Alicon Castalloy Limited (531147) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Q3 FY '20 Earnings Conference Call of Alicon Castalloy Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir.

Thank you, Margaret. Good day, everyone, and thank you for joining us on Alicon Castalloy Limited's Q3 and 9 Months FY 2020 Earnings Conference Call. We have with us on the call, Mr. Rajeev Sikand, Group CEO; Mr. Shekhar Dravid, Group COO; Mr. Vimal Gupta, Group CFO; Mr. Sandip Patil, Head of Global Business; and Mr. Rajiv Gupta, Head of Domestic Business of the company. Mr. Vimal Gupta will start and cover the financial performance, following which Mr. Dravid will walk us through operating highlights in the business. In order to share a more granular view of initiatives towards both the export and domestic markets, we will also have Mr. Sandip Patil and Mr. Rajiv Gupta provide insights on these areas. Mr. Sikand will then cover business developments, following which we will have the forum open for a Q&A session. Before we begin, I would like to point out that some of the statements made in today's call may be forward looking in nature. And a disclaimer to this effect has been included in the earnings presentation shared with all of you earlier. I would now like to hand over the floor to Mr. Vimal Gupta for his opening remarks.

Good afternoon, everyone. On behalf of the entire management team of Alicon Castalloy, I would like to extend a warm welcome to all of you on the earnings conference call. I trust all of you have received the results documents. Weak demand conditions, slowing economic growth, and the underwhelming festive season have meant status quo for the auto sector during the quarter. Due to these conditions, it would be appropriate to compare the quarter 3 financial 2020 performance with the immediately preceding quarter as the domestic industry is undergoing a onetime event of change in regime of -- for emission standards. We have witnessed a revenue decline by 15.24% from INR 267 crores in quarter 2 financial year 2020 to INR 227 crores in quarter 3. The revenue decline is primarily on the back of lower volumes as we are fast approaching BS-VI transition deadline as well as the pre-effects of our initiative to reduce inventories across our global operations. For quarter 3, exports, including overseas revenues contributed to 21% of the total revenue in quarter 3 financial year 2020, while domestic contribution was 79%. In 9 months financial year 2020, revenues from operations stood at INR 760 crores. Exports, including overseas revenues contributed to 20% of the total revenues in 9 months of financial year 2020, while contribution from the domestic market was 80%. Coming to our performance across verticals. The auto division contributed to 92% of the total revenues in quarter 3 and non-auto division was at 8%. For 9 months, in FY '20, our auto segment contributed to 90% of the total revenues, while non-auto stood at 10%. Gross margins improved to 49.6% in quarter 3 of FY '20, and EBITDA stood at INR 32.7 crores, with margins at 14%, higher by 122 bps on year-on-year basis. Our various cost management initiatives enabled a healthy improvement in operating profitability during the quarter. Profit after tax for the quarter stood at INR 8.4 crores. In 9 months financial year '20, EBITDA stood at INR 95.9 crores with margins at 13% and profit after tax stood at INR 22.9 crores in 9 months of FY '20 with profit after tax margins at 3%. During the quarter, the company added 6 new customers. These are across auto, non-auto as well as e-mobility, and the pipeline of inquiries remains healthy. While the domestic OEMs continue to monitor the markets closely and are keeping their current orders fluid, our investments in talent, marketing offices, design and development in recent years have resulted in improved yields across domestic and international markets. On that note, I would like now to hand it over to Mr. Shekhar Dravid, who will talk about operating highlights for the quarter.

Thank you, Vimal. Greetings to all investors. The requirement to reduce BS-IV inventories coupled with OEM preferring to upgrade on just-in-time basis has meant that the industry volumes continued to be subdued in the third quarter. Our strategy in this uncertain times is to collaborate more closely with customers and drive greater flexibility to completely align our operations with the requirements as they shift from BS-IV to BS-VI production. One of our strategic steps taken to maintain this and strengthen the client are engagements that we have deployed. Focused teams working alongside customers have compressed the time lines of production schedules to react more quickly to changing requirements. Our teams are also supporting customers on areas such as design detailing, raw material mix, and jointly navigating through the regulatory and technological changes. We also have separate teams focusing on improving the product portfolios to address the changing technologies and catering to the customized requirements for both domestic and export customers. I'm also happy to share that our recent contracts with the customers like JLR, Daimler, Samsung and MAHLE are progressing well along the targeted schedules. The design and machining stages are underway and volumes and delivery schedules are being mapped out. These multi-year contracts will result in steady and consistent volumes in the future. This will also enable us to demonstrate performance on new technologies and platforms. On e-mobility, we have witnessed increasing investments behind creation of e-mobility platforms, and now launches have begun to pick up pace in both Indian and international markets. We are already invested in talents and technologies towards this ensuring we are well equipped to win potential opportunities in this space. On our non-auto business, the endeavor is to further improve the product portfolio to better cater to existing and new customers. During the quarter, we added a range of high potential paths across various segments and received orders from the customers like Kansai and Denso for BS-VI requirements, Daimler and TAFE Motors in the e-segment and Honeywell automation and ABB in non-auto and to bring in differentiation and build up our product suites to grow the existing platform further. Looking at the 9-month performance, we are expecting by year-end with the same vector and it will be -- Alicon will be -- the growth will be in the tune of around 13%. On that note, I would like now to hand it over to Mr. Sandip Patil to throw light on our global businesses.

Thank you, Mr. Dravid. A warm welcome to everyone. I will bring forward the developments on our international business front. The international business, including exports, has been a key propeller of our growth strategy facilitated by our European subsidiary, Illichmann Castalloy, we have increased significant foothold in our -- in the Europe and U.S. markets over the last few years. To date, export, including sales from Illichmann, contribute to about 20% of our total revenue contribution, and while we aim to increase this over 30% over the next 3 years. However, we believe that FY '21 is likely to witness a drop in our contribution of export business owing to technical disruption happening much faster in overseas market. In FY '20, we got orders from JLR, Daimler, Samsung, MAHLE. These products are under testing, based on new products like [indiscernible], we are in the process of targeting new customers like Fiat Chrysler, MAN Trucks, [indiscernible], ZF, et cetera. To strengthen our market reach and increase our engagement with various customers, we have opened up our marketing office in France with 2 key account managers and U.S.A. with 17 key account managers who have strong contacts in U.S.A. and Europe markets. Companies like Renault and Ford have already opened doors for us, and we are in process to add basket with additional products after our first entry solution is provided to the customers. I would like to now hand it over to Mr. Rajiv Gupta, who will cover the development in the domestic business for the quarter.

Thank you, Sandip, Good afternoon, everyone. Looking at the domestic business, I think you all are aware of the current market situation. This is the worst downturn for the automobile industry in last 20 years. On an industry-wide basis, in the first 9 months of the fiscal year 2020 we have witnessed volumes decline by 13% that is in the year-on-year basis. Within this, two-wheelers are lower by 13%, passengers are lower by 14%, commercial by 27% and three-wheelers by 6%. The decline, as you all are aware of are attributable to combination of factors such as slowing economic growth, NBFC crisis, increase in insurance cost, increased cost of BS-VI vehicles as well as factors like shared mobility. As we sense the weakening customer sentiment and noticed declining volumes, we ramped up exploring of opportunities to diversify the products. This opened up new product lines, establishing -- some -- I mean, substituting some existing businesses. We explored opportunity to develop other parts such as wheel hubs, BFT, outer tubes, and inlet pipes in the two wheelers. I'm pleased to share that we have already booked business in these parts with Honda two-wheelers and Royal Enfield. In four wheelers, we are looking ahead for development of cylinders with the existing and new entrants coming into the market. Now let me brief you about the next year projections. Next year, we're looking ahead at a growth around 15%, and the growth will be from the new business as well as increasing the share of business from the existing business with the transition of BS-VI. In two wheelers, we have added new product range like, in displays, TVS. In EVs, the growth rate from the new customer addition that is Ajanta and from the start of business from the existing customers like Ather for the electric scooter and Tork motorcycles for the electric bike. And in non-auto, we have added 2 customers, ABB and Honeywell, which will give us the growth in the next year. I would now request our group CEO, Mr. Rajeev Sikand to share the views and prospective on Alicon performance.

Thank you, Rajiv. I welcome all our investors, thank you for joining the call. My colleagues have already summed up the results for the 9 months gone by, and given you the outlook for the near term for Alicon prospective. I would only like to share that while the last months were challenging, we remain undaunted and our improved EBITDA margins and continued engagement with our customers gives us reason to believe in the course we have charted for ourselves in last few years. We would be happy to take your questions now. Thank you.

[Operator Instructions] The first question is from the line of Ankit Merchant from SMC Global Securities.

Sir, my first question is related to the EBITDA margin. So I understand the gross margins have improved. So is this a one-off phenomenon just because of the drop in the price of raw materials? Or what has basically changed for us now? And what is the reason for this spike in EBITDA margins?

In this, if you see that there is no impact of the raw material because in our case these raw materials completely passed on to the customers. So indeed, if you see our results, so -- we have done a lot of cost reduction measures in the company, and that has given this result. So in all areas, we have done a lot of exercise of cost down activities. And that has given at the end the impact on the EBITDA margins.

Sure. And my next question is related to...

It is the conversion cost of that site.

Okay, sir. Sir, my next question is related to the two-wheeler sales specifically. We have seen that two-wheeler sales over the last, I mean quarter 3 was also quite muted. And quarter 4 is expected to be -- it is expected to remain flat. And if there is suppose any conditions of prebuying, which should be coming in because of the BS-IV. So quarter 1 of next year is also likely to be very challenging. So how are you weaving your portfolio regarding to BS-VI? And what is the price changes, which you are expecting in your portfolio coming to -- related to two-wheelers?

So basically, in two-wheelers, I do believe the market is down, but what we did, we diversified our portfolio. We added new products where we're not there, like products like inlet pipe we got from customers like Honda and we have 100% share of the business. And there we have good margins. And also, you would agree, with transition of BS-VI -- with the BS-VI, the parts are very critical and stringent to make. And with this, we are in discussion with customers for the price increase compared to BS-IV parts.

Sure. So when you're guiding of -- this 15% growth in the coming year, so are you talking in the terms of volume? Or you are trying to -- or on the value front, how would be the breakup be?

Basically if you see, this -- it is a top line, what we are going to get. As you know, that was last year. This current year is a flat year. And with the transition of BS-IV to BS-VI, our growth majorly comes from the existing businesses with BS-IV to BS-VI transitions, and new portfolios what we added as Rajiv has already explained, that we were not there previously and now we do those components. Those product portfolios have been added. So that will give us another advantage on the top line. Also, mentioned in my report that basically, the EV is going into -- so 2 new customers have been added. So the new customer base like that and also the new customers from the non-auto working at adding it, that will add to the growth of 15% what we envision next year.

Of total.

Sure. Another question is related to the current -- the quarter 3 revenue mix. So is any part -- has any part come in from the new products for us in the quarter gone by?

Right. Yes, there are few parts, which have come into quarter 3. But this is just the beginning of BS-VI. So it will give us the advantage in quarter 4 and coming years, but there are very few parts, which are the new parts in the quarter.

Sure. On the EV front, I just have one -- just one last question on EV. The EV -- yesterday in the con-call of Bajaj Auto, the management was guiding quite a good amount of positive related to EV. They have received good response for their Chetak. So as such, how are we planning to take up our EV as a product? And Ather -- as far as I know, Ather has also launched another new vehicle in the competitive space. So are we -- what is the game plan going ahead for EV for us? And would we be targeting to get into Bajaj Auto's hand also to supply some products to them?

Basically, looking at EV, at present, nothing is clear from the OEMs at present whether these parts will be developed in India or not. But looking at, as you mentioned, Ather, and we are associated with Ather for a longer time, basic change has come in with our business strategy of Ather itself. Now we are going to launch their products in 7 different cities rather than 1 city at a time. So we are anticipating a good growth in the Ather business in coming years. And I think for the next year, we will have a better business from Ather. As far as the question comes from the two-wheeler industry, Bajaj as far as we know and whatever kind of -- our work business relationship with them, yes, they have not started any such development for components in India, and we are yet to get a clearer cut picture from their side. So it will be very early to talk about it at this time. But we're also -- we are the partners in supplying -- other models we are supplying the components to Bajaj. So we are just awaiting their complete strategy on EV. Once it is unfold, we will have our strategy in place based on that.

[Operator Instructions] The next question is from the line of Saurabh Jain from Sushil Finance.

My first question is, how sustainable are these 14% levels of margins? So I believe, this is probably the highest ever EBITDA margin which we have achieved this quarter. So how do you see going forward?

Thank you, Saurabh. So first of all you see that these margins have come up from the cost reduction activity that we have started in the Alicon. So it is a continuous journey. So it is not like that, okay, suddenly in 1 quarter it has gone down, again, it will go up. Maybe when the volumes will go up, the costs will go up, but not in that ratio. So we feel that we will be able to maintain our margins what we have achieved in Q3.

Okay. So on a yearly basis, also, we will be -- from next year onwards, we can believe -- we believe that we can achieve this 14% kind of margins, right?

Yes, that we're also expecting.

Okay. And sir, there was 1 previous order from Daimler and BMW of INR 700 crore of exports orders, which we were able -- which we were supposed to execute over the 5 to 7 years. So how are things going on in that front?

Just to correct, there was no BMW in that list.

No, I'm talking about 3 years back?

Yes. These orders are going very well as per the time line given by the customers. The products are -- some products are already developed and under testing, some products are under development as per time line.

No, no, he is talking about 3 years back, the Daimler, coolant collector, and the swing arm for BMW.

Yes. The 3 years backward orders we bagged from the Daimler that was a coolant collector and end of the next year these products will go out from the production and that will be replaced with the new products and new products already are under development. The same in case of the BMW swing arms that supply has already started.

Okay. Okay. And sir, one more thing I wanted to ask, have you taken any price cuts during the last couple of quarters?

Hi, Saurabh, Dravid here. Basically, keeping our relations with the customer and whatever their business relationship we have got, we have not given any cut as such product and the costing or the pricing. And frankly speaking, customers are asking, but they are not insisting it, further maintaining our share of business. So answer is that we have not given any such deductions.

Okay. And sir, one last question from my side. These new orders, which we will start executing from -- the dispatches will be starting from June onwards. So what would be the incremental addition to our top line from the new orders for next fiscal? Because I believe, there will be some products which will phase out during the next year as you just mentioned that Daimler's coolant collector will probably phase out during the next fiscal or in the beginning of the next fiscal. So what would be the amount of revenues that will phase out? And what would be the incremental addition to the top line from new orders? Although you have mentioned that overall you have factored in all these things to 15% top line growth, but if you can break these down that would be helpful.

Basically if you see -- first, I would like to answer that regarding the Daimler, you had raised the question. Yes, there will be a lag, but these models are getting converted. And for the new model, we already bagged the orders. So there will be compensation of that loss, but with a lag. So as such there will be no direct impact on the figures as far as Daimler is concerned. Moving onto the 15% of our growth what we are anticipating for the next year, that growth, out of that, there will be around INR 160 plus crores we are planning for our growth, in which there will be a growth of around INR 90 crores to INR 100 crores, which is from the new products once we have launched it. And these are -- will be in SOP for the next year. So out of INR 160 crore, around INR 100 crores will be from the new businesses what we added and already developed and ramp up will start in June -- April onwards.

[Operator Instructions] The next question is from the line of Bharat Gianani from BNP Sharekhan.

Congratulations for a great set of numbers in a challenging environment. My question is that, what's the gross debt currently in the books? And what is the CapEx plan for this year and for the next year if you have finalized?

So first, when we talk about the CapEx plan. So in 9 months, we have done around INR 44 crores and we are expecting to close in the range of INR 60 crores to INR 62 crores, in that range, further addition of INR 15 crores to INR 20 crores because whatever -- currently Mr. Dravid is explaining that we are adding the new businesses. So for that, we need that. And on the debt side, so the total debt including the long-term and short-term is -- we are in the range of around INR 300 crores.

Okay. Okay. And CapEx for next year, if you have finalized?

Next year, actually, you know that in this industry, we need a maintenance CapEx that year-on-year and we are doing that, that is in the range of INR 25 crores every year. And in addition to that, we are expecting maybe INR 15 crores to INR 20 crores based on the projection -- outlook shared by Mr. Dravid. And it is a dynamic market that you know very well. So if we get a new business or new orders or some attracting business, so it will change according to that.

Right. Right. So that's helpful. I just want to ask that earlier we had given -- in the previous call, we had said that we had received INR 800 crores worth of new orders. So -- and is executable over a period of, I think, 5 or 6 years. So basically that makes the per year incremental order book to about close to INR 150 crores or so. So I mean Mr. Dravid just pointed out previously that in FY '21, we're expecting about INR 90 crores to INR 100 crores of new projects. So are we seeing that in FY '22, there will be an increase in the contribution of new projects? Or will it remain at the similar levels?

Sandip?

Yes, we are increasing the contribution of the new projects.

New projects in FY '21.

FY '21, yes.

My question was more from when the year after FY '21? Because like INR 810 crores was the order book that we said that was incremental and executable over a period of 5 years. So basically, that gives then a top line of about INR 150 crores. So are we trying to say that in FY '22, the contribution from new projects will be higher than FY '21? Or -- is that a right way of understanding?

Basically, I will tell you that whatever we declared of INR 800-plus crores of business in the last quarter that is going to go up in manufacturing line in '21, '22. So whatever -- just now what we have talked, this is from the existing customer, which will be added to the business. So INR 800 crores, definitely that will be added in '21, '22, and that will be there.

Okay. Okay. So that -- so basically, this whatever order book we have received that will -- we will start execution in '22 only for that.

No. Something will come in '21, very little of it will be in '21 because you see these are all big carmakers, [I know Honda] used to come there. These are all global carmakers. Their projects normally have 12 to 18 months of a lead time because they have -- they do their own testing of these products. So Sandip has the figures. Whatever is the figure this year?

So for year 2021, the new projects will be in tune of INR 163 crores. And next year will be INR 207 crores and third year further INR 285 crores.

So INR 163 crores is in FY '22, right?

2021.

'21, okay. Okay. Okay.

[Operator Instructions] The next question is from the line of [ Agastya Dave ] from CAO Capital.

Sir, this question I have asked previously also and I'll ask again this quarter because you have, again, done a very good job cutting down costs. So if I take your guidance for next year of roughly 14%, 15% top line growth, and I look at the employee expenses this quarter, which is INR 33 crores. Is it a good idea to take that INR 33 crores plus some wage hike as our base for employee costs next year?

Sorry, can you just repeat the employee cost over there?

Sir, your employee cost this quarter, I believe, is INR 33 crores. And I have seen a few quarters which are upwards of INR 40 crores. So you have cut down on your employee expenses quite a bit. Now last 4, 5 quarters, we have been either seeing low growth or the growth because of the industry. Now next year, when you start ramping up again and growing, let's say, 14%, 15% plus the new orders. So will your employee expense now start moving up? If it starts moving up, what's a good assumption for next year? Will you be adding a lot of employee cost? Or this INR 33 crores that you have seen in this quarter, is that a good base to work with?

No, when -- growth will mean there is definitely there will be a little upward movement in the cost -- because you know that in this industry we need blue-collar people. So -- for increasing the volumes, so we need those people. So it will not be in the same proportion, but the increase will be there.

Right. So just hypothetically speaking, if I go back to second quarter of FY '19. At that time, you had a revenue of INR 306 crores and employee cost was INR 44 crores for that quarter. So if you go back to now today, you are INR 227 crores. If your INR 227 crores now goes to INR 307 crores, will you be going back to INR 44 crores of employee cost?

No, no, already, the impact, we can see that whatever the measures we have taken for the cost cutting that is the creamy layer.

So some of this is permanent, you're saying. It's not related to just the industry de-growing and the volumes decreasing?

Yes.

Great. Sir, next question is more an industry question. So if I look at the OEM volumes and what the P&L they have reported so far, whoever has reported. And if I look at the auto ancillary industry, the auto ancillary industry is still showing much steeper declines. So is there an inventory adjustment which is still going on between you and the OEMs? When will that get over? And then you yourselves have individually taken a call of reducing inventories, and you have shared the impact of that on your revenue over the last 2 quarters. Sir, can you share that for this quarter as well? And again, related to that, when will we see inventory adjustments getting minimized across the industry and, again, also for you? So any insights you can give would be great, sir.

You know that principally BS-IV to BS-VI is a fundamental change, right?

Right.

So this is something which is happening automatically now in this quarter for most of the OEMs. And if there is any spillover, then they can sell it in Tier 2 or Tier 3 cities. As far as Alicon is concerned, whatever we had to finish, we have done it in the last quarter. Now all the inventory modulations have been finished at our end.

So sir, are there inventory adjustments related to the OEMs? Can we expect that Q4 would see the end of that, and Q1 onwards, we start with a fresh slate with BS-VI?

Absolutely.

And then whatever happens with, happens with the BS-VI, nothing to do with inventory adjustment?

I cannot speak for them, but I think there would be some lag, there would be something going, personally I feel there could be, but it is very difficult to speak for them.

There could be. Okay. Right. Right. Okay. Okay.

Because everybody is trying to do for the same, they're trying for BS-VI, but there could be some.

The next question is from the line of [ Dhiral Shah ] from PhillipCapital.

Sir, my question is pertaining to the new project which you are talking about. So you're guiding for INR 90 crores to INR 100 crores of revenue in FY '21. So which is this new project, sir, apart from the project which we have got last quarter?

Okay. Apart from that, basically, growth is in -- one is we've added new product line with REML, earlier we were supplying only cylinder heads, and now we are supplying other parts like wheel hubs and other parts for them. And also, they are introducing one new vehicle, but that also was added on the cylinder business. And others are -- the main one is the inlet pipe business, which we've received from Honda, and you might be aware of the volumes of Honda and this will be 100% supplied from Alicon. So you can imagine the amount, the quantities of supplies when we talk about ramp-up of this business. Then we'll -- then it's the non-auto business, as we mentioned, 2 businesses we dabbed with, ABB and Honeywell, that will materialize in the next year. So these are the businesses which will help us. Dravid, would you also update.

Basically, if you see, as he's rightly mentioned, in two wheelers, basically, we have -- the portfolio -- new portfolio with the existing customer as we highlighted. And the biggest -- what we are anticipating, as you rightly mentioned that for Honda Motorcycle, we have bagged an inlet pipe business.

Four wheelers.

For four wheelers...

This Renault.

We're working with Renault. And Renault volumes, we are anticipating the growth in the export. Renault volumes not in India, but as we are already supplying to Brazil, the new -- whatever cylinder heads we have developed that will start from this fiscal for export to Brazil. So that will be one more addition to our top line from the point of view of four-wheeler business. So all these things prepare us to whatever the price increase that we are talking of.

So what I mean is that you have confirmed order for FY '21?

Yes.

Yes.

Okay. So the new order which you have got last quarter of above INR 800 crore so that will be the incremental opportunity you will get in FY '21, if you can deliver it also?

No, because those -- that's the time line that's governed by the customers. And about their launches, governed by those dates. So by end of '21, we will have certain few parts starting up and ramp-up will be really in '22. So that's what we have mentioned that time also and we are maintaining the same at this moment. So in 2021, we are not going to get any growth from those models.

Okay, okay. Understood, sir. Second is that this Bajaj Chetak, are we supplying anything?

No. At this moment no.

Okay. So we didn't get order for that?

No. Basically, it is not we. The development pattern for this EV vehicle is not yet been declared and disclosed by Bajaj Auto and as soon as they unfold their strategy, we are ready for that whatever comes for our business portfolio.

Okay. Sir, with this BS-VI implementation. So what would be the change in content per vehicle for us?

Frankly speaking, as for as BS-IV in the regular way compared to last BS-IV to BS-VI, it will not be much. But to come back with having our share of business increase with each OEM we have entered into the different portfolios, which already explained other than the cylinder head business, and as we increase our share of business with each existing customer our volume.

Okay. And sir, I just have only 2 questions. So who are our top 3 customers in, let's say, two-wheeler, four-wheeler, CV business?

Okay, in two wheelers, the top customer is Honda Motorcycles. The second one is Hero motorcycles. And four-wheeler, our top customer at this moment is Renault and the second one is Maruti Suzuki.

And as a policy none of our customers are more than 20%.

And sir, in CV?

CV, it's a mixed bag. So...

Daimler would be big if you take globally.

Globally.

Okay. And sir, lastly sir, we are also -- we have done a tie-up with ABB and Honeywell. So what we are going to supply? And how big is that opportunity?

Right now, whatever for ABB we have done that is in the energy sector, it is in energy sector and it contributes for our -- yearly it is around INR 14 crores business. And for Honeywell automation this is a totally new product line for different enclosures and different types of requirements in automation, which predominantly was developed in high pressure dye casting, but because of the low volumes, this opportunity, we've grabbed it under our business portfolio.

And how big is that opportunity?

It is again approximately around INR 10 crores per annum.

And then lastly, on debt reduction plan. So do we have any debt reduction plan?

Just to answer one more question which you had asked, and many others have asked around the newspaper article which we shared. Next year, I think that in '21, we would have around INR 24 crores to INR 25 crores sales coming out of this new business as a start-up, various start-ups, various parts to that extent, it will be there.

Okay, okay. And sir, this debt reduction part?

On the debt reduction part, we have already prepared the plan. So hopefully, in the coming next 6 months, you will see change in the figures.

Sure. Right now, it is 1:1, what would be the debt right now, sir?

Debt is at 0.9.

So how it is going to improve in the next 6 months?

So maybe we are expecting approximately or to reduce by INR 30 crores to INR 35 crores.

The next question is from the line of Bharat Gianani from BNP, Sharekhan.

In FY '21, you have guided for booking bandwidth. So just trying to understand what kind of growth have you factored for the auto industry as such majority of the growth, I think, is coming from the new customer addition and increased share of business. So what I was just trying to understand that in your estimates have you factored any growth for the industry? Or what kind of growth have you penciled in or [indiscernible]? So that's one.

The first 6 months, I think, till the festive season, we are seeing a very flat growth. So as my team has explained, these are more or less the orders which we have bagged, which are new or they are replacements or they are eating into the share of business. So this is where we are seeing for the first 6, 7 months until the festive season. Hopefully, we should have some good news tomorrow but nothing substantial. We seem to have some debt because the government hands are also tied in terms of fiscal debt. But let's see what happens tomorrow, because sentiment plays a big role in the market.

Absolutely, sir. And sir, just on the capacity utilization side, what's the current capacity utilization you would be looking at?

At present for the year '19 -- around 55% to 60% is the capacity utilization at this moment.

And obviously, in FY '21, as you pointed out, there will be an impact of the slowdown because of the condition and economy is also not that great for the next 6 months. But what I'm trying to understand is that in FY '22 the auto industry rebound is there. And -- plus the pace of orders that you pointed out that would also start coming in from FY '22. So what kind of growth are you assuming for FY '22. If you can just share your assumption on that?

I think we would rather wait for another 1 or 2 quarters. It's too premature. But our long-term vision for '24 to '25 stands. And right now, that is something which we stand, maybe plus/minus here or there. But let us wait for other 1 or 2 quarters where we can then definitely give you a figure.

And sir, your long-term target was, if I'm not mistaken, is about INR 2,000 crores, right?

Yes.

That will be right by '24, '25 you are targeting?

Yes.

[Operator Instructions] The next question is from the line of Saurabh Jain from Sushil Finance.

Sir, my question is about the tax rate. So have you opted for the new lower tax regime, because we -- our tax rates are still high, so if you can throw some light on that?

So at this moment, Saurabh, we have not taken a decision. So when we will finalize our accounts for the year, so at that time, we will take the final decision on that considering the benefits.

Okay. And the next question is on FY '22. So where do we see the share of cylinder heads as a percentage of revenue standing by -- over the next 2 years?

Approximately, it will be same as, right now it is around 56% of our total revenue.

56%.

It is around 56% of our total revenue. And by '22, we anticipate that it will remain same.

But your question maybe little -- our answer maybe little different, it may move more towards the four-wheeler.

Four-wheeler.

Okay, okay, fine. And if I may squeeze in one more question, like as you mentioned a couple of times that real ramp-up of new orders would happen only in FY '22. So what kind of growth can we expect in FY '22? I understand you just mentioned that it's too early and you would like to wait for a quarter or more.

Sandip will give you the figure.

17%.

No, no, on these orders, Sandip.

No, I was asking the overall growth rate for the company. So can we expect a growth rate to be north of 15%, which we see for the next year?

So these orders, we would get around INR 70 crores to INR 80 crores on what we declared as a ramp-up figure, from INR 25 crores it will move to INR 70 crores to INR 80 crores plus the other growth. So there will be quite a good growth in that year. We anticipate a good growth again in that year.

Okay. Sir, what was these figures. Someone had given INR 163 crores for FY '21 and INR 207 crores for FY '22, because you mentioned the new -- contribution from the new products would be INR 70 crores, INR 80 crores?

No, that is in FY '22.

The next question is from the line of [ Dhiral Shah ] from PhillipCapital.

Sir, whatever cost reduction you have done till date, which has led to the EBITDA of 14%. So do you feel further room of improvement in this?

Actually, if you see that, opportunities are always there, but we have to consider the inflation. So immediately, I can't say that we will have a major cost reductions or this will happen, but room is there.

Okay. So whatever...

Is what we can say.

So maybe in coming years, we can see further margin uptick above 14% also, right?

That completely depends on the mix -- that business mix that we have done. We are planning.

So let's say in terms of mix right now, maybe two-wheeler is contributing around 45%, if I'm not wrong, and maybe four-wheeler and CV is contributing 20%, 20%. So let's say, four-wheeler goes up, so do you see improvement in margins?

That's why I explained the opportunities are there for improvement, but we should not forget about the inflation, the increase in the cost. So that we have to factor when we finalize all these figures.

Okay. And sir, whatever order we have in our hands. So that would be of EBITDA 14% only?

That at this moment, we cannot share. These are the confidential information.

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

Thank you, everyone, for your time. We are excited about the opportunity ahead of us and truly believe we are very well placed to capitalize on the shifts in the industry landscape. I hope we have been able to answer all your questions. Should you need any other further clarifications or would you like to know more about the growth, please feel free to contact us or CDR India. Thank you once again for taking your time to join us on this call.

Thank you.

Thank you.

Thank you very much.

Thank you. On behalf of Alicon Castalloy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.