Alicon Castalloy Limited (531147) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Alicon Castalloy Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mit Shah from CDR India. Thank you, and over to you, sir.

Thank you, Darwin. Good afternoon, everyone, and thank you for joining us on Alicon Castalloy Limited's Q3 and 9M FY '25 Earnings Conference Call. We have with us on the call today Mr. Vimal Gupta, Group CFO; and Mr. Shyam Agarwal, Chief Marketing Officer. Mr. Vimal Gupta will provide an overview of the operating and financial performance for the period under review, following which Mr. Agarwal will take you through the developments in the global markets and insights on domestic business. Thereafter, we shall open the forum for a Q&A session. Before we begin, I'd like to point out that certain statements made in today's call could be forward-looking in nature and a disclaimer to this effect has been included in the earnings documents that has been shared with you earlier. I'd like to invite Mr. Vimal Gupta for his opening remarks. Thank you, and over to you, sir.

Good afternoon, everyone, and welcome to Alicon Castalloy Quarter 3 Financial Year '25 Earnings Conference Call. Thank you for joining us today. We appreciate your time and interest in our company. I hope you have had a chance to review our earnings documents shared earlier. Performance in the third quarter was influenced by a volatile macroeconomic environment which impacted demand across key segments and geographies. While we navigated the challenges with resilience, our overall performance was slightly weaker than anticipated, reflecting the thoughts -- reflecting the though industry conditions, revenues for quarter 3 FY '25 stood at INR 393 crores compared to INR 406 crores in quarter 3 FY '24. Top line was impacted by subdued demand in key export markets with severe weakness in Europe. We also had some customer-specific incidents with a production shutdown at India plant of a leading Japanese OEMs and challenges with one of our European 2-wheeler OEM customers, impacting the ability to absorb volumes of our products. While demand for 2-wheeler in the domestic market continued to be robust, it was not sufficient to offset the broader revenue impact. The macro environment remains challenging, with slowing of growth and persistent inflationary trends. As a result, the GDP in real terms is set to slow across most major geographies, resulting in normalizing of growth happening post the COVID super-cycle. In the context, USA seem to be holding up well, but there is sluggishness, particularly in Europe where demand weakness persists. These trends are also coinciding with a slowdown in industrial production, which is anticipated to have bottomed out in quarter 3. Turning to the financial performance, gross margin for the quarter came at 45.81%, making a decline of 543 basis points from 51.24% in quarter 3 of FY '24. This was largely driven by shifts in the sales mix as lower sales in the commercial vehicle segment and carbon-neutral products were not entirely compensated by the growth in 2-wheeler volumes. We also made up-front investments in new technologically advanced plants, embedding robotics, automation and new age manufacturing processes. As these units are yet to scale, the recovery of fixed cost has been suboptimal, impacting the gross margins for the quarter. Some of you may recall our discussions on the earnings call last quarter, where we had indicated that gross margins were softening due to the change in mix. We have seen further impact of that trend this quarter along with the effect of some setup cost for the new projects. The EBITDA was INR 35 crores compared to INR 53 crores in quarter 3 of FY '24 with a margin of 9% versus 13% in quarter 3 last year. The impact on gross margin from higher fixed costs and adverse product mix had flowed into EBITDA. Depreciation rose to INR 23.5 crores from INR 20 crores, reflecting investments in machinery and tooling as well as automation and advanced manufacturing technologies. Pretax profit stood at INR 1.05 crores compared to INR 23 crores in quarter 3 of FY '24, while net profit for the quarter was INR 0.78 crore versus INR 17 crores last year. This is reflecting the impact of the adverse sales mix and the up-front cost of establishing new lines, for which impact is evident on gross profit and EBITDA level 2. For the 9 months period, total revenue stood at INR 1,298 crores, up 14% from INR 1,142 crores in 9 months FY '24. Gross margin was 47.91% compared to 50.6% last year, while EBITDA for 9 months of FY '25 was INR 150 crores, a 7% increase year-on-year basis. The profit after tax for the period was INR 37 crores compared to INR 41 crores in 9 months of FY '24. Our capital expenditure for quarter 3 stood at INR 42 crores, while for 9 months of FY '25 it was around INR 140 crores with investments directed towards machinery and new product development. For quarter 4, we expect further CapEx of around INR 20 crores to INR 25 crores, aligned with our growth initiatives. As we started FY '25, we had guided for INR 1,800 crores in revenue, targeting 15% growth for the full year. After a strong performance in the first half, in the earnings call last quarter, we had indicated that we witnessed softening of demand in export markets of Europe and U.S. as well as in the domestic market. Like we are seeing across the industry with other players who are supplying to the markets of Europe and USA, there has been a sustained weakness in the demand in Europe as well as uncertainty around the evolving dynamics of tariffs and regulations that the new regime may introduce in the U.S., which has made buyers and OEMs adopt a cautious stance. Further for Alicon, there were some customer-specific disturbance this quarter. All of this has meant that volume offtake by customers as anticipated by us at the start of the year did not materialize as we believe that full year performance will be a bit lower compared to expectations. While the near-term environment remains challenging, we believe this is a temporary phase and the long-term growth potential of our industry remains intact. Forecast for the industrial production indicate a bottoming out in calendar year '24 with a revival anticipated in calendar year 2025 and thereafter. Our strategic initiatives focused on product diversification, expanding market research and strengthening our leadership in hybrid technologies positions us well to capitalize on emerging opportunities. Our ongoing engagements with the key clients, including domestic leaders like Japanese auto manufacturers, reinforce our confidence in the road ahead. Our business visibility is strong with a healthy order book position. We are confident that there will be a recovery in the fourth quarter performance and believe that quarter 3 marked the bottom for both revenue and margin, and we will continue to see steady improvement in performance going ahead. We remain committed to navigating the current headwinds while driving sustained growth and value creation for all stakeholders. With that, I will now turn the call over to Mr. Shyam Agarwal for the operating highlights of the quarter.

Thank you, Mr. Vimal. Good afternoon, everyone. In quarter 3 FY '25, global auto industry witnessed 4.6% Y-o-Y degrowth in volumes. Within this, Europe volume declined by 5% and North America by 4.5%, respectively. In contrast, the Indian auto industry reported a healthy performance of 6.6% volume growth, driven by the 2-wheeler segment. Analysis of growth by segment indicates 8% growth in 2-wheeler segment, 2.8% growth in PV segment and 1.8% degrowth in commercial vehicle segment on a Y-o-Y basis. As we progress through the quarter, a few headwinds begin to emerge. The sustained decline in the CV segment took a bearing on the volume offtake by our customers. This was accompanied by challenges in our export markets too. Supplies towards CV products and to customer and Europe are among the categories with highest value-add in our business. Thus, even as we have added volumes in our 2-wheeler business, the impact of top line was not -- was only partially offset. The European market witnessed a sharp drop in commercial vehicle segment in quarter 3 compared to the same quarter last year. As recently in quarter 2, trends were projecting sustained demand and the fall in volume has been fairly sharp, taking the entire industry by surprise. We have seen slightly elevated pressure in supplies to commercial vehicle customers. In Europe, one of our 2-wheeler OEM customers faced some challenges during the quarter. Following this, we have completely stopped production. As a result, they paused volume offtake of parts being supplied to them from our facilities in India as well as from Europe. Coming to the India business, supplies continued to a leading Japanese OEM this quarter with consistent demand for 4-wheeler cylinder heads. In addition to that, Alicon has received one more cylinder head business, which will give us additional sales, starting from financial year '25-'26. Volumes to India plant of a European OEM continued to ramp up. And as we have steadily scaled up volumes to this customer over the last couple of quarters, we are now in talks to enhance the volume further. This customer is making its Indian facility into an engine manufacturing hub, which will serve the domestic market and from which engine will also be assembled and exported to Europe. We are now in discussion to scale up the capacities to align with the second phase investment by this OEM, which will see them double the monthly volume offtake. Interestingly, all of the incremental volume will be for onward supply to global markets. And with this expansion, we will be catering the demand from the new region within Europe, thereby indirectly servicing markets that we have not been present so far. A leading Japanese OEM continued to witness strong demand for their 4-wheeler hybrid models in India. After the plant shutdown in quarter 3, we anticipate the volume to pick up in quarter 4. In fact, over the next 2 years, the expectation is that the monthly supplies of cylinder heads will increase by roughly 80%. Thus, the strong outlook for production from 2 Japanese OEMs, who have good focus on hybrids, coupled with scale-up capacity in the European OEMs, India plant argues well for the PV segment. For another leading European OEM, after-supply initial volumes for their requirements from our European plant, we are scheduled to ship production into our India operation. For this, we have established a plant in India and have already successfully submitted samples with a small lot supplies set to commence shortly ahead of their upcoming launch in quarter 3 of calendar year 2026. Our state-of-art automation plant for this OEM integrates artificial intelligence, robotics and IoT to set new benchmarks in precision, efficiency and smart manufacturing. Featuring cutting-edge technologies such as robotic arms for enhanced accuracy and safety, advanced digital process control for real-time optimization and machine intelligence for data-driven decision-making, the facility aligns with global best practices to meet the evolving demands for our customer and their product requirements. By embedding AI and IoT into our operations, we have significantly enhanced the productivity while reducing rejection rates, ensuring a more efficient and responsive manufacturing ecosystem. While up-front investment in automation have led to higher depreciation and fixed costs in the short term, which are not being fully recovered at present due to the low volume in the initial phase, these advancements position us for the long-term scalability and operational excellence with an elevated margin profile as production volume increases. Now coming to the business wins, in quarter 3, we have added 7 new parts from 7 existing customers. This includes 4 parts from ICE segment, 1 part from structural and 2 parts from the non-auto business. Of these 7 parts added, 5 parts pertains to the domestic business and 2 parts pertain to international business. In India, we have won business from the leading Japanese OEM for a product set to be launched shortly. Traction with 2-wheeler customer is strong for product category to ICE technology. We have also won an order for the structural part for a leading 2-wheeler supplies in India. The 2 parts for the international business cater to requirements of marquee global customers in the non-auto segment. Looking ahead, our total new order booking stand strong providing good visibility for future growth. On this note, we can open the floor for the questions.

[Operator Instructions] We have the first question from the line of Yash Bharat Dalal from Sushil Financial Services Private Limited.

So just a few questions from my end. Firstly, in terms of the margins, of course, they've been compressed this quarter. So I want to understand from the expenses, are there any one-offs in this quarter that we won't be seeing in the coming quarters?

So yes, if you see that the mainly -- if you review the results, so major impact has come from the gross margins, where this is due to the change in the sales mix, where we have seen the reduction in the volumes of high-value addition parts and the increase -- some increase in the volumes from the 2-wheeler parts, where margins are low. That is the major impact. But when we are talking about the expenses, so definitely, as a company, we are taking lot of actions for further cost reductions. But onetime, yes, there is some costs we have absorbed due to the some issues we have seen with one customer, global customer. So there we have to absorb onetime cost here.

Okay. Okay. And what is the impact of these development costs and for advanced technology and your new lines in Q3?

Yes. When we are talking about this, so when we are -- earlier we were discussing that the new EV parts, the e-axles we are developing. So that development is in now full swing. And it is a very critical part. And due to that, lot of what we call challenges we face in this development. So due to the criticality, so failures, rejections, all this and then we have to do a lot of experiments on that to further development. So those costs are there.

Okay. And you had mentioned about your CapEx. What kind of capacity will it be adding?

So that I think this major CapEx is going on for the EV part, that developments are going on. And hopefully, because this will give additional approximately INR 200 crores to INR 300 crores, INR 250 crores to INR 300 crores in that range of additional capacity in the next coming 2 years.

Okay. Okay. And coming to your order book, what is your total order booking for FY '25 and your overall till date, if you could quantify this?

Yes, Yash. So our order book is around INR 9,000 crores as on today. So we have added in this quarter also the 7 parts, which is almost INR 500 crores turnover from the new order. So if you see this with the INR 9,000 crores, so we have almost a run rate of -- we have cover for next 5 years as far as our current turnover is given.

Okay. Okay. And can we still -- you had mentioned earlier in your previous calls that of INR 2,200 crores top line by FY '26, does that still stand? And what is the outlook beyond FY '27?

So Yash, we feel that because now we have to just keep our fingers crossed and how this -- the geographical challenges we are seeing. So let's see how the things are moving. But definitely, it looks difficult because now the numbers are softening in this year. And what we were talking about, those were the original, I think, 3, 4 years back, we have put the target. And due to some delays, what we are seeing from the EV OEMs, so maybe that we need to postpone by at least 1 year.

Okay. So by FY '27? Okay.

Yes.

Yes.

And just one last question. Could you please provide an outlook on your EV and export business?

Yes, Yash. First, I complete the previous one. So we have our budget-making exercise, which is going on and it will be completed by second week of the next month. So maybe in our next investor call, we will give you the more idea on the next year turnover. So that will be more logical from our side, Yash, just to cover that. Yes. What was your next question, Yash?

Just -- sure. And just outlook on your EV and export business?

Yes, Yash. So as you know, the EV is not doing good globally. You know that we have taken lots of new orders from the EV. And currently, we are seeing the demand is not very good in India and also on the export market. But we are very hopeful that in 1 or 2 years, the demand should pick up. And there, we will see the good numbers from the EV for which we have put lots of efforts from our side and also lots of CapEx investment, which we have done. So right now if you see, we are getting -- just a minute, I tell you. Yes. So EV currently covers 18% of our total turnover right now. And if we see the export, export is around 30% of our total turnover.

The next question is from the line of Raghunandhan N. L. from Nuvama Research.

Can you help us in understanding the mix on a YTD basis for 9 months FY '25, what would be the share of 2-wheeler, 4-wheeler, commercial vehicle? And how was the same mix last year?

Yes, Raghu. So 2-wheeler currently contributes 40% of our turnover, if we see and passenger vehicle around 38% and commercial vehicle around 15% of our total turnover. This is I'm saying cumulative till quarter 3.

And can you give a comparison versus last year?

Yes. Last year to this year, if we see the 2-wheelers, so last year, the contribution was 42%, which has reduced to 40%. Passenger vehicle, which was 32% last year, now it's 38%. And commercial vehicle, as you know, globally, it is coming down. So last year, it was 20% and this year, it is 15%.

Understood. And specific for this quarter, how much would be the 2-wheeler?

This quarter, quarter 3, it is 36%, the 2-wheeler contribution.

43%.

Sorry, it is 43%.

Got it, sir. So in terms of exports, the share of export has gone down to 24% versus 28% last year. Within exports, what would be the rough share of Europe and North America? And how much has been the decline in both these regions, YTD?

If you see Europe contributes -- Europe and U.K., they contribute almost 65% to 70% of our export and 30%, 35% is USA. But if you see in the decline side, so we have seen more decline in Europe as compared to the USA.

And as you indicated that it's better to be cautious as of now, but what is the sense you're getting based on your interactions with customers? How long do you think the weakness can continue? And when do you expect a recovery? And relating to that, you are obviously working on strengthening your presence in overseas markets, negotiating order wins, hiring more people in marketing and also diversifying into new segments. So if you can give some thoughts as to how you see this segment pan out over the next 1 to 2 years?

Yes, Raghu, if you see the macro environment right now, so we are seeing the worst was quarter 3, if you see the global indicators. So we are seeing there should be a recovery in the global market as well as in the domestic market. Here, we see the faster recovery or the holding will be more in the North America, while the Europe will still take some more time. The sentiments in Europe is still weak as compared to the North America. And if you see in the segment, so if we see like commercial vehicle will still be affected in Europe, while the recovery will be more -- much better in the North America in the both commercial vehicle as well as in the passenger vehicle. If we see in the technology front, so we are seeing the hybrid will still do good in India as well as we are seeing in North America the demand for hybrid is much better as compared to pure EV vehicles. However, everybody is anticipating there is a natural transition from ICE to hybrid and then hybrid to EV. But I hope this should be more prominent in -- after 3 to 4 more quarters later.

Understood, sir. Vimal sir, if you can indicate, you referred to that some upfront cost incurred relating to new lines. How much should be the quantum? And is that likely to repeat in the coming quarter?

Raghu, it is a decent amount because approximately, we can say that it is in the range of INR 4 crores to INR 5 crores that we have lost for the development for the new projects. And definitely, in coming quarter also, maybe there will be improvement because once we start, then there is a huge impact of the cost. And then slowly, we start recovering that and the improvement in our operations. And we hope -- there will be definitely a decline in quarter 4, but further impact we'll see on continuous quarter-on-quarter basis.

Understood, sir. So these are certain overheads, fixed cost, which you have upfront started taking. And as the ramp up happens for the new orders, that fixed cost absorption will happen?

[ Segmently ], you see that because now this is -- you must have seen that Alicon is having the biggest CapEx in this year in the history of last 20 years. And we are now developing the most critical part for the EV also. So these are the challenges we are having initially.

Understood, sir. And in terms of business ramp-up in FY '26, you referred to 2 Japanese OEMs, one European OEM. There is also one U.K. OEM. So like what is the kind of SOP that can get added for FY '26 based on your current understanding?

Yes, Raghu, so I'll just highlight on that. So when we mentioned the new volume addition from the Japanese OEMs, so there we see a good traction on that. And with both the Japanese OEM, as I have mentioned in our con call also, we see the volume will be picked up almost 80% to 100% in next 1 to 2 years' time. So that kind of a volume we are seeing. And same way for the European customer, whatever volume we are supplying, we are adding the capacity. And the volume will be double by end of this year. So that kind of a volume, we are working on that. And as Mr. Vimal mentioned, because of these addition in our capacity, we have done lots of CapEx, which is the highest in the history of Alicon, if you see. So we are seeing that from this quarter onwards, we will see the good performance from Alicon. Sequentially, it should improve on quarter-on-quarter basis.

The next question is from the line of Jyoti Singh from Arihant Capital Markets Limited.

Sir, just wanted a idea on the order book size that we plan to supply for Tata Motors, if you can highlight?

Sorry, Jyoti, your voice was not very clear. If you can repeat once again.

Yes. Sir, if you can give us a idea on the order book that we have for the Tata Motors. So what's update on that front?

Okay. So Jyoti, generally, we don't -- we avoid with the specific customer detail on con call. So maybe we can take your call offline. So specifically to the customer, we would like not to answer in this con call.

Okay. No issues. And sir, how is the margin we are seeing from the new businesses...

Sorry to interrupt, ma'am, but we request you to change the mode on your device because it echoes a little in between.

Yes, sure. So just a idea on the new business side, how is the margin we are seeing from the new business?

Jyoti, generally, when we were explaining that when we are finalizing the new businesses, we always look for the better margins and the ROCE. So on that basis, we are finalizing. And...

Yes. Jyoti, also, I would like to elaborate a little bit on this. So if you see the -- whenever we take the order, it depends in which category we are taking, whether it is a 2-wheeler, 4-wheeler, it is a domestic export and what is the criticality of the parts. So based on that, the prices, the margins are decided and also it also affected by the competition. So generally, if it is more critical part, which we are expert to develop, we charge higher margin. But if it is a very simple part for the 2-wheeler, of course, the margins will be less. So it is as per the market demand and the criticality of the part, the margins are decided.

Okay. And also, sir, as we have a major revenue mix from India and -- but a lot of issue that is going on, on the Europe and U.S. So how is the demand we are seeing from the India business comparatively Europe and U.S.?

Yes, Jyoti, if you see like in India, we have grown by 6.6%, while Europe and USA, we have seen the de-growth. So of course, we are seeing the higher demand from India, not only in this quarter and also in the next quarter onwards that the demand from India will be higher. But as you will also appreciate that we also have to do the risk mitigation. And that was the purpose that we have developed more part for the Europe and for the USA. And also for the various technologies like EV. We were the early movers in the EV. We developed lots of parts. But somehow EV currently is not doing good. But in future, of course, it will do good. And there, we will see the fruits, what efforts we are putting right now or the CapEx we are putting. So we are very hopeful that in future, we will see a higher performance, much better performance in terms of the top line as well as for the bottom line. Secondly, we are also working on the skill level of our people. And also, as Mr. Vimal told, we are putting lots of efforts on the smart factory, which we have put in for the robotics, IoT and the AI, the use of AI. So that will also give us much better performance in the coming quarters.

And sir, last question on the like geography side is not doing very well for us and for other OEMs. So are we planning to shift any plant to India?

Jyoti, generally, if you see, we are in the business of B2B, okay? So when we are supplying the parts is going to the OEMs. And there, if they change the source or change the location, it needs lots of PPAP activity, the vehicle validation, lots of costs are there. So some of the customers do, but these practices are very less in the B2B businesses, considering the long lead time for the development and the validation cost. Of course, as you know, India is a leading cost country. And because of lots of geopolitical issues, lots of OEM wants to source out of India. So we see the sourcing, of course, will increase out of India, but the re-sourcing is always a challenge considering the cost which is needed for the validation and the development of the parts.

Okay. And sir, how much like currently capacity utilization across the plant, if you can give us the average?

Yes, Jyoti, currently, we are running -- if we specifically see the quarter 3, so we are running at the capacity of around 70% to 75%.

[indiscernible].

Yes. Because we have dedicated facility for different, different parts. So some parts which we have developed, but still in the ramp-up phase. So there, the capacity utilization will be less. Some of the parts which are running in the full swing, the capacity utilization more. So if you see on the average term, it will be around 70% to 75%.

[Operator Instructions] The next question is from the line of Devang Shah from Asit C Mehta Investment Intermediates Private Limited.

Sir, as far as EBITDA margin is concerned, as you were saying, because of the onetime expense, we have seen some kind of decline in margin and it was somewhere close to 9%. So moving forward, will you be -- come to your original territory of EBITDA margin with your new product mix somewhere close to 12% to 13% kind of range from coming quarter onwards and for coming years?

Yes, definitely. This is a short-term just that we can say that we got in quarter 3 due to the change in the sales mix and maybe some onetime costs. So then you will see quarter-on-quarter the improvement. And very soon that we will catch up the numbers.

Okay. And sir, what is the -- as we did a heavy CapEx this year, what is the CapEx plan for next year?

I think that will be good that we discuss in the next our call because at this moment, we are in process of finalizing our budgets for the next year. So maybe in mid of March, we will be able to finalize it. So that will be the right time to give some idea about that.

And sir, initially, you have mentioned that you are finalizing your budget. So as far as revenue growth and trajectory also, so you are going to highlight from next con call or after the next quarter results, sir, after you finalize your budget?

Yes. Yes.

Okay. And last question, sir. Any kind of -- generally, we are seeing that -- I read somewhere because we are exporting some kind of auto ancillary to U.S. as well. So because of such kind of tariff war emerging so far started, do you feel there is some kind of opportunity also emerge from the global market, especially from U.S.? And if I'm wrong, then also correct me, sir, if something is being misunderstood by me.

Devang, very right question. We are also keeping our finger crossed. We are seeing with the lots of things right now that tariff war is going on, new tariffs on the -- some countries that is going on. Hopefully, India has a good relationship with the U.S. So hopefully, we should be benefited. But let's see how it moves on. Maybe in 1 or 2 months' time, once we will see more clarity, then we will be able to answer you in a better shape.

The next question is from the line of [ Moksh Ranka ] from Aurum Capital.

Sir, I used to follow the company from 2018. So we used to be exclusive supplier to Ather NV. We were the ones who like the first designed their product. So are we -- do we have any plans for supplying aluminum castings for their new models? Also, they are setting up a capacity, which is close to our plant. So will that be a possibility in the future?

Moksh, you are talking about Toyota? Your voice was not very clear.

I'm talking about Ather Energy.

Okay. Moksh, we actually -- if you see, we are not pushing more sales for the 2-wheeler considering the margin pressure and especially on the EV. So we are focusing more on the PV side, the commercial vehicle. That's why if you see the contribution for the different segments, so we are putting more focus on the PV and the CV. So currently, the 2-wheeler EV is not our focus area.

The next question is from the line of Faisal Hawa from H.G. Hawa.

Sir, we are talking of this order book of around INR 8,000 crores -- sorry, INR 9,000 crores now. Is there some deadline to the orders being completed? And would it be a right expectation that in 3 years from today, at least our revenue will be double from what it is today?

Faisal, thanks for the question. But for the revenue guidance, as Mr. Vimal said, we are in the middle of budget preparation. So maybe in the next call, we will be in a better shape to give you the idea on our revenue for the next year and onwards. However, as we have mentioned in the con call, we have a strong order book and we will see a good growth in the top line as well as in the bottom line. But right now it's very difficult to give you the numbers on that.

But there must be a deadline to these orders. Are there like some perpetual orders?

Yes, it is for the 5 years till 2028, '29.

Okay. So we have to complete them by then?

Yes, absolutely.

But it will not be very regular or uniform progression of the orders being completed? In some years, we may have some very good execution. Also in some years, the call-offs may not be so good.

No. Faisal, if you see like this is for the -- mainly for the OEMs in the automotive market. So generally, a project for any OEMs, it is the life of 5 years, 7 years like this, okay? So when we get any order, it is for the lifetime of the project, okay? So it will be a consistent supplies from our side and there will also be the end of production for some of the products. So we will get the new businesses, we will supply for the new models and some old models that will discontinue. So it is like it will go. So it is based on the product life cycles that we will have to follow.

Is there one customer which -- who is contributing to almost more than 20% of the order book today?

No, Faisal. We have very, very balanced customer portfolio. And right now none of our customers contributes more than 20% of our turnover.

And sir, there was this project within the company to increase the ROCE and ROE of the organization. Have you made any kind of progress on it? And if not, how soon can we expect some progress on this?

Progress is going on maybe if you see year-on-year, last 4, 5 years. So there is a continuous improvement in the ROCE. And definitely, this is on. And quarter-on-quarter basis, maybe this is the worst quarter we have seen in this quarter 3. But after that you can easily see that there is a continuous improvement in the ROCE.

We have a follow-up question from the line of Jyoti Singh from Arihant Capital Markets Limited.

Sir, just a clarification on the guidance side. We are keeping INR 1,800 crores and INR 2,200 crores for '25, '26 or any changes on that side?

Jyoti, for INR 1,800 crores, that in my speech, I already explained that maybe some -- we will not be able to hit the exact number, maybe some decline in this because this sudden decline in the CV demand from quarter 3. And for next year, the guidance, so we are just finalizing our budgets so that we have explained that in the next con call that we will be able to give more clarity on this.

Okay. And also, sir, we are doing any changes in our strategy because earlier, like till now, we are focusing more on the PV side, but still Q-on-Q mix has been changing and more favorable towards 2-wheeler. I know demand is good from the 2-wheeler side, but still we are shifting again on the 2-wheeler side. So what's your view on that side?

Jyoti, our strategy is for the long term. It is not for the 1 quarter or the 2 quarters. Okay? It may happen in 1 quarter or 2 quarters, but one particular segment can do good. But we define our strategy on the long term. And in the long term, our firm belief is that if we focus more on the passenger vehicle or the new technologies like hybrid or the EV, there we will get more fruits in the future. And with that, we are working. So right now also, we don't have change in any strategy to put more focus on the 2-wheeler. Of course, 2-wheeler is important to cover the fixed cost, so that we are doing. But our ultimate plan is to put more focus on the passenger vehicle, commercial vehicle, EV, hybrid and the export market. So those are our focus areas.

Okay. And sir, on the -- like can we talk a little bit on the Maruti side with their new plant, Gujarat, how the progress is going? And also, the -- how the order execution that is going on, if you can explain on that side, it would be helpful.

Okay. Jyoti, I would say like Maruti Suzuki, as you know, they are the leading 4-wheeler company in India. And we have a very good amicable relationship, very strong relationship with all Japanese OEMs, including Maruti Suzuki. So I would say in this call, not specifically for one customer, but we have a strong relationship and we are seeing that very good volume growth we will see in the coming quarters with all OEMs and also with the Maruti Suzuki.

[Operator Instructions] We have the next question from the line of Manas Jain from [ JUS Enterprises ].

Manas here. Sir, just looking across the prior quarters for last quarters from FY '21 to FY '24, what -- and we had given similar product mix in FY '21, '22 and still our gross margin and EBITDA margin was at least around 10% to 11%. So what -- I mean, what is explaining this? I was trying to dice the data from all the angles, but I still can't understand how we have gone to 8%. Within the worst of times, we were there around 10% to 11%. So this is something I want to -- management to at least help us understand what led to -- this is such a bad fall?

Mainly the raw material cost is going up when you see maybe comparison for the last 3, 4 years. So when you're talking about from '21, the prices of aluminum have gone up, but not -- the value addition is not grown in the same proportion. So automatically, the ratio goes up of the raw material. And as a percentage, the margins goes down. And when we have built up in the last year -- last 2, 3 years, we have started building up the margins based on the bringing the new businesses from the commercial vehicles and the passenger vehicles. So that is the main reason that we have built up and reached the gross margin of 51% -- more than 50%. And when we go to the 2-wheeler or maybe that mix also, when you are talking about, it is not like actually only 2-wheeler and 4-wheeler. In the 4-wheeler also, there is a mix. So where some part, especially the commercial vehicles, we are having a very good value addition, the gross margins. So that has given a big hit when we saw that approximately how much -- 30% decline in this quarter. So that has given a major impact.

So when you're saying 5% fall in the CV volume, so when we compare as a percentage to sale, so that 5% had the severe margin impact. Is this -- is my understanding right? It had such a severe impact even quarter-on-quarter.

[indiscernible]. No, It's not 5%. It's 30% I'm talking about commercial vehicles. And then the KTM where the export 2-wheelers having the good margins. So that there is a slowdown.

Okay. And also, I mean, the second question, where we said the Toyota, there was some shutdown due to which we had an impact on that too. So what will be the impact? And will it flow in the next quarter if there is -- I mean, if the activity starts again?

Yes. Okay. Manas, for this particular customer, of course, there is a year-end shutdown is there. And in between, they stop the production to increase their capacity, okay? So now that shutdown is over. And from this quarter, from January, we are seeing the regular offtake from their side. And with their plan, we are seeing that demand should further increase. In next 2 years' time, we will see the 80% increase on the volume front from this particular customer.

Okay. But what was the impact this quarter just for bookkeeping purpose?

We generally -- Manas, in this con call, we don't give the specific number for particular customer. We can discuss it offline.

Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Thank you. As we have shared, we remain confident of an improved performance going forward. Our deep engagement with customers and the growth plans they have indicated -- indicating provide us comfort that we will see increased volume from quarter 4 onwards. With our process expertise, backward integration in design and engineering, combined with focus to enhance manufacturing capabilities with addition of newer technologies, our focus is on strong execution of the orders on hand. We also believe the quarter 3 marked the bottom of the cyclicality in the industry and that there will be an improvement in export markets of Europe and U.S. as well as an enhanced demand environment in India. This will ensure that our revenue and margins performance will improve going forward starting with a sequential improvement in quarter 4 and further building up into FY '26. Our association with Enkei positions us well to optimize the opportunities ahead. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification 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. On behalf of Alicon Castalloy Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.