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GMM Pfaudler Ltd
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Good day, ladies and gentlemen, and welcome to the Q2 and H1 FY '23 Earnings Conference Call of GMM Pfaudler Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Priyanka Daga from GMM Pfaudler Limited. Thank you, and over to you, ma'am.
Thank you, Michelle. Good evening, ladies and gentlemen. A very warm welcome to all of you into the Quarter 2 FY '23 Earnings Call of GMM Pfaudler Limited.
The earnings presentation was uploaded on the Stock Exchange last evening and is 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 Poempner; and our CFO of India Business, Mr. Manish Poddar. 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 with the overview, a brief disclaimer, which we have uploaded on the Stock Exchange and on our website, including our call discussions that will happen now, are contained or may have certain forward-looking statements concerning our business prospects and profitability, which are subject to several 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 an overview of the performance. Over to you, Tarak.
Thank you, Priyanka, and good afternoon to everybody. We are happy to report a strong quarter with a revenue growth of close to 21% year-on-year. Our EBITDA margins have also improved 0.2%, and our order intake has also increased 6% year-on-year.
As for the order backlog, we stand currently at INR 2,119 crores, which has visibility for the next 6 to 9 months as well. We continue to see a lot of traction both in the chemical and pharmaceutical spaces around the world, and we believe that both international business and the India business will continue to do well, which will be driven by the 2 main industries.
The international business has done really well in this quarter, both in terms of revenue and profitability. Our European business, in spite of the higher energy costs and the cost reduction measures that we have rebated, has done quite well. And we believe that looking into the future, the European business really kind of globalize energy prices now stabilizing and also kind of going down.
We've also completed the acquisition of Hydro Air Research Italia. This is a company that we had acquired a few months ago. That acquisition is now complete. This company deals in membrane separation system and opens up new investment as well.
We've also completed the acquisition of the balance 46% in the GMM International S.a.r.l. As many as you know, GMM was a subsidiary of the company and now wholly owned subsidiary of GMM Pfaudler Limited with 100% of the profit accruing from Q3 onwards.
We also have reaffirmed our credit ratings both by CRISIL and ICRA, A- and A1+, respectively. We also completed recently our first Investor/Analyst Day, which was held in September 2022.
Now to give you a little bit more color on the numbers, both consolidated and standalone, I would like to invite Manish Poddar, our CFO of the India Business, to take you through the numbers. Manish?
Thank you, Tarak. Good evening, everyone. So to start with the consolidated balance sheet. We see an NCI, the noncontrolling interest has netted. That's because we just acquired the balance for the 6% of the Pfaudler International. So going forward, you'll see 100% of the profits accruing to us.
Similarly, the debt has increased in value on account of debt that we're acquiring this stake. Pension liabilities have gone down substantially on account of rising interest rates and therefore, the present value of the liabilities, pension liabilities going down.
Moving on to the Goodwill and Intangibles. There have been some addition in account of the Hydro Air investment that we made in Italy. Similarly, talking about the fuel ratios, the net debt is 767 minus 300, say 467 gross. And so net debt to equity stands at 0.7. EBITDA to -- net debt to EBITDA stands at 1.1.
Moving on to capital. There's a slight increase in the working capital. Some debtors need to be recovered in the stand-alone business for India. There have been some increases in the working capital overall, primarily on account of heavy engineering taking larger share of the business.
And then moving on to the cash flow. So there has been business cash generation of INR 231 crores and the investment of INR 251 crores on the working capital and CapEx, and the balance has been primarily on account of repayments of the debt and the interest thereon.
Moving on to dividend, the EPS. We have the analyzed EPS would turn out to be something like, say, INR 50 if we just analyze it for the H1 results. And the ROE and ROCE has also improved substantially to 29.2% and 33%.
That's it for me. Priyanka, do you want to take it forward?
Thank you, Manish. Michelle, we can now open the line for questions.
[Operator Instructions] The first question is from the line of Venkatesh Balasubramaniam from Axis Capital.
My first question is to Manish, more like a bookkeeping question. I believe that if you actually look at the numbers, second quarter numbers, your EBITDA is close to around INR 119 crores for the consolidated entity. The stand-alone entity has done INR 42 crores, and Mavag and Pfaudler Inc. has done INR 70 crores. So INR 42 crores and INR 70 crores adds up to INR 112 crores. And there is another positive INR 7 crores.
So is there anything else in the company that we are missing here? Because ideally, if you look at the numbers, last year, usually, when you added the numbers which you gave in your stand-alone EBITDA and your international EBITDA, you had to actually do some elimination of INR 6 crores or INR 7 crores to get the consolidated EBITDA.
But since the first quarter of the current year, it's slightly different. When you add up your stand-alone numbers, which you put in your PPT and the international numbers, you have to actually add a small number to get to the consolidated EBITDA. So can you please explain this?
Yes. Good catch, Venkatesh. Yes, that's true. That is primary on account of initial accounted concept per se. So what happens is when you export something from India to Germany -- so when you export from India to say, Germany or U.S. in this case, so you accrue to the profit in the standalone business in the earlier quarters. However, in the consol you get the profit -- the entire profit of stand-alone and international business once you sell it out from the group, which happened in Q2.
So therefore, the shipments for which India shipped before Q2, and international business then moved out to the ultimate customer in Q2, the entire profits of stand-alone and consol accrued to this. So that's where the INR 7 crores of positive is there. You may see this small number positive or negative, depending upon which one -- which quarter was higher or lower, going forward as well.
Okay. Understood that is very clear. Now I also remember that Mr. Patel had given some kind of color after the first quarter result, where he said that as of now, you are executing your orders with high cost inventory of steel and you are expecting that given steel prices have come down, third, second half of the year, your margin should be better.
Now you've already got to 15.2% consolidated margins in the second quarter. So is it reasonable to assume that you can still -- margins can go up even further from here in the second half? And would this be more led by the -- what exactly do you expect happens to the stand-alone numbers because -- which are contracted quite sharply on a Y-o-Y basis in the first half? So are you expecting that to improve or you're expecting more of an improvement in the international part of the business?
Sure. So Venkatesh, so, I think, Y-o-Y comparison for stand-alone maybe a bit of an aberration simply because that was the first 2 quarters of the year of FY '22 where we got the risk, but we're still consuming the old gate. And now exactly that the opposite has happened in these 2 quarters of this current financial year.
And that's why you see that huge difference between a 25% and 16.5%, 17% sort of a number. We expect this to be normalized in second half of the year. So this 16.5%, 17% should now, Q3 and Q4, we should see maybe improvement there on a stand-alone basis. International business has already enhanced its performance to something like 13%. So we expect something like 12%, 13% to continue for them as well.
Okay. Okay. Just one last question, if I may. What would be a reasonable effective tax rate for the full year for the consolidated entity?
Yes. So effective tax rate, something like 27%. If you're alluding to this quarter per se, so there has been a different tax credits back, and there's a much lower percentage, but that's not a true reflection of a sustained basis. On a sustained basis, something like 27% of the net effective tax rate is.
We have the next question from the line of Utsav Mehta from Edelweiss AMC.
Just -- I'll just continue on the previous question. So does that mean that from what you reported in this quarter, the international margins should sort of normalize back towards 12, 13? That is India will pick up. Is that correct? Is my understanding correct?
Yes, that is correct, that international business has already, I think, improved considerably in recent past from 10%.
No, I asked -- because it's at 15 right now. This quarter was, I think around 15-ish -- sorry, not 15-ish.
15 is the consol number. 15% is the consol number, international 13%. India is at 16.5%. So India, you can expect 16.5% to go up and [indiscernible] of the international business primarily, you may expect to restate.
Okay. Sorry again the conclusion, I was adding INR 5 crores to INR 7 crores. Sorry, I was adding INR 5 crores to INR 7 crores.
No, you're right. So what also has happened is INR 7 crores will give you that differential. Okay.
Sorry, you were saying something?
No. So I say, yes, that INR 7 crores is going to give you the differential as well between the numbers. The [indiscernible] India and International business.
That may or may not repeat in the coming quarters, basically?
Yes. Yes, on the steady state, right.
Okay. Fair enough. Tarak, I just wanted to check. So it's been 4 quarters running the order book, on an absolute basis, it's around INR 2,100-odd crores. If you could just provide some flavor in terms of where do you see this number go. And do you believe that -- what does it take for this to go to INR 2,300 crores, INR 2,400 crores, INR 2,500 crores? Is there enough in the market for this number to continue to go up?
Right. So I think, on the order front, I think, like I mentioned to you, I think we already had quite a sweet spot for the international business. I think having any more backlog means longer delivery time, so that would not be the right place to be at. But I think where we could probably grow order intake is here in India.
I've spoken about this in the last few conference calls, where I've said that we have been very selective in terms of glass-lining business to a quarter know to customers when the prices did not meet our requirement.
And having said that, we were also waiting for some of the larger -- the projects to come through from our key clients. So that when those large projects do materialize, we have enough order capacity for that. We've just started seeing a big large order intake happening in the glass-line business here in India.
So I think, looking forward, you will see the India backlog increase, which is right now currently at -- for the glass-line business around 4 months, but being around 4 and 6 months for us is just the right the sweet spot. So I think we still have some capacity here in India to increase order intake. And I think the glass-line area here in India is going to be a big driver for us in the next few quarters.
And if I'm not mistaken, the current furnace now should -- we should be able to take on more in terms of the amount of orders we can give, correct?
Right. So I was actually going to say this in my opening remarks and it completely slipped my mind. But yes, we have now decommissioned the 80,000-liter furnace, which is India's biggest furnace, and obviously, will cater to super large vessels, not only for India, but also for the international business.
We've actually received an order for 3 80,000-liter storage tanks. That's already in our books, and fabrication has started. We're expecting another 5 number, 80,000 liters. So as soon as -- actually, the timing has been just reported. So as soon as we start -- this furnace came online, these orders have now be come in. So yes, that will also help us improve both our shipment and the number of EUs that we have that we can manufacture here in India.
Fantastic. And just one last question. Apart from receivables in India, I've also noticed other financial assets sort of increased by INR 50 crores over the last 6 months. Typically, this tends to be unbilled revenue. I just wanted to clarify what this number is?
Yes, you're right. Yes, you're right, Utsav. Can you hear me, Utsav?
Yes, I can hear you. I just wanted to ask the reason why receivables and unbilled revenue both have gone up?
So receivables, of course, have gone up primarily. There's some collection that we need to make, and we expect this to improve in the coming quarters, and that is one. But POC, you're right, the unbilled revenues have also scaled up overall in the business, both in India and international business.
And this is just to do with the scale at which we are operating or -- because in terms of number of days...
I think there's some INR 90 crores of POC addition, that has happened in this business -- in this H1, and we expect this to maybe something like INR 30 crores to INR 40 crores improve over in H2, but that beyond that, should remind in the business.
[Operator Instructions] We have the next question from the line of Tanayaa from Marcellus Investment Managers.
Okay. So behind your strong set of numbers, just a couple of quick questions. So if I look at our stand-alone business, other expenses, just about the EBITDA, they have gone up by around INR 20 crores on a yearly basis. Could you kind of provide some color on that?
Manish?
Can you please repeat. Which number are you talking to?
INR 20 crores of other expenses has increased.
So the number...
Yes, assets have increased by INR 20 crores, primarily on account of power and fuel, if you referred to vis-a-vis last year Y-o-Y. And also the total space primarily because in engineering, again, the combination of change is taking an impact. And also, there's some freight outputs because we had a larger export shipment. So freight outward particularly in this H1 has -- or Q2 actually has been also higher.
Okay. And sir, the pension liabilities reduction and the consol that is purely because of [indiscernible] going up, you have a funding or cash outflow to kind of get this number down. Am I right?
Right. So this is purely on account of the interest rate results.
We have the next question from the line of Jason Soans from Ashika Stock Broking.
So I just wanted to -- so if you could just give us some color on the demand outlook for GMM overall. So you had earlier in the Analyst Day as well as spoken about the slowdown in the Pharma segment in terms of demand order intake -- in terms of order intake.
So just a brief outlook I would want, especially in amid rising costs, inflationary environment as well as whatever is happening in Europe. Just wanted to understand what's the demand outlook for pharma and chemical both from the end user segments?
Yes, Jason, this is Aseem Joshi. I'll take the question. So..
Sir, I'm sorry to interrupt. You're sounding distant. Can you please closer.
Is this better?
Yes, sir. Please proceed.
Yes. So -- as far as -- I'll start with India, and maybe Thomas can add on the international business. As far as India is concerned, Tarak mentioned earlier, we've been careful about selecting the right set of orders. So we've made sure that we fill our factory with the kind of orders that we like.
Now in recent times, we started seeing a pickup of some of the large projects that we saw on the horizon, and they're starting to move forward. And in fact, one of the big order that Tarak talked about, [indiscernible] is one such project.
There are several more that are on the horizon, and we feel we are competitively placed on that. So I think from a demand perspective, especially for larger projects, we are starting to see reasonably good movement.
Of course, some of the smaller projects, the runaway business, that's still -- we're still sort of still at a sluggish pace, like the large projects are picking up, right? And Thomas, would you like to address for the international business?
Mr. Thomas Kehl, can you hear us?
Okay. So maybe I'll kind of take that. So Jason, you're right. So like Aseem mentioned, pharma has been a bit slow. But we have seen some kind of traction, mainly in the PLI schemes that have been launched, especially in penicillin here in India. So 3 large orders for penicillin manufacturing implementation that we've got.
But pharma has been much, much lower. We see the main -- the main drivers for us have been the chemical industry, both agro and specialty chem. And the large project that we speak about are also kind of for the specialty chemical kind of large projects, right?
Also, what we've done now recently is we supplied the first lot of our stock and steel investor to Europe. So 24 equipment have been ordered in India, which will be stocked and sold in the European facility, and will be sold when customers have a breakdown and immediate need for a replacement. So that's worked out quite well.
But generally, across the board, I think our chemicals will account for nearly 60% of our total glass-lined sales, and pharmaceutical will account for nearly about 25% to 30%.
And one question what I wanted to ask you is, I mean, we are seeing pretty good traction in the international business. So in terms of revenue growth and margin growth also, which is around 9%, 10%, has now moved up to 12%, 12.5%. And this is in a phase of -- energy price is already growing in Europe. So I just wanted to know what is different so that to gain such a positive performance? What do you do [indiscernible]?
Yes. So I think -- so I'll maybe start off, and then if my German the colleagues are online, they can kind of just build on that. But we have taken some remeasures.
So in Germany sales we have gone down to a 4-day work week. So we actually have less number of hours. I mean with the same number of man hours being used, so they work longer hours, but 1 day is additionally the factory is closed, which obviously helps us reduce our consumption of gas and energy.
In terms of pricing also, we've kind of built in all these material and energy increases into our pricing, and that's also helped us. And then on top of that, we've added new businesses, small businesses through M&A, which are now showing a good amount of the turnaround and growth and that's also helping improve profitability.
The last thing that's also changed significantly is the services component because the services component -- because of the pandemic was in smaller -- in terms of the price, the smaller. And now we see a lot of factories opening up and the services part of the business is actually growing. And as you would know, services is definitely more profitable than the other businesses, right?
Thomas, Alex, if you're on, if you want to speak maybe a little bit about the energy situation in Germany?
This is Alex, not so sure if Thomas is in. In fact, what you said I could definitely echo this. And with regard to the energy situation in Europe, I think, finally, we face an increase already since end of last calendar year, became really strange from February, March, April onwards.
But nevertheless, we, currently, are even in this situation with this higher energy cost and able to increase the margin. It's partly due to the shift just that they have a higher share of service business. But nevertheless, we will also already for -- focusing on some margin improvement, and this now drops through. So it currently overcontemplates the energy cost increases.
And now looking forward, that the energy costs stabilize or even they reduced in the last weeks. So we are confident that the outlook remains positive.
Then just 2 more simple questions. Just wanted to go back and ramp up and what about the ramp-up in the Vatva facility. And now that you have an has taken over the remaining 46% stake, and this is going to reflect from Q3. So are we not going to see any noncontrolling interest? Just wanted a clarification.
Yes, exactly. So I think, currently, 46% is removed for noncontrolling and now you see 100% accrual from Q3 onwards.
So we will not see any noncontrolling interests, right, from Q3.
Yes, so noncontrolling interest has been eliminated in September, as of 30 September as well. So in the balance and 1st October was the entire profits accrued to the organization.
Right, sure.
[indiscernible].
And as far as Vatva is concerned, we're very pleased with how the site is processed. As you know, we've taken it over a little over 18 months ago. And since then, the ramp-up has been really to our expectation.
So the site is now full. We've had a number of orders that have already been executed and shipped from there. And we've, in fact, broken the record, in some cases, about the size of the equipment that's been shipped.
So overall, we're very pleased with the way it is progressing.
[Operator Instructions] We have the next question from the line of Saketh Reddy from [indiscernible] Enterprises.
Congratulations on good results. There's one thing in the international balance sheet pension liabilities. Can you explain how it is -- is it treated in the P&L? If it is treated on the P&L?
Sure. So, I'll start off, and then maybe Alex can jump in. So typically, these are non-funded pension liabilities, primarily in Germany. And these are close plans, and no new employees are being added, the existing employees age is approximately [indiscernible] years.
And the accounting treatment is basically the different interest as the interest rate rise as you imagine, the present value of the future liabilities is good, and that gain accrue the OCI, the other comprehensive income. And then the balance sheet movement happens. Alex, do you want to add something?
[indiscernible] fully correct in factor on what we see in the balance sheet will start that assumption or the actual report and changes, and it is especially driven due to the change in the interest rate as Manish already mentioned that the participants and the number of participants will reduce over time just because they pass away.
The plant is closed, and now we just have changes due to the interest rates. But from the cash perspective or there an impact on the income statement it's [indiscernible] tax.
Okay. And Tarak, now we have -- I think in H1, you did around 11% margin in the international business. So any further impacts on the trajectory there? I wanted to maybe mid-teens or was it [indiscernible]?
Yes. So I think the international business has already shown a strong recovery. I think both revenue growth has been significant and profit improvement as well. We are looking to fine-tune our product portfolio. There are definitely products that we need to bring up to the level in terms of profitability. We are working on those.
We have put in a lot of effort over the last maybe a few years. And we believe that some of the things that we have done will start showing results in the next few quarters. So again, the focus area to really improve margins is to really focus on services and grow that part of the business, and then obviously, our nonbrand business, right? Because that's where we can really grow.
We have small market share. We have the small products, which really can be global, can use the -- for the global network and be sold. And we're seeing a good amount of growth that will come from there as well. But all in all, I think all the product lines have done well.
We also now, thanks to new acquisitions, we've made have access to new industries, right? So I did speak about some of this in the past, but these kind of sold products now to meet companies that make a plant-based meat we sold products to the bioplastics.
We also made inroads and metals and minerals in terms of also power. We've had a large order here in India. So all in all, I think in spite of the investment that's going on in our core industries, just chemical and pharma, we are also trying to move into new industries that will help us kind of diversify and make sure that our growth is on track.
And my last question on the services part. So I look at your revenue breakup and also the order intake breakup, in the stand-alone business, services is pretty low compared to international. So it's in low single digits, low to mid-single digits, whereas the international business itself is around 30% or 40% if you look at revenue or order intake. So why is such heavy divergence, [indiscernible] a high-margin product?
Saketh, you're right. So this is definitely an area of focus for us. Historically, the service -- customer behavior in Europe and the U.S. has been different relative to India in terms of the kind of -- the amount of service that they expect from OEM.
Having said that, we recognize that single-digit service as a percent of our business is low, and that's certainly an area of focus for us.
In fact, just this quarter, we have made some changes to our organization and appointed a service leader in the India business, which is very similar to how the international business also runs it. And so I expect that with the focus that this individual will bring, we'll start to see an improvement here.
In fact, we're already seeing it. And it's really about the approach to our customers, the analysis of our installed base, our service offerings, the appropriate pricing, et cetera. All of those actions are now underway. So it's certainly an area of opportunity for us, and we are working on it.
Right. And just one last question on the shareholders. You've completed GMM international acquisition. So now how the shareholding structure look like? I think [indiscernible] has 24% and the rest of the promoters take would be with DBAG. Is that correct?
[indiscernible] balance 31% as of now, and the balance is on the shareholding.
So just to add to that [indiscernible] we have increased our stake. We were around 22-point something, now we are at 24.2 through the prep allotment that we recently did. So our stake has gone up. And the balance is with the public out of which, I think, 18%, if I'm not mistaken, Priyanka, maybe you can correct if I'm wrong is with SBI and we have mutual funds about 5%, 6% and then obviously, all the other institutions and bucket.
And DBAG is committed to stay with you? Is that right as of now?
Yes. So when we did this transaction, we have signed a contract and an agreement where we have a 3-year lock in, and they are committed to the business.
We have a follow-up question from the line of Venkatesh Balasubramaniam from Axis Capital.
Yes, I had a couple of follow-up questions. Now if we -- if I just look at the India business of glass-lined equipment, and I actually look at the business of one of your largest competitors here, HLE Glascoat. If you notice over the last 1.5, 2 years, when you've been busy in consummating the [indiscernible], HLE Glascoat has grown at a much faster pace than your glass-line equipment in India part.
So have you been losing market share in India? And is this a cause of concern? Because I also observed that HLE Glascoat, on an average, their India business meets almost 400 basis points lower margins than you. So as you have this key competitor being cutting prices and picking up orders and is this something that you worry about? This is the first question.
Yes. So let me address this. So look, I obviously can't comment on other business' performance. What I would say is we always are -- glass line is obviously our largest business, and this is an area that we have been a leader in. We intend to remain a leader in.
As we outlined earlier, we are going to -- we've always been careful about the orders that we use to fill our factory with, and we'll continue to do that. So we are quite satisfied with the performance of our glass-line business.
Our Hyderabad factory is also now ramped up nicely.
And so we have used our capacity to satisfy the right kind of customer needs, including some of the export orders that we have started to ramp up on.
Okay. What exactly is your capacity in terms of equivalent units currently in India?
Yes. So with this new...
Sir, your sound.
Sorry, yes, yes, yes. With this new furnace that we have now commissioned, we should be up to about 2,900 to 3,000 EUs per year.
Okay. And what kind of utilization are you currently at?
So I think in terms of utilization, I think both the Karamsad and Hyderabad facility are close to 80%, 90% utilization. Obviously, now with this new furnace that has just come in, in Karamsad, obviously, that number will drop.
But yes -- so we are at pretty much very high utilization across all our plants in terms of the glass-line business, where we have very large backlogs.
Now just one last question from me. I think this question was asked. I'll just put it across in a slightly different way. Now obviously, the continent of Europe is under severe stress. I mean what is the war, inflation, energy prices going through the roof and the kind of news which we keep reading in terms of end industry, a lot of industries shutting down, things like that.
Now, are your customers basically in the chemical industries and the pharma industries, are they having any of these companies? Are they having stress? And if they are having or understate how come it is not impacting your numbers? So what exactly is the key driver for this very good growth? Because I think almost 39%, 40% of the consolidated numbers comes from Europe. So some color on that would be very helpful.
Yes. So I think some of the news that we get here, obviously, maybe gets blown up a little bit and there is also a lot of the fostering that happens. But on the ground, what we are seeing today is that customers are finalizing new orders. New factories are being set up, I'll just -- to give you an example, I think one of our companies, the Swiss subsidiary, is actually finalizing an order with maybe [indiscernible] I'm not mistaken, which is going to be delivered 2.5 years from now, right?
So people have that long-term visibility. People don't even need it immediately, and they're willing to wait. But the order book that we have gives us a lot of the comfort, right? So that the next 6 months, 9 months in different regions, we already have orders on hand, and our focus really shifts to the execution, right?
Are we seeing anything on the ground that tells us that things are going to slow down, things are not looking that bright. I don't think we're seeing any of that right now. The opportunity level, the interest levels, the inquiry that do continue to flow in are of pretty much the same level.
The only thing that we probably see now is that the time it takes to finalize something is slightly longer than earlier. People may take a few months more. That's really the only -- the difference that we see. And just coming back to India, again, like I mentioned, chemicals has a lot of new projects.
Obviously, we work with the host of the chemical companies, and many of them are and have plans to expand further and invest more and more in terms of building new facilities. And obviously, being a major supplier to chemicals, we will definitely benefit from that.
The next question is from the line of Harshil from AUM Fund.
So from what I'm hearing is in Germany, the government is aiding companies which are keeping their plant shut. So are we receiving any kind of incentives from the government?
No, nothing right now. But the government and what we hear, especially in Germany, there could be a bailout the package that could be kind of a program where the government will step in and help some of the companies who are facing a lot of pricing issues and production issues, but nothing that we have seen. Like I mentioned here and what Alex said as well is that we're actually seeing the prices now stabilized, energy costs have stabilized.
And in the last few weeks have also come down. So we are -- we kind of believe that we are actually past the highest level. So anything further improvement will only be -- will have a good impact on the rest of the year as well.
Okay. Okay. What I wanted to understand is, is there any kind of government subsidy in our margins, which is why we are hitting kind of 12%, 13% margin.
[indiscernible].
We have a follow-up question from the line of Tanayaa from Marcellus Investment Managers.
Sir, on the international business front, you had several new smaller businesses, which are showing good traction apart from your glass-line [indiscernible]? Could you just kind of go into a little bit more detail on that?
And related to that, next question you have said with the system technologies that we have been #1 [indiscernible] . How do you see growth in system specifically in [indiscernible] but growth in the systems business and international bank, which the base at kind of driving this action?
Right. So I think maybe let me just kind of take you through what we have in our portfolio. So obviously, we have 2 new acquisitions that we made. Hydro Air is obviously in membrane separation the technologies. That business is about $8 million or so. We expect to kind of double that -- double that business in the short term.
So they are doing a lot of nice and interesting work that will help us not only internationally, but also here in India. They do a lot of work in bioplastics, in bio meats, proteins, EVs and things like that. So it opens up a whole new industry segment for us. So that's where we believe our growth will come from.
Having said that, they already have a strong foothold in chemical and pharmaceuticals. So it's definitely a complementary product. The other product that has done exceedingly well is a product called Interseal, which is the sealing technology that we've launched here in India as well.
They recently won a very large order, about $2 million worth of business with a large German customer. And in India also, we are finding that there are a lot of interest, and we've also got orders, I think, if I am not mistaken around the 20 seals or so has been sold in India.
So again, a small business that was about $3 million is now trading around maybe $10 million, $11 million. So we've grown that business in a very short period of time. We decide that we also have some smaller businesses. They are not brands per se, but these businesses are small and they grow quite quickly.
They're quite profitable as well. So we have plans on growing those businesses as well. And in terms of the system business, I think that has done quite well. I did mention to you last -- in the last quarter call that we received our second asset recovery or the year around INR 20 crores plus from a power company, right?
So this power company, we currently had sulfur that they actually -- it goes into the air, which they now want to convert in the sulfuric acid and a large chunk of that project because it's also kind of -- it kind of brings into the glass-line equipment space as well.
So the system also remains an important part. That's where we really kind of move up the value chain. And since we offer process know-how and technology, they can definitely command much better margins. I think Aseem may you want to add something to that.
Yes. So just on this last example that Tarak talked about the asset recovery. I'll add a little more color to it. So this -- it's a very interesting space because it's essentially a flue gas desulfurization application, which is essentially the smoke coming out of smoke stacks is clean through scrubbers. And it basically creates sulfuric acid which is weak.
And then that's where GMM Pfaudler comes in, and we actually help them concentrate that weak sulfuric acid into concentrated sulfuric acid, which can actually then be used. So this is -- it's an interesting application. It has the potential to scale. Of course, in India it's just starting off, but we are pretty excited about the possibilities and what GMM Pfaudler has to offer.
Tarak talked about some of the other businesses around the bio meat, the plant-based meat, et cetera. That too is now new to GMM Pfaudler through the Hydro Air acquisition, but we see potential to scale that up reasonably quickly as well.
So all in all, we have a portfolio now where we think we have a number of interesting bets that play on macro trends. And we believe we should take them forward. One sec, Tarak just going to add something?
Yes. So just to build on that, I think we have some ideas in terms of how do we further enhance our portfolio as well like I mentioned to you that certain businesses that don't fit that well and new businesses that fit better. So we are always looking at opportunities. And I think that's going to be the cornerstone of our growth strategy as well. I think M&A is going to be a very important part of our growth strategy. And we always have interest in increasing and improving our -- the portfolio.
We have the next question from the line of Rohit from Progressive Share.
Tarak, two questions. First one is a follow-up. When you mentioned that there are certain businesses that don't fit the entire system that well. It reminds me of Edlon and its divestment. So any update on that?
Right. So Rohit, yes, Edlon was up for sale. The process is still ongoing. However, files process has been ongoing. Edlon has done quite well. They do -- they have a large order backlog and their profitability has also kind of improved significantly. So we are still reviewing and we're still working on that when we have an update on earn, we will definitely let you know.
Okay. My second question is related to Mixion industrial paints and the developments that you are doing with AG as well as Mavag. If you can just take us to numbers in terms of [indiscernible]?
So I think Mixion is a business that has seen significant growth, and will continue to see a significant growth. It's a complementary product because it's mixing. It's used in the same industries that we cater to. We can use mixing in the glass-line business as well. It's very complementary. We will -- we really like that business. It's quite profitable as well. And recently, we've had major breakthroughs, like I mentioned, not only in the historic chemical and pharmaceutical industries but we've got into fermentation, we've got into metals and minerals, we've got into paint. And I think I can continually say that today in India, we would probably be the biggest mixing player in the market, right?
So Mixion is definitely a focus area for us growing this business not only here in India but internationally as well. And we do need to probably look at building the resources and capabilities, but this business, on a long-term view, is something to be very excited about.
Tarak, can you give us currently, approximately what percent of turnover is coming from Mixion?
In India, I think last year, we did about INR 60-odd crores of revenue, this year should be twice as much, right? So we have a very large order backlog. The business is doubling in size, if not more. And we wish to really grow the business and become a large player in this space.
And on the international front?
International fund mixing is something that is quite small. We don't export a lot of these mixes. We have sold some to Europe and the U.S. But again, having a strong footprint in international business, we would probably need to have a little bit of local manufacturing as well. And that's where probably an M&A opportunity if it were to come up, would be very interesting for us.
But yes, but mixing is something that definitely is on top of our minds right now. How do we grow this business and how do we become a relevant player in this market.
We have the next question from the line of [indiscernible], an individual investor.
There was a talk about relocation of your Hyderabad facility some 2, 3 quarters back, and we haven't heard anything further. Can I know what's the position now?
Yes. So the Hyderabad facility right now, there is no plan on the relocation, the Hyderabad plant, we've just invested and just decommissioned a brand new the furnace.
We are also renovating some of the factory sheds. But our thought was that when Pharma City were to come up, we would then ask the government for land in Pharma City. So we could be closed, obviously, to the industry that we cater to. As of now, there is no plan in place to move. And when Pharma City were to be available, we would definitely like to look at that as an alternative production facility.
We have a follow-up question from the line of Jason Soans from Ashika Stock Broking.
Just wanted to know in terms of margins and stand-alone results, we have seen quite a sharp dip from 25% around margins last year, now they're at around 16.4%. Just wanted to know from you what were the reasons for the same one would probably be the higher steel prices and the higher cost of inventory which you've been holding?
But some other reasons in fact some of the Vatva ramp-up is you'll have lesser margins than GL equipment, obviously, so that the product mix also has an impact on that. Just wanted some color on that, the margin.
Yes, I take this I'll take it first. Perhaps you can add. So I think, first of all, the basis for comparison Jason, is little, unfortunately, last year, this time, we were really benefiting from the strong tailwinds, and we were achieving close to 25% EBITDA.
That was quite abnormal. So it's really the -- but -- so -- and as Manish mentioned earlier, a year later now, we're seeing the opposite effect of the high commodity prices affecting us. I think -- so that's probably the biggest factor, the commodity prices that have let us down.
Yes, you also identified the second factor around product mix. That's something that was not unexpected. So as we scaled up in some of the equine of business is probably not as high margin as our traditional business. But these are things that we are addressing, and we are confident that as we continue our sales strategy around being selective around orders, we will be able to get back on track.
Manish gave an outlook for the rest of the year already, where we expect to see a continued improvement in margins in the stand-alone business. So we feel pretty comfortable that we're on track to do that.
So yes, Manish did give an outlook for the margins. So in terms of margins, probably we'll be looking at an effect from the stand-alone entities and probably international margins, we can at least expect them to be steady, steady stage from hereon?
Yes, I think that's broadly what we expect.
And just one thing, just in the presentation, there is a [indiscernible] mentioning backlog with net of POC. Just wanted some clarification on the POC concept, if possible.
Sure, Jason. So what happened is...
Sorry to interrupt. I mean, we are running out of time, but maybe you can take this up separately off-line with him because that concept itself will be kind of long, and you'll have explained [indiscernible].
Sure, Jason, we can take this off-line and [indiscernible].
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you, Michelle. Thank you everybody for participating in our earnings call today, and we look forward to meet you again in the next quarter. Thank you, and good night.
Thank you. On behalf of GMM Pfaudler Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.