Alicon Castalloy Limited (531147) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Q2 FY '22 Earnings Conference Call of Alicon Castalloy Limited. [Operator Instructions] I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir.

Thank you, Stephen. Good day, everyone, and thank you for joining us on Alicon Castalloy Limited's Q2 FY '22 earnings 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. We will begin with Mr. Vimal Gupta, who will cover the financial performance for the quarter, following which Mr. Rajeev will walk us through the operating highlights. We will then have Mr. Andreas Heim and Mr. Rajiv Gupta sharing a more granular view of initiatives towards the global and domestic markets, respectively. This will be followed by Mr. Rajiv Sikand, who will share a brief summary of the quarter gone by and the outlook. That will be followed by the 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. Over to you, sir.

Good morning to all of our investors and best wishes for the festive season. I hope that all of you and your near and dear ones are safe and well. Thank you for taking the time out to join our earnings call. Q2 began on a challenging note as India was emerging from the devastating effect of the second wave. However, we witnessed a partial recovery in demand as many of our customers had ramped up their production by the end of the prior quarter and thus commenced quarter 2 with much improved utilization levels after the disruption in quarter 1. In addition, there was also an element of higher pricing of alloy during the period. The combination of slight increase in volumes and the higher prices of alloy has enabled us to report a consolidated revenue of INR 268.7 crore during the quarter, higher by 31% year-on-year and 27% on quarter-on-quarter basis. However, I would like to highlight here that while our revenues are elevated by repricing, we operate with a pass-through model, which minimizes our exposure to metal risk [indiscernible]. On a comparative basis, our revenues performance in quarter 2 is eventually driven by both volume growth as well as repricing growth. However, for ease of understanding, if we were able to -- if I were to exclude the impact of repricing on a like-to-like basis, our revenues in the quarter have grown roughly around 23%. We understand from our customers that demand, especially in the 2-wheeler segment has been impacted by higher fuel prices and increasing insurance as well as uncertainty given the emergence of new and viable options for electric mobility. The incentives being offered by the government have also improved the economics of electric 2-wheelers. Hence, there is a significant element of deferred purchasing as customers are evaluating the EV versus ICE decision. In the passenger vehicle space, volume growth would have been even better, but for the shortage of semiconductors which impacted the pace of manufacturing and better dispatches of OEMs. The impact has been uneven with some customers impacted more severely than others. Further, in the international business, there has also been some impact in Europe from the summer holiday season. For the quarter, exports, including overseas revenues, contributed to 25% of our total revenue, while domestic contribution was 75%. Across verticals, the auto division contributed to 94% of the total revenue in quarter 2 FY '22 and non-auto division was at 6%. Even as the human cost of the second wave [indiscernible] by the end of the previous quarter, the impact on supply chain has continued to linger. As you are aware, industries worldwide, including the auto and auto ancillary space, are witnessing bottlenecks in the supply chain and inflationary trends in input prices. As a result, during the quarter we experienced a challenging and volatile input price environment and have witnessed prices of aluminum and related alloys, which is new highs. In addition, logistical problems such as unavailability of shipping containers and increased [ bid ] costs have compounded the impact of the price increase. We have seen shipping costs increase from 2x to 4x in the last few months itself, which further impacted overall expenses in quarter 2. In order to efficiently mitigate these extraordinary cost pressures, we are working alongside our customers to undertake price hikes and pass-through these costs. Our pricing with our customers enable a pass-through, and we are actively engaging with them to shorten the lag. This will enable more rapid transmission of input prices, thereby protecting our working capital and cash flow position to a considerable extent. As the input prices are slightly significantly higher, there is a value increase in both top line and material costs. The gross margin was 47% in quarter 2 of FY '22. As can be seen, the sharp increase in input prices has resulted in margin compression, which is largely optical due to the higher base effect. EBITDA for the quarter was INR 25.3 crore. Here too, that denominator, which is revenue for the quarter is higher on account of increased material prices which are passed through. As a result, the EBITDA margin during the quarter is 9.4%, and the compression is largely optical due to the sharp price in input prices. In a normalized raw material environment, we anticipated EBITDA margins to bounce back to stable range of 13% to 15% going forward. Profit after tax during the quarter stood at INR 3 crores. On the balance sheet front, our net debt as on September 30, '21 was at INR 235.5 crore, with a net debt of equity ratio of 0.55. The conclusion of equity raise through QIP and [indiscernible] issue has helped to enhance our liquidity and reduce our debt. During the quarter, we have reported steady cash flows from the operation. Given the uncertainty due to the further base of pandemic shortage of semiconductor and disruption in supply chain, we have undertaken a well-thought-out decision to alter our CapEx spend for the year. While we have envisaged around INR 90 crores at the start of the fiscal, we will be closing the fiscal year around INR 55 crores to INR 60 crores, and the balance will be deferred to the next years to invest for growth as we anticipate a stronger recovery in FY '23. Overall, we will continue to follow a disciplined capital allocation framework. Even as we have deferred our CapEx to align ourselves with our customer schedules, our stronger balance sheet and more robust debt position place us in a very strong position to ramp up production to service our new order wins. We have adequate liquidity to build up our working capital and also investment in machinery and tool production lines. Our plants are now operating at 60% to 65% utilization level. With the improved visibility due to the [indiscernible] we anticipate that the relation will be 12% to 75% in the second half of the year. To summarize, we have reported a resilient performance during the quarter. With a pandemic impact largely behind us and large backlog of orders for the auto industry, we anticipate continued scale-up of production by entire auto and [indiscernible] sectors. Add to that the rapid increase in traction of electric mobility as newer models are launched, and there is a faster adoption. 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, Vimal. Greetings to all. I trust all of you are well and staying safe. The domestic auto segment during the quarter saw mixed signals of recovery. While there was an improvement over quarter 1 after the second wave, demand and bookings across the vehicle segment and especially 2-wheelers have been sluggish. This is largely due to increase in fuel costs as well as the overall inflation pressures, which seems to be impacting buying power. This has also deferred decision-making in 2-wheeler segment. As customers evaluate the ICE versus electric decision more carefully. Further supply side issues due to chip shortage, container cost and the volatile input prices weighed down the overall volumes in the auto space. Sales for CVs in the quarter were hampered by supply chain constraints, leading to high getting periods for some of the high selling models. However, new vehicle registrations in the PV space was higher in September when compared to the pre-pandemic period. The SUV segment also saw sequential improvement in demand with increased freight availability and the resumption of construction activities. Agriculture and commercial demand was also largely stable in an otherwise seasonally weak period. Overall, while consumption pattern were encouraging, weak retail owing to the supply side constraints in addition to the higher fuel price has restricted the pace of recovery in the quarter. On the international front, most of the key export geography in the U.S. and Europe reported healthy at auto sales, led by steady demand and stable currency in those key markets. Against this backdrop, we have reported a solid performance during the quarter. To reflect upon key orders, we have [indiscernible] 17 parts from 8 customers during the quarter, of which we are have added 4 parts from the domestic customers like Honda Motorcycles, Piaggio and Dana Corporation and 13 parts from export customers like JLR, MAHLE, Renault, Dana Corporation and Tata AutoComp and a new logo addition of Scania in the EV division. In the IT segment, we have added 6 parts. We got a breakthrough order in from Renault in France. This opens more revenues for the growth for us in a new European market. Additionally, we also received an opportunity from a critical [indiscernible] resourcing projects for another European location. In our structural segment, we added new parts from JLR in U.K. and entered into a new segment in 2-wheelers with Piaggio. In other EV segment, we have added 9 parts. We got order wins from the Dana for an existing location as well as for the new location in Mexico. With existing customers, MAHLE, we received a promising order for EV parts from Spain, another new market for us. We are happy to share that we added new logo Scania [indiscernible] 5 parts for the European region. Let me now share the highlights of our performance across each of our 5 key strategic growth pillars, the first being our auto business. This segment, as just discussed, was impacted on account of supply issues. However, it is witnessing a good bounce back in demand and [indiscernible] on the month-on-month basis. We expect the chip shortages issues to resolve in the coming quarters with the resumption of chip manufacturing factories in Malaysia, [indiscernible] across the domestic and export markets continue to remain healthy. We are also seeing improving order wins from the OEMs that we work with. This in turn bodes well for us. On the industry trends, the global automobile space is in the phase of transformation. Across the globe, there is a shift to quickly transit to cars with a premium high-tech features and towards electric mobility. In India, the pandemic has accelerated the development in the automotive industry with consumers requiring personal transportation modes, it has fueled the number of first-time auto buyers across the country. As the latest industry trends, most consumers are preferring high tech features for their car [indiscernible]. This is also facilitated by the attractive financial scheme available in the domestic market today. Both urban and rural demand has seen healthy recovery, and we are seeing stronger traction in vehicle registrations in the country. Coming now to the second of our growth pillars, which is in electric vehicle division. Globally, volumes of electric vehicles have been exponentially grown in recent times. A total of 2.65 million new EV registrations were reported in the first half of 2021, an increase of over 170% over 2020. In India, too, the segment is fast picking up the speed. In September, EV sales for the first time ever crossed the 30,000 units mark in India. These registrations were mainly driven by electric 2-wheelers and the passenger side electric 3-wheelers, which together accounts for more than 90% of the total registrations. We have seen established and new players announcing exciting launches during the quarter. The likes of Audi, Mercedes, Volkswagen, Mahindra & Mahindra, Tata Motors have announced launches of a range of e-passenger vehicles during the quarter. While Honda Electric, Ather Energy, TVS Motor, Ola Electric continues to announce new launches in the 2-wheeler space. Recently, Ola Electric made history by registering the highest ever sales in a day of its e-scooter in the Indian e-commerce space. There have also been a strong build-up in activity for PV infrastructure and ecosystem creation. Hero Electric is partnering with [indiscernible] has announced a plan to set up 10,000 EV charging stations by 2022. [ EVRV and Spark Plug ] have announced partnership for establishing another 10,000 EV charging stations across India over 2 years. Similarly, Tata Power is hoping to close this fiscal with 2,000 charging stations with an overall ambition of reaching 10,000 mark in 5 years. These are just some of the few developments to begin with. Government is also announcing supportive regulations and policies to increase the adoption of green energy in the country. Last month, it was announced the PLI scheme for the automobile [indiscernible] industry with an outlay of INR 26,058 crores in order to accelerate EV manufacturing and localize advanced automotive technologies in India. The detail of the PLI scheme has been recently notified and we are studying them to ascertain the benefits available. Our preliminary understanding is that we are well positioned to qualify for the incentives based on our scale, our track record and the parts that we produce. We will inform all stakeholders of the progress in this regard at the appropriate time. The scheme, in addition to the already launched PLI for advanced industry sales, which is of INR 181 billion and faster adoption of the manufacturing of electric vehicles [indiscernible] scheme of INR 100 billion to boost manufacturing of electric vehicles in India. Cumulative incentives being offered across the 3 schemes which will be amounting to INR 531 billion targeting both the demand and the supply side. The various initiatives by the government provides a clearer direction that the policymakers remain focused on promoting new energy vehicles. The EV segment is at the cusp of rapid adoption in India, and we believe this will bring in solid growth opportunities for us going forward. We are working with the OEMs as well as the parallel suppliers of [ engines ] in our EV business. We are excited to share that we are actively engaging with Tata Motors who is fast emerging as a leading PV supplier, passenger vehicle supplier in the domestic market, with over 1,000 units sold each of the last 3 months. Alicon has got an opportunity to work with Tata Motors for EV sector through PACO, who are developing and supplying the battery packs and motors for EV platform to Tata Motors. PACO is currently sourcing components from China in a CKD mode, but due to same 4 regulations, they plan to transition to local suppliers before March 31, 2022. Alicon has got the RFP for more than 15 parts from PACO, and we are in advanced stage for getting nominated for these parts by December 2021. We've also been working extensively with Dana Corporation in both domestic and international orders and the portfolio with Dana stands at [indiscernible] parts. We are also engaging this [indiscernible] a leading global EV company, which plans to set up a plant in Bangalore in India. There is an RFP of 40 components for which we are actively engaged. We are also happy to share that we are an exclusive supplier for Ather Energy in India. We are also engaged with Top Motors, which have seen the projects being revised after a pause due to pandemic. [indiscernible] order is from Gareth, MAHLE, Etan, Samsung, Danfoss have all gone into the mass production mode now. We continue to work alongside with our customers in EV space and believe there are massive opportunities here. With the industry dynamics constantly changing, Alicon is one of the frontrunners in the EV space to capitalize on these growth prospects. We have already built up a portfolio of over 65 parts catering to EVs. Our earlier stated target to bring the wallet share of EV business to 25% of overall revenue by 2025, '26. However, given the order booking on hand and we are already on the track for 18% of revenue share from EV and now raising our target for EV business to 36% of overall revenue by '25, '26. Now on to our third growth pillar, being technology-agnostic platforms, wherein we focus towards building niche around existing and new products by leveraging our core competencies. This includes lightweighting of the product in an auto and EV space. We are getting increased inquiries from the OEMs, both in the domestic and export markets, and for the development of trains and the control arm like components. Our successful conclusion of orders with JLR has opened many opportunities in this domain. Our fourth growth pillar being the non-auto sector -- segment. Here we are witnessing healthy growth in demand across the sectors such as defense, aerospace, agriculture and energy, and we expect this momentum to strengthen in the quarters ahead. Currently, our orders in defense sectors to supply the wheels for the battle tank is nearing completion, backed by the Alicon's efficiency and work quality, we are pleased to announce that we have been called for the tender for the refurbishing of 129 tanks, battle tanks, which corresponds to 3,870-plus wheels. And the tender will be closed by end of December 2021, the [indiscernible] in our focus on increasing customer wallet share. I'm happy to share that in the quarter we have got improved business wins from repeat customers. Our long-term approach is towards building wallet share and positioning ourselves as a trusted supplier for our existing customer base. On this note, I would like to now hand it over to Mr. Andreas Heim to throw some light on our global business.

Thank you, Mr. Dravid. A warm welcome to all of you. I will [indiscernible] development on our international business. This quarter [indiscernible] to the group financial performance. In the quarter, we saw improvement on income in the markets of US [indiscernible]. We have received new orders from [indiscernible]. However, the chip shortage across the globe [indiscernible] from our [indiscernible] in the second quarter. The rise of the [indiscernible] Malaysia [indiscernible] further amplified supply side constraints. However, we are hopeful now that the situation is easing and we expect [indiscernible] to improve in the second half of this fiscal. This is also reflected in our customer orders from Samsung [indiscernible] increase of the demand. Aluminum jumps to the highest since July 2008, with existing power prices wise supplies of the energy incentive dispositional costs are covered from customers who also it our revenue. In addition, implement pricing in terms of tooling iterations, Lan services, the service move revenue growth. Furthermore, we are performing well in our operations in terms of cost control in transactions, which is supporting us in our profitability growth as well. In corporate, we have 17 new parts out of this 9 parts in EV onto customers, such as MAHLE, Dana and Scania. Out of those customers, Scania given new logos in [indiscernible]. International business, including sales and EBITDA from [indiscernible] about 26% of our fiscal revenues. Currently, we are working on partnering with [indiscernible].

Mr. Andreas, sorry to interrupt, but your voice is sounding a bit muffled, sir.

Okay. Currently, we are working on partnering with PPS in U.S. in entering untapped markets of South America. In addition, there are new opportunities emerging in the Middle East, China and South Korea, the sign country derivate global footprint. On this note, I would like to now hand it over to Mr. Rajiv Gupta, who will cover the developments in the domestic business for the quarter.

Thank you, Andreas. Good day, everyone. Demand across the domestic market has been on uptrend driven by increase in spending and consumption, especially post lockdowns, a shift towards new high-tech vehicles, personal mobility, preference among other factors. There are initial signs of recovery in replacement demand as well, which we believe will be more prolonged in the coming quarters as stringent implementation of fitness tests on the older vehicles will further support the replacement cycle. While there is a demand in the space, the severe supply constraint has moderated the auto volumes in the quarter. Domestic tractor and 2-wheeler volumes were impacted due to muted customer sentiment in monsoon deficit states. Domestic passenger vehicle witnessed a steep fall mainly on the account of chip shortages. However, domestic commercial vehicle volumes stood [indiscernible] aided by better freight availability and rates. Now coming to our performance. Given the macroeconomic backdrop, Alicon was able to report a steady sales in quarter 2 FY '22. During the quarter, we added 17 new parts from leading 2 domestic customers and 6 export customers with 1 new logo addition. Overall, we are witnessing a good level of inquiries and bookings in the market. They have booked average yearly sale of around INR 30 crores with a project sale of around INR 130 crores over a period of 5 years in quarter 2. This year, till what half yearly, we have added 30 parts with 12 in the EV segment with average daily sales around INR 30 crores, with project sales of around INR 240 over a period of 5 years. Our total order booking now stands at around INR 3,150 crore over a period of 5 years with yearly average sale of around INR 625 crore. While there are supply side constraints in the short term, from the longer run perspective, we are seeing a very exciting time in the domestic auto industry. On this note, I would now request our group CEO, Mr. Rajeev Sikand, to share his further perspectives.

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. In last 18 months of the pandemic, a lot of changes and disruptions have taken place across society, economics and the businesses. During this extraordinary time, Alicon has sharpened its ability to adapt to the changing business environment while creating new opportunities. We have continued on our journey to build a more resilient and a robust organization, undertaking strategic initiatives to augment our efficiency, sorry, fill technical edge and improve product offerings while also managing costs and infrastructure more effectively. Even in the quarter gone by, although the demand scenario was encouraging, supply-related issues and raw material pressures significantly impacted volumes. However, on an optimistic note, our ongoing interaction with our partners indicate that raw material issues are beginning to ease and with the continual retail inquiries and upcoming festival season, we remain positive that the volumes will see a steady uptick in the quarters ahead. In this quarter, we have announced order wins with multiple OEMs, which further provide us a healthy growth visibility for years to come. We have further encouraged to share that just in span of 5 years, Alicon has captured a total order booking of over INR 3,150 crores. This is a commendable feat for our whole organization and we look forward to registering stronger and sustained order wins going forward. Health and safety of our employees is one of the key focus areas for us, and I'm happy to share that 100% of our entire employee base has been vaccinated with first dose and 78% of our employee base has been fully inoculated for the second dose. The remaining second dose will be completed by December. We are slowly marking return to normalcy with our corporate office plant and facilities operating at a stabilized manning level. As Rajeev mentioned, these indeed are exciting times. We have seen a set of well-intended initiatives undertaken by the government towards boosting growth in the economy and towards developing India as a strong player in global auto value chain. The series of announcements made from scrapping policies, [indiscernible] schemes to recently announced PLI, all work in favor of the domestic auto and auto component sector in multiple ways. We are currently studying the recently announced PLI scheme to understand how we can take benefit and we'll be sharing updates with you regularly. Ecosystem for EV is shaping up pretty well and initiatives taken by the government are further driving EV adoption. Based on a strong momentum, my colleagues have already indicated that we have raised our overall revenue share from EV to 36% by '25, '26. Given the exciting developments, we have an aspirational target of 45% by '25, '26. On the whole, we look forward to a promising future and continue to stay focused on our objective of being future-ready and being consistent, trustworthy and a 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 N.L. from Emkay Global.

Congratulations for a good set of numbers. Firstly, just in the overall order book, can you indicate the share of EV orders and also expectation in terms of annual revenues this year and next year? And if you can also share the major EV customers for the company in domestic market, especially on the 2-wheeler side?

Okay. I'll first answer on the EV. Having a European know-how in an early stage and having a first-mover advantage, Alicon is aiming for a partnership with OEMs by providing lightweight solutions, HPDC to LPDC conversion by giving customer advantage of lower CapEx. Thermal solutions for the components like battery housing, motor housing, the future technology and further [indiscernible] solutions for a structural [indiscernible] relevant EV parts. We have developed now 80 parts from 13 customers till now. Last quarter also, we have added good progress, which already my colleagues have explained in the call. Talking about domestic front, yes, we have till now [ 63 ] parts in domestic in the EV front.

And if you can also talk a little bit on the non-auto segment, the revenue share has come down to 6% this quarter. How do you see it going forward?

Going forward, as my colleagues have just explained, the tender of 4,000 wheels have been submitted to -- I'm expecting a finalization by January '21. We are penetrating with existing customers like Siemens, GE, IR, Honeywell Automation. We are focusing to get global locations from the same platform. And we are also focusing on high value-add with critical and complex parts like cylinder heads from a customer [indiscernible].

On the gross margin side, I understand the part about optical compression. But going forward, how do you see the gross margin improvement triggers going ahead? I just wanted to understand that within the current quarter gross margin compression, there would be factors like under-absorption of fixed costs due to inventory adjustment or lag in pass-through of cost increases even on the rate side. So can you help us understand what would be the gross margin improvement triggers going ahead?

In this, if you see the gross margins, the EBITDA margins for this quarter, it is coming around 9.4%. And as is explained, that we have the impact of the aluminum pricing. So if we remove the effect of those things. So in the real terms, we have a gross margin of -- margin of 10.5%, which is ahead of 9.4%. That is one for the quarter. And you know that I have explained the impact -- the major impact has come from the cost like energy as well as the logistics. So that has impacted approximately INR 7 crores in this quarter. And now after this, we have started -- because, after this increase started the negotiations with our customers. Because we have the settlement rising and it has to be also passed through. So we are expecting that we will get this benefit in the coming quarters, quarter 3, quarter 4 and in the future. So for the full year, we are expecting maybe to certainly down this for the full year, the margins will be in the range of 12.5% to 13%. And going forward, as explained, in my see that approximately, we will be normal in the range of 14% to 15% in the coming years.

One last question from my side. On the PLI scheme, I understand that you are studying the scheme and you will come back with more details. But just wanted to understand, would there be -- would we be benefiting directly or indirectly from the scheme? Just wanted to understand how does it apply to us because we do qualify on the eligibility criteria.

Scheme is currently notified yesterday, and we are further studying the components notified by the government. As per our understanding, some of our components from the EV will qualify for this scheme. And we are discussing the same with our consultant and will give a detailed benefit in 2 weeks' time.

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

My first question is, it's about Ather. Ather recently posted a robust set of numbers. For the month of September, they posted a sales volume of around 3,500, which was multifold high albeit on a low base. But they have also focused huge growth plans. So my question is, if you can throw some color on how many contents do we supply to Ather and how much business does Ather contributes?

Yes, agree. We have noted the volumes are promising for Ather. And the good thing is, the content per vehicle with Ather is around 17 kg, which is very promising. And if you exceed -- yes, the content of Alicon is around 17 kg, which was somewhere around 2 kg to 3 kg when it was an ICE vehicle. So with that approach, definitely, we see a good growth along with Ather.

Yes. So if you can -- if it is possible, can you throw some light on the contribution from Ather? What's the size of business do we get from Ather?

This will be around 3% on a higher side. Approximately 3% to 4%.

So 3% of the total turnover?

Right.

Okay. Okay. My second question is, our European subsidiary, the performance was relatively soft as compared to last 3, 4 quarters, but on the profitability front we have done quite well, better than last 2 quarters. So if you can tell us how is the outlook looking for the second half. Last year, we did a turnover of around INR 75 crores from Illichmann. So do we think we'll be exceeding that in the second half?

So first of all, because in quarter 2, there was holidays in Europe. So due to that, the sales were a little bit down against when we made a comparison with the quarter 4 or quarter 1. But you see that we are able to improve even further our margins if we compare with the previous quarters. So in the EBITDA, we have crossed the 20% against the 19% in the quarter 1 and approximately 19% in quarter 4. So going forward, we are feeling that we will be able to maintain this growth in second half of the year in Illichmann with the same margin in spite of having the issue of the chip.

Right, right. Get it. So this was also on account of EBITDA margins, which you just mentioned that for the full year, you are looking at 12%, 13% kind of EBITDA margins to close this year. In Q1 and Q2, we had 8% and 9%, respectively. So second half, looking at your estimates, it should be around 14%, 15%. So what kind of turnover are we expecting? Would we be able to -- because of this pressure on gross margins and the other constraints, which you mentioned, like chip and supplies and all? So are we still very confident of closing the year by 13% kind of EBITDA margins?

Yes. So in this -- so the main important thing we should remember that when we talk about the new orders -- so, now we have started the supplies against [indiscernible]. And in this year, approximately INR 260 crores or INR 255 crores, we will do. So major revenues are, now we will get from these new orders in the quarter -- in the second half and with a good margin. And secondly, that I've explained that now we are in settlements with the customers for the price increase against this increase in the cost of the commodities, especially in the energy as well as the logistics. And that we have already in our buildup in our cost issue -- we are sure that we will hit.

14% is quite achievable for the second half, right?

Yes.

Okay. Okay. That's all from my side.

[Operator Instructions] The next question is from the line of Pranati Trivedi from Electrum Capital.

So I just have one quick question. In your Q4 FY '19 call, you had guided that non-auto contribution will reach around 12% by the end of FY '22. So has this guidance changed, seeing how the EV market is picking up in the domestic market? And like when can we achieve this target? And also, if you can give some color on what will contribute more to the EV contribution increasing, 2-wheelers, 3-wheelers or passenger vehicles? And can you also give us breakup for FY '21 and H1 FY '22?

Okay. Coming to the first point on non-auto, yes. We know our performance was good in the last year, quarter 4, basically in non-auto just because the auto had a turmoil. And that reason we were able to get good sales [indiscernible] non-auto. Yes, this year, we noted the volumes were on a sluggish side for non-auto. But we are seeing a promising that I've explained, good numbers going forward. So if you see, we are aiming now to touch around 7% to 8% next year, and we are aiming to take this non-auto to 14% in the period of 3 years going forward. Coming to the good margins on the EV front, yes, if we see in terms of a component with IT segment-wise, in the passenger and commercial, we get good margins because the weight of those parts are on a higher side compared to 2-wheelers. Also, we get the opportunity with a value added service. And we are doing extremely good in this area. We are actively in touch with the customers like Dana who are pioneers into this area. They've already developed a lot of parts with -- for the commercial vehicle with them. And also, we have explained in our script the way we are approaching new customers like Arrival and PACO for the passenger vehicle of Tata Motors.

Okay. And if I can ask one last question. Can you give me some clarity on the current order book visibility? And what would be your incremental yearly average sale? I think you've mentioned INR 625 crores. Is that correct?

Right.

So that is, that's incremental, right?

Yes, this will be my average yearly sale of INR 625 crore. If we see incremental -- next year, we are planning to book somewhere around INR 4 crores to INR 80 crores from these businesses. And this will touch to around INR 750 crores to INR 780 crores at the peak period, somewhere around INR 25 crores, INR 26 crores.

And order book visibility?

Sorry?

Order book visibility, sir?

Yes, this was on the order book visibility. The sales what I mentioned, these are from the new orders what we have booked till now.

So till now, right?

Yes.

Okay. And good luck in the coming quarters.

Thank you.

The next question is from the line of Nakshita Mehta from Credent Asset Management.

I have a couple of questions. My first question is on the cash at hand. So I noticed that it has reduced to 2 weeks' expense. So can I like know -- are you making any capacity expansion? Is there any CapEx [indiscernible]?

Yes. Because we have -- the new orders, the growth plans are there. So only thing is that we are controlling all the capacities. So for this year, we made a plan of around INR 90 crores at the beginning. But now we have deferred or reduced. And for this year, we are expecting to close in the range of INR 55 crores to -- around INR 60 crores. But definitely, we will require the CapExes to fulfill or to serve our customers against our new orders, what we have win.

So we are making the CapEx from internal accruals, is it? Completely?

Yes.

Okay. My next question is on the debtor side. So what would you say with -- how much time do we receive the payment, the receivables? Like what will be [indiscernible] period?

So it's totally different customer to customer because from 30 days, 45 days, 90 days and for the export side -- on the longer side also, approximately takes 120 days to 150 days. So it's totally different customer to customer. But overall, we are working on this. And this September also a little bit -- that I expect that the aluminum prices increase. And it is a complete pass-through. But it takes time because it has suddenly happened in the last 3, 4 months. So of around INR 25 crores stuck in this, and that will be realized in October and November and in this quarter, at least, that we will be able to realize that money. So that maybe you will able to see that in the coming quarters the impact of that. As well as, like we are explaining, the new developments are happening, so a lot of new orders. So for that, some customers because this -- we have to develop the tooling for all new parts. So maybe some customers, they pay, and some customers, they don't, means that we have to amortize. So amortize is one part, but when get paid. So in this -- initially some advances, but it takes time to realize the full money. So that is the reason for a little bit now, we see a small increase in the debtor side.

Correct. Okay. Understood. My next question is on the capacity utilization. I understand that it's still 60%, 65% in the -- as of now because of the chip shortage as well. But can you tell me -- can you hint me on what was it pre-COVID? What was the pre-COVID levels?

It was 82%, 85%.

Okay. Okay. So there's a 25% -- 20% in [indiscernible].

Yes, 15% to 20%, we have to keep idle because there are fluctuations in the volumes of the customers, because once suddenly in the festive season, there is a jump like that.

Okay. So now coming to the EV, first of all, it's a very good opportunity for aluminum companies. So in 2-wheelers, as you said, mentioned that 90% is from 2 and 3-wheelers, correct? So from our customers, how many customers are into EV? Our 2-wheeler customers, how many are into EV and how many have plans for expansion?

So we -- if you talk about 2-wheeler EVs, yes, we noted there are about 40-plus start-ups now, and we are in touch base with 20 such start-ups. They've already received [indiscernible] like Ola, Ultraviolet, [indiscernible]. And we are hoping to get some breakthrough going forward. We are already there with Chetak, and the Tork motorcycle, which have now arrived and I will [indiscernible] will start. Talking with the OEMs, yes. initially, their plans were not very soon, but seeing the consumer behavior, now they are planning to start the developments -- take those developments in early stage. So we are actively involved with these OEMs on a regular basis for early-stage participation for the components.

Correct. Okay. And on the PLI. So now you will be [indiscernible] so can we assume that in the next quarter, there benefits would be realized -- I mean, we've seen on the raw material pricing and on the margins?

We will be studying this, and we'll come back in the next quarter.

Okay. Just one last question. So I -- we saw in the previous quarter, that is July, there was some preferential share issues. So was that a fresh issue or did the promoters reduce their holdings?

Yes, it was a fresh issue.

It was a fresh issue? Okay.

Fresh as well as our Japanese collaborators.

Sorry?

It was a fresh issue to the promoters and our Japanese collaborators also.

[Operator Instructions] The next question is from the line of Karthi Keyan from Suyash Advisors.

One thing is in terms of the order book that you've talked about, INR 3,000-odd crore and you we you'll ask about INR 480-odd crores. A, how exactly have you factored in the volatility in raw material prices? How exactly will you be able to protect yourself [indiscernible]?

Yes. For the raw material, that will make all settlements with pass-through conditions. So we don't take any exposure in the raw material appreciations. Except -- because there is a time difference may be there because the settlements are on a quarterly basis, some monthly basis. So that -- maybe 1 month up and down. That may be the impact. Otherwise, we don't have any impact.

Right. So you are basically saying that the embedded profitability on the INR 3,000-odd crores would be in the 15% range ballpark that you indicated? Or it could be better also?

Yes.

And secondly, in terms of the shipment scheduling, is there -- is it contingent upon certain conditions being fulfilled? Or do you believe that this is reasonably a done thing? Because I remember on 3 separate accretions, you had indicated 3 different numbers, and I'm not holding it against you, but just saying that these things happen because of various variables. So is the INR 480 crores number a more given thing or could this vary as well?

So this will be somewhere at that range because if you see the orders, what we have booked around 70% -- around 60% is from the new market existing or with our existing market, new product or a new market, new product. So this means we have captured a new entity, a new customer or a new market. So we're quite sure this will add on rather than this will be sluggish with the existing market.

Sorry. Just to clarify. My question was whether this is a confirmed schedule or is this contingent upon certain other aspects like, for example, the chip availability is a macro issue. But apart from that, is there any other variable in this schedule? That is what I was trying to understand.

Yes, this is based upon the confirmed schedules received from our customers. Yes, I do agree chip shortages have come up, but we have done a thorough research, studied with our OEMs also. What we understood, this will be there for another 5 to 6 months. Thereafter, things will be under control.

One last thing. When you spoke about supplying 17 kgs of components to Ather Energy, is there further scope to increase this for Ather? And can you also share some color on how this has gone from 2 kg to 17 kgs?

Okay. So you see -- in an ICE vehicle, I have opportunity because cylinder and a BFC. But if you talk about Ather, they eye it as a premium segment, and they involve that designer at the start of a project. They wanted a unique product to launch, which will be durable and very innovative. And the lightweight, because this is very important in an EV vehicle because the light vehicle will help to give you good performance. And with that ground, they have involved us in making those components with aluminum parts. And that is the reason we got more opportunity with the content per vehicle in the EV space with Ather.

One broader question, if you will permit me to. You've talked about several order wins, and I'm assuming that the competitive landscape is global rather than local. So what exactly is helping you win these orders? Can you talk about some specific points that have helped you to win these orders?

Yes. I think there are 2 of them. In the EV space, we started with our European entity in 2016. It gave us a much more headroom. And whatever we learned from our development there, we've been able to bring that to India, both for Indian OEMs and as well as global OEMs because that is our strategy to move that path forward. And of course, working right at the start of the design. It's not so easy for them to change for some of them where the design is fixed. But for others, it's more easier. Secondly, our [indiscernible] to move into the agnostic parts, which are either ICE or EV is the focus area. And this of this area is helping us to break more international volumes which requires this kind of components.

And how do you assess the global demand-supply scenario for aluminum casting? What I read is that there has been a fair amount of capacity added. Can you bear that out?

Everybody -- you also see what is happening on the green gases [indiscernible].

Sure.

And eventually, India has an opportunity, I think, with the China also going more towards greener, the cost will be much more. So if you have been offered a competitive logistics, other things, we have a much more scope on the aluminum parts. And this is -- for quite some time, it will remain with us as the Indian subcontinent.

Sure. And do you perceive inorganic opportunities with some of these European possible capacities, especially for the technology that they may bring to the table? Is that something that you consider as a possible option?

Actually, these have been coming to us, but while it's been there for the last 3 years very actively. But our thing is that what are we looking at. Either we are looking at -- we have our own entity there, which is leading edge in all these OEMs. So either we look at somebody who has a very big domain and we marry with the domain partner. So right now, the opportunities are in a way we will sooner or later grab [indiscernible].

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

Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call, and we look forward to interacting next quarter. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Alicon Castalloy, that concludes this conference. Thank you, all, for joining us, and you may now disconnect your lines.