LMW Limited ($500252)

Ladies and gentlemen, good day, and welcome to the earnings call of LMW Limited for Q4 of financial year '25-'26 hosted by NSDL. [Operator Instructions] Please note that this call is being recorded, and this is Himani from NSDL. We have with us Mr. V. Senthil, Chief Financial Officer, and ma'am V. Dhana Lakshmi, Associate Vice President of the company. Over to you, sir.

Thank you. Thank you, ma'am. Very good afternoon to everyone, and thank you for joining the LWM's earnings call. We will have a brief about the overall performance of the company for the year ending March '26, followed by an interactive session. I would like to clarify that certain statements made in the discussion during the call will be forward-looking in nature. To begin with, let me explain the overall performance of the company, then we'll go into segment-wise and consolidated performance. The financial results have been posted on the company website, and I hope you had the opportunity to go through the same. The revenue for the year ended March '26 stands at INR 3,082 crores as against INR 2,909 crores for March '25, which is an increase of 6%. And for the quarter ended March 26, the revenue is INR 854 crores as against INR 767 crores during the previous quarter of December '25 and INR 789 crores for the corresponding March '25. PBT for the year stands at INR 221 crores as against INR 155 crores for the previous year, which is an increase of 42%. There is an exceptional item of around INR 11.5 crores and INR 1.68 crores during the year and period ending March '26, which is a onetime impact on account of new labor code and VRS outgo. Now going into the details of the division. TMT revenue stands at INR [ 1,081 ] crores for the current year as against INR 1,840 crores for the previous year, which is down by around 2%. For the quarter ended March '26, INR 485 crores as against INR 440 crores during December '25 and INR 493 crores during March '25. Profit for the division is at INR 9.75 crores during the year compared to a loss of INR 15.64 crores during the previous year. With respect to the order book, currently, we hold an order book of INR 3,300 crores, of which the active the orders are around INR 2,300 crores. With respect to sales, which has been clogged during the year, the ratio of domestic to exports to spares stands at [indiscernible]. With respect to LMW Global, the turnover for the year stands at INR 184 crores as against a comparative number of INR 146 crores for the previous year. For the current year, the loss stands at INR 32 crores as against a profit of INR 1.9 crores for the previous year and the order book stands at INR 44 crores. In LMW China for the year, the turnover stands at INR 130 crores and for the comparative period last year, it was INR 67 crores. There is a breakeven during the current year as against a loss of INR 6.8 crores during the previous year. The order book in China stands at INR 120 crores. Now with respect to Machine Tool Division & Foundry. The revenue in Machine Tool & Foundry stands at INR 1,205 crores for the current year as against INR 1,003 crores for the previous year. Out of this, around 10% relates to Foundry Division. The balance is towards Machine Tools. Division. With respect to ATC, the revenue for the current year is INR 207 crores for the current year as against INR 169 crores for the previous year. At a consolidated level, the revenue stands at INR 3,353 crores for the current year as against INR 3,137 crores for the previous year and profit is at INR [ 195 ] crores as against INR 151 crores during the previous year. With this brief, I would like to continue for the interactive session. Over to you.

[Operator Instructions] We have with us [Mr. Himang.]

Sir, my first question on the Textile Machinery side, what is the current scenario of -- yarn spreads are improving. So how you see the order book pipeline going ahead? And what is the level of inquiry in Indian market and especially global as well? My second question on Machine Tools division. So this time we saw 25%, 28% of turnover growth in MTD division. So how you see the nature in terms of the revenue growth for the machine tool division? And if you can highlight on the ATC division as well, what is the active order book and the time line of executing that order book?

Mr. [ Himang ], with respect to the Textile scenario and textile Machinery division, the industry has been doing much better in last 2 months, from a cotton point of view and a yarn, cotton yarn point of view. There has been challenges on the synthetic where the synthetic price because of the crude because, again, on account of the geopolitical issues, the crude price has been very volatile. There has been challenges on the crude-based synthetic fiber and then subsequently the profitability on that. But with respect to general -- the cotton spinners and the profitability has been good. The spreads have been good. Hence, the profitability has been good. We have also -- if you look at the order intake, we have actually got a significant increase in order book compared to the last quarter, what we have declared, the current order book stands at INR 3,300 crores. And all these orders were brought in during the last -- intake during the quarter 4. However, the outlook as far as domestic is concerned, it looks positively good. [indiscernible] are good. We would anticipate that going forward, there will be much larger offtake of machines, much more offtake of machines. And we have even said that almost 24 months since the slowdown has happened in Textile, this is something which we were looking forward to. In fact, in the last call, we did mention there has been a consistent slowdown, and we are anticipating there is a pickup. Of course, the impact of the geopolitical and the crude price has impacted in a lot of -- changes in the market. So what we see is a lot of yarn is going into -- Indian yarn is going into China because of which we are also seeing good markets like Bangladesh, where we have a significant order book from Bangladesh, those markets are getting reactivated, including Turkey, which has been very, very dull for quite some time because of the high interest costs, et cetera. There, also because of the current issue on the synthetic, the cotton-yarn producers are becoming active. They are modernizing and it is slowly starting. I wouldn't say it is back to where it was in the past, but at least it has started slowly. So from an overall scenario, which we [indiscernible] to see between last January and post the war -- conflict, which has kind of started impact that is having from a textile spinning sector, it has kind of helped with the cotton spinners and the cotton yarn. Whilst like I said, the synthetic is going through some bit of challenge. Synthetic yarn producers are going through some bit of challenge. Also the fact that the tariffs have been rolled back, that is another point and the FTAs have come in. So overall, it looks to be a very positive outlook over a period of time from a textile sector. Whether this -- again, whether this would be hockey-stick recovery kind of what we have seen in '21, '22, that is too early to be mentioned. Having said this, we should also be aware that the cost increase which is happening, is happening right across the industry. We are also impacted because of the increase in logistics cost, increase in cost of raw material, plastics, commodities like steel. So that is something which we are keeping a very keen eye on and how do we kind of overcome this as we move forward is something which we are continue to work on. This is with respect to textile industry, Textile segment. With respect to Machine Tools segment, yes. In fact, last quarter, we would have seen a significant growth in terms of the turnover. It is continuing to grow. Machine Tool Division is continuing to do well. The ratio of the segment which we are addressing from a customer point of view continues to be 50% dominated by automotive, 50% to 52% is dominated by automotive. The non-automotive business continues to be around 48% from a segment -- from a segmentation point of view for the Machine Tool division. We are definitely seeing good traction on the defense aerospace side of the business. And like we have always maintained, I think there is significant runway for growth in this particular business. And as far as our capacities are concerned, even with the current shipments, what we have seen in Q4, still we continue to maintain possibility to grow by another 20% because of all the capacity additions what we have done in the past. So Machine Tool division is seeing traction. We are also seeing traction on the machining centers, which is vertical machining centers and also some amount of horizontal machining centers. With respect to ATC, ATC, we have been able to clock INR 195 crores. Our order books like last quarter, we mentioned it has not significantly moved. It's around INR 360-odd crores, which needs to get executed over a period of 1.5 years, 18 months. And we are continuing to maintain that order book. We have not seen much new orders, which has to get executed in a short period of time [indiscernible] come in during the last quarter. But outlook continues to be positive. We are also adding capacities there. In fact, if you have seen the financials this year, almost 50% of our CapEx has gone into ATC for the machinery purpose. So yes, we are adding capacities there. All these capacities will start yielding higher turnover probably once they come into production, probably in the second part of the year -- current year. I think this would basically answer your questions. Over to you, ma'am.

Next, we have Mr. Sanjay Shah. [Operator Instructions]

Sir, my question was continuing our ATC division. It's still small, but it has a very highest margin profile with Q4 revenue of INR 56 crores segment result and INR 11 crores and margin close to 20%. For FY '26, ATC revenue grew by INR 206 crores and segment profit by [ 20% ]. Could you explain the nature of this business in more detail? What portion is across or the precision component, what is the customer qualification cycle and what milestone should investors track to assess whether ATC can become a materially larger profit pool for -- over next 3 years?

Any other questions, Mr. Shah?

Yes. One more question was on UAE investment. Board has approved an investment of USD 30 million in a holding company UAE, -- so for working capital. The subsidiary, which is doing around, I think, INR 18 crores of top line, what is the rationale? And what expected revenue opportunity in payback period as a management you feel?

I think -- thank you for the question on ATC. I will take a bit of a time to explain what we do within ATC. In ATC, we have 2 divisions within ATC. We call it the Metallics division and second one is the Composite division. Within Metallics division, we have engine parts, we do sheet metal, we do structural, we do assemblies and we do special process. And the predominant feature of our ATC division is, it is concentrated almost 90% concentrated towards exports. This has been the business. And with respect to Composite, whilst initially, we have brought in this facility and this expertise and this diversification in Metallics, so Composite was mainly towards the Indian aero, Indian Space Program. In fact, if you look at the literature, what has been published in the past, the [indiscernible], the PSLV launch vehicle, the entire the [indiscernible] satellite, which is basically a 9-meter by a 4-meter apart is done at this facility and in Composites. So the flavor for ATC is absolutely, like you rightly said, the precision engineering, and that is both on the Metallics and the Composite side. The effort what we put in into the Metallics is that we have -- we are suppliers. We are either number -- we are tied to suppliers to some extent, we are tied to suppliers in the supply chain. And there is a vast amount of orders which we can take. We also ensure that we are able to pick up only those highly technically challenging parts for us. And that's where you see a little bit of a higher margin because the parts what we do are not regular run-of-the-mill parts. They are technically challenging parts. And we bring together the ability to have both Composite and Metallics at the same -- within the same workshop, right? So when you get a part which has to have both Composite and Metallics, it is much easily done by us. From the Composite side, what we have is a very large facility like I just explained. So right now, we are also going into the composite part requirement of the existing customers who are on the Metallic side. They are technically the same customers. So we try to increase our wallet share with the customers trying to provide a lot more value-added and a little bit more of service to the customer. Like I said, we have seen the turnover of INR 195 crores. Our order book, what we just now mentioned is around INR 360 crores, which has to get executed over a period of 18-months. The only challenge when it comes to [ ATCS ] division is the fact that these orders are all actually long-term orders. They do have a visibility. They give us a visibility of 3, 4 years when they actually give us the orders. But the only challenge there in certain times is there is a pushout or a pull in. That's the way the business works, and we have to work with that risk. It is a highly intensive working capital-intensive business because the raw materials are all sourced from abroad, and you can see that again in our segmental results, the working capital requirement is quite high in the business. And that's -- but that's the way the business is. So we have to have working capital. We have to -- we have visibility of orders. We take up very high precision parts, and that's the way we increase the business and increase the wallet share. Yes, we have done three different things. One, whilst we have always started in the past with Metallics. 4 years back, we have invested into Composites. We have expanded into Composites. Our Composites offtake as a utilization would still be closer to 50%. So there is enough capacity for us to go on the Composite side. On top of it, we have just mentioned to the previous question that our investments have continued into ATC business. And it will continue into the ATC business as we see a much better traction. We have also mentioned in the past that we are trying to put a new facility for the ATC business because the current facility as what we have it is a little bit smaller. It is in middle of the town, and we have to move it out of town, so it will definitely become a larger facility. This is the runway we have for ATC division. Whilst we can't give you numbers how we are going to -- what we are going to be in next period of time. But definitely, the intention to expand the infrastructure and the decision to continue to invest in machinery is evidence enough that we would continue to grow in this. With respect to the investment of $30 million, currently, the company there makes INR 180 crores. And the requirement is that this $30 million goes not just to the working capital. Working capital is one portion of it. The idea is to also explore potential growth opportunities from there. If you have seen in the past, our export has always been closer to INR 600 crores to INR 700 crores -- has always been our export market share in the past. And we -- the only place to grow, both for our Textile Machinery division and Machine Tool division is the export market. And this has been -- we have been there for 2 years in GCC countries. And we find, for example, in Machine Tool division, the demand for Machine Tool has been quite interestingly quite high, and we have a lot of what we call turning centers has been a quite high demand, where we were at no turnover on exports, we have actually clocked, I would say, closer to around some INR 20-odd crores on export of these machines to this particular location. So like that, if you have to see, there is a huge potential for us to grow on the export side, and that is what we would like to capitalize on. On top of it, the current geopolitical situation has put a lot of pressure on the working capital, the bank's ability to fund working capital for us, and that is something we need to immediately support on this. These are the reasons. And of course, we are looking at a return over the next 3 years where we can build an equally strong and a large export portfolio, which we had in the past at around 23% to 25% of exports, we would definitely like to build on the export side.

With your permission, can I squeeze one more balance sheet-related question?

Yes, please go on.

Yes, it was regarding the -- since such a prudent management and such a wide visionary, can you -- how can you elaborate on improving our ROCE from current level from all the divisions ramping up and getting a good moats after treasury income when you see that our company going to a reasonable ROCE metrics?

Definitely, I think we are working on it. Mr. Shah, we are definitely working -- Mr. Sanjay Shah, yes. Mr. Sanjay Shah, we are definitely working on it. I think -- see, this business is a little bit cyclical, right? I think we'll have to understand two portions of textile machinery business. Textile Machinery business is heavily cyclical. And if you actually trace and track our numbers over the last 24 years, you'll find an 8-year cycle coming through this. We are in a very low down cycle, 24 months of absolutely very, very challenging period. And the Machine Tool has only now started. And -- so if you had to actually split up this division-wise and look at it, of course, you would find ATC at a much better ROCE, MTD will do better. But from a Textile point of view, it is a bit CapEx-heavy, it is cyclical, but we will definitely get there. We have got plans, we'll definitely execute and get there. You should also understand how the business -- if you look at our business, our bill of material of our each machine might go up to 20,000 parts. The amount of the complexity in the business is not -- is quite interesting, I would say, interesting. That's why it is -- when it is cyclical, we have to tighten our belts, make sure that we are positive on cash. We invest. We continue to invest even especially during the downtime, whereby we are able to capitalize during the up cycle.

Now the next person we have Mr. [indiscernible].

Firstly, one clarification. Order book in TMD, you mentioned it is INR 3,300 crores and active order book is INR 2,300 crores. Just wanted to see whether I've heard it right or not? Secondly, in the opening remarks, you mentioned that the raw material cost has increased across the board. So can you give a sense what kind of price hike you will have to take in the Textile division and the Machine Tool division to offset this raw material? And thirdly, in the Machine Tool division, sir, what is the total imported content for the raw materials for LMW? And are we looking to source it domestically or do some backward integration on that front? So these are my three questions.

With respect to raw material, yes, the prices are going up. Everywhere the rising prices of everything from logistics to commodities to availability. In fact, the larger challenge is even if you pay the price, do you have the things which are available. I think all of it comes in. But it is also prudent from our side, not only to look at passing it on to customers, but also look at what we can do. So yes, it is something which is the discussion or the topic of the day, as you might call it, that this is something which is getting discussed and we are acting on it on a daily basis. Both on looking at how we could save out of it, what we could save, and there are a lot of things we do on this. Passing on, we can't anyway tell you how much what we are planning, and that's not something which can anyway share with you. With respect to order book, yes, you heard it right, and that's what I mentioned that the order book stands at INR 3,300 crores, and that has been an increase in the last quarter compared to the number which I had given in the previous quarter in the January call. With respect to the import content in Machine Tool division, it's around 50% of the material would be imported. But again, we will have to that when it is imported, some of it is imported, but we do source it locally within the Indian currency, where it is denominated in Indian currency. And there will be some of it which is sourced directly, which is [indiscernible] to the U.S. dollar. When we say imported, it would be imported, but sourced locally. Very important question, which you have asked, can we localize what we are importing? I mean -- I mean, you touched the Make in India question here. Can we make whatever we are importing here? Possible, but it is not something which we can switch immediately. It is not something where it is available and because of -- even with availability, we are not importing it. It is just because to ensure good quality and items are not available and then it has to meet our standards of what we deliver to a customer, only in those cases, we definitely look at importing these items. And most of them, even if branded, they are trying to -- our supply chain is also trying to source it rather, assemble it or make it locally as well. Quite a few of them over the last decade or who have started localizing the supply chain. Having said that, it doesn't remove too much of a risk, right? I mean today, absence of -- we all know about absence of LPG because it impacts everyone, absence of certain other gases which are used in production is also impacting. And we are working our supply chain team is and also the production teams are going constantly to see how to reduce use of these products, which do not -- which is not available very easily. And there's a lot of things being done on a very active basis.

Sir, can I squeeze in one question? Yes. MTD division has seen good profitability in the current quarter. It is at a multi-quarter high at around 11%, 11.5% EBIT. So this run rate would be sustainable going forward in FY '27? And also one thing is that would we have taken any price hike in the last couple of months or a couple of quarters in MTD division?

No price hikes in MTD division. And some portion of it, I think you may have been -- is on account of the slight ForEx income which has got booked there. But however, even we have maintained that when we cross the threshold because we've got enough capacities. If you see we have kind of built capacities, we were at close to utilization at 65%, 70%. So we had enough capacity to go up. So what you're seeing is pure operational -- the margin which is coming through because of consistently doing upwards of INR 100 crores or INR 300 crores per quarter. So this would -- we would expect this to continue. And as the turnover goes up, definitely to have this. But again, when we see that we are reaching a number which is very close to our capacity, then we would continue to invest to grow that.

Next person we have Mr. [ Divyam Doshi ].

I have two questions. The first one is on capacity utilization. What is our current capacity utilization? And how much are we actually utilizing? And is there any additional CapEx required? And the next question is that for our ATC business, so our ATC revenue has always been good, right? But the company has never named the customers or programs or any certification that it possesses like the AS-9100 certification that is generally required for an aerospace company. You have never named it. So who are we actually selling the products to? That was my two questions.

Okay. I think the capacity utilization is something which we can share. Our customer names and the projects would be difficult. But anyway, see, for us, the capacity utilization on the Textile side would be somewhere around 50%, 55%. On the Machine Tool side is around 70% to 75% is what we currently are utilizing. With respect to ATC, to be in ATC business, to my count, we require 19 certifications. right? I mean, apart from standards or AS standards, ISO standards and [indiscernible] approvals. So there are, to my knowledge, the 19 approvals, which is required. So for us to sell to customers, we need this. And there are also customer-specific certification, which is also required. So your -- the Boeing and the Airbus of the world would expect you to have their certification also if that is so. With respect to who we sell to, like we said, we sell to customers who -- our customers are suppliers or rather suppliers, Tier 1 to the aerospace companies like Boeing, et cetera. So that's what it is. And we also supply to Indian Space Program, so ISRO, HL and all the defense we also supply from ATC division.

Okay, sir. And on the CapEx side?

CapEx side, okay. From a Textile Machinery and Machine Tool point of view, we would -- like I mentioned to the previous question, as we scale and reach a capacity utilization, which is closer to 90%, we would then continue to invest in that particular business for us to keep that gap for us to grow. So Machine tool division as of now, we did invest the year before last year and the year before last. We had invested continuously for 2 years. And in fact, if you look at our CapEx investment over the last 4 years, it would have been quite significant. Around INR 300-plus crores has been the CapEx investment last 3 years. So this has all gone in at a time where we were hitting that 90%, and we had to also modernize these machineries. We have done that. But for ATC, like I already mentioned, yes, we will continue to invest this year also, we have invested and we'll continue to invest there in ATC, we have to not invest for capacity, but we have to invest as we get orders because there, it becomes important to deliver on time. So as we get more wallet share with the customer we work with, then we will invest for those projects. It are more project-specific investments and that we continue to do so as and when we win projects.

At this moment, we don't have any hand raised. So next, we have Mr. Suraj.

Growing at 50%, 100%. And since you are long present in this division, like do you see such demand in aerospace from the Airbus, Boeing or any Tier 1 suppliers?

Suraj, we missed your full question. I think you are on mute. I could only hear the second part of it. Can you repeat the question?

Yes. Sir, what I meant was like in Aerospace division, especially in India, we see like many companies winning orders left right and center, like companies are growing at 50% and 100% because of Airbus and Boeing and other Tier 1 suppliers outsourcing them to India. So do you see such demand going forward in the ATC segment?

Suraj, absolutely, yes. I think -- the addressable market size in the ATC from -- even if you take the market size towards aircraft or market size towards the defense industry. And we are -- for us, it is both, right? And it is in probably its trillions. And we are looking at very small number as to what comes to India for manufacturing. We are part of that ecosystem. Like I said, we are definitely looking towards more and more business from the customers. In fact, I also mentioned that our exports constitutes almost 90% and that is where the entire ecosystem is supplying to. So there is immense potential, no doubt. But our process of how and what we choose to supply is very important. And that is where we try to choose -- to supply only those parts which are technically challenging so that we are able to maintain the engineering -- the skill and engineering at a much higher level. Like I said, we are one of very few facilities which also bring together composite and metallics together. So there are certain processes which we would like to be part of. We don't envisage this to be something where we would just get into everything and try to supply everywhere. Like I said, we have our own segments within this, Engine Parts, Composite, Sheet Metal, Structural Assemblies and Special Process. So this is something which we would like to grow within this segment. But to answer your question very clearly, yes, there is immense potential. And that is where we also mentioned that we have taken a call to grow the infrastructure for the company as well. So we are trying to build a new facility for ATC, which will be much larger to the current facility. So these are all plans for the future.

And there, you have -- I think you have announced around INR 150 crores of CapEx for ATC over the next 5 years, right? Which can give you potentially INR 300 crores of revenue in this segment?

This CapEx was going towards our infrastructure to start with. Then what comes inside that. So that's after that. So we would have facilities which would be much larger than what we currently hold. And within those facilities can scale more than INR 300 crores what you asked for. This cost, what we mentioned was towards the CapEx infrastructure build.

It's nothing -- it doesn't include anything on machineries?

Machineries will be add on after this.

Okay. Okay. So sir, basically, can this business scale to INR 1,000 crores in 5 years? Like can that be the potential opportunity for LMW?

The opportunity is definitely there, but we don't give out numbers as to what we will do.

Mr. Hemang has a follow-up question.

What was the breakup of revenue in ATC division for Composite and Metallics for the fourth quarter and financial year '26?

I would probably give you overall number. It's around 20%, you can take 22% you can take as Composite and 78% is Metallics.

At this moment, we don't have any hand raised. Sir, shall we conclude?

If there is no hands raised, then yes, we can conclude.

Since we have no raised hands further, this brings us to the end of all the questions from all the attendees. Thank you so much, everybody, for joining us and especially thank you so much, Senthil, sir, for answering all the questions asked through the entire meeting. Thank you so much, sir. Thank you, everyone.

Thank you, everyone.