Alicon Castalloy Limited (531147) Earnings Call Transcript & Summary

Good day, and welcome to the Q1 FY '22 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. Thank you, and over to you, sir.

Thank you, Aman. Good day, everyone, and thank you for joining us on Alicon Castalloy Limited's Q1 FY '22 Earnings Conference Call. We have with us on the call today, Mr. Rajeev Sikand, Group CEO; Mr. Vimal Gupta, Group CFO; Mr. Shekhar Dravid, COO; Mr. Andreas Heim, Managing Director of Illichmann Castalloy; and Mr. Rajiv Gupta, Head of Domestic Business of Alicon Castalloy Limited. Mr. Vimal Gupta will cover the financial performance for the quarter, following which Mr. Dravid will walk us through operating highlights. In order to share a more granular view of initiatives towards both the global and domestic business, we also have Mr. Andreas Heim and Mr. Rajiv Gupta to provide insights on these areas, and they will be followed by Mr. Rajeev Sikand, who will give us a brief summary of the quarter gone by. Then 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 and also uploaded on to the exchanges. I would now like to hand over the floor to Mr. Vimal Gupta for his opening remarks. Over to you, sir.

Yes. Good afternoon to all our investors. I hope that all of you and your near and dear ones are safe and well. Thank you for taking out time to join our earnings call. The quarter gone by was a challenging one on account of the second wave of the pandemic, which has devastating impact across the country. While there was no repeat of the synchronized national lockdown, but localized lockdowns are also resulted in significant disruption to economic activity at [indiscernible] which was all showrooms dropped, car dealership were closed, and OEM customers curtail production schedules. Combined with challenges in logistics and constricted movement of material and manpower, there was impact on our manufacturing operations. Thus, we have witnessed a compression in production volumes, and consequently, revenues during this period. Our manufacturing units in India operated at 50% average capacity utilization level, respectively. On account of this, in April and May, we reported lower volumes. Soon after with easing of restrictions in June, we saw a hint of recovery from OEMs and reported improved sales in the month of June. However, it was a challenging quarter in light of the headwinds caused by second wave in India as well as increase in input prices globally. Given that quarter 1 of financial year 2021, was severally impacted owing to new year's global lockdown during the first phase of COVID-19, comparison with the corresponding quarter of the previous year are not meaningful. We are, therefore, giving comparisons against Q4 of FY '21, which was a fully operational quarter. This will give you an idea of the impact of lockdown in quarter 1 FY '22 on account of second wave as against quarter 4 of FY '21. Total income was up 294% as against quarter 1 of FY '21 and 34% lower against quarter 4 of FY '21. For the quarter, exports, including overseas revenues contributed to 28% of the total revenues, while domestic contribution was 72%. I'm happy to share our exports, including sales from Illichmann subsidiary, continued the momentum from the second half of last fiscal and posted growth on a sequential quarter basis too. Across verticals, the auto division contributed to 90% of the total revenue in Q1 FY '22, and non-ARPU division was 10%. We have continued our various initiatives on our cost of optimization strategy to align our expenses and optimize our working capital cycle. During the quarter, we have seen a challenging input price environment with high volatility, leading to persistent pressures in raw materials such as aluminum and other input costs. This, coupled with the sharp reduction in volumes on account of the lockdowns during April and May 2021 impacted production level and a consequential impact on lower closing WIP and FG, leading to higher material costs. In order to efficiently manage this situation, we are speaking to our customers to increase recency of raw material price adjustments on a monthly basis rather than quarterly. This will slightly compress the working capital cycle due to more effective readjustment. On the profitability front, owing to the muted volume increasing -- increased the material cost, as explained above, fixed manpower costs, and other overheads, our margins were compressed on a sequential basis. Our EBITDA margin stood at 6.3% in Q1 FY '22 as against 14.26% in Q4 FY '21. This drop is despite our content efforts and continued focus on efficient production and cost management, which has enabled us partially offset the impact of muted volumes and inflationary trends during the quarter. On a stand-alone basis, we reported a loss before tax of INR 9.99 crores as against profit of INR 19.97 crores in Q4 FY '21. Our EBITDA on a consolidated basis stood at 8.52% in quarter 1 FY '22 as against 15.20% in quarter 4 FY '21. We are pleased to highlight that our European subsidiary continued to maintain steady volume on our prestigious order for battery housing for Samsung, which is used for further supplies to JLR. The European operations were also benefited on account of onetime billing pooling to one of our regular customers, supplies of pooling have decent margins, which are reflected in the results. When compared to Q1 FY '21, our EBITDA was INR 18.03 crores as against a negative of INR 23.40 crores. The loss before tax was much lower this quarter when compared to corresponding period last year on account of the happening certain stances between first wave and the second wave. On the balance sheet front, net debt has reduced after the successful QIP issue, which concluded on 30th June. With a view of [indiscernible] asset we continue to undertake several steps to best leverage upon our service operational structure before undertaking new capacity expansion. Even on the CapEx front, we will be investing in enhancing our capacity that will only be related to the new projects and new order base. Our focus will essentially be on 2 types of capacities in FY '22. One is CapEx for the new order base, which will include enhancement of existing capacity, especially machining and for the new technologies. Two, service new wins and second would be maintenance CapEx, which is expected to be minimal. So for the year, we will undertake CapEx to execute our order, but this will not result in higher overall capacity. We are pleased to share that our equity raise has been successfully concluded. Our QIP brings on both mature investors who have demonstrated belief in the Alicon equity story. Following the QIP, we are -- we also made a sequential issue to the promoter group and to Emkay. Through this QIP, we raised this INR 80 crores followed by the potential issue, which -- where we will raise around INR 30 crores. The additional -- addition of INR 110 crores of equity to the balance sheet augment our long-term resources to also pursue our growth initiative. This capital raise also serves to enhance our liquidity and enable us to balance our working capital requirements. On the whole, while our results are underwhelming, we are confident that as the volumes of the auto industry grows, we would be able to report decent growth in the second half of FY '22. We hope that the deferred -- demand would enable a healthy recovery in business and economic activities and results in higher sales volumes for the auto industry. On that note, I would like now to hand over to Mr. Shekhar Dravid, who will talk about operating highlights for the quarter.

Thank you very much. Greetings to all. I trust all of you are well and staying safe. I will share with you some of the trends witnessed in the quarter gone by. To begin with, the quarter started on a somber note on account of the lockdowns and restrictions, on account of the second wave of the COVID-19 pandemic. Across the industry, while there were concerns of the second wave in the March, we did not anticipate the impact both on the human life and the businesses to be this performance. What we saw across the domestic market is that many OEMs, especially in the month of April, had to either completely stop manufacturing or revise their business plan. In some regions and the market, the pandemic induced lockdowns and restrictions extended till June, which severely disrupted the plant or some other industry participants. The quarter also saw huge inventory pile ups at factories, dealers and distributor levels. However, broadly, what we observed was that OEMs and the suppliers were better prepared to deal with these situations as compared to the previous year. Unlike last year, when there was a nationwide lockdown, this time around, lockdowns were only in a certain horse port and micro containment zones. So we had a case wherein our customers was fully operating, while Alicon's plant was in the containment zone. But we have to push ourselves and take up the challenge to meet the customer requirements. In addition, supply chain issues further impacted the processes. So while our performance was impacted due to these disturbances, especially in the April and May, the severity was managed given the established state of protocols to handle the pandemic-induced disruptions. As the lockdown and the restrictions eased in June 2021, what we saw across the domestic auto space in that OEM, OEMs reached about 60% of their earlier volumes. From July onwards, these volumes will be upward by 75%. On the consumption point of view in June and July, passenger vehicles witnessed better recovery than the other categories, driven by the high pending bookings, low channel inventory and the strong underlying demand led by the preference for personal mobility. We have seen stock levels at OEM and the supply levels reducing significantly in the June and July which is a positive sign. While the CV segment recovery has been slower on account of lower trade availability and seasonally weak infrastructure demand, good monsoon, hike in MSP prices and continued strong government support to all activities is leading tractor sales. On the international front, most of the key export geographies in the U.S. and Europe reported healthy auto sales led by healthy demand and stable currency in key markets. Our performance is by and large in line with the trend witnessed in the automobile industry. Like previous year, I would like to discuss our 5 key strategies, strategic growth pillars and the development within each. The first being of is auto business. This segment, while it was impacted due to the second wave, witnessed a good bounce back in the demand and recovery in the month of June, resulting in the steady volumes during the quarter. Although domestic market saw an impact on account of the second wave, our export recorded continued momentum. We saw increased client engagement, especially coming in from the export market during this period. During this period, we added 13 parts out of which 4 were from the domestic market and 9 parts were from the export market. In the domestic market, 4 parts were from the existing customers, so 3 were from Dana and 1 is from the Garrett. In the export market, 3 parts were from Eaton, 3 parts were from MAHLE Behr and 2 parts from TitanX. I'm also pleased to share that Alicon this quarter has recorded a new client win in the export. After several [indiscernible], we are now providing part for MAN SE, which is a part of the big Volkswagen Group for the truck category. On the industry front, we are seeing demand for the passenger vehicle segment, both for 2-wheelers and 4-wheelers, gaining traction as the consumers are preferring personal transport over public transport. More so, with the travel and tourism stabilizing in country, EVs and even the CVs are seeing a strong recovery. Rural demand, although saw an impact due to the second wave, is expected to recover given timely arrival of the monsoon and a favorable agri indicator. We hope that this will further boost consumer spending. In addition, we expect the upcoming festive season to add momentum to the gradual recovery. The schedules from our customers are reflecting growth. We are also seeing some supportive reforms coming in from the center and the state governments, which will further create demand for the new vehicles, that's boding well for the Indian other industry. Two factors which are dampener are the semiconductor shortages across the domestic as well as the global market as well as the input cost inflation is also impacting the performance. Coming now to the second of our growth pillar, which is the electric vehicle division. In the international market, we are seeing a strong momentum. We have won orders from the repeated OEMs during the quarter, such as Dana. Through Illichmann, we are already supplying battery houses to Samsung who supply to JLR in EV space. I'm pleased to share that we have been continuously receiving new business wins from Samsung, which has helped us improve volumes this quarter. We are now supplying battery houses across 3 EV models JLR. To share the interesting [indiscernible] few years ago when not many players were absorbed in the EV space, our company had then seen a huge and game-changing opportunity and has embarked upon a challenge to deliver high-end, technically complex and highly confident solutions for vehicles in EV domain. I'm proud to share that we have been extremely successful in this venture. Our association with the likes of Samsung, Bosch, Dana, Danfoss, Ather, Mahindra & Mahindra, Eaton, among other market names have provided us with a great visibility as a reliable and trustworthy partner and has helped us build a strong reference base in the EV domain in India as well as in the global market. We have received several acknowledgments and awards that has enabled us to strengthen our foothold in the EV space. In one such recent example, Alicon received a prestigious award from Dana Corporation for the e-mobility platform for the solutions -- end-to-end solutions. I am proud to share that out of 3,000 suppliers worldwide, only 11, including Alicon were elicited, and we are the only supplier from India. So this is a proud achievement for the team of Alicon. Coming to the domestic side, the development of e-mobility here is lagging global markets. However, the tide is slowly changing for the better now. The central government is strongly supporting the absorption of a clean and green energy in the country. They have issued several initiatives, providing incentive and subsidiaries, such as aim to concessions to the manufacturer, which has boosted sentiment. Even the Maharashtra government recently has rolled out and revised EV policy in a move for cleaner environment and to support the EV program in the country. The government aims at 10% of newly registered vehicles in its major cities to the electric ones by 2025. It has also aimed to have around 1,500 charging stations in Mumbai itself by 2025, along with converting 15% of MSRP buses to electric. The state government will provide incentives to generate demand and for setting up advanced chemistry cell batteries manufacturing plants. The government targets setting up 1 gigawatt battery manufacturing plant in Maharashtra. Similarly, in June, the Gujarat government came out with the Gujarat State Electric Vehicle Policy 2021, which is state would commence from July 1, 2021 for the period of 4 years. The government is targeting 1.1 lakh electric 2-wheelers, 70,000 electric 3-wheelers and 20,000 electric 4-wheelers during the policy period. Fundamentally, what we are also seeing is that the pricing between the e-mobility and IC vehicles is narrowing and becoming a major benefactor for EV adoption. In addition, higher fuel prices are enabling the shift for consumers from IC towards e-mobility. In the near to medium term, the focus for the Indian market will be towards 2-wheelers and 3-wheelers as the infrastructure and the consumer sentiment today are principally geared towards the smaller vehicles. In the domestic EV industry, we have seen an influx of over 2 dozen start-ups reach meaningful plans for e-mobility. Even the event empty plant of Ola Electric in the Indian market will be very disruptive and will pave the way for mainstream EV usage in the country. So there is sort of development happening on the EV side in the country, and we believe that this will bring in solid growth opportunities for us going forward. We are seeing many e-mobility players in India floating RFQs with Alicon being one of the function Fortuner in the EV space in the country. We look forward to capitalizing on such opportunities and building long-term relations with customers in the EV space. In the longer term, our target is now to clock upward of 25% from the Electric Vehicle division on the growing revenue base by 2025, '26. Now onto our third growth pillar being a technology-agnostic platform, wherein we focused towards building niche around the existing and new products by leveraging our core competencies. This includes lightweighting of the product in the auto and the EV space. We are getting increased inquiries from OEMs both in the domestic and the export markets for the development of frame and the control arm. Our successful conclusion of orders with JLR has opened many opportunities in this domain. During the quarter, I'm happy to share that we have received an RFQ from the customers -- prestigious customers like JLR, SYM, Piaggio. We look forward to materialize the sale in coming times. Our fourth growth pillar being the non-auto segment. Here, we are witnessing healthy growth in demand across the sector, such as defense, aerospace, agriculture and energy. And we expect this momentum to strengthen in the quarter ahead. During the quarter, we have received the RFQ from Textron and Rexnord. We look forward to materialize this sale in the coming time. The fifth growth pillar is our focus on increasing customer wallet share. Our long-term approach is towards building wallet share and positioning ourselves as a trusted supplier for our existing customer base. On that note, I would like now to hand it over to Ms. Andreas Heim to throw light on our global businesses.

Thank you, Shekhar. A warm welcome to all of you. I will briefly cover the developments on our international business. This quarter, Alicon Castalloy has enhanced its contribution in the group financial performance. We have reported strong volumes during the quarter, driven by healthy demand environment in European, U.S. and other international markets. In addition, incremental pricing in terms of tooling preparation and all services EV project further fueled revenue growth. International business, including sales from Illichmann countered to about 28% of our total revenues in quarter 1. Over the last few months, we have seen increasingly focusing towards implementing technical enhancements across our -- sharpen the focus product categories. Just to give you an example on this in one of our collaboration with the customer in Europe through our thermal engineering solution, the [indiscernible] improved the performance of this vehicle from 50% yield to over 90% yield, thus leading to higher volume offtake for our customer. Given this sort of traction, we are now being seeing a strategic and valuable partner at several OEMs. Through these initiatives, we have also been able to command better pricing and has undertaken suitable prices hikes that has further helped us record margin efficiency. We anticipate this trend to continue going forward. Appointment of global representatives in U.S. and European market, namely TBS in U.S. and Gifavi in Europe continue to pave the way of [ protocol ] for us. We are expanding our presence in this market through significant reach, and we are engaging with a wider customer base. In [indiscernible], we are also working on niche business opportunities with customers in the great countries of America, Europe, China and Middle East. [Audio Gap] our entry into the Japanese market reflect on it further our engagement with players like TitanX and Eaton has lead to several development programs. So overall, we are seeing a strong pipeline under development, which provides healthy future visibility. In quarter 1, we added 9 new parts from global customers such as Eaton, MAHLE, TitanX and [indiscernible]. From a demand standpoint, we are seeing normalization in demand in the European markets. While there are fears of potential third wave, the impact of the vaccines in reducing illness is easing in the symbols of normalcy into the border operation environment across markets, and we are seeing volumes strengthen on a month-over-month basis. On the operational front, our plants are operating at 85% utilization levels. And we expect this sustained at these levels going forward. In May and June, we organized vaccine drives for our employees, and we are happy to share that 90% of our employee base is now fully vaccinated. Subsequent vaccination drives are in process and will be rolled out in due course. On this note, I would like now to hand over to Mr. Rajiv Gupta who will have a development in the domestic business for the quarter.

Thank you, Andreas. Good day, everyone. The domestic auto industry came under pressure from the first week of April. The major states like Maharashtra, Delhi, Ariana, Karnataka, Tamil Nadu had to place stringent measures in place in light of rising case volumes. Across the industry, there were reduced footfall at the showroom and lower sales volumes forcing OEMs to curtail production in April and May. While some continued to operate with limited capacity to meet export orders, the domestic operations in the month of April and May were significantly impacted. Auto companies also face simultaneously commodity-led margin pressures in the last few months. As the spread of the pandemic ease, Indian auto demand improved in June. Based on OEM reported data, there was strong sequential recovery in the passenger vehicle and tractors in June. Two-wheeler wholesales are also seeing uptick. Currently, activity indicates that customer interest in passenger vehicles have recovered to early 2021 level. Now coming to the performance given the macroeconomic backdrop and a lower base in Q1 FY '21 on account of the first wave. Alicon was able to report steady sales in Q1 FY '22. During the quarter, we added 4 parts from leading existing customers as Dana, [ EMPOL ] and Garrett Motion. We are witnessing a good level of inquiries and bookings in the market, both June -- and are hoping to improving macros will further support this momentum. On this note, I would like -- I will now request our Group CEO, Mr. Rajeev Sikand, to share with you his perspective on the Alicon performance.

Thank you, Rajiv. I welcome all our investors. Thank you for joining the call. I hope you and your family members are well and safe. Before I begin to share with you the perspective on Alicon's performance, I would like to extend my heartfelt thanks to all our team members and employees for their continuous efforts in driving and supporting business operations during very difficult phase in April and May. On behalf of the Board, I would like to take this moment to thank all our employees, communities, customers and partners who are demonstrating determination and [indiscernible] every day amidst this pandemic. Coming to the recent development, I'm happy to share that we have successfully concluded our fundraise aggregating to INR 80 crores through the QIP rule. The QIP witnessed a high level of interest and has been 100% allocated to market domestic institutional investors, including Axis Mutual Fund, Aditya Birla Sun Life Mutual Fund and IDFC Mutual Fund. I would like to thank you all and the entire investor community for their support and confidence in the company. This capital will enable us to implement our growth plan and pursue our expansion plan, enabling us to address our large pipeline. Alicon will also look to reduce debt and strengthen its balance sheet further. Now from a macro perspective, despite a loss of business volumes in the month of April and May, we were able to record good recovery in June. That enabled us to report some part of the impact in performance in April and May. From June onwards, we have seen domestic order space steadily gaining traction, improved recovery and growth in the domestic economy and sustained improvement in the export markets will enable us to report a healthy growth volume and order wins as we go forward. The inquiries and the new business wins across our auto, EV, non-auto segments have remained healthy during the quarter. We have built up a strong order pipeline to the tune of INR 3,000 crores or 5-year peak sales of INR 700 crores annual yearly average of INR 600 crores as of June 30, 2021, with improved concentration from high-margin product categories and exports, based on current visibility of our order book. The trend in order wins that we are seeing in last few months, we remain optimistic on the growth potential, especially in the near term. Health and safety of our employees is one of the key factor areas for us. Across the company, we continue to follow strict adherence to social distancing, hygiene protocols and safety. In May and June, we have started vaccination drives for protection against COVID for all our employees, employee independents, for both staff and business partners. Overall, we are hopeful that this new fiscal year, we will see normalization across from economic activities, business operations to everyday daily exit. With the economic anticipated to mark a strong recovery in the second half of financial year '22, we are hopeful that the pent-up demand will enable us to pick robust demand in the business and economic activities. This in turn will provide momentum in inquiries, order wins and volumes for automobile and auto component players going ahead. As one of the key players in the domestic auto market, we look forward to a promising future and continue to stay focused on our objective of being future ready and being consistent, trustworthy and reliable partner to our strong and growing customer base. On this note, we would be happy to take your questions now. Thank you.

[Operator Instructions] The first question is from the line of Raghunandhan from Emkay Global.

Good afternoon to the management team. Thank you so much for the comprehensive opening remarks, extremely helpful. To Vimal, sir. Sir, can you elaborate on reasons for increase in the RM cost to sale and other expenses to sales in this quarter and also the expectations ahead. In addition, if you can highlight, given the COVID-related issues, were there any one-offs in terms of COVID-related expenses in the quarter.

Thank you, Raghu. So what I would just explain the impact on the margin. So we talk about the raw material because we see there is approximately 2% increase in raw material cost. So that is mainly one that we have a little bit sales mix change where we have high margins. So those OEMs have started their percentage late. So the sale was impacted during that quarter where we had high margins. And second is that you see that in the results also there is a decrease in the FG stock. So that has also impacted the consumption of our stock. And due to that, there is a little bit on the production side on the lower side. So these are the main reasons for increase in the raw material cost, but those are only a onetime impact we have seen in this quarter because when the productions are normal, so these things will go away. And the second, you see that the manpower cost, these are not 100% variable cost. And in this manpower, I think we are more -- performance is much better if we compare with other OEMs because even having this fixed cost, the manpower, still we are able to maintain and reduce it. And -- but and 100%, we cannot make it a variable cost. So that has impacted around 3% on the margin. And another impact is that this lockdown, it is not like that the earlier, the wave one. And that was a complete lockdown. In this lockdown, it was on/off situation. So there was a complete flexibility or fluctuation from the customer side in their orders. So somebody asked the orders, then we have to fulfill, we have to start the production, then we have to close it. We don't have the orders. So this off and on situation that has impacted our cost side. So we have to -- because it is competitive running process, we cannot stop, and then again, that maybe start. So that has -- there is a cost for this. So that is expected on the margin. So on this overall -- that also has impacted around 2% on the margin. So overall, we see that around 7% to 8% has impacted on the overall margin for the quarter if you compare with Q4. So I think the answer to your questions, Raghu.

So to understand it correctly, with normalization of operations, easing of lockdown and pickup in sales, these things are temporary in nature and should reverse going forward. On the subsidiary part, I mean extremely strong results. But can you quantify what was the tooling revenue and related margin benefits? Also wanted to understand what should one expect as a sustainable performance going forward?

Yes. For the [indiscernible] company in Europe. So one I think that you have heard from Mr. Shekhar Dravid, that is major impact is coming now from the EV side. So that is the main thing that we are trying to highlight every time that how Alicon is going into this field and how this is the first result we can see the performance from our European facility. So the margins are good there. But definitely, there is an impact of the -- I think around -- the sales volume value was around INR 4.5 crores and the profit margin was INR 2.5 crores impact. But if we even remove then the -- if you compare with the margins from the last year, there is a substantial improvement in that. And definitely, we see a growing demand in the [ Italy ] that meant in the Europe and a lot of new parts that as explained by Mr. Dravid. Those developments are happening, and we will be able to deliver the good margins that we will be able to sustain those ones.

Great to hear that. And Vimal sir, one last question to you. If you can talk a little bit about the working capital reduction and debt reduction targets for FY '22 and '23, that will be useful.

Yes. Definitely, we have more focus than at earlier cost. Also, we are discussing about our working capital cycle as on the debt side. So on the debt side, the plus we have taken that we have raised INR 110 crores total equity that [ we ahead ] as well the potential issues. So that has given a major impact on the debt side. So when you will see the quarter 2, the balance sheet should come under next quarter, then a lot of things with we've seen that on the debt side as well as on the working capital side. Still also, we have worked out that there is approximately now reduction by 10 days for that we have done in this quarter. And hopefully, further improvement we will see in the coming quarters. So we are completely focused on to improve our working capital cycle.

To Shekhar sir, congratulations on the new orders. Can you indicate approximate size of the orders won in this quarter? And secondly, if you can highlight the major orders like Toyota, PKC, by when are you expecting the commencement? And how do you see the ramp-up in '22 and '23? So basically trying to understand the major orders, which will commence and ramp up in '22 and '23?

Raghu, I think better Rajiv will answer.

Thanks, Raghu for that question. So I'd like to share with you like on the new order booking. For the last quarter, we have added 13 parts away from the domestic customers and linear from the export customers with around INR 121 crores of total projects over a time of 5 years with our yearly average of INR 24 crores per year. I talk about realization, yes. Up till now, we have a [indiscernible] [ 52 38 ], but we are aiming to realize next year to around INR 480 crores. This will be around INR 600 crores by the year '23 '24 and eventually I think around INR 700 crores at the peak by '25, '26.

And which would be the major customers where the ramp-up will happen?

Yes, so major...

This will be basically our last time what we discussed about Tata and PSA. This will take a ramp-up from the next year. Toyota will take place from June 2022, the ramp-up being start and their ramp-up there, it should be this will start from October as a vehicle. And PSA will start from October, September '22, where they will start from December '22 as very soon. So these major 2 will give the ramp-up for next year and not from the previous order booking.

Thank you. The next question is from the line of Saurabh Jain from Sushil Finance.

I hope everyone at Alicon Family is safe and healthy. Sir, my first question is, in one of the previous calls, you had mentioned that new product contribution would be approximately INR 350 crores for this fiscal, and next year, it would -- it may go up to INR 500-odd crores. So I would like to know what kind of top line we are aiming it at for this fiscal and next fiscal? Before that, if you could please let us know about the top line recorded during the month of June because April and May were broadly affected by the pandemic restrictions. So it would be easier for us to understand the monthly run rate.

Thank you, Saurabh. So first is the addition of the new businesses that I already -- Rajiv has explained. And when you are talking about the complete -- the top line for the full year. So what we've estimated, approximately INR 1,100 crores for this year. So we are still confident that we will be able to deliver that one.

And sir, anything for the next year? Anything for the next fiscal? Just rough estimation if you can provide.

Maybe we can add up from INR 300 crores to INR 400 crores further into that. So that is our just estimation. So it is -- please also know that there is a forward-looking statement, so we cannot give so much commitments on this.

Sure. And sir, June top line, if you can -- if it is possible for you to share?

Yes. For the month of June, as you know, I mean rightly said by you, April and May was due to the second wave of lockdown. And June, we noticed the industry have taken up 71% of the production figures of March. With that, we have done quite well in the month of June.

Sir, my second question is on Illichmann. Since we acquired this probably in 2009, '10, we always mentioned Illichmann as just a base in Europe, and for years, the revenue was stagnating around INR 90 crores and INR 100 crores. Now since last couple of quarters, the revenue have started picking up. Last quarter, we did INR 44 crores, INR 45-odd crores and this quarter, we did INR 34 crores, INR 35 crores. And I believe roughly 40% of it is from EV segment. So sir, this quarter, we were actually positively surprised to see Illichmann doing EBITDA margin of 20% and net margin of around 15%, 17%. So the previous participant has already started this question, but if you can just share a bit about the numbers. How do we see Illichmann going forward? What kind of EBITDA margins are sustainable for the next few years?

Thank you. This is Rajeev here. Illichmann is, as I have explained earlier, it plays a leading technical role for our growth. It's like a synergy. On one side, we have the Japanese know-how, the quality, the Enkei behind us. And second side, we have Illichmann in Europe, which is a historic company which came to us having all the global customers. So when we have focused on 2 very key areas, and our focus has been to focus on technology-agnostic parts. Regardless, whether IC, whether anything else, EV, these parts are what we want to make in Illichmann. The second part which we came over was the development of EV parts. And the customer cycle in Europe after all these developments has significantly increased, Tesla doing the bulwark worldwide. So we see that jump has come. And these models which we are servicing just now have shown a robust growth. And our team has done a very good job on the cost side, maintaining all that -- what they need to maintain. And you are seeing these results and this will continue. And sometimes the tooling will not be there. But otherwise, as I hear until yesterday, the volumes are going even higher because the customers are now changing their markets more swiftly than we would have anticipated. But Illichmann is on a strong growth with these 2 focus areas: technology agnostic and EV. Thank you. I hope that answers your question.

Yes, sir. So roughly INR 15 crores, INR 20 crores kind of turnover we are seeing Illichmann from the EV segment and which I believe is the primary contributor to the profitability. So this may go up substantially up going forward?

No, these will be merely, as I said, we have maintained them. And a little bit it will go up. But as the new model, what is happening, the whole industry in Europe is going through a shift certainly, with [indiscernible] doing very well, the new norms being announced. In [ Sudka ] in some areas, they're questioning the traditional fuel in Germany. So all these are leading to an EV. And here, we are able to offer a very competitive solution from the last 5 years. So this is what will help us. The fallout of that is in India. The EV part which is coming in India to us is because of Illichmann driving it and the know-how which we have got there. Otherwise, it would have been a very difficult journey for Alicon alone to go into EV space. Of course, these are all casting. But when you show them the parts which we are developing, are so critical in nature. This all helps to build up the customer confidence and especially the global. I mean within EV also, there are 3 segments: below voltage, the mid-voltage and the high voltage. And the high-voltage parts are always and the mid-voltage parts are always larger by size. Maybe lower then, the value addition is also better. So that is where our perspective is, and that is how we are moving forward.

Got it, sir. That was really helpful. One last bookkeeping question. So the investor presentation, please the proceeds from the QIP would also be used for some debt repayment besides executing the huge order. So what kind of debt repayment are we looking at? And just to and if you can throw some more colors on the orders, which Rajeev sir had mentioned in his opening remarks, a INR 3,000 crore order book and execution.

Yes. So on the utilization of the QIP proceeds, that will be -- definitely, we are going to utilize this for the debt reduction. And we are actually making approximately INR 60 crores to INR 70 crores debt reduction by the end of the year because some proceeds will be utilized for the CapExs also. So that is the estimation we are having. And about another question, I think Rajiv will answer for the order book.

Yes. On the order booking, yes, we have been quite -- doing quite well. And at this moment, with 38 part, the total booking is roughly around INR 3,000 crores. As I explained year-on-year how much we are going to accumulate in the -- from these parts.

The next question is from the line of Deepak Poddar from Sapphire Capital.

I just wanted to understand on the margin front, you did kind of indicated that the impact of 6%, 7% on the margin is temporary in nature on account of RM cost and other costs. So going forward, do you expect the margins to normalize to 15% that we have been doing or we have done in the last quarter?

Yes. Definitely because in the last quarter, [ Konkola ] also [indiscernible] now how the ship is happening in telecom on the margin side. Because one example already that we have because discussed this now about Illichmann and same thing we are seeing that tailing. The changeover is happening in the Alicon in the domestic market also. So on that front, definitely, we are confident that we will be able to deliver the margins that we will be able to maintain that.

So your voice got cut, sir. I could not hear the last thing you said.

Something that we will be able to definitely deliver the margins, what we have promised, and you will see that the improvement quarter-on-quarter in the margin side.

So like what you have promised in the sense like 15% is what the benchmark you're looking at?

Yes. That's the benchmark we are having. Yes.

Okay. Fair enough. And going forward into next year, now you did say about a higher share of like in INR 3,000 crores order pipeline. There's a good share of higher-margin business and the new business also contribution will increase, which typically has a higher margin profile. So going forward into FY '23, '24, you expect your margin profile overall as a company to improve significantly, or some sense on that?

Yes. That's a thing that the improvements will be there and maybe the first is that quarter-on-quarter, you will see the year-on-year also. Because whatever our new orders are coming on coming, those are quarters that the IC side is at this moment and maybe when -- how when we are seeing that the technology change and moving to EV segment out, so EV is definitely going to give us good margins plus technology agnostic parts.

The next question is from the line of Aditya Makharia from HDFC.

Yes, sir. I just wanted to check. You said that EVs is how much of our overall sales right now? Is it 20%?

8% at this moment in India. Literally 8%.

8%, okay. And where do you -- but the overseas arm is higher, right? So at blended level, it will be how much?

No. If I blend that, it would -- it's around 12% currently.

Okay. And in India, I believe you're supplying EV components mainly for the electric 2-wheelers. Would that be correct?

No. We in India, we are supplying to Dana in commercial segment, our market share made about [ 70 ] different variety of parts we have developed for Dana, which will help us to create a good fit with other OEMs in that space. Then was doing passenger vehicle with Mahindra & Mahindra, the battery housing which we have developed for them. There is [ Apur ] which we have mentioned and also Tork motorcycles, this order which we have got in last year.

Okay. So this 8% includes exports also, means you're exporting out of India as well. So Dana, when you say it's basically we're exporting to that?

Yes, Dana is a mix of domestic and export both.