Alicon Castalloy Limited (531147) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Alicon Castalloy Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you.

Thank you, Ryan. Good morning, everyone, and thank you for joining us on Alicon Castalloy Limited's Q1 FY '27 Earnings Conference Call. We have with us on the call today Mr. Sumit Bhatnagar, Group CEO; and Mr. Vimal Gupta, Group CFO. Mr. Sumit Bhatnagar will begin by sharing his perspectives on the industry environment and overall business performance. Mr. Vimal Gupta will then take you through the financial and operational performance for the quarter. Before we begin, I would like to remind you that today's discussion may contain forward-looking statements that are subject to risks and uncertainties. The relevant disclaimer is included in the earnings materials that have been circulated earlier. I would now like to hand over the floor to Mr. Sumit Bhatnagar. Sumit, over to you.

Thank you, Mayank, and good morning, everyone. Let me begin by thanking all our investors, analysts, shareholders for joining us today. This is my first investor interaction with you after taking charge as the CEO of Alicon effective 1 April 26. So before I speak about the quarter, I would like to take a moment to share with you how I see Alicon, where are we today and more importantly, where are we going. When I took charge, I articulated three words to the organization, which is reset, refocus and rebuild. And I clearly remember that I did share this with you during my last call in the last quarter. These three words are not about changing the fundamentals of Alicon. In fact, it is quite the opposite. We believe Alicon has a strong foundation over the years, strong customer relationship, deep casting and manufacturing capabilities, a credible technology platform, global exposure and most importantly, a talented and a committed organization. Our objective is to take these trends and sharpen them. We want to make Alicon more agile, more efficient, more customer-focused and more scalable. And therefore, a reset, refocus and rebuild is not a short-term program. It's the operating philosophy with which we intended to build the next phase of Alicon. Let me start with the market environment. The Indian automotive industry, it continues to remain structurally very strong. The underlying demand environment has been positive, and we have seen healthy growth across the major automotive segments. More importantly, the latest industry data continues to support this positive trend in Q1 FY '27. The passenger vehicles recorded their highest ever first quarter sales at approximately 1.57 million units, growing to around 11.3%. 2-wheelers grew 21%, and commercial vehicles grew 19.5%. So the overall environment is quite supportive. But what is particularly encouraging for us is that Alicon has grown significantly faster than the underlying market. During the quarter, Alicon registered a year-on-year growth of approximately 37.7% on a consolidated basis and 43.6% on a stand-alone basis. If we adjust the impact of material inflation, our underlying volume or growth is approximately 17.5% on a consolidated basis and 22% on a stand-alone basis. For me, this is an important number because it demonstrates that our growth is not simply a function of higher commodity prices being passed through to the customers. There is real underlying growth happening within the business. Our commercial vehicle business is particularly a good example. We have registered approximately 26% growth in commercial vehicle segment, supported by the conversion of some of the businesses we acquired recently into mass production. This is precisely the kind of growth we want to build growth that comes from new customers, new programs, increased wallet share and successful industrialization. At the same time, Q1 was definitely not an easy quarter on a profitability perspective. The quarter witnessed a significant volatility in the input cost, particularly because of the geopolitical developments in the Middle East, metal prices, gas prices, tooling costs and several other input costs moved sharply. This created pressure across the entire automotive supply chain and Alicon was definitely not an exception. Therefore, while the top line performance was strong, the inflationary environment created a huge pressure on the margins and profitability. This is something we are addressing very aggressively through our operational efficiency initiatives, which I will come to you shortly. Now if I look at the automotive technology transition, it's very clear that there are most important structural changes which are taking place in the industry, the transition towards the new [ powertrain ] technologies. We believe the future automotive landscape will not be defined by a single technology. It will be a combination of ICE vehicles, hybrid and electric and other emerging technologies depending on the application, geography, infrastructure and the customer requirements. We see particularly a strong potential in hybrid vehicles. Our current assessment is that the hybrid segment could grow an approximate 25% to 30% CAGR over the next several years, while EVs could grow at approximately 20% to 22% CAGR over four to five years of time. This is strategically important for Alicon because we are already well positioned. We have a strong presence in hybrid vehicles, including supplying the largest hybrid vehicle manufacturing company in India as a single source supplier. This is a significant strategic advantage. At the same time, our EV portfolio is also expanding. We are supplying products such as electric motor housings, e-axle housings, battery housings, inverter housings to the leading Indian and global companies in the EV ecosystem. So we are not betting on one technology, and we are positioning Alicon to participate in the entire evolution of vehicle architecture. And this is where our technology and engineering capabilities become extremely important. Now with the three words reset, refocus, and rebuild, let me first talk about what we are trying to reset. This is the first pillar. When I say reset, I do not mean starting from 0. We are not changing the basic fundamentals of the company. We are sharpening our strategic intent. The first objective under reset is to create what I call as an island of excellence. We want Alicon to become an organization where excellence is not dependent on an individual or a particular plant. It becomes a culture. It becomes a system and it becomes the way we operate every day. One of the most important areas for me personally is people. We are redefining our people policies with the objective of making Alicon one of the most desired workplace in the industry. Over the last past few months, we have significantly strengthened the organization. We have brought in experienced and highly quality talent across technology, quality, process engineering, human resource, maintenance, safety and manufacturing and supply chain. We have hired some of the best talent from across the industry and the country, and I'm particularly pleased with the quality and depth of leadership team that is now coming together. The organization has been rebuilt to prepare Alicon for multiple growth. Now talking about the refocused strategy, which is the second pillar. Refocus means being very clear about what we want to play, which customers we want to serve, what capabilities we want to build and importantly, where can we create the highest value. We are looking very closely at our customer portfolio. We are asking ourselves a very simple question. Are we getting enough value from every relationship, every program and every capability that we have built and our objective is to increase value addition. During the quarter, which has just gone by, we registered an approximate 17.6% growth in our value addition. But we believe there is a considerable headroom ahead. We are, therefore, working extensively on improving our operational efficiency. Every factory, every process and every function is being examined through the lens of productivity, cost and quality. We are looking at our conversion costs. We are looking at energy consumption, tooling, rejection, [ rework ], health of the machines, logistics, inventory and every single form of waste in the system because in an inflationary environment, we cannot simply rely on the price increases to protect the margins. We have to become structurally more efficient. This is the philosophy behind refocus. And I believe this will become one of the most important drivers for margin expansion for Alicon over the medium term. Now talking about rebuild, which is the third pillar. Rebuild is fundamentally about building the future growth engine of Alicon. This includes rebuilding our customer base, strengthening our order book, adding capacities ahead of demand and creating the manufacturing infrastructure required to support the next phase of growth. Recently, we announced an investment of approximately INR 125 crores over a period of next two years at our leased facility at Shikrapur. The facility is approximately 1.36 lakh square feet. We deliberately chose to lease facility because we want to significantly reduce our time to market. At this facility, we are investing in GDC, LPDC and machining capabilities to support the recently acquired businesses. Based on our current programs, we expect this facility to generate approximately INR 500 crores of annual revenue over a period of four to five years of time. But I want to emphasize one thing. This is just the beginning. We are already evaluating additional opportunities to increase our capacity, and we expect to announce further investments as these opportunities mature. Our philosophy is now very clear. We will invest behind visible demand, but we will also build capacity ahead of the growth curve where we have strong customer visibility. Now let me quickly also talk about the recent order books. The other important part of rebuild strategy is our customer and order book strategy, and I'm happy to say that we had a very successful quarter on this front. During the last quarter, we acquired businesses across both automotive and non-automotive segments, which together have the potential to generate more than INR 450 crores of revenue over the past next five years. This is strategically important because these are not just the incremental orders, they expand our customer base, increase our addressable market and create opportunities for additional programs. We're also working very closely with several Indian and global customers and expect to book additional high-value orders during the current quarter. Another important milestone is that we have recently gained entry into two large Indian passenger vehicles and commercial vehicle OEMs. And together, we currently have visibility of approximately INR 850 crores of business over the past next five years with these two customers. And these are the orders which are already booked with them. For Alicon, this is much more than a number. These customers additions strengthen our position in the Indian automotive ecosystem and create a platform for multiple future programs. At the same time, our relationship with some of the largest global commercial vehicle OEMs continue to grow consistently. We are acquiring multiple programs from these customers on a regular basis. And what is particularly encouraging is that we are now receiving inquiries from global OEMs with whom Alicon has never before. That tells us our capabilities, quality standards and technology are increasingly getting recognized globally. We will, of course, update you as these opportunities mature and become firm business wins for us in future. Now let me quickly also briefly talk about our Europe operations. Our European facility reported a lower sales during the quarter, primarily because the production ended for certain parts that had reached the end of production cycle, which is quite normal of an automotive business. What is important that we have already acquired new businesses, and we expect the European operation to make a strong comeback as these programs ramp up. Our objective remains to build a sustainable and profitable European business with a healthy pipeline of new programs. Now let me also quickly touch upon our profitability, while the numbers will be taken up by our CFO, Vimal Gupta. Coming to profitability, despite the challenging input cost environment, our performance was better both year-on-year and sequentially on the relevant consolidated and stand-alone comparisons. I would like to put this in context. The quarter was characterized by strong revenue growth, but also by significant volatility in input cost. Therefore, our immediate focus is on ensuring that the strong top line momentum increasingly translates into profitability. This is where the three pillars come together. Looking ahead, as I look at Alicon today, I see a company at an important inflection point. We have a strong market behind us. We have technology transitions creating new opportunities. We have a strong leadership team. We have new customers. We have new programs. We have capacity investments underway, and we have a growing pipeline of opportunities across India and global markets. But I also want to clarify that we are not going to chase growth at any cost. Our ambition is profitable, sustainable and capital-efficient growth. The quality of growth matters to us as much as the quantum of growth. We want to improve our customer mix. We want to increase value additions. We want to improve asset utilization, reduce waste and also we want to strengthen our margins. And we want to generate superior returns of capital we deploy. Our ambition is, therefore, not simply to become a larger aluminum casting company. Our ambition is to become a technology-led, globally relevant, high-value manufacturing partner to automotive and selected nonautomotive customers. And I believe that we have the right ingredients to achieve that. With that, I would like to hand over to our CFO, Mr. Vimal Gupta, who will take you through the financial performance for the quarter. Thank you.

Thank you, Sumit, and good morning, everyone. We have commenced FY '27 with a strong performance and importantly crossed INR 500 crores of quarterly sales for the first time in Alicon history. During the quarter, total income stood at INR 579 crores, growing by 37% year-on-year and 17% on a sequential basis. The EBITDA was INR 55 crores with the EBITDA margin of 9.5%. We are pleased to report strong growth in profitability with profit before tax of INR 18 crores, growing 45% year-on-year and profit after tax INR 12 crores, higher by 23% year-on-year basis. From a revenue perspective, the quarter was supported by higher volumes and program ramp-up across our domestic business together with steady execution of existing customers programs. Our international business, however, had a relatively softer quarter. This was largely in line with our expectations as certain mature programs in our European operations are nearing the end of their life cycle, while the next set of programs is yet to ramp up to meaningful production volumes. As a result, we are currently in transition phase where the decline in legacy business has not yet been fully offset by new program launches. Given that our stand-alone operations continues to deliver stronger profitability, this temporary gap in the international business has also had an impact on our consolidated margin profile. We remain confident that as these new programs move into production over the coming quarters, the performance of our international business will improve progressively. It is important to highlight that the growth during the quarter reflects a combination of volume growth, program ramp-ups, new business execution and the impact of price movement in aluminum base and other alloys. On the margin side, profitability during the quarter continued to be affected by higher input costs, including aluminum and other alloys as well as increase in employees, energy, logistics and other operating costs. There are three distinct factors to consider when looking at our margin trajectory. The first is raw material inflation, primarily aluminum and related alloys. These costs are contractually pass-through in nature and are fully recoverable from customers, albeit with the timing lag. The second relates to manufacturing costs such as labor and other operating overheads. We are actively engaging with customers to recover a part of these costs increases through price revisions. We have already secured approvals from some customers, while discussions with others are progressing well, and we expect further closures during the current quarter. The third and perhaps the most important from a long-term perspective is improving the underlying cost structure of the business. This is entirely within our control and includes initiatives around productivity, automation, process optimization, manpower efficiency and better absorption of fixed cost and as volume grows. At the same time, we are consciously improving our business mix by increasing the share of higher value-added products involving machining, engineering and more complex manufacturing. Our objective is, therefore, not merely to recover inflationary costs, it is to improve the structural profitability of the business and build a more resilient margin profile over time. We are confident that these initiatives will become increasingly visible in the margin profile as the benefits accumulate and the newer capacities towards high utilization. Now coming to capital allocation. The new manufacturing facility announced during the quarter represents an investment of approximately INR 125 crores. It would be important to highlight that these -- we are pacing the investment over two to three years rather than deploying the entire amount upfront. The project will be funded primarily through internal accruals supplemented by borrowings as required. The pace of investment will be aligned with the progress of customer programs and the requirements of the facility. This is consistent with how we intend to approach capital allocation more broadly. Investment should be supported by customer demand, have a clear path towards utilization and generate appropriate return over time. For quarter 1 FY '27, capital expenditure was approximately INR 40 crores and for the full year, it is planned approximately INR 150 crores. This includes around INR 70 crores out of INR 125 crores earmarked for the new manufacturing facility. Now coming to the outlook. Including the recent order wins, the quarter Alicon's executable order book stands at approximately INR 8,450 crores as on 30 June, which represents executable orders over a period of six years from 2026 to 2031. This doesn't include programs that are currently ongoing and had already formed part of revenue prior to FY26. For FY27 financial priorities. From the financial perspective, therefore, I would summarize our priorities for FY27 in four areas. First, to support 8% to 10% underlying top line growth that we have guided for while maintaining the quality of the growth. Second, progressively improve margins through a combination of customer recovery and internal productivity measures. Third, to deploy capital in line with customer demand and maintain discipline around leverage and cash flow. And fourth, to improve working capital efficiency and to ensure that a greater proportion of our operating performance converts into cash. We recognize that these improvements will not necessarily happen in straight line each quarter, but the focus is very clear and the initiatives are already underway. With that, we would now be happy to take your questions. Thank you.

[Operator Instructions] We take the first question from the line of Raghunandhan N.L. from Nuvama Research.

Congratulations, Sumit sir, for the strong first quarter with your leadership, wishing many more milestones ahead. Thank you very much for sharing the order book execution time line in the presentation. This is very helpful. Two questions. On the domestic market, good to see strong growth and customer additions. Can you talk about the overseas business, considering maturity of some programs, there was some softness in Q1. How do you see the performance in remaining part of the year and also for next year? Also, if you can provide how do you see the total revenue outlook for FY '27? And over a two, three-year basis, a three-year outlook, how would you see the revenue expanding?

Thank you, Raghu, for your question. I think you have asked three questions. The first question you have asked is on the performance of our global operations. I think you're talking about the European operations. Okay. So yes, you're right, Raghu. And I've also said that we saw a little downfall in the business volumes at the European operations because some of the critical products reached their end of life. But the good news is we had acquired e-axle business from one of the biggest -- one of the largest automotive giant in the world. And this business is already under development. We have already invested in very latest technologies in this plant, which will be the starting point for this plant to be seen as a high-technology plant by the European OEMs. So this is one. Secondly, there are some more businesses which are right now under development from some of the bigger, again, big automotive giants in Europe, which will come into SOP towards the later part of the year. So the slow growth or I would say, the reduced growth what we have seen in the European operations may continue for one or more quarter, which will not be significantly lower than what it has already been. But we see a reversal trend from the last quarter of this financial year. And next year, definitely, we want this plant to be coming back to the normal state. So this is how it is happening there, but I can tell you that we have already hired, again, a lot of experts in this factory to bring new businesses, work on the technologies and uplift the complete manufacturing part of Europe. And those investments when they happen, we will definitely come back to you and tell when it is happening. But the new investments on the technology for the new businesses one has already been committed in the last year, and it will show results from the third quarter of this financial year. So this is one. Secondly, your question is on how do we see this financial year FY '27. If you remember in the last quarter, when we were actually meeting you for the first time, we were talking about a modest growth of 10%. And I clearly remember that investors also had asked me at that time that this looks to be very modest and does not have an aggression. Good that we have a great start, and we want to continue this journey. I can see a growth of approximately 12% to 15% coming in this financial year, which is neutralized to the material effect. So this is not because of the inflation, but the true growth is approximately 12% to 15%, which I can see in this financial year FY '27. And I think your third question is that how do we see the coming two to three years of time? This is going to be a journey of growth for us. We will make some strategic decisions, which we will be letting you know when they are happening. But this financial year is the year of setting up the capacities. We have invested in one factory. We have plans, which we will only announce you soon, but we may soon come with more investments very early, I would say, in a different part of the country. But before it happens, they will definitely announce our plans about it, but we are working on our strategies, and we will be announcing it soon. Organically, we see major investments coming in next two years of time. On inorganic growth, there are some plans which I cannot share with you, the investors right now. But I promise you that by the fourth quarter of this financial year, I will also show how inorganically Alicon grows. And the growth rate what we are indicating for this financial year, definitely, we are looking for a similar growth rate for the next few years as well. I hope that answers Raghu the questions you have asked.

And just a clarification. So in Q1, the actual growth was around 17.5%. So that is the growth you are referring to when you are taking a one-year and a three-year outlook. Is that right, sir?

Yes, that is right. That's the right assumption.

Second question to Vimal, sir, on the margin side. Sir, good to see INR 18 crores PBT in Q1, which is a 20% growth Y-o-Y, a strong performance. On the margin side, how do you see the [ receipt ] of that price increases from customers for the various cost inflation in coming quarters? How do you see the margin outlook for coming quarters and taking a two-year view, where do you want the margin to go back? If I talk FY '28, FY '29, how is the aspiration? Where do you want to take the margin levels back?

Raghu, if you go for the margins for the last year, it was approximately 11.4%, I remember. And this quarter also, we have reached up to that same level that we had in the last year, even after having the lot of impact of the cost increases, the inflation we have seen. Against that we got some corrections from the customers, but not full. So those are under discussion and maybe some part we will get in quarter 2 and maybe quarter 3 also because you know that OEMs immediately they don't give all corrections immediately. So they take time and all these things are happening. So for this year, what -- on the growth side, Sumit has already explained 12% to 15% growth we are expecting by neutralizing the impact of the aluminum. On the other, we are also expecting at least 1% improvement in the EBITDA margins. So this is the our expectation for this year -- and hopefully, that maybe in the coming -- what you are talking about in the next two to three years, progress like what we are investing on that basis. And further, it will improve only, I can say, but it is difficult to give the guidance for the future for that, because a lot of initiatives we are taking on the cost side and our business restructuring as well as giving the more focus on the high VA and the high-margin parts.

So we can only tell Raghu, that we will be progressively looking for improving the margins as well in the coming years.

We take the next question from the line of Avinash Nahata from Parami Financial Services.

Yes. Am I audible?

Yes. You're audible.

Yes. So the first question is when we are talking about INR 8,000 crores order book, can you talk about how much is non-automotive built into this, the six years visibility what we have provided?

Non-automotive.

Yes. I need to understand the how is non-automotive shaping up in terms of order book and future revenue booking?

Yes. Out of this order book of INR 8,450 crores, we see at this moment, the non-auto visibility is 2%. So this is roughly around INR 1,200 crores.

Also to add to this, this number of 2% is as per the order book, but this is definitely a pie which we want to expand in the next few years from now.

Okay. So incrementally, so since we talked about refocus, so nonautomotive casting business, so is there a new set of team hired for this business? Can you just spend one minute on this?

So okay. So it's a very, very good question. So we are creating a completely different vertical for our nonautomotive sales. The sales and marketing team, which we have just created is completely independent from the marketing team, which is handing the automotive business. And as we have to grow this business, we will also strategically put more resources to this team so that they are taking complete account of this vertical separately. And but the marketing people are already included separately.

So when can we see -- based on whatever team we are building, so there's obviously a lead time when they go to market and position our facility, our capability. So when do you incrementally start seeing order booking? I mean, which quarters we can hear 3 quarters from now, 4 quarters from now that inquiries and order bookings have started?

All right. So just to tell you, it has already started. And just to tell you that we had recently won a business in non-auto segment and which is for HVAC facility for data servers. Now this is a business which is going to be starting from India, but it will be soon growing globally into all parts of the world. We have not announced the potential of this business because there are some formalities which are still due with the customers to be signed up. But this has already started. That's number one. Number two, we are already doing some businesses in the defense segment, which is a nonautomotive segment. And this business RFQs we are continuously handling and attending to. And very recently, and I think I should have included in my speech, very recently, we have also got into the tractor segment. And we have got the first ever business in the tractor segment for a cylinder head, which will be going to the largest tractor manufacturer of the world. And there is a change -- just to also maybe tell you, generally in tractors, this product is traditionally a cast iron product, but customers are now exploring the aluminum options, and we are the first one in the world to be able to give them this solution, and we've already won a business. This business currently looks small, but it has a huge potential because eventually, this is the future, and it will be replacing cast iron cylinder heads and tractors in time to come. So these are some of the things which I did not explain in the meet, but I can tell you that these will -- these are add-ons, which will be adding up to the order books in time to come. So yes, right now, it's 2% it looks slow, but this number will begin to change by end of this year to be -- to give a precise answer to you.

Sorry, just to clarify, the first thing you spoke about is HVAC, is it?

No. See, what happens is in the global data centers, what happens nowadays big companies like Amazon or Danfoss, they [ build ] huge global data centers where they use HVAC to completely cool the facilities. When HVACs are used to cool the facilities, then there are a lot of consumption of compressors and the related housing, which comes from aluminum. Now this is a segment which was never untapped or untouched, and this is where we have got a business from a global company to begin with for India. And then the same part will be used in various locations in North America as well as in Europe.

So this is housing part of it?

See, because we are basically the aluminum experts and technology in aluminum. So we will be doing the aluminum housing for this compressors, which are using -- going to be using huge volumes, which will be a nonautomotive segment for us, industrial.

Okay. I have two small questions more. The second is, is it possible to share tonnage for domestic and European business, which we did last year and on this particular quarter? And third is, for our European businesses, what are our fixed cost?

See, I think if you're talking about tonnage, just allow me a few seconds. We had done approximately 9,000 tonnes in the last quarter. Let me just tell you precisely.

This is stand-alone?

Yes. No, no. This is on the consolidated basis. Let me just have a look. So the tonnage in our European facility is very less. So it is -- if I say we have done 9,124 tonnes, only 150 to 200 tonnes is what we do in Europe. So it is very miniscule at this point of time. So that means everything is basically on a stand-alone basis. And if you ask me how much tonnage we did last quarter or last year, I don't know. But if you talk about last quarter, so we have done close to 1% higher tonnage as compared to the last quarter. While our sales growth, you can see is much more than that, we have shifted to some high value addition parts and high revenue parts, which this is why even on a quite similar tonnage, our revenues are looking much better.

Understood. And similarly, FY '26, what tonnage we did for stand-alone?

FY '26 stand-alone, that's what I'm saying. This tonnage was around 9,000 tonnes in the quarter 1, which we have done 9,124 tonnes in quarter 1 of this financial year. So this is 124 tonnes higher as compared to the last year. But last year, the tonnage was higher in the European operations. So -- but 100 tonnes is only a differential which is coming because of the European operations. So tonnage-wise, it is a little ahead of the last financial year. Last quarter, sorry, not last financial, last quarter.

Yes, I understood that. I was asking about the entire FY '26.

Just give me a moment. I'll just come back to you in a minute. My team is just looking at the last year data. Just allow me a minute till the time I go to the..

No problem. You can take next question. While you are answering other participants questions, you can answer this.

We take the next question from the line of Bhavya Doshi from Sushil Finance.

So my first question is the first quarter had 17% volume growth. And your comments said you guided about 10% to 12% growth. So are we going to see volume growth slowdown in the further quarters?

I'll just correct -- I think I didn't say 10% to 12%. I said 12% to 15%. So yes, 17% is what we have achieved. And overall 12% to 15%, so thing is right. Still we are not out of the complete volatility. We have to watch quarter-by-quarter. We will be very happy to do more, but this is something which I can tell is clearly visible to us at this point of time. But there is no clear reason why there should be a slowdown as of now.

Okay. My next question is, how is the standard order procedure shaping up for new projects? And what are the expected order wins for the rest of the year?

So I think all the businesses which we have acquired, they are well on course on development. There is a complete process they follow till the time they reach the market. You're already aware that our new capacities are coming up, and we expect our SOP in those facilities to come by March 2027, which would be within six months of acquiring the plant. And most of the order books, which we have already booked with the customers, they are all going to be going from the new facility. So they are all on track. And if you talk about the order book for the rest of the year, I think it is quite similar to the acquisitions which we have done in the previous quarter. I've already let you know how much did we acquire in the last quarter. And we see absolutely a similar growth pattern in the rest of the quarters as well.

Okay. And so the margin for Q1 was 9%, while for FY '26 was 11%. You said there will be a margin improvement. So will it be compared to FY '26 or this quarter?

No. This quarter, we have the margin of 9.5% against 11.4% for the last year. But I have also explained that if we -- the adjusted margin is 11.4% for this quarter when we remove the impact of the aluminum.

Okay. So the margin improvement will be in general, right? It will be 12%. You said 1% improvement.

Yes. I explained to you, in this year, we are expecting to improve by 1%.

Okay. And my last question is, so you said new plant where you're doing INR 125 crores of CapEx will generate INR 500 crores annual revenue. Did I hear that right?

Yes, you got that right. In four years, five years of time. That's right. All right. So before we go to the next question, just to answer to the question which was asked before this on the total tonnage of the last financial year, it was 34,000 kgs 34,000 tonnes.

We take the next question from the line of Riddhesh Gandhi from Discover Capital.

Just had a few questions. Firstly was, if you can update us on the JLR EV expectations on when we see the orders hitting our revenues?

All right. So I think it's an interesting question, and I can clearly understand why. See, the JLR EV dispatches and consumptions have already started. So this vehicle, I think, is already due to be launched very, very soon. And the consumption -- the productions have already started in JLR. And currently, we are expected to supply them at a rate of 600 sets per week. And we already have an indication from JLR that this number would further increase from Jan 2027. And I cannot reveal those numbers because of our confidentiality with the JLR. But I can only tell you that the consumption have started. And next financial -- next year onwards, these numbers are going to further increase.

And this has started and it's already reflecting in the first quarter or it will reflect from Q2 onwards?

That is very marginally, very marginally reflecting in the first quarter. They have not completely peaked, but we expect them to peak after by quarter 3 of this calendar year.

Got it. Sir, the other question was, obviously, in our revenue growth, there is an element of aluminum price increases. So while the revenue is higher, obviously, margins would be lower, but absolute EBITDA hopefully would be higher. So if we adjust for effectively the aluminum price increases, what is actual growth in Q1 been?

So I think I did explain while I was talking, the actual growth neutralizing the impact of aluminum was around 17%. And -- and if you really -- and on the stand-alone basis, if you see, then this growth was actually 22%, which is adjusting the aluminum impact.

Got it. Is there any lag impact of the price increases in terms of, that we expect the increases to be passed on, therefore slightly higher profitability as the lag effect catches up, or is it immediate pass on of pricing?

See, just to tell you, during the inflation and the prices and they went up, some of the largest companies and OEMs of the country, they made it online. So while there used to be a lag of a quarter, but they made it to be back to back from 1 April. So as we are sitting end of the quarter, there is no -- nothing which is going to be impacting us in future, as compared to what we have already shown. -- aluminum, that's right.

So it is an immediate pass through effect.

Just for aluminum. That is right.

And there's obviously been a reasonable increase in freight prices as well. So is that also impacting us or are we able to pass that on as well?

So generally, there are two models in which we operate. In some of the models where the freight prices are substantially high, some of the OEMs pick up the material from our place and then take it. So it doesn't affect us. But it does affect in rest of the cases, and these are the cases which are already in discussion with the customer as a part of all the inflationary increases. And as we've already said, some increases are already accounted for, which we have already got a confirmation, but some are in discussion, which we should be able to conclude in this quarter.

Got it. Got it. Sir, and you had indicated the products for data centers which we are in early stages of evaluating. How large could potentially this overall market be? Is it reasonably large in terms of size and can sort of have a material impact on the business? Or is it a sort of small industry?

See, we started with India and they have already confirmed in the next 2 quarters, they are going to open up the Europe market and thereafter the Mexico. So this is just to start with one customer, but we have done a survey and we see a great potential. I mean there are near about seven to eight such aluminum parts, which we can name. And also we have listed down various other customers which we can tap. So we have considered this as a special project seeing the futuristic growth expansion and that we are going to watch.

Got it. And in terms of capacity utilization, what levels are we at right now?

Okay. See, currently, in the last quarter, we have reached close to 100%. It's more than 90% for sure. And that's exactly the reason that we are now quickly setting up a new facility. And maybe we have some more by end of this year, which we will let you know soon.

Sir, but just to understand, if we are already close to full capacity utilization, our revenue and profitability is not sort of reflecting an extremely attractive ROCE. So is it that as this capacity gets full, we moved into higher-end products? So how do you like look at that because if we are already the full and yet our return ratios are not particularly attractive. I mean, then have we just sort of invested in a CapEx, which has not been particularly actually fruitful from a return perspective?

So I think it's a very, very fair question. See, if you would have already observed that in the last quarter, and even though our tonnages have not substantially increased over the previous time, our value has substantially changed. There is clearly a change in the way we are acquiring the new businesses. Traditionally, for past many, many years, we have been mostly known as into 2-wheeler products only. But we were not into a high-value game. But I think this is very clear that all the acquisitions which we are doing since at least last one year are only into high-value propositions only, and that is why it is changing very fast. I've already said that we are relooking at all our customer portfolios. We are freeing the capacities. We will free up some more capacities in the next 2 quarters, and we will allocate it to the higher-value products. And all those things are in plan to really make sure that ROCE improves from there onwards.

Got it. So if I understand is because utilization levels were low, you took orders, which may not have been particularly good. Now as utilization has increased, you're looking to reallocate capacity to products which will give us higher profitability and margins as well.

See, this is not true. See, if you look at automotive industry, and if you really look at 2-wheeler and CV and PV segments, any company, any automotive company who is operating in these three segments have different margin expectations from these segments. While 2-wheeler is a high-volume market, which is mostly commoditized, you generally don't find very high margins in these products. As I said that Alicon began with 2-wheeler. For many, many years, we were there. But also to tell you that we have intentionally reduced our market share in 2-wheeler segment by 1% to 2%. And this is basically because we want to allocate the capacities now for higher-value products. Yes, we have some very, very critical and very valuable customers with us. We will stick with them forever. But definitely, this is not a segment where we are planning to grow. And this is not a segment we are really going aggressively to acquire new businesses. So that's the reason. I think we have to again -- we are actually relooking at our existing capacities, freeing up the capacities, which really we want to get rid of and then finally adding higher value businesses. But it's a business process. We started with 2-wheelers, then we went to passenger cars, then we went to blue (sic) [ global ] exports. And now we are also going to industrial and defense. Now this is completely the way Alicon has worked so far, and it will be completely changing the way of working in future as well.

Got it. Sir, then because if we look at it, right, in terms of even if we annualize Q1, your ROCs are still sort of in very, very low double digits, right? So you would expect that to sort of inch towards this is what I wanted to understand in terms of like CapEx, what is your internal threshold in terms of the payback period or steady-state ROCE? How do you look at in terms of CapEx?

See, there are a few things. See, once I said that we are in the process of freeing up some capacities. I think we need to also understand that we don't tell a customer that we don't supply them tomorrow. There is always a process of handover and changeover, which takes some time. It takes from six to eight months of time, but we have already initiated that. That's number one. When you talk about the paybacks on the CapEx, generally, in our kind of setup, the paybacks are generally typically three to four years, which is quite impressive. And I can only tell you that ROCE, which yes, today does not look so impressive, but this definitely is on an increasing trend, and it will soon come into a very desirable number.

Importantly, in the ROCE, one more issue we have to understand that some businesses where we are bleeding like when we are talking about the JLR. So we have put up the investments and those are not being -- we are not able -- the orders there is a delay in the SOP. So those areas where investments are there, but there is no return, even we are in the losses. So those are going to be turned around in this year. That's what we are talking about.

And I think if you only look at numbers, the last financial year, our ROCE was as low as 10.7%, which already is looking at 15% by only minor tweaks, which we have done in the business process. So this is definitely very rewarding, and I think it should fall in place soon.

[Operator Instructions] We take the next question from the line of [ Atharva Deshmukh ] from MM Capital.