Carborundum Universal Limited ($CARBORUNIV)

Ladies and gentlemen, good day, and welcome to Carborundum Universal Q4 FY '26 Earnings Conference Call hosted by Equirus Securities Private Limited. [Operator Instructions] Please note, that this conference is being record. I now hand the conference over to Mr. Harshit Patel from Equirus Securities. Thank you, and over to you, Mr. Patel.

Thank you. Hello, and good morning to everyone. We welcome you to Carborundum Universal 4Q FY '26 and Full Year FY '26 Earnings Conference Call. We have with us from the management, Mr. Sridharan Rangarajan, Managing Director; and Mr. G. Chandramouli, Adviser and Head of Investor Relations. I would now request the management to give their opening remarks on how the fourth quarter as well as full FY '26 went by and provide some outlook for the future. Over to you, sir.

Good morning. I'm Chandramouli. Let us start the proceedings with the disclaimer. During this call, we 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's current expectations and our associates 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 risk that the company faces. Thank you.

Thank you. Good morning to all of you and a very warm welcome to our fourth quarter and full year earnings call for the financial year FY '26. I trust you and your family members are safe and healthy. We will begin this call by providing an overview of the company's performance for the full year FY '26 and Q4 FY '26 followed by an outlook for FY '27. We also plan to share some glimpses of the -- our aspiration 2030 later in the call. To start with stand-alone sales. On a full year basis, stand-alone sales in FY '26 was INR 3,024 crores compared to INR 2,784 crores in FY '25. This is a growth of 8.6%. It may be noted that the company has crossed the mark of INR 3,000 crores in stand-alone revenue this year. Growth at stand-alone level was driven by the Electro Minerals segment, which grew by 11.1%, recording a sales of INR 906 crores compared to INR 815 crores last year. Ceramic segment grew from INR 939 crores last year to INR 1,000 crores in this year. This is a growth of 6.5%. Abrasives increased from sales of INR 1,195 crores in FY '25, INR 1,270 crores on in FY '26, marking a growth of 6.2%. Across the stand-alone segment, growth rebounded strongly overheads too and particularly in Q4 FY '26. Stand-alone sales increased from INR 1,410 crores in H1 FY '26, INR 1,614 crores in H2 FY '26, reflecting a strong sequential growth of 14.4%. On a year-on-year basis, H2 FY '26 grew by around 14.1% compared to INR 1,415 crores in H2 FY '25. You may note that H1 FY '26 was only marginally higher by about 3%. Stand-alone abrasive grew from INR 594 crores in H1 FY '26 to INR 675 crores in H2 FY 26, which is a growth of 13.7% on a sequential basis. On a year-on-year basis, abrasive grew 15.6% compared to the last year same period. Ceramic increased from INR 466 crores in H1 FY '26 to INR 534 crores in H2 FY '26, marking a sequential growth of 14.5%. Year-on-year, it grew by 8% in H2 FY '26 and 4.9% in H1 FY '26. Electro Minerals from INR 425 crores in H1 FY '26 to INR 481 crores in H2 FY '26, an increase of 13.2% sequentially. And on a year-on-year basis, the segment delivered a strong growth of 15.5% in H2 FY '26 and 6.5% in H1 FY '26. Overall, the growth in H2 FY '26 was broad-based across all segments with abrasive, ceramics, Electro Minerals all contributing double-digit sequential growth leading to a strong performance in comparison with H2 FY '25 as well as in comparison to H1 FY '26. In Q4 FY '26 stand-alone recorded at INR 845 crores compared to INR 769 crores in Q2 FY '26, reflecting a sequential growth of 9.9% compared to 680 crores Q2 FY '26 sales grew by 23.1% in that period. Abrasives grew from INR 323 crores in Q3 FY '26 to INR 35 crores in Q4 FY '26, marking an increase of 9.3% sequentially and compared to Q4 FY '25, it recorded a strong growth of 21.5%. Ceramic increased from INR 255 crores in Q3 FY '26 to INR 279 crores in Q4 FY '26, marking an increase of 9.2% sequentially and compared to Q4 FY '25, it grew by 21.7%. Electro Minerals rose from INR 229 crores in Q3 FY '20 to INR 252 crores in Q4 '26, marking a growth of 9.7% sequentially and compared to Q4 FY '25, it grew by 22.3%. Stand-alone profit after tax FY '26 PAT was INR 216 crores compared to FY '25 PAT of INR 322 crores, reflecting a growth of 29.4% year-on-year. The PAT of FY '26 includes dividend from one of the subsidiary, about INR 76 crores. H1 FY '26 PAT stood at INR 209 crores compared to H1 part of 180 crores, registering growth of 16.4%. H2 FY '26 PAT was INR 207 crores compared to the H2 FY '25 INR 142 crores, a strong growth of 45.9%. Q4 FY '26 PAT came in at INR 122 crores compared to Q4 FY '25 PAT of INR 61 crores, resulting in doubling of profit in this quarter. Now I move to the consolidated results. Consolidated sales on a full year basis was about INR 5,149 crores in FY '26. This marks a growth of 6.5% over the sale INR 4,833 crores in FY '25. It may be noted that the company has surpassed the mark of INR 5,000 crores in a consolidated revenue this year. Consolidated growth was driven by ceramic segment, which grew from INR 1,160 crores to INR 1,268 crores, marking a growth of 9.3%. Consolidated abrasive segment grew by 5.1% from INR 2,159 crores to INR 2,271 crores. Consolidated Electro Minerals grew by 3.7% going from INR 1,575 crores to INR 1,632 crores. The meter consolidated Electro Minerals growth reflects the higher base in FY '25 due to VAW. You will note that VAW sanctioned in January 2025. So in FY '25, VAW had a normal sale of 3 quarters. In Q4, FY '26 consolidated sales were INR 1,383 crores compared to INR 1,199 crores with a growth of 15.4%. Growth in Q4 was driven by Abrasives grew by 13.4%, ceramic, which grew by 18.6%, Electro Minerals which grew by 14.6% over Q4 '25. Compared to Q3 '26, which recorded sales of INR 1,273 crores sales in Q4 grew by 8.7%. During the last call, I said the consolidated sales would grow by 5.5% to 6.5%. Against this, we have recorded a growth of 6.5%. Now I'll cover the consolidated PBT profit. Consolidated PBT before exceptions in FY '26, consolidated profit before exceptional items and taxes stood at INR 416 crores compared to INR 572 crores in the previous year, reflecting a drop of 27.2% year-on-year. A majority of this decline was on account of VAW, almost about INR 87 crores, Foskor, almost about INR 22 crores, AWUKO INR 46 crores. I will cover all these in detail later. Exceptional items, Foskor and AWUKO. In FY '26, exceptional items amounting to INR 135 crores have been recorded in consolidated financial statement. In FY '25, there was an amount of INR 104 crores for the provisions relating to the foreign currency deposits and receivable outside of Kumi Group, following the imposition of sanctions in January 2025. During the financial year, Kumi International Limited, the holding company of AWUKO approved to initiate the closure of AWUKO through voluntary winding up process under applicable loss in Germany. Considering the continued inter-performance, so with the mounting losses and its inability to turn around in the prevailing market conditions. So exceptional items relating to disclosure amounts to INR 119 crores. Foskor Zirconia Private Limited is a subsidiary of Kumi International Limited. Kumi holds 51% stake in Foskor Zirconia. Foskor Zirconia has not been able to achieve sustainable profit since 2013, despite several strategic and operational restructuring initiatives undertaken in the past. Further, the escalation in electricity and other input costs in South Africa, coupled with the intensifying global competition and foreign exchange fluctuations has rendered the business commercially and viable. Turnaround initiatives have been adversely impacted by the prevailing market conditions, marking continuation of operations unsustainable. Accordingly, the Board of Foskor Zirconia based on the recommendations of the management have concluded that there is no realistic alternative to carry on the operation and we'll be seeking requisite approvals.in this process. Accordingly, the consolidated FY '26 financials include the impact of INR 16 crores relating to the write-down of various assets to the really stable value. I will cover the profit before interest and tax. Stand-alone PBAT at stand-alone level, the business reported a total PBAT of INR 525 crores in FY '26 as compared to INR 425 crores in FY '25, reflecting a strong growth of 23.4%. Segment results of INR 491 crores in FY '26 is marginally higher than the results of INR 418 crores in FY '25. At segment level, Electro Minerals delivered a strong performance, increasing from INR 63 crores to INR 83 crores, registering a robust growth of 31.1%. Abrasive PBAT was INR 195 crores in FY '26. compared to INR 193 crores in FY '25, registering a marginal growth of about 0.9%. Ceramics declined from INR 233 crores to INR 214 crores, reflecting a drop of 8%. We will cover this later in the call. Consolidated PBAT consolidated was INR 404 crores in FY '26 compared to INR 541 crores in FY '25. This marks a decline of 25. 3%. The drop is due to VAW, Foskor, AWUKO and Rhodius. As explained earlier, I will cover this later in detail. I'll go to the segmental performance. Abrasives segmental performance, consolidated Abrasives, consolidated Abrasives recorded a sales of INR 2,271 crores in FY '26 as compared to INR 2,159 crores in FY '25, registering a growth of 5.1%. On a quarterly basis, sales of INR 610 crores in Q4 '26 grew by 13.4% and compared to INR 538 crores in Q4 FY '25. On a sequential basis, sales grew from INR 516 crores in Q3 FY '26 to INR 610 crores in Q4 FY '26, reflecting growth of 7.2%. Consolidated abrasive sales growth was driven by growth in stand-alone segment. Rhodius Abrasives, AWUKO Abrasives, Kumi America and selling Abrasives. During our last call, I communicated sales growth of 4% to 5% in consolidated Abrasives, we can expect. We are now at a growth of 5.1%. Now I'll covers standalone abrasive. Standalone Abrasives has recorded a full year performance of INR 1,270 crores as compared to INR 1,196 crores reflecting a growth of 6.2%. On a half yearly basis, H1 '26 stood at INR 594 crores against INR 611 crores in H1 '25 registering decline of 2.8%. However, in H2 showed a strong recovery, increasing to INR 675 crores from INR 585 crores in H2 FY '25, reflecting a growth of 15.6%. The overall, the performance improved from INR 59 crore crores to -- in H1 FY '26 to INR 675 crores in H2 FY '26, marketing growth of 13.7% sequentially. So overall, the full year growth was driven by a strong rebound in the second half. You would note that the business faces issues such as inventory collections from the dealer channel and seasonal range, which delayed construction activity in some markets, tepid demand in Industrial segment and a short period of caution in the northern markets following Pahalgam attack. The net range of go-to-market initiatives, including market expansion activities such as dealer appointment, new product introduction, rebranding our established products in new onboarding of key potential OEMs customers and a host of other initiatives. Besides this, implementation of GST rationalization and the rebound in festival season demand prior growth in Pets. I'll move to Rhodius Abrasives. Rhodius Abrasives sales was -- in FY '26 was EUR 61 million compared to sales of EUR 67 million in FY '25. This marks a decline of 8.8%. Q1 FY '26, Rhodius made a transition to a new third-party logistics partner considering the long-term operational efficiencies. This transition resulted in loss of sales of about EUR 0.5 million. We communicated this earlier with you. While operations assumed normalcy by Q2 FY '26 the lost sales in Q1 FY '26 could not be regained over the rest of the year. Yes. So in an account, so overall, I think they delivered sales of INR 61 compared to INR 67 million. We expect sales in FY '27 to grow by 5% in FY '27. And the loss -- the PAT loss in FY '26 was $2.6 million compared to $0.2 million in FY '25. We expect FY '26, the PAT to be a very smaller loss. AWUKO Abrasives recorded sales of $10.5 million in FY '26 compared to sales of $10.1 million in FY '25. This is a growth of 4.6% in euro terms. The loss before exceptional and tax increased from EUR 6.6 million to EUR 7.7 million in FY '26. This marks an increase of 15.8%. Losses were higher in AWUKO on account of various factors. We -- anyhow, we have decided to wind down the company as following the legal process as driven by respective countries. Abrasives PBAT. Stand-alone abrasives FY '26 recorded a marginal growth of 0.9% year-over-year. Looking at the half year dynamics, there was a strong sequential recovery with H2 FY '26 growing by approximately 31.3% over H1 '26. While there was a significant gain in the momentum overheads too due to reasons explained earlier, the impact of lower volumes in H1 and the result in lower cost absorption offset the profitability gains in h2. Stand-alone PBAT margin percentage decreased from 16.1% in FY '25 to 15.3%, 81 bps drop. This decline was mostly on account of the lower volume in H1 FY '26. At the consolidated level, PBAT margin dropped by 36.2% going from INR 141 crores to INR 97 crores. Higher losses at Rhodius, AWUKO contributed to this decline. Rhodius lost INR 45 crores versus nearly 0.44 in FY '24 and AWUKO, INR 75 crores of loss versus INR 58 crores of loss last year. At the consolidated level PBAT percentage of Abrasives segment dropped from 7% to 4.3%. During the last call, I said PBAT margins of Abrasives would be 4% to 4.5%. They are now at 4.3%. EMG segmental performance, consolidated Electro Minerals. Consolidated Electro Minerals recorded sales of INR 1,632 crores in FY '26 compared to sales of INR 1,574 crores, a in FY '25. This marks a growth of 3.7%. The growth at consolidated level is entirely on account of lower sales at VAW Russia, which declined by 22% in INR terms in the Electro Mineral segment. VAW Russia, in ruble terms, we had recorded sales of almost RUB 6 billion compared to RUB 9.4 billion in FY '25. This marks a decline of 35.3%. Sales in Abrasives segment in VAW was about 14% lower compared to FY '25. Sales in ceramic segment was lower by 31% compared to FY '25. Profit before exceptional items and tax of the entity declined from $1.7 billion in FY '25 to RUB 617 million in FY '26. Lower sales and profits are on account of the tax imposed by U.S.A. despite the volume being considerably lower, the business continues to be profitable at this current level of operation. Stand-alone Electro Minerals. Stand-alone Electro Minerals recorded a full year performance of INR 906 crores in FY '26 as compared to INR 815 crores in FY '25, reflecting a strong growth of 11.1%. On a half yearly basis, H1 26 INR 425 crores against INR 399 in H1 '25, registering growth of 6.5%. H2 FY '26 increased to INR 481 crores from INR 416 crores, reflecting a stronger growth of 15.5%. Sequentially, the performance improved from INR 425 crores to INR 481 crores with a growth of 13.2%. Overall, the full year growth was driven by stronger growth in exports. Exports grew by 100% from FY '25 to FY '26 currently contribute to a little over 33% of the total sales compared to 11% of the sales in FY '25. Exports were driven by leveraging business existing relationship with many global OEMs across abrasives and refractories, introduction of treated grains coupled with antidumping duties against sizes grains by EU all helped to achieve this. Foskor Zirconia Private Limited. Sales at Foskor Zirconia recorded ZAR 465 million compared to ZAR 415 million in FY '25. This marks a growth of 11.2% in rand terms. The loss after tax increased ZAR 27 million in FY '25 to $77 million in FY '26. In terms of loss before exceptional and tax increased from INR 37 crores in FY '25 to INR 77 crores. The vitality in zircon sand price dropped in ZAR 450 price and an appreciation of the rand against the U.S. dollar impacted the bottom line and hence the losses increased. So we decided to find that this is not viable anymore to continue. Electro Mineral PBAT. Consolidated PBAT on a full year basis recorded INR 91 crores in FY '26 compared to INR 177 crores in FY '25. A majority of this job was on account of the sales job due to sanctions at VAW and on account of the higher losses at Foskor Zirconia. Stand-alone Electro Minerals PBAT grew by 31.1% at INR 82 crores compared to INR 63 crores. During the last call, I gave a guidance of 1% to 2% of sales growth in consolidated Electro Minerals, we are at 3.7% now. The last call, I said PBAT margin could be 4.5% to 5.5%. We are at about 5.6%. consolidated ceramic. Consolidated ceramic sales of full year was INR 1,268 crores compared to sales of INR 1,160 crores in FY '25, which marks a growth of 9.3%. Growth was driven by stand-alone business, which grew from INR 939 crores to INR 1,000 in FY '26. I'll cover in detail the ceramics. I'll first cover ceramics portion of the business. Our ceramic segment consists of industrial ceramics, which is 57% ceramic segment and refractories, which is 43% of the ceramic segment. Industrial Ceramics full year sales stood at INR 569 crores in FY '26 compared to INR 528 crores in FY '25, reflecting a growth of 7.8%. Sales in H2 grew by about 10.7%. Industrial ceramic is broadly divided into 3 segments: Wear ceramics, engineered ceramics and metallized ceramics. Wear Ceramics, which constitute roughly 30 percentage of the business offers wear assistance products and engineered ceramics, which constitutes about roughly, again, 1/3 of the business as a suite of customized engineered ceramics such as 3 channels, part blog, ring, x-ray image intensified tubes, et cetera. Metallized cylinders are used in VAC interrupters in the power transmission and distribution industry that constitute another 1/3 of the business. Standalone wear ceramic business, which degrew by 9% sales to 3 broad geographical segment in sales products to Kumi Australia, Kumi America and India. While the Australia grew by roughly about 13%, India also grew well by 12%. The export America degrew by 40%. Within the wear protection business, sales in Austrian subsidiary grew by 13%, driven by strong orders with the OEMs. Our domestic business grew by 12%. Our engineered Ceramics segment grew by 30%, driven by the S segment, which is seeing a strong demand in the AI-driven data center segment. Metallized Cylinder business grew by 9%. This segment, which typically grows about 14% was impacted by product-related challenges that cropped up in production-related challenge that cropped up in H1. But got addressed by Q4. This was resolved. By Q4 operations are back normal hence test fall in growth to 9%. I'll cover refractories now. Full year refractories consists of 2 broad segments, refractories and anticorrosive products. Refractories constituted 77%, anticorrosive constituted 23%, segments stood at INR 437 crores compared to INR 418 crores, reflecting a growth of 4.7%. The refractory business dropped by 4.3% compared to H1 FY '25, and this was aided by a strong return of deferred projects, especially in the glass segment. Orders in anticorrosives and structural composite business have been well sustained over the year. Anticorrosives grew very well in last year. Sales driven by fertilizer industry and structural compulsive business demand was strong in various sectors. During the last call, we gave a sales of growth of 13% to 14% in ceramic. We achieved 9.3% growth in ceramics. We'll move to CapEx. Consolidated CapEx was INR 309 crores, of which stand-alone constituted INR 235 crores. We communicated a CapEx estimate of INR 350 crores during our last call. I will provide a brief of what CapEx we did last year. In FY '26, we commissioned the first module of exclusive facility for the manufacturing of advanced ceramic components for semiconductor wafer fabrication equipment with a CapEx outlay of INR 66 crores. The facility comprised of an end-to-end capability from preparation of high-purity borders through precision missioning and cleaning will cater key global OEMs like Applied Materials. Serial supplies of qualified products will commence in FY '27 with the line utilization gradually improving. Further expansions in line with the development road map and long-term strategies is very much there. In the first year of serial production in FY '26 the focus would be on assimilating technologies and establishing stronger system, a gradual ramp-up in FY '26, the focus supplies to the key customer applied materials will be on. In Aerospace and Defense segment, we have commissioned a new facility with an outlay of INR 49 crores to produce advanced ceramics for ballasted production of vehicle and personnel. The business is expected to scale up high in 2030 gradually. Further ramping up will happen around that time. In this segment, we have secured Sena qualification of vehicle armor and for personal protection of ceramic qualified BIS threat level 5 and 6 equivalent to NIG and 4 levels. We are awaiting comet approval, which will enable us to expand the business. The next major program is the upgradation of existing white foods alumina further from 2 MVA to 4.5 MVA, which will increase the existing capacities substantially. CapEx outlay this is about INR 23 crores, including installation of 110 kV substation to meet the future power requirements of the plant. Incremental capacity will have a maximum revenue potential of INR 95 crores for the full utilization. We have increased the treatment facility as well. This is a CapEx outlay of INR 30 crores. This CapEx is a maximum potential revenue of about INR 120 crores. Additionally, pilot facility was established for the manufacturing of ceramic powders for solid oxide fuel cells. The facility will leverage the technology tie-up we had with the CGCRI. During the year, the business also entered into an agreement with a leading industry expert for the transfer of technology towards manufacturing of aluminum nitride and silicon nitride powders. The next major growth project is the commissioning of thin wheel capacity at Hosur using the assets that we bought from [indiscernible]. Total CapEx outlay is INR 83 crores and can produce 46 million thin meals with a peak revenue of about INR 120 crores. FCF, free cash flow on a full year basis at a consolidated level is 56.6% to PAT compared to last year's 16.1%. Stand-alone level, the FCF PAT was 46.5% compared to 14% last year. Debt-to-equity ratio is 0.08. Now I'll go to the guidance. At the consolidated level, we expect the sales to grow approximately 4% to 4.5% in FY '27. However, if we exclude the revenue contributed from Foskor Zirconia and Kumi AWUKO, which accounts to INR 343 crores in FY '26 sales and compare it with our business plan, comparable growth would be 11% to 12%. Consolidated Abrasive sales are expected to grow by 5.5% to 6%. However, if we exclude the revenue from AWUKO, which is about INR 108 crores in FY '26, sales growth would be 11% to 12%. Consolidated ceramic growth is expected to be in the range of 15% to 15.5%. Consolidated Electro Minerals sales are expected to decline by 6.57% on account of the closure of Foskor Zirconia, which accounted for INR 235 crores in FY '26. However, if we exclude the revenue contribution from Foskor Zirconia in FY '26 and compare it with what we are planning to do in FY '27, the growth would be 8% to 9%. Consolidated Abrasive margins are expected to be around 9.5% to 10%. The reported margin in FY '26 is 4.3%. However, if we exclude the comparable margin, if we exclude AWUKO losses, it would be a 7.9%. So basically, it will grow from 7.9% to 9.5% after 10%. Consolidated ceramic margin would be 20.5% to 21% the reported margins 20.2%. Consolidated Electro Mineral margin could be 9% to 9.5%. In FY '26, the reported margin is 5.6 million. However, if we exclude the loss of Foskor Zirconia and compare it, the FY '26 margin would be 9.1%. So basically, from 9.1%, it would be 9.9% to 9.5%. We expect to be a CapEx of about INR 400 crores in FY '27. The key CapEx program for FY '26 include expansion of advanced ceramics for power electronics including substrate, metallized tubes, rings, race assemblies, expansion of Broncos alumina, addition of integrated furnace facility for thermal spray powders and zirconia furnace and grain processing facility. We also intend to do 110 kV substation and tile clean for the factories. These are the major projects, which should account for about INR 400 crores of CapEx. Now I would quickly cover our aspiration 2030. The company launched its aspiration 2030 and FY '26 is the first year. The aspiration is built on 7 key building blocks, building a high-performance organization, ambitious growth for the current businesses, focusing on innovation, exploring new opportunities for the growth achieving manufacturing excellence, strengthening sales and marketing excellence and supporting all this through digital and ESG initiatives. Progress is regularly track to structured reviews involving teams across the business. In Abrasive business, the company has a clear market strategy across the segments and its expanding dealer network, strengthening relationships with existing partners. The focus is also gaining on the new customers and increasing business with the current ones. The company is strengthening its presence in the areas where it has currently low presence. It has also growing sourcing of business sourcing business and as set at a new vertical for this a clear road map for the new products to be introduced with the well-supported investment in R&D team and capability and process building in R&D team. The thin wheel capacity based on assets acquired to Ramco has been discussed earlier to stay competitive against the low-priced products, especially from China, the company has launched a cost optimization program across significant SKUs and strengthened the coordination between sales products, development and quality teams using digital tools. In the Electro Minerals business, the capacity is being expanded by creating furnaces. The company is also increasing its capacity in value-added products in aluminas and diversifying raw material sourcing. Exports are a key priority and already form a significant share of the business. Electro Mineral I would like you to look at it in 3 broad categories: core, our range of few celimina products, including BFA, WFE and silicon carbide products constitute our core product portfolio. We have expansion plans in both WFA and BFA while the core products will continue to form the bulk of our product basket, its share is expected to current level of 85%. It will come down to 55% to 60% by 2030 as other product categories would scale up. Feature products. Feature products, which into products that run rogue treatment and coating are relatively high performing in nature. As discussed, we are undergoing -- undertaking a related CapEx initiative in this area. We aim to increase the share of treated grains from 5% to 6% at the current level, nearly 20% by 2030. Specialty products, the business currently manufactures alumina zirconia products catering to applications in abrasive refractories metal metrics, composites and related industries. We also produce some zircon maleate grains. We have expansion plans for both alumina Zirconia as well as Zimo. In addition, as part of LTSinitiative, we plan to start production of calculable cone and monocline zirconia. Collectively, this suit of zirconia-based products will form specialty products portfolio whose share is expected to increase from 8% currently to 18% to 20% by 2030. Transformational products at the same time the company is investing in new technologies and products such as SOC powders and nitrates, which are expected to drive future growth. In FY '26, we have commissioned a pirate lab facility with a spray pyrolisis technology to prepare powders for SOFC and so easy cathodes. This was then based on the technology transfer of CGCRI. Going forward, we will focus on capacity creation and securing anchor customers. There has been good progress on nitrate side as well with a leading technology consultant being onboarded in this year. Apart from this business, has achieved 5 end purity on HPSI, we'll be working on securing customers for the same over FY '27. The technology route for 6 and per of HPS as we also been initiated and the business currently worked on a pilot scale manufacturing facility for the same. Besides this, we are working on establishing application for graphing in bioplastics, coating, concrete and rubber. All these such as palpate acolytes or ceramic products for Sous nitrites, HPSI, graphing or collectively called transformational products. We expect transformational products to contribute around 10% by 2030 compared to the current level, practically very little. Growth in this segment is expected to be gradual as these are advanced materials catering to the emerging sector. We believe we need to create a good base in the transformational product in the aspiration period and will create a new leg of growth beyond 2030. Ceramics, when we come to industrial ceramic segment, we can view it as core and emerging businesses where metallized cylinders, Wacom interrupters -- sorry, metal cylinders or racemase ceramics for diverse applications would fall under the core business. Emerging business encompass components for semiconductor wafer fab equipment, aerospace and defense, electronic substates. In the core segment, the business plan is to increase metallized cylinder capacity substantially from the current level. Additionally, the business will expand production facility to meet the growing demand in SOFC segment. In the emerging segment, the company is entering into high-growth areas like semiconductor through newly commissioned plant, which manufactures components that go into warfare fiber equipment products have been approved by key customers for CL production. What is also under vatable capabilities in advanced electronic components through global major tech partners. Additionally, the business is entering to AMD and DBC active metal-based products and direct bonded copper products, substrates and based assemblies for power electronics, a qualification program has been drawn and both these critical product segments and prototype development submission will be completed this year. In the refractory business, the growth will be based on both fired and monolithic business. The fired refractory portion of the business, we are increasing the capacity by 75%. Additional capacity will focus on Mollie, higher alumina and IFB Bricks PCFC ships for application in glass, petrocum, super alloys and ceramics. We are also progressing on our plans to increase our monolithic capacities. We will gradually ramp up of capacity in composite business as well in carbon brakes for porting advanced seal composites. While we do this, post of initiates the business, they are also done good work in terms of the support functions. Kumi's manufacturing excellence program, which works on an integrated manufacturing excellence framework, improvements in quality, cost, delivery and operational efficiency across businesses. This program is delivered to inter cost savings in the first year through automation, digitally enabled QAQC and throughput improvement in PSS beyond savings in the MX focuses on institutionalizing a culture of manufacturing excellence and the support of Manufacturing Excellence Academy, which sends the program for both management and nonmanagement stock. The company is also strengthening sales capabilities through CRM implementation and the Sales Excellence Academy, which aim to drive more data-backed approach to sales. Digital initiatives are further enhancing manufacturing and planning systems, including the rollout of manufacturing execution system, MES, across identified plans and implement the S&OP software. Safety and sustainability remains central to the company's long-term strategy through a structured excellence fame company is advancing its goal to near 0 emission, water positivity and improved material circularity. FY 2030 targets include increasing renewable energy use to 50%, reducing emission intensity by 25% and lowering energy intensity by 20% from FY 2025 levels. Progress is supported by renewable energy adoption, cleaner fuels, waste heat recovery, energy efficiency initiatives. The company has also made significant progress in zero-harm journey recording a substantial reduction LTIFR through risk management and behavioral safety programs. People capability development remains a key enabler of growth and a program called faced to perform F-A-C-E-D to perform. The framework consists of focus on the factory, which is the first major initiative, acquisition of talent, rewarding Carrier part employee experience and development of talent, we aim to do a high-performance organization relationship, development initiatives include the next 100 programs are helping build a strong future ready talent pipeline. Alongside this, the company is driving cultural transformation through fast behaviors, bold and timely vision making embrasing change with the solution-driven mindset, fairness to all stakeholders, accountability addition making and standing up for each other. So I would like to summarize that we continue to drive the focused execution across functions with multiple initiatives. The progress achieved in the first year of execution is really giving us confidence. We have delivered the top line as well as the bottom line as per our internal targets and the progress from the functional level also has gone well. So with this, I would like to open up for Q&A. I know it is a long opening remark, but I thought it is needed. We would have 45 minutes of the Q&A.

[Operator Instructions] The first question is from the line of Jonas Bhutta from Aditya Birla Mutual Fund.

Firstly, I just want to congratulate the management in taking a timely decision on the divestiture of profit growth. I had 2 questions. Both sort of relating to your high growth or emerging segments. Firstly, if you can touch upon the SOFC segment, there, we've seen the client place some very large orders on another vendor in India provides line of sight right up until calendar year '29, in fact, 2030 as well. In your case, if you can give us the lay of the land in terms of how is that business for you grown? What is your wallet share? Are you one of the many vendors for those ceramic parts? Do you see any disruption in the technology that leads to lower adoption of ceramics in that thing? And can this business become like a 10% to 12% portion of your sales, maybe 3 or 4 years down the line? That's the first question.

All right. Thank you. I think -- so first of all, we feel that we are very important shareholder of the particular segment that we serve to the SOFC segment. We believe that we have a vision, at least going up to the next year, and there's a line of sight the management provides the customer provides going up to, say, 2,028 like that. And the customer also is growing well. So we have to build the capacities using that as a clue plus the intermediary guideline that they always give for the next 1 year. So this is how we are looking at and we feel that given what the customer is embarked upon and the kind of growth that they are facing. We feel a very strong growth possibility in the segment, and we have grown well last year, and we expect to grow well in the coming years as well.

And what would your wallet share with the client be?

Yes. We wouldn't like to share such details at this call. We have -- as I said that we feel that we are an important supplier to the customer.

Sure. And any guidelines on how big can this business be 3 years out, sir, for you? Not a number, but it's at least 7%. Can it be meaningful in terms of like that greater than 10%?

Definitely, it will be a meaningful share that we will have. And as we said that the engineer segment itself is currently is 1/3 of the business that substantially, it would grow up is our [indiscernible].

Understood. The second question was on the new CapEx that you've done for Applied Materials. If you can delve a bit on what exactly will that help you get for Applied Materials, where is this product used particularly? And with the -- I think, if I got the number right, you did about INR 60 crores to INR 70-odd crores of CapEx for that. Where does it take you? Is it predominantly first to get the articles out and get the prequalification and post quit will require further CapEx, if you can give a time line to that. That's fine.

Right. We've crossed the qualification stage on set of products. And this is an initial investment, as I said. We expect that this investment could go at least 3 to 4x higher. And we have geared for that. And we also expect the revenue potential also is substantial in this industry.

Next question is from the line of Harshit Patel from Equirus Securities.

Firstly, on Abrasives, China has removed the export rebate on upgrading products from 9% to 0%, if I still from April as the domestic market pricing improved because of this? Or we have been able to garner a little bit better market share in the last 1 or 2?

So it's a very recent phenomenon at this point in time, a lot of people will have inventory through the imported materials, all that is happening. But we believe that this is good for the domestic industry, and it will help us to grow. Of course, the growth in H2 is about 15% is very encouraging. A lot of that could be due to this factor as well. But I think overall, we see a rebound and our work in terms of all the areas, whether it is GTM initiatives, new products that we introduced, bringing cost down of our products. All these combined efforts of our strategy is playing out. I mean, as we have been doing over the last 18 to 24 months is now playing out.

Understood. Just a follow-up to that. Given that we posted such a strong growth in the fourth quarter if you could explain your growth in terms of how industrial market did, how precision, how retail abrasives did? And what would be the outlook on these 3 subsegments going ahead?

I think we have a broad outlook in terms of the segmental sales that what we are looking at. But we feel that stand-alone, we grew 6.2% this year. We believe that we can grow in the range of about 12% next year.

Understood. Sir, my second question is on stand-alone Electro Minerals, what has been the contribution of volumes and higher pricing in the 22% Y-o-Y growth that we posted for fourth quarter. And even the full year growth at 11% was reasonably healthy. Also, you could comment on the Chinese import intensity, whether it has increased or decreased in recent times in that Electro Minerals business based out of India?

So the Chinese intensity continues to be there. There's no kind of coming down of it. But we started focusing more on the treated products, export segments -- and that is the focus that we are looking at. And that gave us this growth that we posted in the full year as well as in the Q4. The predominant growth has come from volume, where prices probably you can treat it as flat -- slight -- some small percentage.

Next question is from the line of Ravi Swaminathan from Avendus Spark.

My first question is with respect to the FY '30 vision 2030 fashion. Any revenue target or growth target that we have and any margin targets that we have for this?

Ravi Swaminathan, thank you for asking this question. We have not been sharing a guidance. We have started sharing only a 1-year guidance and also giving programs that what we are looking at going for the aspiration 2030. We believe that it would energize and bring the growth substantially from now onwards. And we have kind of addressed some of the issues that we are facing in terms of loss-making subsidiary, so we should see a rebound.

Got it, sir. And with respect to the ceramics and Refractories business, if you can once again highlight -- you had mentioned numbers in terms of bifurcation between ceramics and refractories if you can call it out once again? And what kind of growth that we should think of in each of the individual subsegments we can build?

I think give an elaborate one, but I'll just give a broad outlook to you is that we feel that 57 percentage of the ceramic is industrial ceramic and 43% is refractory business. The growth that we are looking at in terms of -- just a second -- the growth overall in ceramic segment that we are looking at this year, we achieved 6.5%. We expect next year would be in the range of about 14%. I'm not sharing the individual data of the refractory and industrial ceramic, but they would broadly form part of around this rate, 14%. .

Next question is from the line of Amit from PL Capital.

Just wanted to understand how has been the exports across the segments. I think you mentioned something 11%, 33%. I missed that it's possible for you to give us some color in terms of exports within ceramics and aggressive? And what is the kind of outlook there?

I shared the export share of Electro Minerals business said that we have reached a 33% share in the current business, over INR 300 crores of export in the Electro Mineral business. That's what I shared.

Right, how has been the export in Ceramics and Abrasives if you can get the breakup and what's the outlook there?

Ceramic is the biggest portion of the ceramic over 80% of the business is all exports. And that is doing fine. I mean that basically, whatever is the growth that I talked about on the industrial ceramic predominantly comes from those areas. Abrasives, very small portion of the abrasive business is the exports. It's less than 10% is export.

Understood, sir. And my second question on Rhodius. I think you guided about 5% top line growth and kind of breakeven or some very small loss. So what exactly we're factoring in the growth seems to be still kind of mid-single digits, but we are expecting the breakeven. So what -- where exactly the improvements will happen? And if you could elaborate more in terms of how business volumes are happening in Rhodius and what will lead to the turnaround this year?

So if you see the last year, the big reason for the drop in Right. Last year, we had almost EUR 5 million impact in terms of the logistics change, and that really affected the top line change. And we feel that they have been growing in the range of about 6% to 7%, and we feel that, that growth should happen. And second is that because of this loss of sale as well as the margin impact due to this loss of sale, along with the logistics costs on the shift, these things would come down. And hence, we feel that we should get back to a small loss or a breakeven. The third reason is that we have also now working on a program with the ProODeus team in terms of how do we accelerate the profitability as a special program. So these are the reasons why we think that we should get here.

The next question is from the line of Akshay Thakur from [indiscernible] Capital Management.

Okay. So my question is pertaining to the stationary arm within your defense and also CFRP products for aerospace. So currently, there is a lot of ecosystem being developed for aerospace and for aeronautics and for this defense as well. Almost 100% of that would be imported. So how do you see this? Like in terms of commercialization, where are we placed? Are the certifications right? Are we negotiating with the OEMs? Or where are we placed on that?

So I think you kind of very clearly described this. So step 1 is to have the certifications in place, which we are definitely doing it. I described the certifications that we already got -- so pretty much we are in good shape as far as certification is concerned. We are working with a few anchor customers at this stage. We also have the ability to work with them because they would be the front ending in terms of what they would finally supply. We are only a product supplier to this case. So hence, this is how we are planning to move in this model.

That was helpful. My second question is, so it's been a long time that we are facing the war situation in Russian subsidiary. So like all this time, where -- like are we able to figure out any alternative strategy? Like India also imports a lot of silicon carbide. So are there any alternative strategy? If there is, what type of lower realization would SIC get in other economies?

Honestly, it's difficult to create a capacity and the cost will be pretty high. So it's going to be very difficult to recreate anything like that. But at the same time, Russia is not in a position to export products, which is what we are currently going through. So practically, we need to wait for the sanctions to be lifted, so which gives us an ability to go beyond Russia. So at this stage, we don't have an alternate solution for this.

One more question. Can you just throw some light on the subsidiary you have Plus? How is it doing?

Plus is doing fine.

In terms of profitability?

Yes, they made profit and they -- it's a very small profit, they are doing fine.

The next question is from the line of Chintan from PCO Capital Private Limited.

So sir, one of the questions that I had was that as you said, the ceramics business is around 80% exports for us and most of our peers will be global. And they spend a lot on R&D. So how do you see our business and our R&D evolve over the next few years? And what are the key areas that we'll be focusing on?

Yes. I think it's a great question. We spend roughly about 1% as R&D. And I think this needs to go up, and we expect that we should at least start spending 2% to 3% level. We are working in terms of strengthening our R&D team across the individual BUs. And we're also strengthening the new product development process, coupled with software-enabled process so that we kind of make sure that we do the right thing in terms of new product, getting the right input from the market, customers and the users. So all these factors are now being put part of this R&D process. So strengthening the R&D, building the capability, putting process, we need to accelerate the spend, both in terms of CapEx as well as in terms of the OpEx.

All right, sir. And the second question I had was more on the ceramic side. So basically, a lot of applications in EV require ceramics. So are we working on any products or programs with any OEMs or Tier 1s where ceramics are getting used on the EV space? And how do you see it evolving over the next 3 to 5 years basically?

Yes, we do work. I think this is part of the engineered ceramics that I described. And that's why we feel quite upbeat in terms of that segment's growth. So we are working with Tier 1 suppliers to OEMs. That is how we -- our role would be, and that's definitely we are doing that.

And how do you see it evolving maybe, sir? I mean would it be a substantial part of our revenues? What are the key focus areas, if you could just elaborate on that?

So engineered ceramics will be a key focus area for us, which would bring a substantial share of our business, which consists of areas like that what you talked about in terms of SOFC, EVs as well as rings. -- also consists of image intensified tubes. All these products group would fall under that. And we feel that the growth rate would be substantial. And we also feel that the share of business will go up, and that is how we are creating this capacity. We are also trying to create, as I said, that ceramic substrate capacity for electronics is -- we are creating -- we are working on that. Technology transfer agreement is done. Now the capacity augmentation would happen in FY '27 on that.

The next question is from the line of Preet Jain from [indiscernible] Investment Advisors.

Congratulation on good set of numbers. Sir, my first question is on the semiconductor side. The semiconductor opportunity seems to be a massive long-term driver. So can you split between structural [indiscernible] cycle time lines with global OEMs given the strict require, when do you expect this segment to cross the threshold into material revenue generation for us?

Lot of loaded comments and you are asking the right question. particularly on the ceramic for the wafer fab equipment in the case that we have built the capacity. The material qualification process is pretty long. It would take about 4 to 6 years. We have crossed that, and that is how we have created the capacity at this stage. We have samples tested. Now we are in the development phase is completed and now we will start supplying to them the serial production will start. So you're right, it takes a long time, and that's how we took a long time to get here. We will now complete Phase 1 and then expand to Phase 2 quickly.

And when can we expect material revenue generation from that?

2 onwards we can expect.

Okay. And my second question is, given the massive power distribution and grid infrastructure CapEx happening domestically, how quickly we can debottleneck our current metallized cylinder capacity? And furthermore, are we seeing traction in penetrating the export market to compete against Japanese player like and NK...

Sure. We have -- in fact, our metallized cylinder, the biggest portion is only exports. So definitely, we are competing with the names that you are mentioning. And -- we are doing it well. And the expansion would happen in the next 18 months, 24 months in a phased manner. I mean it consists of 3 phases, but it could happen in that fashion.

So do we have the capacity until 1.5 years next to supply this mall?

Yes, yes, definitely. We have -- we are one of the #2 worldwide player in this field, and we feel that we have headroom, plus we are also creating the new capacities in this debottlenecking and creating the capacities.

Okay. And sir, another question is supplying to one of the largest [indiscernible] has expanded its capacity from 1 gigawatt to 2 gigawatt can I get to know what are your revenue regarding that SOFC product? And given that 5 to 7-year replacement cycle of that [indiscernible]?

I think a lot of that has got elements of it, you are getting headline information. But we feel that definitely the gigawatts of additions that each of them would add would definitely help us, our demand also would go up. As I said in the earlier question, we feel that the growth rate in this segment is going to be substantially high. We are parallelly gearing up because we are also feeling that we need to work in terms of creating this capacity ahead of time, so which is what we are working on this. I think you are right. Step 1 is to -- this growth would seem to be going up because of the AI-related data center demand, et cetera. So definitely, it's a clear sign of growth in that segment. And SFC is a clear market leader in a clean energy segment, which definitely helps us quite a lot.

Okay. If time permits, can I ask one more question? Sir, basically, China has reduced its export rebate in April 2026 from 9% to 13% on the abrasive products. So are we seeing any current traction of abrasives sales growth volume improving in current month or last month due to this policy?

So I did comment on this, a little bit in the earlier question. I think it just happened. We are in the month of May. So it just -- a lot of inventory would be there in the system that should get also completed. I feel that definitely it is a good sign. It helps the domestic market to grow faster. We have grown 15% in H2.

The next question is from the line of [indiscernible] Kapoor from [indiscernible].

Just a couple of questions on the R&D side of things in the business. What percentage of your recent R&D and innovation projects were deliberately stopped or pivoted or redesigned because customer or market learning invalidated the original assumption? That's my first question.

That's a great question. If I just quickly look around our R&D at 4 BUs. I haven't experience any such program of that we stopped our customers' request change type of a situation, definitely not. But we have experienced cases where you need to put a particular application, but you require some more work to make sure that the application really is capable of using our product. That type of thing happens.

No, understood. So how will Kumi ensure its investments in silicon carbide, advanced ceramics and other high-tech materials become high ROCE scalable businesses rather than technologically strong, but capital inefficient platforms?

I'm not sure I get your question. Why would you think it's a capital inefficient platform?

No. So I mean, do you have internal benchmark that so we are doing a lot of advanced R&D and in the annual reports, we are almost confidently saying that post 2030, Kumi will emerge as a very different looking business because of the initiatives that we are doing across many things. So I can name maybe most futuristic opportunity to my mind is something like semiconductor linked materials, EV, but even things like electro minerals, silicon carbide, we have got most strategic capability around that. difficulty is also very high. So what is the kind of -- I see, ultimately, from an investor perspective, it's about how scalable the business can be and what will be the steady-state ROCE it will generate. That will determine -- the outcome will determine the shareholder wealth creation. So I was coming from that perspective.

Sure. No, I think these are definitely looked at part of our threshold to evaluate any such opportunity. Clearly, I mentioned that you are looking at market size and opportunity growth rate and the ROCE that we would get in a steady state. We feel that these areas that we just listed in terms of ceramics for semiconductor, ceramic for electronics, high-purity silicon carbide, ceramics for aerospace and defense. All these areas, we feel that are good areas to work on and invest, and that's how our programs are on. CUMI is capable of funding itself. If you really look at it, we spent this year INR 310 crores plus CapEx, and we have 0 debt, net zero debt at this point and substantially very good FCF. So we are able to fund these type of programs and kind of practically, we think that we would spend INR 400 crores next year as well.

And a year before we did spend about INR 250 crores plus.

The next question is from the line of Rachana Kukreja from SIMPL Limited.

Sir, could you please help me understand the performance of a Abrasives business for [indiscernible] like when [indiscernible] in terms of growth as well as segmental profit margins. If you could give some color on the [indiscernible] performance it would be very helpful.

So I am afraid I'll comment on that. This is another listed company. So I think I would encourage you to stay in touch with the management. They would be able to provide that. But I think their shortfalls are coming because of the machine building segments and super abrasive is doing fine. I would limit my conversation to this level.

We'll take the last question from Pravesh Kochar from [indiscernible] Capital.

First one on Ceramics. I think last call, you mentioned we'll end up doing 13%, 14% growth in that segment. And then the guide for next year also is like 15% to 15.5%, and we have ended the year at close to 9%. So just want to understand if -- what's the gap between those 2? Second, again, on the ceramic SOFC side, -- do we supply only the ceramic plates, et cetera? Or are we also in the electrolytes for that particular business?

Okay. Right. Two great questions. I think -- why did we miss? I think that's the only area we missed our guideline. It's largely because of deferred projects, which I think is substantially the one line reason for why did we miss our guideline. And why do we think that we can meet 15% is the backlog and the forecast from our customer gives us that confidence. We are not currently into electrolytes, but you are asking a very deep question. We have the capability because of our Electro Mineral business, we have the capability of manufacturing electrolytes. That's the technology we had worked with CGCRA. And as I mentioned, we had a small pilot scale plant we established to manufacture that, which is what we just shared in the call as well. So this is -- we have a small capability there. We need to now expand that. At this point in time, it's more a pilot scale.

Understood. On the overall segment, my question was earlier, we used to anticipate 16% to 18% kind of growth, right, in the Ceramics segment. So I was assuming because of the deferred projects, the next couple of years would be in that range, right, given this year, some projects were deferred into next year. So just trying to understand if structurally, there is more competition that you're seeing or the overall market itself is kind of slowing up?

I don't see -- I mean, it's not because of structurally something is changing. I feel that it's more projects, plus a lot of it would depend also on how we do business in America in terms of the ceramic side of the business. So these are factors that we have kept in mind when I told the kind of 14% to 15%...

That was the last question. I would now like to hand the conference over to the management for closing comments.

Right. So first of all, I thank you all for patiently hearing us. I just want to summarize. We have done fairly well in FY '26. We have addressed all the major issues in terms of loss-making subsidiaries. The loan contribute to a loss of over INR 100 crores to INR 120 crores. So the first year of our 5-year journey, we have done fairly well. CUMI has created a good base over the last 24 months for this aspiration. KUMI has made a significant capacity and capability investment in FY '26. You see 3 years, INR 280 crores, INR 310 crores. Next year, we would plan to spend about INR 400 crores. That creates -- all of them are in capacity or capability building, so that would give a strong future revenue growth. CUMI has achieved a good free cash flow after meeting all CapEx investment. It's a good sign and CUMI is net debt free. CUMI has drawn a good aspiration 2030. It's well resourced both in capacity and capability, has built a good strong execution rhythm. Above all, it has a good leadership and a strong team exhibiting BFA behaviors, which consists of bold and timely decision-making, embracing the change with solution-driven mindset, fairness to all stakeholders, accountability and decision-making and execution and standing up for each other. So thank you all for hearing us during this call. Look forward to meeting you in the next call soon. Thank you.

Thank you so much, sir. With that, we conclude this conference call. Thank you for joining us, and you may now disconnect your lines.