Carborundum Universal Limited (CARBORUNIV.NS) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Carborundum Universal Q2 FY '26 Earnings Conference Call hosted by Kotak Securities. [Operator Instructions] Please note this conference is being recorded. I now hand over the conference over to Aditya Mongia.

Thanks, Mark, and good morning, everyone. Welcome to the earnings con call of Carborundum Universal. From the management side today we have Mr. Sridharan Rangarajan, Managing Director; and Mr. G. Chandramouli, Advisor. Without any further delay, I request the management to share with us their opening remarks, post which Q&A can follow. Over to you, sir.

Thank you, Aditya. Good morning. I'm Chandramouli. Let us start the proceeding with the disclaimer. During this call, we may make certain statements, which reflect our outlook for the future or which could be construed as forward-looking statements. These statements are based on management current expectations and are associated with uncertainties and risks are more fully detailed in our annual report, which may cause the actual results to differ. Hence, these statements must be reviewed in conjunction with the risks that the company faces. Thank you.

Good morning to all of you, and a warm welcome to our second quarter and the first half earnings call for the financial year FY '26. Thank you for joining us today. Hope you all had celebrated Diwali with family and friends. Our warmest Diwali wishes to everyone and trust the festive season bring you joy and prosperity. We will begin this call by giving an overview of company's performance as well as the first half, then open up for questions. To start with, consolidated sales in Q2 FY '26 was INR 1,287 crores compared to INR 1,209 crores in Q2 FY '25. This shows a 6.4% growth as compared to Q2 FY '25. Abrasives grew by 7.4% from INR 543 crores to INR 584 crores. Ceramics grew by 7.8% from INR 280 crores to INR 301 crores. Electro Minerals degrew marginally by 0.9% from INR 402 crores to INR 399 crores. Compared to Q1 FY '26, sales in this quarter grew by 6.6% from INR 1,207 crores to INR 1,287 crores. Abrasives grew by 15% from INR 508 crores to INR 584 crores. Ceramics grew by 0.6% from INR 300 crores to INR 301 crores. Electro Minerals degrew by 1.6% from INR 405 crores to INR 399 crores. Consolidated sales for H1 FY '26 was INR 2,493 crores compared to INR 2,393 crores in H1 FY '25. This shows a growth of 4.2% growth. The growth was driven by Ceramics segment, which grew by 9.4% from INR 549 crores to INR 601 crores. Electro Minerals grew by 2.6% from INR 783 crores to INR 804 crores. Abrasives degrew by 0.3% from INR 1,095 crores to INR 1,091 crores. Coming to the PBIT performance. PBIT for Q2 FY '26 was INR 111 crores against INR 154 crores in Q2 FY '25. Compared to PBIT of INR 81 crores in Q1 '26, Q2 PBIT grew by 37%. VAW about INR 51 crores, Rhodius about -- sorry, PBIT for the first half of the year was INR 192 crores compared to INR 304 crores. The drop is mainly contributed by VAW about INR 51 crores, Rhodius INR 26 crores and standalone INR 34 crores. Now I go to standalone. Standalone Q2 FY '26 sales were INR 712 crores with a growth of 1% compared to sales of INR 705 crores in Q2 FY '25. Compared to Q2 FY '25, Electro Minerals grew marginally by 1.2% from INR 210 crores in Q2 '25 to INR 213 crores in Q2 '26. Ceramics was almost flat. Sales in Ceramics moved from INR 227 crores in Q2 FY '25 to INR 228 crores. Abrasives degrew marginally by 0.1%. Standalone sales of INR 712 crores in Q2 FY '26 compared to INR 698 crores in Q1 FY '26 grew by 2%. Abrasives grew by 7.5% from INR 286 crores in Q1 FY '26 to INR 308 crores in Q2 FY '26. Electro Minerals was almost flat with a growth of 0.2% moving from INR 212 crores to INR 212.7 crores. Ceramics degrew by 4.3% from INR 238 crores in Q1 '26 to INR 228 crores in Q2 FY '26. Standalone sales for H1 FY '26 was INR 1,410 crores, a growth of 3% compared to sales of INR 1,369 crores in H1 FY '25. This was contributed by growth in Electro Minerals at 6.5%, which moved from INR 399 crores in H1 FY '25 to INR 425 crores in H1 '26. Ceramics grew by 4.9% from INR 444 crores to INR 466 crores. Abrasives degrew by 2.8% from INR 611 crores to INR 594 crores. PBIT for Q2 FY '26 was INR 87 crores compared to PBIT of INR 116 crores in Q2 FY '25. Mainly Ceramics contributed to INR 17 crores pick-up here. PBIT for Q1 FY '26 was INR 166 crores. PBIT of Q2 FY '26 dropped to INR 87 crores. This is mainly due to lower dividend income. PBIT for the first half of the year grew by 7.9% from INR 235 crores in H1 '25 to INR 254 crores in H1 '26. I'll go to the segment performance. Abrasives, consolidated Abrasives. Sales of H1 FY '26 was INR 1,096 crores when compared to INR 1,095 crores, almost remained flat. Q2 FY '26 sales was INR 584 crores with a growth of 7.4% compared to INR 544 crores in Q2 FY '25. This growth was contributed by AWUKO INR 9 crores, Rhodius INR 25 crores and CUMI America. Compared to Q1 FY '26, sales was higher by 15%, moving from INR 508 crores to INR 584 crores. This is largely driven by sequential recovery in standalone INR 21 crores, recovery in Rhodius about INR 48 crores, which has seen a loss in Q1 on account of the transition to a new third-party logistics provider. Standalone Abrasives in Q2 FY '26, standalone Abrasives sales of INR 308 crores remained flat compared to the same period last year. Sales of H1 FY '25 was INR 594 crores with a degrowth of 2.8% compared to INR 611 crores in H1 FY '25. Sequential growth is encouraging and looking forward to a better H2. Rhodius Abrasives in H1 FY '26 achieved a net sales of EUR 30.6 million compared to EUR 33.8 million in H1 of FY '25. This represents a 9% degrowth over last year. For the quarter, Rhodius achieved net sales of EUR 17.4 million, which is 5.4% growth over Q2 FY '25, which saw sales of EUR 16.5 million. Q2 FY '26 sales is higher by 31.6% compared to EUR 13.2 million in Q1 '26, reflecting the resolution of operational challenges relating to logistics. In our previous call, we had said that we expect the stability of operation to come by end of August. We are almost resolved and back to normal. And we had also said that Q1 performance would impact the full year sales as well. We said that we expect the remaining 3 quarters sales would be in line with the last year's sales. In Q2, we are seeing a 5.4% growth. We still maintain the same outlook. In H1 FY '26, Rhodius incurred a loss of EUR 2.2 million against a loss of EUR 0.1 million same period last year. This is after the PPA write-off of EUR 1.4 million, reflecting the loss of sales in Q1 impacting the profitability. At the full year FY '25, Rhodius made a loss here -- made a loss of after tax EUR 0.2 million in FY '25. We expect the loss after tax to be about EUR 3.5 million to EUR 4 million this year. This is after PPA write-off of EUR 2.8 million. AWUKO achieved a sales of EUR 5.5 million for the first half of the year. This is a growth of 5.3% when compared to the sales of EUR 5.3 million last year. For the quarter, AWUKO delivered sales of EUR 2.9 million, which is a 31% growth over last year EUR 2.2 million. Sequentially, it was higher by 12.7% compared to EUR 2.6 million in Q1 '26. The losses after tax in H1 versus this year has remained flat. At the full year, we expect the sales growth to grow by about 20%. We maintain the same outlook. The losses before tax could decrease slightly. Now I will come -- I will cover the bottom line performance of the segment. Consolidated Abrasives PBIT for the first half of the year was INR 45 crores compared to PBIT of INR 90 crores in H1 '25. Margins have declined from 8.2% to 4.1%. The margins were impacted by Rhodius and standalone business. Consolidated Abrasives PBIT for Q2 FY '26 was INR 33 crores compared to PBIT of Q2 FY '25 at INR 34 crores. Compared to Q1 FY '26, the PBIT was higher by INR 22 crores. This is sequentially driven -- sorry, compared to PBIT of the same period last year, Q1 FY '26, was INR 11 crores. This is mainly due to Rhodius and standalone Abrasives. Electro Minerals consolidated sales for H1 FY '26 was INR 804 crores compared to sales of INR 783 crores in H1 FY '25. Standalone business and Foskor Zirconia helped to grow this. Standalone business grew by 26%, Foskor grew by INR 20 crores and VAW degrew by about INR 83 crores. Q2 sales was INR 399 crores compared to sales of INR 402 crores in Q2 FY '25. The growth was on account of VAW -- sorry, the degrowth was on account of the VAW. Sales in Q2 FY '26 was INR 399 crores compared to INR 405 crores in Q1 FY '26. This is also largely arising from VAW. Standalone Electro Minerals. Standalone Q2 sales was INR 213 crores. This is a 1.2% growth compared to sales of INR 210 crores in Q2 FY '25. The growth was largely aided by volume, while prices remained flat. Exports continue to perform well in this segment. Compared to Q1 FY '26, the sales in this quarter was almost flat. Sales for H1 FY '25 was at INR 425 crores with a growth of 6.5% compared to INR 399 crores in H1 FY '25. This growth was aided by volume and price. Export definitely helped a lot. VAW sales in local currency in Q2 FY '26 degrew by 37.2% compared to FY '25 from RUB 2.4 billion to RUB 1.5 billion. In INR sales, the degrowth was 27%. The exchange rate used in Q2 FY '25 was 0.94 compared to the exchange rate used in Q2 FY '26 is about 1.08. Sales in local currency degrew by 15%, that is RUB 1.8 billion to RUB 1.5 billion compared to Q1 FY '26. VAW delivered a profit after tax of RUB 222 million in Q2 FY '26 against INR 466 million during same period last year and RUB 71 million in Q1 '26. In local currency, H1 FY '26, the sales was RUB 3.3 billion compared to RUB 4.9 billion in H1 FY '25. This is a decline of 31%. We communicated this expectation earlier. In INR terms, the sales decline was from INR 459 crores to INR 364 crores, resulting in a decline of 21%. H1 FY '25 profits were RUB 294 million compared to RUB 753 million during the same period last year. This is a decline of 61%. In terms of H1 profit from INR 70 crores, it declined to INR 31 crores. With respect to the full year performance at VAW, we had earlier committed a drop in volume by about 25%. We maintain the same guidance now. Foskor Zirconia. For the quarter, sales was ZAR 114 million compared to sales of ZAR 82 million in Q2 '25. The loss after tax was ZAR 24 million compared to loss after tax of ZAR 21 million in Q2 FY '25. In Q1 FY '26, sales was ZAR 121 million. And in Q2 FY '26, the sales was ZAR 114 million. In Q1 '26, the loss after tax was ZAR 18 million compared to the loss after tax in Q2 '26 of ZAR 24 million. In H1 '26, sales was ZAR 235 million compared to H1 '25 sales of ZAR 203 million. In H1 '26, loss after tax was ZAR 42 million compared to ZAR 32 million in H1 '25. I'll move to Ceramics business. Consolidated sales for H1 FY '26 was INR 601 crores compared to INR 549 crores in H1 '25. This is a growth of 9.4%. Growth was driven by standalone operations and the Australian subsidiary. Q2 FY '26, the sales was INR 301 crores compared to INR 280 crores in Q2 FY '25. This is a growth of 7.8% and was driven largely by our Australian subsidiary. Standalone Ceramics Q2 sales was INR 228 crores, which is flat compared to Q2 FY '25. Compared to Q1 '26, sales in this quarter degrew by 4.3%, basically INR 238 crores to INR 228 crores. Sales for H1 was INR 466 crores. This is higher by 4.9% to INR 444 crores in the same period last year. To cover the PBIT of the segment, consolidated PBIT for Q2 FY '26 was at INR 62 crores compared to the PBIT of INR 75 crores in Q1 FY '26, mainly due to product mix and volume. Consolidated PBIT of H1 FY '26 was INR 137 crores compared to INR 144 crores in H1 FY '25. Standalone Ceramics PBIT decreased by 3.8% to INR 107 crores from INR 111 crores in H1 FY '25. There was no debt in our standalone books. Total debt at consolidated basis was INR 210 crores at the end of Q2 FY '26 compared to INR 172 crores at the end of Q1 '26 and INR 103 crores at the same period last year. The debt-to-equity ratio is 0.06 at consolidated level. Cash and cash equivalent at the consolidated without cash in VAW is about INR 215 crores, which means debt net of cash is 0. During the H1 FY '26, our CapEx investment was INR 162 crores against INR 124 crores in H1 FY '25. This is against our full year plan of INR 350 crores as we communicated during the last call. So we are progressing as per the plan. At the standalone level, the CapEx was INR 120 crores compared to INR 69 crores same period last year. Now I'll provide an update on the outlook for the current year. I maintained the outlook shared last time, which is as follows. Consolidated sales growth could be 5.5% to 6.5%. Consolidated Ceramics growth could be 16% to 18%, same as earlier communicated. EMD growth guidance is about 1% to 2%, same as last time communicated. Abrasives sales in our last call, we communicated 4% to 5% growth for the year. Margins at consolidated level, Ceramics section, we communicated 23.5% to 23.7% on a full year basis, maintained the same. EMD in the last call we said 4.5% to 5.5%. Abrasives last time we said PBIT margin could be 6% to 6.5% on a full year basis. We said that last time the overall PBIT margin could be 8.2% to 8.5%, we maintained the same. CapEx side, we would spend about INR 350 crores. We have spent about INR 162 crores in H1. So we think we will meet the CapEx plan. So that's broadly my opening remark, and I think I'll open up for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Ravi Swaminathan from Spark Capital.

My first question is with respect to the standalone segments of Abrasives and Ceramics and Refractories. The growth were subdued during this quarter. So if you can give a bit more granularity in terms of quality of growth in Abrasives in the retail side and industrial supply side. Similarly, for Ceramics and Refractories between the Wear Ceramics, Metallized Cylinder and Refractories, how the individual subcategories were growing, that will be great, sir?

Thank you. I think -- so the growth in the standalone segment, particularly Electro Minerals was about 6.5%, Ceramics 4.9% and Abrasives degrew at 2.8%. But the growth sequentially in Abrasives at 7.5% is encouraging. We expect that trend to continue for the second half. And that's the broad outlook that we have. And as far as the Ceramics is concerned, the H2 will be strong, largely because of the way the order books were built and some of the projects requirement are coming along. So we expect that there could be -- H2 will be heavily loaded compared to the H1. So hence, we feel that the growth compared to the H1 versus H2 will be different. And Electro Minerals will continue the trajectory that we have been committing. That should continue. That's what broadly guiding to.

And within the subcategories, any flavor, sir? So for example, Ceramics and Refractories, how Wear had performed, how Refractories had performed, how Metallized Cylinders have performed?

Yes. So Metallized Cylinders and Engineered Ceramics have performed over 20%. And I think the Wear challenge is basically on the Wear Ceramics side. Both Wear and some of the Refractory side, the project-based dependence, there's a delay, which should pick up in the next quarter and we should see overall growth. At H1 level, we are at about 11% growth. We expect that, that would pick up.

Okay. And which sectors would be -- Wear Ceramics would be catering to where this delay? Is it like steel, cement...

So it is steel, cement, glass, all these sectors, there are some project delays.

Understood. And similar flavor on Abrasives side, retail vis-a-vis industrial supply, how it is doing? Any flavor on that?

So I think industrial and precision are doing fine. Retail is a bit subdued, but the encouraging thing is that the inventories at the dealer level have really come down, which sees that Q3 and Q4, we should see a pickup. The lot of festival pickup helped to move their inventory level. So that is something is encouraging to look at Q3 and Q4.

Got it, sir. And my final question with respect to the Electro Minerals business, you had highlighted that there is a bit of Chinese competition in aluminium oxide and how it is panning out. So is there increased competition which is there or is it maintaining? Any views on that?

It is maintaining and no difference that we see at this point.

The next question is from the line of Harshit Patel from Equirus Securities.

Sir, my first question is on standalone Ceramics. I think the margins over there have been the weakest we have seen in last 4 years, about 20% or so. You have highlighted adverse product mix as one of the reasons. What could be the other factors over here? Also, we had expected a strong revenue growth as clean energy sales to the U.S.-based customers are reviving. However, we have posted only flattish sales. So if you could explain, co-relate these things, that will be very helpful.

So I think product mix and the other one is the top line. There's base level fixed cost absorption needs to happen. So since there's a top line is a bit soft. So that's why we expect the H2, we could pick up. I mean, we will bounce back better in the H2 and that should start showing the margin pickup. And that's why even in the overall margin guidance, I still maintained what was earlier said.

Right. Just a follow-up to that, sir. But sir, when our Metallized Cylinders and Engineered Ceramics are doing so well, which are obviously the higher-margin businesses for us vis-a-vis the Wear Ceramics and Refractories, shouldn't the product mix be good for us? Should that not be an accretive product mix?

It does and that is why it is helping us a bit. But if you look at the VAW plus the Fired Refractories business, they are not bad. Their margins are also very encouraging margins. But the volumes that they hold to the total business when it is not growing, it will does have the impact of the mix. And that's why we used the word mix.

Understood. Sir, my second question is on the subsidiary level Electro Minerals business. Here, the sales seem to be very strong despite the continued sanctions on VAW. Margins have also improved on a sequential basis. So how have we achieved this improvement in the [indiscernible]

No. So I think if I look at Abrasives, we have done fairly well outside, of course, there's a domestic Abrasives pickup, equally Foskor Zirconia top line pickup. These 2 are helping us in terms of our overall pickup. But you have also a fall of almost INR 83 crores in the top line as far as VAW is concerned. But the eliminations, the intercompany eliminations are lower compared to the last year because we no more source from VAW. So that benefit also accrues to us. So that is how the overall we are in better shape as far as Electro Minerals is concerned.

Sir, just lastly, a book-keeping question on our others segment, wherein we combine the results of [indiscernible] SEDCO as well as the IT business. Here, we have posted the positive PBIT after consecutive losses of 14 quarters. Anything you could highlight here?

I think I don't want to track individually these smaller businesses, but I think all of them are doing fine. So all of them have fired well, and that is the basic reason for that.

The next question is from the line of Amit Anwani from PL Capital.

First question on VAW again. So obviously, you have highlighted that there would be 25% reduction in volumes. I wanted to understand any development which has happened on sanctions. And in case of sanction continuing, what kind of volumes are we expecting any strategy or any hope of sanction getting lifted? How should one think of this business slightly medium term?

Look, I think this is a very tough area to guess because this is a geopolitical question. I would like to stay away from that. I think you are as good as mine or more than mine in terms of knowing the geopolitical situation as everyone reads instantaneously, as everyone treats. I feel that our focus at this point in time is to stay within the ambit of what we can do. And that I think is what we will stay. What is helping us is a debt-free company and also highly focused way of running the business helps us to stay afloat. And we hope sooner some better prospects would come.

Sir, on the 2 subsidiaries, AWUKO and Rhodius, I would love to understand are we on track for breakeven and when are they happening? And second, with respect to what is driving the demand? I understand there's a lot of sales there is global in nature. So just wanted to understand what is the situation on demand side for these subsidiaries? There's some improvement which has happened and we are expecting H2 to be slightly better. So updates on that.

Sure. So I think the Rhodius drop in Q1 is a one-off event largely driven by the way the logistics was handled, but they are out of that and they are back to normal. And the demand, I would say, it is good and it is continuing the way we are planning as far as Rhodius is concerned. And we -- as I said that we continue to look at Rhodius as a good company, would get back to the profitability even after PPA soon. That is what we are broadly looking at. As far as AWUKO is concerned, we feel that getting to about roughly about EUR 12 million to EUR 14 million top line for this year is the first milestone that we should hit. So far, it looks like the trajectory is towards that. And then at the end of the year, we will again update you in terms of how we are looking beyond that. So by and large, both are traveling as per what we were looking at.

Sure, sir. Lastly, sir, on the new product development. Last time I recollect you highlighted the high-performance SiC pilot plant is on track, though we do not expect the volumes in F '26, F '27. So any update on that? And apart from that, we're seeing a lot of activities happening on semiconductor, CG Semi installed the plant and even L&T is talking about it. So -- and we also talked about some ceramic-based products for semiconductor. So just wanted to understand with respect to product developments, what one should look at in near to medium term, which can materialize in 2, 3 years?

Sure. So semiconductor, basically ceramics for semiconductor fab equipment is what our focus area. And that facility is coming up pretty much in line. And we expect these would start benefiting in the next year onwards, which is what our earlier cadence also. So that would continue. And the defense program, aerospace and defense program investment is also very much on track. The investment on HPSiC is also very much on track, all the programs that we broadly talked about. As far as our long-term strategy is concerned, everything is pretty much on track. That's why you see a strong CapEx spend, which is very much in line with our spend as well. In fact, the INR 160-odd crores is probably the highest at this point in time. So we are progressing based on our long-term trajectory.

Sir, are we seeing any contribution coming in from these projects in the next 2 years or it will be beyond years?

So as far as the semiconductor, we expect that it would start contributing from next year. And then aerospace and defense, partly next year, but mostly year after. And then as far as the HPSiC, we said 2 years, we need to wait because these are all seeding time, which is what we are currently doing.

The next question is from the line of Rupesh Uttvani from Nayan M. Vala Securities Private Limited.

I just would like to know that over the past 2, 3 quarters, if I am to look at your other expenses, they are on a standalone basis, they have grown on a higher trajectory, which has been affecting your overall margins. So if you could maybe just shed some light on what is causing that increase, that would be really helpful?

I think other expenses, what you call as unallocable at the consol level is very much comparable at H1 to H1 level. And standalone level, there is a marginal increase of about INR 10 crores. So I see that it is very much in line. We don't abnormality, except there are some dividend income movement, which is like we also disclosed that close to some INR 68 crores plus is the dividend that we had kind of one-off dividend, which -- other than that, I think if you exclude that, I mean, as we exclude unseed, we see that it is very much in line.

Okay, sir. And I just wanted to confirm that you had said that -- in this call, you had said that VAW is not exporting raw materials to the Indian subsidiary for, let's say, from the Electro Minerals perspective. So I mean, would that affect our margins anyway in the Abrasives or any other segment?

I don't think we had any link to the -- our domestic Abrasives business. We never sourced for our domestic Abrasives business and has no connection to that. And we are not sourcing. I mean that stopped here.

The next question is from the line of Bhavin Vithlani from SBI Mutual Funds.

Sir, the question number one is with respect to your comment to the earlier where I also was observing a 35% increase in capital expenditure. If you could help us what is the planned outlay for the current financial year and the next? And if you could also give us a breakup between the key projects that we are planning this capital expenditure?

Yes. So Bhavin, I think we did guide INR 350 crores of CapEx at the full year level is what our guidance is. And we have spent about INR 160-odd crores now. Second half, we will have the rest. And this is as per our long-term strategy program that what we have worked on. So it is very much in line. Individual project details will be difficult to share, but these are coming for, let's say, semiconductor facilities, facilities for aerospace and defense, investment in HPSiC facility, investment in thin wheel relocation. All that is -- these are the programs that we are working on.

Sir, pardon me for hopping this. What would be the total planned outlay for the semiconductor for the aerospace, defense, Ceramics and HPSiC over a 2 to 3-year basis, the total planned outlay for getting the project up and running in the Phase 1 of our plan?

So Bhavin, I think it is a reasonable facility and based on our expected returns and the top line is the normal way that we evaluate and put. Individually, we are unable to share how much is this, et cetera. But be rest assured that it is based on anchor customers' programs that we have in place to support that, and that is how we are making these investments.

Sure. My question -- other question is on the Electro Minerals. And when I look at the subsidiaries performance, which is standalone minus consolidated, the revenue run rate that I see for the quarter is about INR 186 crores. And prior to the sanction, it used to be about INR 190 crores to INR 200 crores. So it's not very different despite the sanctions. So -- and this is a continuous process, the VAW is a continuous process business. So could you help us understand, is the impact that we are seeing is largely the realization where we've been able to push out the volumes, maybe at a lower margins? And in this quarter also, we've seen a remarkable improvement on the profitability front. I mean, if I look at the EBIT of the division where it was negative in the previous quarters, about INR 2 crores, INR 3 crores and it is about INR 13 crores positive. So the effort that we are putting, it will be helpful to understand and what transpired such an improvement despite the sanctions.

So first of all, sanction does affect. It is not that it is not affected. So it's told that at H1 level, we have an INR 83 crores of impact on the Electro Minerals business. So it does affect. But what helps us is the standalone growth, growth in Foskor is helping us to a large extent to offset this. So that is what I would say rather than anything else. So -- and obviously, that helps us also to some extent a margin stabilization. And so I think had VAW performed at its normal level, we would have enjoyed a far more better results than this. I hope to see that day soon.

Sure. And if you could -- I mean if possible, what would be the plan assuming the sanctions go on for years? How do -- what is the plan of action for the company to get to alternative markets, alternative customers?

See, I think -- I'm sure this is very difficult to even work through a simulated experience of answering this question because it's very tough. From our side, we have an approach where focus highly on what VAW can do with the limitations what they have. So that's number one. Make sure that we run this in a way which is within the framework of what is possible, highly focused on cash conservation, making sure that they have reasonable margins and able to survive. At the same time, thinking beyond how can we do beyond this is a very, very difficult task, Bhavin. We have limitations of what we can do. So definitely, and as a group, we will not do what is not possible.

Sure. Sir, my last question is on the Abrasives front. As we've highlighted, there are 3 broad segments, retail, industrial and precision. Retail is where the pressure was. But I also understand is that within the precision and the industrial, automotive as a sector has a greater salience. And as we are seeing pickup in the automotive production, I mean if you could just give us an outlook in terms of do we see rate of growth for the standalone Abrasives improving, because yesterday, our competitor also reported and they reported kind of a 6% growth. So your outlook over the next 3, 4 quarters, given the automotive pickup and how you are seeing will be helpful?

I think as I said that our own reading is that the H2 for the Abrasives going to be better. First of all, if you look at Q2 versus Q1, we are seeing a pickup in terms of growth and we have grown about 7.5% plus. And we expect Q3 and Q4 will be better on a few things. One, our own retail network, the kind of inventories with them is kind of far more thinner at this point in time because of what they had experienced in the last quarter. So the benefit of GST plus the festival growth, et cetera, we should see this coming up in Q3 and Q4. So I would say that our expectation for us is definitely better in H2.

The next question is from the line of Viraj from SIMPL.

I joined the call a little late. So pardon me if my question is repetitive. Sir, my question is largely on recent developments at [indiscernible] So post exit of 3M, we are primarily the de facto promoters in the company. And in the past, we have seen transfer of talent from them to CUMI as well. And recently, we have seen exit of top leadership as well from them. So question is what is our play here now with the entity? And what is our aspiration and expectations from that company? And what will help us achieve those?

So thanks for this question. I would stick to commentary on the performance of CUMI here. And I'm sure you appreciate our constraints on that. We should talk about CUMI, and I encourage you to focus on CUMI.

Understood, sir. And sir, second is more of a feedback. The group is more for being investor-friendly, stakeholder-friendly and our benchmark when it comes to investor communication and practices. But sorry to say, we are disappointed with the approach here at Wendt. We as long-term investors, even participated in AGM, registered as speakers, put our queries, but it's been more than 3 months to say there has been no reply. Worse, the subsidiary has been reporting poor numbers and we have no idea what's happening in that business. So this is very unlike Murugappa Group company. So how do we rectify this? Because as long-term investors, we are still waiting for the opportunity to get our queries addressed.

Sure. Thanks for expressing your sentiment. I would take this back and probably convey this to the Wendt team, and they would get back to you.

The next question is from the line of Aditya Mongia from Kotak Securities.

I just wanted to check with you, sir. So standalone business started to kind of grow over the last 3, 4 years at mid-to-high single-digit more towards mid and high. I'm talking overall business. Could you give us a sense of what needs to change to accelerate the growth to higher levels? That's the first question. And linked up to that is of the INR 350 crores that you are spending in, is the split a lot more towards existing businesses or is it a lot more towards new lines of work?

So I think -- sorry, your second question is not audible. Could you be clear on that?

Sure. What I was asking was that in that INR 350 crores of CapEx, is it more inclined towards existing lines of work or is there a fairly meaningful share of new lines of work?

Okay, good. So I think what needs to happen to have a higher growth is the first question as far as standalone business is concerned. So I think this is the program that we have for a 5-year horizon from now till FY '30 is where the LTS work that we have prepared ourselves. I think each of this business have come up with a set of actions, which would take the growth from the current level to a higher growth rate. We feel that each of them are definitely working towards that. I think we broadly shared last time around that. I think the Abrasives is largely going to focus on sharpening the go-to-market, introducing newer products through the NPD program. Similarly, we also have a program of how do we source and scale. And these are the programs. And of course, there are specific geographies today we are not present or have our market share is lower. So how do I make use of those. So these are the opportunities that we should see and pursue this. In the Electro Minerals, we said that scaling up in alumina more towards the treated grinds, whether it is seed treated or silent treated or sol-gel-treated, blue-treated, zirconia-treated grinds, thereby increasing our alumina portfolio. At the same time, focus on the value-added products through additions of zirconia, zirmil, stabilized zirconia, et cetera, and getting into new areas like thermal spray powders, et cetera. These are the programs as far as Electro Minerals is concerned. As far as Industrial Ceramics is concerned, our focus is largely in terms of how do we serve in newer areas like semiconductor, electronics, aerospace and defense and how do we prepare ourselves for that, which is what is the program that each of them are working. And in terms of the Refractory, it is mostly to scale up on the monolithic refractories. Just broadly summarizing it. So these are the programs which will help us to accelerate the growth. What you have observed as there is a pickup, but will it pick up further. So the answer is yes, and these are the programs that we would work on. Of the INR 350 crores, are you investing in new areas? And if so, how much? I would say a majority of this investment goes into newer areas is what I would share with you.

The next question is from the line of Mohit Pandey from Citi.

Sir, first question is on Metallized Cylinders. So I believe you mentioned in this quarter, there has been 20% growth. So just wanted to understand what are the capacity utilizations there now? And are there any expansion plans here? The end market does look like growing quite smartly here. That would be question number one.

Yes. I think you are right. I think the end market is growing very strong. And I shared over 20% growth, which is what we are telling. And we are also parallelly looking at how do we prepare ourselves for an accelerated growth. And so clearly, we have a program to address that.

All right, sir. Sir, secondly, on the aerospace and defense ceramics. Is it possible to share more color around your offerings here where exactly which subsegments are they likely to find applications in? And have you already entered into any partnerships with any defense customers for R&D for them or how are you thinking about this?

Good. So the 2 broad areas that we work on is basically vehicle protection and body protection. These are the 2 broad areas that we are working on. And so our strength is to prepare ourselves and supply the ceramics needed for that, for which we have some collaboration with DRDO and CGCRI, which are very much in place and the capabilities are very much there. The third area is certification in terms of various international certification in terms of the penetration. So those are also fairly we have got about 4 different levels of certifications that we have got for our products. And we are working with some of the leading suppliers for aerospace and defense in India. And definitely, these are the 4 broad kind of indicators that I can share. This is how we are working on.

Okay. Sir, just to clarify, so this is not just domestic opportunity. This is possibly international because I understand you said about some certification? Is that fair?

No, certification is required even to supply to the domestic market. And hence -- because that's basically -- you need to make yourself qualified to supply, and that's the basic threshold. So that is what we are doing. Our focus is domestic to start with.

Okay, okay. Yes. Sir, and last question is more near term. So Ceramics, you mentioned in 2H, you're looking at on standalone Ceramics a pickup. If you could give more color around whether this is based on certain order backlog that you already have or what should drive this pickup in 2H in Ceramics standalone?

Right. This is based on the order backlog and the project execution time from the customers. So those are the basis for the estimation.

The last question is from the line of Anupam Goswami from SUD Life.

Sir, my first question is on the Ceramics. How do we look at it in a little long-term growth? We had good run until now and it's kind of supporting the other segments. So from here onwards, even beyond, let's say, '26, FY '27, '28, how is the market turning up for us? How is the newer product doing? And how do you see the growth sustaining?

In the Ceramics, I think I was just talking a little bit earlier, the growth trajectories are -- so there is an existing set of business and their own growth trajectory, which is basically either Engineered Ceramic products or Metallized Cylinders and the valve products. That's the growth engines. The second is the newer investments that we are making, which is basically in terms of semiconductor, electronics, aerospace and defense. So that will help us to accelerate the growth currently what we have. So these will be the 2 broad engines and which would drive the future growth of Ceramics.

So until now we had about 20%, 22% sort of growth in Ceramics. Shall we take -- can we take this number going forward? Do we have that conviction here?

So we haven't guided individually, but we have shared a broad cadence 2 calls back in terms of what we are looking at in the long-term trajectory. I think those should help you to make your projection, but we are quite upbeat about what we are trying to do.

Okay. Sir, last on the new areas. Where do you see the revenues coming in? And how much of a contribution we can see from that? What is the scale of we can look at?

I think we broadly guided at the overall company level, 2x in this period of the next 5 years. That's what we have broadly guided. So individually, we haven't shared any guidance and -- but programs, we did share about that.

That was the last question. Ladies and gentlemen, I now hand over the conference over to the management for the closing comments.

Good. I think thank you all for participating. I would summarize, number one is what we have been guiding for this year, we are very much on track. CapEx program is very much on track. Balance sheet is strong. And the trajectory that we all looked at for the LTS 2030, we are progressing well towards that. So I would say that in terms of some of the specific items like issues on VAW, we need some resolution at the geopolitical level, which will help us to take this forward. But other than that, we are very much on track in rest of the programs that what we are looking at. So thank you and all the very best.

On behalf of Kotak Securities, thank you for joining us. You may now disconnect your lines.