technology play, right? So a lot of these skid-mounted units and processes that these guys sell are really kind of made specifically for clients, right? So you work with clients over a few months, you do trials, you do tests and then you come out and then you kind of make and manufacture a complete system. So again, it's kind of moving up the value chain, they're going to give process guarantees, they're going to give kind of value-add and not just sell equipment. So there are specific clients who will come to you who needs specific issues resolved, and that's where we kind of target. But yes, doubling or tripling this business over the next 3 to 5 years should not be very difficult.
Okay. Sir, thirdly, I had this question. So in the last quarter, you had mentioned that you'll give some sense on the guidance for the next 4 to 5 years on our vision, I guess.
Yes. So we are planning something -- an Investor Day sometime in September. More details will be shared in the next few weeks. But yes, we haven't [ submitted ] on that promise, and we will come back with some new numbers and a new plan in terms of what and where we want to be.
[Operator Instructions] We have the next question from the line of Sanjay Shah from KSA Securities.
Tarak bhai, congratulations to you and your team for excellent set of numbers and especially in this challenging time. So my question was regarding our order which we received was on the side of that fermentation application. Sir, can you elaborate on that? Does that technology with us and what size opportunity we see in that segment because I suppose this is a new order what we have received?
Yes. So -- Hi, Sanjay. So the idea here is, obviously, there is this entire push and PLI scheme that is driving local manufacturing. Penicillin is something that we've usually always imported from China, and the government has been kind of proactive to start and have companies manufacture the Penicillin here in India. So there are 2 large -- 3 large plants that are coming up, 1 in North and 2 in the South of India, a major investment in this technology. And in terms of order size, we got orders in excess of about INR 50 crores just for the agitation for the fermentation part of it. So it is a major breakthrough for us. And we do have technology because these are very large reactors. They can go up to about 300,000 cubic meters. So very, very large agitators. And obviously, with the technology that we have in mixing, we were the preferred choice when it came to this. So that's a nice breakthrough for us. And now we're also looking at using this technology to maybe enter the international market where we can also give fermentation technology to other clients as well.
Does that throw us a huge opportunity on this vertical or it's limited?
There is definitely an opportunity. As I said, if more people in India start manufacturing and fermentation becomes a big opportunity for us, definitely, we will be the preferred supplier here. There's not too many other manufacturers in India who can kind of deal with fermentation technology. The other 2 or 3 players are international and obviously, being Indian and local, we have a cost advantage. But yes, if this was something that were to grow, then yes it would directly relate into a new business opportunity for us.
Great. So my second question was regarding our order which we received from Chinese market, around INR 50-odd crores. So that was -- just to understand, what's the USP or what's the rationale of the Chinese people giving order to GMM and where we use the U.S.A. technology and engineering from India? And what is that, that we -- that they have to come to India for such an order, sir?
Yes. So let me take this. So this is quite a specialized product, it's a wiped film evaporator. And normally, they would have to take it from our American source, [ there in Pfaudler ]. Clearly, this is a situation where the customer needed a cost-competitive product. And we were able to really hit the sweet spot of what they needed because our sales team -- local sales team really understood what the requirements were. The process know-how came from our U.S. team. A lot of the engineering work and, of course, the manufacturing work will happen in India. So this is an example where we were able to really benefit from the strength of one -- sort of one team kind of approach across the 3 locations to convince the client, like yes, this company can meet its requirements from a technology, from a cost and from a delivery standpoint. So I think it's a good example of how we can work together to meet customer demands, wherever they are.
So does this order carry, what you call, performance guarantee?
No. So these are equipment that we are supplying and we were in competition with a European competitor and then obviously, having the flexibility of localizing manufacturing, that gives us an advantage. But in terms of the application itself, it is something that we've done quite often but there's no process guarantees associated with this.
We have the next question from the line of Renjith Sivaram from Mahindra Manu Mutual Fund Life. [Operator Instructions].
Congrats on good set of numbers. Sir, just wanted to check with you the local CNG gas prices and the availability issue, are they completely sorted out now and from here on, we will -- do we see an incremental increase in the gross margins or the standalone margins from here on?
So, Renjith -- so supply of gas is not a concern. The pricing is a concern, and that's hitting us by approximately 1% in this quarter. So yes, as the prices cool off back to normal prices of last year Q1, that should be a straightforward improvement in the EBITDA as and when it happens.
Yes. But also for -- just from an understanding standpoint, we do have a combination of gas furnaces as well as electric furnaces. And the way that we kind of look at the gas price increases, we kind of balance the production between gas and electric as much as possible. But if gas prices were to reduce over the next few quarters, that will positively impact our profitability.
Okay. And sir, if there is some thoughts on 2 places where, they're kind of substituting gas with a low-cost propane or something which is low cost. So such kind of alternative is impossible for us or what?
No, I don't think for us, there is a chance of replacing the gas with any other kind of gas, plus the consumptions are quite high as well. So, no, and then to convert the gas furnaces to electric also is not possible. So we will have to continue with gas.
Okay. And how you see overall outlook in Europe? I think this was asked before also like, we hear that the economy is not doing much and they are also impacted by this gas availability and most of the plants are at subdued utilization. So do you see a slowdown in order intake going forward because of this on the international market?
So to be honest with you, I can't say that we are seeing a slowdown right now. The opportunity pipelines across the group are quite strong. So no, we are not seeing anything specific that is pointing towards the trend. But like you said, obviously, there are issues in Europe, obviously, with the Ukraine war, inflationary pressures and things like that. Will it have an impact? I can't really say right now. But right now, in terms of order intake and opportunities, we are not seeing a slowdown, no. And our furnaces outside are all electric services. They're not gas furnaces.
We have the next question from the line of Rahul Agarwal from L&T Mutual Fund.
So first of all, congratulations on a great set of numbers. So just I wanted to understand more in terms of the breakup between, let's say, price and volume and what your revenue and order book growth has been, if you could give some sense on that.
So just to give you an overview. I think we've seen growth. There has been a strong focus on improving pricing across the group, especially here in India, and we've been working towards that. But there's also been volume growth as well across geographies. Like I said, strong execution has been the cornerstone of this quarter's performance, especially in Europe, China, U.S. and India. So those are the areas where we have seen strong execution. In terms of the exact breakup, I don't think I have the number with me right now, but...
It would be something like approximately 10% broadly because these are across segments, so this is a broad number and the balance is volume.
Okay. And just the order inflow that we have got this quarter, would it be fair to assume that these are the new commodity prices that we have after the fall? Or these would be still at the [ old rates ]?
No. So this quarter orders will be executed in the next maybe 6 months or so. So obviously, we will use the cheaper material for these orders, yes.
But your booking, this order would have been at a higher commodity price compared to what you will execute? Is that the case?
Yes. So our pricing has not changed downwards. We still maintain our pricing. And we -- as the price leader, we try and obviously drive pricing strategy across geographies. So from a pricing standpoint, we've maintained pricing. And yes, if there's a benefit coming from lower material cost, you will see that improvement happening from Q3 onwards.
Perfect, sir, perfect. And just if you could just share some more insight into the pipeline that you mentioned as in, in terms of maybe the numbers that you are seeing or any qualitative understanding on a [Technical Difficulty]
So I mean just to give you a broad idea across the group, including the new acquisition that we've done, we all are seeing an all-time kind of backlog plus also a very strong opportunity pipeline. In India as well, we're seeing large chemical investments coming up. Companies like PI Industries, SRF, Deccan, Vivid and many other companies are now planning large investments, which should materialize in the next few weeks to months. So we don't see a real slowdown here. There's also good opportunity for us, like I mentioned in my opening, in acid recovery. Hopefully, by the end of the day or early next week, we should have some good successes here. We are working on a large -- very large project here in acid recovery and would be a major breakthrough for us. So all in all, the pipeline remains quite strong.
If you then look at the China Plus One strategy, if some of the production move to India, that will only further kind of improve that opportunity pipeline as well. But across the globe, across geographies, we are not seeing a slowdown in terms of opportunities. Investments are coming back into pharma and to chemical. And obviously, the new markets that we now also cater to, like I said, fermentation, paint, food and beverage, there's also now a new market like green technology, in the lithium extraction and in bioplastic and plant-based protein. So all in all, things look quite positive for us.
We have the next question from the line of Jaiveer Shekhawat from AMBIT Capital.
So Tarak, firstly, in terms of your order intake, could you specify that -- could it be that some of the orders that was supposed to come in fourth quarter came in during this quarter and hence the high [Technical Difficulty] 40% is the high that we are seeing for the International Business on a Y-o-Y basis? Or do you believe you can build on top of the 1Q order intake levels in the subsequent quarters?
So there's always an issue with backlog. But like I said, the orders are quite well spread. And in most cases, we have a strong pipeline. So just to give you an example, our Swiss subsidiary has now nearly 16 to 18-month backlog as it stands, right? I think the current backlog is close to CHF40 million, right? So obviously, you won't see that kind of new orders coming at the same pace because they already have a very, very strong backlog. But for glass-lined and other businesses, I think where we have a kind of a smaller backlog, especially here in India, where it's about 4 to 5 months only, that's where we can really kind of ramp up because customers do look for quicker deliveries in glass-lined. And that's something that we always wanted to be in that 4- to 6-month range where we can really quickly turn it around and supply to the customer as soon as possible. But in general, as it stands, I also know that Q2 has been pretty good in terms of order intake. So we're not seeing a real slowdown. And I think this will continue at least for the next few months, at least.
Got it. And secondly, on the acquisition, while you've highlighted as to how the acquisition augments your engineering capabilities and the adjacencies that it opens up, how does Hydro Air benefit from GMM's technologies or capabilities? Could you specify that as well?
Sure. So Hydro Air, obviously, they were owned by a small private equity company. And obviously, when we spoke to the gentleman there a few days ago, he was kind of happy that somebody is now talking to him about his product and technology and not really about numbers, right? So strategically, they are very happy to be part of the Pfaudler Group. It opens up brand-new markets for them, brand-new geographies. So the customers that he caters to are the same customers that we go to sell our glass-lined. So our glass-lined guys, our mixing guys, our acid recovery guys can all go and kind of sell these products. So he immediately gets a global reach that he, being a small Italian company, he could not really kind of cater to the world, right? So now the U.S. opens up, India opens up, China opens up for him. And then having low-cost manufacturing in China and in India will also give him a local presence. So maybe bringing the material from Europe was kind of pricing-prohibitive. Now having local manufacturing available, that would give him an added edge as well.
And we also have Thomas Kehl here on the line. And Thomas, maybe you want to add something on the acquisition and how it will -- how does Hydro feel about being part of the Pfaudler Group?
Yes. I think Tarak summarized it very well. It's a small engineering group. They are very keen on their process know-how and their edge is that they develop together with customers' processes through pilot lines and pilot facilities and pilot testing. And usually once the pilot facility testing is successful the order's around the corner. And with the global reach now, we can go far beyond where they have been. Also the financing structure, financing down payments, they can take larger orders much faster. And since the engineering capabilities they have are very similar to the systems and engineering capabilities that we have in Europe, so we can [indiscernible] and create additional resources short term, if we have to, for larger orders. So we believe and also the Managing Director of this company believes that with this global reach now being part of the GMM Pfaudler family, doubling the business, redistributing the business in the next few years should not be a huge issue and we believe strongly that it's a good team, they're very loyal, they want to stay, they're want to be part of us. And they are excited, we are excited and the technology is quite sustainable.
And another case that we see is opportunities in green technologies, so bioplastics, where we're working on a project in California right now that is of great interest. And at the same time, our subsidiaries in U.S. has already started working on bioplastic technologies and processes as well. So we're looking into future technologies that are new to us and some of the customers as well.
That's helpful. And lastly, are you looking for more tuck-in acquisitions like these? And how is the landscape in Europe currently? Are you finding those opportunities?
Yes. So there are multiple opportunities in the pipeline. Again, our thought process is something similar to what we did with Interseal, small companies we would like to buy and then obviously grow the business, double or triple the business like we did with Interseal. When we bought it, it was about a $2 million business. Today, it's about a $10 million business now becoming a global business now with the India launch as well, growing that business quite nicely. So yes, there are opportunities. We obviously, as the Pfaudler Group, is now a global company, quite well known, many of the small companies who have good technology actually look up to Pfaudler, and they want to be part of the group and have that kind of a global reach and be part of a kind of a global company as well. So we get a lot of opportunities. We get a lot of inquiries all the time. But then again, we need to kind of pick and choose the ones that really complement well our portfolio and really add technology to our portfolio as well, right? So yes, that's something that's always ongoing. And that's something that we've always said would be the cornerstone of our growth strategy, would be M&A opportunities, and that's something that we'll continue to look at all the time.
[Operator Instructions] We have the next question from the line of Rohit from Progressive.
Tarak, 2 questions, probably 2 parts to that. GMM was probably the only company listed in the heavy engineering kind of business which was quarterly dividend-paying. This time around, you have skipped the dividend. So anything that you'd like to share the reason for that? And what will be the dividend distribution policy going forward?
So we had disclosed this actually last quarter that we said we are going to switch to twice a year, the dividend policy, after we decided to give the bonus shares. Manish, you want to just quickly jump in?
Sure. So if you recall, we have been paying INR 5 per year. And last year, we finished with INR 6. Now if you divide this into -- and post the bonus, then it practically turns out to be INR 2 per share and then you end up doing it in 4 quarters with this and becomes too small a number and operationally it becomes really from an effort standpoint, from a cost standpoint, too much of an exercise and then, of course, from a receipt standpoint, it's much miniscule numbers. So therefore, we wanted to just consolidate it into a half-yearly basis.
Okay. In the consolidated numbers, what is this [ INR 28.4 crore] of the other income, which is there, if you can share that?
Yes. The other income is primarily on the revaluation gain, the FX revaluation gain of the euro loans that we have at Pfaudler International Business. So because the euro has depreciated over a period of time last quarter, so therefore, you have a gain.
Okay. In terms of the recently acquired operations for Hydro Air or HARI, they've been outsourcing. So who were their clients, if you can share that? Who exactly were they outsourcing their production or the assembly points from?
So they have multiple vendors, and it kind of depends on the specific project. But like the membrane they buy from membrane manufacturers and they outsource it to local manufacturing companies in and around [indiscernible], but no specific names that come to mind. But generally, it's an outsourced model that they've been using and they've been quite successful with it.
Okay. And any thoughts on reducing or have you reduced the pledge position, which was around 32.6% or so?
Sorry, we didn't get that. Can you please repeat the question?
We had a pledge position of around 32.68%. Have you reduced that? Or any thoughts on reducing that?
So there is -- so the pledge, I think, that you're talking about is not really a pledge. It's a [ view ] that DBAG shares -- that DBAG held in GMM Pfaudler has been kind of -- they need permission from the bank before they sell those shares, and that's been something that has been part of the rollover debt package that came to us. But the Indian promoters have no shares that have been pledged.
We have the next question from the line of Rahul Jain from Anand Rathi.
Sir, can you comment on performance of Mavag in Q1 specifically? And how was this demand environment there?
So Mavag has a backlog of close to CHF 40 million. And the performance and output has obviously been quite good, like the rest of Europe and the U.S. They did face a little bit of margin pressure due to the higher material costs, but that should also stabilize in the next few quarters. And they have a very strong visibility, both in terms of execution, but also in terms of the order backlog that they have. So all in all, they had a strong performance as well.
Sure, sir. Sir, can you give the breakup of international order book like between PFI and others, what you used to the give?
I don't have those numbers with me. But again, just to give you an overall view, I think the order book stands quite well balanced between the 3 large geographies that we cater to, so the Americas, Europe and Asia Pacific, where we can include India and China in that. So at least [indiscernible] is quite evenly spread. And again, like I mentioned earlier on, it's well spread between our technology businesses, our service businesses as well as our systems business. So it's quite well balanced. And there's not one specific region that has kind of outperformed the other.
Sure. Sir, one more question about the FX revaluation gain, how much was it?
The pension?
Sir, the FX revaluation gain, which was reflected in other income. So how much was it?
Specifically, I do not have that number. Please give me a few minutes, I'll come back to you on that.
We have the next question from the line of Akshay Kothari from Envision Capital.
Sir, do we see any improvement in working capital cycle going forward?
So Akshay, I think we'll not be able to further improve from the current level, simply because, while you see the metal prices going up and all that, maybe in 2, 3 quarters, that will happen, but then by then, the Group trajectory would have asked for more working capital from that perspective. So therefore, net-net, I think if we could maintain the overall working capital cycle, that should be fine. And most of the cases, as we have been disclosing in our half yearly numbers, the inventories -- we have a lot of advance from customers as well so as to mitigate the working capital crunch.
Okay. And sir, you did mention about the new businesses and you elaborated on fermentation part. Could you please elaborate on paints, bioplastics, food and beverages as well? How are we seeing opportunity over there?
So on paints, certainly, we're seeing a fair bit of demand both for our mixing business and also for some of our reactor vessels. We've won a few orders in mixing in particular, from some of the newer paint manufacturers or -- newer -- sorry, some of the newer facilities that paint manufacturers in India are putting up. So we see this as a good growth vertical for businesses like mixing. And bioplastics is still nascent for us. We're doing some exploration there. I won't be able to comment a lot more on bioplastics right now. But with the new acquisition of HAR, I think there is a potential to expand our footprint in that space as well.
So just to add to that, so Asian Paints, obviously, is setting up new manufacturing, so we got large orders from them. And then also now [ Grasim ] is planning investment in the paint vertical, so that's also driving new order intake in the mixing segment from them as well.
We have the next question from the line of Jiten Parmar from Aurum Capital.
Yes. 2 questions. I think the first one is answered regarding the other income of INR 28 crores. If you can just throw more light on it, whether this is something which is one-time? And second question is, basically, what are the margins for the business outside India?
Yes. On the other income, the INR 28 crores that you're talking about is primarily on account of the euro loans that we have. It's something like, I think, [ $2.6 million to $2.7 million ] gain, something like INR 22 crore, INR 23 crore that we have in this quarter. Primarily, this is an MPM gain, a revaluation of the liability and that's the related gain that we have.
So the other question was on the margins for business outside India.
Yes. So the margin, there has been a margin improvement in the International Business compared to previous quarter, and we hope to maintain margins, both in India and in the International Business. We are focusing internally on our cost structure. We're looking at being more efficient and trying to control whatever we can in-house so that we can maintain margins. And then eventually, when metal prices are going to cool off, if energy costs come down, then obviously that will see a nice bump-up to the margin profile as well.
Okay. So what I get is this that you will try to maintain these margins. Can you give a number? Is it quantifiable? How much is the margin for the business outside India?
So the business outside India is currently at a 10% -- 10.5% margin and India is at about 15-odd percent margin, 16%, 17% margin here in India.
[Operator Instructions] We have the next question from the line of Saurabh Shah from AUM Advisors.
Tarak, a question on the integration plans when you had acquired Pfaudler. There were some short-term targets, and I think there were some longer-term targets in 2 years, et cetera. I just heard that you expect to retain margins at this level. I wanted to check with you, are there any longer-term integration kind of processes still underway? Or you think most of them have been finished in terms of either moving products into some extent to India or reducing outsourcing? And this is outside that gas price bump-up and other things that might happen. So just some integration plan, where do you see yourself for the next 1 or 2 years?
So Saurabh, from an integration standpoint, our major project that we had is now completed, and we've kind of made synergies and integration kind of part and the parcel of our daily work. And it's not something that we kind of really focus on. But yes, it's still an important part of growing our business, both from a revenue standpoint and also from a profitability standpoint as well, right? So there are multiple things that are in the works that are continuing to kind of gain traction and the momentum. So like I mentioned very early on, we had the budget of India sourcing from Europe, and we already crossed -- I mean the entire year's budget was already crossed in the first quarter, right? The opportunity pipeline for India-made value-sourced equipment is at an all-time high. And we hopefully will convert some of these to hard orders in the next few months.
So all in all, India sourcing is continuing quite well. On top of that, as I mentioned early on, we are doing a stock and sale program. So Pfaudler Germany is going to actually stock Indian-made vessels in Germany. So when the customer needs something quickly, overnight, they can turn it around and obviously sell it to them very, very quickly. So that's something that we are working on as well. On top of that, we also have components being sourced from India, nozzles and other -- the metal parts. It gives Pfaudler 2 advantage. One is obviously a price advantage, but the other thing is also to create a second vendor for them, right? So that's something that's ongoing. On top of that, there are multiple other kind of synergies that we are working on, like trying to move engineering to India as well, kind of creating low-cost kind of back offices here to help and support some of the teams in Europe and in the U.S.
And then, obviously, from a synergy standpoint, we've also like launched our new brand profile. We have now a single website in place. We now have a global [ ESOP ] program as well. So I mean getting the company together, trying to have everybody under the same kind of platform also creates, I guess, good synergies within the Group.
That sounds great, Tarak. Just one additional point. On the sales side, are we doing anything with this new acquisition, et cetera? It does sound like you have a much wider product kind of basket? So are you investing in creating, especially in the U.S. or elsewhere, larger sales efforts? Could you just give us a sense of what you plan to do in the next 12 months? That would be helpful.
Yes. So I think our sales network is already quite strong, both in terms of having our own sales teams, but also agents and as well as reps. So we have a pretty extensive network. We obviously keep looking at certain areas where we are not well represented. Like Southeast Asia was one example where we've added people as well. In India, we kind of add people. But you're right. I think for some of these new age technologies, we might need to bring in expertise from outside the industry. We can really go and kind of sell these technologies to new industries that we don't normally cater to. So I think from that standpoint, yes, we will need to add people who know these industries quite well, like, for example, bioplastics or plant-based proteins, the green technologies for some of these other kind of process that we might have to bring in external help as well.
I can confirm that we are opening some new positions created in Europe as well as in the United States as well as in China, where we are now working with [Technical Difficulty] to fulfill those positions. And the skills that we are requesting from the new sales people are bringing in some new insights in the markets which we are going to serve. So we are already in the mode of increasing our salesforce and sales power.
We have the next question from the line of [ Ashit Kothi ] who is an individual investor.
Congratulations. 2 quick questions. One is on interest cost and second one is on green solutions.
Interest costs, Manish? Interest cost, maybe you [ can illustrate ] our average interest cost for the debt that we have.
So interest costs in India is just under 7% and interest cost overseas is approximately 5.5%.
And then coming to green technology. So one of the things that this company that we just acquired does is kind of promote green technologies from very specific processes, meat industry, starch industry, they kind of reduce the amount of water that's being used and create a much more efficient process. So this could be one area that we could kind of sell this product into and give the customers a kind of a better process and a more efficient process to work with than their current processes. And from an ESG standpoint as well, this would be quite nice story where you're actually conserving water and creating new efficiencies as well.
We have the next question from the line of Siddarth, an individual investor.
Congratulations on a strong set of numbers for the company. I want to know if it would be possible for you to give me a number regarding the new acquisition and the market size that you foresee for the company and what it could be adding to the India company?
So the current size of that business was about EUR 8 million -- EUR 7 million to EUR 8 million. The market obviously is large across the world. So I can't put any number to it. But we believe that this business could double in the short term, and that's what our focus is on the back of having a much larger sales network as well as having a little bit more financial clarity will give this company the ability to take in more orders and grow their business.
Okay. Just a follow up to that. Have you received any sort of interest regarding orders that you've received from, say, ethanol and biofuels in India or anything else from India with all the fuels?
So India, specifically, we get a lot of inquiries to many different applications, but this company that we acquired has already supplied [ plants ] to India to customers like Aurobindo and quite a few more [Technical Difficulty]. So they already have a presence in India, so we can start building on that already the strong foundation that they have and go and kind of talk to some more clients in the pharmaceutical area where they have a very strong presence as well.
[Operator Instructions] We have the next question from the line of Jason Soans from Ashika Stock Broking.
Sir, you did mention in your initial remarks, investments are coming back to U.S. and Europe. And we did speak about that last time as well in terms of the aftermath of the COVID crisis, a lot of stabilized economies where -- are in processes now, especially the high in critical work. So I just wanted to know how do you -- just wanted your comments on the sustainability of this trend. Obviously, it will benefit us in a lot of ways that we have the network all over now. So just wanted your comments on how do you see the investments happening more in the developed economies.
Yes. Coming to your first point that our aftersales business has picked up, it was much lower during the COVID time because our people were not allowed to go and be with the factories, and we [indiscernible] engineers and service people who come into factories. Now that, since it's opened up, will obviously create a whole kind of new revenue stream, which was earlier not there. So that's definitely a positive. And you will already see that in our services business, the [ sum ] of services business has increased already. So that's definitely a positive sign. But like I mentioned to you earlier, it's -- the situation, in spite of the global economic environment, still remains very strong for chemicals and pharmaceutical companies, both in India and in Europe. And our ability to cater to these businesses and industries now has put us in a very strong position. So we've been making headways in some of the [ low-cost ] markets like Spain or Eastern Europe or even Singapore, for that matter, some parts of South America. We've had major breakthroughs since we acquired the Pfaudler Group, because obviously, now we have a much wider range of products that we can offer plus a different cost structure. So if there was a client that could not kind of -- or would not buy a German-made equipment, now has access to an Indian-made equipment or a hybrid version. So there's multiple different opportunities that we can play with and that puts us into a very strong position as well.
[Operator Instructions] We have the next question from the line of [ Angel Rodriguez], an individual investor.
Hello. Am I audible?
Yes, Angel, go head.
[Technical Difficulty] set of numbers. I have a couple of generic questions. Can you please share your views on continuous flow reactor technologies? Can the reactors be scaled up for large-scale industry use, our contribution to it and the opportunity size? Also, have you seen any increase in inquiries for your glass steel floor reactors?
So good question, and not that generic actually. So continuous flow reactors are being talked about definitely more now. But again, replacing battery reactors with continuous flow reactors is something that will take a lot of time. However, we already have technology available within our network of continuous flow reactors. We recently had a seminar here in Bombay where we were kind of showcasing our capabilities in continuous flow reactors. We also have a new company that one of our [ new ] companies have acquired in the U.K. that does specific work on continuous flow reaction and filtration as well. But that's something that we will continue to build on. It's a nice technology. There are a few small Indian companies who are already talking about it. Is it really being converted to orders? I can't say that it has been. But for the future, I think it's definitely an area that we should focus on and try to build some technology in that sense. Aseem, you want to add something?
I'll just add, I think GMM Pfaudler is monitoring this trend very closely because the inherent advantage is the continuous flow reaction over that. And we actually have -- we're ready with the product. We have a glass-lined continuous flow reactor, first-of-a-kind in the world that we offer. In fact, we've already sold 1 unit. So as and when this trend picks up, we are ready to serve the market when that comes.
Due to paucity of time. We will not be able to take further questions. I now hand it over to the management for closing comments.
Yes. So thank you, everybody, for this conference call. We'll talk to you again next quarter. And in the meantime, if you have any further questions, please feel free to reach out to our IR team, and we'll be happy to answer those questions as well. Thank you for your time. Good afternoon.
Thank you. On behalf of GMM Pfaudler, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.