Nelcast Limited (NELCAST) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Nelcast Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference to Mr. Abhishek Bhatt from EY Investor Relations. Thank you, and over to you, Mr. Abhishek.

Thank you. Good evening, everyone. On behalf of Nelcast Limited, I welcome all of you to the company's quarter 1 FY '25 earnings conference call. You would have already received the results and investor presentation which is also available in our filings with the exchange. To discuss the company's business performance during the quarter and outlook, we have with us today, Mr. P. Deepak, Managing Director and Chief Executive Officer; and Mr. S.K. Sivakumar, Chief Financial Officer of Nelcast.. Before we proceed with the call, a disclaimer. Please do note that anything said on this call during the course of the interaction and in our collaterals, which reflects the outlook towards the future, or which should be construed as a certain forward-looking statement must be viewed in conjunction with the risks the company faces and may not be updated from time to time. More details are provided at the end of the investor presentation and other filings that can be found on our website www.nelcast.com. Should you have any queries or need any further information at the end of this call, you can reach out to us at the e-mail address mentioned in the company's collaterals. With that, I would like to hand over the call to Mr. Deepak. Thank you, and over to you, sir.

Thank you, Abhishek. Good evening, everyone. Thank you for joining us today for our Q1 FY '25 Earnings Conference Call. We appreciate your continued interest and support in our company. During Q1 of FY '25, we have observed a persistent softness in the demand for commercial vehicles in India. This trend is not limited to only our domestic market, but also our export markets in the U.S. and Europe, both experienced a decline in the commercial vehicle demand. These challenges are largely attributable to prevailing macroeconomic headwinds and political uncertainties surrounding elections. Despite the conditions, we see a silver lining. Production constraints, especially in the EU, primarily due to stringent environmental norms presents a significant opportunity for Indian manufacturers. We believe we are poised to leverage our capabilities to fill the gap and meet that demand that the EU counterparts will be unable to satisfy. During Q1 of FY '25, we made a cautious choice to reduce our inventory levels which led to a decrease in production volumes. This strategic move is part of our ongoing efforts to ensure a robust balance sheet and to present buildup of surplus inventory. Despite this reduction in production, our revenue has stayed consistent, and we have managed to preserve our profits. This is attributable to enhanced production efficiencies that have driven our increase in EBITDA per kilogram. Furthermore, we have seen a solid 10.5% year-on-year increase on our export sales during the quarter. Focusing on the introduction of new offerings, we have developed many products tailored for the electric vehicle sector. Some of these are in the early stages of launch. But when we look at the market, the market is still evaluating whether to commit fully to electric vehicles or to favor hybrid variants. We're keeping a close watch on these industry dynamics to guarantee that our product lineup is in sync with the evolving market references. The U.S. elections will have a fairly significant impact on how this roadmap plays out. Looking ahead, we are cautiously optimistic about a performance revival in the second half of FY '25. Our efforts to streamline operations and enhance efficiency are expected to bear fruit, and we anticipate an increase in EBITDA per Kg from the current levels in the second half. While FY '25 looks like a consolidation year for us, we're laying the groundwork for what we believe will be a robust demand growth in subsequent years. Our strategic initiatives and investments are focused on positioning us to capitalize on these future opportunities. Lastly, commenting on financials for Q1 FY '25, the company reported a modest revenue increase. So we had INR 302.3 crores, which was up 2% year-over-year, amidst a challenging market with soft demand for commercial vehicles, especially in light of the elections that was happening. EBITDA saw slight year-over-year decrease to INR 22.4 crores, but improved 16.2% from the previous quarter, thanks to enhanced operational efficiency, resulting in a healthier EBITDA margin of 7.42%. Profit after tax rose to INR 8 crores, showing strong growth of 10% year-on-year and 56% quarter-on-quarter. Thank you. And I will now open the floor to any questions you may have. We can now open the floor, Shlok. Thank you.

[Operator Instructions] The first question is from the line of Bhavesh Chauhan from Aditya Birla Money.

2 questions from my side. Sir, we say that FY '25 is likely to be a consolidation year. But what makes us so hopeful for FY '26? It looks like we are very, very optimistic about FY '26. And second question is on exports. We have seen a very strong growth in exports. So what going forward is that we are becoming more and more competitive in the global market and we should have more and more exports as we move towards FY '25 and FY '26?

Okay. So thank you for your questions, Bhavesh. Let me try to answer that. I think FY '26, we believe, one, I think it's an anticipation that there will be a bigger rebound happening in the domestic market. I think this year, especially the first half of the financial year, we do expect the commercial vehicle market at least to be quite soft, given the elections and then the post election kind of pickup of activity that is there. So we do anticipate that the second half will be better than the first half. And so there is -- but it's -- next year, we expect it to be a normal -- a little bit more normal. The second trend, I think that also makes us confident on what FY '26 would be much better year is because we believe that there will be the initial signs of the pre-buy that will happen in the North American market. In January of 2027, there is a new emission law that will come into effect in North America and specifically the U.S. And so this change is going to have actually a fairly significant increase in the price of new vehicles and therefore, there is an anticipation of a fairly significant prebuy likely to happen in the calendar year 2026, some of which is also anticipated to spill into calendar year 2025 because the expectation of the price increase, which will potentially drive the prebuy is fairly significant. So that's the second part of it. And the third part of it is we're making a lot of progress in terms of a lot of new products that have recently been -- that have been awarded to us in the recent past, but might not get into production until the end of this year, that's one more portion of it. And the last one is regarding the European business. We're incredibly confident, the more and more that we are looking at Europe and talking to customers there given a variety of reasons, one is the financial conditions of various competitors based in the European region is extremely weak. And many of them have to spend a significant amount of money in order to comply with a lot of the decarbonization regulations and other environmental regulations. So it looks like we do anticipate that there will be significant capacity reduction that will happen in the European region over the next 3 to 4 years. And we believe that we are well poised to take advantage of that. And we should start to see the efforts and results of that perhaps at some point next year.

Okay, sir. And with regards to exports, again, I mean, it's mainly because of Europe, right?

Yes. So we believe U.S. will also continue to grow, but we think we'll have a very big chunk coming from Europe. U.S. is already about 80% of our exports right now. And Europe is only about 17%, 18% of our exports. So we believe Europe will have a much bigger jump that we will see. U.S. will also continue to see growth. U.S., we've been working on a few EV programs that are slated for launch in 2027. And these EV programs is the only uncertainty that is still there, right? That's preventing the OEMs from committing to a decision is also the U.S. election results because the U.S. politics will have a fairly significant impact on how much of a push on EVs will be there versus how much of a relaxation on EVs and decarbonization in general.

Okay. And sir, lastly, we expect our EBITDA per Kg to go up. So can you explain what could be the drivers for that?

Yes. So I think we've talked about this in our overall strategy that was in the presentation. But I think there are a few different things that we believe will drive our EBITDA per Kg. I won't get into all of the details, but I think the biggest drivers will be the increase in capacity utilization that we will see, especially the operating leverage coming out of the increase in capacity utilization of the Pedapariya plant. And also the product mix as our export mix continues to grow. There's also some new avenues that we are exploring in the domestic segment as well, which we believe will be a more profitable business than the current average domestic business. So there's a few different, I think, on the product mix as well as on the cost side, I think there are avenues that we're looking at. But I think in our presentation, you should see more information regarding our overall strategy including the points that I haven't touched on.

The next question is from the line of Vidit Shah from Spark Private Wealth Management.

Just a few from my side. Firstly, in the current quarter, we've seen a INR 5-odd crores sequential reduction in power and fuel costs despite us toning down production and volumes remaining somewhat flat. So could you explain what has driven this reduction in power and fuel costs? And do we expect this to remain at these levels? I mean I just want to understand if this is solely driven by pricing of power? Or is it also driven by some efficiency gains that we've had?

Yes. So I think it's a little bit of mix of the two. I think there's a few points I want to highlight on this power and fuel. One, we installed a 1-megawatt solar power plant inside our Pedapariya premises in the first week of April. So this is -- I think we are seeing some of the results of that also impact in terms of power. The other part of it is, I think if you look at a portion of our power comes from wind energy. And typically, I would say probably May to June onwards, right, and the next couple of months are the peak season for the wind. That also helps us a little bit specific to the quarter. But overall, if you look at how we have done in terms of our efficiencies and power consumption, we have gotten better, albeit marginally, and we actually anticipate over the next couple of quarters that our efficiencies in terms of our power consumption will actually get better. We've made a couple of investments in our plant and equipment specifically in our melting area to drive reduction of power consumption, not just in terms of price, but also the power that is consumed.

Okay. So just a follow-up on that, what is the sense on the power saving that we anticipate in terms of unit consumption?

I think it'd be very hard to put a specific number to it. But I think what we would try to target is maybe something a couple of percent or so is what we would -- we think is -- would be the impact of it.

Okay. Got it. The other one I had a question on was the FedEx orders that you mentioned in the opening remarks that are likely to begin by the end of the quarter -- end of the year. So that would mean by 4Q FY '25, would that be right?

So this quarter, the orders have actually just begun. However, the volumes right now that we are talking about is maybe about the equivalent of perhaps 180 to 200 vehicles per week, whereas the order is supposed to be for 600 -- 590 vehicles a week to be more precise, right? So there is a ramp-up process that is there. But currently, very recently over the last month or so, we've -- that has started, and it's currently only at about -- perhaps about 180 or so vehicles a week. So still a long way to go for it to reach a meaningful number, but it has started.

Okay. And when you say that the market is still contemplating between EV adoption and hybrid, would that have any impact on this one particular order or I mean, like is it possible that this order changes from 590 to something else?

So I don't believe it will have an impact on this specific order but there's a lot of new business that we had started quoting earlier this year, right, as a lot of the OEMs, especially in the pickup truck SUV segment, a lot of them are working about a year ago on their EV strategy and the platforms that they're going to start. And most of these platforms are slated for a 2027, beginning of 2028 or mid-2027 launch. So they had designed the vehicles and all of that. And then, of course, in the last 8 or 9 months, we've seen suddenly EV sales drop, resale values of EVs come down, all of that. So many of them are rethinking their strategy a little bit. And I think the key piece of the strategy is also government and legislation and what's going to happen. So I believe that elections will have a significant role to play. So they do believe that they will have to move in that direction because TAFE norms do mandate certain fuel efficiencies and all of that. But they're just waiting to see before they fully commit to a strategy. A year ago, they were fully committed to say that we have to go EV and GM had even publicly and I think Ford had both publicly said that by 2035 and 2037, respectively, that they would no longer be producing internal combustion engines. I think they have now walked that back a little bit, and I think they are letting the market dictate rather than mandate dictate the phase in phase out. But -- so there's still a question mark whether these next-generation vehicles that get launched in 2027 or 2028, whether they would be pure battery electric vehicles or they would need to be plug-in hybrid vehicles. But this is not for this particular product. This is for new -- potential new orders that we are discussing that might be very, very significant business for us looking forward in terms of like the next 4, 5 years.

Okay. And just out of curiosity, hybrid products are more towards our traditional ICE products that we manufacturer, or are they more in terms of content per vehicle? Or it's more towards the EV products that we are designing right now?

It's more towards the EV products. It is a little closer to EV products, just slightly less because you don't have the same kind of stock requirement in a hybrid that you do in an EV because you also have your IC engine to kind of kick in and give you a little extra torque for the absolute necessities.

Just one last one before I get back in queue is, could you quantify the impact on the inventory levels drop that you mentioned? What was the typical inventory that we would keep and how much have we cut it by?

So in the quarter, we actually cut our inventory by about 1,000 tonnes was the reduction in inventory. And I think this is something that was built up over the last year. Unfortunately, last year, we were not -- while we were not trying to actively build up the inventory, something that did happen, especially because our anticipation of sales in Q4, especially in M&HCV was higher than what the market ended up being, especially post 10th of February, we saw a significant dip. So if we were intending to dilute stock in Q4, which we couldn't. So we chose to do that here. So it was about 1,000 tonnes that we had diluted.

And are we expecting to dilute it further?

We will dilute it further, but not -- perhaps not to that extent. It might be a little bit more gradual perhaps I think over the next -- perhaps over the next 3 quarters, we might look at maybe diluting another 1,000 tonnes or so to what we believe should be -- where we should be operating.

[Operator Instructions] The next question is from the line of Ninad from Subnis Financial.

Am I audible properly?

Yes Ninad, you are audible.

So sir, I have a few questions. So first would be, I think you've elaborated in the start a bit, but could you just retouch on the order book status as of now?

Yes. So I think for the quarter as a whole, right, I think from a tonnage perspective on sales, was actually just shy of 20,000 tonnes, right, 19,977 was the actual sales point for the quarter. And I think this is largely in line with what we had indicated in the last quarter as well. I think at the end of last quarter, given the uncertainties, we have said roughly, we expect the Q1 and Q2 to be in that 20,000-ish tonne range, and we expect 23,000, 24,000, 25,000 tonnes, perhaps something in that range for -- in the second half, right? I think that's what we had roughly indicated. We still believe that, that's largely the picture for the current year.

Okay. So following up on the previous question, you mentioned liquidation. That is accounted for in this guidance you just mentioned, right?

Yes. So this was the sales quantity. Our production quantity was about, I don't know, 980 tonnes or something like we liquidated approximately 1,000 tonnes lower.

Right. Okay. But I'm just trying to assess how would that impact the margin?

So I mean, obviously, I mean, there are 2 factors in which it impacts the margin, right? One is positive and one is negative. I mean, obviously, your fixed costs are spread out over a smaller quantity, which is the production quantity. So it has a negative impact on margins. But you're also selling product out of your inventory, right? So it has some positive effect as well.

Yes, because that would speed up like free our working capital. So that would be in the positive side.

So it has both effects, not exactly clear on how we can separate these two effects out, but I mean, we -- I mean, both of these are the realities of what's happening.

So that's very helpful. My next question is like there has sort of been a muted demand on the CV segment. But despite that, we have performed well. And even though like how would be the outlook since we are getting better going down the year -- calendar year? Or we will see the same pattern continue?

I mean I think we hope to see the same pattern continue that we will perhaps outperform the market. I think CV, I think the one thing that we have to be a little cautious about it when we compare the numbers, is Q1 is actually when tractor is a bigger impact, right, because this is the season, tractor production levels are a little bit higher, right? So pretty much from April all the way until perhaps October, November is the peak season for the tractor production. So that's something. So even on a year-on-year basis, if you see, we have done better. Even though perhaps tractor production, we believe is up only about 3% or so for the year. So I think we have done better than that. I think even we've done slightly better. But CV also, I think, typically, most of the reports that you see on CV will be on the sales, right, sales quantity of CVs. I think the production quantity in this particular quarter was also marginally higher because 31st March, the inventory levels at the OEMs were very low, right? So they needed to bring it back to some degree of normalcy. So that has also helped, I would say. But certainly, our market penetration, I think, is also headed in the right direction.

Yes. Fingers crossed, the monsoons are going well. So hopefully, the demand should also pick up going forward.

Yes, we certainly hope so. And monsoon is something that we -- that I never thought about, but I track -- we have been tracking very closely for the last decade.

All right. Great to know. Just one more question, asking my last question. I am going through the slide which you have given in the presentation. That's a very [indiscernible] development looks like. So we see that we are -- on the exports front, we are very optimistic. And we have already done very well this quarter and potential growth is nice. So going forward for the rest of the FY '25 or even somewhere into early FY '26. Are we -- is the traction or demand coming in from the U.S. and would that market really help drive this export growth? Or is that some other market?

Yes. So I mean I'll answer. So one thing is the market itself has actually gotten quite weak. So if I compare on a year-on-year basis, it looks like the U.S. market will be -- in the calendar year 2024, the U.S. market will probably be down about 10%, the -- I'm talking about the commercial vehicles. And Europe will probably be down about 30%. I mean this is the indication that we've been given, right? But there is an anticipation of growth in 2025 and 2026 from that base. In 2026, the belief, at least for the U.S. market is it's going to be a record year, right? So I think that, to some extent, will drive some of our same business growth, right, same product growth. In fact, we've had customers coming to us and talking to us about what the capacity requirements 12 months from now will be, right? And in some of the cases, some of the products they are talking about 30%, 40% higher than even what was there last year. Right? So obviously, it's a product mix difference. It's not all the products that's happening. But on some products, they believe that compared to what they procure from us last year, their requirement in 2026 will be 50% higher, right? So this is a discussion that has already started with the customers and in fairly advanced stages, right, because they need us to be prepared and there are some -- there might be some tooling, some validation and all of these things that will need to go in for this. So that's the picture on the U.S. market. Other than that, there are some new business orders also that have come in and some in development and some -- in later stages of development, where perhaps by the end of this year, we will be into production and some perhaps early part of next year will be into production. As Vidit had asked, I think it was Vidit who asked the question about the FedEx trucks that -- the GM trucks specifically. So that -- those vehicles also started -- just started the ramp up, right? And it looks like it will be a fairly slow ramp up that will happen, right? It's not that the GM had a capacity of 600 vehicles a week. And from day 1, they start doing at 500 and then go up to 600. It looks like they're starting off at about 150, 200, and then they will gradually go up over the rest of the...

Gradual ramp up, right.

And I think the other part that I alluded to a little bit during my opening remarks was regarding Europe, right? So we believe there's a huge amount of potential in Europe and a lot of that is driven by the current market conditions. And the current market conditions include many -- a few guys that have actually shut down capacities in the last 12 to 18 months, there have been some capacity shutdowns that have happened as companies have shut. There are also a few large companies that are in financial distress and/or -- and some of them even to the extent of going into administration, right, what USA might call Chapter 11. So they're still running, but there's a big question mark on their future. So there is -- I think we're seeing that opportunity just start to materialize now. And I don't recall if I made the statement in the last investor call or not. But I think what we have seen in terms of RFQs that we've received from customers in the last 6 months exceeds the value of the RFQs that we have received from perhaps in the last 2 or 3 years, right? So this is really -- I mean, we're starting to see that interest come in, right? We anticipated that we might see this interest come in about a year ago or so. But a year ago or so, people were, I would say, interested but slightly muted, right? I think they thought perhaps some of these energy issues, the Russian war, all of these -- inflation or some of these things might be a little temporary in nature. And I think now that they realize what the direction looks like. And in our specific industry in manufacturing of iron castings in Europe, there is a lot of questions on the future of the viability within Europe. I think we're starting to see a lot more interest. And I think we will see that interest -- we've seen that interest now translate into RFQs. We're quite confident that over the next 6 months, 12 months, 18 months that this will actually translate into actual business awards and then into actual business turnover.

Yes. So the sales cycle is absolutely picking up. Sir, just a small clarification. You just mentioned the numbers that the demand is 15% higher or 50% higher from the U.S.?

50%. 5-0, on some specific products right, not the entire catalog of products.

Yes, absolutely. Not the entire.

That is the 2026 numbers in comparison to 2023 numbers, which 2023 itself was a record year. But again, at this point, these are forecast, but this is what the OEMs are saying.

Sir, very -- I'm thankful for your insightful responses that was very enlightening. And also appreciate the strategic initiatives you are taking even the one you have just previously described on the power savings. So all these factors really go a long way, getting a good outcome going down the line. All the best for rest of the year.

The next question is from the line of Darshil Jhaveri from Crown Capital.

So sir, just wanted to ask in terms of like maybe as you were saying FY '25 maybe is more of a consolidation year. So in terms of volumes you've indicated the first, in terms of our EBITDA per Kg, like in quarter 1, we did around 11.8. So what kind of end of the year could we expect because we might have more power savings and a better utilization in H2. So any kind of guidance on EBITDA per Kg you would have?

Only that it will improve. Only that we intend to improve it. And I think in a 2-year period, we are trying to see how we can bring that all the way up to 15, right? So I don't think it will be a linear line and some quarters will obviously be better and some will be worse than other quarters in comparison to that. So I don't have a specific guidance, but certainly, I think we will -- in the second half, we do anticipate and expect that we will push in that direction.

And sir, just wanted to know, sir, in terms of like FY '26, what kind of volumes can we anticipate? Because I think we'll have even a higher utilization in FY '26, right, sir?

Yes. So I think that is certainly the expectation. And it's a very slippery slope trying to predict forecast what the volumes look like because some of these -- there's so many factors that can have a negative impact on it. And I realize that sometimes it's harder to predict even what the next quarter is going to look like because the demand pattern and the kind of product mix, all of that can change very quickly. But we would -- I think what we would be targeting certainly would be to be somewhere perhaps 110,000, 115,000 tonnes, we would hope that we can get there. And with the right kind of initiatives, I think, from the government side as well as from -- in the export markets and from our side, I think certainly, it seems it should be possible. Maybe we look at a number that, let's say, roughly 30% higher than where we are today, right? That's the hope. I think there are many things in that hope that are beyond our control, and we would hope that they line up.

Sir, I just wanted to understand one more thing, maybe for some people who are not maybe in the market, what could you suggest as maybe a turning point where you can begin for the demand revival? Is there something that even we could track or something that you could just point out to, you know, this feels like a turning point towards a higher demand?

Yes. So I think one of the things will be in terms of further pickup of all of these infra projects, right? So I think as the projects get awarded and you see more and more roads getting built, bridges getting built, all of that, a lot of our products end up into these construction equipment tippers, right? So there, I think, is one very clear indication, I think, that we will see is that, that activity starts picking up, I think it's only a matter of days or weeks before we can actually see significant demand pick up as well. So I would say that from a domestic market standpoint, that's one. I think on the agriculture side, perhaps monsoon is one of the factors. And the other thing is also rural health in terms of how the rural economy is doing. And I think in terms of exports, it's going to be driven both by how that market grows. As I said, this year looks like a year of de-growth for the market, both in U.S. and Europe. But further years do look like they will be having some growth the next 2 years, looks like they will be having some fairly strong growth prospects that are there. And then the other part of exports is also new product wins, and that's an area that we are actively working on as well.

The next question is from the line of Pradeep Rawat from Yogya Capital.

So my question is around the export opportunity only. So I wanted to know what is like comparatively margin profile and payment terms as compared to our domestic customers in the export market?

Yes. So I'll give you slightly average-ish numbers. On average, I would say that in the domestic market, you're -- on an EBITDA per Kg basis, that number would probably be something closer to maybe around INR 10 per Kg or something like that. And on the export will be INR 15 or INR 18 per Kg kind of a number, it's just kind of a blended, right? Obviously, product-specific things can be different. And in terms of payment terms, domestic can be anywhere between, I think, 45 to 60 days typically whereas export is probably closer to 150 days.

Okay. And my other question is along the same line. So are you expecting some kind of duty on companies like ours to make a level playing field for the EU players who are compliant with their environment norms?

Yes. So there is something that will come into effect from 2026 called CBAM, right? It's a cross-border adjustment mechanism as a carbon tax. We do believe that we will be fully compliant with CBAM and that we will not have any tariffs that will be applied to us, right? So the idea there is to say that, okay, we're pushing European industry to decarbonize. So if there's an industry outside of Europe, that is pushing, making the same product and trying to sell it into Europe, we should make it a level playing field. But what we believe is, if you look at from a decarbonization perspective, we are actually far ahead of most of the -- of where most of the European competitors are. If you look at how much green energy that we're using as well as our overall carbon footprint that we have now recently started to track as well, I think we will be far ahead of where the competition is in Europe as well as where the norms will be, even though the norms are not clear yet. So -- but we -- given that we believe that we'll be far ahead, we don't believe that any such thing will impact us. But I mean, of course, how these things get implemented and all that, there's still a little bit of fuzziness to it. But it's -- I believe this is going to be to into effect from 2026.

Yes, yes. Understood. And I missed the utilization part. So what was the volume for this quarter?

So the production volume for the quarter was just a few tonnes shy of 19,000 tonnes and the sales volume was about just a few tonnes shy of 20,000 tonnes.

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

Sir, firstly, as you mentioned that both the geographies of U.S. and Europe have de-growed -- will be de-growing for this calendar year. So what should be our export trajectory? We did INR 98 crores this quarter. And I think INR 445 crores was the number for last year?

Correct. INR 445 crores was the number last year. Yes.

So where we would be eying, sir, this financial year to exit?

So I think we are certainly looking at growth, right, despite degrowth in the market. I think with new product launches, we are anticipating that for the full year that we will still have a growth perhaps the growth would not have been as robust if the market had not dropped, but we still expect that we believe that we can beat that INR 445 crores number this year for sure. The exact number, we'll have to see based on how the market plays out as well as there's a little bit more uncertainty. I think last year, we were a lot more comfortable. We gave the guidance that we will cross INR 400 crores. I think this year, there's a little more uncertainty because we have more of these new product launches as well as some of the products I already talked about, right? So the exact ramp-up pace is not very well defined right now. So some of this business could ramp up very fast or very slow. So we're a little cautious on providing how much growth we think will be. But certainly, we believe that we should still do better than last year, slightly better than last year in spite of a degrowth in the market. So we would hope unless there is a substantial degrowth that happens now in the second half of the year.

And since the deliverables are scheduled for this ensuing quarter, quarter 2. So we must be in line to give an understanding that INR 445 crores number should definitely be done. This is what's our understanding should be.

Yes. This is based on the visibility that we have today, right, and that's from the customers, that yes. I mean I think INR 445 crores does seem to be something that's in line. But Again, we have to just wait and watch a little bit. We do expect that third and fourth quarter that this is what was told to us will be slightly better than the first half of the year. But I think we are also seeing some slightly negative signs on the current quarter as well. So we're just monitoring it very closely.

That's negative signs on?

In terms of some layoffs happening within the industry, so in the U.S., right? So that's the -- while we have not seen any negative guidance in terms of volumes, we are seeing some people in the industry doing some layoffs and all of that, which is something that we're watching closely, right? Just as a potential sign that even though the volume is not -- we haven't gotten any volume reduction guidance on that, that might be something that might happen, right? So we're just a little cautious on that.

And for the tonnage part, sir, what was our total tonnage last financial year, sir?

So for the last financial year, I think our total sales tonnage was 82,000 tonnes.

And now pensioning in what -- as you have already mentioned that Q2 will be similar in line to what we've done for Q1, that is closer to 30,000, what should be the likely number we should work for this financial year?

So I think my anticipation, perhaps -- I mean, again, this is -- there's a lot of speculation in the statement that I'm making. But I think we do expect that there will be a pickup in the second half and maybe somewhere between 23,000 and 24,000 per quarter in the second half is what we think it looks like at the moment. But obviously, this is based on some forecast that we're getting from our customers, showing better revival in the second half.

And sir, you did alluded to the fact that for H2, the EBITDA per Kg will definitely inch up with higher volumes. So that understanding is correct.

That's correct, yes.

Okay. And how has the raw material basket behaved, sir? How are the scrap prices currently? And 2 more questions on the other income and the finance cost front, sir. We find that, firstly, the other income has gone down sequentially also and also year-on-year also. So what explains this reduction, sir, the nature that has led to?

Yes. I'll let Sivakumar actually answer the first one in terms of raw material prices. We're seeing relative stability but I think, Siva, if you want to explain.

Yes, raw material prices are stable in the first quarter. So there was no much speculation in the prices. It was stable in the first quarter.

Yes, relatively stable. I mean we've seen -- obviously, on a year-on-year basis, we've seen a reduction in raw material prices, but I think perhaps fourth quarter to first quarter was relatively stable. And then I think the second...

And now on the finance cost and other income.

Yes, finance cost and other income. Siva, you want to explain? You want to elaborate on it?

Mainly, last year, we had advantage of FOREX income. But current year, if you see the last 3 months, more or less, the exchange rate is stable. So the FOREX income was more or less not in that -- to the extent what we earned last year. In the case of the interest cost, because of the increase in working capital to carry the inventory in receivables, slightly the interest cost is more for the quarter.

Yes. So even though inventory did come down the...

Receivables slightly increased because of it.

Yes. The receivables went up slightly.

Okay. Sir, what is our net debt number, sir?

Net debt, just give me a second. I don't have it for the quarter, sorry. Siva, you have that?

Yes, yes. I have that. It's about INR 254 crores.

Net debt is INR 254 crores. And the cost of funds, sir?

Cost of fund, about 9.3%.

9.3%. Sir, Deepak, you did allude to the fact of bringing in efficiency in terms of power cost that is evident in the deduction. Other than that, what are the other efficiencies, parameters of improving -- improvement or the efficiency factors that we are working, and especially, how is our Pedapariya unit going to perform going ahead? Or what is the strategy going ahead for the revival? If you could give outline, sir.

Yes. So I think in terms of other efficiency factors, I think we are working on improving our capacity utilization even at our Gudur plant. What we had identified was that the biggest bottleneck that we have, the synchronization between our ability to melt the metal as well as utilize the metal into the molds. So we did make some investments specific to that to create a buffer through a holding furnace. So that investment is something that we have made in the current quarter and that installation has just been completed over the last month. And so this is something that is under monitoring. So we believe this will help us in our power reduction as well as in terms of improving our production output in our Gudur plant. So this is something that is -- that we are doing, right, as part of that initiative to reduce costs as well as unlock some capacity. In terms of Pedapariya specifically, we do have -- in our Pedapariya plant, we had identified -- about 1.5 years ago, we had identified that there were some 6 critical actions that we needed to complete in order to make sure that the unit is running completely the way that it should run and that we can eliminate some of the waste that were there -- that is there. Out of those 6 actions that we identified, we have now completed 5 of those actions in every way, including 3 of those actions that were just completed in this past quarter. So that's something that I think looking forward as we complete the last action as well as stabilize things, I think operationally, whatever the challenges that we had in that should be looking a lot better in the second half. In terms of the demand front, I think one of the things that we are actively working on is to develop some new products. One of the products that is still in the design stage, is that we would like to -- that for the majority of the tipper market, we would like to offer the cast axle housing so that the life of the axle, the warranty costs, all of these are benefits to the OEMs as well as the end user. And we believe that there is a very strong market for this to become the -- because this is the product that really runs in Europe, right, all the -- how the axle housings are cast and that was our intent when we set up this line. So we've started working towards that direction towards being able to offer a solution to the customers. Perhaps for that to get homologated as well as approved and get into production. That might take perhaps about a year or so. But when I look at that particular product, I believe that, that product coming into the product mix in Pedapariya could be the complete game changer for the plant, right, in terms of the utilization as well as profitability. We expect that we should make very, very significant, I would say, zero to one kind of a move on that.

Okay. And when will that we will fructify on that? I missed your point coming up.

I think that the product -- that particular product, I would think between design, making samples, testing approval, would probably be about a year is what we anticipate at this point. But we believe that the market acceptance for this product will be very significant and we believe that it will -- we would experience a steep ramp up if the market acceptance is significant.

And that is totally export?

That is -- actually, that is totally domestic at the moment.

Domestic market?

At the moment, yes, we do have some serious discussions happening on exporting similar products, but those are not as high volume. We think the domestic potentially by transitioning something that is today done in a welded format into a casting product will have a significant impact on the ability to overload the vehicles, which a lot of these tippers are done, especially in construction sites and mining. And while parallelly also reducing any risks of warranty and all of these for the OEMs. So we believe that there will be a significant pull on the market for this.

So this is catering to the off-road segment.

So this will be catering to tippers, right? So mainly construction and mining which are used a little bit on-road, but yes, a lot of this is moving heavy materials that are overloaded.

And last point is on the exceptional item also, sir. You mentioned about the profit on sale of land. So how much have we realized? And I think we have booked earlier also in the March quarter.

So this is also part of the same transaction of the land. I think the registration of the land was done in a few different steps and tranches. So this is still part of that same transaction that we talked about in the -- if I recall correctly, it was the third quarter of last year -- I think third quarter of last year, right? So this is the same thing. So about INR 2 crores, I think, was the number of this quarter that was there as a profit. It's almost done, there's still a very marginal amount that is still left to be done, which we anticipate will happen in this quarter. But by and large, I think a majority of that is completed. I don't know if Sivakumar wanted to elaborate on that point.

That's correct. There are some small portions will be completed in this quarter, second quarter. So with that, all transactions will be completed.

And sir this land is all [ invested ] part or [Technical Difficulty]

Sorry, Saket, I didn't hear you. Saket, can you repeat the question? Mr. Saket?

His line got disconnected.

So ladies and gentlemen, due to time constraints, this was the last question for the day. I now hand over to the management, Mr. Deepak for closing comments. Over to you, sir.

Yes. Thank you. In closing, I'd just like to reaffirm our commitment to driving value for our shareholders. We're navigating through some very challenging times, but I believe we have a clear strategy and a focus on long-term growth. We thank you for your trust and look forward to updating you on our progress in the coming quarters. Thank you all very much for your time.

On behalf of Nelcast Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.