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00:00 Natarajan Srinivasan, MD of CG Power is with us.
00:03 Mr. Srinivasan, very good morning to you and thank you for speaking with us on NDTV Profit.
00:08 Great to have you here.
00:09 The initial sort of brokerage notes on the results are fairly positive.
00:14 I just want to understand a bit, if you can give me a sense on where that margin pressure
00:19 is coming from on the year on year numbers at 12.95% and details of the exceptional items
00:27 which has caused that net profit to fall.
00:33 So we have four businesses reported into two segments.
00:37 One is motors and railways.
00:39 We clubbed them together as an industrial.
00:42 The industrial I think this year I think the margin pressure is coming from motors business.
00:47 Railways is doing okay.
00:50 Then the other business is actually power systems where we have the transformer and
00:55 switchgear.
00:56 Both the businesses have done exceedingly well.
00:59 In fact, for all the businesses other than motors and for the company, margins for this
01:04 year has been the highest.
01:07 All the businesses have some record or the other in terms of sales, profits or order
01:11 book or margins.
01:12 The year-end order book as of March 31st, 2024 is 45% higher.
01:20 It's about 6,275 crores.
01:24 Coming to this extraordinary, we actually sold all our subsidiaries in the US.
01:31 Actually this happened in the first quarter itself.
01:35 That income has been booked there.
01:36 Then that is the main chunk of the income.
01:39 Right.
01:40 Mr. Natarajan, over the last three to four years, you have actually undergone a lot in
01:47 terms of transformation.
01:48 Of course, picking up from your acquisition back in the day, then turning it around, becoming
01:56 profitable eventually and now showing a staggering growth as well.
02:01 But now that we have normalization in place, would about 15 to 20% growth expectation be
02:09 a reasonable one going into the next few years as well when it comes to revenue?
02:16 I think that is quite reasonable because of course, for the immediate year, I think I
02:20 have already mentioned to you that we have a strong order book on hand.
02:25 So I see a clear visibility for the entire business.
02:28 Railways has actually got huge plans.
02:30 We are one of the strong suppliers for railway.
02:34 That segment is expected to grow.
02:36 Our segment, both transformer and shift gear inquiries are very strong.
02:39 I think the demand in the power sector will remain at least for five to seven years, according
02:45 to some, even for 10 years.
02:48 So I do expect the company to grow a minimum of the range of 15 to 20% and we are expanding
02:55 our capacity.
02:56 So that will also facilitate growth.
02:59 Mr. Natarajan, just in terms of the near-term outlook, do you think that the first quarter
03:04 would be potentially a slow one because of the impending elections, the general elections
03:09 that we have and then eventually, do we expect a pickup?
03:13 Perhaps if some sort of a warning for investors to take into consideration the long term and
03:17 not just the short term here?
03:20 So we don't give a quarterly estimate, sir, but for the year as a whole, I am confident
03:26 of growing the top line by 20%.
03:29 And then if there are no spike in the materials, material cost, you know, material cost is
03:35 70% in all our businesses.
03:38 Of course, some we have protection to pass through, some we have price variation class.
03:41 But if there are no huge hike in the material prices, margins can also be stable.
03:50 Mr. Srinivasan, just want to understand a bit about the railways side of things.
03:54 You've seen the railways revenues to grow up to 40%.
03:59 There is already a lot of orders that have been deployed by the government before the
04:06 elections.
04:07 I'm just wondering how much of an upside is there in terms of railways for CG power?
04:14 So I think that whatever I have mentioned, the 40% actually will capture the entire what
04:19 we get to because you need to get orders, what you can execute during this year, that
04:24 will be a challenge actually.
04:26 So we may get orders.
04:27 We are talking to several other players who are executing some large contracts, you may
04:32 get some subcontracting orders, plus new orders also may come.
04:37 But for this year, I think beyond that to execute, I think we can't clock revenue higher
04:41 than this.
04:42 I am with a Korean company in this segment.
04:47 Anything that you can share with us on this, Mr. Srinivasan, because that is obviously
04:51 being seen as a bit positive as well.
04:54 What kind of a collaboration will this be?
04:56 So it is actually a sort of some gap in the propulsion systems, which we will be getting
05:02 it from them, the technology.
05:03 We will be paying outright and then paying out the technology.
05:06 After that, we will become a complete full-fledged player, we can offer the entire scope of propulsion.
05:13 I just wanted to get your sense on the OSAT segment as well.
05:16 I mean, that is, I would say a little, not blue sky, but new and exciting.
05:21 Is there any clarity that you have in terms of when and to what extent revenue contributions
05:27 will come in?
05:29 The project itself will take about four years to get complete.
05:33 The entire project to get completed, it will be four years' time.
05:36 So in the fourth year, probably we may get some revenues, but I think it's too early.
05:42 After two years, when we are nearing completion, we can talk about that.
05:44 It's a large project which we have to execute very efficiently without any time and cost
05:49 or focus will be only on that.
05:52 Is that a segment that you want to increase your focus on in OSAT?
06:00 So I think this project, first is to complete this project and get the revenues.
06:04 When this project gets completed, it has a potential to add our current, whatever we
06:09 are recording as a turnover this year, that can get added to the company.
06:12 And we hold, as of now, we hold about 92% of the equity.
06:16 As per the agreement, our collaborators will put about 8%.
06:21 So it will be a large addition to the CG standard current operations.
06:27 So first that project has to get stabilized, and then we'll see what opportunities we'll
06:31 throw open at that point of time.
06:34 What sort of ballpark figure or idea to how revenue accretive this segment will be?
06:41 So I have already mentioned that the minimum turnover could be about, when a plant gets
06:48 operated at 80-85% capacity, it will be about 7,000 to 7,500 crores of turnover.
06:55 And then sales, PVT of at least margin of about 10% is what we are predicting.
07:00 [MUSIC]