ABB India Limited (500002) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to ABB India Limited Q3 July to September quarter CY 2025 Earnings Conference Call. [Operator Instructions] Please note that the conference is being recorded. And any unauthorized recording of this call is strictly prohibited. The recording will be made available on the company's and SEBI's website subsequently. I now hand the conference over to Mr. T.K. Sridhar, Chief Financial Officer of ABB India Limited. Thank you, and over to you, Mr. T.K. Sridhar.

Good morning, good morning. Thank you very much for sort of conducting the first a few words about it. So ladies and gentlemen, welcome, very good morning once again. Welcome to the Q3 2025 investor call of ABB India Limited. So on the call, along with me are Sanjeev Sharma, the Country Managing Director of ABB India; [indiscernible] who leads Electrification Business in India; and also Sanjeev Arora, who leads the Motion business and Subrata Karmakar for The robotics. Unfortunately, Balaji, who leads the PA, Process Automation division, is not able to join because of its customer commitments. So with this, I hand over the call to Sanjeev to take us through the initial and macro on the market slides of ABB. So over to you, Sanjeev.

Thank you, Sridhar, and good morning to all of you. happy to welcome all of you to this our quarter 3 performance session. So I'll give you some business highlights followed by financial highlights by T.K. Sridhar and then we'll have a question-and-answer session. Next slide, please. So if you see the business highlights, so we had a 13% base order growth and 14% revenue growth. But if you compare last year, we around in this quarter, we had some large contracts, large orders. So if you look into the overall order growth, that looks minus 3%. But the base order growth was quite healthy. Profitability is 16% up quarter-on-quarter, and it is minus 7% year-on-year profit after tax. And there are mix issues, I think, which will take up in the financial presentation. I will give you more details there. And we continue to maintain a strong cash position nearly INR 5,000 crores. We continue to expand our portfolio and bring more premium products to the market, we call market is demanding it. And we have introduced IE5 Ultra Premium Efficiency LV Motors, and this is [indiscernible] induction motor technology and free from rare earth materials. We also successfully commissioned some ABB Ability SCADAvantage Solution for THINK Gas Pvt. Ltd, enabling end-to-end automation and digitalization for compressed gas distribution network. Sustainability is on target, and I'll give you more data. And all our motion factories are certified as zero waste to landfill as on date. Next slide, please. So we saw a good revenue growth of plus 14%. And as I said, net of large orders, we had minus 3% orders growth, plus 13% in the base orders. And our order backlog stands at INR 9,895 crores gives us a good visibility of revenues in the coming quarters. Renewables, buildings and infrastructure discrete automation process industries. I think these are the themes which are built around the opportunities we saw in the marketplace. Next slide, please. So you can see that the diversity of our portfolio plays in diversity of applications, right from wind turbine converters to gas chromatograph Oxygen analyzers for a leading integrated energy player, electrical instrumentation from global F&B player, robotic solution for EV mobility insulated case circuit breakers or power distribution equipment company, process automation and drive solutions for metals. So we can see our 18 businesses playing this 23 market segment always keeps the robustness of the business model at the company level. Next, please. The key element of our expansion of our business is to continue to expand into new market segments, also new geographies and also keep introducing and reintroducing our technologies to our partners and customers. And our team does customer connect programs across the breadth and the depth of country in the market segment as well as geographies and customer large and the medium and the small sized customer base, and that's something that keeps us growth initiatives and the growth impulse that we need inside the company. And that has been the drumbeat for the last many years, and our team continue to have that drumbeat going. Next, please. Our focus on diverse business market segments, which is spread in 23 market segment, we continue to see high engagement and high response in data center, electronics and renewables. And our portfolio is resonating well in these, and these are the long-term gains. And I think we see a much more capacity buildup coming in these areas in the near future. And the moderate growth is basically the segment in the middle and the low growth segment that we see at this point of time, which continue to rotate over a period of time are listed on the right column. Next, please. The theme for the quarter is giving an idea about textiles, a deep dive. India is the world's second largest producer of textile governments with 4.6% share of global trade. It is expected that it will grow at 8.6% CAGR. And the comparative advantage of India into this sector is availability of raw material and also skilled manpower at competitive cost, which is a driving element for this business to happen. And government is paying attention and has some good initiatives in this area, including the PLI scheme and GST rationalization to boost domestic demand. And also, there are key trends which are right now affecting. I think there is a bit of with a challenge for this sector with the U.S. tariff impact. But at the same time, India is diversifying itself and creating more partner countries to mitigate those tariff impact. Infrastructure is being modernized and also, more sustainable manufacturing practices are being brought in this area. And ABB offers, motors, drives, PCs, engineering tools, service and support and host of other solutions in this particular market segment. So we always make sure that we have a good proposition for this growing and important segment in the country. Next, please on the sustainability in practice, we are on track. Our target for reducing the GHG emission was 87%. We have achieved it at 87.05%, zero waste to landfill units. We had a target that in 2025, 4 units will be zero waste to landfill. we have achieved 4. So a great job done by our team and locations. And also, we focus on that our units will turn water positive unit that is we put more water in the ground than we take it out. And our target is 4 units. We have already achieved 3, and 1 unit remaining is under certification at the moment, most likely by end of the year, we will achieve the target. And water recyclability is at 44% and our target is 50% for this year. Next, please. On the CSR and performance with purpose, we continue to focus on education and skilling, diversity and inclusion, communities and environment. And for the last 10 years, we always spend 100% of CSR allocation. And now having run this program for a period of time, we can really see visible impact wherever we have engaged, and we do it in a very institutionalized way. And our teams can see the impact on the communities and the targeted programs that we have taken. Next, please. For 2025 outlook, I think tailwinds are private consumption, government, capital expenditure and moderating inflation. But headwinds, as we know, trade uncertainty is playing out around India. We have prolonged geopolitical tensions, which haven't found a way to subside, but I think we'll have to see that through. And of course, there is a volatility in the global financial markets, and there's a lot of fluctuation on the ForEx. So these are the things we need to navigate both on the opportunity side and the challenges side as we finished 2025 in 1.5 months and also enter 2026. Next slide, please. So here, I hand it back to T.K. Sridhar to take you through financial highlights. Over to you, Sridhar.

Thank you. Thank you, Sanjeev. So I think we now get into the most mid part of it, which is the numbers where I think people are waiting for more information sharing. So if you look at these set of numbers, which is there on the slide, so the orders base orders, which we call are -- have a execution cycle, which is shorter compared to the larger orders which more represent the project orders or the long-term system order. So we have grown for the quarter a 13 percentage growth, which is as per what we understand with the market dynamics, which is there, this is a pretty healthy stuff, at least because it gives us the visibility of revenue conversions going forward are just not depending on the large orders, which are there in the backlogs at this point of time. So -- and this is spread across all the business divisions in the respective business segments. it's not just in 1 division, which has really helped us to do it, but it is across. So it's in, I would say, a good recovery, which has happened from the previous quarter, where we could see certain offshoots, which are coming up. So that's about the orders. And when it comes to the backlog, INR 9,900 crores of backlog roughly on the books. And this would be definitely be executed over the next quarters. We do have a plan, and there are no slow moving or long-term orders -- slow-moving or nonmoving orders. everything are lined up for execution in the few quarters to come. And also, this has almost 30 percentage of it as a composition of large orders. So it is basically 70 percentage which are the smaller orders, which will get executed on a month-to-month basis. Revenues, because we have a backlog, and we said that we would be definitely be seeing it. So it has generated the 14 percentage growth. And profitability, we are at 16.4% on PBT compared to sequentially 14.9% compared to the previous year of 20.5%. We will dwell upon this as we go forward. And that's more due to the material cost. In fact, we have a mix issue of revenue, which we are having because we are definitely pushing the new technologies around and also ForEx, which Sanjeev alluded to in his section. And also, last but not the least, the very recent impact of QCO that we had certification, which is needed for the locally manufactured products to be used in the production, right? So this is basically the overview of how we are for the quarter. And the cash balance, INR 4,500 crores, of course, we could have done slightly better over here. Now we have [ stocked ] up strategically inventories to make sure that we are not bound by any QCO obligations, which could come up as surprise or a delay in certification so we need to serve our customers because we have committed delivery lines for the backlogs, and we have done a conscious strategic stocking up over there on the inventories, which I'm pretty much sure will get liquidated as we go into 2026. Yes, the next slide. So this gives us a bit of a more granular view of the P&L. If you look at it of revenues we did discuss and then we come to material costs. So material cost is something which I know that people are looking at as to what could be the increase in the material costs. And I think it's better that we go business area by business area so that you have more a bit of more granularity on it. So overall, if you see, it's an issue of mix of revenues. The portfolio changes, which has happened and also on the competition, which has intensified in quite a few segments and also the fact that we had an ability to command a premium in the post -- COVID era, which has now sort of dried up. So that's something which is not now there and also under the market dynamics, which are slowing down the decision on quite a few orders. And therefore, opportunities are restrict in the market to play with. And last but not the least, we have the QCO impact as well. So that's how it is. But other expenses, if you look, there are more or less steady, no one-offs as what I would see the expenses if we have, if you see that. And we are unlike the last quarter, we did not have any ForEx, big ForEx impact in this particular quarter. But I think the rest of it is basically a mathematical calculation. So I think -- so this is how we have an overall P&L structure for this. So if you go to the next slide. So electrification. I think on the electrification, in the Q3 2024, we had almost INR 560 crores of a large order right, which is not there in this particular quarter. So that means against 1,700, 1,800, if we round it off, if you take off INR 600 crores, so then we're talking of INR 1,200 crores. So I think the base orders have still grown in year electrification. So that's something which is important to note, and we have been consistent in that particular effort. So the revenues, I think it is across all divisions. There have been no division which has -- which is finding it difficult to execute the backlog and the revenues. The backlog definitely has -- is down 2 percentage. It's more related to the pace of execution is faster than the pace of being take of orders and that therefore, it's a reflection of that. But I'm sure that as the market picks up and we are able to be successful, we should be able to also line up the backlogs going forward. So now comes the profitability element. So I think there were a bit of a question as to what is the impact, which is playing out in electrification. So just to give you a bit of a picture on it, I think both MO and EL have similar issues, okay? So they have an issue of mix which is basically what we do which is a reflection of both market segments where we play out. and also the portfolio what we have used to deliver the solutions to the customers, right? I think that's how we see the mix. So that means if a high profitability segment is absent in this but are lower in this quarter, but we have gone because I take you back to those slides where we used to say what are the high-growth markets, the moderate in the low-growth market. And naturally, the competition also plays out accordingly in these particular segments. And that has a reflection on the mix topic as what we see. So the mix is one thing. And then, of course, the competition is what we see in the limited opportunities what we have at this point of time, which has also got an impact on how the pricing is done. And followed by the QCO and the ForEx impact. So now just to call out some more to draw a bit of color. What's the mix impact in electrification, probably [ up ] 1 percentage could be the mix impact, which we had because that's the portfolio changes what has happened as a market segment changes what has happened where we have delivered this particular revenues. And competition, clearly, I think as I said in the past, we had a clear advantage of 1 to 1.5 percentage in which we used to claim a price minimum, which is no more which is not there at this point of time. And QCO impact, it depends on business to business, ranging between 0.75 to 0.8 sort of a percentage as what we have. And ForEx, 0.6 percentage. So roughly, this works out to a gap of 3 percentage on an average, which used to be the trend earlier in EL in the last 3 quarters is what we have seen, right? So if you look at it, a gap of this is contributing to that, right? And so that's how I see EL listing. But I think all these are they something not normal according to me, we have gone through these particular cycles. Cycles at this point of time are softening as what we see and therefore, we play out. We continue our investments as what is needed for the future. We see that the opportunities are there. They are something which are not drying up at this point of time, but of course, the decisions are delayed. And also, we make sure that we pick those opportunities which are relevant for our portfolio and good to participate in. So that's basically an approach what ABB has, and that has been consistent even in the past. If we go to the next. Motion, right? So motion, again, I think we had a good order of good order intake in this particular quarter. Of course, we had a large order, which played out in motion to the extent of INR 150 crores, which was not there -- and to the extent of INR 900 crores or what was the INR 90 crores was there in the last quarter, a similar year. So again, a good base order growth. So motors having good base order growth is actually a bit of, what you call, a refreshing sign because that's the early trends which pick up to see that how the market is behaving. And so that's how we do it. So execution, 9 percentage. As you know, as a aided a lot of system orders and large orders, which are also sitting as a part of the motion backlog and that's why you could see a 4,100 the backlogs, which are there, and they have probably a higher content of large system orders and long-term orders, which will get executed over a period of 12 to 18 months is what we see. So now coming to profitability. I did -- we did talk about it in the electrification. So here, I think the mix is, again, 1 to 1.5 percentage which plays out. And then we have the market dynamics of and the competition is more intense in terms of degree over here, and that's how we see because Motion has a larger play in core sectors as well as the middle sector as what we used to see. So therefore -- and that's where the competition is intense and then they have a higher impact in terms of competition dynamics. And they also have a bit of a QCO impact and, of course, ForEx impact because they have a huge content of ForEx, which is there. So overall, I think 4.5 to 5 percentage variation in motion compared to the previous profitability level. And what is now can be attributed to QCO and ForEx impact of 1, 1.5 percentage and then you have the market dynamics and the mix playing out on the rest, which is more market-led profits as what we see. If we go to the next. So now the question could be, so is this QCO impact going to remain for some time? Answer to that is yes. Because the dates are definitely changing. So we are preparing ourselves to make sure that we get our slots, get our preparation done for navigating this particular challenge and every business have an action plan. And I'm sure that will also -- I mean it will take some time, probably another 2 to 3 quarters minimum, which would take this particular issue to be resolved for at least for ABB as what we see. So what is this really a QCO impact? I think this was a question which had come to us. I think we normally been using our locally designed products to serve the customers. But as they have to go for approvals and they have to wait for the process to be completed. So naturally, so then we need to definitely use imported equipment to serve our customers. And therefore, that's causing a cost which is higher when you import and definitely, a ForEx volatility, which is impacted to the imported denominated currency, right? So these are a couple other things. So can we come out of this faster? Yes, our efforts are there. So we need to get make sure that we are able to work on this consistency in a focused manner. So the next, coming to PA. I think PA was pretty interesting. So they are cyclical in nature because they operate more on the core sectors of metals, mining and oil and gas and a little bit on pharma sort of it. So they see that the order intake stagnant because the decisions, especially on larger expansions are getting delayed, and they are more relying on retrofits and sort of smaller size orders and they don't have any large orders at this point of time. And that's basically why the revenue levels are also sort of stagnant that INR 600 crores, and they have a backlog which is falling down because the revenue is coming out of these products or in the backlogs. Profitability is pretty much consistent. They don't have a impact. They are systems businesses. So they have multiple vendors through whom they could source the material so they relatively are less impacted by the QCO impact. But for the ForEx impact because they are long-term contracts, they have ForEx variation clauses, and therefore, there are not much impacted on it. But they have because they are long-term contracts, the probability to have improvements on the designs on the optimization of the processes is better yielding them. And also, they have a higher content of services to the extent of 30 percentage in their offerings. And therefore, they have a better ability to maintain the margins as what we have seen in the past. Robotics. I think this robotics definitely ABB globally announced the divestment of robotics. So we still have the decision in India, It's fully dependent on the Board's evaluation and the next set of processes, which would happen, which is at this point of time, not decided. So they did have a good order intake in this particular quarter to INR 203 crores. And so that's something -- and that has come from their segments, which they play out in automotive and electronics area and general industry. So that's how it is backlog stronger profitability again. So I think it also depends here more on the mix and a bit of ForEx, we don't have much of QCO impact over here. So that's how -- and they had a bit of a lower revenues in the last 2 quarters, and therefore, the profitability is muted as we stand, right? So this is basically how the segments perform. And then finally, we go to the chart, which looks at the channels of the market. If you look at it, again, we have a similar ratio of this thing of nothing much changed compared to the previous years. But only thing to note, on a cumulative 9-month basis, the service equipment for them the project has basically come down to 8 percentage. We have services at 13 percentage and products still at 79 percentage. So I think the ratios more or less remain the same, not much of a change as what we see. So yes, that's probably last slide. Yes. I think this is the commentary from the finance side. And so we are exactly 30 minutes from when we started. So we have the next 30 minutes for Q&A. I think we can now open the call for the Q&A.

[Operator Instructions] The first question comes from the line of Sumit Kishore with Axis Capital.

My first question is in relation to your margins. Your profit margins for the quarter are closer to the lower end of the wide band of 12% to 15% that you wish to operate in. Qualitatively, if you could elaborate whether margin pressures around material cost, the market dynamics, those COVID correction are all factored in? Or we still have some room to go? Can this be the new normal for profitability in coming quarters after the record highs that we saw in the last calendar year? So your comments here will be very useful. That's my first question.

Sumit -- Sanjeev, I'll take this question. Okay. Sumit, I think when I had definitely elaborated more than adequately on the profitability movement segment by segment and at overall level, right? So I think that's already answered, so I don't want to repeat it again because that's the thing. So now our question is and as rightly, even in the last call, which we had said, so we are at the lower end of the percentage is what we want to operate in. And we did we're doing it at a pretty high level of 15% base. that's probably registered in the mind of a new normal for quite a few of the markets, but I think we are at the end of the day in engineering industry. And so we have our cyclical impacts to be handled. So now coming back to what are the topics. I don't think we don't have any one-off topics other than what we told about the mix, the market dynamics. As what we understand, which now related to competition scenario playing out on the limited investment decisions what we have, then, of course, the ForEx and the QCO. So I don't have anything much more than that. And when will we improve or move forward as in this particular journey? Probably, I think the QCO should be addressed in another 3 to 4 quarters. That's what we see because that's the time line that the government has also given. And therefore, I should assume that, that is what the time with every one industry will take. That's how it is. And the balance part of it is there is depending on how the market develops and how the private consumption and the investment decisions on the public that happens. So that's all we see. And just to give a bit of more color to our answer on this, do we find opportunities drying out at this point of time, no. yes, the opportunities are there, but the decisions are delayed and the choice of customers today are quite variant. And the only thing a factor which we need to probably unknown at this point of time, on account of geopolitical topics between India and China, how does it play out is what we need to see, right? So that's something which is unknown at this point of time and left to the best case of you guys.

Sure. So in the backdrop of what you said and what Sanjeev mentioned on the call earlier, well, base orders are higher, up 13% year-on-year. They are stable quarter-on-quarter. So is it right for us to sort of interpret that given the decision-making is a bit deferred in the backdrop of the macro environment, geopolitical tensions, is this level of base orders, absolute terms likely to persist for some time before we see a breakout because from a more diversified CapEx cycle playing out? So across 3 segments, the main ones, the electrification, motion and process automation, how should we think about where we are in the CapEx cycle and how this can play out over the next 12 to 18 months?

Okay. So Sanjeev, so would you like to take up this answer?

Yes. So yes. So we have had a very good cycle post COVID wherein we enjoyed very good growth, both an expansion of orders, revenues, profitability and all elements. And that was on back of India growth story as well as a lot of CapEx put in by the government in the right places. And also, we had a good support in our segments that we were focusing on the new segments, mid-segments and also large core segments. So at this point in time, for last few quarters, now there's a sluggishness in the market in terms of CapEx formation as well as expansion projects. They are good at -- they're at a good level, but they are not in a very strong expansionary mode. So from our perspective, this is a cycle which comes as a correction after a strong growth. Whether it takes 1 quarter, 2 quarters, our perspective is this is going to come back, the growth is going to come back. And we will write that cycle because our 18 divisions focus on this very dynamic 23 market segments. The moment the order intake and the order formation takes place, it will directly reflect in our books in the orders, revenues as well as in the capacity utilization, which directly impacts the profitability as well.

Next question comes from the line of Renu Baid with IIFL Capital, and we'll advise every participant to stick to one question.

I have two questions if they can be addressed. The first would be, given that you have mentioned that they've seen some green shoots and base orders and if tariff settlement is near or do you expect the capital investment cycle or broad-based pickup in large order finalizations, which has been not the case for the last 2 to 3 quarters. So what would be your view on the likely revival or recovery in the CapEx momentum? And if the momentum is the way it is there today with flattish book and just early teens growth in base orders, would you think it would be possible for ABB or to manage double-digit growth in CY '26? Or probably that would be a year of moderation of consolidation like '25? And in case if you can give any comment, NVIDIA, the recent relationship on NVIDIA maybe we are working together for sorters for AI data centers, in your view, by when you think the product for this market would be available and ready? And in case of that product is available in India for ABB, to what extent it can increase the TAM for us in the DC market?

So Sanjeev, so I think we could invite Kiran and Sanjeev Arora on this because they are reading the market quite stronger for EL, MO any of 75% as our business. So I have Kiran over here. So Kiran, so you could throw some color with from EL and Motion, of course, Sanjeev Arora.

Yes. Thank you. Thank you, Sanjeev and Sridhar. I think it's a good question in terms of the market, how it's behaving. And also quite an elaborate question in terms of what exactly we are trying to do in data centers as well. I think let me pick up some few of the segments of the market. Let me just pick up something on renewables, rail and maybe something on data centers in the question is it. Now when I look at the way renewable sector is behaving, what we see is a good expansion in terms of the renewable market. Specifically, when it comes to renewable, I'm also looking at something known as battery energy storage systems, which we call it as best. So that's something which is really talking on the charts in terms of the opportunity, which is available for the future as well. And we are also looking at something on green hydrogen, which is also becoming very prominent as a sector in the market. When I look at rail, you have seen a lot of expansions across investments from the government and also into the metro sectors meter rail across the various cities of India. So that's something which is an investment, which is coming across. And we find that this is going to really contribute to the base orders going forward. On the data centers, when I look at it, I segregate into 2 parts. One, in terms of hyperscale and the second one in terms of the co-location data center. When I look at hyperscale, yes, there is a bit of a sluggish kind of a movement in India at this point of time or in the -- probably in the Q3, and we are also looking at a bit in terms of saithe growth there in hyperscale. But at the same time, what is important to understand is how exactly the co-location data centers are behaving. I think co-location centers, data centers, there's a huge demand for them in terms of the capabilities, what they can extend and also the difference of the customers, and they want to have co-locations, which is really supporting them in their day-to-day processes. So we feel that data centers in co-location would grow, and we have seen the substantial growth in Q3 as well. And we would like to go forward with our services and solutions to them even this quarter as well and last quarter as well, we have been doing the same. So maybe over to...

Yes. Sanjeev, Sanjeev Arora.

Yes. Thank you. Thank you, Sridhar. Thank you, Sanjeev, and thanks, Kiran. I think I echo what Kiran has just mentioned. So giving a flavor of the discrete part. Baseload orders, as Sridhar has mentioned, they have been very good for us. And that shows the early signs of positivity in the market demand. Because when we compare to last few quarters, yes, there was a challenge. And Kiran has well explained on the segments part. But then when we touch upon the cement and the steel and the oil and gas part, I would say that the investment cycle has started in these segments as well. So cement, we are seeing a bit of a revival and upturn in the investment. Same goes for steel industry. And also, we do see a good pipeline in the oil and gas sector. So yes, the markets will be a bit dynamic. Price pressures will be there. But the good part is that demand will also be sustained in the coming quarters as we see now. So that's the comment from my side.

Yes. Thanks, Sanjeev. Thanks, Kiran. So no, I think, hopefully, this gives you a more granular view than at the company level. So because that leaves only process automation and robotics across automation forms only 13 percentage and we alluded. And that some of the comments which Kiran and Sanjeev have given also applies to them in a way. So I think overall, we feel that the market would be at a similar level as what we see at this point of time in the next 1 or 2 quarters. And then probably we could see some things which could be on the positive side is what is the attention at this point of time.

Got it. Anything on the NVIDIA opportunity or time for India?

Yes. So I think that's that question is reserved for Sanjeev. So Sanjeev on larger scale, you could probably give some color on that.

Could you repeat the question, please?

The engagement of NVIDIA.

Solid state cooling solutions. On the retail engagement with ABB parent with NVIDIA for AI data centers to develop solid-state drives and cooling solutions. In your view, can the solutions be available to ABB in India that means the products are prepared and ready? And to what extent it can increase our TAM in this particular segment?

So at this point of time, I don't have the complete details of this particular deal. I know as much as you know in terms of intent of ABB express with NVIDIA. But as a principle, if there is no geographical restrictions of application of those technologies, all technologies ABB develops, they are naturally available to our customers here in India.

[Operator Instructions] The first question -- the next question comes from the line of Atul Tiwari with JPMorgan.

Sir, my question is on this QCO. Could you elaborate a little more on what exactly is the nature of the QCO order, which is leading to higher imports? And how long this impact will continue before you add just to the QCO fully?

So Atul, I have actually, in my commentary, elaborated quite a bit, including what's the impact on QCO, right? So for the benefit of a gain, I think probably, I think people joined in late or missed out what I said, I think what is QCO, the government in its mission for [indiscernible] this thing has made wanted to create a system where Indian manufactured or developed products are more used. And before they use, I think they had to be tested and qualified by the Indian [indiscernible] standards, and that's something which is getting done. So now in that, so until now, it was not mandatory, but now it has been made mandatory. So therefore, all the products have to be whatever we manufacture, including the subcomponents, have to go through the testing and certification of these particular institutes. And it takes a lot of time because the number of labs are less, the number of slots are less, and there are so many people competing for the same slots. And therefore, it is definitely a problem. So probably, I think under exactly why the government also keeps extending these particular deadlines because they know that there is a slam in the [indiscernible] capacity issues, which they have to address, right? So -- but now on the other hand, having come to know that this is a problem on hand. So we need to draw a decision, which is better in terms of serving the customers. So we have no other option. If we want to keep the customer serviceability as a main criteria, to use imported material to make sure that they are already -- which are already certified for the global laboratories which could be used, right? So that's something is what is QCO about and how are we handling that. So to address this because there is going to be definitely a lot of time, which will be taken to get our product certified and so forth, others as well. And therefore, in the interim, we have no other option but to import material to serve our commitments to the customers. So what does this mean? what used to be locally developed, which we are using at a cheaper cost, which we now need to import for the base cost itself increases, number one. Number two is that you have a ForEx which is attached to this particular transaction. So that's also subject to volatility. So you have an impact on both. So how long will it continue? We could continue as what set another 3 to 4 quarters is what I mentioned.

Okay, sir. So very purposely, this order, which was designed to promote Indian manufacturer equipment is leading to higher imports. That is the so that's what I wanted to understand. As an industry, are you guys not representing the government that it is serving the opposite purpose of whatever was intended?

So you think that we will not do it Atul, we have done through a lot of other authorizations everyone. Every industry is making sure that it is representing itself to the right authorities to do it. But I think it's a government objective.

Atul, you can also help us by writing analyst report and publish it in the major media and so we can help you with all the information. Any help that we can get to get this thing through is good. But as a matter of time, it will be sorted. But yes, that's the stage we are right now.

We need to go to. We have other way, okay? But it's good in the overall interest of the nation in the long run. That's how we look at it, okay?