Key takeaways of the call

Robust order book at the start of the quarter has facilitated healthy performance in Q1FY19.

Gradual pickup in economic activity is likely to result in further improved order inflow. It is confident of posting strong performance in the future looking at the revival in demand scenario and on back of strong execution and favourable product mix.

Orders inflow/booked during Q1FY19 was Rs 149.8 crore in gear business and Rs 113.5 crore in material handling. OI for MH business has come from fertilizers, cement and coal power plants that revamp its MH equipments.

Order backlog as end of June 2018 for gears stood at 779.4 crore and that for material handling was Rs 533.3 crore. Gears order backlog is for execution in the near to medium term.

The company expects standalone gears sales of Rs 600 crore for FY19. The EBITDA margin will be maintained at Q1FY19 levels. However the company is not expecting a growth in revenue for MH business but growth in bottom-line is expected for FY19.

In MH business the new strategy is stop taking loss making orders but focus on product and revamping/modernisation orders. Moreover the orders focused on are of minimum bought out items as in-house manufactured items provides high margin.

PAT of overseas subsidiaries was about Rs 4 crore in Q1FY19 and if business scenario continues at current level that will be sustained. If US business improves the profitability of overseas operations will increase.

The company is restructuring its entire foreign operations for favourable tax benefits. The restructuring involves liquidation of Mauritius entity and move to Radico, UK.

Slight improvement is in US business. The company has implemented correction measures and the full benefit of it will kick in only by end of current fiscal. The company expect the US business to be cash neutral by end of this fiscal.

Product Mix will remain same for current fiscal.

Capex will be at negligible level for next 1-2 years. Capex for FY19 will not be significant.