Alicon Castalloy Limited (531147) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Alicon Castalloy Ltd. [Operator Instructions] I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir.

Thank you, Rutuja. Good day, everyone, and thank you for joining us on the Earnings Call of Alicon Castalloy Ltd. for the Fourth Quarter and Full Year of FY '22. We have with us on the call today, Mr. Rajeev Sikand, Group CEO; Mr. Vimal Gupta, Group CFO; Mr. Shekhar Dravid, Chief Operating Officer of Alicon Castalloy Ltd.; Mr. Andreas Heim, Managing Director of Illichmann Castalloy; and Rajiv Gupta, Head of Domestic Business of Alicon Castalloy Ltd. As we always do, Mr. Vimal Gupta will cover the financial performance for the quarter, following which Mr. Dravid will walk us through the operating highlights. In order to share a more granular view of the initiatives towards both the global and domestic markets, we also have Mr. Andreas Heim and Mr. Rajeev Gupta to provide insights on these areas. Following this, our group CEO, Mr. Rajeev Sikand, will give us a brief summary of the quarter gone by. Thereafter, we shall open the forum 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. Over to you, sir.

Good morning to all our investors. 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. We have closed the fiscal year 2022 on a positive note, despite several macro challenges. As you would recollect, last quarter, we had mentioned about how Alicon has faced and combated 4 key challenges during 9 months of financial year '22. In the fourth quarter, we saw 2 more of these challenges upending the demand environment globally. The 6 challenges that have emerged, which we have named as 6 Cs, are -- the first E is the COVID Pandemic. Lockdowns and restrictions on account of the pandemic resulted in a slowdown across the domestic and international markets. In addition, job losses, pay cuts and reduction in household income further affected consumer sentiment. A combination of these factors have impacted sales in the auto industry, and we are assessing the long-term impact. The second C is the chip or we can say the semiconductor shortages, which have impacted production schedules of OEMs and resulted in loss in volumes for the auto industry. What we have seen in auto players rationalizing the available supply of chips into more high value of premium models, semiconductors are multi-dimensional products catering to a number of industries. So overcoming these constraints are expected to take another 9 to 12 months. The third C was the cost-base inflation, where in saw a higher cost of vehicle fuel, aluminum elements, energy, logistics and other costs. This resulted in an increased cost of production and a sharp price in vehicle selling prices by OEMs, which again impacted demand. Furthermore, purchasing power was affected due to the unprecedented fuel prices in our country. The fourth C was the cost of new product development. As you know, the development costs for the products are amortized over the product line. However, with the EV evolution, this is an increase in the new product development cycle, and the product lifecycles are shortened. So we are seeing a rise in the trials required for reaching to normalized efficiency levels. The 2 recent Cs are the conflict between Russia and Ukraine, and crisis in supply chain and global auto industry. The ongoing geographical conflict has affected production volumes and has resulted in a complete sales stop in Russia and Ukraine. The conflict is also impacting and aggravating inflationary pressures in raw material. Further, I think all of you have been hearing about the hit on power supply for European countries, which rely on Russian oils and gases. So high power consuming industries like industrial, metals, foundries, et cetera, are facing unprecedented challenges in sourcing adequate power at affordable rates. This has disrupted global supply chain network. The shortages of raw material and subcomponents are expected to impact auto production levels, especially in Europe. So overall, the year gone by was characterized by these significant macro challenges. Given this backdrop, Alicon has performed very well, while we did see some impact on our sales volume, given these challenges. But broadly, we are encouraged with how our Alicon family navigated through these roadblocks and delivered robust performance. Our focus on strengthening sales of value-added components, resulted in favorable revenue mix during the year. In fact, in the last 3 years, we have seen a significant shift in the middle towards a value-added portfolio and revenue mix. In the Auto division, we are seeing strong sales coming in the value-added components in the passenger vehicles and commercial retail segment. But here also witnessed improved volumes, from higher margin products in the EV category. So our focus on value-added addition and our efforts towards driving better operational efficiencies, have supported growth in the year. Our top line in the year stood at INR 1,081.37 crores, higher by 27% year-on-year basis. In the fourth quarter, revenue from operations stood at INR 320.56 crores as against INR 322.57 crores in the quarter 4 financial '21. The degrowth was mainly on account of moderate demand due to the nonlinearities that we witnessed on the macro front. On the profitability front, the continuous increase in [indiscernible] costs, along with inflated supply chain prices, resulted in higher expenses, especially in the second half of financial year '22. While there has been a pass-through in the case of aluminum, for several other inputs too, we have witnessed unprecedented pricing pressures. Recognizing this, we focus on further process improvement and yield enhancement in our production processes. Our teams deployed sustained cost optimization using the Kaizen principle to enable cost reduction. We have been constantly collaborating with our customers to undertake price revisions and have successfully passed on some part of increased costs. There has been significant inflation in almost all costs, including various overheads. We have also put in a lot of work to mitigate the impact of the rise in manpower costs too. We undertook cost optimization across all levels of the pyramid, to accept greater synergies and efficiencies across all aspects of business to counter the cost pressure. Along with the improved product mix, our cost-saving initiatives have enabled us to support margin performance during a difficult year, in the terms of inflationary pressures. Despite reporting gross margins for the year of 49.5%, lower by 499 bps year-on-year, we have reported an improved EBITDA margin, which at 10.7% was higher by 61 bps. In fact, for quarter 4 for financial year '22, the EBITDA margin stood at -- steady at 12%, indicating that our exit rate margins performance remained strong. A key feature of our performance this quarter, has been protecting margins from the multiple challenges, arising from the volatile macro environment. Due to the increase in alloy prices, there has been a dual impact on both EBITDA and sales, which has resulted in about 100 basis points impact on the margin. As the prices of alloy stabilize, the improved margins will be more evident. In a normalized environment, our medium-term target is to improve our EBITDA margin to a level of 14% to 15%, on the back of our cost efficiency measures. On absolute terms, our EBITDA during the year stood at INR 115.79 crores, up by 35% and in the quarter came in at INR 38.72 crores, lower by 21% year-on-year basis. Interest cost has been reduced by INR 6 crores from INR 36 crores in financial year to INR 30 crores in the financial year '22. As we reduced debt by deploying the fund raised through QIP and other initiatives, profit after tax during the year and quarter stood at INR 24.18 crores and INR 13.21 crores, respectively. In view of the improved performance, the Board of Directors have recommended a dividend of INR 2.25 per equity share of INR 5 each, that is 45% for the financial year ended 31st March '22, subject to approval of shareholders in ensuing 32nd annual general meeting. On the operational front, during the year, our manufacturing plant in India and Europe operated at normalized utilization level to the tune of 65% to 67%. We have created a safe, hygienic and a multicultural work environment for our people. Despite the ongoing cost pressures and supply chain disruptions, we are focused on undertaking strategic enhancements, where necessary in our operation. During the year, we witnessed sharp increase in key food costs, which had a resulted impact on the cost of inventory and other debtors. However, we were able to drive greater efficiencies, which in turn has enabled us to basically improve the working capital days despite these pressures. We expect this to be stabilized going forward. Working capital days during the year improved by 18 days in the financial year '22. During the quarter, we have reported steady cash flow from operations. On the balance sheet front, our net debt to [ net EBITDA ] is [ INR 251 crores ], and the net debt to net equity ratio remains comfortable at 0.48. On the CapEx front, we plan to deploy around INR 90 crores in the financial '23, which includes maintenance CapEx and new machining capacity. While there has been some disruptions in recent quarters, our focus continues to be on improving return ratios. As the operating performance rebounds and we accrue the benefits of better product mix, healthy profitability, streamlined working capital cycle and improved balance sheet metrics, we will aspire to take our return ratios to the pre-COVID levels of FY 2019. To summarize, we have reported a very encouraging performance in the financial year 2022, despite multidimensional reception in the automobile industry. We continue to operate a healthy financial profile and a strong balance sheet. In a normalized environment, we look forward to delivering a strong and sustainable growth. 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. Vehicle sales in the fiscal year '22 were a mixed bag. While passenger vehicle, commercial vehicle and 3-wheeler segment registered an improved performance on a year-on-year basis, sales volume of 2-wheelers saw a significant degrowth, marred by the high ownership cost and the expensive fuel. While demand and offtake of the commercial vehicles and passenger vehicle segments remained strong throughout financial year '22. The upside was limited, due to the supply constraints and the ongoing chip shortages. On the production front as well, we are seeing some impact on vehicle dispatches, due to inventory adjustments and the continuing impact of chip shortages. The waiting period for best-selling passenger vehicles in the range of 2 to 12 months or more as per the [ product ]. The average dealer inventory now stands at around 15 to 20 days versus the average level of 4 weeks. So we are seeing some demand-supply gap in the domestic markets. On the international front, most of the key export geographies in U.S. and Europe are reporting improving auto sales, in terms of inflationary pressure, globally and domestically, the auto and auto ancillary space continues to witness supply chain bottlenecks. This has further intensified due to the ongoing geopolitical conflicts. We have seen aluminum and related all prices reach new heights. In addition, the spread of COVID in certain Asian countries is further fueling input prices. However, we are now seeing, in some cases, domestic auto OEMs, sourcing inputs and chips from alternate source vendors. This is enabling them to mitigate cost pressures to some extent. More so, we have also not seen any major OEMs, both domestic as well global, suggesting for any sharp production losses or any production halt due to these issues, which is encouraging. Against the backdrop, we are quite encouraged to have reported a strong performance in the fiscal year 2022. In addition to our focus on value addition, as explained by Vimal, our growth was also supported by new customer against addition of new parts from the existing customers, increasing penetration of 4 wheelers in our overall revenue mix, improved contribution from the EV segment and strong exports. We have also undertaken several initiatives and directed efforts over the last few quarters and years to position ourselves well in the fast-growing industry and our performance in this year, reflects these measures. Let me take you through the highlights of our performance across each domain. The first being our auto business. The domestic auto sector has seen sharp decline for 2 years in a row, adversely impacted due to the COVID and the input pressures. However, with a pickup in economic activity and the normalizing environment should improve the demand environment for all the segments. In addition, high rabi sowing, healthy agri input price support and forecast of a normal monsoon, indicates that the rural demand in the upcoming months could witness similar positive traction. It is also encouraging that vehicle registration with regional transport offices rose by 37% to 16,27,975 units in April, as per the data collated by the Vehicle Retailers Body, FADA. So overall, the outlook remains healthy in the medium to longer terms. Globally, the 2021 global auto production was higher by 1.8% year-on-year, driven by U.S. and China numbers. However, Europe was down by sharp 6% year-on-year. Despite this, I'm happy to share that Alicon's global auto sales marked a strong increase of 63% year-on-year during this year, Alicon India export sales increased strongly by 100% year-on-year. In the IP segment, we are seeing strong inquiry level across domestic and export markets. In terms of new parts added via existing customers, we are seeing repeat orders coming in from customers, such as Honda Motorcycle, MAN Trucks and Tata Autocomp, Eaton to name a few. I'm happy to share that in the quarter, we have won orders for 21 new parts. Overall, in the year, we have seen 1 new logo win, which is MAN Trucks, which is a strong reflection of our growing brand value in the global markets. The passenger vehicle and the commercial vehicle segments are key focus area for us. Our sales in passenger vehicle division grew by 45% year-on-year in FY '22. And the commercial vehicle sales grew by 61% year-on-year. Going ahead, our focus will be on improving contribution from higher-value components in the passenger vehicle and commercial vehicle segments, thus driving augmented brand value and enhanced sales in this division. Coming now to the second of our growth pillar, which is the Electric Vehicle division. The division continues to see strong growth across the markets. In India, the government's decision of raising the FAME II subsidy and increasing the deadline for EV transition to March 2024, is showing growth in the sector, especially for 2-wheeler EVs. We have seen as many as 19 states across the country, that have announced their respective EV policies, with lucrative benefits to the consumer. This has translated to the strong offtake in EV. In financial year '22, electric vehicle sales in the country gained momentum, with total sales increasing by more than 211%. The number of electric vehicles sold in the country, based on the registrations at Vahan portal where 4,19,812 in FY '22 against 1,34,853 in FY '21. While all classes of electric vehicles have shown a big jump, motorcycle sales have shown the biggest jump, growing 461% followed by E-rickshaws and electric car sales. Several 2-wheeler EV OEMs have announced aggressive expansion plans, and to further support the EV value chain. We have seen the center undertaking positive initiatives, such as the PLI scheme and the recently announced policy for the battery swapping. I'm very pleased to share that Alicon Castalloy was one of the companies approved under the Component Champion Incentive Scheme. The Component Champion Incentive Scheme is a sales value linked scheme, applicable on advanced automotive technology components of vehicles. This PLI scheme for automotive sector, along with the already launched PLI scheme for advanced industry sales and faster adaptation of manufacturing of electrical vehicle is aimed to fast-tracking India's transport system into an environmentally cleaner, sustainable and advanced system. For this segment, we are working with the OEMs as well as the Tier-1 suppliers. We have been working extensively with Dana Corporation, Scania, Tata AutoComp, ARRIVAL, MAHLE, on the both domestic and international orders. Overall in the year, we have seen 2 new logo wins, one is Scania and other is ARRIVAL, which again replaced our growing brand value in the global markets. Another area where we are seeing strong response from the customers, is the light weighting of the product in the auto and EV space. We are getting increased inquiries from the OEMs, both in domestic and export markets, and we are actively developing new parts to focus on this segment. We have already built up a portfolio of over 101 parts catering to EV and other revenues from EV business stands at 10% in year '22. It is encouraging that year '19, our overall EV share of revenues stood to just 2%. So we have seen a very strong growth in this segment in just 3 years. Going forward, incremental sales of this company would be a function of this value-add EV segment along with other value-added components from ICV, structural and non-auto segments. Overall, our long-term target is to bring wallet share in EV business to 12% in financial year '23 and to 36% of overall revenues by '25, '26. Now on our third growth pillar, being a technology-agnostic platform, we are steadily adding value-added products to our basket. Various aspects of the vehicles are cross-functional, across both IP as well as EV platforms, and would remain relevant, should there be emergence of any alternative technology too. Our aim is to ensure that we gain relevance in interesting and accretive niches around these products by leveraging our core competencies. In this regard, we are working on diversifying and expanding our product portfolio to include several niche and value advancing offering. Overall, in the year, we have added parts from JLR, KTM and Piaggio continue the progress we have made in the global markets. Coming to our fourth segment, which is a non-auto business, in this we are witnessing healthy growth in demand, especially from the different sectors. During the year, we have added parts complex from Textron and JCB. Both the parts will help to showcase existing and prospective customers, about the capability of the group and will help to add further businesses. Our fifth growth lever is our focus on improving customer wallet share. This will be by leveraging our R&D, our competencies and our relationships. Our R&D facility are core to our operations, and enable us to keep pace and upcoming opportunities. Overall, we are well placed to enhance contribution from the repeat customer, and demonstrate customers' stickiness. Our long-term approach is towards building wallet share and positioning ourselves as a structured supplier for an existing customer base. On that note, I would like now to hand it over to Mr. Andreas Heim, to throw light on our global business.

Thank you, Mr. Dravid. Everyone, welcome to all of you. I will briefly cover the developments on our international business. We have delivered a steady performance in Illichmann during the quarter of the full year on the back of improving demand environment in our key global markets of U.S., Europe and China. While we anticipate the inventory pressure to ease in quarter 4, the geopolitical situation and shutting down of plants in some parts of Asia, once again lead to the [ regressions ] of chip shortage and supply chain issues. This resulted in slight impact on demand in sales values in the second half of the year. For the year, exports, including overseas revenues, contributed to 26% of the total revenue. And for the quarter 4 financial year '22, it's at 22%. I'm happy to share Alicon Global sales marked a notable increase of 63% year-on-year during the year. Alicon India export sales doubled during the year in review. As explained by Shekhar, we have added new business logos last year for the global market, Scania, MAN Trucks, ARRIVAL and Textron. We are working in this quarter to breakthrough with Bugatti Rimac. Rimac has an intensive pressure in EVs, and is [indiscernible] to be the Tesla for the Europe market. Looking ahead, we are actively pursuing growth opportunities in the key targeted markets in Europe, Middle East and the U.S. In addition, there are significant and untapped opportunities even in the markets of China, South Korea and South America. And we are aggressively growing our presence in these regions through our Illichmann subsidiary. We are also making the steady and [indiscernible] progress in finalizing new business wins with existing and new customers in the export markets. Overall, we expect demand in consumption trends to strengthen in the months ahead, given normalizing market conditions. We are also hopeful that the raw material situation eases in the coming quarters. On this note, I would like now to hand over to Mr. Rajiv Gupta, who will cover developments in the domestic business for the quarter.

Thank you, Andreas. Good day, everyone. The demand environment in the domestic market saw a slight uptick for the passenger vehicle segment during the quarter. Bookings and demand continue to remain strong in the passenger vehicle segment, but registrations were still impacted due to continued supply chain issues. While chip shortages have adversely impacted passenger vehicle production since mid-2021, production levels of major OEMs are now gradually improving. OEMs are sourcing chips from alternate vendors, which has led to a better output. The medium and heavy commercial segment category has been a strong buildup in inquiries on the back of revival in construction activities, and improved rural sentiment. On the 2-wheeler front, price hike on the back of inflationary pressures and high fuel costs, partially affected offtake. Now coming to our performance, we have delivered a healthy performance during Q4 and last year. Total contribution from our domestic segment stood at strong 78% and 74% in quarter 4 and full year, respectively. During the quarter, we added 21 new parts from a leading domestic and global customer. On the whole, we have reported an encouraging growth in the domestic automotive segment during the year, led by a pent-up demand, festive push, higher preference towards personal mobility. We continue to witness good levels of inquiries and bookings in the market, and are hopeful that improving macros will further support this momentum. The PLI linked scheme and improved allocation towards road infrastructure, augur well for our auto sector and will help boost consumption going forward. On this note, I will now request our group CEO, Mr. Rajeev Sikand, to share you his perspective on Alicon's performance.

Thank you, Rajiv. Good day, everyone. The last few years have been quite challenging for the industry and economies worldwide, on account of COVID pandemic and inflationary environment. Despite these challenges, I am pleased to report that Alicon has maintained a healthy performance during the year. Our growth has been in line with our internal target level, and reflects the momentum across all our business verticals. While focusing on our growth, we have also ensured a strong balance sheet position, and at the same time, ensuring welfare for our team across various locations. Every year, we focus on strengthening our agile business processes, to navigate the various operational challenges that may come our way. This has held us in good state in the last 2 years. Even now when globally, we are seeing strong inflationary pressures, our inventory management practices and our strategy to collaborate closely with customers, has enabled us to mitigate cost pressures to some extent, thus protecting our profitability margin. As explained by my colleagues, value addition is the key strategic vector for Alicon. Our focus is on improving offtake of value-added products across our verticals of auto, non-auto and EV. This, we believe, will drive the multi-growth synergies for Alicon going forward. In this year, we have undertaken strategically significant initiatives to solidify our trajectory of growth. We have announced significant order wins with multiple OEMs, which provide us with a healthy growth visibility for years to come. Our total order booking now stands at around INR 3,000 crores over a period of 5 years, with nearly average sale around INR 660 crores till now. The inquiries and new business wins across our auto EV, and non-auto segment continue to remain healthy. From a macro perspective, while we do foresee some pricing pressures in the market, we expect them to be largely restricted in the near term. On the business level as well, we are undertaking all necessary steps to mitigate these inflationary challenges. On the demand front, we anticipate the environment to improve going forward, improving rural segment sentiments on the back of normal monsoon forecast and steady agri indicators. Healthy pent-up demand and buoyant CapEx cycle should further augment recovery in the Indian economy, boding well for our industry. From an operating standpoint, Alicon is solid and stable, and we are confident that further stabilization of macroeconomic environment will lead to gradual and sustainable growth going forward. Overall, we remain very excited about our future growth prospects and opportunities in the medium to longer term. On that note, I would now request the moderator to open the forum for any questions or suggestions that you may have. Thank you.

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

Sir, firstly, a clarification, in third quarter earnings call, you had indicated INR 3,250 crores of pending order book. Did I hear correctly, you said INR 3,000 crores this time. Has there been a slight drop in the pending order book?

Thank you. You are right. What we have done is, we have done our internal leveling up certain products, certain things which we have seen in the market, what the customer may [ tell us ]. So we have reduced that. There is no drop from any customer, but we have internally taken cognizance of the market situation that some product lines will not do as well as they are being projected.

Understood, sir. And of this order book, how much would be the share of EV? I was trying to understand to reach that target of 36%, the order book could have a higher share of EV compared to the last year revenue share of 10%?

Sure. Yes, you're absolutely right. What we have done this year, one of our internal vectors has been to always look at value creation in our business, rather than look at tonnage and sales purely; because value creation gives a very clear indicator where we are going. So I will let Rajiv answer that to you. Thank you.

Yes. Thank you, sir, for the clarification. Basically, as rightly highlighted by you, yes, our order bookings are increasing in the EV, [indiscernible] and non-auto. Last year, we have booked around 31% of my order within EV, around 10% in auto, which is way ahead compared to last year -- compared to '19/'20, where the figure was around 9% of the EV and around 8% of the [ non-EV ].

So within this INR 3,000 crore order book, what percentage would be EV, sir?

Within this order booking my EV contribution is 25%.

25%.

A rough figure.

Yes. And the share keeps increasing? Because last quarter, I remember the share was 17%.

Yes. It will be -- this will be over next 2 years, this will grow and maybe we need to revise our targets. Currently, our target is 36%. But this will continuously evolve, as the market evolves in the EV, and this will -- this figure will also evolve.

Yes, sir, I remember you had indicated the aspiration is 45%.

Yes, yes. That still remains.

Sir, which would be the major orders commencing this year, Toyota, PSA, if you can give some color on that? And would the execution of new orders add revenue of about -- that is INR 450 crores to INR 500 crores this year?

Yes, thinking about the growth drivers for this year, mostly will be from the new parts what we've added from existing customers, such as Daimler, Toyota, Eaton and TACO. And also with the new customers, what we have added, such as PSA, JLR, Scania and Magneti Marelli. Also, we are concentrating on increasing our share of business in the domestic 4 wheeler market. Talking about the new business wins -- talking about sales from the new business, here we are aiming to get a sales revenue of roughly 40% from these new businesses this year.

So FY '23-'24, broadly, what will be the expectation of revenue based on the order book visibility?

We are anticipating a growth of around 18% to 20% further this year.

A 20% growth in FY '23?

Right.

Okay. And in EV, if you can indicate that 10% of revenue which came from EV last year, what would be the share of domestic and exports, and what would be the share of 4-wheeler and 2-wheeler?

If we see in terms of domestic and export, around 70% is currently from the global market, and domestic around 30%, which we are planning to increase going forward. Yes, I do understand talking about domestic at this moment, the major contributors are Ather and Dana Corporation. But going forward, with the new business what we have written last year, that is with TACO, for the Tata Motors passenger vehicle segment, this will further increase my contribution in the domestic market.

Got it, sir, and 2-wheeler versus 4-wheelers?

Yes, we'll just give you -- but it is primarily 4 wheeler. But we'll just give you that ratio.

Got it, sir.

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

Yes. Congratulations, sir, for a healthy set of numbers, in an otherwise very challenging environment for the industry. Sir, I have a couple of questions, for -- to start with a bookkeeping question. What was the contribution of new products during FY '22?

So last year, my orders -- sales bookings from the new business were roughly around 25%.

25%. And this year, we are expecting around INR 400 crores to INR 450 crores, right?

Right.

So sir, just wanted to clarify a couple of con calls back, you had probably Q2 or Q3, you had given an estimated sales for FY '23 of around INR 1,350 crores to INR 1,400 crores, if I am right -- if I recollect it, right? And you said you -- this year, you are expecting a top line growth of around 18%. So looking at the challenges being faced by the industry, are we scaling down our guidance for the current year?

Yes, we are also anticipating the challenges in the -- particularly in the existing markets. That is the reason. The new businesses, what we have, back from 2018-'19 is helping us to outperform over the market growth, which was clearly noticed in the last year and which will continue to see in the coming years also.

But our estimates of this year remain nearly in line, barring a little offset we have done in the 2-wheeler market, where we don't expect a big jump.

Okay. Okay, sir. Got it. And if you can give me just breakup between 2-wheeler and 4-wheeler for the last year? Last year, I believe a 2-wheeler was 42% of the total turnover in FY '21.

Please give a minute. In VA last year -- if we see in terms of sales, last year, that is '21-'22, we closed that 48% of the 2-wheeler segment.

48%?

Yes, in terms of sales. This year, we are planning to reduce our dependency on 2 wheeler, probably we are reducing to 40%.

So actually it has gone up from 42%, because in FY '21, our 2 wheeler share in the overall turnover was 42%?

That is with the VA numbers.

Talking about VA, let me just clarify. Last year, the VA -- yes, the last year VA, we closed at 14%, which we are anticipating to bring down to 32% this year. Recently, we are shifting our focus, as the market is a little sluggish, we are shifting our focus from a passenger to a commercial and passenger vehicles.

So Saurabh, let me explain this in a better way. While we are looking at VA, VA gives us the better focus where we should be aiming at. And this is where our long-term aim is also, to reduce our 2-wheeler value addition. So the tonnage and sale may look different, the value addition per kg is a critical thing for us. And that is why we are moving out to more - to different segments of the market.

Right, sir. Got it. My last question is...

And we are hoping by this 2-wheeler segment by 25%, 26% to be less than 20%. And that's what we are aiming for VA, on a value addition basis. So that is the key for our business.

Right, right. Got it, sir. My last question is on the margins front. The margins, of course, saw some inflationary pressure, but still we were able to maintain a healthy 12%. So of course, in your opening remarks, you had mentioned that in the midterm, we aspire margins to go back to 14.5%, 15%. Just wanted to know, can we see those levels in the current fiscal?

So in the current fiscal, we are estimating approximately to improve by 0.7% to 1% improvement [indiscernible] to deliver in this year.

So on last year full...

Yes.

The next question is from the line of [ Darshan Jhaveri ] from Crown Capital.

Yes. Congratulations, sir, on a good set of numbers. Sir, I just wanted to know if -- what is our vision for next 2, 3 years in terms of revenue per margins? By midterm margins, I assume by 2025, we are assuming 14% to 15%. So any color on revenue growth that we can expect could be very beneficial.

[indiscernible] and that we are expecting the revenue growth in the range of 18% to 20% on a CAGR basis. That is the estimation we are having in the next...

Till '25-'26.

Till '25-'26. And definitely, then we will be -- as explained by Mr. Sikand and Rajiv Gupta about the shift in the value addition from 2-wheeler to 4 wheelers and EVs. So that is the main thing that will bring and improve our margins. So definitely, we will be able to improve our margins to 14% to 15%, that I think in 9 months to 15 months, is that we will be able to deliver that. The reason being first, we should understand the impact of the aluminum prices, that unprecedented increase in the last 9 to 12 months. So that -- if I remove it, it's a very simple calculation. If I remove that impact, so our margins for the year, like we are talking about quarter 4, 12%. So it was around 13.5%. It is not 12%, when we make a year-on-year basis comparison. So -- and definitely, we are seeing now the prices are easing out in the international market of aluminum. So then, that impact we will see definitely in the coming quarters.

Okay. That's very beneficial. I'm sorry, sir, one more just clarification. So you right now said in FY '23, we can go 0.7% to 1% better margins. That will be the overall full year basis or from quarter 4? Because there has been that 12%. So can I assume 12%...

We are talking about the full year.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Sir, in the last call, you have mentioned that the -- as the aluminum prices have gone up, the margin percentage on the revenue looks lower. And so, when we say in the medium term, we can reach 14%, 15% margin, this is considering that if the aluminum prices and other commodity prices will come down, or even, let's say, it will remain at elevated level, we can still, with the value-added products, can do 14%, 15% margin?

So definitely, the impact of the aluminum prices are approximately 1%, that has been overall at this moment. So 14%, 15% because when we take on [indiscernible] we can take. So without the increase, means that prices are not eased out, so definitely 14% to 14.5%, we can say, and then further 1% improvement. If prices go down at the same level like 1 year back. So definitely, there will be a further improvement of 1%.

Okay. Okay. And in this FY '22 sale or let's say, Q4 FY '22 sales, how much would be the growth due to only the price increase, and how much would be volume or value addition driven?

So the aluminum approximately, we can say 7% approximately, the impact to the aluminum.

7% growth due to the aluminum prices?

Yes. In the Q.

In Q4.

Yes.

Q4 Y-o-Y, right?

Yes, yes.

Okay. So basically, in terms of volume in Q4, we are down Y-o-Y, right?

Yes, yes.

Okay. Okay. And how much would be for full year, same thing?

For full year, approximately 4% to 5% in that range.

The next question is from the line of Raghunandhan N.L. from Emkay Global.

Sir, Alicon has been one of the first movers in the EV space and wanted to understand off late, are you seeing a situation where the competition is increasing from other players?

Well, we have been early movers, and we are not looking at competition from a perception of parts, we're looking at from the technology point of view. So our playbook, even in the EV will be technology. And certain parts in the EV, we have also redefined the EV segment, certain parts in that, where we will be more focused, which is going to be our playbook. And we are making that pitch with Suzuki Japan, with Daimler, Germany. So certain things will evolve. So you can't say that there will be no competition in this line.

Got it, sir. On the PLI...

Also, some of our -- to be very openly speaking, some of our corporates go out and then they're easy to copy in that way. So it's -- we are not doing a rocket science really. But our core thrust area is our thermal engine, and that remains our core business in the EV.

Got it, sir. And in terms of PLI, some details, if you can indicate on investments, expected revenue, incentives or the focus parts, some color, whatever you can share?

Raghu, Tarun this side. On PLIs, we have filed the application with the [ STPI ] and they have given us approval as well. Now they have appointed the survey agency, which is -- will be finalizing, giving us the go ahead in our products. And based on the revenue and the percentage scheme ranging from 8% to 15%, we will be looking forward for the incentive from the government. So this will be taxing down in mid of June.

Got it, Tarun.

We will be able to give more clarity on this.

Yes, sir. I will wait for that. Vimal sir, if you can indicate in terms of inflation, apart from the commodity side for energy, logistics or any other area, where has been the negative impact? And if you can quantify any of them, that will be helpful to understand?

Sorry...

On the inflation, sir, there has been cost increase in energy, logistics. So how severe has been the cost increase, and by when will the -- by when can the company be able to pass on the impact?

So for this, the impact is there. So approximately in the quarter, we have absorbed around INR 3 crores to INR 4 crores cost in this quarter 4. And now we have started the negotiations with the customers already -- we have started these negotiations. And some customers, they have agreed, and hopefully, next coming 4 to 6 months, we will be able to settle down.

Understood, sir. And the share of exports has been increasing for the company. So given this scenario, how much reduction is possible in the working capital days going forward? I mean FY '22, you've already achieved a reduction in the cash conversion cycle, appreciate that. So just wanted to understand the focus for future?

Yes, we are continuously monitoring this and taking all the efforts to reduce this cycle. So like in the last year, we have reduced by 18 days. So now this year also, we have targeted 18 to 20 days further reduction in the working capital cycle. So that we are trying to take up with all -- whatever the customers or with the discounting, all the fronts we are taking it up.

Got it, sir. And just one clarification, did I hear it correct that the goal is to reach 18% to 20% CAGR till FY '26 on the revenue side, based on the order book visibility? And medium-term target margin of 14% to 15%. Would that be a fair way to understand?

Right.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for 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 interacting next quarter.

Thank you.

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