Carborundum Universal Limited (CARBORUNIV) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Carborundum Universal Q1 FY '22 Earnings Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors Limited. Thank you. And over to you, ma'am.

Thanks. A very warm good morning to everyone. On behalf of DAM Capital, I would like to welcome you to the Q1 FY '22 Earnings Call of Carborundum Universal Limited. We have the management today being represented by Mr. N. Ananthaseshan, Managing Director; Mr. P. Padmanabhan, Chief Financial Officer; and Mr. G. Chandramouli, Senior GM, Investor Relations. I would now like to hand over to Mr. Ananthaseshan for his initial remarks, post which we'll open up the floor for Q&A. Over to you, sir.

Thank you, Bhoomika. And good morning to all of you. Before we begin, as a practice, we will now have Mr. Chandramouli read out our disclaimer, and then I will take the call.

Thank you. Thank you, [ Anan. Good morning ]. During this call, we may make certain statements which reflect our outlook for the future or which could be construed as a forward-looking statement. These statements are based on management's current expectations and are associated with uncertainties and risks, more fully detailed in our annual report, which may cause actual result to differ. Hence, these statements must be reviewed in conjunction with the risks that company faces. Thank you.

Yes, thank you, [ Mouli ]. Thank you all for joining us on this call again. I hope you and your families are keeping in good health. We meet again at the end of yet another challenging quarter. If I reflect back: It was a combination of [ pandemic-related ] lockdowns, increased incidence of infection amongst employees and [indiscernible] disruptions. Under these circumstances, in addition to managing current operations, the company had also focused on building all-around capabilities. All of us, at the end of fourth quarter, were thinking that in -- Q1 and then subsequent quarters would be better than the previous year. And April was an example of a great start most companies had like we did, but the extent of the second wave, which we experienced in the second half of April and through May, is something that has taken the whole world, if not India, by surprise. And if anything, it has been an ominous reminder that this [ bout with COVID ] is not [ that it might end anytime soon ], so over the past quarter, our primary focus has been to keep operations running safely across all our plants. We also ensured that all employees and their families are safe and have all necessary support as and when required. Even while we were running the operations in April and when the COVID really was raging on in the North and later on in the South, we did not think of an intensity of such nature because last year was completely different. We -- the COVID was far away from most of us, and -- but this year, it was very near [ our home ]. So it was sad that, despite all our care, we still lost 7 people to the second wave and also some of our long-standing dealer partners to this disease. At a company level, we had vaccination drives to cover about 75% of our employees and had also rolled out COVID care policy to provide support and improve their confidence. When this wave hit us in April and May, it also caused a lot of fear in our employees and many of them went back to their hometowns. So that, we had to bring them back. And only vaccinations could kind of remove that fear. So we had also provided infrastructure like oxygen concentrators to all our factory locations and we also established quarantine facilities. In addition, we also had to face logistics challenges and increasing raw material costs, coupled with [ poor ] availability. So this is the background in which [ we have a ] Q1. So in summary, the April-to-June quarter. The company recorded a sales of INR 465 crores at the stand-alone level, which was a near doubling of the top line of Q1 last year. And honestly, Q1 of last year was -- is not a great comparison, that being COVID-impacted quarter. And on a sequential basis, this marks a 8% decline. And this decline was caused both by the second wave disruptions as well as the above-average base of Q4 of last year which saw a lot of pent-up demand coming from Abrasives segment. At a consolidated level, sales recorded INR 706 crores. And the sequential decline was lower at the consol level at 6%, thanks to our positive performance in our overseas entities, which have also been seeing a -- second and third wave impacts but at different points in time. So when it comes to the bottom line performance at a stand-alone level on a sequential basis, we have seen a 8% decline in PBT, for a 8% decline in top line. PAT, however, recorded a 10% growth despite lower share of profits from JVs, associates. This is also mostly on account of the base effect. You may recall that we had extraordinary expenses in Q4 due to fair valuation of instruments. So while we did the -- better than Q1 -- significantly better than Q1 of last year, at an consolidated level, operating profits declined by 17% sequentially. Lower quantum of profits at Sterling, CAPL, VAW [indiscernible] have had an impact. However, margins continued to hold up in stand-alone Abrasives despite the lower volumes caused by the lockdowns. May was especially terrible for Abrasives with very little dispatches happening to various parts of the country which are all severely impacted by lockdowns. Overall, we have seen stand-alone Abrasives margin softening by about 100 basis points from 17% to 16% sequentially. In the stand-alone Ceramics segments, the volume impact and cost impact led to a 200 basis point softening of margins. And this cost impact was not so much from input prices but from mitigating the chronic labor shortages at the Hosur complexes, where we have our bonded abrasives, coated abrasives and super abrasives facilities, with the temporary labor returning home for the lockdown period and also the unbudgeted COVID expenses. Stand-alone EMD has been the silver lining of the last quarter with margins increasing by almost 500 basis points. So we have done record volumes in some of our product lines and also managed to pass-on some of the input price increases. In addition to a combination of product mix which is favorable, profitably also had a great run at Maniyar due to a good rainfall. Looking at the segment-wise performance in some more detail. The consolidated Abrasives segment recorded a sales of INR 273 crores, making a 9% sequential decrease; and operating profits of INR 38 crores, marking a 25% sequential decline. Stand-alone operations had a very challenging April and May with many auto OEMs shutting their operations during the second wave. This was a combination of both the COVID incidences in their respective plants and also due to the semiconductor shortage-linked disruptions the auto industry had. On an operational side, we did have some disruptions because of this in our Hosur plant due to the imposition of the lockdowns and also the acute shortage of labor. We utilized this opportunity to revamp some of our critical assets like the [indiscernible], but we were able to regain a significant portion of our lost sales in the month of June as we saw the lesser incidences across the country and the opening of the lockdowns. Our subsidiary under [indiscernible] Sterling Abrasives performed well on account of good demand from agriculture sector. After several quarters of lower volumes at our Russian Abrasives operations due to the ailing home and European auto market, we are beginning to see some revival in demand. Coming to the Ceramics segment. The consolidated sales recorded INR 173 crores, marking a 100 bps decline in top line sequentially. As mentioned earlier, the disruptions in operations at the Hosur plant had impacted production and on-time deliveries. Consequently, our sales to our Australian subsidiary CUMI Australia and other exports were also impacted due to the nonavailability of containers for exports. The orders from repairs and maintenance segments in domestic market have been particularly an encouraging story. What we are seeing is that, after a year of on-and-off operations, many core industries are beginning to invest in these areas again. In minerals, the demand scenario [indiscernible] both at stand-alone and global operations. This is also due to the fact that, while the end user industries are seeing an uptick, there is also a hesitancy from many of our customers -- or rather a preference from many of our customers to have an alternative source of raw materials from China. And that is also helping both our Russian and Indian operations. We also had an increase in input costs that were offset by price increases to some extent. As I mentioned earlier, the good rainfall in our in-house power generation facility at Maniyar has helped shore up our bottom line. This resulted in a 500 bps improvement in margin sequentially. At the consol level, it declined by 70 bps, while in Russian operations we saw good volumes in silicon carbide segment, and these volumes could have even been better. We lost some because of -- we have lost a few days of operations on account of [ incoming ] electricity supply [ deductions ] and COVID-related no-working days in the region. So we do expect the seasonal demand over Q2 to be better in Abrasives and expect the good volume and realization streak to continue in minerals. In Ceramics, we have a good order bank at CUMI Australia and expect the new mining projects in Australia to bode well for us in the near and medium term. So we have also been seeing a rise in costs in raw materials and fuel and we expect this to continue for a while, and this may have an impact on the margins. In terms of CapEx implementation, we have made considerable progress and spent INR 29 crores in Q1 on a consolidated basis. As I mentioned earlier, the focus is on our employees and keeping them safe. And we are encouraging employees to get themselves vaccinated by way of organizing medical camps in our factories. And as I said, 75% of our workforce is now vaccinated with the first dose, and about 12% with both the doses. The work-from-home practice is now limited to about 10% of the workforce mostly [ in offices ]. Now I request Mr. Padmanabhan, our CFO, to walk us through the financials.

Thank you, [ Anan ]. Good morning, everyone. Let me summarize the financial performance for the quarter ended June 30, 2021. The consolidated sales of INR 706 crores for the quarter has increased by INR 262 crores, which denotes 59 percentage up over the corresponding quarter of last year. Of this, stand-alone sales of INR 465 crores showed an increase by INR 231 crores on a quarter-on-quarter basis. This is despite the lockdown-related disruptions by the second wave of COVID pandemic. And as a reference: In the financial year '19, '20, Q1, the sales at consolidated level was INR 664 crores and INR 424 crores at the stand-alone basis. The consolidated segmental PBIT was at 114 crores, which is up by 80 crores and about 238% growth on a quarter-on-quarter basis. At the stand-alone level, the segmental PBIT for the quarter was at 78 crores against 7 crores during Q1 of previous year. On a consolidated basis, profit after tax and noncontrolling interest for the quarter was INR 77 crores, as compared to [ INR 22 crores ] in last year. As a reference: It was INR 52.8 crores for Q1 '19, '20. At the stand-alone level, the PAT increased to INR 63 crores from INR 11 crores. At the PAT margin level at the consolidated, it grew from [ 4.4% ] during Q1 of previous year to 11% in the current year. At stand-alone level, the PAT margin increased from [ 4.5 to ] 14 percentage. On the segments. On Abrasives, consolidated sales for the quarter increased to INR 273 crores from INR 131 crores in the corresponding period of last year. Stand-alone sales -- stand-alone Abrasives scales (sic) [ sales ] increased to INR 224 crores from INR 101 crores. And at the consolidated level, the PBIT was 38 crores, increasing from the negative to (sic) [ from ] INR 3 crores. Our domestic subsidiary Sterling Abrasives and Russian subsidiary Volzhsky Abrasives performed significantly well and showed positive growth on quarter-on-quarter basis for both in top line as well as in bottom line. On the Electro Minerals front, consolidated sales for the quarter increased to INR 288 crores from INR 210 crores in the corresponding quarter of last year. At the stand-alone level, sales doubled to INR 134 crores from INR 65 crores in last year. The consolidated Electro Minerals business showed a PBIT of INR 40 crores against INR 23 crores in the same quarter of previous year. The stand-alone-level EMD segment registered good growth, while Russian subsidiary recorded a marginal drop in revenue on account of the ruble depreciation compared to Q1 of last year. Consolidated sales of the segment grew by 61 percentage on quarter-on-quarter basis from 180 -- 108 crores to 173 crores. The stand-alone sales grew by 79% on quarter-on-quarter basis to 141 crores. Stand-alone Ceramics business performed well despite delays in export logistics caused by the pandemic. Consolidated PBIT of Ceramics segment for the quarter was at INR 33 crores, up by INR 21 crores from the same quarter last year. The entire increase was from the stand-alone ceramic business. On the finance side, the balance sheet continues to be strong, and the standalone continues to be debt free during the current quarter also. On a consolidated basis, the debt-to-equity ratio was 0.02. And the total debt on the consolidated basis was INR 45 crores. And the ForEx cover: CUMI is typically a net importer in dollar terms and net exporter in euro terms. We cover the net exposure in accordance with policy. And the strong balance sheet, good cash position, low debt-equity ratio and [ setting off ] with the net surplus, we are at 6 crores of net surplus -- liquid surplus. This concludes my update on finance. Thank you.

Thank you, Paddu. And over to you, Bhoomika.

Yes, sir. Marika, can you please open up the floor for Q&A, please?

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

Sir, congrats on a good set of numbers. My first question is with respect to what could have been the kind of revenue loss this quarter because of the -- lockdown could have been there, if you can throw some light, yes.

[ You meant ] if we didn't have the lockdowns in May, right?

Yes.

I believe that bulk of the sales was lost in Abrasives and also some in the Ceramics segment. And if we had not had lockdowns, we c have done about another between 30 crores to 40 crores more.

At overall company level, [ does it ]?

At an overall company level.

Got it, sir. And we have gained [ any ] market share in the Abrasives segment from the competitors; or from, say, the unorganized players, especially the Chinese imports. I just wanted to get your sense whether are we -- or the organized sector. Are we gaining share from the unorganized people?

Yes, yes. I remember that you asked this question last time as well, but -- or one of the participants asked. And I think we have definitely gained. That's my sense of -- that's a feedback I get from the market and also my colleagues who are handling the Abrasives segment, definitely from -- some from the -- on the [indiscernible] segments. And also, on coated, definitely we have gained, I will say. We also have gained significantly -- I won't say significant but definitely gained strongly in the precision abrasives segment, the reason being that, many of the customers on the precision abrasives, which is the auto and auto component segments, while they were -- while do -- we have competition both from domestic and from imports, having someone local to support them very quickly has helped them. So we are seeing a preference towards that. So the precision abrasives segment is -- definitely have gained in market share.

Got it, sir. And my final question is with respect to overall revenue growth for this year. Are we in-line to achieve double-digit revenue growth at a consolidated level over last year? And with respect to margins, given the fact that [ the ] costs have gone up or fuel costs have gone up, are we in a scenario to maintain the record-high margins which we had seen last year, which is -- which was around [ 17.7% ] EBITDA margins?

Yes, as for the revenues, I believe that we would be -- as a consolidation, we can hit a double-digit growth, again given that the base was low last year. And on the margin side -- and I must [ put in a rider ] here because [ everywhere ] we are talking about the third wave coming. So I hope that we don't have it, but unfortunately we are already seeing the beginnings of it in other parts of the world. So I hope that we don't have it, but if things are normal [ and going the way ], I don't see any reason why we shouldn't hit double-digit growth on top line. On the bottom line, yes, many of the commodities prices have been shooting up and significantly. And while we are working on 2 fronts, one obviously on seeing how do we depress our variable costs, we're also trying to push out some of those costs to the customers as well. And that's not in any time is easy, and so that's where we have the challenges also. We'll endeavor to keep up. We'll keep the margins or be close to where the margins are currently.

The next question is from the line of [ Vineet Mani from Bidlasan Life Insurance ].

This is [ Vineet from Bidlasan Life EMC ]. Sir, my question is again regarding your margins. So we've seen your gross margins have actually been improving, right, so could you just give us qualitative commentary on, segment-wise, how pricing as well as raw materials have behaved? So is it mainly because of EMD only? Or what's happening in other segments? Could you just talk about that, please?

Yes, yes. We have seen margin improvements in all the 3 segments. If I were to start with Abrasives: Abrasives have been systematically improving their margins over the last few quarters. It has been a combination of very diligent work on the cost front, improving efficiencies; [ growing ease ]; reducing energy costs, energy consumption; very scientific work. So that has definitely helped both in the Coated Abrasives and in the Bonded Abrasives segments. We also chosen raw materials which will give us lower losses. So that has been a work which has been done on the operational side. And on the marketing side, it has been a very systematic way in which we have -- how we have worked on those product groups which are better profitable but also have opportunities to grow and consciously reducing or moving away from those loss-making product groups. So it's been a combination of both, and that has [ kind of ] definitely helped us in Abrasives. In the case of Ceramics, as you know, that -- the bulk of our ceramics in the standalone and also in the case of Russia goes into the exports market. And these are technical ceramics. And despite the lockdowns even last year, the end use markets, which is the fuel cell market or the alternative energy markets, the power transmission and distribution markets, they have been doing very well. And these are custom-built products and of a better margin profile, and that is where we have been focusing on building the volumes. So that has definitely helped in the Ceramics. In the minerals business, while silicon carbide produced in Russia has always had a better competitive advantage due to its position in Russia with access to competitive raw materials and energy, the work which the minerals team in India has done in terms of generating more volumes from the existing assets -- so they have been able to sweat those assets to create more volumes and also significantly change their product profile to ones which consume less energy, which has helped them both by specific energy consumption, thus lowering the cost of energy itself, and also churning out volumes, which help in a better fixed cost coverage. So all these actions have helped these businesses and resulting in possibly better margins overall.

Right, sir. Sir, you spoke about some expenses that you had to incur because of COVID related -- let's say the lockdowns or taking, bringing back workers to the plants, et cetera. Would you be able to give a rough estimate of what were these additional expenses which might not recur going ahead?

See, in this quarter, we -- as I said, there was a combination of health care expenses due to the COVID. As I said, we also had some fatalities. We also took care of people. I mean it did not depend on what level they were, whether they were permanent employees or workers -- transient workers. Some of them had to be hospitalized for extensive period of time, and the company picked up the bills of all of them. We also provided infrastructure in terms of oxygen concentrators, setting up -- or one oxygen concentrator for hospitals here in Chennai. So altogether, we did about, I would say, on a -- we will be about 1 -- between 1.5 crores to 2 crores with the spend that we have towards this as additional expenses. This includes the contributions that we have made over and above the CSR committed spend to the government in Tamil Nadu to support the COVID fight.

Understood. And this -- obviously this is mainly in stand-alone numbers where it will be reflected.

Stand-alone numbers, yes. So we had similar numbers in our Russian subsidiary as well because there you would realize that the number of people in the plants are about 2,000 -- I mean, 1,800 workforce. And about 200-and-odd people are still in quarantine, so we -- they also had to spend a substantial amount of money in terms of their health support. So...

Sure, understood. Sir, my last question is in the P&L account there seems to be a large inventory change number which shows that we've had increase in inventory, which is pretty large relatively, if I look back at the history...

Absolutely, absolutely, yes. So we were -- yes...

[indiscernible] where have you built this inventory, et cetera? Yes.

Yes. So we were always tight on inventories, but this quarter has been exceptional. So we had locked up inventories in 2 counts largely, 1 on the raw materials side and on the finished goods side. On the raw materials side, as you well know, that -- the Abrasives division and also the Ceramics segment import bulk of their raw materials from overseas. And in the Abrasives segment, we do significant imports of the grains from China. And beginning of Q4 and February, when the Chinese New Year starts -- and we all know that the Chinese go on a 15-day holiday, so we normally tend to schedule more in the -- just before the holiday starts in the event that something happens to the supply chains, but unfortunately, we did not receive those materials on time. And then when we -- when the materials were on the way, you had disruptions in terms of May -- April and May. So the materials started coming in, and some were stuck in the ports. Some were yet to receive in the plants, so we were at a loss in terms of how we valued that. We were not producing as much as we should be doing. So this ended up in a piling up of raw material inventory, all good inventory. And this inventory will be diluted over the next couple of quarters. The same story is there for the Ceramics division as well, many of the raw materials getting stuck. And we also had to -- some of [ the critical ] inventory, we had to fly them in, so which added to the costs. On the finished goods side, as I said, the container shortages, the people not being available for production and dispatch also caused the WIP and the finished goods to remain in the plant and not go out of the door. So that also impacted our finished goods inventories significantly, but these are, I would believe, exceptional events. And in Q2 and Q3 -- definitely most of it will be sorted out in Q2.

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

Congratulations for a good set of numbers.

Thank you.

Thank you.

Sir, if you could speak about the end market outlook for the Abrasives. And if you could also give us a color on the pricing environment as well as the input costs that we are seeing.

Yes. So the Abrasives segment broadly, as we all know, is into precision and in mass market. And in mass market, we have both the bonded abrasives and coated abrasives, which deal with whether it is housing infrastructure, all the engineering segments. So when we saw the -- in Q4 and -- Q3 and Q4, the engineering industries coming back, especially auto and auto component industries, coming back strongly, which also indicated that -- the second-tier and the third-tier companies and the engineering companies also doing that. So we see that the precision abrasives -- the demand for precision abrasives has been growing but still not to the pre-pandemic levels, I must say. We saw that grow in Q4. And while it did grow significantly in April, we saw the slowdown in May and a little bit in June. And July, we are seeing an uptick again. Now we believe that this end use market will remain robust if we don't have a third wave. And that is what all of us are praying for. And hopefully, the discipline of vaccinations will help. In the mass market segments, Coated Abrasives has seen an uptick, with possibly more and more home renovations, building renovations happening. And many companies or many, many -- I would say many commercial buildings also which has been closed down after the pandemic, reopening now, getting renovated has -- also helping in moving these coated abrasives products. So overall, the mass market and the precision abrasives market which is linked to the auto and auto component has a positive demand. In terms of the cost push, yes, we are seeing cost push on the raw materials, significant increases in raw materials. And we have also been implementing price increases across our product lines. Some of the cost push can be passed, yes.

Got it, sure. My second question is on the Ceramics segment. In the previous interactions, you did highlight about expansions that we are looking to -- or I mean, we are looking at, considering the growth that we are seeing on the renewable side of the business. If you could give us an outlook. Where are we in the process? What is the kind of investment that we are looking at? And from the current level of the technical ceramics, how should one think about this business on the next 3- to 4-year basis?

See, the -- Technical Ceramics is -- what we are currently in and building upon is on the alternative energy or green energy sector, I would say. Technically it may not be very green because it's based on cell -- oxide fuel cells, which use natural gas. In that sense, it is still a fossil fuel but a much cleaner burning fuel. So that is one segment which we continue to work on and build with. So because there the opportunity is in terms of working with customers and building their next version of the products. So I see that, that segment will continue. Or that industry segment will continue to do very well given the fact that it is -- most of these are located in the Western world, where the companies and the countries are promoting the sustainable development goals seriously. The other segment is also the Power Distribution segment, transmission and distribution; and generation and transmission distribution segment, which are seeing a lot of the metallized cylinders used. So whether it is a larger cylinder which we now manufacture for high-voltage power stations or smaller cylinders which we are now seeing move from renewables energies for rooftop solar, et cetera, that is a segment which again will be driven by the SDG goals. So these are positive trends. And Ceramics also has opportunities in electric vehicles. And here we have started work last year to qualify our products and some of the end users in the EV space, and that have seen traction as well. So overall, good -- I would say, a good outlook for the Ceramics business going forward, and most of them linked to industries which are the future drivers of economy.

So just a follow-up. Can the segment grow at the rate of 20%, 25% over the next 3, 4 years given the strong tailwinds as you outlined currently?

See, the -- I mean today we are about, I think, in the high teens or early 20s. And yes, that is one. I would say that, that is something which we can do consistently in this segment. Whether it will move from the high 20s to mid-20s, high -- or early 30s or late 20s remains to be seen, but I think all depends on how fast the evolution of EVs will happen, which can drive possibly the segment faster.

The next question is from the line of Charanjit Singh from DSP Mutual Funds.

Yes. So first of all, congratulations on a great set of numbers. Sir, first question is overall on the exports as an opportunity. How do we see that? And from the size where we are in the exports. Like Ceramics has done well for us. And in the other segments also, how you see the scaling up of exports. That's my first question, yes.

Okay. See, the nature of the businesses are different segment to segment. In the case of Ceramics, it's a business which has got global customers, all right? So the customers are global, so -- but the -- but they sell the products also globally. So the -- naturally our exports -- share of exports in our businesses is very high because we deal with B2B customers; and work with them; create, co-create products with them. In the case of the ceramics which is heat-resistant ceramics, it's also very similar. So you have customers who are global, whether these are glass customers, carbon black customers, cements. So these are global customers and we work with them on their projects. So the nature of the Ceramics itself lends to higher exports than other businesses. In the case of Abrasives, it is a global business but very localized in nature. So every country will have its own set of abrasives manufacturing, whether it is a bonded or a coated, because it is required for shaping and finishing metals. And that's a reason why we are also predominantly strong in the domestic market. Where we have been successful and growing outside the country in Abrasives is those precision abrasives which are differentiated from the rest of the producers or rest of the competition in terms of offering a better value proposition, I would say. And that's what we are seeing in the U.S. and Europe or in the Far East. So the nature of the business determines how we compete and where we compete. And while we are -- we know that the Abrasives -- or definitely the export market is about -- what we do from India is about 10% of our sales. There is an opportunity for us to leverage this goodwill and grow further in those markets. And obviously the way to do that will be through inorganic growth, and that is definitely on the agenda. As we progress, we will continue to keep our eyes open on those opportunities. In the minerals business, it's -- again it's a global business, but it's a bulk volume business. So the specialities are the ones which would be more export friendly...

Okay, yes, yes. Sir, the next question is especially on the met cylinder. So met cylinder, in terms of our capacity utilization currently, what's like level of -- the level? And how do we see the ramping up of the capacity going forward?

We did implement what we call a 2.5 met line in the last year, during the pandemic, and that has been completely stabilized. And we are -- also gained customer approvals because these things require to be approved by customers, and that is happening. And today, the new line is about -- if I would remember right, it's about 40% utilized already. So this is area where we would continue to invest because it has to be invested in tandem with gaining new or acquiring new customers and gaining their approvals, yes.

Okay. So [indiscernible] -- yes.

So I would say overall it would be about -- sorry.

Yes. Sorry, sir. Go ahead, please, yes.

No. I was saying that on the metallized cylinders line you -- we currently have, including the new line, is about 75% -- 70%, 75% capacity utilization.

Okay, sir. And sir, lastly, sir, while you have talked about the auto as an end market, if you can touch upon the other end markets, like be it metal, cement; how those end markets are behaving [ across product categories ].

Yes. Metal and cement is -- cement is one -- I mean steel and cement are the ones which are doing pretty well. And in terms of steel, we supply products, right, across our segments, whether it is abrasives for, for example, [ road running ] of steels; or in the case of refractories, for -- both for projects and repairs and maintenance, not so much for daily -- as daily consumables and refractory consumables. We also supply quite a bit of [ lined ] equipment for the steel industries. So these are definitely picking up. So we see the product orders coming in increasingly, compared to last year. The consumables like [ road running ] continue to be a good market to be in. The Electro Minerals business supplies significant amount of raw materials to both the foundries and to the steel industry, and that is one reason why we also saw the pickup of Electro Minerals this quarter. And we believe that is going to be a continuing business, yes, and we can see better growth there. In addition to the inherent capacity of these industries to consume a lot of raw materials, we're also seeing that there is, as I said earlier, a reluctance -- or prudence, I would call it. I wouldn't call it a reluctance. I would call it a prudence by end users to source materials locally, given the potential disruptions in the future to -- whatever reasons. And that is also one giving us some impetus in terms of unearthing more capacities from our current assets on the Electro Minerals side. Carbon black, which just goes into manufacturing tires, is -- definitely will be on a roll both from an OE perspective and also for the replacement tire market. So that's continuous good-growth industry to be in. Non-ferrous industries like aluminum, copper, zinc, all of them are continuing to have picked up. And many of them are in the infrastructure space as well. And that is will -- that will give us opportunities in composites, where we produce the electrolytic cells using polymer composites for refining of copper or zinc. And that's -- augurs well. In the aluminum industry, we -- Ceramics, which supplies heat-resistance ceramics both from Russia and from India, are definitely looking forward to the aluminum industry. It's doing very well and that will continue. So overall I would say, the base metals like iron, steel, copper, zinc, all of them hold promise.

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

The question which I had was on your opening remark, in the EMD segment, wherein you talked about the benefit of China plus [indiscernible]...

Aditya?

Mr. Mongia? Sir, your voice is not audible. Mr. Mongia? The line for the current participant -- not audible, so we'll move on to the next question. The next question is from the line of [ Jason Sant from Ashika Stock Broking ].

Sir, I just wanted -- my question is more on a broader level. So in terms of India, also we've -- see a lot of initiatives taken by the government such as NIP, PLI schemes. And even globally also there is a lot of emphasis on infrastructure creation via the U.S. passing the bill, [ an import and infrastructure ] bill. So in light of the same, for the next 2 to 3 years, from a broader outlook, how do you see Abrasives, Ceramics or [ Electro Minerals ]? What do you see the growth path and the growth outlook for all these segments?

Yes. See, among the PLI schemes, for example, for these between 10 and 13 sectors which has been announced by the government, many of them are related to, for example, the auto and auto component industry. Some of them are into the cell -- advanced cell chemistry manufacturing, into solar and solar mobility. And EVs obviously will be a part of that. And we also see special alloys, speciality alloys; and also aerospace and defense. So see, these are some of the sectors which are covered in the PLI schemes. And obviously with our presence already as a reputed consumable supplier to the auto or the comp industry, we see this as a good opportunity for Abrasives. In the case of [indiscernible] infrastructure building, we will definitely require abrasives both from the coated abrasives and the -- I would call, the mass market for -- [ we call the tool-driven ] abrasives [ form ] because that's definitely going to building to productivity. And hence, that's the bright spot for Abrasives overall. Same is story when you're talking about speciality steels because speciality steels -- and even in the steel where India is poised to grow its capacity significantly. So the temperature or heat containment refractories [ of ] Ceramics, for the speciality steels and the abrasives go into them are all an opportunity that we see in those PLI schemes. One area which -- or the new areas of materials [ in common ] is obviously the advanced cell chemistry. And there -- this goes for energy storage for -- both for renewables and electric vehicles. And here additives like high-purity graphite and graphene will be required for improving the energy density and energy storage of these battery elements. So it definitely provides CUMI as a whole a good opportunity.

Sure. And I just also wanted you to touch upon -- we can see that there is...

Sorry to interrupt, [ Mr. J. Sant ]. This is the conference operator, but there is a disturbance coming from your line, sir.

Okay. Is it better now?