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Okay. All right. Okay. So good afternoon, everyone. We're going to get started to give with a short presentation, and we'll leave it open to questions. There's some technical issues, basically in case if any, please contact tech [indiscernible] or reach out so that we can sort it accordingly. Okay. Maybe let's get started, please can you update the presentation. Okay. Good afternoon, everyone. Thank you for taking the time to attend our investor presentation today, speak with you like we did every time a status of where we are. Okay. Now that's -- all right.
Business Overview. So there's 6 people in the waiting room. So I think someone needs to accept the people pending in the waiting room. So can you please add that on or whatever it is. I think [indiscernible].
This is -- so we recorded sales of INR 235 crores, as you all would have seen, what we announced and the quarter 4 PBT figure is at 12.4% and fortunate not that market condition, we got nonetheless to have our best ever quarterly performance and this compared to earlier were 10.2%. As we discussed before, market remains very strong in its demand as well as the resilient economic growth, especially in the sectors in which we are focused in.
As a company, internally, the things that we are focusing on right now are capacity enhancement in specific product lines, the product mix of the type of products we are selling, the markets in which we're selling them in and try to get better realization as well as volumes. Internal, the digitization program, especially that are focused on our B2B supply chains and distributor supply chain. And in the international business, exploring new markets as well.
The international business we are talking about sometimes is very important, improving business sector for us. And we have fortunately done well last year for various factors that are not only internal changes that have been made in the leadership team doing well, but also related to global factors that are more encouraging for Ador to well in the Middle East, Americas and Africa.
Data that you are all aware of, the PBT and return of capital employed data that we track by [ QC ] going forward. Working capital data as well. We expect this year on the ROCE level, we expect to show the RoCE level as flat, the RoCE level. We expect the borrowing figure to be also flat, mainly because the projects and stuff that are coming up, we expect a little bit of growth to happen on that and the debt-to-equity ratio will accordingly moving [indiscernible].
Our segment performance, Consumables, which is a very strong -- our strongest segment. As such, we've done well. We're seeing some benefits of scale and product mix. The Equipment is -- actually being where we are today in the Indian running market, approximately 80% of funding equipments imported out of the balance, 20% almost 50 to 60, 60% to 65% of that is manufactured by Ador. Our volumes have done well. There have been certain supply chain issues that have led to a little bit of margins sort of being lower than expected. Plus, you also had automation division, which had a few things that need to be cleaned out also [indiscernible] slightly lower margin than we expected and we expect this to improve over the course of this year.
[indiscernible], we talked about a lot of changes that are happening. We have a regular product plus a few other projects that are going forward and turning the one where you start by [indiscernible]. Again, this year, the project -- in the second half of the year will be the larger part of the billing or the first half of the year will be a little more subdued, and then it will lead into the second half of the year in [indiscernible]. we have some ESG initiatives, which are new, which is related to the environmental changes that have been made, where there's stopping the use of thermocol, the reduction in plastic consumption by 30% of our plants and the most important thing actually in regard to water usage, which we've been tackling [indiscernible] to which is 50% less at one of our plants and 20% less at the other plants.
The merger application is submitted by [ CRC ] can be the shareholders' meeting at [indiscernible] 10th of August. I don't want it to be [indiscernible] August, and we expect that this merger process will be completed by the financial year '24.
Can we stop sharing this presentation. And now we go over to questions.
You can start typing your name in the chat box and the monitor will [indiscernible].
Good evening, everyone. I'm your moderator for today's Q&A session. Our first speaker for today is Mr. Ankit Gupta.
Congratulations to other entire team for wonderful set of numbers, not just in Q4, but the entire year has been pretty good for us. In Consumables, if you can talk about what has been the volume growth for Q4 as well as for the entire year. And the subsequent question on Consumable is the kind of margin improvement we have seen over the past 2 quarters. How sustainable is this going forward, 15%, 16% kind of EBIT margins on the Consumables side. So if you can talk about that?
Yes, sure. So last year, if you remember, that is, I think we've had [indiscernible] since then. If you remember, Q1 was very, very quiet last year in terms of volume because over the commodity prices and supply chain issue that -- inflationary factors that were taking place. So the overall volume, I think for last year was pretty much almost flat.
For Q4, we had a growth of above -- sorry, we had growth of exactly -- that's about what 5% we had volume growth which is in Q4 for the year before. Now remember, Q4 the year before, there was tremendous volume push because prices were moving up. So you're comparing versus that period of time.
In terms of volume growth going forward this year, we expect volume growth to be in the region of 10%. I think that should be fair also volume, and that's what we were planning to. In terms of margin, what you've seen in to [indiscernible], what you've seen in [indiscernible] is pretty much on the lines of what we continue to focus on. I hope that answers your question.
Yes, yes. I'm able to...
So to clarify, we expect to have 10% -- we expect at least a 10% volume growth in the Consumable segment over the course of this year, and we expect our margins to be in line with what was in [indiscernible].
On the equipment side, Aditya, margins have remained subdued for past almost 2 years now. We have been facing some supply chain issue that you highlighted in earlier calls, although revenue growth has been decent, but margins have remained under pressure. And on our calls yesterday, you have stated that the equipment margins can also touch 14%, 15% kind of EBIT when things normalize and our margins improve. So what is the outlook on the margin as well as growth on the Equipment front, if you can talk about that?
So the Equipment, I expect there to be a several level of growth as you can see in the Consumables in terms of quantities going forward. One thing that is talking about, it's a very [ content ] decision by Ador is that we want to do mid-India part. And mid-India part allows us certain benefits for the same time at a slightly lower margin than I expect leading players who are importing very large bulk of [indiscernible] sourcing will do. So that's sort of actions that we take. Having said that, I think the margins are still a little lower than we would have done and there is improvement. It will [indiscernible] over the course of the year. It will not change drastically in a quarter. But we are doing [indiscernible] the supply chain, any better rationalization of manufacturing, better sourcing, product mix issues over the course of the year. Then we'll see changes happen over the course of this year, closer to what we indicated. I don't think I'm able to hit that number this year, but definitely closer to that.
Thank you, Mr. Gupta. Our next speaker today is Mr. [ Vera ].
My first question is regarding the [ players ] division. You said the majority -- I mean, a significant portion of our [ players ] project business that we got would come in the second half. In the kind of margin profile that you would have expected or that you accepted this business at, can you tell us what will be your rough expectation of the business -- of [ players ] business in terms of margins?
We are expecting at least [ 18% ] to 20%.
18% to 20% on a [indiscernible] level basis is how we look at it. That's pretty much in line with how the project is going at the moment. The project, it's a 24-month execution of the [indiscernible] and the bulk of the -- as we started, for the bulk of the execution will start in HY2 and until HY1 of next year, [indiscernible]. [indiscernible] level actually very closely. We seem to be in line with that expectation of those figures.
Okay. And so in terms of just the cash flows, we see a significant or reasonable jump both in terms of receivables going up from INR 93 crores to INR 125-odd crores and even inventory is going up from INR 90 crores to INR 116 crores, which is hurting our working -- or it's increasing our working capital, also hurting. So do you think these are normalized numbers? Or there was some one-off in the working capital numbers?
So good, good question, and it's very important. So one part is I think on the inventory. These are not normalized, even high levels that we had in this, but you're not [ banked ] effort over the course of this year to reduce that. I think last year, we just -- there was so many supply chain terms and deeper normalized and not now, more comfort when we work at any point over the last year that I think we'll be in a position to start getting our inventory more in a better position. We definitely agree with you that was a slightly bigger position than we work in, and we would improve on that.
On the [indiscernible] front that you see, [indiscernible] business in the domestic welding business to increase like the very large contractors and companies. So some part of that will happen, which is happening, is reflecting already, but that's okay. And we ensure that routines work well and everything like that and as part of the nature of doing business that we have to do that. A certain part of the international business and also had as we increase, but most of that is very, very secure, but we're not concerned about that at all.
And last part is, of course, with the players business coming in, we'll have a little bit of that as well. So it sounds like we're not tracking it. I think a certain amount of [ billing ] will happen and you're seeing a more normalized receivables for the [indiscernible] this year as far as [indiscernible] is definitely room for improvement.
Sure, sure. And just my last question is regarding -- when you said 20%, 20% gross margin, I mean, would it entail the cost at the site and all of that, so which will mean EBITDA margin would -- so then if I don't include the [ HO ] cost, then that would roughly mean that entire 20% close to our bottom line. That's a fair understanding?
No, no, we are talking the direct cost, directly related in the project. So there are certain fixed cost.
Our next speaker today is Mr. [ Danel Desa ].
So I think my first question is, if I look at our consumable business, we grew our revenue by 15%, but you said that the volume were flattish. So is it largely coming because of the higher steel prices or it's the product mix? And to tie in with this, you say that next year, we're expecting around 10% volume growth. So with the product mix changes and steel prices being lower, how do you look at the revenue calculations?
I think -- look, [indiscernible] you have to keep in mind, we are a very odd first 6 months of last year, that sort of [indiscernible] changes the entire profile of what last year was. We are pushing on volumes. We are definitely pushing on volumes. And volumes to the extent of Q3, Q4 [indiscernible] much closer to the utilization that we're looking at. We're adding more product lines in capacity for more diverse product lines that we expect to build out capacities as well.
So we see [indiscernible] really what the input price, right? So you basically have to do what you play with. But we actually want to increase the pushing volumes. While we're showing that minimum margin level is maintained and in the market is [indiscernible]. I think no, if you look at last year, it's very hard to keep looking at that data last year for the H1 because it's not indicative of a normal growth period. So that's why I'm very [indiscernible] and the quarter before that, Q4 of the year ago, there [indiscernible] being stopped. So I think that there's a 9-month period that is very hard to look at the historical factor. So I think you have to look more from October onwards and then start seeing -- or is that actively [indiscernible] demand supplies in [ August ].
Okay. Okay. And second question, Aditya, so in Consumable side, I understand that it's a very decent gross margin business. And with the volume growth coming in, generally, the operating leverage plays out, but you are guiding for a very similar margin profile. So are we looking at any cost line items going up other than the normal inflationary part.
Basically, are you saying any of our variable costs [indiscernible]?
Yes.
We will have a few small increases that would be very, very significant because I told you that -- I may not explain this [indiscernible] but once again, I think from a business development perspective when it comes to the international market, [ exhibitors ], when it comes to the Indian market, in terms of new product lines being added, driving our technical costs -- technical development costs, people costs, a little bit of all of that, I think investing in the future will be there this year.
However, I think the upside, not only over time, but I think this year itself, the potential is there to be able to solve them within the margin levels we need. So I'm not [ tested ] about it. We are making investments in it because at the end of the day, we have to go [indiscernible], importantly and we have [indiscernible]. We are taking on costs that you wouldn't normally in any year. But given the economic scenario and the potential for where we want to go, I think it's worth picking on.
Okay. And last question from my side, so I think from whatever that we are hearing from other people on [ track food ] side and infra side, things are very robust in -- on the ground. And also, we are trying to increase our business on the export side. So putting both this together, can we do more than 10% volume growth because the entire environment is very favorable and we are trying hard to grow.
I'll go in agreement with you, and we have some of our sales heads on this call, and they all know that 10% is a very -- is a conservative estimate that we're working with. It's just that I'd like to [indiscernible] more.
Our next speaker for today is Mr. [ Mehul ].
I had one question because I'm following this company very recently. So what is the rationale for merging the 2 companies, Ador welding and Ador fontech?
Sure. So just [indiscernible] synopsis is they both basically started off as one. And they got legacy from the [ Alicon ] before 1951 when we had a [indiscernible] where basically these 2 companies, one is in the [ capitation ] welding, this is [indiscernible] primarily [indiscernible] welding, but also in other parts of diversified and [indiscernible] of that portfolio onwards.
We then decided about a year ago and are evaluating for some time before that not only us but many large players globally have started consolidating these businesses because they see a lot of benefits on the back end to consolidate manufacturing and various other costs while ensuring that the distribution and the sales remain fairly separate in the front there. And we also saw it's a good opportunity to increase the value of the company. So we decided to [indiscernible] that.
Sorry, I have one other question. I'm sure I don't know the exact number of years, but Ador Welding has been operational for more than 20 years now.
70 years -- 71 years.
Sir, just in your presentation, you mentioned that almost 80% of the services in this industry is from outside by foreign companies and 20% is by Indian companies. Was that a correct...
If we take [indiscernible] equipment business line, welding equipment, welding power source business lines, as for the data we get on the import export data, approximately 80% of welding equipment in India that are sold have been imported. Yes.
Okay. So my question is more from a legacy standpoint. Since the company has been operating for 70-plus years, so still, the company has no competition, which is I mean, is it a correct understanding, we don't have any competition for the company?
We have a lot of competition. We have a lot of competition, right, we do have [indiscernible] competitors in that specific product line are more imports than necessarily domestic manufacturers. Over domestic players, they are very well structured large company as well.
Sir, actually, I was trying to say that no domestic competition. Is that correct?
Correct. What they're [indiscernible] people, these companies. First of all, we have a lot of competition, and we have a lot of competition that is not only large Tier 1 -- and Tier 1, Tier 2, Tier 3 type of competition [indiscernible]. A lot of players in the welding equipment space, which is fine in [indiscernible], we bought their product and [indiscernible] under their own brand. And we have a domestically manufactured product in our brand name for the bulk of our suppliers. That's the only difference we're talking about.
Okay. Got it. And sir, one question or you can throw some light on how do you see the company because it was a surprise to me that the company has been existing for 70-plus years. So how do you see the company in the next -- in the next decade, after a decade or so? Because you have the pedigree, you have the experience as a house.
Yes. So it's a good question, and I have a lot of thoughts that go into it, but I think I'll give you a very -- I think vague answer, I don't think I'll give you a precise answer because I don't think that would be fair. But look, we believe that we should come out at a very, very strong player at the end of this CapEx cycle, at the top. And that's what all the efforts that we're putting in on, put a number to it. But in terms of the product lines that we operate in or the services we operate in or the segments you operate in, we want to be #1 or #2 by a very significant margin in business and we're working towards that. I'd like not to quantify, even though [indiscernible], quantify but that's the philosophy that's driving us to that.
Our next speaker for today is Mr. [ Harshil ].
I just want to understand is after the [ OC ] order, do we have any such kind of big orders in the pipeline or in the bidding stage as of now?
Yes, we do have inquiries at a very advanced level and we have a new a few of them and try to convert them, the teams try to convert those so we keep the order book, churning [indiscernible]. We keep the shop flow, you see if everything [indiscernible] working on that.
Okay. And will it be kind of the same size or any...
Similar type of size, similar type of product profile, similar sort of work like that. Yes, very similar.
Okay. Sir, secondly, what I want to understand is if someone -- if a player buys an equipment from you, what would be the life cycle of the equipment and when does he change the equipment or [indiscernible].
So there's a tremendous variation in that because you can buy, very achieve -- easy to -- sort of quick use, at site, use and dump type of machines that could be 9,000, 10,000 that you use [indiscernible] applications, for example, where you run it through 3, 4 years, I would presume most people, the bulk of it would run a 2, 3, 4, 5-year cycle.
And then there are equipments which we know [indiscernible] 30 years and 25, 30 years as well, the work [indiscernible] think there is a lot. But if you're talking about the general large contractors who buy for sites, they try and depreciate the value of the machine over the course of that project. That's the way we look at it.
Okay. But then, they might be using the same equipment at some other side of as -- or some other [indiscernible].
All those things are the correct.
Okay. Sir, thirdly, I want to understand, you said that in the international business, we are investing heavily in all exhibitions and to create a presence in all these markets. So what tenure do you see that these investments might continue after which we might see a respectable or reasonable margins?
[indiscernible] to see the margin this year itself. I don't think we're going to allow the margin to get compromised. But we will see. I think this year is slightly [indiscernible] big spend business development. We don't have it chalked out over 3, 4 years. I think this year, it is going to be good because of that. But I don't see a tremendous impact on the margins.
So you might see some kind of a gradual increase from Q1 to Q4?
Some sort of it. If you increase it. Which rates, increase sales or margins?
Margins, margins.
For Q1 to Q4? I don't want to answer that question. I just see the perspective of FY '23, I spoke the last perspective. So yes, it should be [indiscernible]. I can't [indiscernible].
So last question on optimizing our working capital cycle. You said that the inventory levels might come back in a reasonable range. But looking at the receivables on tables, what kind of improvements can we do? Or is it just because of the [ ONGC ] order, which we've started executing with -- which has led to an increased working capital [indiscernible].
It's not very large, at least because of the [ ONGC ]. [ ONGC ] sustain increase on the national business in, like I said, on the end user front, which we see on keeping track of, if we look at the ratio overall as a percentage of total sales.
On the inventory front, I think there's a larger scope. As far as ratios go, the receivables is steady okay. The issue, the more or less okay. I think the inventory ratio was something we were not happy with at the end of the year. So that's something we're definitely looking at how do we see a lot of that.
Okay. Sir, one last question is with the current plan, what kind of -- kind of asset turnover when we do and are we investing any CapEx going ahead?
The other significant as we had this year in terms of new product lines and stuff like that. And normally, the ROI is 22% to 25% is what we look at. We have a [ certificate ] which I'm talking about some time in various meetings, whether it's ATM or whether it's investor meet. ROI or CapEx actually is very flat with the spillover effect that comes to this year. And when you are looking at some product lines and stuff like that.
Okay. So what would be the CapEx number for this year? Any budgeted figure?
We have CapEx figure, would be -- have we decided fully? or close it up fully?
[indiscernible] over from last year?
You can look at some addition of the possibility 30.
INR 30-odd crores would be the CapEx this year?
I think that's what I try to push towards because we have levers, we expect it to be about 24, 25 last year. We ended up 15, seeing over effect from there, you're carrying that through as well. So I think we're trying hard. We had a project that I wanted to execute -- as they can get in executed this year itself. So a little bit I think as we [indiscernible] what we want.
Okay. And sir, do we see any product gaps in our portfolio that we are still not presented and careful going ahead of?
There are few small, small pockets. So it's there, we have [indiscernible] always some little small, small, small. There's no very large product gap, except for I think the automation space. We are even lagging behind where we should be, which is a large gap. Everything else is sort of incrementally small product gaps that we keep doing with our [indiscernible].
Okay. Can you just brief a little bit on the automation product gap, on the cost.
It's [indiscernible] the comprehensive execution that we can do in terms of projects and stuff like that. It's not a specific product line or anything like that which is in terms of our capability to execute larger and larger, more sophisticated projects.
Our next speaker for today is Mr. [ Kush ].
Can you hear me?
Yes. Go ahead.
Yes. So my first question was on the Consumables. What would be our capacity utilization or what can be the turnover that we can do from our current capacity?
On average, depending on product line. The product line on average will be some ratio of 80% right now. 75%, I'd say.
Okay. And my understanding was that we were about to do big cost rationalization program, and we had a lot of areas where we could reduce our cost. Current margins, I feel are -- have increased more to do with the operating leverage. So can you still help me understand that is the most part of the cost rationalization program pending and there is a lot of scope further to increase the margins?
There is scope, I think it's going to -- can say quarterly thing. I've always said is stability. Quarter-on-quarter we keep studying and analyzing how we can make small incremental improvements and we keep doing that as we continue. And there are some quarters where raw materal causes some of it. But in general, when it comes to just the way we operate, we keep quarter-on-quarter [indiscernible] in how we can be more efficient in doing work. So we definitely upset [indiscernible] to order. It's a long story we keep playing itself out.
In terms of cost rationalization, I thought we had 6, 7 factories and we are rationalizing to 1 or 2 factories. Has that been done or?
We do not have 6 or 7 factories. We have 3 factories and we are in the process of exploring different options as we go forward from there. And that's also to do with the merger being approved and everything at that time in a position to analyze [indiscernible]. But you're right that rationalization could be busy on a minus to how we can be more efficient in our cost [indiscernible] doesn't stop. And it happens on the manufacturing space for many years, yes.
Okay, okay. And in the equipment side, if you can help me understand, we did sales of INR 166 crores in FY '17. Our sales in FY '23 are around INR 115 crores, what went wrong? And why...
As said, [indiscernible] have a [ grouping ] until FY 2021, used to improve the welding equipment and that led the process [indiscernible] as 1 and after that, we separated a little well. So if we look at the historical data prior to that, compared to -- a little bit difficult. We had our highest already equipment sales last [ year ], by far.
Okay. Okay. And our expectations for exports and in FY '24? And what was the export figure in FY '23?
In FY '23, we closed exports at about INR 58 crores, INR 59 crores -- INR 61 crores and we would expect to do in the region of approximately -- more than that, I think we're looking at 20% growth, so we should be looking at, at least 20%, 25% growth is [indiscernible].
Okay. Okay. And in terms of our blended margins, so consumables margins have recovered to kind of earlier levels or the best levels. There is scope in terms of equipment and flares also. So do you feel that in a year or 2, all this together, including Ador fontech, which has 18%, 20% margins. So our blended margins can maybe increase to 13%, 15% kind of range? Or is that possible directionally?
It's what we are working to.
Our next speaker for today is Mr. [ Ashik Kothari ].
Sir, what was the volume growth in the Equipment division?
Almost 30%.
Okay. And is this number sustainable going forward?
Look, I don't give a forecast of where we can go forward. I see right now, the economic conditions is what you keep looking at. I think right now, it's very feasible with the economic condition. We won't comment on where we see the economy going beyond that.
Understood. And regarding the distribution network, has there been any expansion of distribution network on the domestic side?
We use it to expansion in the domestic welding network. It's all about where regions are and you want to drop and change. Do you want to work with a different partner? Or is it some other reasons that we [indiscernible] that requires. Otherwise, in general, we have a very strong -- a strong base [indiscernible] and it's sort of incremental change to good side.
Okay. And sir, there are these start-ups which are coming up. There is a B2B place called as [indiscernible]. So do we have any tie-up with these startups or places?
We do. Depending on the start-up and the requirement, we do, in fact, we supply to set works or stuff like that. So it varies on case to case basis but yes, there is. There's a lot of B2B stuff coming on in which we participate in some we [indiscernible] somebody yes, there is a little more of that.
Our next speaker today is Ms. [indiscernible].
Sir, I would like to ask that going forward in FY '24, from which particular sector are we expecting growth kind of like infrastructure or heavy engineering or automobile. So which particular sector do we [indiscernible] and will be beneficial to our company?
So I think the railway sector, whether it's the manufacturing or the infrastructure. In terms of heavy infrastructure, things around railway lines and stuff like that, seems to be, at the moment, a very big [ digital ] and that we are seeing now. General heavy engineering and contractors and stuff like that, that are doing [ EPC ] kind of work, heavy engineering projects, that's the second biggest that we're seeing. We're seeing a little bit of work in sort of cement expansion also taking place, that another line is also coming up.
Oil and gas is a mixed bag depending on certain product lines at certain places. But I think this is the top, we hit have all our data in terms of big level growth.
And just one more thing, that is there any margin differential when we supply to different sectors, I mean, as per the product mix?
It does happen. There are certain products that are -- it depends when you supply those product lines in going to auto or very large volumes within your automatic margins that you have a good [indiscernible]. On the railways, it's a mix again. In some segments, larger volumes, so smaller margins. In some segments, you can get a bit of a mix. Oil and gas, heavy engineering, [ automobile ] has a slightly better margin mix for us. As I said, we keep balancing that off as we move.
Our next speaker for today is Mr. [indiscernible].
This is [indiscernible] from [indiscernible]. First of all, I mean congratulations for a great set of numbers and the remarkable work done by you and your team over the last 2, 3 years. So the number -- the quantitative numbers are pretty much visible. But then, if you can talk about the qualitative changes or some structural changes within the organization that we have initiated since we have taken over. I mean for example, let's say, if you have incentivized the way, to change the way we are incentivizing our sales team, our cost structures or, let's say, how our product mix has changed from a certain type of products to newer type of products. If you can just throw more light on that?
Yes. So I can give you some view on a few things, we have covered about a few things. So one of the things we have a product [indiscernible], it's a very interesting subject in [indiscernible], We've done that. We now have a system whereby a minimum or any percent of anyone's package in the company is very [indiscernible]. Minimum of 10% any one's package, anyone, whatever level you are, minimum of 10% of [indiscernible] we have 35% for the bosses, for all senior managers is still very [indiscernible] which defines to be the case [indiscernible].
Of that, a minimum of your [indiscernible] a minimum of anywhere 15% to 40% is in the profit of the company. So that's one of the big change we've made, and we're kind of seeing the benefit of it. And we're seeing a lot of people more clearly align towards that, that's one.
I think one big thing we're doing is been trying very hard at one ownership in the company. As I keep saying, it's a 70-old company, it has its own -- it's a big shift, if you want to turn it, it doesn't turn just because one person sales doing anything, it has to require all the stakeholders to buy in and I think we've been working a lot of time and effort with all the bosses, all the mid-managers take more and more ownership. I think that's a very big part of what we're trying to drive. And I can't quantify that, but that's sort of we would be spent a lot of time and effort on.
We are investing in the people that can add technical expertise or business-driven expertise, I think building a lot of those 2 in everything we're looking at. So that's what the HR perspective. We -- from a [indiscernible] perspective, improving the product mix, taking gambles in service of areas there are more imports sort of thinking that maybe more in terms of domestically and stuff like that, invest in a bigger way and take those chances over there. So that's a big part of what we do. And yes, I think that comes in. There's a lot more we do it on a volume price and all those details, but that's pretty much along the line in essence of what is obviously try and drive on that front. I hope that answers in some way.
Yes, yes. So I mean, when I look at our product realizations, so if you compare it with, let's say, or the largest player in the Indian market, so realizations are around 15%, 20% lower ballpark compared to them. So is it because of the product mix or the pricing or the way our distribution is managed. I mean, what is it that is leading the...
I don't like to comment on other company, and I'm headed to that. I think globally, they are very, very strong India. And we're not that far away from them, especially in the market where we put this out that far away. We can do [indiscernible] at their numbers, and I don't have the details of, so I can't comment, but they have a fairly large service business, which is servicing their own group international companies like technology or [indiscernible] this is what I [indiscernible] about a year, the fair amount of that business that's there, where they're basically doing engineering [ outhouse ] work or something like that. I don't know what the margins are on sales. I don't know anything on that. But I presume that's different to typical in one on supply product.
Second thing is we do have some products where they are some acquisition duly where they have the products that are in the specialized metals and stuff like that. So that's also there for them and only, I think they have a little bit of global sourcing benefits as well that coming. So -- and that's it. And I think it's a slightly different game in that sense. Having said that, it's not optimal we can't reach that gap. It's just a question of who we [indiscernible] getting it done. But that has a couple of billion dollars and where we are, we are. So you are to induce your final, where improvement when you sort of where that we are in that gap, we will be improved more and more. That's definitely a must.
Okay. Okay. So there is a room to improve our realizations and process.
So it's just not going to happen overnight, it's going to play out for sure.
Okay. So let's say, through this cycle, can we expect significant gross margin expansion? I mean not asking for any particular number in neither...
I can't give you a number on that, [indiscernible] definitely.
Okay. Okay. So secondly, on our exports, what are our export volumes versus the domestic volumes?
Export volumes last year, I assume average they must have done somewhat additional 3,000 tonnes -- 3,000, 4,000 tonnes, [indiscernible] last year [indiscernible]. And that will grow.
Okay. Okay. I think on one of the earlier calls, you had mentioned that our exports in 2021, 2022 were less than the exports which we are doing in way back in [ 2000 ] [indiscernible]. My question -- yes.
We will be better with [indiscernible] or I remember that we were -- no, no, we [ bought ] off that, and we bridged that gap by the way as we close that gap and beyond that already.
Yes. So my question is what is leading to this revival in exports? Is it because of the demand from North Africa or Middle East market or is it that we have set up some offices overseas and that is leading to this change?
I think it's very simply 2 or 3 things. The first is we've made massive management changes the world over in to be all and have done well. I think the second thing is that we just restructure, we [indiscernible] and we may set up in those markets than we have been from the management perspective. The third is definitely without a doubt is globally, the supply chain is likely is in a very different position than it was vis-a-vis our global competitors have more capability. I think that is giving the benefits as well.
And lastly, in the Middle East, in certain of the markets in Africa, adverse strong [indiscernible] was under sold are always set under sole brand and now that we will be invested in actually converting to sales. So I think when you say our brand power more effectively and the opportunity to go, there's even more. So I think it's most of the factors that are playing in our favor. Keep working hard and smart and the opportunity to keep going.
Okay. What would be the opportunity size for us, let's say, Middle East and North Africa, if you can quantify it in volumes?
Middle East is pretty close. Saudi, UAE, Oman, those critical aspects of the Middle East, happens a little bit. Now I think [indiscernible] are getting a little aggressive over there and try to see opportunities over there as well. But the market size is that is huge. I don't think it's a market size question. What is the customer market that any to look at, and that's a couple of ex of where we are today.
Okay. Okay. But we can export to Europe and U.S. as well. Logistics is not a major...
No, it's not an issue. [indiscernible] approvals, certifications, there's a whole bunch of stuff that we're looking at. I'm not -- I wouldn't say that the new is our priority at the moment. I'd say that Middle East, the oil and the gas stores and the Middle East. They're not happen part of that, the [indiscernible] a little more patient moment.
Okay. So over the next 5, 6 years, let's say, can exports become, let's say, more than 20% of our sales?
Over the next 5 years, [indiscernible] you can get close to that.
Okay. So my last question is, I was just looking at some North American and European markets. So in those markets, they're using very less number of, let's say, [indiscernible] tools and primarily the U.S. they saw [indiscernible] place welding those products. So why there is a difference between the consumption pattern of these electrodes, let's say, in India versus the other markets? And can India also transition towards, let's say, saw welding going forward? And what are the implications for our product portfolio and margins?
So the transition happens. It's happened globally, happening for a long time. Transitions primarily related to the cost of labor productivity. And what we are talking about is [indiscernible], which are basically more tenuous learning processes where the definition of [indiscernible] basis and for a longer period of time to get done to semi-automated automate processes, promoting, stuff like that rather than [indiscernible] and certain applications with a [indiscernible] it happens in India.
So I think the economies, I think the ratio is around 55% on continuous side at 45% of the noncontinuous sort of segment where India as I said 70:30. 70 is continuouos, non-continuous, 30. [indiscernible] over the last 10 years. Used to be 90:10, [indiscernible]. I think in some in regional, India will be some of the region of 65:35, 60:40 at the end of this CapEx. I don't think you're going to see it jump very [indiscernible] people that. However, as labor increases, intensive job increases as automation comes in. That's why I'm quite [indiscernible] portfolio. Over the next 10 years, this will keep in to it, but it's not [indiscernible].
Okay. But if we have the product portfolio and we are present in both the segments. So it will not really be [indiscernible].
[indiscernible] us.
And sir, my last question is what is the CapEx plan for the next 2, 3 years, if you can quantify it and for which products?
I think over the next 3 years, you're looking at -- you have a region of approximately 40, 45 over the next few years is what I had given indicative that. And this year, it's like a higher part of that. That's what I think about as well. And most of this is point to the [ welding ] business just welding, consumables [indiscernible].
Next question is a follow-up question from Mr. Ankit Gupta.
Actually, if you can give some broad views on how are things shaping up on fontech performance last year? And how do you think FY '24 will shape up for the company?
Very few changes in fontech from ones we've seen, better results in a little bit just start below could have been in terms of our sales base in FY '23 Q4. There's also been production changes. There are product lines that are related to the [ plasma ] starting that where the base effectors are reporting them a little bit and make kind of a few small changes over there through the course of this year. We interestingly quite in line with industry expectations, we are not in a position to do better than that.
So can we expect 10% kind of volume growth over there or it will be lesser?
In fontech, we don't discuss volume growth as much as we are [indiscernible]. In fontech we look about value growth that we keep looking at because [indiscernible] designed. So it's more on that side. I don't want to comment on the value growth. The engineering of that company is more value growth-oriented than volume growth-oriented.
Sure, sure. And secondly, on the consumable part. If you look at our revenue growth, we have grown by almost 15% with hardly any volume growth in FY '23. So there will be a big element of realization increase, also some product mix improvement. So if you can specifically talk about product mix improvement, which has happened in last year and what are plans for product improvement for FY '24 as well.
Product mix improvement is an incremental thing. Happen in small, small stages, statementing more and more special segments and more and more high specialized [ metalized ] technique. I'm not [indiscernible] increment here in a very large pace can happen is the comp beginning of the company. So that's gradually. A lot of what you see is the H1 inflation impact in that 15%, that's a very big part of it. So we want to keep that in mind.
The product mix is a more [indiscernible] small changes, but at the end of the day, the steel [ intermediary ] in the private countries where the reason why we get to. So you're putting around that aspect as well.
Sure. So last year's growth was largely driven by realization increase, the inflationary thing on steel price?
Not even [indiscernible] much -- more on a H1, yes.
That was because of the inflation. Second half and [indiscernible].
[indiscernible] was better.
We have another follow-up question from Mr. [ Danel Desai].
So the first question is on the export side and slightly looking 3, 5 years out. So I wanted to understand from you that we are tracking the Middle East market. I understand because we were there driven and low hanging fruit. But how difficult it is to tap into large markets like North America? And are we thinking in terms of taking that larger market in terms of bandwidth in terms of capability to compete with clients like [ Lincoln ] and [indiscernible].
So it's definitely a slightly different form, whatever to go into South America, Central America, South America, [indiscernible]. However, this is where the global headwinds towards saving and supply chain come a little bit in your favor. So I think that there are a lot of people who are looking here India has ordered in price source and that's currently this conversation to happen.
So you're seeing a much more open door policy to work with this. And I think that's helping a lot. So I think it will happen over time. It will take time, is another over the next 2, 3 years and see results. I still think that when it comes to value, mix and brand and margin pull, the Middle East and the gas markets of the Middle East have a larger potential but as we grow the [ trial ] together, we need the volumes that is solely come out of those markets in the Americas as well.
Okay. So let me put it differently. So in our aspiration [indiscernible] out of exports, whatever, 3, 4, 5 years out. If Middle East and the current markets are good enough to reach that aspiration to...
The markets we intend to establish this year, I can keep repeating this, Americas and the Middle East and North Africa. These 3 markets have the potential to give us that number, yes. Not that every year, we need to go in new geographies [indiscernible]. This is pretty much the road map over the next 2, 3 years, establishing the [ total ] this year, a lot of it testing will help a lot to get that number, yes.
Understood and second question is on the flares. I think this year, we did around INR 45 crore, INR 50 crore, flare business. And [ ONGC ] order 60%, 70% will get executed probably more tilted towards H2, but in FY '24. So this base business of INR 45 crores, INR 50 crores on top of that flare from [ ONGC ], how we should look at it? Or this will get replaced by [ ONGC ] order?
[indiscernible]
So should we add that 60% from [ ONGC ] into the current business of INR 45 crores, INR 50 crores?
No, no, no. [indiscernible].
Okay. Okay. So it's more split of [ ONGC ] for flat this year?
Most of the revenue this year on [ gas ] is related to [ ONGC ] project, correct.
Our next question is also a follow-up question from Mr. [ Harshil ].
Sir, I have a few questions on the Ador fontech business. So firstly, what I want to understand when you said it's more of a value business, so currently, what kind of value addition do we see over the next 2 or 3 years, like will it be something major that we are doing in terms of it or that we need low hanging floor to open just explain.
I'm not going to access [indiscernible] because it's a separate sort of thing and until the mergers do. I don't want to build [indiscernible]. So we'll have a call to give you an overview of that. They do solution-oriented selling as the life of industrialize [indiscernible]. So the question is the product that makes the applications you're talking of, how you sell the applications, the customers you're talking to, the reach you do. All of that and the way you said, we've been allowed to be asking your value back to [indiscernible]. So you can keep adding to it, doing it. I think it's again a question of at least [ IP ] -- the same story is that [ IP ] is a 100 [ sold ] brand deal in that market. I think the team -- the sales team has the potential to utilize the brand power and its application power, grow the value or the mix of the volume, either between [indiscernible]. The application is tremendous on this. So I think that's where experience.
And I think we are we're trying every quarter-on-quarter to keep improving that. There's a lot of work on that. By the way, we do a service business, a lot of it are in our tenant excited in all that, which is also -- we are assessing a month or order book [indiscernible].
Okay. So is it okay if I ADHD a few questions on our Ador fontech business just...
I think 1 more question because I think it would be fair because [indiscernible] Ador fontech. I think one more question on Ador fontech.
So the same question that I asked -- so are we seeing any kind of product gaps that have been filled up in the fontech business, which are kind of the low-hanging fruit going ahead? Or do we have a full product profile in the fontech business, and we just have to go and sell in the market?
Sorry, we have -- we [ don't ] have massive product gaps. We are implementing product gaps that can be added and we took a little bit to do it. We have one specific area actually is related to sort of application of technologies that we're kind of looking at. But in general, there's no massive product gap that exists in terms of the portfolio we [indiscernible].
We have 4 or 5 questions left, we can take no more [indiscernible] close it out. Actually, [indiscernible] have time and I appreciate everyone. But let's go on [indiscernible] we don't mind [indiscernible].
Our next follow-up question is from [indiscernible].
Yes, sir, my one more question is regarding the -- basically the -- our customers. So do we even supply to shipbuilding because...
Yes we do supply shipbuilding. And in fact, over the coming next cycle, and in that's going to be a very interesting play. I think [indiscernible] we decide it's able market indefinitely.
Yes, because a lot of defense orders are going to the [indiscernible].
We have some involvements on some part of it, not in more than some part of it is mix the stuff that happens over there. It's not only the defense sales in the commercial and from both parts. I think yes, it -- there is -- I think the cycle for that is impact about to start picking up the way we view it. Let's see how it pans out on.
And power plant, sir?
Sorry?
Power plants?
Power plants, hearing whenever the contract or certainly in capacity expansion and some of one like that [ PPI ] involved over there.
Okay. And so when there is an increase in raw material cost, we pass it on to our customers. So when there is a cooling of -- do we kind of reduce the prices or...
We must have to look is pretty much open inflation and like a [ epiglottis ] also what you could pay with it's only a 1-month lag from both sides is what we pay out.
Okay. And sir, regarding our competitiveness, so how do we kind of try to bridge our gap between the largest player and ourselves, like in what direction do we try to compete with them and be better, I mean, in the market share?
It's not always ahead of the battle. I don't think it's always a battle. It's from the public markets, it's easier that in with the larger public market companies in this space. I think we also at that sort of sitdown in terms of where we want to go. And there's a free opportunity to reduce the gap, but it doesn't mean that it's always head on with the no normal. There are many issues that we keep looking at.
That is the last question for today over to Aditya Sir.
Thank you very much for your time, and appreciate everyone logging in. Thank you very much. And please be [indiscernible] next quarter again to [ exclusive ] in the next quarter on side. All right. Thank you very, very much.