GMM Pfaudler Ltd

NSE:GMMPFAUDLR

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Q1 FY '25 Conference Call of GMM Pfaudler Limited. [Operator Instructions] There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. I now hand the conference over to Mr. [ Dhaval Rajput ]. Thank you, and over to you, sir.

[Dhaval Rajput, executive]

Thank you, [ Yusuf ]. Good evening, ladies and gentlemen. A very warm welcome to all of you into the Q1 FY '25 Earnings Call of GMM Pfaudler Limited. The earnings presentation was uploaded on the stock exchanges today and is also available on our website so all of you have 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 Poempner; our CFO of India business, Mr. Manish Poddar, our Executive Vice President, Sales, International, Mr. Vincent Leroux; and our Compliance Officer, Mr. Mittal Mehta.

We will give you a brief overview of the performance of the company, after which we will get into the Q&A. Before we begin to give the overview, a brief disclaimer. The presentation that was uploaded on the stock exchanges and also on our website, including our call discussions that will happen now, contain or may have certain forward-looking statements regarding our business prospects and profitability, which are subject to several risks and uncertainties. The actual results could materially differ from using such forward-looking statements.

I would now hand over the call to Mr. Tarak Patel to provide an overview of key performance. Over to you, Tarak.

[Tarak Patel, executive]

Thank you, Dhaval. Good evening, everybody. We are happy to announce a good start to the financial year. Revenue and profitability remained stable with strong execution across geographies. The business environment remains challenging, mainly driven by a slowdown in the chemical and agrochemical sectors.

Order intake improved significantly this quarter, mainly driven by heavy engineering, mixing and systems businesses. The last 2 quarters have now seen a strong order intake and this quarter, INR 88 crores of order intake is the highest order intake in the last quarter. Our order backlog is also up by 5% to about INR 1,777 crores, and our opportunity pipeline remains stable with key opportunities expected to close in Q2.

Our diversification strategy has helped mitigate the slowdown in the chemical sector by allowing us to focus on new market and industry segments. In terms of financial performance. Our consolidated revenue for the quarter was at INR 785 crores and EBITDA stood at INR 89 crores with an EBITDA margin of 11.3%.

We also participated in ACHEMA this year in June. This is the trade show that is the biggest trade show for our industry segment as well. We also inaugurated the GMM Pfaudler JDS facility in Americas, Georgia and USA, which is take facility catering to the re-glass and services platform.

In FY '25, we are also planning to launch our 3-year strategic plan, which will highlight growth opportunities across our platform and regions.

I would also like to maybe spend a couple of minutes just to give you an overview in terms of what we are seeing both in India and internationally. In India, like I mentioned, the order intake this quarter was quite strong, mainly driven by our non-Glass-Lined businesses. And we expect the Glass-Lined business to also kind of have some strong order intake in Q2 and Q3.

Having said that, the industry and the outlook remains slightly better than a few months ago. But again, the chemical and especially the agrochemical sector, it still not so -- I would say, strong in terms of their investment. Internationally, also as well, we have seen strong order intake. So this has been driven mainly by our on-Glass-Lined and non -- the Technologies business, and the Syst business has done really well. We expect the International business also to have strong order intake in the next few quarters.

All in all, it is a challenging environment but we expect that the next few months and quarters should have some positive outcome as well. With that, I will now hand over the call back to you, [ Dhaval ], and we can then open it up for question and answers.

[Dhaval Rajput, executive]

Thank you, Tarak. Yusuf, you may now open the line for questions. Thank you.

[Operator]

[Operator Instructions]. First question is from the line of [ Sagar Shah ] from [ Spark Capital ].

[Unknown Analyst]

First of all, I got your point that currently, there is a very challenging environment of -- so in this visibly stage, still we are seeing almost a sluggishness in the margins actually. Even the order pickup actually has significantly picked up. The order intake is at a 8-quarter high. But still, the margins are coming down.

I understand we have implemented cost control measures, but still, the margins are not being under control. Now the consolidated margins is down to almost 11% to 15%. So what exactly is the reason behind here? So is it the geopolitical tensions or the sluggishness in the glass lining market? Are we booking orders still at a loss on a glass lining level because of -- on the non-glass lined industrial mixing are higher except for engineering. All are almost higher-margin segments actually for this? And on the standalone level also, we saw some, you can say, definite margin. So what exactly is the reason behind this? And going ahead, what are the steady-state EBITDA margin on the stand-alone level as well as on the concern level can we see in this year at '25?

[Tarak Patel, executive]

Let me answer your question in 2 parts. I think one, we started off by saying order intake of this quarter at 82%, of course, is the highest in the last 8 quarters. But of course, keep in mind that these orders are yet to be executed. So the new orders that are coming in Q4 of last year and Q1 of this year are yet to be executed, and that margin profile is yet to flow through in terms of the [P&L].

The last few quarters, yes, we've had lower margins. Obviously, the main reason for this is, obviously, the volumes that we kind of have right now in terms of backlog is not as high as what we've had in the past. And there is definitely a volume issue in terms of cost, right? So the cost absorption that we have across our factories is not completely utilized and then we have slightly lower margins. Plus also, keep in mind that because of the slowness in demand, the competitive intensity is much higher and hence there is pricing pressure as well.

However, having said that, I do believe that coming through a down cycle, where most of my customers are seeing a 20% reduction in revenue and margin, we've been able to maintain margins, and we are not showing any signs of degrowth as well, right? So order intake is positive. It is a tough [indiscernible] for us, definitely because the market that we cater to are slowing down. However, we have also put in a lot of effort into diversifying our portfolio. And PPA, the reason that we are better off than many other people in this business is because we diversified.

So right now, when our Glass-Lined business has closed down, and we see [indiscernible] in the Glass-Lined, we've been able to make up for the shortfall in things like heavy engineering, in [indiscernible] and in [indiscernible], right? So across the board, the other businesses have kind of catered. But yes, generally, there is a closeness in the market and 60% to 70% of our revenues come from chemical and pharma, which we see will slow down.

However, having said that, in the future, we would then kind of reduce that exposure to capital in pharma. And we would expect the other industry to kind of cater and add to the revenue mix as well as the profit to be made. In terms of cost [indiscernible] growth, there are numerous measures that we have taken internally as well.

So some of the benefits of the implemented controls are already showing up and many of them will show up in the ongoing quarter. The outlook for this year is going to be maybe a small amount of growth, both in revenue and profitability. I expect that 5% to 10% growth is what we expect. We hope that the order intake will continue for the next few quarters.

This year is basically a year of consolidation to look internally. I've talked about this in the last few quarters. Business has been slow. And until we bring the backlog up to a much bigger level, we will still see absorption issues. However, the last 2 quarters have been kind of positive in terms of order intake. We are not completely out of the woods, but definitely better off than what we were 6 to 9 months ago. So that's how I would like to answer that question. I think that is clear for you.

[Unknown Analyst]

Okay. So basically, are you guiding for actually around the 5% to 7% growth in revenue, sir, for this particular year?

[Tarak Patel, executive]

So that is what our expectation is. We have a strong order backlog. So we have about INR 1,777 crores of backlog currently [ enabling to put ] backlog. We've already done about INR 785 crores already in Q1. So you can do the math.

We still have order intake in Q3 that will be shipped out in this year. We also have the Services business that will continuously add revenue and shipment as well. So we are quite confident that we will be able to, at least, achieve if not, grow our last year's number, but we expect to grow over last year's numbers. That's the internal estimate that we have.

[Unknown Analyst]

Okay. Okay. So any broad level EBITDA margins that are -- you're targeting for this year?

[Tarak Patel, executive]

So we've given -- I think we've exposed and we want to maintain the same level as last year. I mean the last year, Manish, our margin consolidated was...

[Manish Poddar, executive]

[indiscernible]. Yes.

[Tarak Patel, executive]

Yes. So that's what we are expecting. We might view on that slightly. If the volumes pick up, then obviously, we expect that number to probably be even a little bit better than that.

[Unknown Analyst]

Okay. And sir, currently, glass lining business out of our [ Total Technologies ] business would be how much percentage for right now as of Q1 FY '25?

[Tarak Patel, executive]

I don't have that number right now because they are not just paying for both India and internationally. So I don't have a [ consol ] number. But main outline in India was a large percentage of our revenue that has seen a significant reduction. But largely for us, the Heavy Engineering business and the non-Glass Lined business [ in EMEA ] has made up for the shortfall.

Internationally, they had a service [indiscernible] of their overall business. So for their [indiscernible] areas have given a good amount of growth. But in India, we were definitely more Glass-Lined-focused. Over the last maybe 4, 5 years, we've kind of diversified and created other platforms that can also help us mitigate some risk associated with the Glass Line business.

[Unknown Analyst]

Okay. Okay. Okay. So just last -- just second question would be on the Industrial Mixing business. As we have guided that out of our INR 880 crores of order intake, mixing was also a big part actually. So basically, can you lay out something like -- can you explain on that front? Can you give us color? Then what exactly has been done now going ahead to consolidate all 3 companies of mixing? And how do you look at that business for the next 3 years and also for this current year? And how has it contributed to the revenues actually in this particular quarter?

[Tarak Patel, executive]

Yes. So I think on the number front, which Manish can comment, but this, let me give you and maybe [indiscernible] can jump in as well. In terms of the Leasing business, again, you are absolutely right. It is a very important part of our growth strategy. It opens up a much wider range of industries that we cater to.

Over the last maybe this quarter and that quarter, we received large orders [indiscernible] where both India, Canada and France are kind of go together to win the order. One of -- one very large order from Australia has come through, a couple of quarters in India has come through so we see this growing. We see this definitely an areas we want to focus on. And maybe I'll hand it over to Thomas and [ Manish ] could jump in and he can talk a little bit about what they are seeing in respect to geographies. Thomas, maybe you can...

[Thomas Kehl, executive]

Yes. Mixing seems to be a little more stable because mixing industries are much more segmented and gives us more applications and markets to cater to [indiscernible] in pharmaceutical. So we are at the best we will receive in the order intake. And as [indiscernible] just mentioned, the success in geographical expansion in Australia also just happened a large order to fulfill there. And the #2 order from the same customer and other projects that we have good chances also to get in the near future.

So I think you asked for the outlook in the next 1 to 3 years. We are very confident to grow the business in mixing globally even further. We are developing for technologies. We are also in a project where we are standardizing some of our products to be more competitive and increase margins, and we are [ really ] optimistic in our mixing efforts. And we also look at further opportunities on M&A.

[Unknown Executive]

[indiscernible] let me just add to what Thomas said. If it is to capitalize on the opportunity that the market affords us, we are doing a lot of [indiscernible] internally to ensure that we are positioned well as a global company to address mixing needs, whatever they are. So we have announced or shared earlier that we have a new manager of the mixing business and he is working very hard to integrate these teams across geographies and sure that the domain expertise that exists is available across the company and that has already yielded results.

So some of the recent wins that [ Tarak and Thomas ] talked about in various geographies were only possible because the expertise across the capability of GMM Pfaudler [indiscernible] working to introduce like that and work on standard engineering approaches across the company, those kind of things in the back. So we're very optimistic, and we will continue to focus on the [indiscernible] platform.

[Manish Poddar, executive]

On the numbers front, mixing for Q1 accounts for 80% of the consolidated numbers. And of course, that are used being the focus area, the group trajectory will be faster in time.

[Operator]

[Operator Instructions] Next question is from the line of Ashish, an individual investor.

[Unknown Shareholder]

Yes, sir. Congratulations on a good set of numbers, sir. Sir, can you give some light on how the chemical -- the whole space is looking from a GMM point of view, like the entire space?

[Tarak Patel, executive]

Sure. So you -- that's a good question because obviously, we interact with a lot of chemical companies, both specialty as well as agrochemicals. And we also kind of interact with pharmaceutical company. So in terms of the chemical outlook, the agrochemical outlook not so positive.

The interaction that we have with owner, the CEO and managers in agrochemical company [indiscernible] see that there's really a lot of positive view in [indiscernible] that's going to happen. I feel that there's going to be still about 6 to 9 months further slowdown in this sector, mainly driven by the Chinese competition, right? So the Chinese are still jumping and still competing at a cost structure that the engineering companies are not being able to kind of compete at. And that's going to, obviously, reduce volume and in turn, reduce margins as well for agrochemical companies here in India.

So for most of these companies, obviously, revenue and margins will be pressure for this financial year as well. And hopefully maybe by Q3, Q4, we start seeing some green shoots where some of the investments in agrochemicals will come back.

On the specialty front. We do see some investments. Investments are continuing for people who are not focused only with agrochemicals. After dealing with CapEx, those decisions have been pushed out, but some of those decisions have been now kind of taken and we see some amount of order intake coming from specialty chemicals. And like I mentioned earlier, we do expect some of them to flow in Q2.

In the Pharma space, we've seen a lot more positive kind of news. We believe that pharma will continue to add and again, [ Hyderabad ] pharma, there are 3 or 4 very big projects that are planned, and we expect again -- and these are mainly further Glass Lined business. And we expect some of these large projects to materialize in the coming weeks. So that would put us again on a getting a strong position when it comes to Glass Line. As you know very well, Glass Line, we are the market leader, and we are the first choice. So most companies will end up buying their glass line equipment from us.

Internationally, the chemical sector also is a bit soft. Obviously, a lot of these international companies are dependent on India and China for outsourcing. But the general weakness is not only in India. It is a global weakness. There is obviously overstocking and the Chinese coming in and dumping at lower cost structures, that kind of makes it much harder for Indian company.

Having said that, the focus today is obviously in chemical pharma, we are not going as fast than you would like. We've kind of spread our wings and that we've entered into new markets with mixing and now in many cases, metals and metals and [indiscernible], paint, [indiscernible], food and beverage.

We also allowed the fermentation with our Systems business as well, we will go into new inventory segments with heavy engineering. We have oil and gas, petrochemicals. So there's a wide range of industries that we are targeting. But generally, the weakness in chemicals has accounted for a large slowdown in the Glass Lined business, which is obviously impacting both volume and margins in the [indiscernible].

[Unknown Shareholder]

Yes, sir. And just a follow-up question, like in case of mixing like not quarters but like from here on -- from 3 years from now. Sir, what can be the revenue split of mixing in the entire revenue structure, like not -- like from 3 years from now?

[Tarak Patel, executive]

Yes. So we actually focus that when we brought the new company together and are making business mainly about $45 million, $42 million, $45 million. We expect that in the $100 million-plus business in the 3-year time period, and that's what we are taking.

[Unknown Shareholder]

And sir, one more thing. There are some plans to go into nuclear space as well. Energy nuclear space, reactor space or that is not on the cards presently?

[Tarak Patel, executive]

So this is [indiscernible]. I'll take it. We have some capability for our heavy engineering business to address some of the noncore part of commuting, which we will look at. However, as you probably are aware that the long cycle opportunity. So we will continue to monitor it, but that's not mainly a core part of our strategy.

[Operator]

Next question is from the line of Bhavik Shah from [ MK Ventures ].

[Bhavik Shah, analyst]

[indiscernible] My first question is [indiscernible] in terms of classification. Does it sit on the Systems or Services?

[Tarak Patel, executive]

I mean it's part of technology.

[Bhavik Shah, analyst]

It's part of technology. So what does systems and services constitute for us? Like what do we offer there?

[Tarak Patel, executive]

So services is obvious. Anything that we have set a [indiscernible] go and visit the customer to give them any kind of [indiscernible] start up [indiscernible] all computer services business. So these are kind of very -- kind of sticky businesses, high-margin business, recurring business. And the [indiscernible] business has about 35% of the revenues coming from services in India and China and the [indiscernible]. But service is anything that we have to do to make sure that our equipment is up and running.

The Systems business is obviously kind of complete. Systems that we built together, which has progressed, even manufactured by us, but we do all the piping, automation, [indiscernible] designing and process know-how as well. So when you put it all together into a key margin system or a complete plan, that's something to [indiscernible].

[Bhavik Shah, analyst]

Okay. So sir, what will be how your margins, say, for Technologies, Systems and Services? Can you give a broad range of margin [indiscernible]? Like whatever your order book is, based on that, what's the current like margin profile in Technologies, Systems and Services?

[Tarak Patel, executive]

So I'll take this one and then maybe Manish can add. Look, when we diversified our business, obviously, our benchmark has been the core Glass Lined business and our strategy always has been to add businesses that are at that level or higher, right? And so with that, you can imagine sort of the Technologies business over the long term should be at the Glass Lined level. Systems, actually, we're selling an outcome to our customers.

So again, while it varies across different applications, broadly, it's in line with our Technologies business. And Services is healthier margins because we are there solving our customers' immediate problem often in terms of spare parts, et cetera. So Technologies, Systems sort of typical product margins and Services is [indiscernible].

[Bhavik Shah, analyst]

Okay. Sir, what is your time line for execution of our order book and the CapEx for current year?

[Tarak Patel, executive]

Execution of order book, most of the order book that we have, the backlog that we have, we really shipped out in this calendar year, there could be some kind of pre-order depending on the [indiscernible]. But generally anything that booked in the first quarter or to the second quarter, [indiscernible] we even up to November, the ship out, at least from the India business, like India business has obviously slightly longer delivery panel. And what was the second question you asked, sorry?

[Manish Poddar, executive]

On the basically, we don't have any expansion CapEx coming up this year and mostly nothing in the next financial year as well. The maintenance CapEx we have alluded to towards something like 2%, 2.5%, but we -- I think we'll be much lower than that any which ways in this year.

[Operator]

Next question is from the line of [Yash Goenka ] from Auriga Capital Advisors LLP.

[Unknown Analyst]

Okay. So when I look at your employee numbers from '23 to '24, it has come down but the employee cost has gone up significantly by around 14%. So can you comment on it? Because I think we were of the view that we will bring down number of employees overseas to India, but which I cannot see it in the numbers. Some color on that?

[Thomas Kehl, executive]

Which 2 numbers [indiscernible] comparing [indiscernible]?

[Unknown Analyst]

Okay. Employee count in the annual report, which was 809 in '23 and 784 in 2024.

[Thomas Kehl, executive]

Wait, wait.

[Unknown Analyst]

And when I look at employee cost -- yes, you can go ahead.

[Manish Poddar, executive]

This is stand-alone numbers. These are stand-alone numbers, the rate.

[Thomas Kehl, executive]

The employee count, the 32, is as stand-alone and I think the employee cost is going to is [indiscernible].

[Tarak Patel, executive]

Because these are India numbers. Definitely India numbers.

[Manish Poddar, executive]

Some strong numbers that might not be the right yardstick terms of measuring but [indiscernible]. If you see actually for the current quarter, if you see, we have actually a lower number on the employee cost. And specifically in India, we can talk about that Q1, you would expect an up cycle on the [indiscernible] of increment. Despite that, because of the some employee reduction, head count reduction across all the functions, we have been able to manage the cost at a number lower than the Q4 closing numbers. Internationally as well, the numbers have been absolutely in line with the Q4 numbers a overall.

[Tarak Patel, executive]

Yes. We've actually the head count across our geographies, including India, internationally and in Europe as well. So there is a reduction in the employee and employee costs probably as well. And if you look at the number of capital, you will see that.

[Operator]

[Operator Instructions] Next follow-up question is from the line of [ Sagar Shah ] from Spark Capital.

[Unknown Analyst]

So just what [ Tarak ] said actually previously on my first question. So can we assume that the orders that we have booked in the last 6 months as far as the glass lining orders are concerned. They are of higher margins as compared to what we had seen in the last, you can say, 12 months or maybe 18 months actually. So can we assume those are higher margin orders? So that is the reason that we are guiding for higher margins and higher revenue growth actually as compared to what we have achieved in this quarter?

[Tarak Patel, executive]

No, I don't think that's the right way to look at it. Right now, the market is still very highly competitive pricing in that will be under pressure. However, as the market leader, we do get premium and we try to extract the premium as and when we can. But there is a lot of competitive intensity just because the volumes are not there. We all are now fighting for a much smaller bucket of orders and hence, there is definitely more competition.

Having said that, there is definitely -- there are areas where we do more margins by selling and differentiating our product offering from our competitors. I [indiscernible] export. We look at stuff that is different from our normal kind of stuff that we do, which would help in improving margin. But generally, pricing in Glass Lined is around the same as it was for the last 9 to 12 months until we see a significant change in volumes and investments going up. That's why I think it's not going to significantly change.

[Aseem Joshi, executive]

On the margin side, one of the benefits of the cost position improvements that should start to flow through. But on the pricing side, [indiscernible].

[Tarak Patel, executive]

[indiscernible] we are working hard to do internally where we can reduce all across our district functions as well. There are more [indiscernible] that are ongoing and hopefully will kind of deliver and hope to improve margins. So the margin that we talked about from the internal work, and we hope that the market will support in terms of volume. And in terms of volume, the volume improvement always in pricing and margins will also improve.

[Unknown Analyst]

So -- and my next question was related to our revenue growth, which was down almost 13%. So is this related to any of the some ForEx impact or is it just related to lower utilization? [indiscernible].

[Tarak Patel, executive]

Foreign impact. Q4 last year was a very strong quarter in terms of both order booking and in terms of shipment so it would not be a comparable quarter. Having said that, this year, definitely international has been strong in terms of execution. India has been rebuilt. The India business is going to do quite well this year, did not have a good first quarter, and we expect [indiscernible] to make up for about the shortfall in Q3 and Q4. So overall, we are quite confident that we can maintain or will grow over last year's revenue levels.

[Unknown Analyst]

Okay. Okay. Sure. Sir, last question would be that can you take that as you had from my previous participant had you had answered to that question related to that, the mixing, the overall. The Glass lining margins were related to almost our sale as a systems-to-systems level. The Technologies margins are [indiscernible] Glass Lined [indiscernible]. So what are the margins right now that you are actually enjoying at the glass lining level, mixing level and system and services level? Can you, at least, suggest the ballpark numbers for all your segments?

[Manish Poddar, executive]

We don't have product line in the margins being shared in the public governments. So sorry, I can't share those numbers. But broadly, like Aseem mentioned, mixing continues to be enjoying at a normal glass lining levels. Of course, glass lining margins are down, relatively down for the past 2, 3 quarters as we have been observing. But apart from that, all other businesses have been doing decent.

[Operator]

[Operator Instructions] Next follow-up question is from the line of Ashish who is an individual investor.

[Unknown Analyst]

Tarak just said that the 3-year plan will be shared. Sir, can -- at what point of time, sir, can we see that 3-year [indiscernible]?

[Aseem Joshi, executive]

Yes, yes. So Ashish, the plan, it's coming along. We've had some -- we put in a lot of work over the last few months. We are now putting the final [indiscernible] to the end. I don't have a time frame. But as soon as it's ready, there is no reason for this to kind of be delayed and [indiscernible] will come back to the market and share the land with you. We will need to make sure that everything that we are speaking about, everything that we want to articulate, our business strategy and our long-term strategy are articulated and communicated well. So I think in the next nearly 3 to 6 months, we should have something out there for you or if not earlier.

But we've spent the last maybe 4, 5 months working on this. We've kind of aligned internally with the management team. We are now going across geographies as well and reaching out to employees to get them kind of aligned and got into this plan as well. The joint effort where we kind of come from bottom up. So we are actually getting numbers from every geography to every business, every platform and every product line as well.

And then obviously, we're looking at opportunities into markets where we don't have a presence currently, right? So are there areas where we, as a company, want to kind of explore. One or 2 areas where think that we've kind of [indiscernible] focused on chemicals and pharma. And that's what we really need to [indiscernible] and then focus on the industry, which will give us good and strong double-digit growth, plus strong margin profiles as well. And we've identified some areas where we believe we already have a strong footing and we can even kind of review our brand, our capabilities and our customers' all here to kind of build on that. So a lot of them has to come together, but 3 to 6 months is kind of the right time in terms of we can expect some kind of communication from our side, if not earlier.

[Operator]

Next question is from the line of [ Srikanth Ken ], an Individual Investor.

[Unknown Shareholder]

Sir do you have any [indiscernible].

[Operator]

Sir, your voice is very low.

[Unknown Analyst]

Are you able to hear me now?

[Tarak Patel, executive]

Yes, yes.

[Unknown Shareholder]

So I just want to know if there is any specific impact of geopolitical situation say, in the Middle East and macro events such as the interest rate cuts that have been forecasted in the September rate cycle. Is there any specific impact on us because of these 2 events?

[Aseem Joshi, executive]

Impact of?

[Tarak Patel, executive]

Geopolitical impact, not so much. The only thing that we've heard is that from our customers that shipping cost for some of their chemicals and stuff has increased. Now what impact does it have to our customers? I really can't tell. But for us, there is no specific impact on geopolitical -- the situation. We did have an impact of a few months -- 9 months, 1 year ago when obviously, there was gas shortage in Germany, which impacted energy cost. But I think we are way ahead of that, and we managed that quite well. But otherwise, there no other geopolitical issues that will impact our order intake or our business for that matter.

[Manish Poddar, executive]

The second question on the interest rate cycle. I think it only benefits us because the international business, the debt is at the [indiscernible] whatever interest rate reductions happen obviously flows through in that interest cost savings.

[Operator]

[Operator Instructions] Next question is from the line of [ Miten Lathia ] from Fractal Capital Investments.

[Unknown Analyst]

Sir, earlier in the call, you outlined instrumental sense that you're getting out of both the chemical and the pharma space in terms of the business outlook. Could we also get into slightly more detail and say, if this kind of orders that are likely to come through will be more suited to the capabilities that we have? Or it is likely to be more in the sort of standard type of order, which most of our competitors also are able to supply?

[Tarak Patel, executive]

I think last line generally, if there is a large order, more often than not, they will go with our autonomy our policy because we have the capacity to take it to large volume when customers want to win large facilities [indiscernible] facility. They will not really compromise our quality and the life of equipment is [indiscernible] when it comes to [indiscernible]. So hence, there's a good kind of requirement for good quality of product for Glass Lined and [indiscernible] Services is quite clear.

So more often than not, we can differentiate ourselves. But again, like I said before, there's always competition. Maybe the customers will not buy from them. But at the end of day, they will use their pricing to obviously negotiate, right? So there's only so much that we can do. But generally, the kind of orders that come from pharmaceuticals are -- will be more sophisticated than chemical in terms of what's required.

So a there's a slide in there for GMM Pfaudler. But generally, I wouldn't say this is in between a difference in terms of what [indiscernible] new versus competition. The only thing that I point out here is our last is obviously something that we've kind of developed over the last 15, 16 17 years. It's a technology and a formula that has been developed over the last long period of time and also, the competitors that kind of compete with us [indiscernible] don't have that level of sophistication in their technologies.

[Unknown Shareholder]

And just to sort of take that into context when we look at the financials filed by one of our competitors who's likely to IPO, they seem to have done better over the last 2, 3 years, compared to the 2 listed players in the space. Anything that you would like to call out, in terms of the market itself or in terms of cost correction that we would have had done, post what has happened in the last 2, 3 years?

[Tarak Patel, executive]

I mean I would not like to comment on somebody else's but I know what the market is and the listed competitors, you know what kind of numbers. So it's very unlikely that a first player would be significantly different in the rest of us because [indiscernible] catering to the same customer is dealing with the same people and the same pricing, right?

So obviously, everybody has their own agenda when it comes to their business outlook. I can't comment on that. But the reality is there is definitely a slowdown in the chemical market, which has impacted volumes and in turn, impacted margins. We've been a little bit better off than most people because we have a diversified portfolio.

We have 2/3 of our businesses coming from the international market, which is a little bit more protected than the Indian market. And lastly, we have about 30% of our revenues coming from services, which is sticky and high-margin. So I think we are definitely in a better situation than the other companies that you might talk about. But I don't want to comment on GMM filing and stuff like that. But I would just recommend [indiscernible] to do their own homework and check the numbers because most of these numbers are quite easily available, and you can check on these things in the public domain.

[Operator]

Next question is from the line of Shyam Maheshwari from Retail Mutual Fund.

[Shyam Maheshwari, analyst]

Tarak and team, congratulations on a decent set of numbers in a saline environment. I had a couple of questions. Firstly, on the Systems business. This has seen quite a bit of upturn, if you look at the order inflow numbers. Particularly in this quarter, we got about INR 200-odd crores of in closing systems as INR 70 crores last year. So is there any one-off or big order that we have kind of booked in this quarter? In the Systems business?

[Tarak Patel, executive]

Yes. So let me give you some color on Systems. Systems has really been a good business line for us in the last maybe 2 quarters. In Q4 of last year, we got about $10 million to $12 million of a Systems order in the U.S. We got a repeat or another U.S. order again in the range of $10 million. And we expect another $10 million, $15 million of more Systems orders now from Europe as well that is expected.

So systems has definitely been an area that we've done quite well. We also got other order here in India for INR 123-odd crores. Again with Systems, this was from a company in Bangalore. So yes, Systems has definitely helped us make up for some of the shortfall that we saw in Glass lining.

Systems, again, keep in mind it's a consolidation of many of our product lines where again, the customers give us a Systems business because they believe that we have the capability to design and also help them with process engineering, right? So hopefully, the margin profile of our Systems business are a little bit more than just equipment, and we expect the Systems business over time to grow. And again, as we differentiate the technology that we have and the internal IP that we have around, these processes will help us win some of these Systems business.

One more point to add system with many of the customers do their trials with us. So we have some centers where we work with customers for 6 months, 9 months [indiscernible]. And then you have the eventually, when they decide to go ahead with this ordering, they would then -- or they were [indiscernible] from us because they've done that kind of work with us.

So this is definitely an area we want to continue to focus on. In India as well, maybe Aseem can jump in. We have now created a much larger organization for systems. We've kind of brought in people who are more process-oriented. Maybe Aseem, you want to just jump in and talk a little bit about systems and what you're doing here for some of these new technologies like green chemistry, flow, et cetera.

[Aseem Joshi, executive]

Yes. Look, systems is an important platform for us. We've talked about it. I think I'd like to, of course, suggest the nature of the systems business inherently is a little lumpy because the ticket sizes are bigger. And that's what you've seen in our numbers, there's been [indiscernible] in our pipeline. It just took a little longer to close. But [indiscernible] the bottom that have come.

Now as we are continuing to focus on the Systems business, we recognize that we need to further enhance our capability to serve our customers' requirements. So when you move from being solely an equipment supplier to a solution provider, we need to have a much better understanding of our process.

So we have invested both in our people capability by hiring additional process experts in various domains as well's as the physical capability with our test center in Karamsad, which is now fully operational. People can actually come into a whole range of tests in GMM so that they get a lot more confident in the outcome that they can get from the products and solutions that they buy from us. So we'll continue to develop this. And in a similar fashion, I talked about it in a similar fashion [indiscernible] and is also continues to invest in the system table orders.

[Shyam Maheshwari, analyst]

Interesting. And could you just elaborate a little bit more on the kind of solutions you have provided? So I remember asset recovery was one such thing, which was getting captured in systems. But these recent orders, if you could give a little bit more color on to what exactly solution is this addressing?

[Tarak Patel, executive]

Yes. So I'll start first and then maybe I'll request Vince to give an explanation of what the [indiscernible]. So in systems, we are very particular that we have some domain expertise in the solutions we provide. So we've talked about assets in the past where the center of excellence is in Germany. We have -- sorry, liquid [indiscernible] in sort of solutions it come out of our North American operations based on the [ white evaporation ] capabilities we have there. And then we also have memory suggestion systems that come out of our Italian subsidiaries Hyrdro Air. In addition, there are a whole range of reaction systems that we do in Europe as well as in India and actually in North America. Now maybe Vince, you could talk a little bit about the [ Asian order ]?

[Vincent Leroux, executive]

So we got the model in the U.S. in the range of EUR 10 million in Q1. It was in the pharma sector, medical device but we are in different applications. We would see or we see some -- I mean we have a nice pipeline coming on for Q2, where we are in different industries like energetics, like recovery because we are in the resection business of [indiscernible], for example, and with foundation.

So many different sectors and industries gain into a kind of system. And the pipeline is quite strong at the moment and we feel that system has the facet, has compensate the shortfall of [indiscernible].

[Shyam Maheshwari, analyst]

Understood. And just a follow-up to this. So does the design capability lie with us? Or is it the customers and then you would just call the ] engineer for a possible solution?

[Tarak Patel, executive]

No. So in the case of 90% of systems, we will design the entire [indiscernible] for them. There are certain customers who wanted the [indiscernible] will give you the kind of over-arching design but then have all the PIP, the filing, the implementation, the automation. And at the end of the day, some of the cases, we also made cost a guarantee. So we have to give you so much output and so much product at this kind of quality of percentage by volume or whatever it is.

So whenever we do that, then obviously, our entire margin so far changes because they're moving up the value chain and we're giving customers he leisure. And then that should -- and then that's where we want to be. And in most cases, I think we have a situation where we are designing for the customer, and we have own internal engineering team as well as process team who does [indiscernible] in-house.

[Operator]

Next follow-up question is from the line of Bhavik Shah from [ MK Ventures ].

[Bhavik Shah, analyst]

Question is, so what is your capacity in India and in the international operations? And how do you look at our capacity? Like what metric do you use and what will be your capacity utilization in Q1 versus Q4?

[Aseem Joshi, executive]

Good question. I don't think we have exact numbers, but I think for the manufacturing company of our size, I think about 80% interventions are pretty good. That's where we would like to be. Today, it would be around in India, maybe 55%, 60%. I would say maybe in Europe or [indiscernible] in the Europe and the U.S. China has been [indiscernible] will be going to read that. China doesn't seem to have too much too much expansion coming in the chemical space right now. So China is a bit slow. But generally, [indiscernible] we are probably about 55%, 60% utilization plant is 100% utilized there. So we will be go to utilized is there. But yes, that was the basic capacity.

[Bhavik Shah, analyst]

Right. So we don't need any capacities going ahead for the next at least 1 or 2 years, if this understanding is correct?

[Aseem Joshi, executive]

That's right. So I think Manish clarified earlier, we don't anticipate any growth CapEx. We have no growth CapEx in this year and not anticipating significant growth in the near term as well.

[Tarak Patel, executive]

We could even be in a position where we could look at -- if we have there could be too much capacity from a product like we can obviously use that capacity for something else as well. So that's what we are always trying to do to see if something else picks up, can we kind of give that -- is growing faster, a little bit more real estate, which means that we have to kind of make sure that we have the right team and people to make sure that we can cater to that certainly -- we've done that already, right? [indiscernible] use that capacity there to cater to some other product lines as well.

[Bhavik Shah, analyst]

All right, sir. So therefore, there's a possibility that your stated capacity utilization is improving and already leverage playing out [indiscernible] improving?

[Manish Poddar, executive]

Yes. That's exactly that's what we are alluding to. Yes.

[Tarak Patel, executive]

And maybe here, we plan to also mention that we are going to a cost efficiency improvement program in our India manufacturing center and that's ongoing at a few years ago. And hopefully, that we will also see in both in terms of cost structure, procurement, value engineering and things like that at a manufacturing level as well. And that will be 9 to 12 months also. So hopefully, that will also help us improve capacity, but also reduce cost and improve efficiency as well.

[Bhavik Shah, analyst]

And do you aspire to like be at 15% in 1 or 2 years? Like that's where our aspiration now?

[Manish Poddar, executive]

Sorry, what was the question again? I missed that, sorry.

[Bhavik Shah, analyst]

Margin [indiscernible] are seen, let's say, 15% in coming 1 or 2 years. Like if the capacity utilization picks up, that all you aspire to be?

[Manish Poddar, executive]

Yes, capacity utilization should lead to some like 2%, 3% addition to the [indiscernible] that is something that we should [indiscernible] .

[Tarak Patel, executive]

So you will see, I think you were somewhat in the ballpark. I think you have a good kind of idea of where we should be. As a management that we should be a little bit more operative target. And like I mentioned in the next few months, you will receive a document that comes from the company to the capital market, in terms of what our strategies are. How do we deviate, how do we focus on getting to pharma, how we try to diversify away from pharmaceutic from topline. What is the new opportunity available to us? Where the results don't come from because one of the things that we did internally from this cycle is down side is that obviously, as a company, we are focused only on industry, which obviously is very typical.

So as management, we do believe we put the company in a much better and comfortable situation, you would like the company to have a much wider industry rate that we can take when and that's what we're really working on. And some of the other industries we rare looking at are growing much faster than [indiscernible] pharma as well.

So all these things are things that we are working on. We have to get through this [indiscernible] period of 1 year, which I think we will. We already are in a good situation. Order backlog is good, order intake is a bit [indiscernible] than before, [indiscernible] we all know what needs to be done. We are working internally like I said. And obviously, you won't see a lot of [indiscernible] numbers from us for the next few quarters. So then we do expect in a year or 2 years from now, we will see a company that is much more of, I would say, stable in terms of revenue and profitability. And that's the idea of what we are trying to do.

[Operator]

Next follow-up question is from the line of [ Sagar Shah ] from Spark Capital.

[Unknown Analyst]

Sir, just a couple of questions. One point on debt actually. You have released the BSE notification that you have filed for an extension of place for one of your subsidiaries. And you have also -- basically, there is also modification of let to increase your [indiscernible] by [ EUR 5 million ] and also [ EUR 40 million ] for a new facilities from the existing vendors. So basically, currently on the debt level, actually, as we are not looking for any further CapEx also. And as far as I know that we are not looking for further acquisition. So what is the reason behind the debt? And initially we had guided for a reduction in debt insight in this year for around INR 100 crores on the loan fund. So any color on the debt outlook, sir, for this year?

[Tarak Patel, executive]

Sure. So let me give you some broad level cover. So this is basically a refinancing that our financing package is being rolled over. This financing package was ending in 2026. We have now rolled it up to 2028. The banks are very happy with the company's performance and hence, have agreed to roll it over.

Further, they have given us an additional EUR 9 million or EUR 40 million for acquisitions as and when we need them. There are no current acquisitions that we have in mind. But as a company, and I think I need to correct you there. We do and we will look at acquisition opportunities as and when they arise because for a company of our size and scale, and the diversification that we are looking for, we will have to look at new opportunities in new industry segments and that would only come through acquisitions, right? So that is the thought process. This line will be available until August 2020 to 2028, and it is part of the refinancing and the rollover that we had invited and that's pretty much business as usual. Manish?

[Manish Poddar, executive]

Sure. So a couple of things here. Just what he mentioned, broadly, it ends at some like August '26 and all that. So we have good 2 months from now, but 12 months from now, typically, it will fall under the current liability. So therefore, from a qualification perspective, we need to be a bit more proactive to make sure that from a qualification perspective, the noncurrent remain center [indiscernible] bucket. So therefore, we had to do that well in advance to make sure our balance sheets are in good shape from that perspective.

The second one is one of the bankers -- international bankers, out of his own issues and all that. We won't to have a different -- didn't want it to have extended credit and all that. And we wanted to have relationships, the banking relationship starting -- initiating from India. So therefore, a bank where we have good old relationships here in India has been nominated into the consortium. So that it helps us into a better deals in future as well.

[Unknown Analyst]

Okay. So something FY '25, the long-term debt will remain stable? Or will we see increase in debt in the next few months, the long-term debt?

[Manish Poddar, executive]

So like as I mentioned, we do not have any aspirations to have growth CapEx in current financial year or in the upcoming next financial year as well. So therefore, we do not need any update for that. For the M&A part, I think Tarak already mentioned some that will be all on that.

[Tarak Patel, executive]

There's nothing in lined up in the future, and I don't expect anything to close probably in this financial year. But the credit -- the line that we have is already approved. So tomorrow, when we do find some is something that we can draw down at any given point in time, right? So it gives us flexibility. And as a company, as we mentioned, obviously, there is something eventually that we might want to do, and we need to be ready for that.

[Unknown Analyst]

Okay. Sure, sir. So my last question was related to mixing. As you said, 80% of our revenues came in this quarter of mixing. So that, sir, translates around INR 200 crores of revenue. So basically, did we see a decline in revenues for even a mixing business in this particular quarter Y-o-Y? Or -- and in this year, are we -- as compared to USD 42 million, are we -- can we see growth in the industrial mixing business in the season in FY '24 may be a decline in that?

[Manish Poddar, executive]

No, we will be -- we may not have declined Y-o-Y. I will not have specific numbers there on ready in my space at this point of time. But as I mentioned, long term, we are looking for growth. Quarter-on-quarter may not exactly fall in line with the growth aspiration that Tarak mentioned to you.

[Operator]

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management of GMM Pfaudler Limited for the closing comments.

[Dhaval Rajput, executive]

Thank you, Yusuf, Thank you, everyone, for joining us today. It was a pleasure interacting with you, and we look forward to many such interactions within the course of them. Take care and see you soon. Thank you.

[Operator]

Thank you very much. On behalf of GMM Pfaudler Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.