APAR Industries Limited (APARINDS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Apar Industries Limited Q2 FY '21 Earnings Conference Call hosted by Four-S Services. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Samayak Jain of 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 Q2 FY '21 Earnings Conference Call. Today on the conference, we have Mr. Kushal Desai, Chairman and Managing Director; Mr. Chaitanya Desai, Managing Director; and Mr. Vivek Diwadkar, CFO, Apar Industries. I will now would like to hand over the call to Mr. Desai for his opening remarks. Over to you, sir.

Thank you, Samayak. Good afternoon, everyone, and a very warm welcome to our Q2 FY '21 earnings call for Apar Industries. At the outset, I hope all of you are healthy and safe. Let me start the call with a quick update. And then I will go into details of the segmental performance of the 3 businesses. So Q2 FY '21 saw some amount of continued challenges of COVID-19, especially in the execution for domestic market. There has been a lower activity across domestic project sites in the second quarter. And that, of course, is combined with what is a slower period due to the monsoon. There was minimal production in the railways and defense manufacturing facilities. And a lot of tenders were deferred either from the lack of budgetary support at that point in time or the lack of meetings taking place for finalization between various central government and state government bodies. Transmission and railway tenders also have been postponed. Many of them from April 2020 to sometime in the third quarter of '21, we should hopefully see them coming to light. So in putting these factors together, it has resulted in a lower domestic revenue and order booking. However, since we had already set our focus on increasing export revenues and especially for our specialty oil business, with the location of our Hamriyah plant, it has actually helped us to counter some of the headwinds. We hope that in the second half, we will see tender activity pick up. And some of it will clear the pent-up demand that is in place, plus the government should hopefully support central and state government, be able to allocate more money, given that the GST collections have now come in reasonably well for the last 4 months. Now coming more specifically to numbers in terms of our performance. In the second quarter FY '21 Apar posted consolidated revenues of INR 1,482 crores, which is 19% lower than year-on-year. And this was largely contributed by a 29% decline on the domestic revenue side. Our export revenues were stable and actually grew as a percentage of the total sales contribution, contributing to 42% of our total revenues compared to 34% from a year ago. There was a smart recovery in our specialty oil and lubricants volumes. Due to a strong demand as well as a very large client base that we've developed over the years, our EBITDA post-ForEx adjustment came in at INR 118 crores, which is 8% higher than the same period previous year. And the EBITDA margin is at 8%, which is up 201 basis points compared to the same period previous year. Both the specialty oils and the lubricant segment and the conductor segment posted a higher profitability compared to the previous period in Q2. So profit after tax was at INR 53 crores for the quarter, which is up 58% year-on-year. And one of the features I'd like to highlight in this is that there has been a 56% decline in finance costs as the quarter saw lower rates and also somewhat of an improved working capital cycle. Some of it, of course, was contributed due to a lower top line, but a larger portion came from these other 2 factors. Looking at the first half, H1 FY '21, Apar posted a consolidated revenue of INR 2,775 crores with an EBITDA of INR 153 crores and a positive PAT of INR 30 crores. We have managed to reduce receivables and inventory in absolute terms by about INR 609 crores across the divisions, as you look at the closure of 30th September. And we've also completely repaid all the moratorium and short-term funding that had been taken to tide over the initial months of the lockdown. So for all practical purposes, by the end of September, our cash flows were absolutely back on cost. In terms of a couple of highlights in the transmission and distribution sector as such, so T&D companies won orders of approximately INR 7,000 crores in this quarter, which is a marked reduction over the same period previous year. 22 TBCB BS transmission projects are currently under construction as on September 2020. And we would imagine that activities would pick up pace in the second half for completing their execution. Most of these are for evacuation from infrastructure projects, which are essentially renewable energy projects. INR 1.08 lakh crores of loans have been sanctioned under the liquidity package for the stressed discounts, of which INR 30,000 crores has been so far disbursed. So the government is also working on some other systemic reforms like a new draft electricity amendment bill 2020 that will recast the costs, which are reflected in tariffs, bring in compulsory smart metering, DBT, discount privatization, financial discipline for discounts, et cetera. And if this happens, then it will be a huge step in the right direction using legislation. Also, the government plan for the Indian Railway Electrification still stands at completion by the financial year '24 and 23,765 railway kilometers are still required to be converted. Now coming on to the more specific sector-wise performances. Our Conductor revenue declined 30% year-on-year and came in at INR 628 crores in Q2 FY '21. This was mainly due to a 48% decline in the domestic revenues and largely coming in from the COVID-19-related issues, as I've explained earlier, in terms of project sites, and the work going on, on project sites, which only started normalizing a little bit closer to the end of the quarter. Exports declined marginally by 3% year-on-year, but still contributed to 56% of the revenues, up from 40% in Q2 FY '20. So overall, volumes fell by 22% year-on-year to 33,797 metric tonnes. So for all practical purposes, about 34,000 tonnes. There was an improved demand for the copper transports conductors used in the transformer industry and OPGW, based on new approvals, which we have obtained. The EBITDA per metric ton post ForEx adjustment came in at INR 11,791 per metric tonne compared to INR 7,789 per metric tonne a year ago. If you look at the new order inflow, we had inflow of orders of about INR 805 crores in the quarter, which is 9% lower than same period previous year. The order book at 30th September 2020 was INR 1,698 crores, so INR 1,700 crores for all practical purposes, and orders in the pipeline are INR 380 crores. And these orders are basically where we are L1 and the formal order process or financial arrangements are still in the pipeline. If you look at the first half FY '21, the conductor revenues came in at INR 1,337 crores. So they are down 30% year-on-year. The EBITDA post ForEx adjustment came in at INR 9,071 per metric tonne. The new order inflow in the first half was INR 1,122 crores. So that's about 24% lower than the same period previous year. In the conductor segment, we were able to reduce receivables and inventory to the tune of about INR 294 crores. In terms of specialty oil, revenue increased 5% year-on-year to INR 599 crores, driven by about a 20% increase in our export revenues. We have achieved the highest Q2 sales volume over the last decade, which came in at 1 lakh, 13,897 [indiscernible] , which is 16% higher than the same period previous year. Exports contributed to 42% of the revenues compared to 36% a year ago. Our Hamriyah plant, which I had mentioned earlier, paid off in terms of the strategy of being, having multiple locations in multiple countries, was able to run at a capacity utilization of 98% for the quarter versus 65% in Q2 FY '20. And we were also able to add several new customers to that site who wanted to de-risk their supply chains given that the COVID-19 numbers from India were kind of peaking towards the end of August, beginning of September. So white oil sales, both in the domestic and export market, were up by almost 50% year-on-year, whereas transformer oil declined due to poor demand from the utilities and transformers OEMs, for the same reasons as I mentioned earlier in my opening remarks, as well as with the conductor division. The auto lube side of the business and industrial lubricants have done quite well, where the revenues are up 15% year-on-year. Our focus on the agriculture segment on the lubricant side, where we supply [ Eicher ], Sonalika and [ Escorts ] contributed to approximately 25% of the oil revenues versus 23% a year ago. We also gained from a reasonably good recovery in the retail side, led by increase in the volumes of tractors as well as 2-wheelers. So if you look at the EBITDA per kL after ForEx adjustment, so that has increased by 130% over the previous quarter -- sorry, previous year, same quarter. So that came in at INR 6,538 per kL. Q1 FY '21 lockdown, also created, obviously, ordering and supply disruptions. And that caused a negative effect in Q1 with higher-priced inventory. But the benefit of it came in Q2 as the orders were executed, but with a cheaper inventory level. So to that extent, there has been some amount of an exceptional occurrence taking place due to this. If you look at the overall first half, the oil business posted a revenue of INR 950 crores, which is down 20% year-on-year. And the EBITDA per kL post ForEx came in at INR 4,500 per kL, which is still 32% higher than the same period previous year. When you look at reduction in terms of receivables and inventory, it came in at approximately INR 94 crores. And finally, if you look at the cable segment, so cable revenue has declined by 31% and came in at INR 254 crores. This was due to an overall low market demand. We did have a lot of delayed payments from EPC customers and some of the utilities. And the competitive pricing has resulted in quite a few unremunerative margins and particularly the commodity lower end of the power cable segments. The export revenues contributed to 12% of revenues. Power cables continued, as I mentioned, to be highly competitive. The Elasto and E-beam cable side also was affected due to the lack of production as the factories of railways and defense. Well, in the first half, we've run at less than 10% capacity. Our expectation is that in the second half they will start picking up, but some of the orders have been pushed back to the first quarter of next year, which is from April onwards. The solar sector projects were slow in the first half. But towards the end, that means from September month onwards, they have started picking up. So we expect a much better order flow, and it's already started from the month of October for the solar DC cables. The optical fiber and telecom side also saw relatively lower offtakes. There has been a deferment of deliveries in a few cases. The EBITDA margin post ForEx came in at about 4.4% versus 11.2% in the previous year. The export order booking for the second half, however, is a lot better on the cable side. In the first half FY '21, cables posted a total revenue of INR 504 crores, which is 34% down compared to the previous year. And the EBITDA margin posted was 3.7%. We've -- there has been a reduction of INR 221 crores in receivables and inventories. So just to summarize, going ahead, in the second half FY '21, we expect definitely better tendering to be in place compared to the first half. We are also expecting a higher utilization in the railways and defense facilities. A revival in demand has already seemed -- is already showing signs of picking up in the mining sector, the wind power as well as the solar segments. Our execution of export orders will also improve in the second half, especially in the cable business, as I mentioned earlier. So with this, I come to the end of my comments, I would like to thank all of you for joining our call, and wish you good health. We would like to just open up the floor for questions, if any. Thank you very much.

[Operator Instructions] The first question is from the line of Pratiksha Daftari from Aequitas.

So my first question with respect to conductor segment. So now that, that order inflow is more tilted towards exports, I wanted to know how is the margin profile for these export orders? And how does it compare to our existing business? And whether the working capital requirement or the days for this business would be higher as compared to our existing?

Generally, our export business has been giving us better margins than the domestic business on the conductor side. The only problem we see is that the government of India is undergoing a transition with regard to the export refund scheme for certain taxes. Earlier, it was in the form of an [indiscernible] scheme. Now they have said they will have a sunset for that, and they'll introduce a new scheme. So we are not clear as to what the new scheme in terms of the numbers will be compared to the existing scheme. So there is a possibility that there could be some different kind of rate that they'll fix up. So that we'll know in a due course of time. And with regard to working capital cycle, generally for the export is a little higher, but the rate of interest cost is lower compared to the domestic side. So overall finance cost per se, is actually reduced. And also, we don't have to hedge in terms of the export because of the natural hedge we are buying raw materials in dollars and selling also in dollar terms. So the hedging cost is somewhat reduced in the export compared to the domestic, whether we buy from Indian producers or we buy from the duty-paid imports, they are all back to the LME rate, which is in dollars. So we have to take a forward cover also for that. And we have to incur the cost of the rupee dollar as it fluctuates.

Right, okay. And with like a good margin has been better this quarter for conductor segment, our EBIT margins have been -- sorry, EBITDA margins have been about 6%. Do we think that these margins are sustainable, considering that a key raw -- like metal prices in general are going up, the key raw material prices are going up? And would we be able to like sustain these margins in H2?

So basically, we have a hedging mechanism for the raw materials. And our entire business model is based on the value addition on the raw material. So we typically take back-to-back hedging position against the orders that we take. So as such, even if the metal prices are high or low, it does not really make a difference for us.

So this margin improvement would be with respect -- like because of cost optimization?

So yes, it's -- one part is, of course, to do with the order mix because now in the conductor business, we have not just the conventional conductors, but we also have other types of products that we have introduced over a period of time. So that has contributed to some extent. And also certain costs, we had to reduce with the COVID situation and the lockdown. So we have taken certain steps to reduce our operating costs.

Okay. Okay. And with respect to volumes, what I have -- last year, we've done an average quarterly volumes of 40,000 net tonnes. So do we expect to get something closed by, say, Q4? Or this year, we could -- I mean, volumes will be substantially lower?

As things stand, it looked like they would be lower because in India, a lot of the tendering has got postponed. So we'll be taking somewhat of a reduction in volume on the local business. We are trying our best to try and make up on the export side. But probably, net-net, we may still see a reduction in the volume. And also, some of the other businesses where railways are involved and all, there's also been a slowdown basically. So a lot will depend on how quickly people want to catch up on the 6 months, which are practically been lost. So if you see the plan, we had approximately 140,000 tonnes which we planned for the year. And if you see the first half, it's come in at around 66,000 tonnes. Pro rata basis, it's a little bit lower. As Chaitanya said earlier, there is just some uncertainty in terms of exactly the call-offs that will happen. Our sense is the second half activity will pick up because the coronavirus situation has improved to some extent. And I think the arbitrariness in the way in which project sites were being handled, pre September, I think that also has settled down. So hopefully, we don't get a huge spike after Diwali, which disrupts things. But otherwise, I think the second half should look a bit better. It's difficult to paint exactly what it would look like, but the general trend looks like it should be a bit better.

Right. Okay. That's great to know. So on the interest, what I assume it's a commendable reduction in cost. That means, INR 40 crores over the quarter was a great number. But I just wanted to know that now that we are expecting that, in general, the activity will improve in H2 and the business in general will pick up, how much of this interest reduction is going to be sustainable, like?

This interest is sustainable, actually. But if we do more business, then more working capital will be required actually. That is true actually.

Okay. And...

Just if you see that -- if you take the -- if you just look at the whole first half situation, the revenues have been down by about 20%, whereas the interest cost has been significantly reduced. So it's come on account of 2 fronts. One is lower interest rate itself, and secondly, more disciplined in terms of the whole working capital cycle. So being more selective in terms of who we do business with, what are the payment terms, inventory optimization, all that sort of stuff. So there is a certain portion, as Mr. Diwadkar said, which is sustainable, only 20% of it has come down on account of the volume, which was lower, or rather the value, which was lower.

And sir, if you could just give us the non-fund based limits number along with the breakup?

I'll just give you. The total nonfunded number, interest-bearing, is INR 916 crore. Out of that, INR 578 crores is LIBOR-based and INR 318 crore is domestic.

Okay. And sir, now this year, this 6-month period, our balance sheet shows that there has been an increase in short-term debt. So are we like moving on to a model where we'll be taking more of fund-based limits and maybe we are reducing working cap or nonfund-based limits? Or is there...

No, it is more than that, actually. It was before, for the initial COVID period, we had taken moratorium finance and that moratorium finance later on, because it was costly. Moratorium finance, the bank deal with that was for 10.8%. So we did a buyer study actually, which [indiscernible] like actually about 5.4% actually, and reflect the moratorium finance. But the [indiscernible] remain as the supplier [indiscernible] what we have been doing actually the same models in [indiscernible].

And sir, with respect to oil segment. So how much was the decline in transformer oil revenues?

The decline in -- the transformer oil volume was down approximately -- domestic. Domestic was down a little over 10% in the second quarter compared to the same period previous year. It was more than made up by whatever happened, the applications with white oils and pharmaceutical oils go into. As they go into medical formulations, food packaging, all these areas, we saw a substantial increase.

Right, right. And sir, so this margin now, you said that in Q1, we had high-priced inventory and I mean, the raw material cost. In Q2, we had lower price and there's an exceptional gain year. So how do you see this margin normalizing?

So the -- that's why I mentioned that the average that we see in the first half is what we pretty much are at that level, even in Q3 now.

Okay. So average margins of H1 is sustainable?

At least, yes, so far, Q3 seems to be also pretty much in that way.

And sir, what about new clients? I mean, the volumes that have come from the new clients and there's a sudden surge in utilization in Hamriyah, is this because of the COVID disruption? Or we would be able to retain these clients and this volume?

So there were several of our existing clients also became new clients for that facility because people wanted to -- our customers are always looking now at the supply chain risk. Also, there is an acute shortage of containers. And the freight rates have substantially gone up. And India has seen a relatively higher increase in freight rates compared to other locations. So when you look at the whole analysis of things, risk, risk mitigation, just in terms of location versus delivery, et cetera, customers are -- so we are one of the few who is able to provide, out of India, to alternate locations, which are unconnected to each other in terms of supply chain risk. So we've gained market share as well as the business has got split a little bit between India and Hamriyah. So the 2 effects have happened. So one is, we've signed on new clients, and there is an absolute increase with clients. And secondly, there has been some movement out of India into Hamriyah as part of a risk mitigation strategy that customers have had.

Okay. All right. And sir, with respect to working capital requirement, I think this segment has been the one which has the highest working capital requirement in terms of days. So how is that faring?

It has improved, actually.

What would be our days like in this segment?

Debtors is 76 days and inventory, 51 days.

Sorry, come again. 57 days for debtors and inventory?

76 days debtor, and inventory, 51 days.

And this would compare to, earlier of?

About 4, 5 days improvement is there as far as debtors is concerned. And further, you will be able to see some -- some actions have been taken, actually some dividends have been taken. The impact of that you will be able to see in Q3 and Q4.

The inventory also includes the inventory which is in transit. What we've got on the ground actually is less than 30 days today. And you have about 30 days of inventory on the high seas for goods incoming into the 3 manufacturing plants that we have.

And sir, my last question. For this, so we know what we want is [indiscernible] overall orders in T&D has gone down. And the relief package for discount, what we've understood is that the disbursement is really low. I think most of our business is dependent on power sector, a lot of our segments are dependent there. How do you feel is going to be the demand in medium-term from this segment? Do we see any material change happening, which could help us or adversely impact us?

So our exposure is much more to the transmission sector than distribution. The transmission sector still seems to be relatively in a better position. The state governments have actually gone in and kind of frozen any expenditure happening for some period of time because there was a huge allocation that they had to make for fighting the coronavirus-related issues in the absence of the GST payments coming in from the central government. Now with the central government, the GST collections having improved, and they have already started releasing money to the states, plus there is some discussion going on, and a few states have already started borrowing from the GST window that has been created for funding. Our sense is that the transmission projects will come back on track a lot faster than the distribution. So on the distribution side, we really have only the cable business, which has a direct impact. And of that, there are -- the bulk of our cable revenues come from 3 states as far as the distribution companies is concerned, which is Gujarat, Maharashtra, Karnataka and to some extent, Kerala. So these 3 states are relatively not in such a bad position as far as the discount is concerned. Gujarat is -- the discounts have traditionally been profitable, and in Karnataka, a lot of our work goes on between Bangalore, Bangalore is with a B and Mangalore with an M. And those are fairly profitable hubs in Karnataka. So there will be some impact, but it's not going to result in that derailing whatever business that we are seeing on that front. Our concern has been more on the cable side on 2 fronts. One is the general demand has been relatively affected. And secondly, a very profitable portion of our business was supply to the railways and the defense sector. And because no production has been happening over there, it's less than 10% for 6 months. Activities have started picking up, but you've got a lot of deferments in supply is happening. So I think that's where we see a bigger red flag than any problem on the distribution side, the utility distribution side.

So sir, how soon do we expect the Transcom activity to pick up? And what would be our trigger point for Railway and Defence to -- for their production to pick up? Like, are you saying that it's 10%, so...

So I'll take the question. On the Defence and Railway, is that's really anybody's guess. The private sector running at full -- our plants are running at full capacity from middle of May. These guys are struggling to follow all the norms, which the government has set for all the manufacturing companies in terms of the precautions to be taken and et cetera, et cetera. But having said that, they are located in -- a lot of the plants are located in the eastern part of India and in the south. ICF, for example, is in Chennai. So there, the coronavirus situation also has improved. So our sense is that it will start picking up. Definitely, Q4 will have a big impact. And I'm sure they'll run on over time and churn out a lot of stuff. But difficult to exactly predict. All I can say is that it will be much higher than the second half than in the first half. And on the transmission part of it, what we see is that it's been more delayed due to procedural aspects, with regard to opening tenders. It is not stuck up because of financing. And typically, these are tariff-based competitive bidding projects, where the finance will be not from the central government. They will be, again, based on bank financing for people like Adani Grid, Sterlite Grid and Power Grid and some of their other boot operators. So it's, to a large extent, is just a procedure of also a physical meeting and awarding and things like that.

So typically for us to benefit, I would -- I'm assuming there'll be some delay, right? Like first, the tendering has to begin and then order flowing to us and our execution --

That's why our domestic side -- we feel that the second half will be better than the first half. But we are continuing to concentrate more on some of the export projects, where the path seems to be clearer and the orders have already come into the system.

The next question is from Maulik Patel from Equirus Securities.

Just a few bookkeeping questions, a lot of questions are already answered. So what are the CapEx we are looking for this year and the next year?

Maulik, we have already incurred about INR 17 crores CapEx and not much CapEx is now planned, actually. At the most, another INR 15 crores, I will say.

Okay. So just for this financial year. Anything you have planned for the next financial year?

Next financial year, we have to --

But there is no -- there is -- Maulik, there is no major, major projects which are [indiscernible] . If you take maintenance CapEx and everything put together, it'd probably be in the range of around INR 40-odd crores.

Sir, the question is in the context of the last 2 years, not this year, but the previous 2 years, we invested a lot into the -- based on the facilities and others. And now beyond that -- are we looking to reduce our long-term debt in the next 2 years significantly from the current level?

Look, whatever long-term debt we have in the next couple of years, so it will be largely paid off. There is one ECP that we have, which is a little bit longer term. But as the due days come for this, we intend to pay it off and then not likely to have to take any more debt on. So we are on a debt reduction mission as opposed to needing any further long-term borrowing as such.

Okay. Second question is that beyond this sort of pandemic and the way that things are working, have you seen any of your business, particularly from the export that the Chinese -- the competition from China is lower although the buyers are preferring more about non-Chinese players, something that you observed?

So I just run through the -- both the conductor and cable business are the ones which have been facing competition from China as such. One thing on the cable side is that the inquiry levels have substantially gone up. And it has translated in some amount of business coming in. We believe that it's at the expense of diversifying the supply chain related to China. But I think the bigger kicker will come in when customers are in a position to travel here and complete doing all their diligence. Because we've done whatever due diligence has been done with customers, have been done all online, where you had -- with cameras moving around and equipment and things like that. So the work has already started, and there is a definite interest in terms of diversifying supply chains away from China. But customers need to establish that not only quality but even delivery and things like that are all falling in place. So we see a longer-term trend for sure.

So that's more prevalent in the cable business, right?

Yes. In our oil business, we don't compete with the Chinese at all. The Chinese are very internally focused. Conductor side, there is competition in certain markets outside India, where the Chinese have been active. But the sense we get is that the clients are -- if other things being equal, they would prefer to buy from maybe an Indian party compared to a Chinese, just from a trust point of view. One of the markets where we've seen a clear benefit, and our tenders, quotation, discussions have reached significantly more serious levels, has been in Australia. You see the Australian business on the cable side, substantially increasing in FY '21 compared to FY '20, in spite of all the other limitations that I've mentioned. And in some of the other places also, I would imagine that this will take place. So it's -- I wouldn't bank on some huge numbers changing in Q3 and Q4. But this trend is a trend which is definitely going to be in our favor, and we are working as hard as we can, in terms of putting all more resources on to the export side to build that part of the business. And in the longer term, I'm sure that business will shift in our businesses from China to Indian companies.

The next question is from the line of Saurabh Patwa from HDFC Mutual Funds.

I wanted, sir, some bookkeeping numbers. What would be the amount of LC and guarantees?

So the total LCs are INR 916 crores.

INR 916 crores.

Out of that, INR 578 crores is LIBOR-based and INR 318 crores is domestic. These are interest-bearing [indiscernible].

Yes. So this has come down sharply, right...

Yes, the rate has come down.

Saurabh, 3% of it has coming down only because of the volume, which is lower. But in some of the cases, as the cash flow has improved, domestic purchases and even from the export purchases, smaller purchases, we are just taking on a direct basis, without opening letters of credit.

All right. So my question was on -- so historically, last 4 years, what has happened is, I think we have been pretty -- we have seen improvement in conductor business, especially in terms of EBITDA per tonne. But our financial charges, incremental financial charges actually indicated that positive impact. So how do you see -- so I think if this quarter's financial charges were, I think, this at least in last maybe like last 3 years or maybe more actually. So what are the kind of trend you're seeing? Or is there any change in strategy or in terms of market conditions?

We have tightened our working capital overall, actually, as far as debtors are concerned, inventory, which are near also Kushal had mentioned actually. And so you will see this trend actually. Whatever you are seeing in this quarter and the last quarter also into [indiscernible], you will see this trend going forward actually. We have also said that we are having more focus on the working capital.

Right, because our debt has been coming down, but this LC-based part was actually negative all the term things.

Yes [indiscernible] also come down.

No, I'm not talking about this quarter, I'm saying in last 3 years or so.

I agree with you, actually. Earlier the trend was there, actually, there is -- the finance cost has increased actually. So now you will see that the finance cost is going down.

One other thing, Saurabh, that you may have even picked up from the last call that we had, and the call before that, that we had -- and this was before the pandemic even hit that we had already put a plan in place to make sure that our finance costs came down, and the total working capital cycle became more efficient. And we were prepared to drop the bottom end of the business if that was required in order to achieve this particular objective. So we've actually gone and executed it. So you'll see that to some extent, the business volumes also have suffered. On the cable side itself, if you take some of our -- some of the customers where the orders were relatively large, about INR 200 crores of business we've not pursued, even though we were at the final stage, and the customer wanted to place the order on us because we couldn't agree on the right commercial terms, et cetera. I think slowly larger players who will also burn themselves if they don't follow this discipline will start falling in line because the banks have become very tight in terms of extending credit for dues which are beyond 90 days, et cetera. This discipline is something which we'd already started. That's why the benefits of it have shown up in the first half of this year. But it's something which we want to go forward with. And in fact, to the previous question also, I mentioned that the reduction in the interest cost is much more than 30%, which is the reduction in the sales value that we've had.

Right. So I just also wanted to understand our strategy on the cable part, so the shutdown drop has been sharp. But many of these projects now, there is a competition increasing which from other E-beam cables plant being added in the country. So maybe from 3, 4 years down the line, how do you think the competitive scenario? And how do we see ourselves [indiscernible]

So yes, the competition has increased on that front. But we've done 2 things to secure our own volumes. One is that we have started expanding our footprint outside India for the same sets of cables, including solar cables and other E-beam cables. The second thing is that we've forward integrated into doing railway harnesses. And so that gives us a much bigger leverage because you're using our own cables to then provide a value-added service to the various locomotive companies as well as the coach companies. So the harness business also will help. So that's another additional source of growth, using the same E-beam cables. The cables are cut and put together in a ready-to-use frame, just like how you have harness for cars, which is something like mothers and [indiscernible] being leaders in that space. We also have -- we are the first guys to get approval from JBM for the electric vehicles, the buses. So we've got the first order of 99 buses, and that's to be followed by another 140. So that also we are supplying an electric harness, the cable in the harness form to JBM.

Understood. If I could just nudge along, 1 more question, if I can just add on. So in this -- how many as now we are reaching a utilization level, which we were always targeting? And I think in your presentation also mentioned that a large part of it is also due to a new customer addition. So would it be fair to assume that going forward, so add the initial target when we were setting up the plant was that we will be moving the export market -- export demand to Hamriyah and we'll focus the domestic plant, will focus more on the domestic market? Are we nearing that thought process?

Not entirely, Saurabh. There's a sense here, our idea is to utilize our Indian capacities and then have the Hamriyah capacities incremental. Some of the cannibalization has taken place to win overall business or overall share of business from customers by providing a derisked supply chain, which none of the other Indian competitors of ours has been able to provide. If you see the Hamriyah's capacity for the quarter was 98, for the half year, it was 76. And we can actually look at debottlenecking and produce more over there with minimal investments in piping and other things. So we will do that as and when it comes up. There are certain -- the other thing that we've evolved to is that there are certain product lines, which we are executing now out of India, where the products are off from a higher value and more specialized. And we've moved some of the more commodity products of white oil, et cetera, to Hamriyah, which they can execute reasonably efficiently. So one of the things that has been demonstrated in this quarter is if you look at the fixed cost structure, Hamriyah, even though they ran at about 98% capacity compared to the previous quarter, which was in the mid-50s, the cost structure hasn't changed very much because the plant is highly automated. Whereas in our Indian plants, if we were to step-up that kind of production, there's almost a linear increase that happens on the variable cost front. So we expect to continue to push as much of the commodity business of white oil and a certain geographic spread to the Hamriyah plant. And we are using the better in front or the more specialized infrastructure here to do more specialty grades out of India. So you will still see both the plants, export happening from both locations.

Okay. So -- but then this will increase our blended margins compared to our historicals like you used to make between like 4,500 to 5,500 [indiscernible] was generally the average. So does this make a longer-term minimum change to this? So obviously, last 2 years have been weak, but...

Yes. So it absolutely should. In the last 2 years, we've had finance costs and ForEx changes affecting this. More and more, volume [indiscernible] of Hamriyah, we are also immune to any of the ForEx-recognition-related things because the whole business is a dollar-run business.

Right. And also, as you mentioned then, the finance -- the fixed cost of Hamriyah was the same, even 2...