Kirloskar Ferrous Industries Limited (500245) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Kirloskar Ferrous Industries Limited Q1 FY '25 Earnings Conference Call Hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pallav Agarwal from Antique Stockbroking. Thank you, and over to you, Mr. Pallav.

Yes. Thank you, Lia. Good morning, everyone, and thank you for joining us on a Saturday morning for the Kirloskar Ferrous first quarter results call. We have the senior management with us today represented by Mr. Gumaste, the Managing Director; and Mr. Srivatsan, the ED, Finance and the CFO. So now I would like to hand over to Mr. Gumaste for his opening comments. Over to you, sir.

Yes. Thank you very much, Pallav. And I would like to start with thanking everyone for joining on Saturday morning, though it’s a holiday, sorry for organizing this on a holiday. We will take care to keep it on a working day next time onwards. And thank you very much in spite of being Saturday joining this call in large numbers. I would like to start with all of you know that this would become the first quarterly call, which is being conducted on a merged entity. We completed all the 3 steps of acquisition turnaround and merger thinking into Kirloskar Ferrous Industries Limited. And happy to have this conference call in such a short period of entire thing completed in 3 years. Having said that, all of you have been -- I mean, the number of questions regarding KFIL in addition to that ISMT and one of the question was when do we going to have conference call for ISMT. I think with this merger, it will be a combined thing, and we are happy to host this as a combined first quarterly call. As all of you know, quarter one results are out and all those numbers are with you, I would prefer not to give all those numbers once again because you are completely up-to-date on these numbers, which are already on the public domain. But I would like to just say that the quarter one was the quarter wherein we had elections across India and some effect on the projects and project-related buying and rent some effect coming out of that. Also during this quarter, we rather last year and this year we went live on ERP system and the latest season system Oracle ERP system and we had some teething trouble and some effects on these sales and dispatches in the Steel and Tube business. And in general, also the market was quite subdued. In spite of that, the entire team has still managed to achieve a small growth of 4% on the top line compared to the last year first quarter. And also, I would say that sequentially, we could improve the bottom line, we could improve profitability but margins in general in iron and steel industry are under pressure. And a good part is that all our projects are on track. We have not deferred anything, and we will be going ahead with all the projects, which are basically in the nature of either cost reduction or in the nature of improving the productivity and the top line. Also during the quarter, we commissioned the solar power plant 35 megawatt out of the 70 megawatts. But technically, 70 megawatt is positioned, and we are adding more modules to the grid, and we expect that by the end of September, early October, we should be on go with the entire 70 megawatts of solar. Further, we are attempting to take the capacity at the same location, Jalna to 100-megawatt so that by the end of this financial year, we will reach a level of 100 megawatt in solar, which will help us in further decarbonizing and cut down on our CO2 emissions at this same time also help us in cutting down the power and fuel cost. As you all know, that we -- last year, September, we acquired Oliver, and we have, at an advanced stage of restoring the facility and very recently, we got the full power connection from the Punjab Electricity Board, and we are now ready for testing the trials set commissioning of the foundry. We expect to commission the foundry in the month of September. I also made the conference -- submit the samples to the customer and go on regular production from the second half of this year. I think these are some of the key highlights during the quarter. I mean, I would prefer to move ahead with the questions quickly so that I can try and answer more and all the questions, what you people have this morning. Thank you very much once again.

[Operator Instructions] The first question is from the line of Aashav Patel from Molecule Ventures PMS.

Also congratulate to the entire team on the successful merger, which was long due and lovely news to know. Sir, I'll start my question with a couple of suggestions first. We would like to know the update on NSE listing because as we know now it has been almost a year, and we have not been listed on National Stock Exchange. Because of that, it presents multiple institutions to buy and trade actively in our stock. So please give an update on the same. Second one is kindly upload the PPT on the Exchange because that is for all of the companies out there. Third suggestion would be segmental EBITDA per tonne because now we have 4 different verticals with all different moving variables. Like our peers also give EBITDA per tonne segment-wise. So if you could give that, that would be really helpful for us to actually understand which segment is placed out at any point in time? That's all from my side. I'll start with the question. So while ramp-up for all the segments have been quite slow compared to our expectation all pig iron and casting both, they are still operating at FY '19 for run rate. So if you could give the explanation on the same and same goes for tubing, in fact tube has de-growth.

Yes. Thank you, Aashav, for the questions. And as we have earlier also stated, NSE listing will be taken up after the merger of ISMT into KFIL. We couldn't handle them together because of the challenging nature of merger process. So we will, at the earliest take up to get listed on NSE. So we will talk to our concerned teams in fact, and we will take up the next steps without care. And on your suggestion of PPT on the Exchange, let's see [indiscernible] are on the call, and we will take up appropriately including the segment reporting EBITDA as per the requirements and the guidelines and the best practices we will align without any doubt. And I explained a little bit on the slower growth, I think of the contributing factors. I don't want to repeat the same thing. But going forward from quarter 2 of this year, we are definitely committed for the growth in all the segments, and we have the focus for that. We have created quality capacity to achieve that, but we are a part and parcel of the whole – bigger market and can't avoid that. But operationally, we are not lagging anywhere to take it to the growth path. For example, I would like to say that we are running all the 3 blast furnaces, and we expect -- we have already reached, and we expect our sales volumes will go to the range of 55,000 metric tonnes per month and only change which will come with ISMT sales will be internal plans. But we are committed -- as you know, once we get into the oxygen enrichment our productivity goes up, and we are expecting to go with the oxygen engagement in October itself, which will give the double-edged benefit of reducing the cost because of replacing coke by coal to an extent of another 50 kg to 60 kg per tonne of hot metal in basic grade, maybe 30 kg to 40 kg in case of the foundry. So with the increased volumes, I expect that our net sales of [indiscernible] and should remain more than 150,000 per quarter. With respect to customer demand, there is -- there was definitely subdued demand position up to the 15th of May, but subsequently demand across the board, including the tractor, automotive and cooling equipment has improved, and we have the opportunity to produce full and sell. So we are ramping up and current run rate, we are more than at 12,000 tonnes per month, and we expect growth to start appearing from quarter 2. Same story with the tube, and we have worked on all these teething problems related to ERP and the project demand in tubes has also picked up. We have some more challenges in the area of steel, which we are working, and we are confident to bring growth in steel sales also, so we expect overall growth to return back from quarter 2.

Got it, sir. So sir, just to summarize, thee -- given our earlier guidance of FY '25 close to 6 lakh metric tonnes, casting close to 1.6 lakh metric tonnes and tube close to 1.5 lakh metric tonnes so broadly speaking, all these guidance will remains intact for FY '25, right?

See, typically, if you look at April and mid of May, we kept being [indiscernible] close for markets not being good enough [indiscernible] margin. That would become a net loss. But whether we can recover that much quantity, we are working on that and there are possibility -- but you are right. The guidance always should prevail.

Okay. Got it, sir. And sir, regarding the blended coking coal price, what would be the -- our average for Q1? And what is our average coking coal price on inventory?

I don't remember exactly because we keep going month wise. But I would say that our blended coal prices in quarter one compared to the last year dropped and quarter 2 will drop further. But typically, at any given point of time, we have 3 months coal less. Not necessarily everything in stock but in transit, in contract and in stock so the effect of reduced price comes only after 3 months. And I expect it to really reflect in quarter 3. So but it is dropping. And we know if we are able to manage the market in spite of [indiscernible] prices falling, it's only because our cost on coal has come down and our efficiency we have proved, whereas the cost of iron ore has not come down rather they have a bit gone up in the Indian market context.

Sir, in Seamless Tubes segment, sir, one of our peer and who is also a market leader, they reported a bad set of numbers for Q1. And they also guided for sustained margin pressure largely on account of dumping primarily from China, but being dumped from elsewhere other geography. So what is your take on that situation despite having an active antidumping duty, do you feel the seamless tubes are still being dumped? And what strategy do we have to overcome this challenge?

It's not a domestic market not getting affected dramatic way. Definitely, the export market is affected because of the surplus condition with respect to China and their desperation in selling across the globe and also certain pressures coming into India. Maybe we will try to protect India to the extent possible, but there are always time lags, and there are innovative ways of awaiting certain things. But I would like to say that the effect is likely to be more on our exports. Indian steel and steel exports are definitely affected and some dumping effect on India, but we are very actively in contact with Government to protect the Indian manufacturers against the dumping and we are always available for the fair playing field competition. I would like to say that in India demand conditions are going to revive and we should be able to manage the volumes. And definitely, it's not expected full growth, but at least expectation of 10% to 12% growth, could be 15% growth. We look forward in this year.

So just a follow-up on that, sir, our large clients like ONGC, do they prioritize domestically produced seamless steel for their own requirement or they are independent?

No, I think they are highly committed to Make in India policy. They are part of the public sector. And we are working with them to support in all aspects whatever is our range of operation, and we are very happy to have such valuable customers, and we'll be happy to work with them to support them in all their process, and it is our duty.

The next question is from the line of Heena from DXC.

I just want to know, is there any planned shutdown?

No planned shutdowns in pending as of my best knowledge, no.

No. In the coming short quarters?

No. No, I'm talking about quarter 2 or quarter 3. I don't have. But you can expect the steel and tube plants, which are in Maharashtra. Typically, we will have Diwali time stoppage typically one week is a common thing.

Okay. What are the strategies for the iron ore sourcing? Is there any guidance on the iron ore cost that can you provide to us?

The guidance. Basically, we are very clear that Indian iron and steel industry, especially the southern or eastern sector. We have to do dependent on Indian iron ore -- it is definitely not a sensible thing to export Indian iron ore. I’ve been of this opinion all along. We are a populous country. We have to create jobs, and we are in the business of creating jobs, and we are committed to that. And I think India has enough iron ore to support the Indian iron and steel expiration, but export is a problem. And I expect that Indian mining industry will support us in fulfilling the growth aspiration of iron and steel. Whereas coking coal is a scarce commodity in India, we don't have a good quality enough coking coal, we have to import. And we can still manage our manufacturing cost with imported coal, but indigenous iron ore and remain competitively priced in India as well as worldwide. I think that is why we continue to work on this and also talk to government [indiscernible]. I think we will continue to source domestically.

The next question is from the line of Bharat Sheth from Quest Investment.

And congratulations on now successful merger. Sir, my question is mainly relating to casting. So how do we see, say, second half of the casting, I mean, volume-wise, if you can be? And within that, the Grey segment, this segment and then the heavy castings also as well as the machining. So overall, casting, where do we see from, say, not '25 or the second half of the '25 and going ahead with '26 -- how do we really want to, I mean, the kind of -- I mean, the capacity we have created, you would like to deploy it?

I would like to say that I'm quite upbeat and excited about the opportunities in casting, the business side. Casting manufacturing of the foundry, the hardcore manufacturing activity, and it is unlike a blast furnace, where we just start the furnace, we get the full volume production or very close to production, it doesn't happen in foundry. We have to stabilize the processes, ramp up the processes. And that's why we find certain hurdles in ramping up the volumes without increasing the – or deteriorating the quality. We have -- we are working without any stoppage in creating 0.25 million tonne casting capacity. We have -- our installed capacity is already more than 200,000. We will be at 250,000 and subsequently going closer to 300,000 installed capacity. Thank you very much. I think somebody cross-talked. Having talked about the capacity creation and utilization of capacity, we have our current run rate recently in this quarter is at 13,000 metric tonnes per month. I expect to continue with that and build on that. And we should definitely look forward to see the growth numbers coming back into quarter 2 and then how much more we can add into quarter 3. I'm sure that we will add some quantity into quarter 3 from Oliver and more quantity from Oliver in quarter 4. So I would say that we should – we still look forward to the numbers what we've mentioned. And we are definitely excited about the growth prospects and opportunities in the casting field where we are working. Our customers are very supportive. There are a lot of interest in Kirloskar Ferrous Industries casting and foundries. And we are working very closely, and we have onboarded new items from the existing customers as well as some items from the new customers, and I'm sure those are robust enough to support the growth for coming years, '25, '26 as well as '26, '27 as the item developments have been lined up sufficient to take care of the growth.

Okay. And sir, on the machining side and.

Mr. Bharat, there's lot of background noise from your side.

Sorry. Sorry. Is that now clear?

We can hear somebody talking from behind that's why.

Yes. So now is it clear? So sir, I mean, if you can add some more on the machining side as well as give more color as well as on heavy-duty casting. And could we reach I mean or cross 2 lakh tonnes per annum?

No, I couldn't get the last part.

Yes. And your expectation for '26 is about 2 lakh tonnes or if you can give some color, your ballpark number on heavy duty casting.

Mr. Bharat said everything that should go by my aspiration. I'm an optimist. I always look for great numbers. Like all of you look for great numbers. But as I mentioned, we have to really ramp up on certain activity. So having said that, let me come back to the first point of you on machining. The interest from the customers continues and we continue to order machines. Recently, we ordered 30 machines with our machine supplier. And we expect them to be delivered within next 8 months' time, and they will all be commissioned, and we expect to announce our machine shops [Technical Difficulty]. Customer expectations are definitely very strong, and you will see the growth. But I know that the growth has been slow in the past, but I expect to catch up them in the coming months and quarters. With respect to large castings, phenomenal demand situation there. But -- we have already started small way of making large castings. And we have -- we are going ahead with the 2-part large foundry and Solapur, and we expect it to take 15 months' time to install and commission and that will definitely enhance our capacity, and we will -- we are working with our customers, and we will deliver large parts up to at least 2 tonne single piece in coming days. And we are not there beyond 2 tonnes or 3 tonnes of casting.

And last 2 questions. On solar side, by year-end, what would be the capacity that we are expecting? And secondly, on the question for our.

I did mention that on the solar, we have already commissioned 35 megawatts, and we are getting the benefit -- started getting the benefit of that, and we will complete a 5-year 70 megawatt by October. It's the monsoon season, some days are getting lost and the project implementation because of rains, but it is part of the business we need rains as well. And Jalna location itself, we are working, and we have signed the MoU to make it to 100 megawatts instead of 70 megawatts, which will happen in this year itself, commissioning. And beyond that, we are going to other locations where we are working to add another 70 megawatts, which would be the next year project. In the meantime, this year, we are ordering some balancing windmill power plants because peak hours 6 to 10, we can't use solar. So we need the wind power there, and we are adding that immediately with an investment of about INR 100 crores. And beyond this, I think we will have more clearer strategies in the next year. But we are fully committed to green power coming out of solar and wind to the extent what we can utilize fully in combined entity [indiscernible].

And sir, one question for Mr. Srivatsan. Sir, I mean, still on combined entity, where do we see effective tax rate because still in consol numbers, we are showing a 30% above tax rate. So if you can give some color, where do we expect in this year on a consolidated basis tax rate?

Can you repeat the question, sir?

Currently in consolidated results published for the June ending, we are showing tax rate is above 30%. So once I mean that fully merge as an entity -- NCLT approval is in place. What will be the tax rate for full FY '25?

Sorry, still I did not get the full question now.

So what will be the effective tax -- current tax rate adjusted?

So tax rate, you're talking -- income tax rate. We have got 25%, sir.

So in steel, it is -- in current quarter, it is showing consolidated number, 30%, above 30% so.

It doesn't come like that because there are some [indiscernible] that's how it won't reflect exactly 35%.

So that -- I was asking the reported number will be what -- I mean, at the year-end for the full year?

I calculate and let you know, sir.

The next question will be from the line of Aditya Nahar from Alpana Enterprises.

Sir, I have no question. Just to sort of congratulate you on the successful merger of ISMT, to you, Mr. Srivatsan and Mr. Ektare. Wish you all the very best, sir.

Thank you for your kind words and best wishes, Aditya. Thank you.

The next question will be from the line of Digant Haria from GreenEdge Wealth.

Sir, my question is, firstly, on the casting sector that in the last 12 to 18 months, the tractor has slowed down. So our contribution from tractor has gone down from 44% to 34%. And at the same time, the auto sector has picked up meaningfully for us. So first question was, sir, now we are just seeing that even the auto sector may slow down the premium and there is a lot of inventory and all. So do you think that these proportions will reverse now or we have made some significant inroads in auto sector that our volumes in auto won't fall?

I would like to say that, first of all, about 30% of our auto sales are deal export. So they don't really fully depend on India market. To some extent, it's a different market segment we are serving. Another thing is currently, typically, our top customers have been having different kind of [ needs ] and we are well-supported on that at least in the last many years. So I expect that current projections and current indications of the -- our leading customers from the other sector is going as the plan and I don't still expect any major drop in volumes. Third thing is we also have a good amount of penetration in automobile equipment, stationary engines, large castings where the interest and demands are higher to balance the [Technical Difficulty]. I think this is my understanding as on today. We need to be careful and watchful with respect to market demand still coming. Another thing is also what I am looking at is the monsoon is -- has been very good so far and expect to cover the spread in coming -- remaining part of the monsoon season, and we expect that to help the agriculture and once again, the growth of tractors would come back. Quite hopeful and I'm sure that even the tractor industry quite hopeful to pick up after the monsoon season in a very decent way.

Sir, in our engines and off-highway has consistently been around 12% of the total casting volumes. Is there any scope to increase that? Because you have been mentioning that we are working hard on that -- these 2 segments, especially the off-highway and large vehicles.

Earlier 12% is [Technical Difficulty] still lower. We have picked up. I'm very sure that we will pick up further because of the customers' interest and requirement. But the increased percentage would be on the increased base as then. And there is definitely opportunity for further growth in off-highway and us moving in equipment sector. And we are working with the customers to add more volume there.

Sir, so if all these things pick up together, like tractor also picks up, auto does not slow down for us. And then we should see a good year for casting at least maybe somewhere in the next 12, 18 months.

I think I have stated that quite optimistically.

Fine, sir. Sir and second question was on this Tube business. So this was the first time we got such a large order from ONGC. And our contribution from Oil Country Tubular is around 28%. [Technical Difficulty] on this because otherwise, we become overly dependent on this one particular sector?

No, I think as we are looking forward to debottlenecking, expanding, we will definitely look at value-adding sectors, value-adding opportunity areas, and we will focus on them. I think there is still a good provision to expand even in oil and gas, along with projects and other -- in auto and engineering areas. I think we are focused on all the areas to go and acquire more orders and more customers to make our servicing board more robust.

Right, sir. Sir, in the tube business, what is our higher -- or what one or 2 products are we most bullish on because maybe we have an edge there or we have a very good margin there or less.

I don't think it has remained stable earlier. ISMT was very well known for bearing quality steel and bearing quality tubes. And we continue to hold on to that. And I found that it got suffered because of more entrants at some level, it went up to one dozen -- people there got crowded, margins got compressed, and we were thinking of why do we do this business, but I'm very focused in this segment, we will create a differentiator, and we will work on our cost of manufacturing, our productivity, our offerings to customers. We will be very happy once again to have a dominant position in the bearing, which has been the traditionally strong area of ISMT. In addition to that, as you know, we have started and we got into premium couplings, oil and gas, and that is a growth opportunity for us. And at the same time, we will be -- also we have a good niche good market to have precision tube-making facility, which should place us well on the power sector, the boiler tubes. I think these 3, 4 areas are the key focus areas to build the volumes to achieve growth.

The next question will be from the line of Sahil Rohit Sanghvi from Monarch Networth Capital.

Again, congratulations for your merger with ISMT. My first question was, sir, what was the transfer of [indiscernible] to ISMT this quarter or maybe now that you're saying 55,000 tonnes can be per furnace per quarter production number. So what is the transfer by quarter?

Around 5,000 tonnes to 6,000 tonnes, 60,000 tonnes to 70,000 tonnes max per year.

Okay. Okay. So roughly, we should be able to sell like a 1.40 lakh, 1.50 lakh [indiscernible] per quarter, if everything works fine.

Yes, what I have mentioned is -- currently July month, for example, without the transfer consideration, we added sales of 54,000 tonnes, 55,000 tonnes. And out of that 5% growth, we still will be left with 48,000 tonnes, 49,000 tonnes, but we expect [Technical Difficulty] See, basically, there are almost potential of one dozen customers in the northern part of India. And currently, we are working with 5 of them. And all of them happen to be our existing customers and we supply from the south. And we have made arrangement how we can supply more quantity by supplies going up from Oliver. And currently we are developing about 15 parts, which can easily give us 1,500 tonnes to 2,000 tonnes per month kind of once we ramp up and stabilize these supplies. And we expect it to bring us a [ delta ] additional capacity utilization and additional sales volume coming out of our presence in North.

Right, sir. Sir, my third question would be the wind energy plan that you have kind of, I think, preponed because first, we had a different kind of program on that. So I just wanted to understand the time line on that, sir. I mean you told us that by March, you should reach, say, roughly 100 megawatts. So that will be solar. And wind energy, what will be the time line and when do we start?

See if you look at time line, I just mentioned that solar by the end of this year, we should commission 100 megawatts. And ordering maybe 11 megawatts to 20 megawatts of wind, which has almost 2.5x generation. It's -- when we say 10 megawatt to 12 megawatt, maybe 30 megawatt, 35 megawatt equivalent power because efficiencies of modern windmills are much higher compared to earlier one. So and I talked about this commissioning will happen in next year. And similarly, we plan to add another 70 megawatts of solar unless we change our mind or change these numbers. But that will commissioning will be next year.

Got it. And my last question is there any update on the EC for the steel plant at total specialty steel plant?

Yes, I think I would like to answer this question. I think thank you very much for asking this. Important step in environmental clearance is the public hearing and we conducted people rather district administration conducted the public hearing on 6th of August and went very well at best of my understanding, full support from all the neighbors, all stakeholders, NGOs, participated in a big way and supported the project in a very big way. It's a testimony of Kirloskar's commitment to environment, the green movement and we will next 2 to 3 months, we should have the EC in our hand to start the steel project [Technical Difficulty] which are part of that.

The next question will be from the line of Suman Kumar from Antique Stock Broking.

I have a couple of questions. The first one would be the.

Not audible. Not audible.

Am I allowable now? Yes, sir. Okay. So the first question that I had is what is the status of the commencement of captive iron ore mining? And also, could you please throw a little bit of light on the CapEx guidance for FY '25 and FY '26? And post the merger, what would be your net debt level current year?

After merger, what would be?

What would be the net debt?

Net debt, okay. Okay. Thank you very much. I think status of iron ore mines remains same as what it have been in the last quarter, except that some more progress has happened. To the best of my belief now we have all the approvals, all the approvals necessary for the mine, and we also have the approval for the road as well as temporary road permit for the road, but now we have to complete -- getting the necessary documentation done and start the mine. So I expect mine to start any time. And every time I speak, there are some steps which are taking undue -- long time, I hope and hopeful that it will end and we start the mines very shortly. And with respect to CapEx I would like to say that all of our client programs are on live, though timing-wise, there has been delays in certain, I think, important projects which are in progress. One is I talked about the increase Pulverized Coal Injection with oxygen plant that is coming up -- Oliver is getting ready. We got the power last week, and we will be taking 4 to 6 weeks to complete all the equipment trials and start the foundry in September, then we will submit samples and start ramping up. I expect foundry to start operational in a small way from October, and we should be able to cover some volumes in the second half of this year, so the only one project. We are progressing well on this Solar power plant, I talked about it already in detail. We have progressed well on foundry, Line 2 Phase 2 in Solapur, getting geared up to produce full quantity in Solapur -- should be able to as early as possible, go to 5,000 tonnes per month. So now I talked about the environmental clearance and the public hearing completion, and we will be getting into the steel project. And I think we continue to invest and expand the machine shops. There is no change in that position. However, our total debt is in the range of INR 800 crores to INR 1,000 crores before merger, after merger, no major increase in the debt. Our investments are in line with our cash generations more or less, except plus/minus INR 100 crores, INR 200 crores here and there. My looking forward is that we improve on the margins and the profitability coming months and quarters, and we should still be able to hold on to be at that levels in spite of the ongoing projects. The biggest upcoming projects are the solar and wind power and the steel project, whether that will make a difference, yes, it can. But also coming year profitability can be better and then we should remain in the -- or remain or go down in the debt and not really increase the debt in the common years. That is my view, but we will keep updating you on that what happens next year onwards. Thank you very much for the question. I think I covered all the 3 parts of this question.

The next question will be from the line of Chetan Phalke from Alpha Invesco.

And congratulations on ISMT merger. Most of my questions are answered. I just have a couple of questions. What kind of capacity and CapEx we are looking at for our Alloy Steel project?

350,000 metric tonnes, 360,000 metric tonnes per annum and we already have iron making. It will be addition of steel making, and we expect a CapEx of about INR 750 crores.

Okay. Okay. And sir, with respect to our capacity ramp-up on castings and machining, if you can just help me understand how will both of these capacities will look by the end of FY '25, '26 and '27? I just want to understand the ramp-up on both the sides on castings and machining since you mentioned that we have ordered 30 more machines. And so I just want to understand how many machines we have right now, where are we adding machining capacity?

We have 100 machines. We are adding another. You can see the scale of orders and I think the interest of getting machine cutting and also expanding the machining from our valuable customers continues, and we will be required to invest on machining. The more machine value reflected in the -- our account should start because still we are marginal end use of machining as well as machining valuation on the books. But I think it is going to pick up. And in addition to that, I would say that we are well invested on the foundries. As you know, we are also investing in Line 2 Phase 2 in Solapur. Oliver’s would be the next one. The current capacity is 28,000 per metric tonnes per annum and current facilities only for producing housing, but we are working fast to also start making their block and head. There's good block and head foundry in the north, and we will bring on there and expand the capacity of the Oliver foundry to anywhere between 60,000 metric tonnes to 70,000 metric tonnes per annum so that some meaningful capacity is available there to service the marked customers. There is demand more than what capacity we can create. And with that, we -- I will say that our installed capacity will go beyond 2.5 lakh metric tonnes per annum, and we are also committed to completing the last casting [indiscernible] foundry in Solapur, with the capacity of at least 15,000 metric tonnes to 16,000 metric tonnes per annum. All this put together, our capacity would be in between 2.5 lakh to 3 lakh metric tonnes and it is usable capacity and realize the build capacity and though we are currently, like I mentioned about 13,000 metric tonnes per month. But Oliver we're riding Solapur expanding, I look forward to go to at least 20,000 metric tonnes of casting per month with the next one or two years. I hope I have answered all the questions relating to casting, capacity and utilization.

The next question will be from the line of Pratik Kothari from Unique PMS.

Sir, a couple of questions on ISMT. One, on the steel part, you did mention in your opening remarks that there are some operational issues that we have [Technical Difficulty] highlight what are those? And what are we doing to solve those?

No, I think what I didn't mention operational issues as such. But if I have to just add based on this line which I had to say -- we acquired this company to end of year stack, and we took up immediately the increment on maintenance, maintenance spare parts and the [indiscernible] creation. And all that is necessary with respect to safety, continued operations, stable operations, we have done enough and I think nothing is enough, we continue to do more. Second thing we took up in the last one year is debottlenecking projects, both in steel and tube to realize at least to the extent of very close to 3 lakh tonne of steel and maybe 2 lakh tonne of steel bottlenecking projects. Many of them have progressed well, and many of them are getting completed in the month of July, August, September, and I expect improved volumes coming out of Tune as well as some increased volume coming out of Steel in the second half of this year, and that should really support us in operating these capacities in a stable, decent way. And subsequently, we have plans to expand rolling capacity in Jejuri to 300,000 metric tonnes. And if that happens, then we will be able to roll the entire quantity in Jejuri what is produced. And we expect steel plant – our Koppal steel plant when it comes, the booms will go to Baramati and get rolled thereby the net sales -- outside steel sales would be mainly from January and not from -- there would be a strategic approach we are taking for steel business.

Fair enough. And sir, one of Tubes part, I mean, one -- your comment on the margins that we are showing there right now? And second, like you mentioned, it's a continuous journey to improve over time and just solving the power and fuel cost via wind, solar that we are doing. But anything else on the fixed cost or employee expense, etcetera that we were intending to improve? And so where are we in that journey over the last 2 years? And how far have we come?

Yes. Thank you very much. The focus definitely has been number 1 is stable, expanded business volumes. The fundings in tube and steel, what we are talking today were not there 2 or 3 years back. We are bringing stability. We are building stability in the markets, continued order support from the customers, both for steel and tube. And subsequently, once we have a stability and connectivity levels, all these higher productivity levels will also support us to bring down the cost. For example, the power in [indiscernible] will not remain at 18%, will drop to maybe 15% once we have the enhanced funding what we are realizing recently. Having said that, still the power in [ fuel ] are very high. We are working to reduce our -- I think I talked from that. Coming to also improving the efficiencies, especially in the steel plant, we are working on a number of initiatives on power, for example, the MFG conservation, power factor improvement. Then also on the consumption level reduction, yield improvement, quality improvement and ensure that those aspects will also contribute in bringing down the fixed cost. With respect to the employee cost, our strategy is very clear that we don't look forward to do any manpower reductions, but rather strengthen the people competencies, work on developing the competencies and people produce better results and increased output and increased productivity will bring down the ERE to sales in Tube and Steel business to the level of starting point was 10%. Currently, we are at 6%, 7%. I think it will come to 4% to 5%. And that is the value we want to give it to the people who contribute and we don't believe in bringing it down to 1% or 2%.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Gumaste for closing comments.

Thank you very much each and everyone who's who joined for the call and also organizer today being a holiday or Saturday you all cooperated with us. Thank you so much. And look forward to next quarterly call and till then goodbye and thank you very much. Thank you. Back to Pallav.

Thank you. On behalf of Antique Stockbroking, that concludes this conference. Thank you for joining us. You may now disconnect your lines.