Kirloskar Oil Engines hosted a conference call on Nov 3, 2023. In the conference call the company was represented by Gauri A Kirloskar, Executive Director & MD.

Key takeaways of the call

On track of its 2X-3Y strategy targets i.e. Revenue Rs 65 billion @ double digit EBITDA in 3 years.

Powergen Q2FY24 is a quarter of transition as demand was weak after strong pre buy demand in Q1FY24. Powergen sales in Q2FY24 were down 8%yoy to Rs 360 crore.  Last minute notification allowing sales of CPCB 2 engines till Jun 2024 forced the company/industry to take up lot of changes in its transition plans (sales, inventory management etc) for moving to new CPCB4. Now managing multiple product line complying multiple emission norms.  Seeing demand for CPCB 4 products from specific regions in India. Continue to sell CPCB 2 products, which at significant levels.    The things are to normalize gradually over the period July 2023-Jun 2024.  For period July 1, 2023 to Jun 2024, initially the CPCB 2 product demand/sales will be higher than CPCB 4 but somewhere in the middle the CPCB 4 product demand and CPCB 2 product demand to be equal and then CPCB4 will keep increasing with descent in demand for CPCB2.   Higher inventory is expected to normalize going forward.

Industrial – certain segment such as Agri, where the demand is lower than expectation  in H1FY24.  Infra and data centres shows strong demand growth. Executed orders from 500 kva products  for data centres.

B2C side – small engine business has show more than 20% growth. Full control of LGM export focus resulted in good results.

Several new product launches during the quarter. Now have comprehensive range of gas gensets. Marked entry into HHP Segment by launching OptiPrime upto 3000 kVA.

Industrial business ended H1 with a very strong order book led by large  railway & defence order.   Expect the steady performance to continue in H2FY24.  BS V program on track, field engines clocked 1,000+ hours. TREM Stage-V (BSV) is expected to be introduced in April 2024, although the date is yet to be finalized.  

Expect the quarterly staff/employee cost run rate to be around Rs 70 crore.  Higher staff cost in Q2FY24 is largely due to lower volume leverage and transition.

High HP segment is a large market segment with annual opportunity of about Rs 2000 crore. This segment is currently catered only by limited players. 

Getting into white space higher kva range 1500 kva above now we have product in that range. Increase service penetration and ramp up after markets  these are the three initiatives the company is working on to improve margin.   

LGM Optiqua merger on track

LGM Plant consolidation on track

LGM Margins improved to 7.7%, against 3.5% last year.

Exports from LGM reached at about 30% of sales for H1FY24.

GOEM appointed for key International market  such as GCC.

AFHPL revenue from operations in Q2 FY24 stood at Rs 127 crore, a growth of 52% YoY and the PAT stood at Rs 18.5 crore, a growth of 22%YoY.  Total Debt as on 30th Jun 23 stood at 3,154 Cr. Total AUM as on 30th Sep 23 at Rs 4128 crore  of which Rs 932 crore is real estate, Rs 368 crore is for warehousing logistics and Rs 1500 crore is for SME/ MSMEs etc.   GNPA stands at 0.19% and NPA  0.05%.