APAR Industries Limited (APARINDS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Apar Industries Limited Q3 FY '20 Earnings Conference Call hosted by Four-S Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Samayak from Four-S Services. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. On behalf of Four-S Services, I welcome all the participants to the Apar Industries' Q3 FY '20 Earnings Conference Call. Today on the conference, we have Mr. Chaitanya Desai, Managing Director; Mr. V. C. Diwadkar, CFO, Apar Industries. I would now like to hand over the call to Mr. Desai for his opening remarks. Over to you, sir.

Thank you. Good afternoon, everyone, and a warm welcome to the Q3 FY '20 Earnings Call of Apar Industries. Our Chairman and Managing Director, Mr. Kushal Desai, is unable to make it for today's call. So I'll proceed. I will start with an industry update and overview of our performance, followed by detailed segmental performance, after which we can open the floor for questions. The quarter saw continued slowdown in both domestic and global markets. IMF has lowered 2019 growth estimates for India to 4.8%, a significant 1.3% cut from the earlier estimate of 6.1%. IMF has also lowered its global growth estimate to 2.9% in 2019 and 3.3% in 2020. Further, as the credit challenges in domestic market persisted, we took a cautious approach towards new orders with focus on margins as well as payment terms. While there have been some announcements in the new year, there was no immediate stimulus to revive the sector in the third quarter. This impacted our revenues. Q3 FY '20 consolidated revenue was at INR 1,837 crores, maintained at a similar level to the second quarter, but down 13% year-on-year, mainly due to decline in domestic revenues. We focused more on export markets. This has resulted in a year-on-year growth of 6%. Our focus on value-added products yielded results, and this helped grow our EBITDA by 3% year-on-year to INR 119 crores in Q3 FY '20. EBITDA margin improved to 6.5% in this quarter from 5.4% in the previous year's same quarter. PAT was at INR 37 crores, up 6% year-on-year. PAT margin improved to 2% in this quarter from 1.6% in Q3 FY '19. For 9 months this year, our consolidated revenues increased 3% year-on-year to INR 5,650 crores. EBITDA improved 8% year-on-year to INR 364 crores. EBITDA margin improved to 6.4% from 6.1% in last year's 9 months. PAT increased 21% year-on-year to INR 112 crores. I will now cover a few highlights from the T&D sector. 2020 has started on a good note with the Finance Minister announcing INR 102 lakh crores of infra projects for the next 5 years to make India a $5 trillion economy by 2025. Of these, INR 12 crores -- INR 12 lakh crores would be in power sector and INR 9.3 lakh crores would be in renewable energy sector. Government has also proposed a grant of INR 1.1 lakh crores to bail out state DISCOMs that might be a part of upcoming budget. It expects to spur about INR 3 lakh crores of investments in the distribution sector, out of which INR 2.9 lakh crores or the first phase would be in infrastructure upgradation. 10 LOIs have been issued by December '19 in the current financial year for TBCB-based transmission projects. Of these, 6 have December 2020 deadline, scheduled completion. T&D orders of over INR 8,600 crores were announced by key companies in Q3 FY '20. 7,083 circuit kilometers of AC transmission lines and 48,760 MVA of AC substations transformation capacity has been added in 9 months FY '20. As per year-end review 2019 of Ministry of Power, 2.7 crores households have been electrified under Saubhagya Government of India grant of INR 3,857 crores has been released in year-to-date FY '20 under DDUGJY Rural Electrification. Significant progress has been made under the Integrated Power Development Scheme in the current financial year with the physical progress reaching almost 80% in the system strengthening works. More than 9 lakh smart meters has been installed in the states of Uttar Pradesh, Haryana, Bihar, NDMC, Delhi and Andhra Pradesh. We are still to see the benefits of these announcements in terms of impact on the ground. Hopefully, these will percolate into action in the near future. I will now brief you on each segment's performance. Conductors business posted revenue of INR 868 crores in Q3 FY '20 compared to INR 1,052 crores in Q3 FY '19. Export revenues were up 20% year-on-year in the quarter. Volumes decreased 23% year-on-year to reach 36,410 metric tons. EBITDA per metric ton post ForEx adjustment improved 50% year-on-year to INR 12,409 with increased share of higher-value business 33% compared to 26% in Q3 FY '19. High-efficiency conductor revenues increased 129% year-on-year and contributed 22% to revenues compared to 8% in Q3 FY '19 with pick up in stringing and re-conducting demand. There was slowdown in railways business that saw a share of copper conductors come down to 11% from 18% in Q3 FY '19. As explained earlier, with stricter order booking, our order book at the end of December 2019 was at INR 2,231 crores compared to INR 3,226 crores in Q3 FY '19. New order intake was INR 625 crores, down 61% year-on-year, due to lower domestic inflow. This includes new order inflow of INR 113 crores of HEC and INR 164 crores of copper conductors for railways. The traction in the new CTC and PICC products was slower than expected due to adverse market conditions in the transformer industry. We expect demand for CTC, PICC and OPGW demand to pick up as approvals come in. In 9 months FY '20, conductors revenue was INR 2,786 crores, up 8% year-on-year. Volumes were up 1% year-on-year to 1,21,660 metric tons. EBITDA per metric ton post ForEx adjustment increased 5% year-on-year to INR 10,665. Moving to the specialty oils. Revenues were at INR 587 crores in Q3 FY '20, down 19% year-on-year due to both domestic and global market slowdown. Utilities and EPC credit situation continues to be challenging. Volumes were 1,02,194 kiloliters, down 12% year-on-year. Hamriyah plant's capacity utilization was at 65% in Q3 FY '20. The auto lubes and industrial oils contributed 24% to the revenues. EBITDA per kL after ForEx adjustment declined 24% year-on-year to INR 3,082. But compared to the previous quarter, there was an improvement of 8%. In 9 months FY '20, oils revenue reached INR 1,778 crores, down 8% year-on-year. Volumes were down 2% year-on-year to reach 3,06,705 kiloliters. EBITDA per kL post adjustments were up 15% year-on-year to INR 3,293. Moving to the cables business. Revenue declined 7% year-on-year to INR 391 crores in Q3 FY '20. Strategic focus on exports and copper cables helped arrest the impact from demand slowdown in renewables and telecom and intense competition for conventional products. There was demand from railways and defense sectors for elastomeric and E-beam cables. EBITDA margin post adjustment improved to 10.6% from 9.8% in Q3 FY '19. In 9 months FY '20, cables reported marginal decline in revenues at INR 1,154 crores. EBITDA post adjustment increased 12% year-on-year to INR 135 crores. EBITDA margin post ForEx adjustment improved to 11.7% in 9 months FY '20 from 10.2% in 9 months FY '19 with improved product mix. We hope 2020 will be a better year on the back of new TBCB projects and demand revival, if the government initiatives kick in. We hope that credit situation will also improve as there will be a better appetite the banks have for lending. We will continue to observe strict sales discipline with focus on cash flow and profitability. So with this, I come to the end of my comments. I would like to thank everyone for joining our conference call and open the floor for questions.

[Operator Instructions] The first question is from the line of [ Eksha ] from Kartikeya Investment.

Okay. So sir, last quarter, we had said that there were certain profitable orders that the delivery for which was delayed. So I'm assuming if those were HEC orders, I wanted to know how much of this current quarter revenues would be pertaining to that quarter. And what can we expect as steady-state revenue for HEC going forward?

They were not actually HEC orders. Actually, they were conventional conductor orders only, but more profitable orders. If I remember correctly, it was about INR 220 crores that was there in conductor division and about INR 30 crores was in transit as far as cable division is concerned.

Okay. So sir, this quarter, what -- the revenues of about INR 190 crores that we have in HEC is pertaining to this quarter it says, there were no delays there. And what would you expect to be in the outlook for this? Is this sustainable revenue going forward from HEC?

No, no, no. We can't go by this 22% number actually. We feel that the -- overall, it will be about -- we will end the year with about 16%, 16.5%. And next year, we can look at 20%, actually. Earlier, we were looking for 20% in 2020 -- FY 2020. But now, I think we'll have to defer it by 1 year, actually. And FY '21, we can look at 20%.

Okay. And sir, what outlook do we have for copper conductors? Are you seeing execution picking up on a steady basis for some railways?

[Foreign Language], that we have said that in the Q4, it is likely to get normalized by end of Q4.

So we can expect close to 20%, the contribution to revenue from copper conductors going ahead?

Not in the Q4, actually. But Q1 onwards, you can expect 20%.

Okay. And sir, my next question is, sir, from a medium- or a long-term perspective, for all our segments, do we have any internal targets or metrics that we are trying to achieve in terms of profitability or say, in terms of ROCE? How do we ourselves have internal targets for, say, is it like EBITDA per ton or EBITDA per kL? Or are we targeting any ROCE?

[Foreign Language], last time, actually in the last call, we had said actually that we are targeting close to 12,500 EBITDA margin for conductor division and we are targeting close to 4,400 or 4,500 per kL for specialty oils business, and we are targeting close to 12%, 12.5% for cable business.

And sir, this would be -- what time horizon do we have in mind for this?

We -- if the situation improves, actually ground-level situation improves, we feel that we should be able to get it in next year also. So right now, the situation in the power sector is not that good, actually. One is the demand is also weak. Actually, other thing is the credit situation is worse, actually. So people who are having orders, if they are not having money. For us, actually, that demand is of no use.

Okay. So sir, what are our debtor days right now?

Our debtor days, in case of conductor division, they are about 102 days. And about 100 days in case of cable business and 72 days in case of oil business.

Okay. And sir, we have certain off-balance sheet debt that we have. So if you could give us me -- give the breakup of LIBOR-linked and domestic?

LIBOR-linked is about INR 1,100 crores, and about INR 600 crores is the domestic rate.

INR 1,100 crores, you said, sir?

INR 1,100 crores, LIBOR-linked and INR 600 crores on this domestic rate.

And sir, do we have any receivables or overdue receivables from the telecom sector, sir, BSNL, specifically? And how long has it been overdue?

We have a overdue of close to about INR 40 crores at the end of last quarter. But during the quarter, we had approached -- means, as an industry, we had approached the Minister, and we got close to about INR 30 crores out of that.

So then we have just balance of INR 10 crores?

[Foreign Language], INR 10 crores, INR 12 crores balance is there on BSNL.

[Operator Instructions] Next question is from the line of Maulik Patel from Equirus Securities.

Few questions. You mentioned about the conductor, and there is not much improvement, and -- though the government has announced certain steps to help the sector. But historically, what we have seen that this type of business took lot of time to particulate on the ground level in terms of improving the finances of SEBs and then the order book. Generally, what is your assessment? When do you expect? Is it 2 quarters down or 3 quarters down the line when we start seeing that payment difficulties faced by the vendors will be eased out and the new orders start coming?

So it's possible that the government in the budget will implement something. That is what we feel. And if that were to happen, then maybe in a couple of quarters thereafter, we should see the effect. So we have seen in the past also that things can improve very quickly before one expects also, the momentum picks up well. And in this case, it's not just a question of demand. It is for money is due to the industry for materials already bought by the utilities. And so the monies have not been given. So if that comes through, then across the board, whether it is transformers or conductors or cables, EPC, a lot of months the money comes in, then the rotation will start working faster and all the demand which is kind of kept on hold, that also will start moving fast. Because right now, we are not in a sort of situation to just accept any orders, except wherever we have showed that, yes, the party will be able to pay. So in fact, wherever the client is asking us for open credit type of business beyond the limit, we are saying no to that type of orders. So once the normal system of opening LCs or giving the proper payment as per the contractual obligations start happening, then again, the normal demand will come in place.

And is it more related to the SEBs only? Or is it also related to the central PSUs also, like Power Grid or any other one?

It is primarily driven by the state distribution companies where the problems are. So much of the other industries who are sort of linked to this segment of the market, even if they are doing transmission work, they have kind of diverted the monies from transmission inflows through the -- funding the distribution hits. And then accordingly, not paid even their vendors for the transmission. So this is where the main problem is.

Okay. I got it. I got it. Second is in terms of then oil, though oil has been volatile, has it been hitting the margin because once, as you mentioned that customers again have the -- payment delays are -- there is an issue. But price -- I mean, oil volatility has led to the slowdown in the business?

No, no, no. Oil volatility has not hit the slowdown actually. The slowdown is that actually, see lot of transformer manufacturers they are having orders. But we are not able to accept their orders because they are not in a position to make the payment. So sole line customers are very few. So with that, actually, the demand and supply situation gets squeezed. And we feel that, going forward, the things can improve because other phenomenon was there that the -- there was surplus base oil in the market because of which -- see, you are aware that we work on the contract basis. We have about 65% of our procurement, oil procurement, base oil procurement on contract basis, whereas there are some smaller competitors are there who work on spot basis. Because of the more availability of this base oil, the spot prices were better than the contract prices. So in that situation, actually, they are -- they were heavily competing with us. But going forward, with this IMO 2020 coming in actually, which we had mentioned in the last call also, whereby the emission norms for the ships, actually, they have to use the low-sulfur oil. And the sulfur contained in the oil has to go down from 3,000 PPM to 500 PPM. So with that, actually, some part of the base oil, the few -- the oil which gets into base oil will get into -- get for fuel into the ships actually. With that, we are seeing that there will be a tightness in the base oil market, and our phenomenon of the contracted prices being better than spot will come back actually. With that, we are hoping that the oil margin should improve.

And the last question, in terms of what kind of -- in the PAT and ForEx levels with the term of the quarter? And what's the CapEx so far we have done and what kind of a CapEx we envisage for the next year?

[Foreign Language] as far as debt is concerned, the total debt is about INR 272 crores. Out of that, INR 143 crores is long term and balance is short term. As far as off-balance sheet or the debt which gets into the credit is concern, actually, that supplier's credit. I have already given the reply earlier actually. [Foreign Language], so level -- about INR 1,100 crores and -- of LIBOR-based and INR 600 crores of rupee-based actually that the supplier's credit is there.

And the CapEx, do we see...

CapEx. We have done CapEx of close to about INR 110 crores, and we have a CapEx program of INR 168 crores in this year. As we have said in the last call also, the CapEx in future, from next year onwards, the CapEx should go down actually. Because more or less, the CapEx for all the 3 business is over now. So the CapEx will be in the range of about INR 60 crores, INR 65 crores, which is equivalent to our depreciation.

And this year, CapEx round off is INR 168 crores, large part of the CapEx is to the cable business.

For the last part it means around INR 35 crores, the CapEx which we have already done, INR 35 crores is for cable business, about INR 22 crores is for the oil business and balance is for the conductor business.

Next question is from the line of Anuj Upadhyay from Emkay Global.

Sir, of the total order book of INR 2,231 crores, how much would copper conductors account for? This is for the railways I'm asking.

Copper conductors is INR 263 crores, and high-efficiency conductor is INR 384 crores.

Okay. And both of them are for the railways?

No, no, no. Copper conductor is...

Copper is for the railways. Fine, fine, fine.

High-efficiency conductor is for the transmission sector.

Fair enough, sir. And sir, you have mentioned about the suspension of orders that impacted the sales. So it's just a postponement of the order? Or it's a calculation?

As we have said, actually, the inventory had accumulated at the project site, so that is why that slowed down the procurement because the execution was not in line with the procurement, actually. And that we have said in our investor update also that we are feeling that in this Q4 -- by end of Q4, we should be able to see the normalization of that railway business.

Okay. I believe, sir, even the railways are facing some kind of a credit crunch issue. So have that things been sorted out as of now, which gives us this confidence that the Q4 should get normalized?

No. We have not seen any -- we are dealing with railways for -- actually, for oil as well as the cable business and conductor business also, all 3 businesses, we are not seeing any credit crunch as far as railway is concerned.

Yes, because traditionally we have been supplying as opposed to doing the project work. So what we hear in the industry is some of the EPC companies, they are not getting the retention money out because of contract closure delays. But in our case, it is a matter of supply. That's all.

[Operator Instructions] Next question is from the line of Dhiral Shah from PhillipCapital India Pvt. Limited.

Sir, with this recent development of Atal Distribution Yojana or maybe privatizing DISCOM or announcing around INR 3 lakh crores of electricity distribution scheme. So what kind of demand you see for our product?

That Yojana is there actually, but they have not yet officially announced. Unofficially, in this EEMA conference, when the Minister had come actually, he had mentioned that we are coming out with UDAY 2, something like UDAY 2, but the name will be that ADITYA or Atal, something like that. ADITYA, I think. Yes, Atal, huh? Atal, Atal, Atal. Yes. [Foreign Language], Atal distribution system actually. But the -- if this Yojana is there and if this Yojana is properly implemented, then we feel that there will be demand across all the 3 businesses. And more towards for oil and cables actually.

Okay. So FY '20 would largely be remain flat in terms of revenue. So for the next, let's say, 1 to 2 years, sir, what kind of growth we are expecting?

As we have said, actually, all 3 businesses, the business should be good actually. But right now, the government is in a tight spot actually. So we have to see this budget actually. To what extent the fiscal deficit -- see they have to release that percentage of fiscal deficit, which they have in mind, actually, for 1 or 2 years. Actually, maybe still the release actually. And that's how the money can come in the system. And which we will be doing right now actually. Because without that, actually, the economy will not work. We have to wait for budget.

Secondly, sir, when I see your revenue, revenue was down 13%, but our other expenses have remained flat. So is there any one-off in the other expense because ideally other expenses also go down along with the revenues.

No, no, no. See, there is a -- different type of mix is there actually. The business mix can be different actually. So we cannot relate like this, actually, like this, actually, you cannot take percentage.

Okay. So other expenses, you feel entirely they're fixed cost in nature?

No, no, no. Other expenses will have other cost also, no?

So what is the proportion, sir? Because ideally revenues came down, so other expenses might have gone down, but it has remained flat or it has gone up from INR 271 crores to INR 278 crores, sir.

It depends upon what type of mix is covered in the business, actually. Offline, actually, if you contact with me, actually, we can discuss.

Okay. And sir, secondly, with this Fed cutting rate, sir, in our finance cost also -- have also moved up from INR 41 crores to INR 52 crores. So when do you see this finance cost [indiscernible]?

Now the finance cost, in this quarter also, you must have seen that interest cost is lower than the last quarter. So now going forward, actually, you should be able to see finance cost on account of rate, it will come down actually. But the -- still the tightness is there in the market as far as the credit is concerned. That we have said actually, that we are facing difficulties in collecting money from our customers. But rate, I agree with you, actually, the rates have gone down.

Okay, okay. And sir, in cable business, particularly, what is the export contribution?

Export is about -- in this quarter, it is about 13%.

And for 9 months?

I think 9-month is 13% -- sorry, 9-month is 13%. This quarter, it may be slightly higher than that.

Close to 20%.

Close to 20%, sorry.

Okay. So when you see this solar and wind kind of a elastomeric cable demand coming up again?

Elastomeric cable demand that way is reasonable because railway and defense as we have said in our investor update, railway and defense is doing well. The solar has come down actually. This -- in this 9 months, we have seen that solar coming down by close to about 35%. But we are hoping that solar should improve actually. Wind, we are not able to tell anything about wind because there is not much interest seems to be for wind actually.

Yes, it may take a little longer for the wind companies to come back as they were doing in the last years, but our effort will be to do lot of exports because worldwide though, wind is still going strong.

Okay, okay. And sir, what is the size of the overall elastomeric cable in India?

Well, it's a relatively niche product line as compared to power cables and house wires and some of the other commoditized-type products. So it constitutes typically about 10% or less of market size.

And sir, when we say we are the domestic leader in this segment, so what could be our market share?

It will be, I think, 25%.

25%, yes. There is no official number available on this actually, because some of the companies are closely held companies.

Okay. Okay. And sir, do you expect this cable business which used to grow...

Sir, sorry interrupt you. May I request you to speak a little louder?

Sir, do you expect this cable business which used to grow 20%, 25% CAGR, again, will bounce back from FY '21?

There should be improvement, actually. We had expected that this year there may not be any growth in cable business actually. But next year onwards, we feel that cable business can grow, actually. One of the reason why cable business has not grown is also the optic fiber cable business actually, which has gone down by close to about 35%, 40%.

Okay. So next year, again, you will see the good...

We feel that, again, in this budget, we have to see what is their allocation for Bharat Net program and with what aggression they drive the Bharat Net program. Because this telecom companies are not spending right now. But as far as the government spend is concerned, we feel that, that should come back in the next year.

Okay. And then, sir, what is the overall capacity utilization of the company?

Normally, the -- if you take the business of -- business-wise, actually, conductor will be close to about 80% or so. The oil also will be close to about 75%, 80%. And cable will be about 85%. But it depends upon segments actually. As far as OFC is concerned, right now, the utilization level will be close to about 40% or so.

And sir, when we do CapEx in conductor business, so what is the CapEx, sir?

We invested recently in the CTC and PICC business, which is the conductors used in the transformers. So this was one of the CapEx which we have done recently. Then the year before, we did on copper, railways and OPGW. So we have been getting into related diversified production.

And sir, what is the opportunity size here?

So each of these businesses have different sort of markets, like OPGW maybe about 50,000 kilometers in a year. And what we have gone for is the capacity of roughly 1/5 of that. Then on the copper conductors, the total demand in India would be like 25,000, 30,000 tons. And for the CTC -- and particularly CTC, it would be close to 15,000 tons to 20,000 tons in a year.

Okay. And in terms of realization, sir, particularly for CTC?

CTC is driven by the copper price because it's the main raw material, and we envisaged about INR 360 crores of business for our -- once we reach the full total capacity.

Full capacity utilization.

Okay. And sir, lastly, do we get order from -- directly from Power Grid?

So are you talking about the -- all the businesses or any...

Yes, yes, yes.

So we do some business directly with Power Grid. And earlier, Power Grid used to buy all the conductors directly. But on the TBCB, they are nowadays buying through the EPC route.

And sir, lastly, with this green energy corridor, are we getting any orders, sir? Because this is a program which has to complete by December '20, and the first phase is around INR 15,000 crores.

Yes, we have got business from some of the parties who have won the business. So they have either placed orders directly, some of them being like Adani or some like Power Grid who have bought through some of the EPC companies.

Next question is from the line of Lalaram Singh from Vibrant Securities.

My first question is that the capital employed in the conductor business has gone up significantly, I think, quarter-on-quarter also and year-on-year. Is it because of the inventory which is still lying and we have not shipped to the customer?

No, no, no. The capital employed in conductor business has mainly gone up because of the reduction in liabilities actually, some liabilities got paid off actually. And these are supplier's credit, actually. That is how the interest also has come down, no?

Also, we invested in -- as we mentioned earlier, in terms of the new businesses we have entered.

So CapEx is going on, no? So that will also increase the capital employed.

Okay. Okay. Understood. In the -- if your interest cost, I remember that you mentioned it is better to look at it in terms of percentage of revenues. And over a quarter-on-quarter basis, the revenues have been flat, but interest cost has gone down from INR 60-odd crores to INR 50-odd crores. So is this a temporary phenomenon that we have paid out our operating liabilities and we'll do come back -- again revert back to its normal level once the liabilities, again, come as a normal course of the business?

No, interest as a percentage to the revenue will go down actually because of the rate, actually, in the earlier caller, had said that the LIBOR rate has gone down. And that effect will come slowly in the entire liability, which is there actually. Because the interest -- the LIBOR rate, which is applicable when you do the supplier's financing, that point of time whatever LIBOR rate is there, that is applicable. So still, we have the liabilities with old rate. So as we go ahead, actually, the rate should come down.

Okay. Can I get the split of the interest expense in this quarter in terms of open period ForEx, the term interest in ForEx and a bit -- and the ForEx of our...

[Foreign Language], the open period for ForEx for the quarter was INR 6 crores. The forward cost was INR 5 crores. And the other borrowing cost was INR 4 crores.

Okay. Understood. Okay. My second question is that in the cable business, also we have shown -- delivered a reduction in the quantum of revenues, but our margins actually have gone up. So is it because of the product mix which is much more superior?

Yes, yes, it is because of the product mix.

Annually gross margins in the cable business?

We don't share that actually.

Okay. Understood. Thirdly, in the oil business, I want to know that our capacity utilization is humbly at 65%, right, as of today?

Close to 70%, 75%, I said, actually.

Okay, okay, okay. Understood. So when do we expect it to reach 80%, 85% plus? Next year, is it possible?

It is possible actually because things are improving, and we feel that with this new program, the government is -- have given a lot of programs, actually. But the -- on ground, we have not seen the execution of that program. So hopefully, after this budget, actually, we should be able to see some allocation of money for these programs. And then the programs will be run aggressively by the government.

Okay, okay. And sir, there was one note in the cable business wherein export of INR 66-odd crores accounted as transit inventory, into some carriage and insurance paid terms, I think. So does it mean that we have not booked the revenues because of certain conditions not being met?

Correct, correct.

[Foreign Language], see the -- because the Incoterms are CIP, carriage and freight paid. So these are the Incoterms. So unless we read the material, still the customers go down, and we are not able to book the revenue as per the accounting standard. So that is what we have said actually. So although the dispatches have taken place, but it takes -- our estimate is that it takes about 105 days to read the material. So we are not the -- so we have made that -- those -- that product. We have dispatched the product. But because these products have not reached, we have not booked the revenue, as per the accounting standard.

So effectively, this will be booked in the next quarter?

This will be booked in the next quarter.

Okay. So accounting for this, you expect the revenues for the overall full year to be similar to last year levels in cables, right? You don't expect growth?

Correct, correct.

Okay. And sir, can I get the return on equity for each of the business segments, conductor, oil and cable, as of...

Cable for 9 months, the return on equity is 16% for cable business and 12% for oil business. And then breakeven or say, 1% minus for conductor business. And the overall -- as far as the whole return on equity is 12%.

Okay. And sir, historically, what has been the ROE for the conductor business, steady-state ROE for the conductor business?

Conductor has delivered ROE of 12% to 15% also earlier, actually. And we are hoping that with the steps which we are taking, we should be able to reach that percentage.

Sir, is this reduction in the ROE to almost say, 0, is it simply a function of drop in the margins because the -- it doesn't seem to be very off from the long-term median of, say, between -- to [ 10,000 ]. I think we're there. So what is causing that ROE to be, say, 0%? Can you please help me understand that?

The -- what has happened, the EBITDA margin has come off, actually, and the interest has gone up. Because of that, the ROE is coming less. So we are expecting that, going forward, we should be able to get ROE of close to 10%.

10%? Sorry, I missed that number. 10%?

Yes. Just one second, one second. Just hold on.

Okay. You said 10%, right?

Typically actually. The number I have given you is return on equity, after knocking off the tax.

Absolutely. Understood, understood. And sir, over the long term, you have mentioned that we intend to generate 25% return on equity. So do we have any sort of plan and levers which we have identified, which will lead to this expansion? Because that's actually a steep jump from these levels. It's almost double, right, more than double?

See, as explained earlier, actually, we -- strategically, we have taken a lot of steps, actually. Like say, high-efficiency conductor, then copper conductors, then the CTC conductors and OPGW, where the size is very small right now. So all these, actually, the effect of all these, plus the impact which will be there when the power sector improves its performance and the credit situation is improved in the economy. So across all the 3 businesses, strategically, we are ready, actually. When the sector does well and the credit situation improves. And this is our vision, actually, and where we want to reach, actually, so we may not reach about 25%, but at least we have the reason and we are working towards that and we may reach 23%. But this is dependent -- definitely dependent on the sector improving and the credit situation improving in the economy.

Okay. Sir, one final question, then I'll leave for the queue. So when our CapEx intensity reduces from the next year, what is the plan to deploy the excess cash flow? How do we...

See, we will see what sort of opportunities are there, actually. And maybe we will increase dividends, actually. And if we find some opportunities for some acquisition or for taking some other businesses, good businesses which are not doing well, then we take those business and try to turn around these businesses, as we have done in case of cable business.

[Operator Instructions] Next question is from the line of [ Gaurav Jaura ] from Systematix Shares & Stock Broking.

My question has been answered.

[Operator Instructions] Next question is from the line of Dhiral Shah PhillipCapital.

Sir, in cable business, we are also looking at new opportunity like auto cables, railway harness. So how big is that opportunity, sir?

Well, the opportunity is very large. And we are just a sort of beginner in those fields. So there's a lot of scope for us to grow there.

As far as railway is concerned, we were already -- the railways used to employ -- the harnessing contractors were different. And they used to purchase cable from us and do the harnessing and give it to railways. So whereas now, we -- as it is, we were giving the cable, which was the major portion of the harness value so we thought of doing ourselves, harness. So that is how we are doing the harness. As well as auto harness is concerned, we were not present in that actually. So as Chaitan [Foreign Language] said, actually it's a big opportunity. So both these opportunities are very big opportunities actually.

So this auto harness, we are looking for aftermarket or for OEM?

OEMs, OEMs.

Okay. And sir, regarding our automotive oil, so what would be our percentage revenue coming from OEMs and from aftermarket?

OEM is about 60%. And aftermarket is 40%.

And in OEMs, whom we are supplying to this automotive oil, sir?

There are -- various OEMs are there, Escort is there, International Tractors is there, Greaves is there, Atul is there, URS is there. So there are so many OEMs are there, actually.

Next question is from the line of Lalaram Singh from Vibrant Securities.

Sir, I was just reading that there was some strike at Lapanga facility. Can you throw some light? What was it about?

Well, it was not a strike with regard to our own facility. Sometimes, the problems are there of the whole state or some of these other things which are going on politically in the country. People are calling for an off day, and then the officials -- government officials don't go for work. But as far we are concerned, the factories have been running.

Understood. And sir, all the advantage that you were emphasizing with the backward integration there and sort of material tie up with Hindalco, is that -- all that has been reflecting in the numbers? Or yet, it is to be -- it will still come down in terms of the improvement in the profitability because of that?

No, it is already factored, actually. It is there. But right now, the -- see, basically, the Lapanga plant and the Jharsuguda plant we are using for domestic conventional conductors. So the trigger of conductor demand and the margin is so low, actually. So -- and we are able to sustain only because of all these cost-reduction measures which we have earlier taken.

[Operator Instructions]

Okay. So thank you very much.

Thank you. As there are no further questions, I will now hand the conference over to the management for closing comments.

I would like to thank everyone for joining our conference call. Thank you.

Thank you very much.

Thank you.

On behalf of Four-S Services, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

Thank you.