Action Construction Equipment Limited (ACE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Call of Action Construction Equipment Limited, hosted by Emkay Global Financial Services Ltd. We have with us today Mr. Sorab Agarwal, Executive Director; Mr. Rajan Luthra, CFO; and Mr. Vyom Agarwal, Head of Investor Relations. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Shah from Emkay Global. Thank you, and over to you, sir.

Good evening, everyone. I would like to welcome the management and thank them for giving us this opportunity to host their earnings call. I would now hand over the call to the management for the opening remarks. Over to you, sir.

Yes. Good evening, and welcome, everyone, to this earnings conference call. I am Sorab Agarwal, Executive Director of ACE. And along with me today in the call are Mr. Luthra, Rajan Luthra, our CFO; and our Head of Investor Relations, Mr. Vyom Agarwal. I hope all of you have had an opportunity to look at the company's financial statements and the earnings presentations, which have been circulated and also uploaded at the stock exchanges. It gives me immense pleasure to inform you that the first quarter has been the best quarterly performance in the history of our company so far with highest quarterly revenues, EBITDA and net profits. To brief you on the financial performance for the first quarter of the financial year ended FY '21. The operational revenue grew by 38% on a year-on-year basis to approximately INR 400 crores with an EBITDA of INR 45 crores, which grew by around 102% year-on-year. The EBITDA margin stood at 11.29%, excluding other income. The profit before tax grew by 154%, and the net profit grew by 143% year-on-year to INR 42.7 crores and INR 31 crores, respectively. While the PAT margin stood at 7.72%. For 9 months ended FY '21, the operational revenue stood at INR 770 crores with operating EBITDA of INR 69 crore, EBITDA margin at 8.99%, and net profit at INR 41 crores, which again is better as compared to last year's 9-month results, even though the first quarter of the current year was a washout with some losses. It will not be out of place to mention that owing to certain supply chain constraints, we were not able to fully capitalize on the potential of revenue increase in December quarter as well. Otherwise, our top line, bottom line and profit margins would have been a tad bit better. The company's growth was mainly driven by revival in construction and infrastructure activities, and also strong growth was witnessed in the industrial and logistics sectors. Growth in the Agri and Construction Equipment segment was driven by realignment of our business fundamentals, which we carried on in the last 2, 3 quarters. The company's operational efficiencies also improved due to the cost-control measures taken by us in the past few quarters. Although the steel prices continued to increase in the quarter, the company was able to pass on the price increase to the customers, ensuring that our margins were not compromised. Further in our pursuit to offer world-class products with contemporary technology, we have now developed a lithium-ion electric forklift for our valuable customers. This is a relatively clean and user-friendly technology, and it is a proud moment for us as this is the first -- we are the first indigenous manufacturer to develop this advanced technology product for commercial and industrial use. In the quarter gone by, the company has also given a principal approval for an employee stock option scheme for clients, ESOP, to motivate performing employees and align their efforts towards long-term value creation in the organization and to attract new talent. Looking ahead, we believe India's strategies around recoveries will be stronger, aided by government's focus on urban infra and rural development with fiscal expansionary policies. The vaccination drive shall also contribute to the healing from the damage done due to COVID-19. The green shoots of economic revival and healthy order flows makes us believe that the demand scenarios will continue to remain strong in the fourth quarter as well. As conveyed earlier and looking at the current momentum of economic activities, we should be touching distance of our last year's revenues with better margins by the end of current financial year. Further, we remain optimistic about the medium- to long-term prospects of the company and expect recurring growth in Construction Equipment and Agri segments, coupled with sustained growth in cranes and metal handling segments, to support the expansion in top line, bottom line and margins of the company. With this, I would like to open the call for the question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Sanjay Dam from Old Bridge Capital.

Congratulation, sir, on a wonderful set of numbers.

Thank you, Mr. Dam. Thank you.

And congratulations as well entire team. It's a very, very, very proud moment for you.

Yes, all of us have worked very hard. And keeping in mind that the COVID is still around and was especially around in October, November, there was also a risk, all of us here work to perform. Yes, I agree.

Yes. So with COVID, we discuss internally that INR 15 crores is what the company has done quarterly best. So we used to always say that is to wonder so where does the journey lead from here? You've done 30 crore. That's an amazing number to achieve. And I would like to multiply by 4, but life is not so simple as that. But on a more serious note, when I look at your segmental revenues, you've indeed done extremely well in cranes. But agri equipment has fired like nothing never before, so it’s INR 73 crores agri equipment. So question number one is that, how do you see it going ahead in the next 4 quarters? So to give you a perspective, INR 175 crores is what you've done in the last 4 quarters. And if I look at your FY '20, you already did INR 145 crore, right? INR 145 crores in last FY. INR 175 crores in the last 4 quarters. What is the road ahead? Because this has also contributed reasonably good to your profitability as well as the segment EBIT. Question number one. Question number two is that when I look at construction equipment, I mean you've always mentioned that this segment can become larger than cranes themselves, and we sincerely believe that. So very crucial juncture in this -- in your journey is that you’ve hit your, I think, your highest-ever construction equipment revenue. It's almost about INR 40-odd crores, almost. And not only that, it started to contribute to profitability also. So if you will give us some sense of what the next 4 quarters you think will look like given that we see an explosion in not only public CapEx, but also private CapEx is reasonably picking up. I mean a lot of private CapEx is happening across that publicly -- public space. And third is that the cranes themselves, you've again hit a kind of a very good number on the -- I think this would be your highest-ever quarterly crane revenue also and so is the EBITDA that you've done. So if you could give us some sense of -- Mr. Agarwal, all these 3 are at a juncture we've never seen before. So your sense on these.

I would call it the inflection point.

Yes. I mean we've never seen these numbers. We've been tackling it for some time. We've not seen it so well. And each has its own -- so agri is not something which is the main line. But you've done something out of ordinary. Cranes is, again, you've done the highest ever. Construction equipment, which can become as big or maybe larger than cranes, you’ve become reasonably profitable. INR 89 crore of EBIT is a reasonably good starting point. And INR 39 crore, INR 40 crore of construction equipment quarterly revenue is a serious number to start with. So yes.

We -- to answer all your questions, but let me start with what you said initially that there is a particular price and multiplying it by 4 is ideally what you would want, I would want. But I would say, I would rather want that for [3 and Q4] and another increasing factor because I think -- which is possible. Obviously, the demand has to be sustained and our performance has to be sustained. Coming to your question now with respect to agri or construction equipment, both of them. The demand potential of the scope of company's growth or increase in revenue remains. So if you put the agri, it's somewhere maybe about INR 50,000 crore, INR 60,000 crore, INR 70,000 crore market, wherein we are practically doing all of these, and the end of this will end by about INR 180 crore, INR 190 crore or INR 200 crore revenue. So the potential or the available market size is huge. It says that for so many years now, it was languishing. And internally, we have done whatever possible and especially in the COVID time and after that. And we have started to do that just before that to organize, reorganize to ensure that effective results come. Because unnecessarily a lot of money will be spent in areas where we don't get spent in these divisions and the result was not forthcoming. So the teams have also been reset. The focus has been brought in. And to be very frank with you, I've personally worked with the Construction Equipment segment. We're leading it and driving it for that. The potential that is there because the construction equipment alone, I think with a slight price increase is INR 9,000 crores, INR 10,000 until now, which obviously, INR 8,000 crores, INR 9,000 crores, which will go to about INR 10,000 crores, INR 12,000 crores in the next 1 to 2 years, 3 years. The potential there again is immense, and we were just languishing. So what really has happened is that we’ve been able to -- our go-to-market strategy also increase in a particular area. We've been very successful with what we have been doing, what we have done in the last 1 or 2 quarters. And we are pursuing it hard and following the same set models and in other areas, geographies that I've mentioned. Now to answer your core question that I see that in both these segments for the next quarters, 4 quarters, 5 quarters, let's say, the next financial year, I see that we should be -- for construction equipment, we should definitely be looking at sequential growth quarter-on-quarter basis, definitely on a year-on-year basis. But yes, sequential growth. And if everything goes well, we should be able to make a 40%, 50% revenue increase over the current revenue, which will give us close to INR 120 crores or something, plus-minus, possibly in the current year, financial year, maybe going up to 170, 180, even touching 200. Maybe more than that is possible, but obviously time will tell. So -- and once the base increases and sales price, this simple formula has established throughout time, so going by that, if we're able to do 200, then 300, 400 will become easily possible, 500, 700, 800. But that's how things happen. And like I said -- have said earlier that in the INR 8,000 crores, INR 9,000 crores, INR 10,000 crore possibility possible market space, it should not be difficult for us to go to INR 2,000 crores to INR 2,500 crores the next 3, 5 years. That will be slightly long on this. But yes, our immediate target is 200, then 400, then 800, which it looks like that we are in the right place. The ball is rolling. There are no stoppages in the way. The team is well trained, well grown. The market, in a way. The accessibility has been established. And something [ similar ] thought, tractors. Here, I would say that the tractors are picking up and improving. But maybe in the current quarter, you might not see a sequential increase, maybe even flattish or maybe a slight increase. But going forward, you'll see much more because we just finished the harvester truck for harvest season. And we were able to do pretty reasonably well in the tractor mine section in the last quarter and the quarter before that. So on the whole it will be flattish or slightly low. But yes, I'm sure in the next year, let's say, starting from theFY22 onwards, we should see a consistent maybe a 25%, 30%, 35% increase, if not more, on a yearly basis. And you will see a sequential increase in the quarters. So obviously, if that happens, then utilizations improve, obviously, our margins expand, our ROC also improves. So everything would start to happen, which we have seen happening in this quarter and some part of it in the last quarter. Because if we look at the quarter through September quarter, rains did take off, but they were still very slow. Because we are market leader and overall market was dormant initially when quarter 2 started. But we were able to save our quarter 2 with respect to some numbers and profitability, primarily again because of equipment and agri even in quarter 2, there again. So -- and another [indiscernible] which is -- because our company is more like cyclical in nature. So to come out of the cyclical things, we primarily worked on a lot of factors. So like the tractor business, agri business starts, including harvester starts delivering because it's not [ accounted technical ]. Construction equipment again is more to do with infra and less to do with industry. So without agri business signing with other construction equipment business coming off some level and growing from here onwards, coupled with our increased focus on exports, I'm sure with the diversified portfolio and cranes sustaining with the growth of the economy or everything in the field. I think with the diverse portfolio, even the content -- the cyclical nature of our business will diminish, and it will become more like [1,000] over the next 2, 3 years. Apart from obviously the economy under the basic fundamentals remaining okay around us and the macro factors, I think 25%, 30% over the year end. Maybe to be able to further accelerate that pace, it should not be difficult because the availability of the potential of growth is much more than what we've been able to capitalize so far. I was able to answer your question?

Yes, sir. Thank you so much for that perspective. I'm sure...

One thing sorry. The third part was crane. See, what I also understand and also some webinars and some discussion here and there. So China plus 1 strategy and the interest cost being low and the FX cycle is sort of kicking in and hundreds of billions of dollars worth of manufacturing sectors are going to come into the country or have already started in the next 3, 4 years. So I think cranes will grow much faster than what we could have imagined. I think we should be utilized by end of next year. That's what I would think. Maybe it happens faster. So agri will contribute. Construction equipment will contribute. Cranes will grow maybe at the same size as these businesses, which are new for us. So it could actually be much better than what I’ve been thinking or maybe you can also [indiscernible] but time will tell.

Sir, I'll just ask -- but one question I have, and I'll come back in the queue, would that -- if you got INR 1,000 crore of top line, you do have 5% kind of net margin, sir. The next INR 1,000 crores of top line, will it be similar 5% net margin?

No. I think you can -- net margin [indiscernible] is after tax, right?

Yes. Yes, sir.

Yes, I can talk on -- or maybe Luthra can help me. But let's say a profit before tax type of a scenario. So INR 1,000 crores, whatever we do 5%, 6%. But for the next INR 1,000 crores, I think [indiscernible] 17%, 18% if not more. It's about 17%, 18% for every INR 1,000 crores, right? INR 1,000 crores is still a bigger -- I would say INR 100 crores, INR 200 crores or INR 1,200 crores, it would be at least 17%, 18%, right?

Because if you do...

To remain constant or...

You got capacity for how much, sir?

We can maybe go up to INR 2,500 crores or a little more than that. Because even as of now, we have utilized about 60%, 40%, 55% here and there. So doing a, let's say, INR 2,500 crores, which is also a little fungible here and there, I think it's possible to go to -- easily if you've got INR 2,500 crores, maybe a little more than that. Obviously, some minor CapEx will be required from very smaller machineries and some certain -- but nothing substantial. No actual CapEx [ utilized as such ]. And when it comes to doing that, we have a reasonable amount of land available, about 40-odd percent of our land is available for further expansion after what we have done already, the capacity we set up. And this is the key reason that our ROC will -- should go up substantially as our utilization increases. So I think it's a mix. It's an amplification of everything. Construction will do well. Agri will do well. Everything will start to open well. Utilizations will improve. ROC will improve. So obviously, everything is selected. So -- and I think we are at that inflection point that we should not be looking to stop now where we brought ourselves.

And sir, you're outsourcing. So is it INR [12,000] crore to develop outsourcing that you have? Would that remain the same when you hit the next INR 1,000 crores?

Yes. There is some additional alternate vendors here and there. Primarily, it will remain the same. And -- but obviously, whenever there is a capacity constraint or any other foreseeable issue, that will be adjusted or whatever needs to be done. So that's an ongoing process. So see, we already faced problems in supply chain in September and then in the last quarter again, did improve but not to the extent we wanted them to improve. So even for some bigger things, we had -- luckily for us, we were getting [ sales ] in one of our major engine suppliers because of their own capacity. But I guess they have further increased their -- they were setting casting. So they improved there. But additionally, some time or a year back, we had introduced technology of Mahindra to one of our machines. So we just ramped up supply from Mahindra. And similarly, we are suffering in cylinders, both being one of the biggest -- 2, 3 of the biggest in the country. So we have rather helped create a new setup for cylinders [indiscernible] the own industry number. So that's set up to be operational sometime in March, April. So that probably will go forever. But this is a new vendor coming in who will primarily be dedicated to us. So yes, it's an ongoing process. So wherever we see that capacity can be centrally sustained in our endeavor to reach maybe about INR 2,500 crores over the next 3, 4 years. I would say, 3 years for top 4, but let's say, 3 to 4 years, which looks evident. So that has been settled on the go. What happened in the last quarter or in November, September was, it happened very unexpectedly.

Sure. Sure.

Given that time to breathe, we still don't have time to breathe. Morning to evening, I'm now talking to our sales guys who are already [ talking about lunch ], what are you doing?

Sure. Do I have space to ask one more question?

Yes. Yes, why not?

Yes. So basically, sir, we know now that INR 1,000 crores parter have actually done more than INR 1,000 crores in the last year. For the sake of simplicity, let's say, INR 1,000 crores, we know about the breakup of your agri, construction, cranes and material units. So the next INR 1,000 crores would affect you more than crane, sir, very dramatically?

For the second INR 1,000 crores, yes, definitely. Because I think they would be contributing more or less in similar ratios. And somewhere, I think that the construction equipment might contribute a little more. So -- but they're for the next INR 1,000 crores.

Yes, yes.

So I think maybe it will be somewhere between 30, 35, 30, 35, 30, 35, is going to my scenario. It would be similar. Cranes still might lead because what I understand and the feeling that I get with respect to the overall infra space and government already doing the DTR for the next 6, 7 bullet train projects and all that, all that, I think cranes could still be slightly more than others because others will be growing drastically, but that's a [ fine pen ]. I would think that it will be somewhere similar over for the next INR 1,000.

Our next question is from the line of Anuj Sharma from M3 Investment.

Congratulations for a good set of numbers. I had 3 questions. One is as we evolve into a larger company introducing [ lower and lower ] equipment, we always have this policy of standard sales and equipment. Do you see that scenario changing? And do you also have estimate that maybe 3, 4 years down the line the contribution of spares and services could be much higher than what it is today? Or the counting of it [indiscernible]?

Wherever possible, we believe in using standardized components and spares. But yes, definitely, when we are evolving machines and even in the current machines, I would say 40%, 50%, 50%, 50%, 60% of the components are unique loss for us and for our design. So going forward, as far as our philosophy, I don't think we'll be wanting to change it for the next 2, 3 years because we want our machines and our products to be user-friendly and easily repairable even in a worst-case office scenario. Because, especially for construction equipment and crane, they do even work in the remotest of areas. But yes, I would still say that about 60% or even more than that is specifically for us because that is either made by us or made by others as per our design. So in any case, you cannot be finding replacement for that in the market. I guess obviously, let's say, the hardware and maybe some filters and certain hoses and smaller things like tires and rims, they are generic, yes.

But for us, is this an important variable, let's post 3 years, 5 years down the line or [indiscernible] will be higher, but [indiscernible] contribution coming from spares and services. Is there a hard number which we are working upon?

But to be very frank with you, we are really not working on a hard number per se. Yes, spare sales are increasing year-on-year with machine population and base increasing. And like I said, our intention is to sell more machines than spares. Machine is more reliable and require less care.

Sure. My second question is historically, when we have seen that the material prices have increased, it's been difficult for us to pass on or we've been able to pass on with a lag. However, this time around, the pass-on has been relatively easy. So any structural change or anything that has changed between company going forward?

What happened is that back to 2018, we used to be generally very skeptical about passing on the commodity price increase, and we used to struggle with it and that there could be a lag. But in 2018, for the first time, we did a reasonable amount of price increase because the steel prices were going up again even at that time. And in 2019, again, in early '19, we did put in an inflation price increase. So going back at last 2 years, 3 years, our experience has given us a lot of confidence that if the price increase is genuine and it is commodity based, so the market also accepts it. Yes, there is some revisions because we had a major price increase coming in on 1st of January in the current year. There is still some delistings happening. The inquiry level is not less. Yes, the conversion has slowed down slightly because the price increase is to the tune of 9%, 10% for some buyers. So there is a little resistance, but it will come through. It has already fallen through. In most of the focus areas, it has already been accepted. So we are very confident that in February, again, the order flow would be just like the way it was in December. Our structurally changing our thought process with respect to price increases, this is playing out now.

All right. So you believe part of it could be structural in terms of passing on the price increase?

Yes, I think so.

And my third question is on the bullet trains project we are seeing across, what is our acceptance or suitability to these? I mean most of these are in the Bombay and others in the [indiscernible] structure. So are machines or cranes suitable? Or they would require higher cranes? Just some suitability required for these projects?

For elevated projects, what you require are obviously approvals initially. And then you require smaller cranes 10, 15, 20 tons to be doing most of the ground material handling, shifting movement, so our products are totally suitable. And then as the structures go elevated, then you do require bigger cranes. So as a matter, I'm very proud to tell you that the first crawler crane on the bullet train project working with LNP has been supplied by our company. This happened 2 months back -- for the first 2 or 3 months back rather, sometime in October or November. So that's the bullet train project. So that's a 75-ton crawler crane . For final placement of prefab structures, we do duly require 150-, 250-ton or even bigger crane. And as of now we are developing 160-ton crane. If everything goes well, we should be able to offer it very soon to the market. So we do have the crane. But yes, for the final placement of the prefab orders or certain things, we really do require 100-, 200-, 300-ton or even bigger crane. And we are also moving towards that range.

The next question is from the line of [ Saket Kapoor ] from [ Kapoor & Company ].

Sir, firstly, on this part, due to this COVID factor, there has been disruption in terms of the weaker hand and the weaker players exiting the market or not able to perform due to XYZ figures. So how much have you have been able to garner the market share on these grounds? And how much is the new growth that has emerged due to the increased economic activity?

If you talk of secondary cranes, which is our single biggest segment, and then power cranes, let's say, if I talk of cranes, so in secondary cranes, there are 2 main players. One is our company and one is our main competition [is cost], where we control about 96%, 97% of the market. Definitely, even in the last quarter, we did increase our market share by about 2% or here and there, which obviously remains as of now. And there are some very smaller companies or unorganized players, 2, 3, 4 of them. They keep on coming, keep on going. That’s the trend. So obviously, they do double up in the price somewhere here and there. But eventually, the client understand and they don't last long enough and their liabilities, with their numbers and whatever this is. And even in the tower crane segment, currently, there are 2 main companies. Because all the other Chinese -- and they're still very much there, but they’re hardly doing any business. So we are the leaders in that segment again. And we completed Manitowoc. Manitowoc Potain. It's American -- it's a French-American owned company, so which are globally one of the most prominent. The situation is like that in the crane segment. So we do control the markets in a reasonable way with respect to market share and brand loyalty or customer loyalty and our effective service and steel parts and technology, all of them, we can see that. So there's a lot of value in this. And for the other segments, whether it is construction equipment or agri, we are a very small player ourselves there and have tried to set up foothold for ourself. And I'm sure there is a lot of value here down the line once we have increased our businesses in these segments by another 200%, 300% or whatever over the next 2, 3 years.

Right. If you look at the finance cost part also, sir, that has also been trending lower. And I think so this is because of this lower interest rate that is the question. Could you please give us how have the cost of funding be for this quarter and 9 months and compare to [indiscernible] last year?

I think I will request Mr. Luthra to answer that question regarding cost of funding because he's the one who's organized it.

Thank you, sir. And you're right, the cost of funding has gone down. But the -- maybe the cost of financing is basically 2 factors. One, we have been able to manage our working capital also and for us cheaper funding of options. At present, if you look at -- I'm borrowing at somewhere about as low as 5% to maximum of 6.5% as compared to last year of almost 8%. That is one of the one reasons. And we being a double rate [indiscernible] of A1 plus is your highest rating and a good rating. And even during the COVID times, we did not take any deferment for many of the core liabilities. So we have got a very good reputation in the market and banks, and other players are willing to lend at a very competitive rate. So -- and then we have been able to take advantage of this scenario. And not only this, and we have been paying or supporting all our vendors to support us in this COVID time and...

To interrupt, Luthra sir, but here, I would say that [indiscernible] currently, I think it is time to build up a creditor base so that working capital further improves.

Yes, yes, that's right.

We are 30%, 40% lower on creditors on a year-on-year basis or, let's say, [ if look get that cycle back ]. [ We are paying ] but let’s get our cycle back.

That's right. I'm following this closely or the Chairman, Mr. Vijay. We need to support our vendor first during their tough time. So we are there, we should be first one to support our vendors, employees and all those things. That'd be -- beforehand, and still, we were able to get a good financing, and we are able to control our financing. We are -- and that is the reason you got reduction in the interest cost. And going forward also, we are -- as we have committed in the past, also probably in next year or so, we'll be a debt free company as such. So that is the one we are looking at.

And that is also what we target for that -- we would have ideally done this in this year if COVID has not happened. So if everything goes well, the next financial year, we should be nearly debt-free.

What is the current debt, sir, working capital requirement and the term loans, if any?

Right now, we have got a term loan of the outstanding is what around INR 40 crores and the...

I think in light of that because of the inquiries [indiscernible]...

Right now, the term loan is INR 40 crores. And the working capital utilization is around INR 60 crores, which we intend to bring it down to probably by end of the March of the current year. The total borrowing [indiscernible] on the short-term debt somewhere should be around within INR 50 crores to INR 60 crores.

Okay. Sir, not to be very precise, we have seen that players, particularly in the eastern region, if I could name the company also, Tractor India Limited, do they pop all in the category of any competitor, peer comparison can be drawn with them with their business profile overlapping with any of your products?

Yes. See, about 1.5, 2 years back, we have started the truck crane, which are self-propelled truck cranes, where we do compete with TIL. So a certain portion of their business, see what TIL does mainly is truck cranes, rough terrain cranes and the reach tractors, which are used for container handling. So we don't compete there. In truck handling, we don't compete right now because the volume -- overall market size is less, but we are developing that product line. But yes, in the last 1.5, 2 years, we started competing in the truck crane segment.

Sir, the product profile does not suit the market currently, that is what you are telling that. It is not correct to enter that profile segment at all because of the lower demand or reason which you have...

No, we are doing the truck crane. We've already entered into the truck crane segment. And to be very frank with you, here not only us, but even Tractor India Limited are facing very fierce competition from these Chinese suppliers who are, in a way, global leaders for truck cranes by numbers. The product they are offering and with very lucrative payment terms of 1 to 2 years and a very lucrative price, which is beyond us, how they're able to do it. So yes, definitely in the truck crane segment there is a lot of fierce competition from the Chinese. It's a good segment to be in. That's why we enter. And I'm sure just like what we have done with the power cranes with the Chinese because they were again very good with pricing and whatever uniquely they will do. It will take some more time, but I'm sure we will establish our foothold and take on the Chinese.

If you take the eastern market as a footprint, what kind of customer from percentage of the total revenue are you garnering from this segment? Or if that very difficult? To be very precise, this is a company that is lacking, I'm talking about TIL to be named, they are lacking the, what to say, the leadership at the top. And they -- our understanding is that they may be looking up for JVs or people in the same interest to collaborate with them within form of JVs or all because they have certain lines with them. And they have -- there are 2 to 3 land partners can run in the eastern region. So if any strategic collaboration can happen, you have done the good work and now you are about to scale up. And if things mature because there are some legacies with that company, but like to be alluded to, it could translate into a good story. I was just setting the company so that [indiscernible]

I understand what you're saying, and I'm also aware of it. And obviously, we are open to all such alliances and executions as and when anything happens or progress in the right direction.

So the approach has to [indiscernible]

I'll be very frank with you. See, unfortunately, they are in Eastern India. They’re in Bengal and [ Karapura ], wherever, which is highly humanized. And so on the face of it, it might appear to be a good thing, but there are more troubles associated. There are productivity issues with that company. So -- but let's see, I mean what you're saying is definitely -- everybody has to keep all their options open.

In order to pursue that proposal, sir, is there any green lights that you're looking? Or due to the unionized pattern, the subject is not to be taken?

Why would you want me to answer the question [indiscernible]. I think I will refrain from answering that.

I know that, sir. But if you want to delve further into it, it could be a win-win situation for both organization. You being there in the system for a longer period of time...

Would you like if the debt will reflect on my books. You will not like it.

No, no, sir. It is not about the debt, sir. It's not about the debt. It should be the business model that could be adopted, and you could amplify the same with your skills, which they are lacking today because of some business reasons, which you people would be understanding better than we, the investor. Because a business...

[ Understanding is not ] what you're saying. And to be very frank with you, like I said, we have already entered into the truck crane business. And obviously, it'll take some time to get our -- we've already kept our foot in the ground. And over the next 2, 3 years, we will end up capitalizing on what we are doing. And perhaps whatever opportunity you're talking of, like I said, we have all our eyes and ears and everything open. And we'll let the water through.

Right. And to the agriculture right now, you were talking that this is a big market, and we are ready making -- our presence is very nascent in that segment. So sir, what kind of ground work you have done? And going forward, what kind of market share are you looking to garner in agri equipment part? Because mechanization is the game going forward. This is very much evident to increase the yield, the productivity. This has been the order.

Yes. I would say our first benchmark is, by the end of this year, we should be somewhere around INR 180 crore, INR 200 crore of revenue with agri. So our first benchmark over the next 2 years or 3 years, fastest cost would be to take it to INR 400 crores, INR 500 crores. It might happen in 2 years, it might happen in 3 years, maybe in 4 years. But pacing there is possible in an average around 3 years because as a company, also we want to develop our revenue over the next 3 years. From INR 200 crores to INR 300 crores, we want to enter to INR 500 crores as a target which we have set for ourselves. Our first initial target would be that in this market space availability of maybe a little more than INR 50,000 crores, INR 60,000 crores. First to go to INR 500 crores. And now we want to take that to INR 200 crores. Next to INR 1,000 thousand crores to INR 2,000 crores to INR 200 crores, and that's how things progress. So currently, in the next 2, 3 years, this is what we are targeting at. And something similar, I would say, for construction equipment, maybe somewhere between INR 400 crores to INR 500 crores over the next 3 years, and we are currently working towards that. And once we are there and then, obviously, then, then we go forward. So -- but yes, all I can tell you is that if all our cards play out well and things remain in positive territory like they are, which they will, I'm sure. With respect to our agri business over the next 5 years to 10 years or let's say, we should be a formidable player. That I can tell you for sure. We would be in the top seven.

[Operator Instructions] The next question is from the line of [ Shyam Sundar], individual investor.

Congratulations on a good set of numbers. What I want to know is what is the current capacity utilization? Can you give us the breakup for all segments if possible?

Yes. For the crane, we are currently working at a little over 60%. Construction equipment, we are working at 35%, 40%. For material handling, we are working at a 50%, 60% utilization right now. And for agri, we are working at about a 55%.

Agri is 45%.

Agri, 55%.

Okay. So what is the capital work in progress for the INR 20 crores capital work in progress?

On system routine, CapEx here and there, we're adding a little bit of painting here, a little bit of some machineries and plasma cutting machines to -- because we are forecasting increase in crane business, and our fabrication needs to go up. But I'm sure it would be with respect to all such [ smart source equities ], which are happening all across plants to -- with a little CapEx, just multiply the capacity in.

So why have you purchased land in the last year?

We have -- which particular land are we referring to here?

Basically what happens -- let me explain.

Okay, this is in the [ Godola ] area only?

Yes, that's right.

And you report you purchase land for...

Let me explain. Let me explain, sir. See, basically, if you -- you have not vested of largely. When we built up this plant in [ Godola ], we have been buying land from pieces, and there are -- if you look at [ Opac ] also, this is not completely a [indiscernible] factory because some of the farmers have not sold their land who are lying in between. So as and when they want the money, so we keep on adding some lands, although we do not require and to make a factory [indiscernible] factory. That is why what about the land, which come in between in all covered area, we buy that land. But then even the farmer will not have any buyer for that. And as a company, it's a good strategy to have a complete piece of land so that whatever...

I understand a little bit. I'm just -- will you be consolidating our land holding in the same area by adding some nooks and corners or intrusions, which are in our land?

Definitely true.

That's it.

Sir, but because I think it affects the ROE, right? The ROE is still at the lower end.

Don't worry about it. As soon as our utilization, which are going up, you just calculate our quarterly ROE and ROC. I think it is as good as it can get. And just because I have the number in front of me in the current quarter, it is 26%, and ROC is about 36%. So I'm very sure that as the utilization is increasing, so there are certain things you need to do in order to add that overall setup and get up in place as well. So...

[Operator Instructions] The next question is from the line of Tushar Sarda from Athena Investments.

Yes. Thank you for the opportunity. I wanted to understand your next 3- to 5-year growth plan. You've been, I think, in the plan, a couple of questions, you said that you see a huge growth from construction equipment going to INR 400 crores, INR 500 crores. I think last year, it was around INR 100 crores. So if you can throw a little more light on this segment and your competition and how do you plan to grow this segment. And second question is on the agri equipment. Last 3, 4 years, it has been flat, but now you're seeing some momentum and you expect the turnover to double in 3, 4 years. So a little more light on that also would be helpful.

See, let's say, doable 3-year plan, which we have already envisaged as reaching revenue of at least about INR 2,500 crores, if not more over the next 3 years. We are very hopeful that it should be possible in the next 3 years. And if not earlier. So we had already reached close to about INR 1,350 crores the year before, and then there was some slippage because of overall scenario in the last year. So we went back to INR 1,150. So we get -- all we have to do is stand, grow at 25%, 30% over the next 3 years as a company to attain that INR 2,500 crores, which looks pretty doable. And in doing this, we create -- we are already market leaders, and we will grow with the country with the economy with things. So yes, we still might be able to increase our market share a little here and there. But yes, the main impetus with respect to the possibility will come from the space where the potential is available, and we are not addressing it properly. That was the construction equipment and the agri side. Wherein we have a reasonable amount of portfolio, which has been created and right things, right strategy is working in the right direction, which is happening in the last 3 quarters, 4 quarters. Unfortunately, COVID started, otherwise, the results would have been better even earlier. So this is building point and with the potential being enormous in these 2 segments, specifically, so we see that our majority of the future growth might come from these 2 segments. Apart from crane segment growth, along with the country, along with the economy, along with the infrastructure growth and the industry growth. So -- and luckily for us, if you look at the sectors where we are addressing or where we are working, infrastructure, hard core, industrials or manufacturing because everybody needs to lift, ship, move some growth, whether forklifts, whether cranes. Then real estate, again, I was very surprised at 6.0 to 8 months, the number of tower cranes have increased all of a sudden. So real estate seems to be bouncing back a little here and there. Then you look at the agri sector, which is reasonably diversified. So it's agri, it is infra -- sorry, it is infrastructure, it is manufacturing. It is some part of it is logistics, where we supply, then agri. And obviously, further derisking, we are doing by increasing our export setup. And we already have a reasonable export setup in about 25 countries, which is going to expand further in FY '22. So the one we have set up will start delivering even better. The numbers will increase. The volumes will increase. We are helping them, sourcing them, supporting them. And then certain new areas, even on about 12 to 15 will open up, including some CIS countries and Eastern Europe in FY '22. So all of that planning and everything is happening, so that we are easily able to obtain our INR 2,500 crores at least, if not more, within 3 years or earlier. So that is what we are working at. And going in the same [ branch ], it seems that the way things are and the momentum we should be looking at, at least, a 25%, 30% growth overall in the company in this coming year, if not faster. That time will tell us.

No, I agree with you, sir. I wanted a little more insight on construction equipment because I think March '20, your turnover was INR 100 crores, and you're targeting around INR 400 crores, INR 500 crores. So what is the competitive scenario? What is the size of the market? Which specific products will you be able to grow?

The biggest product in this segment is a backhoe loader, which currently, JTB is leading the market. So -- and the addressable size there, I would say, would be close to about INR 700,000 crore, INR 7,000 crores approximately, wherein you can see the numbers what we are doing with practically nothing. So for us, these are 3 main advantages: right products, right price, right service. So our products today is as good as competition, if not better. Our price is definitely better than competition, and our service and support and care system that we have evolved around this product is even better than competition. And there is a lot of cross-selling of common market, which is available for this product, especially with respect to the infra base. So we are using, standardizing whatever strength we have in our existing crane business, coupled with a focus on evolving a separate network for sales or service, whatever required, to increase this product. Our biggest bottleneck here, just like tractors, used to be the financing part. So now the machine is stable. The machine price is good. Service is as good. Easily financed by financials all across the country, and our network is increasing. Our visibility is increasing. So that's what we are doing all across to ensure that we increase our volumes and numbers and whatever small bit of market share is.

[Operator Instructions] The next question is from the line of Sagar Naik from Equentis Wealth.

So just wanted to understand the margin profile. So if we look historically, we've done somewhere in the range of 6% to 9%. And this quarter, our margins are at 11%. So is this just operating leverage playing out or something else that has contributed? And also going forward, what will be the sustainable range of margins?

I would feel that moving forward, you'd see some more margin expansion. Because, obviously, some more of our operating leverage will play in. But at the current center, we've been able to attain this by controlling our costs wherever possible, by spending the money in the right direction so that the business increases. And because of that operating, we will take it. And also by passing on or transferring the commodity price increase at the right time and not waiting for it. So these are the things which we have done, right? And yes, obviously, capacity utilization or operating leverage is playing an important role here. And going forward, I think there is still scope to increase it by another -- take it up to 13%, 14% at EBITDA level. That seems possible because the construction equipment aspect still has to release some more margins to our overall kitty. And obviously, with numbers of cranes and agri going up further, there will be some more operating leverage. So there still is a potential to increase it by at least a 2-odd percent.

Okay. Okay. And sir, what would be your maintenance CapEx for the year? A normal number...

It was between INR 10 crores to INR 20. Right, Luthra sir?

That's right, sir.

Okay. Okay. So as you mentioned, current capacity can generate around INR 2,500 crores of revenue. So for the next 2 years, we won't have any heavy CapEx going on, right?

No, nothing major except for we intend to spend at INR 20 crores, INR 30 crores on a modern crane shop, which has been -- we were planning it pre-COVID. It got postponed because of COVID. We were still a little skeptical. So that might go through in the next year, if at all, but nothing substantial apart from that.

[Operator Instructions] The next question is from the line of Shaleen Seth from Seers Fund Management Limited.

Congratulations on these great numbers, sir.

Thanks.

I just have a quick question on tower crane. I just wanted to know that -- could you just give us an idea as to where the demand is really coming from? I just want to have a geographic understanding. Is it another part of India, certain part of India, et cetera?

Slightly difficult for me to answer at this juncture because I don't -- like I said, I was hard looking at the sales side in the last 3, 4 months, focus more on the plant side so that they're able to send those tower cranes also, I mean apart from other machines. But I think it is -- it has been -- I would -- if I say west, north and south. It has been all across.

Okay. And could I possibly get a monthly number on the tower crane as to how much was the number in December?

This time, so I mean, 17, 18. Luthra sir, do you have the numbers? Not monthly, maybe you'll have the quarter on this.

Quarter number, we have right now because the monthly number is -- it is around 21 to 22 cranes per month. For the quarter, we have done 62 cranes. It's in the range of 20, 22 cranes per months.

Yes, yes, yes. And I was very surprised because post lockdown and we opened end of April. So somehow tower cranes were strong from May, June, June, July onwards. I mean they were the first ones to be -- it's very surprising why people ordering tower cranes. They didn't even need it.

Right. Probably the affordable housing is giving it a good push. That's maybe.

Affordable housing and also see what has happened now, a lot of tower cranes are also getting consumed into infra projects with so much elevated construction happening. So with metros being built, you need to build stations. With bullet train now coming, you need to build stations. So a lot of elevated construction is happening, and the contractors realize that by using a tower crane, they are able to do it much faster at a lower cost. So apart from the traditional use of building, it is also going into the infra side now in a way.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

Yes. This has been a good quarter for us, reasonably unexpected. Like I said, we could have done better, and we would have been able to deliver better. But like I said, the momentum maintains, and the order flow is still there. Things are looking up. The vaccine is also coming around. People are getting vaccinated. And hopefully, COVID will be behind us over the next 2, 3, 4 months, for sure. And the economy will pick up. We look forward to a good budget, and we are doing all the hard work required to ensure that we are able to attain our 3-year targets, which we have envisaged for ourselves, which is to be about INR 2,500 crores as soon as possible. So -- and we're doing all the right things in that direction. Thank you.

Thank you, everybody.