IFGL Refractories Limited (IFGLEXPOR) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to IFGL Refractories Limited Q3 FY '26 Earnings Conference Call hosted by Monarch Networth Capital Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital Limited. Thank you. And over to you, Mr. Sanghvi.

Yes. Thank you, Meena. Good evening, everyone. On behalf of Monarch Networth Capital, I welcome you all to the Q3 FY '26 Earnings Conference Call of IFGL Refractories Limited. We are pleased to have with us the management being represented by Mr. James McIntosh, Managing Director; Mr. Arasu Shanmugam, Director and Chief Executive Officer, India; and Mr. Amit Agarwal, Chief Financial Officer. We'll have opening remarks from the management, followed by the Q&A. Thank you, and over to the management for the opening remarks, please.

Good evening, ladies and gentlemen. Thank you for joining us on the IFGL Refractories Limited Q3 and 9 months FY '26 earnings conference call. I hope you and your family and friends are in good health. Joining me on the call today are Mr. Arasu Shanmugam, Director and CEO, India; and Mr. Amit Agarwal, our CFO; and SGA, our Investor Relations advisers. Our results and investor presentation have been uploaded in the stock exchanges, and we trust that you have had an opportunity to review them. I am pleased to share that we delivered healthy revenue growth during the quarter. Consolidated revenue grew by 23% year-on-year, while standalone revenue increased by 16%. Gross margins moderated during the period due to changes in product and sales mix. EBITDA margins were impacted by elevated employee costs and related overheads during the quarter. We have initiated cost optimization measures and expect gradual improvement in margins over the coming quarters. Standalone EBITDA [indiscernible] margin of 6.5%, [indiscernible]. Now let me briefly touch upon the global steel industry outlook. We continue to operate in a volatile global environment. As per the latest outlook by the World Steel Association, global steel demand is expected to remain broadly flat, followed by a modest recovery in 2026. While trade tensions and geopolitics uncertainties persist, infrastructure investments under improving financial conversions are expected to support gradual stabilization. Regionally, China steel demand is projected to decline by around 2% in 2025 with the pace of decline moderating in 2026 as the housing sector stabilizes. In the U.S. demand is expected to grow by approximately 1.8% in both 2025 and 2026, supported by infrastructure spending. Europe is also expected to witness a gradual recovery with demand projected to grow in the region of 1% to 3% over 2025-'26, aided by infrastructure and defense spending. Importantly for us, India continues to remain a key growth engine, with steel demand projected to grow by around 9% over 2025 and also in 2026, driven by broad-based expansion across steel consuming sectors. Demand growth is also expected to remain robust across several developing economies. Against this backdrop, our strategic focus on domestic operations has yielded strong results. India remains one of the fastest-growing steel markets globally. And our India Made, India Sold strategy has delivered meaningful traction. On a 9-month basis, our India Made and India Sold business grew by 25% year-on-year, reaching INR 648 crores in revenues, reinforcing the strength of our domestic positioning and gaining the market share. Moving ahead, our American operations have shown encouraging improvements during the quarter. Recent tariff-related developments calibrated price adjustments with key customers and a rebound of demand supported strong performance. Revenue by our U.S. operations grew by 37% year-on-year. Profitability in the region has also improved on a sequential basis, and we are confident of carrying this momentum into Q4, subject to stable market conditions. In Europe, revenue grew by 39% year-on-year, whilst overall regional demand remains challenging. We have taken structural changes within the team and repositioned our focus for application equipment towards core refractory products. These initiatives have begun to show results at the revenue level. However, profitability in the region remains under pressure due to higher operating costs. We are working towards operational improvements and aim to move towards breakeven over the next financial year, assuming stable macro conditions. Sheffield Refractories has been operating steadily and continues to progress at a measured pace. The technology transfer to India is underway and is expected to be completed by March 2026. Whilst there has been some delay, the process is moving forward in a structured manner. Following completion, the localized products will undergo trials at leading cement plants in India for shock treating and related applications. Beyond these geographies, we are also strengthening our presence in Middle East and Australia where we see emerging opportunities and potential for incremental growth over the medium term. In conclusion, while the operating environment remains dynamic, we believe the company is positioned on a stable footing. Our focus remains on disciplined execution, improving cost structure, strengthening regional operations and enhancing products. With steady demand in India, improving traction in the U.S.A. and structural initiatives underway in Europe, we are working towards gradual margin recovery and sustainable growth. We remain committed to long-term value creation for all of our stakeholders. Before I conclude, I'd like to share an important update. As part of our previously announced succession planning, I will be stepping down as Managing Director of the company upon the close of business hours on the 28th of February 2026 and will also cease to be a director effective of 1st of March 2026. Based on the recommendation of the nomination and remuneration committee, the Board has appointed Mr. Mihir Prakash Bajoria as Managing Director of the company for a period of 3 years commencing the 1st of March 2026. I am very confident that under his leadership, the company will continue to build on its strong foundation and pursue its long-term strategic objectives. I will continue to remain associated with the company under its wholly owned subsidiary, IFGL Worldwide Holdings Limited in a consulting capacity for a period of 3 years from March 1st, 2026, ensuring continuity and smooth transition. I can say it's been an immense privilege and honor to serve as Managing Director of this company, and I'm deeply grateful to the Board, our employees, customers, partners and shareholders for their trust and support throughout my tenure. I take immense pride in what we have collectively achieved and remain confident in the company's future journey. Thank you for the opportunity to lead this organization. With this now, I'd like to hand over to Arasu for his comments and our developments in the Indian region.

Thank you, Jim. Good evening, everybody. We delivered a stable performance in Q3 FY '26, reflecting our continued efforts, strengthened market positioning and expand share across key regions. On a consolidated basis, total income increased by 23% year-on-year, while standalone revenue grew by 16%, largely driven by strong momentum in the domestic market. Profitability during the quarter was impacted by, as it was mentioned, with higher employee expenses and related overheads. In addition, lower export offtake and continued investments in business development and marketing initiatives weighed on margins. We have already initiated targeted cost rationalization measures and expect gradual improvement going forward. Turning to operations. Our India business continues to perform strongly and remains the core growth driver. Domestic revenues grew by 17% year-on-year in Q3 FY '26 and by 25% for the 9-month end period reaching INR 648 crores. Consequently, the domestic segment's contribution to standalone revenue increased to 78% in 9 months from 71% in the previous year. Export revenues for the quarter grew by 13% year-on-year to INR 62 crores. Our focused approach towards the domestic market has strengthened our engagement with leading steel producers, supported by advanced technology capabilities and continuous innovation at our R&D center. We have expanded our customer base and deepened penetration across steel and cement plants. We are also seeing encouraging traction in the non-ferrous segment, which we believe will emerge as an important growth avenue. On the expansion front, our greenfield project at Khurdha, Odisha, has commenced and is progressing as planned with the completion target by the end of financial year '27-'28. Our second facility in Gujarat being developed through a joint venture with Marvel is also seeing a good development even by government of India measures like the commencement of direct flight from China to India as well as the opening up of online business visa. So this will help us take the project from here on with better speed. During the quarter, we made meaningful progress on the product and technology front, which we believe will support long-term growth and customer retention. Our in-house tube changer refractories in a segment previously -- which is a segment previously dominated by global suppliers are now delivering measurable productivity gains for customers. These solutions are enabling longer casting sequences and increasing tonnage capacities from 30 to 70 metric tonne, directly improving plant efficiency and throughput. Similarly, our snorkels continue to outperform industry benchmarks against a typical industry life of 65 to 80 heats, our products have delivered 85 to 119 heats at leading Indian steel plants. This superior performance enhances customer economics by reducing downtime and refractory consumption, strengthening our value proposition. On the automation side, we introduced the tube changer mechanism, SIB-HSD1 system, designed for high-quality steelmaking environment. The system combines advanced control, precision engineering and built-in safety mechanisms to ensure consistent and repeatable operations. In simple terms, it improves operational stability for customers, which is increasingly critical in modern steel plants. Our total refractories management, TRM model, is witnessing encouraging acceptance in the market, and we are currently engaged in advanced discussions with multiple steel producers. Through total refractories management, we go beyond supplying individual products to -- products and instead provide end-to-end refractory solutions, including application support and performance optimization. This approach enhances customer integration, improves operational visibility and helps create more predictable and recurring revenue streams over the long term. To conclude, the quarter reflects steady progress, not only in the revenue growth, but also in strengthening our technological capabilities, customer engagement and long-term strategic positioning. While short-term profitability has been impacted by cost pressure, the underlying business momentum remains intact. We continue to focus on improving operational efficiencies, driving higher value-added product mix, expanding our domestic and international presence and executing our CapEx plans in a disciplined manner. With improving traction in key markets, growing acceptance of our advanced solution, stronger customer relationship, we believe we are building a more resilient and scalable business platform. We remain committed to delivering sustainable growth and long-term value for all our stakeholders. Thank you. And we are now happy to take your -- sorry, with this, now I hand over to Mr. Amit Agarwal, CFO, for financial performance. Amit?

Thank you, sir. Let me just give you a brief on the financials starting with the standalone financial highlights. Total income for quarter 3 FY '26 stood at INR 272 crores, reflecting a healthy 15% year-on-year growth. For 9-month FY '26, total income was INR 839 crores, up by 13% year-on-year. Gross margin was 44.4% in quarter 3 FY '26 and 45.4% for 9 months FY '26. Margins moderated during the quarter due to change in product and sales mix. EBITDA for the quarter 3 FY '26 stood at INR 17.8 crore. EBITDA margin was 7% for the quarter and 11% for 9-month period ending. Margins during the quarter were affected by higher employee cost, increased investment in business development and marketing activities. We have initiated the targeted cost rationalization measures and expected gradual improvement in the coming quarters. The quarter also included an exceptional expense of approximately INR 4.8 crores related to implementation of new labor code. Adjusted PAT after accounting of the exceptional items stood at INR 1.3 crore for the quarter 3 FY '26 and was INR 31 crores for 9 months FY '26. Breaking it down further by domestic and export sales. Our domestic business recorded a robust 17% year-on-year growth in FY '26 quarter 3 and a 25% growth for 9-month FY '26, reaching INR 648 crores. The domestic market contributed 78% of our standalone revenue in 9 months ended FY '26, up from 71% in 9 months ended FY '25. Our export business saw a growth of 13% year-on-year to INR 62 crores, contributing 22% of the standalone revenue in quarter 3 FY '26 compared to 29% in quarter 3 FY '25. For 9 months FY '26 exports were lower by 12% primarily due to strategic shift in the focus towards domestic market. Now let me move forward to consolidated financial highlights. Our consolidated financial highlights also include our international subsidiary. Total income for quarter 3 FY '26 grew by 23% year-on-year to INR 470 crores. For 9 months FY '26, total income stood at INR 1,418.2 crores, reflecting 16% growth year-on-year. EBIDTA for the quarter was INR 25 crores, registering a 27% year-on-year increase. For 9-month period, EBITDA stood at INR 104 crores. EBITDA margin was 5.3% in quarter 3 FY '26 and 7.3% for 9-month FY '26. At consolidated level, margins were impacted by change in product mix, higher employee cost. And as we said, expense towards business development and marketing initiatives. We witnessed a double-digit growth across key international geographies. U.S. delivered growth of approximately 37% during the quarter and continues to demonstrate healthy operational momentum. Europe recorded a growth of around 39%. However, recovery in certain market remains gradual and a few operations reported loss during the period. That said our Sheffield Refractories U.K. business is progressing steadily in line with our operational road map and strategic priorities. The quarter includes an exceptional charge of INR 4.8 crores arising from the implementation of new labor code, which had an impact at the group level during the period. Adjusted profit after tax after accounting for exceptional items stood at INR 1.3 crores for quarter 3 FY '26 and INR 30.9 crores for 9-month FY '26. With respect to liquidity position, we have a debt of INR 199.8 crores with a strong balance sheet. Cash and cash equivalents stood at INR 122 crore on consolidated basis as on December 2025. With this, I shall now leave the open -- leave the floor open for question-and-answer. Thank you.

[Operator Instructions]. Our first question comes from the line of [ Rohan Mehta ] from [ Nexus Capital ].

Sir, I have 3 questions. Firstly, sir, under this total refractory management model, can you give us some idea what would be the revenue visibility and margin profile compared to the traditional product sale?

Okay. Other 2 questions?

Okay. Sir, I've seen this quarter, U.S. revenues have grown 37% on Y-o-Y basis benefiting from the tariff period development and the price adjustments. So just wanted to understand how much of this growth would be volume-led and how much is price-driven? And going forward on a sustainable basis, is this kind of growth momentum sustainable into FY '27 or how should we look at growth over here? And thirdly, with the technology transfer from Sheffield Refractories expected by March 2026, what is the kind of incremental revenue or margin benefit that we are expecting after the localization happens? Because we see other players also doing quite well in the iron making, so what are our plans in this space? So yes, that was my 3 questions, sir.

Okay. See, I would leave that U.S.A. part to our Managing Director. The other 2, let me respond. One is the TRM model. In coming days, this TRM model is continuously growing. And roughly, I would say it is around -- 35 to 40 percentage of our total monthly revenue comes through this TRM model, which is continuously expected to grow, okay? And so this is definitely an area where we will be concentrating more and that's also going to be differentiating factor for IFGL from the crowd of many refractory manufacturers and suppliers in the industry. So we will be one among top 3. And in this place, because the profitability range, I mean, is also better than the direct material because the efficiency of our own application at the plant has a direct impact on our margin. And iron-making question, I would say that, yes, iron-making is, definitely is a new area for us. As I said, there are -- let's say, leading there are only 2 players who are very actively involved into this space. And with a growing upcoming steel -- iron and steel making expansion, they want an alternate additional vendor and there are a very welcoming discussions with 2, 3 important leading steel producers with us already. Competition is going to be a common element in every space wherever you go. So there are -- we can't expect any space where we are free firm competition. But it all depends on how are we executing. And here, the major strength comes from a well-proven technology provided by our Sheffield Refractories who are doing exceptionally well in this space. So this equips us to make. And naturally, once when we get into this field and establish ourself for sustainable, continuous volume, then we will be able to give you a kind of a margin levels and all. But we are bullish and we are very, very optimistic in this. On U.S.A. part 37% and the other thing, I would request our MD to respond.

Yes. I mean, obviously, 37% is quite -- a nice jump for the U.S.A. businesses. And I can say that -- I mean, this was over quite a lackluster year last year. The American market this year is very robust and it's going to be growing. And especially in the customers that we are involved in. And we feel that looking at the next year we feel that we're going to have a really good growth year again. It wouldn't be at 37% level, but it will be a very good level of growth for the United States and also at the same time, we expect to continue the growth and profitability.

[Operator Instructions]. Our next question comes from the line of [ Mansi Shah ] from [ EVNA Advisers ].

Sir, my question is that as the new capacities in Odisha would ramp up, what effect on end margin profile should we expect from these investments?

Yes. I think we have indicated in the earlier, definitely, at any point of time, it will never come down from 2-digit margin, that is absolutely assured, because of these products nature and also at present available competition in the market, it's very less. So definitely, this is going to be a very high rewarding project and that is how we are putting all our efforts in making it -- putting it on a fast-track.

Okay. Sir, I have one more question regarding the margins. So despite healthy revenue growth, EBITDA margins were below expectations. What would you consider a normalized sustainable EBITDA margin range for the standalone India business and for the consolidated entity?

Double digit is definitely ensured. That's what we always do and maintain and that's our thing. Yes, I mean, plus/minus 0.5 point here and there, but it will never come down from double digits.

So sir, double-digit, in like what range would you...

Yes, standalone, we have already said 12% minimum on that range.

Okay. Sir. And can it go higher 16% also or is it that in the same range of 12%...

That we cannot actually suggest at this stage, but the minimum level, what I mentioned, will be there.

Our next question comes from the line of Sahil Sanghvi from Monarch Networth Capital Limited.

Yes. My first question is the employee cost as a percent of revenue, where should it stabilize now, because there is a lot of volatility in that number? So for our modeling purposes and for our assumptions, where should we look at that number? Would it be fair to say that it will be around 10% or it would be 12%, 13% on the top line? Can you help us?

Yes, it will be around 10% only for coming year because as we know that we have -- as we have these projects which are already on and the team is working, and this will be around that percentage, 10% around.

So Sahil, as we have mentioned also that there are some nonrecurring costs -- employee costs included in this quarter, so we do foresee a reduction in employee cost in the next quarter.

Right, sir. But the expenses that we had this quarter, do you expect this kind of thing to be happening once a year, every year or how...

No, no. It's nonrecurring.

Okay. And with respect to -- on the consol side, it's fair to assume that our employee cost will be, what, in the range of 17% to 18% or would it be...

Similar range, what we have, but we do not foresee further increase from this level, for sure.

Right. Now secondly, on the margin, sir, I think we had a guidance of working around 12% on the consol side of the EBITDA margins. I think this year, we are very much far away from that number in the 9 months that we have delivered. So I mean, can we get back to that number in next year or FY '28, what is -- what would be your guidance? What would be your understanding on that?

As you know that because of U.K. operations, our margins are getting eroded, okay? We -- our U.S. operation has come back and is performing well. So our U.S. operation with respect to revenue is doing good. And as we inform that we are working on the cost optimization, so we are hopeful that in -- maybe in a couple of quarters, we'll be able to reduce our losses or make it 0 for Monocon, and then we can expect the growth in EBITDA margin for consol level.

And what will be the measures that you are taking up in the -- on the Monocon side, which will help us turn positive on the margins?

There are different, operational efficiency, cost cutting, everything is there. As we have worked upon sales, we have regained sales, part of the sales. We work on the cost efficiency on Marvel also to get back on track. And obviously, market has to support us.

Right. Got it. And lastly, I wanted to know your CapEx number. I mean, how much will you spend on the CapEx side this year and next year?

So see, Sahil, I think, we have already announced that we have 2 major CapEx in the pipeline. One is for the Khurdha project which will be around INR 325 crores approximately, and which will be 100% IFGL project? And second is our JV project, which will be 51% IFGL and 49% Marvel, which will cost around INR 300 crores. So this we need to bifurcate in 2 years' time.

So this year and next year, you will complete both these spendings? This is exactly what I want to understand.

So the FY '28, Khurdha we are targeting to close and '29 is the target for Marvel.

It doesn't answer my question. I'm asking you this year, how much will be the spending...

So that will be bifurcated. Let's say, INR 350 crores will be bifurcated into 2 years, maybe 60% to 70% this year and balance next year. And Marvel will start after this regulatory approval. We have already acquired land that is already spent. So we need to spend just 50% of 30% of investment because it is bifurcating into 70%-30% debt equity -- 50-50 debt equity. Hope you got it.

Yes. So that first year will be -- that spending will start from next year, right, FY '27?

Yes.

[Operator Instructions]. Our next question comes from the line of [ Rajesh Majumdar ] from [ 361 Capital ].

Yes, I had a question on the standalone business. Why are our margins so sharply down, despite peers reporting a better performance this quarter on account of slightly better pricing and slight moderation in RM costs? What has happened this quarter in our product mix that the margins were so sharply down when it should have been a better quarter compared to the earlier quarter for the domestic business?

I think we have spoken about that. There are 3 things that have impacted our margin. One is the product mix, second is the increased employee cost and third one is the operational overhead that we have increased in this quarter. Otherwise, if we see our YTD level numbers, 9 month numbers, our standalone EBITDA margin is 11%, mainly in line with our peers.

Excluding the employee costs, the gross margin is also down very sharply. So the product mix has depreciated in favor of -- I mean, like, clearly, what has happened because you have TRMs as well, what has happened to warrant such a sharp drop in the gross margins?

See, every quarter, we may not have the same product mix, it may vary from quarter-to-quarter. We are hopeful that next quarter, we'll have a better product mix and margin levels.

If I talk to you about pricing, what is the pricing change you've seen this quarter, say, on a quarter-on-quarter basis in terms of the pricing?

There's no major price change from last quarter to this quarter.

Okay. And sir, last question is on the TRM. We also see some performance incentives, et cetera. So that -- is there any chance of us getting some performance incentives down the line from any of the TRM contracts going forward or largely, it's going to be like this only?

I think performance bonus and penalty is part of a contract, and that is a recurring nature, sometimes plus, sometimes minus. So it will not have very big impact until and unless there is a specific big ticket item in the quarter.

Our next question comes from the line of Hemkesh Khattar from Green Portfolio.

My first question is regarding the technology transfer. So earlier, the management had given a guidance of technology transfer to be completed by December, but now we have moved this to March. So what is the reason behind this delay? And whether like can we expect a further delay or the deployed transfer is to be finalized now?

No. I mean, we are expecting -- because the delay was due to some of key -- the technology is a combination of both material as well as application installation combined. And there were some delay on a key component supply, which has affected fabrication of that particular unit. So we are now expecting this to be shipped in end March-April, so we will get it Q1, end of Q1 next year. So from there onwards, our journey starts.

Okay. That's very helpful, sir. And the second question is regarding the capacity utilization. So if we specifically talk about the 2 Vishakapatnam plants that we commercialized in FY '25, what is their current capacity utilization?

So because there is different lines and different lines are varying, and there are 2 lines which we just recently only started. So right now, putting up a number like capacity utilization for that 2-year-old plant will be misleading. So we are making a good progress that much I can say.

Okay. And is there any guidance of incremental revenue to come from those plants going forward?

No, no, I mean, that is included in our entire growth. And I think specifically, we don't have a number to tell in plant-wise.

Okay. And just one thing, what is your guidance regarding FY '27 growth numbers?

'27, I think, we'll come next quarter with our guidance. This year, we'll -- let us close this year first.

We are still working, yes.

Okay. And just one last thing that in the investor presentation, you have mentioned some regulatory delays coming in the JV, so can you please elaborate there a little?

No, no. See, that's like actually specific to this particular case is PN3, the press note #3 will suggest the 1 layer additional approval required when we bring technology from the countries sharing the border with our nation. So that is the thing which is now overcoming. But now as I was mentioning in my opening remark that very positive things which are in public domain now that direct flights, which was not there for almost 3, 4 years, now it started. And also now a special manufacturing and technology transfer related business visa, which is also already approved for this, what you call, the neighboring country, what we are discussing. So all positive signals are coming and so those are all the things.

Our next question comes from the line of Praveen Jayaraman from Avendus Spark Institutional Equities.

Sir, my question is in the line of dolomite refractory. So in the earlier con calls, we mentioned that the size of the market will not be only pertaining to the stainless steel as end market, and we could take global average or global usage of dolomite refractory and apply that in India market size. Sir, here my doubt is if even in normal steel cases, if you are using dolomite refractory, what would be the case of switching here? Whether it will be on a quality basis or it could be on a cost basis?

It is primarily on a quality basis because of the material it contains. It helps making cleaner steel compared to the conventional thing. So it's basically on quality and not the cost front. It is a special refractory, yes...

Right sir, and how far the adoption rate that we are expecting internally, sir?

You see, when -- with the kind of growth expected in stainless steel alone is going to give full market potential for our product. What I mentioned was that -- I mean it will take some 2 to 3 years for normal steels to adapt for a quality-based, quality needed adoption of this [ plate ], that will come, which is for further our expansion of the project. So the project at this stage has much more, a market only in stainless steel growth alone. That's what we mentioned. It will take a long time, and that has got no impact on our projected supply from this project. That is why further expansion of this project.

Okay, sir. So the steel plate adoption is for further expansion of dolomite refractory?

Yes, yes.

Sir, if that's the case on existing stainless projects which we are going to serve, whether it is going to come from growth of stainless products on the base of -- from current base or it will be more of an import substitution?

Both. Both because we are envisaging 6 million tonnes to come up in another 1.5, 2 years from 4 million tonnes right now and also import substitution, both will have. It's not only a single element, both elements are there.

And what would be the thumb rule here, sir, refractory usage per tonne of stainless steel?

No, no, it depends on -- because of now 40 to 60 tonne AODs to 120 AODs, it will vary. And I mean, so we can't put one number because it will also be used in the [ level ] carrying the same thing. So it's a single number right now, I'm not -- I cannot give you a single number.

Okay, sir. Okay. Sir, a question other than this. In electric arc furnace, whether there will be any increase in refractory usage compared to blast furnace? And if yes, could you quantify the same? Or any...

Definitely, electric arc furnace will consume -- the specific consumption of refractories in electric arc furnace route is going to be slightly higher than the conventional route overall value chain from blast furnace to converter.

Sir, can you give any broad numbers or a percentage to conventional converter?

Because when you say electrical arc furnace, it's a family, energy optimization furnace and then electric arc furnace and then twin hearth electric, many things are there. So -- but all put together will be 2 -- I could say that absolute, I will not be able to. But at least 2.5% to 3% will be higher than the normal conventional route.

Our next question comes from the line of [ Ragini ], an individual investor.

My first question is on employee cost. How much increase is onetime and what is the real reason for incremental fixed costs?

I think, [ Ragini ], thanks for the question, we have clarified this that this has some portion of nonrecurring costs in the quarter, which is nonrecurring and non-remittance and it will not come in quarter 4 or in the next year. And we expect to maintain 10% employee cost as a percentage of sale as of now.

Can you tell me the quantum?

That is not to be disclosed at the point.

Okay. So my next question is, as we are consolidating in INR, we must have got FX-positive. So how much is EBITDA one time due to this FX-positive?

Sorry, come again?

As we're consolidating in INR, we must have got FX-positive. So how much EBITDA is onetime due to this FX-positive?

I don't think I have that number already available in front of me. We'll get back to you on this through our Investor Relations.

Can you give me an approximate number?

No, I would not like to give an approximate. We'll get back to you on this, for sure. You can contact SGA for this, we'll get back.

[Operator Instructions]. Our next question comes from the line of Saket Kapoor from Kapoor & Company.

Yes. Sir, firstly, earlier last year, and in fact, for some part of the first, second quarter, we were constrained in margins because of the iron prices, especially the alumina prices, which the management worked out that post 2 quarters, the revision in cost that will be passed on. So now taking into consideration those prices being flattened, why have the margins not improved by any material means? And secondly, in terms of the product differentiation from the new facility at Khurdha, what would be the incremental margins that we are expecting? You did mention earlier, but I missed your -- in the opening commentary.

So on the first part, the price increasing trend is not where it has flattened, but it has never come down to the original level. So that cost pressure, it is because of increasing -- instead of increasing cost pressure, it has come to a place where increased price holding is there. And there is not much -- we cannot compare alumina as a whole because there are some special alumina with specific characteristics, where the prices have not come down. There are -- which are commercially used high alumina of our other categories, which are used in big quantum of things which are brick and other making. There, there was a reduction, but in our case, there is no much impact. But yes, increasing has stopped, flattened. So -- whereas other costs are increasing. So we are now -- we'll have to calculate even the new labor code and what kind of impact it is going to give. So that set alone. Otherwise, there was no big relief on that. Only the relief came from flat price, not any reduction. And then the incremental, as I said, incremental -- yes.

For the Khurdha unit. Yes.

Khurdha unit incremental from whatever down, it will be around, if not more, minimum 8% to 10%.

8% to 10% more than what our current products...

Yes, yes. Standalone on Khurdha basis...

Standalone on Khurdha basis, correct.

Okay. No, sir. What I'm trying -- standalone Khurdha basis will be 8% higher than what we are doing currently in the standalone or it will be at 8%?

For the revenue generated in Khurdha. We are talking about that whatever revenue -- but particularly, if you calculate a specific Khurdha-based EBITDA margin level, that will be 8% to 9% higher than the average standalone Indian right now, whatever we have, 11%.

Okay. And what should be the asset turnover from the units, sir? When will we be working at...

So that again has a mix effect. We need to come to that actual mix and that percentage effect on that. So we will come back once when we progress further.

Okay. Sir, earlier, Amit ji mentioned that employee cost for the standalone unit will be 10% of the revenue. So if we take this quarter number, at INR 270 crore, the normal rate would have been INR 27 crores, wherein we had employee cost of INR 35 crores, so this will get even out for the next quarter. So there is one-off in the employee benefit expenses for this quarter.

Yes, yes, yes.

Okay. And for the consolidated, it will remain 12%.

Yes. It will remain at the same level. Obviously, the impact of standalone will be passed on there.

Right, sir. And lastly, sir, just to understand the cost structure for the sector as a whole and our company. The bottom line is not commensurate to the type of effort that we are doing in terms of the CapEx. The EBITDA number and then the final PBT, there is a very strong declining trend there. The numbers do not suffice to commensurate for shareholders' value. So where do we stand today in terms of that value creation exercise, which I think so earlier, our CEO has mentioned, we did came out with a bonus issue. That is also counterproductive in terms of the tax, the incentivization that we have currently for bonus. So what's the thought process for creating the value for your shareholders? That has not happened, sir?

No, no, you see, all -- what I mentioned is the new technology and the better solution and all, these are seeds, we have put seedings. Now, let's say, when the next contracts which are going to be renewed down the line of May, June, July, so that time, our business share will come. So these are all wherever we have put our new, everything has been -- encouraging result has come and customers have assured us. So I said it is seeding, so the coming quarters, it's going to yield. Okay?

Also, if I could add, Obviously, as Amit mentioned earlier, the U.K. business has been under considerable pressure for over a year. We implemented many plans there for new product developments and many of these new products have already entered the market. Unfortunately, because of the market conditions in Europe and many of the markets that they're involved in have been very slow on the uptake of these new products, much slower than we expected. But we feel that we're on the right track. And that, along with some changes that we will make in terms of the structure and approach will definitely enable us to increase our profitability. That is a drag on the company, the profitability of the U.K. company as a drag, the company at the moment. And over the coming quarters, we will see improvement in that.

Right, sir. Sir, just to conclude, we can see that worst is behind us in terms of the inflationary trend, then the worst of the product mix and the employee cost factors, all factors that have dented the profits. Are we -- are these things have passed or we can face similar headwinds in the quarters ahead also?

[Technical Difficulty]

You are not audible, sir.

Sorry to interrupt, your voice is breaking, sir.

Yes. Sorry, I don't know what happened there. Yes, as Amit and Arasu mentioned earlier, I mean, on the Indian side we feel very strong, things moving forward. On the overseas side, as Amit mentioned earlier, the U.S.A. is very strong and we see continuing in the future. Hofmann Ceramic is, we feel at the bottom is moving forward and moving up. Sheffield Refractories is very strong. The main area only in the company that we need to work on, and we are working on very hard is the Monocon business in the U.K. And we feel sure that over the coming quarters, we will start to notice, I think, the improvements in those figures. We will have a massive company because that is the drag at the moment.

So you were not completely audible. If Arasu sir could supplement what John sir was trying to...

I'll just update what he was saying that the Monocon U.K. business is the only drawback what we have, is dragging us down, and we need to work on that, and we are already working on that, to overcome the losses. I think if we overcome that, the things will be online -- aligned. That's he wanted to convey this.

Okay. That is where the European operations are. So we are struggling with those.

Correct.

Our next question comes from the line of Sanjay Nandi from VT Capital.

Sir, what percentage of our total portfolio is being contributed by flow control on a consol basis?

I think we do not -- I think like peers, we don't share or give the breakup of the revenue product wise.

Sir, just wanted to know only flow control envelope share, that's it, sir. So I don't want the remaining kind of product share. If you can kind of throw some light on that, sir?

I don't know, Arasu, if you would like to...

Yes. I mean it's close to, let's say, our flow control per se will be around 50%, 55%.

Thank you. Ladies and gentlemen, we take that as the last question for today. I would now like to hand the conference over to Mr. Sahil Sanghvi for closing comments. Over to you, Mr. Sanghvi.

I just want to thank the management for elaborately answering all the questions. And also thank you to all the participants for participating in the call. Management, would you like to give any closing comments, please?

Yes. I mean, we hope we have been able to answer most of your queries. We look forward to your participation in the next call. For any queries, you may contact SGA, our Investor Relations adviser. Thank you.

Thank you very much.

Thank you. On behalf of Monarch Networth Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.