Interarch Building Solutions Limited (INTERARCH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Interarch Building Products Q3 FY '25 Earnings Conference Call hosted by Ambit Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, and over to you, sir.

Hello, everyone. Welcome to Q3 FY '25 Earnings Call of Interarch Building Products. From the management side today, we have with us Mr. Arvind Nanda, Managing Director; Mr. Manish Kumar Garg, Chief Executive Officer; Mr. Pushpendra Kumar Bansal, Chief Financial Officer; and Mr. Anil Chandani, President, Corporate Finance and Strategy. Thank you, and over to you, sir, for your opening remarks.

Thank you, Dhruv. Thank you, everybody, for joining this call and taking your time out. I'm Arvind Nanda, MD of Interarch Building Products. So before we get to the other thing, I'll again -- because a lot of investors are new and a lot of investors are coming in for the first time. I just wanted to take 2 minutes to explain what the pre-engineered building industry is all about and where Interarch fits in. The pre-engineered building industry, it's basically building made out of steel, but we are not classified as a fabricator or a steel structure company or a contractor, et cetera. The pre-engineered building, the principle basically behind pre-engineered building is that the customer will come to us with his total requirement of whatever he wants. It could be a manufacturing plant, it could be a high-rise building, it could be a warehouse, it could be a data center. He comes to us with his requirement on a technical basis that this is what I need. So the first stage that the pre-engineered building company gets involved in like Interarch is the design and engineering of that building. So we must have excellent capabilities in-house of design engineers and technical software and the senior engineering team to be able to convert their requirement into a design, which is not only acceptable as per the total requirement, but also a great value add because the customer doesn't tell us to give a rate on a per kilo basis or a per square foot basis. It's a lump sum building quotation that we give him. Therefore, it is very important for us to design and engineer these buildings very, very well, and that is the key to a pre-engineered building. If a pre-engineered building company has good engineers and design -- so you design the whole building very well. Consequently, your costing is good and your execution and production is better. So we design engineer the whole building. Then according to that, whatever steel requirements are there, we primarily use three different kind of steels. One is an HR plate. So we use a flat plate. We do not buy any ready-made sections for the building. We make everything out of that plate as far as columns and beams are concerned. Then we have secondaries, which come to us in coils, galvanized coils or sometimes even pipes and rods, et cetera. And those we then roll form into the secondaries, which hold the columns and beams together when the building is erected. The third part is the roof and wall cladding, which is the final skin of the building, which again comes in predecided material, means it could be what kind of colors, what kind of coating, what thickness is, et cetera. But we buy it in coils and the full roofing cladding, et cetera, is manufactured by us. So the full building is actually manufactured by us in our plant. from basic raw material like plate, coil and whatever little bit of accessories we need. So the first part is design engineering, then that design engineering team decides how much material of each type do we need. Then they decide what is going to be the manufacturing cost because each building is very unique. We have no standard items. We have no standardized products to make. Every building is uniquely manufactured, designed and manufactured in-house. So then what does it take to manufacture that? What is the costing of that manufacturing of that building? We take that, then freighting it to site. And at site, the whole building is assembled in a nut and bolt assembly form. No work is done at site as far as the building is concerned in terms of welding, cutting, drilling or painting even. Painted also -- painting is also done in the factory. So everything goes ready-made in pieces, in transportable pieces to the site. And there, it is just assembled like a nut and bolt assembly. No other work at the site is required except nut and bolt assembly, including the roof and wall cladding. So the costing of this whole thing is taken at the time of quotation and we give it to the customer as a lump sum price with a fixed schedule. We tell them, look, we will take 3 months, 4 months, 5 months, depending on the building and the complexity to execute this whole project from beginning to the end. And he will get his complete building at the end of the day. He doesn't have to look at any other vendor, any other supplier buying any material, et cetera. He orders a building on us like a product. So everything from design engineering to putting it up at site is the responsibility of the pre-engineered building company. So that is the major difference between us and any other contractor or fabricator or steel building supplier because they just do part of the work. we do the complete building like a product. So therefore, we become a one-stop shop for the company. They deal with us, the design, engineering, production defects or execution delays, et cetera, is all put on one company. They don't have to run around in circles trying to get this work done. So it is very similar to buying a car today or ready-made furniture or even ready-made apartments and office blocks as we buy. We buy it depending on the reputation of the company, the sizes that we want, the location that we need and we decide to order it. And he will get that fixed price for the full term of the building. Therefore, he doesn't have to worry about any cost escalations or any delays. That is all our area of work. So consequently, over a period of time, due to the complexity of the buildings, due to the size of the building, we would also say complexity of the clients because most of our clients are highly sophisticated and world-class companies, which are very, very concerned about safety standards, quality standards, design, your execution dates, your supply date, scheduling. We are very concerned about that. So we have actually become like a capital goods partner with these companies. We do not consider ourselves, neither do they consider us as a vendor supplying some steel fabricated item, but as a first capital goods that they need for their product. Because if we cannot do the building according to their requirement, today's requirements of production or even building of warehousing are highly complex. These buildings are built at various different levels. Some of the buildings we have done, industrial building go up to the height of 70 meters, which is like building a 20-, 25-story building with different weights of machinery, levels of machinery being installed at different levels, heavy cranes, mezzanines, conveyor systems, all these are a part of the building. We have to take consideration of all these items that they will be installing in that building as a part of their process of production. So whether it is conveyor systems, whether it is your -- even the solar systems installed on the building, we have to take consideration of those weights, et cetera. So we are very closely working with these companies. So they value us greatly. And they go with the companies like Interarch because of the value that we add to them. It is not an L1 process. It is not the cheapest company will get the order or just an open tender and everybody quotes. But the client will first select the vendors or the partner that he wants, he feels are capable and able to do the work that he wants. So like in capital goods, the ability and capability is far more critical. So like in machinery and other capital goods, the company has to also design, engineer, produce it and make sure that the product functions as the customer wants and not only function, but keeps giving him that output and keeps giving him that durability over many decades to come. So that is why we feel that we are a capital goods company with these multinationals and large Indian concern. Two, three other things that happened with pre-engineered buildings and with Interarch is that we are also pretty much industry agnostic. The way we have built up our engineering and design department and execution and our production line, we are very much industry agnostic. We can work with any industry. We have worked with automobile, with oil and gas, with the data centers, the semiconductor industries today, with lithium battery, with your A-grade warehousing, with all manufacturing industries. There's nothing, whether it's a Coca-Cola plant, whether it's a Pepsi, the concentrate plant, whether it is machinery manufacturers like SMS, there is no company in India that is existing here that we have not worked for, I would say. So starting from Reliance to the L&T to ONGC to rail coach factories to the Terminal 3 airport that is made in Delhi. And we have done a variety of buildings, right, from Fortis Hospital building in Bangalore to malls, to stadiums, to schools, colleges, hospitals, homes. So we are very much industry agnostic. We are very much building agnostic. It doesn't matter to us what kind of building you want. We can do very wide building, meaning no central support up to 100, 120 meters, very high building. We have done already 70 to 80-meter high buildings with very heavy loadings, with very heavy cranes on it. We have done schools, hospitals, add-on to additional floors, homes, hill homes, farmhouses. So we are very much building agnostic also. And as Interarch, we have also built ourselves to be very much geographically agnostic as well. We have done projects all over India. So it is not that we are limited to certain territories or certain states, but we have done work in the Northeast. The recently announced project of Tata microchip semiconductors in Assam is what we are doing. We have done work for Berger and for HUL, very big projects in the Northeast earlier. And there is no state in India that we have not worked in, whether it's in Jammu Kashmir, whether it's in South, whether Odisha, Bihar, Jharkhand, everywhere. So we are building agnostic, we are industry agnostic, and we are very much geography agnostic. That is how we are trying to build up this company. And our whole basis is how to build up a good relationship and good partnership with the world's best companies which are working in India, whether they are Indian companies, whether they are Indian consultants, whether they are foreign consultants and whether they are foreign companies which are coming into India. We want to be their first preference and top of the mind preference because that is how these projects get decided. Like I was saying, it doesn't matter what your price is, it is your capability and your ability to do. So the history of Interarch has been where we have worked with all the top companies. We have done nearly every kind of building that can be done. So we become very much a part of the preference of customers because when they look at our history of the last 25 years in pre-engineered building and last 40 years in this field, they feel that we are the right company for them to do the job because we have already done something very similar and very close to their requirements earlier. So that is the position of Interarch, and that is what pre-engineered building is all about. So I will not go much further in that. I pass it on to Manish. He will give you some idea further up, and then we will go for question and answer.

Good afternoon, everyone. Taking it further from where Mr. Nanda left, we are today the fastest-growing company in the organized pre-engineered building sector in India, and we currently rank 2 in the overall scheme of things. Between FY '15 and FY '24, we successfully executed and completed over 600 projects. That demonstrates our extensive expertise and strong market presence. And in terms of PEB turnover, we have secured the third position amongst integrated PEB players. We specialize in high-quality pre-engineered roofing and cladding systems tailored to meet diverse customer requirements. Interarch operates five state-of-the-art manufacturing plants and four fully integrated pre-engineered building facilities located in Sriperumbudur, Tamil Nadu, where we have two facilities and then two in Pantnagar and Uttarakhand, followed by Athivaram, Andhra Pradesh and Kichha, Uttarakhand, where the new facilities have come up. Our facilities have a combined installed capacity as of today as 161,000 metric tons per annum. And given that the utilizable capacity in our business typically ranges between 80%, 85%, this translates to an effective 135,000 tonne -- metric ton per annum of utilizable capacity. To support future growth, we are currently expanding our facilities in Andhra Pradesh, Athivaram, which we call the Athivaram Phase 2 and Kichha Line 3. Once completed, sometime in Q1 FY '26, this expansion will add about 40,000 more metric tons to the installed capacity, bringing our total installed capacity to 200,000 metric tons per annum, adjusted to about 80%, 85% as utilizable capacity. Some of the recent developments at Inter includes our R&D work done in engineering department, where we are trying to automate a lot of manual tasks to increase efficiency and productivity in the engineering department. Also logistics being a very important part because you heard Mr. Nanda saying we operate pan-India. We are trying to add a lot of platforms, which automate our logistics operational management and also the logistics partners who have their own fleet. Because we believe that, that is going to be critical going forward to support our growth. And we also are looking at capacity building through inducting the fresh talent into our engineering projects and design. And we are also actively participating in upgradation of Indian codes to cater to pre-engineered buildings specifically. As of today, our total order book stands at INR 1,305 crores, which reflects a very strong pipeline and sustained demand. And we take pride in our diverse customer base, wherein our repeat order percentage remains more than 70%. Some of the major orders that we procured in the past quarter and in the past few years, already Mr. Nanda explained, they are from the new age industries as well. We expect to continue growing at the pace that we have demonstrated. Looking ahead, we are focused on expanding our footprint and diversifying our solutions to tap into emerging growth opportunities, including expanding our operations of manufacturing in Gujarat going forward to support our future growth, wherein we already have secured a land, which is registered in Kheda. So that's to support the manufacturing setup for future. We also have already diversified into future sectors like EV infrastructure, renewables, data centers, multistory and our tie-up with JSPL is making it far more possible for us to handle these kind of specialized sectors, particularly the high-rise and the heavy steel sector. Now I'll come to the financial highlights for the quarter. And coming to them, Q3 FY '25 highlights are very pleased to report the revenue for the quarter stood at INR 364 crores with a growth of 15% on a year-on-year basis. The business mix of end user industry was industrial and manufacturing predominantly at 86%, and infrastructure, including logistics at about 12% and others building at 2%. Our EBITDA for the quarter stood at INR 35 crores, which is a growth of 28% on a year-on-year basis. Our EBITDA margins also saw an improvement and stood at 9.7%. Profit after tax for the quarter came at INR 28 crores with a growth of 28% on a year-on-year basis. And our total order book, as I explained today stands at the unexecuted order book at INR 1,305 crores. In terms of YTD, 9 months FY '25 highlights, our revenue stood at INR 990 crores with a growth of 9% on a year-on-year basis. Our business mix, I've already explained to you. On a year-on-year basis, it stands at 75% from manufacturing and 23% from infrastructure, followed by 2% from other building types. Our EBITDA for the period came at INR 88 crores with a growth of 20% on a year-on-year basis. And our EBITDA margins for 9 months FY '25 came at 8.9%. Our profit after tax is INR 69 crores for the period with a growth of 23% on a year-on-year basis. With this, I would like to conclude the presentation and open the floor for questions and answers. Thank you.

[Operator Instructions] The first question is from Yashovardhan Banka from Tiger Assets.

Congrats on a fantastic execution. I just wanted to understand what is the attrition rate of our designers, sir, for this year?

Our attrition rates are pretty low, generally in the company. For design, I don't know whether we have an exact figure. Manish, would you have an exact figure, but I think personally, I feel it is very low.

I don't also have the exact figure, but I can say that for the recent period, it is about 10% for engineering in particular.

Okay. So that includes our designers, right?

That is correct, sir. That is correct.

Okay. And sir, as I see, we have, I think, secured around INR 405 crores in the last 3 months of orders. So, sir, any major client break through as a big client where we can see sustainable repeat orders moving on?

In the next 3 months?

No, sir. So the orders that we've secured.

In the last 3 months?

In the last 3 months, yes.

There were three or four major orders that we did get in the last 3 months. Two we had announced recently also, one from Tata Projects for their Tata Agratas, which is a battery -- lithium battery plant to be set up in Gujarat and the Tata Electronics project in Assam, which they are going to make the semiconductor chips, which also made a lot of news otherwise. So these two. Then I think recently, we have also got a couple of more projects, one from, I think, Birla Copper for their plant. And another one, we are getting -- I think there are about four major orders. I think, Manish, which was the one that we got last recently.

Yes, sir. So Hindalco was the one that we got.

Hindalco is the last one, yes.

Yes, that is what is called Birla Copper.

Okay. And one more we got recently, I think that is from -- which we just finalized from the solar company, Vikram Solar, I think.

Yes. But that, that is...

Not taken in this figure.

Yes, that is not taken in this figure.

Yes. So that I think probably might have come after 31st Jan. So we are -- the bigger orders are coming from this renewable line. Our normal orders of warehousing and from the manufacturing industry are continuing. But the renewable sector and these new age sectors like semiconductors and all they require very large building. And then -- so therefore, the value of the orders is also a little larger. And we are concentrating a lot of energy on to these sectors now.

Got it. So just a follow-up to this. I mean, the INR 1,300-odd crore order book, what is the approximate execution time line for this?

I think Manish mentioned, see, normally, the order lines are getting shorter and shorter. Now normally, people would have expected the large orders to be finished between 8 to 10 months, but now I think it has become 7 to 9 months for this. So I think the INR 1,300 crores, we have to finish in the next 8 to 9 months. That is why we are a little restricted also in taking more orders because we have to judge our capacity and our ability to execute as per customers' requirement. So once we ramp up more capacity, I think we should be in a position to take more orders, but these have to finish in the next 8 to 9 months.

Next question is from Ashish from EverFlow Partners.

So my first question had to do with -- I wanted to understand what kind of an opportunity does the management see in the export business?

See, we have exported in the past, but not too much. I would say, on an average, maybe we were doing about one building every quarter. Now we are doing about maybe one building every month. See, the opportunity on export basically is how much concentration we pay on to exports. So since last year, we have created a special export wing and concentrating a lot more on the export orders. And we feel that the opportunity coming up from the Western countries and the neighboring countries. Western countries more so because they are all -- they were earlier importing a lot of these kind of buildings from China. They need -- they want to now have an alternative source for their requirements. And then a lot of requirements were coming even to U.S. and Canada from Mexico or Canada. So we see a very good opportunity, and we feel that we are now in a good position to exploit it. The figures might not be very relevant in terms of the total turnover in the next year or so. But I think next 1 year of our effort will show to us how much business we can get. But the kind of business pre-engineered building is, it's very difficult to get a very large chunk of your business from exports because of the design, engineering and then you need a local partner who will have the name and the trust of the client to get the buildings and then to be able to execute that thing. So that we cannot do. But I think the requirements are coming up, Africa, neighboring countries, we are trying Sri Lanka. We have done a lot of buildings in Nepal. So I think the scope is there. But for the first time since last year, we are actually concentrating on it. So I can't name any figures, but I think maybe after another year, we will have a more definitive idea. But we are certainly concentrating on it.

Okay. So my second question had to do with in the domestic business for the large projects, how many people do you see bidding on these tenders? And what is the competitive intensity? Like how is it affecting your margins?

See, in the competitive -- in the larger space, normally, the customers would go by, like I said, ability and capability of the company to do it and history. I mean, how many projects like that you have done in the past, similar because their time lines are very critical. Probably wanted to make a semiconductor or a data center or making battery or solar cells, time lines are very critical for them. So we rank pretty high in that capability and ability preference of mind of the customer. In these projects, normally, there are not more than two or three companies, maximum sometimes four. If the project is very large, they will divide it. Simpler buildings can go to a third or fourth player. The most important competitor for us in this line is normally Kirby, which is a Kuwaiti company based in India, which is the #1 company in India. Most of the orders would either go to them or to us or we share them for the larger ones. But we have seen the other lower players, players who are less than our size or do not have the ability to do complex building, taking a share of the simpler building in this project because each project like this could have seven, eight buildings. Two, three could be very relevant, very large and very critical. And four, five could be smaller like warehousing for storage of materials, storage of finished goods, et cetera, et cetera, going to other players. The competition is there. There is no doubt that competition is very severe. But I think the history that we have built up and the ability that we have shown in the past and the relationships we have built up because we have done work for these companies and these sectors like Tata Projects and Tata Group, we have worked with maybe 15, 20 of their companies in the past. So whether it is a Pepsi or a Coke or Reliance, we are doing Reliance Solar. We have been working with Reliance Group for the last 40 years in their various projects doing various things. So that has helped us in the thing. But yes, I think a lot of the margins we will have to create and make from internal working to make it better, to make it more efficient, to utilize our present resources for getting more orders so that the operational leverage also kicks in. We'll have to learn to make more and more margins from inside, which we are very good at, increase our productivity, increase the output of our sales and project teams and the production. Otherwise, I don't think that we are going to have to rely on better margins from customers. The competitive environment is there. But certainly, we will be able to hold and increase our margins going forward.

Next question is from Tushar Raghatate from KamayaKya Wealth Management.

Sir, the recent CapEx which got, and there is also 40,000 CapEx lined up for Q1 FY '26. Just wanted to know when are you seeing that CapEx to get fully operational? And also the Gujarat CapEx which is in pipeline, what tonnage would be for that CapEx?

This CapEx will come into play by the first quarter of FY '26. It's already in production. The building is coming up. The machinery is ordered. So the two lines coming up in Andhra Phase 2 and in Kichha Phase 3 will be operational in the first quarter. The Gujarat one, we have the land and we start some development. depending on the order intake and how -- if the order intake carries on as it is today and the pipeline looks good, our plan is to start it after the monsoons this year to go forward to the Gujarat plant. But for production facilities also, I would like to inform everybody that we are also tying up. There are a lot of good companies which are doing production because they have set up very good PEB plants, but a lot of these companies, I can't name them. They couldn't do the PEB business as such, but they have good plans. So we have tied up with two, three, of them to give us the production facilities of theirs, which are world-class to work according to our systems. So we are also tying up that, that in case we want to do the intake of orders faster and we are getting more orders, so we don't lose them. So that also we are doing as an outsourcing kind of a model. So we are working on that also. But our own CapEx will be these two, which we are doing by the first quarter will be operational fully. And Gujarat should start in the third quarter of this year, the next quarter.

Sir, I couldn't get the answer. Like basically what I'm trying to understand, you mentioned in the past that 40,000 tonnes capacity has a revenue potential of INR 400 crores, INR 500 crores. My question is like when do you see that Q1 FY '26 CapEx to get fully utilized? That was my question actually.

Okay. I think it will get utilized up to about maybe 75% in the next financial year. So that INR 500 crores for adding for this -- because the first quarter will be a little bit of trial production, et cetera. So 75% in the financial, and 100% in the following financial.

Got it, sir. Sir, my next question is on the competitive intensity. So like as for the material capacity I'm considering, so the Kirby capacity is near to 212,000, and the second competitor comes the EPACK Prefab, which has 113,000. So like our capacity will be 2 lakh post the CapEx. So just wanted to know like all have good revenues and margins more or less similar. But in the case of Kirby in the working capital, they are working capital negative with INR 400 crores of cash. So just wanted to know our headroom to improve our working capital. What are our plans to improve our working capital going forward?

See, our working capital requirements generally have been in the range of 20 to 25 days. So it's reasonably good, and that is what we have managed to maintain in spite of doing very large projects where the working capital cycle goes a little haywire because of the milestones that these large companies put for payments. We are always trying to controlling stock. We do get reasonable credit from even the steel companies by opening LCs or open credit. So I think that we will be able to hold our working capital cycle to 20, 21 days. And I don't think that working capital cycle, if I'm not mistaken, doesn't include our cash reserves. I think it is the debtors, the customer advances, suppliers and the stocks. So that is how we calculate the working capital. And we have cash reserves of even now of nearly INR 300 crores. So I don't think we take that into the working capital cycle.

Got it. Got it. Sir, just wanted to know the recent collaboration with JSW. So what's the benefit of that? Any discounts we are getting in terms of large chunk orders? Or what sort of benefit are you seeing due to this collaboration?

The collaboration with JSPL, Jindal only, but the Naveen Jindal Group. So it has nothing to do with the steel procurement. JSPL has a separate unit in which they do fabrication of heavy structures, the structure that you see in high-rise buildings or data centers or even in the girders in the metro and the road. So they have very good facilities to do fabrication, which they had originally set up for their own purposes to set up their own steel plants. but now they don't need it fully. So we have tied up with them that there are a lot of heavy -- like pre-engineered building structure, even though the buildings can be very large and heavy in terms of weight, but each piece is light. So therefore, what we have done with them is that we have tied up with them that when we get a contract like a microchip plant or a data center or even one of these lithium battery plants, these have requirements of 20%, 30% of their requirements can be what we call heavy structures. So we are going to use them for the heavier structure production and joint marketing of other buildings like high-rise buildings and data centers and commercial building malls. There, we are going to do joint marketing, joint bidding and our engineering and design strength, their production, and they also have a good history because they have worked on a lot of these projects. So the collaboration is primarily for buildings which we are not doing too much today, but we can do because more and more people are shifting to steel buildings for other usages, nonindustrial usages. So that is the tie-up with JSPL, in steel, yes.

What would be your average advance which you take from the customer for any project, big size project which you execute?

Normally, for the bigger project, we would take at least 20%. The small, medium one can be anything between 10% and 20%. After the small medium -- after the advance, they have to pay in full before we deliver the material to them. And in the larger projects, the balance steel supply payment would come in with -- on a milestone, we would supply, raise a bill. And within 15 to 30 days, we would get our payment of the supply of steel. The supply of steel would be fully covered by the time we finish our supplies. Advances being 10% to 20%.

Sir, all are fixed contract, right, the prices?

Sorry?

The prices are fixed, right?

Yes. Most of the prices are fixed. When it's a longer-term project, we do take variable pricing. So I think today, would be maybe 30% to 40% of our projects would have variable pricing. If the project stretches over 8 to 10 months. But since the prices have been stable, more and more clients are insisting that we do not get into this variable pricing, which means a lot of calculations every month to order. And we are also accepting since the steel prices have not really moved too much in the last 8 to 10 months. But yes, otherwise, a lot of our orders today.

[Operator Instructions] The next question is from Rohit Chaberwal from Niveshaay.

My first question is on export side. So you said you are building one building per month in the export markets. So I was wondering what kind of margins are we getting from that?

The margins are not that much different in exports to the local market, but they are much -- I mean, they are a little higher and the payment terms are secured. And basically, the advantage is that it's only a supply job. You engineer, design the building and you supply it. There's no further execution and then payments according to a schedule and the payments are all against LC. And also, I think it's a different market that we need to get into. See, the margins are a little better than the local market, but not excellent because there's a lot of freight cost. The freight rates have gone up a lot and a lot of our export is going to North America. And there, the freight -- it's adding a lot to the freight cost. But in spite of a little better margin and in spite of freight, they are still finding it very competitive. So we are looking at higher volumes from there for simpler buildings and utilize more of our production capacity and execute those orders. But overall, the margin is only slightly better. I would not say it is fantastically better.

Okay. Makes sense, sir. And sir, my second question is again on the margin side. So currently, they are doing high single-digit margins. So how do you see that in coming quarters or in coming years? Is 9% or 10% sustainable margins? Or are you expecting more or less from that?

So they are very sustainable. A lot of the sustainability of the margin in our case depends on the volume of business that we do. So right now, we are looking at volumes doing well. We have done well in the past 3 quarters that you've seen. They've been rising. They are better than last year and they're better than each past quarter. The order book is good. The pipeline is good. And so we do not see any problem right now, at least for the next 3 to 4 quarters in margin sustainability. Better margins, we are always trying. We are using a lot of better technology, making better use of people, making -- getting -- trying to get orders which have a little better margin because of volume. So better margin is always an endeavor that I think we can do. But what we are doing presently are certainly sustainable. I don't see any problem in the next few quarters in the margins.

Got it. Got it. And so my next question is on capacity utilization. So it has been around 55% or so in the last year and last few quarters. So what is your take on that? Would that -- I mean, do you see it increasing? And if yes, by how much percentage?

Okay. I'll let Manish answer that. Manish, can you take that question, please?

Yes, sir. What is the percentage, sir, you're talking about, which percentage?

Capacity utilization, I'm talking about.

Capacity utilization. Okay. So I think, sir, our capacity utilization, as I said, there is something which we call the installed capacity and then there is utilizable capacity. So we have what we call the primary capacity that determines how we utilize the overall capacity. So when we reach -- so we are already at about 80% of the capacity utilization, okay, in the overall scheme of things. And going forward, we started adding capacity only when we reached about 80%, 85% because in our kind of business, the kind of product mix is there. It's not really dependent on the machine capacity determination. It's not really a machine installed capacity. So going forward, we do feel that we should be able to raise our capacity utilization of already utilizable capacity percentage by at least 3% to 4% and we should reach to about 90% of the utilizable capacity in next 1 year.

Okay. Okay. What is the difference of number between utilizable and installed capacity at present?

That is correct, sir. So our utilizable capacity in the pre-engineered building business is about 80% to 85% of the installed capacity. That is the proportion which always gets maintained between installed capacity and the utilizable capacity. So that's the percentage even today.

Okay. Got it. Got it. Sir, one last question I have. It is on top 10 customer revenue, I was wondering. So you're getting so many big ticket clients, so as you said Vikram Solar you recently get. So I was wondering what is the top 10 customer contributing to the total revenue on quarter-on-quarter and on a year-on-year basis...?

I think, sir, I would have to first clarify, and we have done that in the past as well, that in our kind of business, our top 10 customers quarter-on-quarter, year-on-year will keep changing. And because we are not an OpEx item, we are a CapEx item. So our top 10 customers could be very different in FY '24 than in FY '25 than in FY '19. But if you were to ask me that whatever the top 10 customers will be, so top 10 customers could be, let's say, for FY '25, it will be Reliance, Tata Projects and, let's say, 4, 5 more. Next year, it could be Aditya Birla and somebody else. A year before, it was Birla Opus and Asian Paints and all. So they keep changing every year because we are not an OpEx product. But yes, top 10 customers can give us revenue about 40% to 50%.

Okay. Okay. And what about the recurring revenue you're getting?

Yes, there is no recurring to that extent, sir. There is no recurring revenue because, because ours is a project business and there is no recurring revenue which is guaranteed from one of our customers. But what we can say is a recurring account. So for example, Tata as a group will account for a certain amount of business over the years, similar for Reliance and Aditya Birla Group and Pepsi and Coca-Cola. But which year, how much, we can't say. But yes, overall, they are our repeat customers. So for 1 year, they may not order anything. But in the second year, they could contribute 15% to my revenue depending on what their CapEx plans are. So this is what our business is, sir.

I think only thing I would like to add is that there are some warehousing, A-grade warehousing companies that we deal with on a consistent basis like Indospace and Welspun, et cetera, who keep giving us business every year. Of course, there's different warehouses, different regions, but we do deal with them year-to-year every year. So that we can say something like a consistent business more than anybody else.

Got it. And what would the percentage be of the warehousing that you're talking about on the total revenue?

I think what we are showing is infrastructure is primarily that warehousing sector. The 23%, we have shown that as the warehousing. What we show as infrastructure is primarily the warehousing sector, A grade.

Next question is from Dhiral from PhillipCapital.

Sir, as on 9-month basis, we have grown our revenue around 9% to 10% on a Y-o-Y basis. But what could be our corresponding volume growth?

Volume growth. Volume growth on quarter-on-quarter is about 11%, sir, to be precise, 10.8%.

And sir, on a Y-o-Y basis?

Y-o-Y basis, I think it's about the similar number, sir. I don't have it in front of me, but that's about, I think, again, about 9.2% or 10%, something of that, sir.

And sir, this will be for the Q3 FY '25, right? And what will be the corresponding for the 9 month FY '25.

Yes. So I will repeat, sir, so that there is no confusion. On a quarter-on-quarter basis, for September '24 quarter to December '24 quarter, it is 11%. It is 11% volume growth. Now you are talking about the 9 months to the 9 months?

Yes.

That also is about the same, sir.

11%.

Yes.

Okay. And sir, what is our current order bid pipeline as on date?

Order book, we confirmed it is INR 1,305 crores of the order book right now.

Sir, the order bid, bid pipeline.

Order bid pipeline. Mr. Nanda did explain. We -- our pipeline overall is INR 4,000 crores, which is distributed into two facets. One is INR 2,500 crores of confirmed bids. Those have been put for the jobs and INR 1,500 crores is which is under active discussion to be bid. That is how the INR 4,000 crores of pipeline is distributed, sir.

Okay. And sir, lastly, what will be the CapEx requirement for the Gujarat plant?

I think similar, maybe about INR 80 crores to INR 90.

And we are looking to commence this capacity by Q3 FY '26, right, post monsoon.

Not -- I mean, commence in the sense, commence work on setting up the capacity.

Okay. So maybe this will start, let's say, from next year FY '27.

This takes time. So we will commence work probably that time. But yes, it will take some time to build that up.

Next question is from Sanjay Parekh from Sohum Asset Managers.

Congratulations on a fantastic set of numbers and emphasizing on sustainable long-term growth rate and return ratios. Sir, I have a question in a sense that when I see your capacity creation and you also mentioned in the call that the supply is an issue why you're not taking. I mean the order inflow that you would accept you want to gives them scheduled deliveries on time and hence, supply is a challenge is what I get to know. So do you think that the Gujarat plant could have in hindsight, could have been earlier and would have led us to better growth? Or practically, it's not easy to set up plants. So what is your sense? That is the first question. The second question is, I mean, what I'm trying to ask is, is it supply which is constraining you than demand. Because demand visibility we see is quite a lot. And is it also due to your conservatism that you did explain when we met? The second question is I had that you had a long-term goal of doubling your turnover from -- in 3 to 4 years. Now let's say, if we take a base of INR 1,400 crores this year, INR 1,400 crores to INR 1,450 what comes this year. And then you spelled out that in '26, you'll have 10% to 15% growth rate. Let's take that as well. Then for you to double in 4 years would mean 20% growth in the next 3 years. So do you think that we have the capacity and to get there? That's the second. And third, of course, you did mention that the operating leverage. I mean, generally, as you said, the margins are around 10%. But as you scale, can we look for a little better margins over the longer term? These are three questions.

So your first question is, see, the thing with pre-engineered building is primarily that it is not just only factory-related product. Like we mentioned earlier that the first stage of design engineering is very critical in pre-engineered building. So to have a very good team of pre-engineered building engineers, designers because we can't even quote otherwise, a very good team of salespeople based all over the place, dealing with various clients. These two are very critical to even be able to deal with the client to even give them a quotation. So these two, as we call a pre-engineered building as a four-legged animal. So these are the first two legs, which are very critical, and these are totally people oriented. Of course, technology is used a lot in the design engineering, but very people oriented. Then comes the plant. Plant is also becoming more and more people oriented because you set up the plant and you also need the people and trained people to do it. And then the fourth, of course, is that we have to set up all these buildings at site. So therefore, you need a very good project management as well as the erectors and builders that we outsource to get trained and certified by us. So all these four legs must move in -- move together simultaneously in great coordination, then only can you execute a project properly. So therefore, while you are right that we could have done the Gujarat first, but we need to work all these four legs together. So what we are doing is you are 100% right that why should one we give up an opportunity. As we are getting better, we are outsourcing, I mentioned in answer to an earlier question also that we have started looking and confirming booked quantities of the production facilities with other companies, which are there in the country, very, very good factories. They couldn't do the PEB business, but they are very good in the factory. So we have tied up with them to overcome this thing that if we can get more orders as we get better in engineering and design and execution, we can increase our orders beyond the capacity of our production also even if they are not set up. So it can be a hindrance, but the bigger thing is also that the other three legs we have to get into coordination. Otherwise, we will fall. just setting up a good factory is not the solution to pre-engineered building, but all the things have to work together. So we have to be a little cautious because most pre-engineered building companies which have failed in this country and a lot of them have failed, very big companies, companies with a lot of money, companies with a very good reputation. All kinds of companies have failed in this. So it's a very niche business and the focus has to be on executing every project very well and making sure that it's fully coordinated. So that is the first. Yes, we are -- like we are -- we have found that land was a major issue when you want to set up a new plant, land was the biggest hurdle that took time. So we have started booking the land earlier, keeping it, which we were not doing earlier. So that is why we went in for production into Kichha because we had spare land there. So we said, let's put it up there. We had, of course, land in Andhra. We already booked Gujarat. So we are very well prepared, but we have to be cautious that all the four legs move together, and we are trying to move it faster and faster. Now your second question was on the question of sustainability of margins, I think.

Yes. Second was that turnover doubling in 3 to 4 years and third is sustainability of margins.

No, that we are still aiming for that by '27, '28, we are hoping -- I think even our next year's objective is to increase the sales by 20% and continue with that 2 20% per year so that in the next 3 to 3 years or now well 3 years left in the thing that we should achieve more or less double the figure of our '24 figures. That is still on target. And I think the pipeline exists, and I think we are preparing for that. So we are very well prepared to achieve that figure. We are not letting anything get in our way of that. Let's hope everything continues to be good. We are trying to add many more types of buildings that we can execute, going to many new areas, many new companies, our tie-up with JSPL. On the other side, we are also tying up with some good engineering companies, which already have the experience of building on which we don't have the experience right now like high-rise, et cetera. So that their credibility combined with ours and our ability to execute ourselves as well as through JSPL will increase. So I think all these will come into play in the next 3 years. And I think we are pretty confident that we'll achieve that figure that we have said in the past that we will achieve. We are well on track and our preparations are going full steam on that. Margins, yes, I think operational leverage can give us better margins, but it's very difficult to say because at the same time, you have to also prepare for higher turnovers and more sales going forward. So a little bit of the expenses also go up. But we feel that operational leverage is a very critical aspect of our company of this business because if the salespeople, you don't need to double your salespeople to double your sales or double your engineering department to double it. Plant, yes, it's a production item, so you need to do that. Execution also, you don't need to. So I think operational leverage will kick in and make it better. We have seen that in the last 4 or 5 years also as turnover increases, the operational leverage has kicked in. But frankly, I would not like to commit anything as to how much it will be, but definitely, it should be better.

Great. Great. No, commendable effort, sir. I mean, absolutely a great thing the way you are managing it in terms of your asset turn and EBIT margins and return ratios of 23% to 25% is truly commendable.

Thank you. Our whole focus is to run the company well. That has been our focus from the beginning and make sure that you have good customer relationships, execute them properly. And we feel that all these other things, ratios and profitability and margin will follow to run the company well, and I think other things will come automatically. That is our motto.

[Operator Instructions] The next question is from Richa from Equitymaster.

Sir, my question is when it comes to rights to win a certain contract apart from certain experience that we have with that player, is the location of the plant also something that is considered? For example, maybe we have a plant in Gujarat. So it is more feasible to provide or cater to the needs nearby as compared to Northeast. And going forward, when you consider setting up plant, would that be a factor? Second question is, can you give me an estimate of what kind of capacity we are planning in Gujarat plant? And what kind of difference in CapEx is there when it comes to a brownfield versus greenfield capacity? So if you could answer these two questions, and maybe I'll come back in the queue.

See, in our business, it is very difficult to be there as a customer, a customer could be anywhere. We have Tata as a customer and they could be all over. Tata Motors, we have done four plants for them all over India. But we find that every time we set up a new plant, once we reach an optimum capacity, it is good to move away because then you -- otherwise, the shortage of people or the amount of people that you have at one location or you do get some advantages in terms of freight or logistic cost if you move. But only after the plant has reached an optimum size. It is not -- does not make it worthwhile to have five plants running all over and all at half the capacity. So yes, every time we have reached a full capacity, we have moved. And that is why the next location is supposed to be Gujarat. And I think it will help us. See, there's -- in the plant, there's also a psychological part of the location is that people setting up more and more projects in Gujarat somehow feel happier, even if the cost is not an issue that our plant is in Gujarat, and it will be close by to their projects. So if you have Western India, we have two in North, two in the South, I think it is always beneficial in that. I think your second question was about the cost of setting up the plant.

Yes. What capacity and the greenfield versus brownfield estimate of CapEx for this capacity?

Yes. See, normally, we do not really -- a brownfield for us is only that we do it in phases, like Andhra, when we bought and we planned, it was our plan was to do both the phases, but one after the other because setting up 2 phases, you suddenly need 700 people to be working in the plant. So why invest everything and then run them partly. So we have never -- the only brownfield that we are doing now is in Kichha. So of course, brownfield plant is much cheaper to do because the land is fully developed. The whole -- the development has already taken place. The management team doesn't change. That is the biggest advantage in a brownfield plant. So that is why we have kept two in the north run by the same management team. And the new brownfield line also coming up there does not require any new management team. South also, while one is in Andhra, one is in Sriperumbudur, but they are not more than 2, 2.5 hours away. So the overall senior management team is the same. So the cost of brownfield is less in that sense. And then the greenfield to a greenfield means total development as well as setting up a new management team. But at some point, you have to go out to a new area. So the cost is slightly more in running it in the beginning. But once it achieves reasonably full capacity, then I think they are all equal cost in running. So Gujarat will be the next one, next greenfield plant where we feel the location will also be helpful. And maybe a lot of development is happening in Gujarat and Maharashtra. It will be a psychological advantage as well.

And sir, what is the capacity that you are planning in Gujarat?

Most of our plants have similar capacity, about 40,000 tonnes utilizable capacity and about INR 500 crores of building sales. So all the 4 plants are the same right now. After the Andhra second phase is done, all 4 plants will be about INR 500 crores each and Gujarat will also be about INR 500 crores with 40,000 tonnes of buildings manufactured there.

And sir, how much time does it take? If I got it right, you are planning to start production, commencing, setting up this plant in first quarter of FY '26, right? Or is the third?

Well, normally, it takes about 9 months. So if we start in September, by sometime by first quarter, May, June next year, June, July, we should be able to have it in production.

[Operator Instructions] The next question is from Saket Kapoor from Kapoor & Company.

Sir, firstly, sir, what is our current working capital requirement to run with an order book of INR 1,300 crores and the bid pipeline which you have spoken.

Manish?

So, right now, sir, we are operating at about 28 days and our requirement is going to be approximately 30 days of working capital, sir. 30 days of the sales will be our net working capital requirement.

Okay. So as you said that we will be completing this into 9 months. So in absolute numbers, what is the working capital?

Absolute number will be INR 150 crores, sir. Because INR 150 crores times 9 is going to be that number and about a month of net working capital we need, so about INR 150 crores, sir.

And sir, currently, what is our fixed cost per month or quarterly number?

Approximately about 10%, sir.

10% of our sales.

Yes.

But sales will be a variable number. So I was just looking at the fixed cost to run the company on a consistent basis.

So sir, actually, what happens is that there are certain proportions of the fixed costs, which are not really fixed, which will go up slightly as the turnover goes up. So I would say that it used to be about 10%, they dropped to about 9.2%. So going forward, if the turnover increases more than that, then your fixed cost as a percentage could be slightly lower because of the operating leverage. But right now, there are about.

Kind of figure, I would probably say about INR 12 crores to INR 13 crores a month.

INR 12 crores to INR 13 crores a month. And lastly, sir, in the utilization of the IPO proceeds, we have mentioned about upgradation of our manufacturing facility at Tamil Nadu and Pantnagar, that is to the tune of around INR 20 crores. So if you could just elaborate what kind of upgradation are we seeking? And what kind of benefit we will be deriving post the same? And when will that be on stream?

Both of them, sir, right now are underway at Pantnagar as well as at Tamil Nadu. So at Pantnagar, the upgradation actually consisted of setting up an automated short blasting line, adding a few new cranes and adding some new machinery for cutting and bending, which gives us the efficiency of operations. and a more sustainable environment inside the plant. So they were like line balancing equipment. So they will certainly give us a far more better productivity norms at those plants. And similar investments were planned in Tamil Nadu also with short blasting and a few new machines to balance the lines for upgradation.

And when is this commission, sir?

This should be commissioned by end of this quarter, sir, quarter #4 of this year. They are underway right now.

And the efficiency in percentage terms, if you could just elaborate or...

I would say, sir, they are more like line balancing equipment. Frankly, these are not really, I should say, going to add capacity or something, but I would say that they can increase 2% to 3% efficiency inside the plants.

And also, I think there's a lot of improvement in quality and the customers change or requirements for their quality standards is becoming higher and higher. So I think more automation is going to be useful going forward. And I think productivity increase, we are also looking at that the amount of skilled people, highly skilled people required for our industry, sometimes are not that easily available. So utilize the existing people to produce more in terms of whether it's 2%, 3% or if we are setting up new lines, how to utilize those people in the new lines by having lesser people in each line. So we are looking at productivity and automation on all these aspects, quality, faster production, more production per person. Because while we are expanding, it helps us to have less people per line. let us say, if I have 150 people per production line, if I can reduce it to 140 and put my extra people in the new line, overall per person production also goes up. So we are looking at all different angles because I think people is also going to be a major issue going forward. We are taking many steps to improve the quality, I mean, improve the people, have training, have more people taken up at fresher levels. But I think highly skilled people will always have a training -- they will always have a shortage going forward. So looking at all these aspects, the automation, more productivity, better quality. So we have to take consideration of all of them when we do these kind of upgradations.

[Operator Instructions] Next question is from Prateek Bhandari from Art Ventures.

Average order value? Hello?

Sorry, sir. Yes, yes, we can hear you.

Average order value.

Average order value. Okay, okay. Yes, yes. Average order value. Average order value, sir, right now is INR 12 crores.

INR 12 crores, considering the fact that we have some big orders.

Yes, sir. The fact of the matter is that 3 years ago, it used to be INR 4 crores. It moved up to INR 6.5 crores to INR 9 crores, and now it is INR 12 crores. So because of the fact that we are getting much larger orders than what we used to get earlier, the average order size has moved from INR 4 crores to INR 12 crores, which is 3x in the last 3 years, sir. And that is really the result of the bigger orders that we get, which are INR 50 crore plus kind of orders that we just explained to you, sir. So INR 12 crores is a result of getting many big orders as well, sir.

See, in pre-engineered building, another thing I would like to point out is that the small and medium orders in numbers are very critical. because they are the biggest beneficiaries of pre-engineered building. The large buildings use it for different reasons, but the smaller and medium ones are your ideal clients in the sense that they don't really need to sometimes even go and get an architect or a consultant. They just come to a pre-engineered building company. Their orders are maybe INR 2 crores to INR 10 crores, and they are the biggest beneficiary because they are just outsourcing everything to a company like ours and getting the product, getting the factory built and getting it. So that will always be a very important bread and butter for any pre-engineered building company. The larger orders add to the value when you want to grow faster, then yes, naturally, if I have 100 small orders, contributing, say, about INR 600 crores, INR 700 crores, I will need 15 big orders to contribute INR 60 crores, INR 70 crores to reach INR 1,600 crores, INR 1,700 crores. So a number that seems a little odd, but that is the basic bread and butter of a pre-engineered building industry. And we are always seriously concentrating on that also. And also big orders are a hit and miss thing. I could be bidding for 10, sometimes I could get two, sometimes I could get five. But small orders is a continuous effort of our sales teams all over the country. We've got over 70, 80 salespeople set up in over 20, 25 locations. So they are always looking for the small and medium orders in new industrial areas, among new factories coming up, 10,000, 20,000, 30,000 square meter buildings which may not sound very important or sound very impressive by name, but they are really the base and bread butter of most of the engineer building companies. It's critical to have that.

Got it. Also, can you tell me as to where you're anticipating to close your order book at by year-end?

See, we are, right now, like I said, our order book is pretty limited and connected to our own capacities to execute because the order periods are getting shorter and shorter by the client. It used to -- like last year, average large order could be finished in 10 to 11 months or 12 months and the customer was happy. Now suddenly, it has become 8 to 9 months for most of the large orders. So we have to see what our capacity is. So I don't see much change. Maybe from March onwards, it might start picking up the order book because we'll have increased capacity coming in place in April and May.

Okay. And my last question is on the guidance for FY '26, both in terms of the revenue growth and the margins. Hello?

Participants, please stay connected. We seem to have lost the line of.

Yes, FY '26.

Yes. Guidance for FY '26, both in terms of the revenue growth and the margins.

I think Mr. Nanda had already mentioned about 15% during this call itself in the top line. And margins are in the same...

Margins should be in the same range?

Yes, margins should be in the same range.

So considering the fact that even if we grow with a run rate of 15% from FY '26, the long-term target that we have set for ourselves to double our revenue in the next 4 years seem to be unlikely.

So I think, sir, we did provide a clarification to that, that now that we are building capacity, which we explain to you at Kichha and Andhra and then going forward, all these capacities, once they come on stream and we utilize them fully, our growth going forward in the years after FY '26 could be greater than 15% to be able to achieve that doubling the turnover in 4 years, as we had said. So it could also be 20%, 25% in those years.

Got it. Maybe because of the operating leverage kicking in?

Yes, yes. Mainly because of the operating leverage and the new capacities coming on stream.

We should be able to -- I think by next quarterly call, we'll have better figures. I think we should be able to achieve higher than 15% in the coming year also. That is my estimate with all these capacities coming in. But I think we'll have a better idea by the next investor call that we grow -- I think if we grow 20% next year, then that would be better.

Next question is from Krupanshu Shah from Thinqwise Wealth.

Yes. So because of our limited capacity, I just wanted to understand if we are losing some of the orders to say Kirby. And if you could comment on the utilization -- capacity utilization as well. That was one. Secondly, I just wanted to understand the gross margin movement sequentially. Now implied realization growth is 2% to 3%, but our gross margins have fallen. I would have assumed that larger projects got executed. So could you please explain that? And do we have any commercial arrangements with JSPL, the tie-up that we have done? And lastly, sir, on employee cost, basically, what is the steady-state run rate, quarterly run rate that we are seeing now that we have new plants coming up? Do we envisage hiring more senior designers and engineers?

See, in the losing of orders in terms of capacity, this thing, I mentioned even to an answer to an earlier question that we have to move our capacity on all the four areas that we work in, which is design, engineering, sales, production and execution at buildings. So yes, we could always be losing orders because we can't move fast enough, but we have to move all the 4 parts of the company equally fast. So we can't just move fast in production and putting up factories and not having better design engineering or sales outreach to be able to execute those orders at the site also. So I think we are moving pretty fast in the sense that 3 years ago, we were only doing, say, less than half the turnover that we are planning for this year. So doubling the turnover already in 3 years is pretty much faster than what we were doing earlier. And we are very much on track to achieve our targeted turnover by '27, '28, as we have mentioned earlier. So we are well on track of that. I don't know whether we'll move faster than that or not. It's not depends on how much push we get from the customers also because we are also not only looking at internally, organically growing very fast, but we have started tying up with companies outside of our unorganic growth, as I would call, companies which have production facilities very well, and they are only ready to do job work for us, engineering companies which have the capacity to do work like what we want, but at a cost, then we outsource it. So we are fixing up all these angles so that we can grow faster. But we can't just put up new plants and grow faster. That doesn't make any sense in our business. All the four legs have to grow equally fast. So I don't think we will let any business go. But we, as a company, have to be capable of executing all these projects. Otherwise, most of the companies have closed in this business because they took up more business than they could or they thought that they could do. And they closed because they couldn't deliver on time. They did bad engineering, quality of the product became bad, customers started imposing penalties on them or most of them didn't get paid at the end of the day, and they closed down. So premier building is a bit like making a car. You can't just make one item more and say, I've made a car. So you have to get everything together. And in the end, you have to have a very satisfied or delighted customer because they are the people who want to keep coming back to you and keep recommending you to other people. So it's a little bit of a more niche business than just a factory. But we are on it. And like I said, I mean, this is the target that we have today. We might change our mind by the end of the year or early next year, seeing how things are. So last year, you had asked me at the same time, I wouldn't have given you the targets that I'm giving now. Our confidence level and our ability to do has grown in the last 1 year enormously, and we are working on it very hard to make it grow faster and faster. Your other question, Manish, can you just take that?

Yes, sir. Could you please repeat the other question, sir, that you wanted?

Yes. Sequentially, the gross margins have fallen, and I think the realizations have increased. So I thought the product mix has skewed towards larger projects. So I would assume that gross margins would increase. So what was the reason for the gross margin decline sequentially, one? Second, employee cost steady state run rate quarterly because your capacity is increasing. So are we going to hire more senior level engineers? And lastly, the commercial arrangement with JSPL, if any?

So sir, gross margins sequentially, I would request you to please recheck. I think they have not fallen. They have actually grown. So I would request you to please recheck the numbers.

Sorry to interrupt. Gross margins have actually improved by 100 basis points. Sequentially as well as Y-o-Y.

Okay. I will check.

So gross margins actually have improved, sir. So that answers your question. In terms of commercial arrangement with JSPL, sir, this is more of -- so there is no commercial arrangement as such. This is an arrangement to utilize both the parties' expertise in taking the steel usage to the next level for certain kind of buildings, which are right now not really very popular in steel like high-rise and data centers and heavy steel structures. Wherein JSPL will contribute with their manufacturing expertise of the heavy members, and Interarch contributes with their market reach, the deep penetration it has in this field, engineering as well as the erection part of it, and the other facets, other particular building members that comes into this. There is no commercial arrangement as such. This is a cooperation arrangement to take the buildings to the next level, steel building which is to the next level, sir. And there's nothing to do with the commodity purchase from JSPL.

Right. And the employee cost, please?

Sorry?

Employee cost.

Employee cost?

Yes.

So employee cost, sir, actually, we had explained earlier in our kind of business before we actually -- so actually, you saw that in FY '24, our overall cost of employees had actually increased significantly because in our kind of business, the employees have to be it engineering, projects, they have to be beefed up. That thing has to precede the actual manufacturing capacity. So as we build capacity in our other plants also, you would see that going up in the proportion, which is a little lesser than our turnover. But yes, they will increase to that extent, sir, because we are building capacity for doubling the turnover, as we said, 3, 4 years down the line, and people are very critical to it. So this is an ongoing process. But you may not see the blip that you saw a year ago.

And also, I think I would like to add that we are going in for a lot more technology use and automation going forward so that the employee cost should not go up as much as it was going up earlier, not only because it's not very easy to get good trained, skilled employees, is getting more and more difficult. So we are concentrating a lot on that as well to make them more productive.

Due to time constraints, we'll have to take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Thank you very much, everybody, for joining this call and taking out the time. I hope we were able to answer your questions satisfactorily. And through SGA or Ambit, you can always reach out to us. If you have any queries, you want any individual calls, or any more time from us, we are very open. We are very happy to explain our company, our business, our figures to everybody as a very transparent way. So please reach out to us at any time you want. We are very, very available to you for this. Please, again, thank you very much, and all the best to all of you, too. Thank you.

Thank you very much. On behalf of Ambit Capital, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.